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Speaker 2: We start strong with a conversation for Global Wall Street
Speaker 2: out on LinkedIn. Wayy of Blackrock is a massive value
Speaker 2: add she publishes at a regular rate with wonderful informative charts. Whaley,
Speaker 2: let's dive right into that. And you have something that
Speaker 2: pushes against all of the zeitgeist. You say there is
Speaker 2: no rising tide lifting all boats. That's sacrilege.
Speaker 3: Discuss well, if we think about the peeriod after global
Speaker 3: finance crisis, with the injection of Emmas pool of liquidity,
Speaker 3: companies that didn't have good fundamentals were rallying alongside companies
Speaker 3: with very good fundamentals. And this is what I meant
Speaker 3: by rising tight lifting all boats. But we're now in
Speaker 3: an environment of greater dispersion. We're in an environment of
Speaker 3: secular transformations like AI that is likely going to imply
Speaker 3: winners take hold. So this is an environment where being
Speaker 3: active and selective pays off more. And this is not
Speaker 3: a hypothesis. Our study actually shows that in a period
Speaker 3: coming out of the pandemic, actually the additional alpha generated
Speaker 3: by good active managers is greater compared to the peerage
Speaker 3: when rising tight was lifting all boats.
Speaker 2: Adam Parker a week ago in Barons I Thank You
Speaker 2: Parnassis Funds had a paragraph on the value of gross
Speaker 2: margin analysis. Jacob sanashin yesterday at Barons recapitulates that with
Speaker 2: a lot of Adam Parker research and the income statement,
Speaker 2: those successful companies that are rising, what does their gross
Speaker 2: margin or other margins down the income statement look like.
Speaker 3: Honestly, it's incredible that margins in the US have held
Speaker 3: up so while they are testing a recent year high,
Speaker 3: and it's notably higher than the equivalent in Europe in Japan,
Speaker 3: for example, So there really are something exceptional about US companies.
Speaker 3: But again to the point of greater dispersion and differentiation,
Speaker 3: one would note, digging under the hoods that actually a
Speaker 3: lot of the margin staying elevated and pushing higher has
Speaker 3: been driven by names Magnificent seven that are growing their
Speaker 3: revenues without actually hiring a lot more people. On the
Speaker 3: other hand, you have companies smaller PABs. For example, they
Speaker 3: are more vulnerable to rates settling at a higher level
Speaker 3: compared to before. They are more vulnerable to having to
Speaker 3: refinance their dad they don't have immense amount of cash
Speaker 3: sitting on their balance you. So again, this paints the
Speaker 3: picture of being active and selected.
Speaker 4: Well, I must confess I am a huge fan of
Speaker 4: yours on social media. I need to know where you
Speaker 4: bought that slice of pizza the other day. But you
Speaker 4: had a post yesterday pointing out equity manager Alpha and
Speaker 4: how it's improving. I'd love for you to expand on that.
Speaker 4: I'd love for you to talk about active risk taking
Speaker 4: and how active risk takers are outperforming in the current environment.
Speaker 3: Well, so that's really important. Then, this is why we
Speaker 3: think that this is really the golden age for being
Speaker 3: active right now. This is an environment of dispersion. You
Speaker 3: look at company is large cap versus small cap, tech
Speaker 3: versus consumers. Their margins, their earnest momentum very very different.
Speaker 3: I only talked about them on the level of sectors.
Speaker 3: Dispersion is even greater with in sectors along on the
Speaker 3: level of single names as well. So our study shows
Speaker 3: that for good managers they're being paid more for taking
Speaker 3: active risk and for median managers if they keep static
Speaker 3: macro factor exposure. It would have been okay in an
Speaker 3: environment where rising tight was lifting all boat coming out
Speaker 3: of global financial crisis. But now if they have static
Speaker 3: exposure to macro factors that are becoming less friendly, that
Speaker 3: actually becomes more punitive in this environment. So one can
Speaker 3: no longer get away with sitting on kind of macro
Speaker 3: factors and let them drift. We've got to be a
Speaker 3: lot more dynamic and active in our management style.
Speaker 4: Where you alluded to the data center build out, right,
Speaker 4: I mean the world of private markets in funding infrastructure
Speaker 4: and the AI build out and all that good stuff.
Speaker 4: And I just you know, I'm looking at some of
Speaker 4: the you know, high frequency cappecks indicators here in twenty
Speaker 4: twenty five, and it looks like things are pouncing back.
Speaker 4: It's unlike what I would have thought with all the
Speaker 4: uncertainty regarding tariffs in trade. You wouldn't think that corporates
Speaker 4: that the c suitely spending money in this way. What
Speaker 4: are your thoughts? What are you guys seeing over black Rock?
Speaker 3: The tariffs uncertainty is a timed uncertainty things are happening
Speaker 3: very very quickly, but I think the expectation is that
Speaker 3: we're going to see Lending Spot in the coming weeks, months,
Speaker 3: and quarters. Whereas the AI competition is a multi decade
Speaker 3: competition that goes beyond the cyclic code, apps and flows,
Speaker 3: and I think companies are viewing that as existential competition.
Speaker 3: You either spend and stay on the table or you
Speaker 3: could be at did the competition right, which is why
Speaker 3: we see Kapecks coming and continuing to be very strong,
Speaker 3: which is why we also think that there's a lot
Speaker 3: more to go in.
Speaker 4: The AI across the nation.
Speaker 2: Wayey with Black record, as we continue with Wayley here
Speaker 2: with Green and the screen ever so slight the vics
Speaker 2: nicely under seventeen sixteen point sixty three. Damien said he
Speaker 2: wouldn't show up unless I quoted yen one forty eight
Speaker 2: fifty one. Yeah, and really a surprise can get out
Speaker 2: to a weaker one fifty. We welcome all of you
Speaker 2: on Serious XM Channel one twenty one in Washington, Boston,
Speaker 2: in New York in a special good Morning out on YouTube.
Speaker 2: It's our new distribution, humbled by the success of the
Speaker 2: YouTube product, including Tracy Alloway and Joe Wisenthal there as well. Wait,
Speaker 2: if we define exuberance is something to do with Alan
Speaker 2: Greenspan or something to do with Robert Schuller at Yale,
Speaker 2: how does Wayley measure the exuberance the equity market this
Speaker 2: summer of twenty twenty five.
Speaker 3: I think by historical standards, if you compare to average
Speaker 3: multiples right now, multiples look stretched. But I think that
Speaker 3: is a big kind of statement to compare to historical
Speaker 3: averages because we're not in an environment where things are
Speaker 3: expected to revert back to historical mean. We're in an
Speaker 3: environment of transformations, right, So what is the benchmark? What
Speaker 3: is the fair value? I think all of them needs
Speaker 3: to be scrutinized a lot more in this environment, I
Speaker 3: would observe whilst versus historical long term You know, you
Speaker 3: look at Sharpe for example, they look stretched. You look
Speaker 3: at Magnificent seven, they're forward. Ky's actually right now in
Speaker 3: the middle that they are thirty times a pe right now,
Speaker 3: in the middle of the range since the launch of CHGBT, Right, So,
Speaker 3: so I think really scrutinizing the level against which we
Speaker 3: make our comparative statement is the key. I would also say,
Speaker 3: right now, you know, like we are, we're risk on
Speaker 3: despite multiples looking a little stretched because technical and positioning
Speaker 3: is not as stretched as compared to the beginning of
Speaker 3: the year. This has not been a much participated, heavily
Speaker 3: participated rally, especially by institutional investors from what we're hearing,
Speaker 3: and alongside the fact that fundamentals are holding up, alongside
Speaker 3: the fact that you know, we're talking about lots of
Speaker 3: headlines on tariffs flying around, but considerations for US that
Speaker 3: sustainability should take out some of the extreme left tails.
Speaker 3: So this is why we're risk on despite val Well, wait, I.
Speaker 4: Mean, look at US equity earning season, right despite all
Speaker 4: this ongoing trade uncertainty, they were surprisingly good in the
Speaker 4: first quarter. They're looking rather rosi here in the beginning
Speaker 4: of two Q and sorry to borrow baseball now during
Speaker 4: All Star break, But you know, what inning are we
Speaker 4: in exactly? I mean, most argue that we're late in
Speaker 4: the business cycle, but many still feel that, you know,
Speaker 4: the US exceptionalism narrative is merely taking a modest breather.
Speaker 4: What are your thoughts there?
Speaker 3: How many innings are there in the analogy all the time.
Speaker 2: This is the first guest, we've ever had great point,
Speaker 2: great question this afternoon. I mean Carpedo and you know,
Speaker 2: Rick Reader, when they want to hear from you on
Speaker 2: the equity markets at two pm, you just say, I'm sorry, Rick,
Speaker 2: I've got to watch Red Sox Cubs for nine innings.
Speaker 2: Damian continue here.
Speaker 4: I mean just in terms of the business cycle, and
Speaker 4: again it goes back to your point on CAPEX, which
Speaker 4: is so important. I mean, like put you rightly point out.
Speaker 4: I think the tech sector the mag seven we're responsible
Speaker 4: for eighty percent, upwards of eighty percent of all CAPECS
Speaker 4: spending twenty twenty four. Somebody told me that I don't know,
Speaker 4: but you know, cap X is what we should be
Speaker 4: focusing on here, and it seems like in the US
Speaker 4: at least it's okay. I mean, you seeing the same thing.
Speaker 3: I agree with you hundred percent. Corpex is what we
Speaker 3: should be focusing on, and also companies tech budget upgrades.
Speaker 3: You know, these are the things that we pay attention
Speaker 3: to understand how much more there is to go in
Speaker 3: the AI build out phase. But specifically back to earnings,
Speaker 3: like you said, Q one was very good. Q two
Speaker 3: expectation was for SMP to row about five percent six
Speaker 3: percent on a year on year basis. That's not hard
Speaker 3: to beat. I am pretty confident that we will beat that.
Speaker 3: You know, like it's mostly driven by tech, of course,
Speaker 3: but we're in the early innings of the tech AI supersycho,
Speaker 3: so we definitely think that there is there is more
Speaker 3: to go. Yeah, so we continue to be overweight driven
Speaker 3: by our conviction in tech.
Speaker 2: Well, well, how do you rationalize okay ai tech I
Speaker 2: get it even three m now with a nice recovery
Speaker 2: after a decade of mediocrity. How do you rationalize a
Speaker 2: thirty time times plus multiple for a large grocery store,
Speaker 2: big box store. That man has a grocery bolt and
Speaker 2: called Walmart. How do you it's grown single digit it
Speaker 2: makes nice even How does that thing get priced out
Speaker 2: it over thirty times earnings?
Speaker 3: I can comment on single names, as you know, Tom,
Speaker 3: but I would say that this is why we need
Speaker 3: to be selected right. There are companies that we legitimately
Speaker 3: can see a case for AI boosting productivity profits, and
Speaker 3: there are companies where such estimate is a bit stretched
Speaker 3: and hard to justify, which is why, even though we
Speaker 3: have the broader overweight within that we focus on companies
Speaker 3: that are likely going to benefit from a greater AI adoption,
Speaker 3: boosting productivity, including healthcare, including financials. But of course tag
Speaker 3: consumer discussionary and so and so.
Speaker 2: How does Wley with Chris Waller coming up at forty minutes,
Speaker 2: how does Wayley translate this FED debate with the President?
Speaker 3: Yeah, I think the bigger micro picture is that we're
Speaker 3: in an environment of high for longer because of inflationary pressure,
Speaker 3: in part thinking about kind of the tariffs new regime,
Speaker 3: but in part because of the environment shaped by supply,
Speaker 3: including labor supply shortages, right, so thinking about aging population
Speaker 3: and persistent wage So that being the case, persistent inflationary
Speaker 3: pressure should mean rates would settle at a higher level
Speaker 3: compare to before. But it means that income is back,
Speaker 3: you know, for the first time in a long time.
Speaker 3: Eighty percent of global fixed income is yielding four percent
Speaker 3: and higher. It will be very different two before. This
Speaker 3: is an environment for income.
Speaker 2: Beautifully described the ambiguity here of a sustained higher rate.
Speaker 2: Most people go OMG, the gloom of it all, and
Speaker 2: others that think of John Riding formerly at bear Stearns
Speaker 2: now Bring and Wayley at Blackrock saying there's an opportunity
Speaker 2: there for the coupon and the paths forward. Wayley is
Speaker 2: with Blackrock.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: There are people that talk and there are people that do.
Speaker 2: And out in Chicago, Ta Konig is one of the
Speaker 2: people at Monroe Capitol does these huge commitment to Northwestern Medical,
Speaker 2: of Northwestern University and all of that, and of course
Speaker 2: his work is academics, i should say, in Indiana University,
Speaker 2: a bit ago and Damian. Why don't you bring in
Speaker 2: Ted because this is sort of in the wheelhouse of
Speaker 2: this expansion of alternative investments.
Speaker 4: Yeah, Tad, will you and the team at Mono Capitol
Speaker 4: focus on middle market middle market credit, really private credit
Speaker 4: to be serious? But here, you know, we know the
Speaker 4: private credit markets are consolidating, and we were just talking
Speaker 4: about the private equity space. My goodness, fundraising is plunged.
Speaker 4: And so my question for you is what are your
Speaker 4: thoughts on the emergence of all these continuation vehicles? Colo
Speaker 4: demand this week MNA activity. I mean, is the market healthy.
Speaker 5: Yeah, the market's healthy, Damien. But we're seeing today it's
Speaker 5: a unique phenomenon. We came off of two or three
Speaker 5: really solid years of M and A and private equity.
Speaker 5: Dry powder today sits in about a one point seven
Speaker 5: trillion dollars. It's the highest it's ever been. This is
Speaker 5: money on the sidelines.
Speaker 4: We find all work and.
Speaker 5: Because of the challenges let's say in the last year
Speaker 5: or so with prognosticating tariffs and regulation, inflation, interest rates,
Speaker 5: there's a lot of PE firms that are sitting on
Speaker 5: companies and not able to sell because the market's not clear.
Speaker 5: And when that happens, the system gets backed up, and
Speaker 5: what we see is a proliferation of continuation vehicles. We
Speaker 5: see second can down the roads and you know the
Speaker 5: challenges you're seeing kind of the results of that right
Speaker 5: now when you see these endowments selling private equity portfolios.
Speaker 5: We've never seen a year where there's been more private
Speaker 5: equity sales of portfolios into the marketplace. Secondaries.
Speaker 4: Yeah, well, I mean we had way lea of Blackrock
Speaker 4: on earlier, and we had this wonderful discussion about CAPEX
Speaker 4: here in the US, and we know that it's the
Speaker 4: big tech, the mag seven that's driving a lot of
Speaker 4: the data center build out. But what's going on in
Speaker 4: the middle markets in middle market America and your wheelhouse?
Speaker 4: You know, what are the proceeds being used for? Is
Speaker 4: it for you know, recaps in restructuring or is it
Speaker 4: being put to use?
Speaker 5: Yeah, so it's interesting. We've got about five hundred and
Speaker 5: twenty companies in our portfolio. We're the largest middle market
Speaker 5: finance company in the country.
Speaker 2: So you like the new Chemical Bank, that's really what
Speaker 2: we're talking about.
Speaker 5: Yeah, you know, the key is is that all the
Speaker 5: financing has come out of the regulated banking system for
Speaker 5: buyouts and it's going into the alternative assets system. And
Speaker 5: we've been the beneficiary of that because that's been our focus.
Speaker 5: Most of our competitors have kind of morphed up market
Speaker 5: and done larger deals. We've kind of stayed in our wheelhouse.
Speaker 2: Do you compete with Jamie Diamond?
Speaker 5: No, Jamie's a good guy. He's never going to be
Speaker 5: in our business and we're never going to be in
Speaker 5: his business.
Speaker 4: He's trying to be in your business. I mean, let
Speaker 4: me ask you this though, I mean, there has been
Speaker 4: a lot of talk about how you know, private credit
Speaker 4: really is, you know, eating Wall Street's cooking here. I mean,
Speaker 4: is there any truth to that? I mean, is there
Speaker 4: any way that the big banks can crack that nut?
Speaker 5: You know? It's interesting. There's two ways banks work. One
Speaker 5: is there either in a distribution business or they're in
Speaker 5: a storage business. They make a hell of a lot
Speaker 5: more money in the distribution business than they do in
Speaker 5: the storage business. So what they want to do is
Speaker 5: take the deals, pack the deals, distribute the deals, and
Speaker 5: make fees. It doesn't require regulatory capital, it doesn't require
Speaker 5: risk capital, and it generates significant earnings.
Speaker 2: Surveillance Audibo Damien sas a fight up about alternative investment
Speaker 2: Monroe CAPITALO, I don't care. I have the golf stream
Speaker 2: after the show and I'm going out through a hair
Speaker 2: and for the first time in ninety years, the Boston
Speaker 2: Red Sox play at Ridley Field. And what I want
Speaker 2: to know, Ted, is do I I'm looking at stub
Speaker 2: ub right now. You gotta help me. Do I go
Speaker 2: with section eighteen just to the left for twelve hundred bucks,
Speaker 2: two seats. Missus Keane says she's got to go or
Speaker 2: do I pump it up for twenty six hundred dollars.
Speaker 2: Excuse me to check that twenty eight hundred dollars for
Speaker 2: where you sit Section AA nineteen. Which is it? I
Speaker 2: tell you what you do?
Speaker 5: You call me and I'll call my pale Tom Ricketts,
Speaker 5: and I'll put you next to the double game.
Speaker 2: Say good morning to mister Ricketts. I have goosebumps. I'm
Speaker 2: going home, folks. I have a younger children birthday party.
Speaker 2: I'm told I have grandchildren haircuts, and I said it
Speaker 2: may be divorced. But Red Sox cubs at ridley Field,
Speaker 2: I have at least I got ducky bumps. Right now,
Speaker 2: Bill Murray, I'm sure will be there. This is like
Speaker 2: a huge deal. Would you like to ask a question?
Speaker 4: Look at your eye back on the ball here. I
Speaker 4: mean what I need to know here is will the
Speaker 4: one big beautiful bill be good for middle market America
Speaker 4: and for your space?
Speaker 5: You know it's there's two ways to look at it.
Speaker 5: I think anything that provides certainty is good, and we
Speaker 5: finally have some certainty on tax policy. The challenge that
Speaker 5: Tom was referring to is middle market companies based decisions
Speaker 5: on capex and growth and those are five ten year decisions.
Speaker 5: If you're a manager, private equity firm, an owner, a
Speaker 5: family business, second third, fourth generation business, significant business, you
Speaker 5: have to make decisions based on projected cash flows and
Speaker 5: payback periods. If you don't have certainty on what that's
Speaker 5: going to look like, it's very hard to make those decisions.
Speaker 5: That's why over the last six months nine months, we
Speaker 5: haven't seen a lot of big capex. We'd put about
Speaker 5: ten billion dollars a year into the ground in middle
Speaker 5: market companies. This year we did about four and a
Speaker 5: half billion in the first six months of the year,
Speaker 5: which we're on target. But what's interesting that this year
Speaker 5: eighty percent of our deals came out of our portfolio
Speaker 5: add ons, tuck ins, and dividend recaps, dividend transactions, not
Speaker 5: new platform buys, not new M and A, but dividends
Speaker 5: to sponsors that wanted to take money out of companies
Speaker 5: to create value to their LPs because their alps are
Speaker 5: clamoring for return of capital.
Speaker 4: Yeah, so, I mean, let me ask you this, I mean,
Speaker 4: what typpy yields. I mean, I know it's very different.
Speaker 4: I don't want to get into the weeds here, but
Speaker 4: I'm thinking mid to high double digit yields in your space?
Speaker 4: I mean, is that is that something that you see often?
Speaker 5: No, I mean we're We've done double digit yields to
Speaker 5: our LP investors for twenty six years now, so think
Speaker 5: ten to twelve percent. That's what our LPs want. And
Speaker 5: if you're a pension fund or you're an insurance company,
Speaker 5: that's as good as you can get.
Speaker 2: Should Lisa have private credit in her IRA?
Speaker 5: Great question, Great question. Lisa should have private credit in
Speaker 5: her portfolio. The question is whether it's in her IRA
Speaker 5: or not. Lisa can do it because she's more sophisticated
Speaker 5: than ninety nine percent of the population, but the rest
Speaker 5: of the population doesn't necessarily understand this.
Speaker 2: Are they going to get a second rate piece from
Speaker 2: the private credit vendor because fancy guys like you?
Speaker 5: Great question, Great question. I'm concerned that the acid aggregators
Speaker 5: will start creating detailed products only, and that's a challenge
Speaker 5: and something back on the stuff.
Speaker 2: In there, come back. I'll see in Chicago and your
Speaker 2: Red Sox cubs here really history being made right now,
Speaker 2: Tech County. Thank you so much for running your capital.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: We get lucky. That's all there is at Chewett Brandon o' lindsey,
Speaker 2: and you're on the airlines are a huge out of
Speaker 2: Georgia tech. I'm incredible vista on transportation in America. I
Speaker 2: got to start with two things. Let me start with
Speaker 2: the railroads. I got a two hundred billion dollar railroad.
Speaker 2: They're only doing this because Trump's president, right.
Speaker 6: I mean I think so, because I've been doing this
Speaker 6: for twenty years, and for twenty years I've heard a
Speaker 6: transcontinental merger is just a no go because we tried
Speaker 6: this one.
Speaker 2: If they tried it, well, that's right, we tried.
Speaker 6: Canadian National was the last one to try to buy
Speaker 6: Burlington back in the year two thousand and It's spurred
Speaker 6: enhanced M and A regulations now. But I think the
Speaker 6: CEOs look at this and say, look, industrial productions has
Speaker 6: been flat for three years. We've kind of gotten all
Speaker 6: the costs out with precision scheduled railroad. And what's next, Well,
Speaker 6: it's merger.
Speaker 2: Do you think this will go through? Brian Olenski, what
Speaker 2: do you think?
Speaker 6: I think the odds are possible here. Look the way
Speaker 6: we do things today with these regional networks is Union Pacific.
Speaker 6: We'll have traffic going from La maybe to Atlanta. Yeah,
Speaker 6: they'll push it to Cho to connect it to Norfolk
Speaker 6: Southern that will then take it down to Atlanta. And
Speaker 6: that's in both carriers' interests because they're maximizing revenue and profitability.
Speaker 6: If now you own an East West rail line, you'd say,
Speaker 6: I'll just flow that right through Saint Louis or Memphis.
Speaker 6: So I think there's a lot of potential efficiency here
Speaker 6: and actually economic benefit for the country.
Speaker 2: Hey, fabulous, love it. Thank you so much for that.
Speaker 2: I have a personal question. We rarely do we have
Speaker 2: someone come in that actually flies an airplane. For all
Speaker 2: of our listeners and viewers with this horrific twenty twenty five,
Speaker 2: they feel safe in the American airspace now, the commercial
Speaker 2: American airspace.
Speaker 6: Oh fully. And I am a commercial pilot and I
Speaker 6: understand the airspace system quite well. There's so much redundancy.
Speaker 6: I mean, I know, the media attention on Newark was
Speaker 6: really bad, but the reality was there's dual runways there.
Speaker 6: They had to close a runway for repairs and it
Speaker 6: caused a backup.
Speaker 2: Can you get me a seat at the United Club
Speaker 2: at Newark because every time I go, it's Pas working there.
Speaker 2: Brandon Olinski with us, with Barclays, Damien jump in here
Speaker 2: with airlines questions.
Speaker 4: So yes, but Brandon, you know, it just so happened.
Speaker 4: Last week I got to fly down to Dallas Fort Worth,
Speaker 4: you know, for a family event. It was unfortunately passing family,
Speaker 4: but nevertheless I sat on the tarmac for three hours.
Speaker 4: Three hours at Dallas Fort Worth. This is the hub
Speaker 4: for American Airlines right because there was a lightning storm
Speaker 4: that hung over the air Have you ever heard of
Speaker 4: such a thing like that? The entire airport closes down,
Speaker 4: They leave you on the tarmac for three hours, completely
Speaker 4: blew up by evening plans, everything about it. I mean,
Speaker 4: how does an airport manage itself like that?
Speaker 6: Well, the major hub we are talking about American and
Speaker 6: their operational performance does lag well? No, I like Robert
Speaker 6: Iman team down there in Dallas, and for sure they're
Speaker 6: trying hard and Roberts brought a lot of operational focus
Speaker 6: this company. But even for Delta United, this happens when
Speaker 6: a thunderstorm shots started the field.
Speaker 4: You can't get your ground American airline issue. It's the airport,
Speaker 4: right because there's.
Speaker 6: Only so many gates and there's incoming flights, so you
Speaker 6: can get stuck.
Speaker 4: But Dallas love Field, Now I'm aplying into love Field.
Speaker 2: You most hate going to social events where people just
Speaker 2: corner you and you know, give you all the complaints,
Speaker 2: like young Sassaur here, what's your single best buy? If
Speaker 2: you're hearing Scott Kirby this week, United, is your single
Speaker 2: best buy in Latin America? Is it Air of France?
Speaker 2: Is it something in the US?
Speaker 3: Brandon?
Speaker 2: Where is it? Now?
Speaker 6: I'm a buyer, mister Kirby. I mean, he's got quite
Speaker 6: a culture going in Chicago.
Speaker 2: He's a pilot. You're biased because he's a pilot.
Speaker 6: Uh, He's he's got his point of view for sure,
Speaker 6: and we don't always see. I had a lot of things,
Speaker 6: but I really like the environment that he's created at
Speaker 6: that company, and everyone's rowing in the same direction, and
Speaker 6: you just see you rarely see these cultures that really
Speaker 6: mesh every company in CEO says they have a culture,
Speaker 6: but I think Scott's really got a lot of good
Speaker 6: things going on.
Speaker 2: If you're all day on this, I got to shift.
Speaker 2: I can't say enough, folks. This is out of Georgia
Speaker 2: tech academics.
Speaker 6: State.
Speaker 2: Excuse me, Georgia state, excuse me. This is I might
Speaker 2: stand corrected. This is incredibly important. It's not just about
Speaker 2: a flight out of DFW ORWR, FedEx, Amazon and moving
Speaker 2: boxes around in America. Where are we in three or
Speaker 2: five years.
Speaker 6: Oh, this is a great question. We need to bring
Speaker 6: UPS into that equation too. And I don't want to
Speaker 6: be negative on UPS, but there's just immovable economic forces
Speaker 6: at work here. What's happened in the last twenty years
Speaker 6: is we've seen FedEx Ground developed this independent contractor network
Speaker 6: across the country and it's grown significantly, and Amazon effectively
Speaker 6: replicated that five or six years ago. So you have
Speaker 6: these two very large, low cost, high service networks, and effectively,
Speaker 6: here's UPS that's fully unionized, fully team start contracted, and
Speaker 6: they're really struggling because they're the high cost provider with
Speaker 6: incrementally more challenging service. So the way we see this
Speaker 6: and we saw this play out in the less than
Speaker 6: truckload sector because there was a big competitor there, Yellow Roadway,
Speaker 6: which was unionized, and Old Dominion, which is one of
Speaker 6: the highest valued thoughts in my sectors, really took a
Speaker 6: lot of share and ultimately Yellow went out of business.
Speaker 6: So I'm really worried that this uncompetitive dynamic where UPS
Speaker 6: has a contract that the others don't. We see parcel
Speaker 6: shift going towards Amazon and FedEx long term.
Speaker 4: So what's the plan on UPS. It's a dividend play, right,
Speaker 4: I mean, what all is there.
Speaker 6: I think they're yielding six or six and a half
Speaker 6: percent right now, and I don't think they're going to
Speaker 6: cut the dividend anytime soon. But if you listen to UPS,
Speaker 6: Amazon is a twenty percent customer in their domestic US network,
Speaker 6: and Amazon's shrinking that by half in the next two years.
Speaker 6: It's going to really hit in the back half of
Speaker 6: this year, and UPS has come out and said, look,
Speaker 6: we need to shrink our domestic network by ten percent.
Speaker 6: That's going to be really challenging in these very time
Speaker 6: definite pickup and delivery networks. So we're of the view
Speaker 6: and we tell investors all the time the dividend looks juicy,
Speaker 6: but ultimately, if you're shrinking your network, you gotta think.
Speaker 2: A level four.
Speaker 4: You know, I'd love to stick with this talk on
Speaker 4: logistics in the US here, but I gotta go back
Speaker 4: to airlineses time. I mean, what you saw on the
Speaker 4: United Jet Blue partnership, this Blue Sky partnership, how's that
Speaker 4: going to impact things? And more importantly, what are your
Speaker 4: thoughts on the Delta one club. I love it there,
Speaker 4: It's so awesome.
Speaker 6: Oh well, Delta one is nice if you haven't tried it,
Speaker 6: especially at JA.
Speaker 4: Recommend Is it working? Is it feeding the bottom line there?
Speaker 6: I mean you can find a seat there by the way,
Speaker 6: for sure. I think it's more encompassing. I mean, United
Speaker 6: is pursuing the same strategy. They have their ployers or
Speaker 6: lounges as well. But it's clear, you know, Delta has
Speaker 6: been on this journey effectively since they as exited bankruptcy
Speaker 6: in two thousand and seven merge with Northwest. They said,
Speaker 6: we are not going to be just a commodity anymore.
Speaker 6: We're going to be differentiated and we're going to offer
Speaker 6: you things. Do you want to pay less? Do you
Speaker 6: want to pay more? And we'll give you a differentiated experience.
Speaker 6: And now at the very high end they're really trying
Speaker 6: to it.
Speaker 2: You're the high end, Damian A minute, I got one
Speaker 2: minute left. Is there a partition, as Kirby outlined, between
Speaker 2: international travel, Transatlantic and the Pacific the romance of international
Speaker 2: and a dog eat dog domestic travel for twenty twenty.
Speaker 6: Six, I think International is going to continue to pay
Speaker 6: dividends for Delta United to some extent American as well,
Speaker 6: just because we shrunk the wide body fleet. These are
Speaker 6: the dual ale aircraft. To confly, Yeah, we got rid
Speaker 6: of them during the pandemic. It's a five percent smaller
Speaker 6: fleet today and everyone's going to grease France Spain in
Speaker 6: the summertime. So this is going to keep paying dividends
Speaker 6: for them for sure.
Speaker 4: And are you seeing visitor numbers, tourists arrivals, all of
Speaker 4: that is going up from the US.
Speaker 6: Brought well, remember that the dollar was strong, so when
Speaker 6: we're like European visitors are down, it was just a
Speaker 6: function of FX. I know everyone want to say they
Speaker 6: hate Trump whatever, but the reality was it's a simple
Speaker 6: FX equation when when the dollar is weak and then
Speaker 6: all of a sudden Europe.
Speaker 4: Yeah, exactly, Tom. You love when Europeans come to New
Speaker 4: York City, don't you? Especially real.
Speaker 2: Yeah, it's like a huge, huge deal, and it's like,
Speaker 2: off the top of my head, folks, it's tourism. You're
Speaker 2: seventeen percent of the to me. Can you Are you
Speaker 2: based in New York? Are you based like in Dallas
Speaker 2: or Georgia?
Speaker 6: No, I'm based right here.
Speaker 2: Thank you so much. Brandonaglensky with Berkley's there.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple, Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
Speaker 1: us live every weekday on YouTube and always on the
Speaker 1: Bloomberg terminal.
Speaker 2: Roy Chaupers Live this Anna Harvard and Wharton. Yes, the
Speaker 2: former director of the Consumer Financial Protection Bureau. He was
Speaker 2: appointed actually by mister Trump to the Democrat seat slot
Speaker 2: ages ago, and then it's more associated with Democrat party politics. Roy,
Speaker 2: thank you so much for joining Bloomberg this morning. Is
Speaker 2: it the wild West out there in regulation with a
Speaker 2: Trump administration?
Speaker 7: Well, it's interesting, it's not so much the wild West.
Speaker 7: It's mostly a set of giveaways to very politically connected firms.
Speaker 7: You know, we have seen big giveaways to Wells Fargo
Speaker 7: by the Federal Reserve. We have seen giveaways from the
Speaker 7: CFPB essentially pardoning and pulling out of court allegations of
Speaker 7: pretty serious crime. So I think you're starting to see
Speaker 7: parts of the business community getting a little nervous about
Speaker 7: this because if the rules are applying to some of
Speaker 7: them but not to others, that's a recipe for a
Speaker 7: playing field that's just not lovely.
Speaker 2: I don't want you to pick on one thing. I'm
Speaker 2: going to do it for you. But I guess my
Speaker 2: concern is if there's big things that gets through, like
Speaker 2: the railroad merger of two hundred billion discussed today in Norfolk,
Speaker 2: Southern and Union Pacific. The fact is you're the guy
Speaker 2: that went after Corinthian College. I mean there's some real
Speaker 2: garbage out there. Is that stuff going to slip through
Speaker 2: the cracks because of a more entrepreneurial regulation.
Speaker 4: Well, let's talk about that.
Speaker 7: So Corinthian colleges not only engaged in some serious misconduct
Speaker 7: against students and loading them up with debt for worthless degrees,
Speaker 7: they also were defrauding functionally the federal government out of
Speaker 7: public funds.
Speaker 4: So I do think.
Speaker 7: That in my experience has been that sometimes when there
Speaker 7: is a push for letting animal spirits run wild, a
Speaker 7: cost of that is more funds, public funds being siphoned
Speaker 7: away to bad actors, but also individuals engaged in serious,
Speaker 7: serious destruction of their own financial life, and really no
Speaker 7: one is there to fix it. And I don't know
Speaker 7: if the market system in the US thrived from just
Speaker 7: no rules. In fact, many people would argue our securities laws,
Speaker 7: our patent laws, so much of that was critical for
Speaker 7: really driving a lot of innovation and our government investments
Speaker 7: which helped incubate you know, SIRI, GPS, so many transformative
Speaker 7: technologies from NASA and DoD. If that is all gutted too,
Speaker 7: that means our private sector won't be able to run
Speaker 7: with it. So I'm really not sure that this is
Speaker 7: good for long term growth. To have a sort of
Speaker 7: no regulation, no law enforcement type approach ro we.
Speaker 4: Have to go there. The Consumer Financial Protection Bureau basically
Speaker 4: just had proposed to you know, keep medical debt off
Speaker 4: their credit reports, but that ruling was just overturned by
Speaker 4: the White House by Trump. More than fifteen million people
Speaker 4: have more nearly fifty billion of medical debt on their
Speaker 4: credit reports. Talk to us about the impact of that.
Speaker 4: Is that good for the American household?
Speaker 7: Well, so here's the deal. Lenders really want to know
Speaker 7: what people have borrowed. I think the difference with medical debt,
Speaker 7: and there's been a series of studies that we conducted
Speaker 7: on this, those medical bills are not really predictive of
Speaker 7: whether or not someone will repay an auto loan or
Speaker 7: a mortgage. The circumstances are totally different. And we also
Speaker 7: find that many of the medical bills that are parked
Speaker 7: on credit reports, we're either already paid or we're never
Speaker 7: owed in the first place. I think we've all experienced this,
Speaker 7: that loop between the insurance company and the medical provider.
Speaker 7: So I think this is going to have a negative consequence.
Speaker 7: It's going to lower credit scores for many people. It's
Speaker 7: going to make it tougher for people to really take
Speaker 7: those risks when it comes to borrowing for their first
Speaker 7: home or advancing in their financial life. So again, I
Speaker 7: just think this is a total stop to the medical
Speaker 7: debt collectors, debt buyers, and credit reports.
Speaker 4: Well, just to clear the parodience, I mean, these credit
Speaker 4: reports are the same things that households need to get
Speaker 4: a mortgage, right, to get an auto loan, a small
Speaker 4: business loan. So I've got to believe that if this
Speaker 4: stuff is included on their credit reports, You're absolutely right,
Speaker 4: it's going to make it a little bit more difficult
Speaker 4: one we'd think to take out a loan, right.
Speaker 7: Yeah, And I just think we want the information on
Speaker 7: credit reports to truly be accurate, and we wanted to
Speaker 7: reflect loans that people have. I really worry that, for example,
Speaker 7: all of these buy now, pay later loans they're not
Speaker 7: necessarily I had auto lenders complain to me how am
Speaker 7: I supposed to know what people owe on buy now
Speaker 7: pay later? And again we see this new CFPB just
Speaker 7: completely pardoning and letting these buy now, pay later companies
Speaker 7: do whatever the hell they want.
Speaker 2: Right, you had an extinguished career at Wharton and then
Speaker 2: before that at Harvard, I mean Bloomberg surveillance. We want
Speaker 2: to know when you were at Adam's house in Cambridge
Speaker 2: at Harvard, did you swim nude in the pool?
Speaker 7: I think they actually covered up the pool well before
Speaker 7: I got there. But you know what, I do think
Speaker 7: that the things that you end up learning in these institutions,
Speaker 7: you learn textbook stuff. What we used when we were
Speaker 7: regulating was actual, real world business experience. And I feel
Speaker 7: that when you have regulators that are now just blindfolding
Speaker 7: themselves to what is happening in the markets and what
Speaker 7: is happening with people's lives, that is a recipe.
Speaker 2: He just completely. That was extra points. I didn't want.
Speaker 7: I didn't I didn't want to make anyone seem too
Speaker 7: dated by it.
Speaker 2: Thank you so much. Don't be a stranger. We'd love
Speaker 2: to see at our headquarters here in New York. Is again,
Speaker 2: mister Choper is public service, uh in the CPP.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. You can also listen live
Speaker 1: on Amazon alone from our flagship New York station. Just
Speaker 1: say Alexa, play Bloomberg eleven thirty.
Speaker 2: The newspapers.
Speaker 8: Okay, birthdays, right, it's a time to celebrate.
Speaker 2: It's your breath one today. I'll love today this morning.
Speaker 2: Oh okay, baby immediately really seven years old?
Speaker 4: Okay, no, it's nice.
Speaker 8: Somewhat disciplined, somewhat happy, birthday. But it's also time where
Speaker 8: you can cash in on some freebies. Okay, So I
Speaker 8: always try to get my free Starbucks on my birthday.
Speaker 8: That's the one thing I go for. But some people
Speaker 8: make an event out of it, right, So you have
Speaker 8: these competitive birthday freeloaders. So the Wall Street Journal they
Speaker 8: spoke with one guy. He makes an event out of it. Okay,
Speaker 8: he has a spreadsheet of all his stops for the day. Okay,
Speaker 8: he starts working on it monthly in Evans, he spends
Speaker 8: like fifteen hours He's sifting through emails and loyalty apps,
Speaker 8: terms and conditions. He starts today like six am. He
Speaker 8: logs like ten thousand steps that day. Okay, he has
Speaker 8: drives thirty to fifty files in his car. Businesses are saying,
Speaker 8: you know what, more people are doing this, they're cashing in.
Speaker 8: Did you know that you can go to Denny's and
Speaker 8: get a free grand Slam of breakfast?
Speaker 4: Leonia, New Jersey. I just want to know what your
Speaker 4: go to Starbucks drink is?
Speaker 8: Black coffee, so boring, brown sugar.
Speaker 2: N The only time I've been to a Denny's is
Speaker 2: between twelve forty four.
Speaker 3: That's time.
Speaker 2: That's the truth.
Speaker 6: Next.
Speaker 8: Okay, so banks, right, they've had an issue with private
Speaker 8: equity taking over their junior talent. This has been the
Speaker 8: news a lot. Goldman SAX thinks they have an answer
Speaker 8: to that. So what they're doing, they're offering them buy
Speaker 8: side jobs within the bank. So apparently yesterday Goldman sent
Speaker 8: out a letter to its summer interns. This from Business Insider,
Speaker 8: they announce this new program. It's going to offer a
Speaker 8: select group of those junior bankers the chance to work
Speaker 8: for Goldman's asset management business after their two year investment.
Speaker 8: Banking analyst pro truly read between the line statement yes, yeah, yeah, No.
Speaker 4: I mean for me, it's all about, you know, trying
Speaker 4: to keep the town from walking out the door. But
Speaker 4: I mean what's amazing is you have some real like
Speaker 4: kind of conflicts of interest. Right If you have a
Speaker 4: banker that's working for Goldman SAX, but then he's already
Speaker 4: kind of committed to working for I don't know, Apollo
Speaker 4: or some other private equity shop two years down the road. Yeah,
Speaker 4: that's kind of a big complet of interest from a
Speaker 4: client perspective.
Speaker 2: Right, You're not as good looking as Shnalie Basset, but
Speaker 2: I'm going to the nale question. The bottom line here
Speaker 2: is investment banking hasn't come back. No, it's not booming.
Speaker 4: No, no asset management. I mean those asset management positions,
Speaker 4: that's what you're really after. At least that's what I'd
Speaker 4: be after if I were.
Speaker 2: Graduation slots aren't there and investment banking anymore.
Speaker 4: And they're not really there, and as management, it depends.
Speaker 4: I mean, look, if you're private credit, yeah, but how Look,
Speaker 4: I just questioned the durability of that market, thank you
Speaker 4: very much. But I mean other areas like commercial real estate.
Speaker 4: I mean again, you know, the hiring is kind of
Speaker 4: not what I mean. And I'm kind of close to
Speaker 4: this because I have a son who's twenty years old
Speaker 4: and going into his junior year of college. Yeah, it's tough.
Speaker 4: It's competitive out there, for sure.
Speaker 2: It's really something that's really tough.
Speaker 8: Yesterday, Okay, have you are you a fan of the apparel?
Speaker 8: Sprint has been.
Speaker 2: Selected members of the household?
Speaker 8: Okay, okay, selective members. You know, White Lotus like made
Speaker 8: it big because the second season filled in sicily. Some
Speaker 8: people like it's like a bittersweet flavor.
Speaker 2: Right.
Speaker 8: I'm not a big fan of it. Others say it
Speaker 8: tastes like medicine. That's what I kind of think. But
Speaker 8: there is a new summer cocktail. It is the Hugo Sprits. Okay,
Speaker 8: you have to try this one. It is prosecco, Club
Speaker 8: soda and Elderflower.
Speaker 4: Older Flower. I am a big fan.
Speaker 8: Of the elder flower. The Saint Germaine is like, great,
Speaker 8: I love it. So Saint Germaine actually said they're they're growing.
Speaker 8: They were bought by Bacardi back in twenty thirteen, but
Speaker 8: they're really growing. They have the hand pick flowers that
Speaker 8: grow in the French Alps, you know. So people really
Speaker 8: love it. It's on the TikTok and Instagram feeds. People
Speaker 8: are really enjoying.
Speaker 4: It's a glue free Does.
Speaker 2: A president want real cane sugar?
Speaker 8: That's a good question.
Speaker 4: And my go to is always a spicy margarita. But
Speaker 4: you know, if you're going to make a spicy bug
Speaker 4: rada the right way, you need that Tahiti around the rim.
Speaker 4: I don't think any of that salt that's the good stuff.
Speaker 2: This is way too much infermanship.
Speaker 6: Thank you so much.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
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