Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Speaker 1: Week Daily reporting from the magazine that helps global leaders
Speaker 1: stay ahead with insight on the people, companies, and trends
Speaker 1: shaping today's complex economy. Plus global business finance and tech
Speaker 1: news as it happens. The Bloomberg Business Week Daily Podcast
Speaker 1: with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: Let's get to Peter Cheer. He's head of macro strategy
Speaker 2: at Academy Securities. He's back with us in our Bloomberg
Speaker 2: Interactive Brokers studio. It is kind of wild, Peter, considering
Speaker 2: how this year has started and the actions in Venezuela
Speaker 2: and then kind of markets to look past it. I'm
Speaker 2: just curious your view on this, and I'm curious what
Speaker 2: kind of calls you were getting from either clients at
Speaker 2: your firm.
Speaker 3: So we certainly had a lot of questions about Venezuela
Speaker 3: over the weekend and into this week. It's at Academy.
Speaker 3: We work with thirty retired generals and admirals, so we've
Speaker 3: been doing it a lot.
Speaker 2: On yesterday.
Speaker 3: Yeah, that's right. Yeah, Master Robinson, he's great. So yeah,
Speaker 3: I think I think the market who's actually do make sense?
Speaker 4: Though?
Speaker 3: I think this is the start of the year stuff. You know,
Speaker 3: you got cs going on, So there's a lot of
Speaker 3: you know, headlines coming out of Vegas that people seem
Speaker 3: to be like. So I'm not surprised that we're kind
Speaker 3: of rallying away from that. I think on Venezuela it
Speaker 3: was a very impressive military operation, whatever else you want
Speaker 3: to think about it, it was very successful, incredibly you
Speaker 3: know fast, you know this very precision. Now, I think
Speaker 3: we're not going to see a lot on oil energy prices.
Speaker 3: I think it's there's a lot of building out and
Speaker 3: what I think this is going to really this is
Speaker 3: a quick fix. None of this is a quick fix.
Speaker 3: And I think what this is really going to boil
Speaker 3: down to is this is our first real confrontation with
Speaker 3: China away from either kind of sphere of influence.
Speaker 4: Right.
Speaker 3: If you think about all the trade negotiation was mainland
Speaker 3: China versus US. You know, there were some tariffs, but
Speaker 3: all of a sudden, we're going and saying we're going
Speaker 3: to take stuff. China's invested a lot of money there.
Speaker 3: China has a lot of loans to companies. How is
Speaker 3: that friction going to play out. China's going to use
Speaker 3: their lawyers to try and stop things. I think this
Speaker 3: is really important too for China because if they kind
Speaker 3: of get pushed out of Venezuela very easily and they
Speaker 3: lose money, the rest of the world where they put
Speaker 3: out their belt and roade initiative starts looking at that
Speaker 3: and it could be a big role on effect. So
Speaker 3: I think we're going to see friction. I honestly think
Speaker 3: we're going to see China first attack with lawyers, and
Speaker 3: they won't attack anything until they start seeing what we're
Speaker 3: actually doing. So far has just spent a lot of
Speaker 3: talk and noise.
Speaker 5: Venezuela was the story yesterday and it certainly is today,
Speaker 5: But in the last few minutes, Greenland has become more
Speaker 5: of a story. President Trump and his team are discussing
Speaker 5: a range of options for acquiring Greenland. A Reuter's reporter
Speaker 5: says in a post on exciting a White House statement,
Speaker 5: where does that strategy fit in?
Speaker 3: That one's a hard one for us. I think when
Speaker 3: we look at the world, when we kind of view Iran,
Speaker 3: we could see maybe doing something the IRGC. I don't
Speaker 3: think we would do anything with the religious side of
Speaker 3: Iran and any way shape or.
Speaker 5: For what When you say do something, what do you
Speaker 5: mean maybe with.
Speaker 3: Support, you know, to attack some of the irg's facilities
Speaker 3: or something. If the IRGC gets very aggressive against the protesters.
Speaker 3: I could see something around there. Cuba seems a little
Speaker 3: bit more easier to deal with we already had have.
Speaker 3: The uss Ford is in the Caribbean Sea. It's actually
Speaker 3: not a very efficient place for it to be. It's
Speaker 3: too small of an area for an aircraft carrier group,
Speaker 3: and it's due for some refitting and remodeling. So I
Speaker 3: think we will try and use it as much as possible.
Speaker 3: So that's why we weren't surprised about action in Venezuela.
Speaker 3: I think we could see activity in around Panama Canal
Speaker 3: where we try and either buy it or invest in it.
Speaker 5: Is that for a China proxy, I.
Speaker 3: Think for a China proxy, And again I think we
Speaker 3: really want to control shipping through central South America and
Speaker 3: the Panama Canal is a big part of that. And
Speaker 3: don't forget Marco Ruby is the first place he went
Speaker 3: on Greenland. I think we all struggle with why this
Speaker 3: term annex or take keeps coming up. I think that's
Speaker 3: a struggle.
Speaker 5: So to recap Panama, Venezuela, Cuba, Iran makes sense, Greenland
Speaker 5: not so much.
Speaker 3: I find it very difficult to like play why we
Speaker 3: would just wrap NATO, And again, I think we've been
Speaker 3: less thoughtful on NATO and where it's important is but
Speaker 3: this kind of puts a lot of friction, And even
Speaker 3: from a business standpoint, I think I can believe that
Speaker 3: in Venezuela there there's a lot of raarers and critical
Speaker 3: minerals that have been underinvested in. I find it hard
Speaker 3: to believe someone hasn't been checking out Greenland and saying
Speaker 3: this is just economically unviable. I do know, and I
Speaker 3: think this is interesting because one of our generals is
Speaker 3: actually now the Undersecretary of War, and before he became
Speaker 3: Undersecretary of earlier still working with us, he did talk
Speaker 3: about and point out that China has more ice breakers
Speaker 3: than we do, and so China views themselves as an
Speaker 3: arctic nation. Russia clearly views themselves as an arctic nation.
Speaker 3: So maybe this has coming something to do with as
Speaker 3: the polar ice caps are melting that it creates different routes,
Speaker 3: so we want some more protection there. So maybe some
Speaker 3: of that makes sense, but again that all feels like
Speaker 3: it could be done within the confines of existing rules
Speaker 3: and regulations rather than having kind of this annex or
Speaker 3: take concept.
Speaker 2: Yeah, I mean, I don't know, how are you thinking
Speaker 2: about this year when it comes to the Trump White House,
Speaker 2: and especially with midterms looming. I've heard some folks say that, Listen,
Speaker 2: there's a lot of pressure on the administration to get
Speaker 2: things done early in the year because as midterms loom,
Speaker 2: there are expectations that there might be pushback against the
Speaker 2: GOP and the Trump administration. But I'm just curious what
Speaker 2: you're telling your clients.
Speaker 3: So what we've really liked is what we've been calling
Speaker 3: prosec or production for security, and it's kind of along
Speaker 3: the lines of resilience, and that includes anything from chips, electricity,
Speaker 3: so Intel, for example. I think there's gonna be huge
Speaker 3: pressure on companies to use US chip manufacturers, right, we
Speaker 3: have to break away from Taiwan. I think there's realization
Speaker 3: we're not producing electricity. We will deregulate, we'll get electricity
Speaker 3: in all forms running. I do think President Trump will
Speaker 3: give up on his kind of hatred of solar and
Speaker 3: adapt solar, but you're gonna see solar nuclear I do.
Speaker 5: I think it's just Wind is a step too far.
Speaker 3: I think Win's a step too far. They really does
Speaker 3: not like he really does not lie. I think there's
Speaker 3: a visceral hatred to it. Partly, I think it does
Speaker 3: destroy views. I think there's questions about his efficiencies, and
Speaker 3: it does kill birds and stuff, and that seems to
Speaker 3: really bother them. So I'm not going to fight the wind.
Speaker 3: I do think on.
Speaker 5: Solar housecats kill a lot of birds too, truly.
Speaker 3: That is probably true. We had one that was very
Speaker 3: good at that, yeah, true, Yeah. So I think those
Speaker 3: are all the things that we can invest. And we
Speaker 3: just saw yesterday two point seven billion going into your
Speaker 3: ranium companies. So I think you can move away from
Speaker 3: the AI story and into anything that's going to be
Speaker 3: part of this building out of infrastructure. You know, you've
Speaker 3: got Cat, You've got Deer, Navistar, all the heavy equipment makers.
Speaker 3: I think we're going to see real efforts to become
Speaker 3: slightly more independent.
Speaker 2: Are all nations doing that?
Speaker 3: So how I see this starting as the US really
Speaker 3: jumpstart of this, right, the US has been all over this.
Speaker 3: I think what we're starting to see now is capital
Speaker 3: is going to follow next, So investors are starting to
Speaker 3: follow this. We talk to private equity companies who are
Speaker 3: starting to scour the universe for Hey, who's got mining
Speaker 3: rights that have been unused, who's got some interesting patents?
Speaker 3: And around these rarest and critical minerals, I think you're
Speaker 3: going to see again these huge buildouts, potentially in electricity production.
Speaker 3: So it's capital vitalization dead well. I think other countries
Speaker 3: are going to figure this out eventually, that they have
Speaker 3: to do it. I think at some point Europe's going
Speaker 3: to release like Shell and BP to actually do what
Speaker 3: they're phenomenally good at. And so far there's still constraints,
Speaker 3: but I think everyone's adopting this. I think you have
Speaker 3: to look much closer when you're thinking about supply.
Speaker 5: Chains, domestic political risk of this new world order. That's
Speaker 5: something I've been thinking a lot about, especially in an
Speaker 5: election year, because we thought that the Make America Great
Speaker 5: Again movement was really about keeping within the US's borders,
Speaker 5: not getting involved in foreign wars. The President has talked
Speaker 5: about leaving countries outside of the US alone, and that's
Speaker 5: not really what we've gotten in the last few months.
Speaker 3: No, though I will say, I think if prior to
Speaker 3: you know, Liberation Day and stuff, I think there was
Speaker 3: a lot of hope that we'd work very closely with
Speaker 3: Canada because Canada has a lot of things that we
Speaker 3: need that would be a big part of this. We
Speaker 3: work closer with Mexico, and we kind of got away
Speaker 3: from that, So I think this starts. Maybe it's just
Speaker 3: trying to reshape how these relationships work. Ultimately, I think
Speaker 3: we're going to need things like podasts, We're going to
Speaker 3: need to work with Canada. But I do think you know,
Speaker 3: they laid it out of the National Security Strategy and
Speaker 3: it's only thirty nine pages of double space. It's even
Speaker 3: I could read it, So I would recommend reading it
Speaker 3: because I think it does form this way. Yeah, we've
Speaker 3: been telling corporations for years now, and I think now
Speaker 3: we're getting a lot of incoming calls. Like we've been saying,
Speaker 3: if you are manufacturing in Thailand and Vietnam, you're not
Speaker 3: really disversified because you're going through the same shipping lane.
Speaker 3: So I think you've got to be very careful about shipping.
Speaker 3: If you're looking at building a new plant this year,
Speaker 3: I think you want to build it in North South
Speaker 3: America or Central America or the US precisely because that's
Speaker 3: where we have a lot more control. So I think
Speaker 3: that's where corporations follow into this. And I don't want
Speaker 3: to say it's going to be us by ourselves. What
Speaker 3: I've been trying to say is I think for every
Speaker 3: single commodity or product, every country is going to have
Speaker 3: an X amount that they want to do themselves so
Speaker 3: they can be sufficient. Why you can do with your
Speaker 3: close neighbors, and then Z or Z you just do
Speaker 3: on the open market. And I think that's going to
Speaker 3: vary by country to country what they can do. But
Speaker 3: I think Europe's behind on this.
Speaker 5: I think the.
Speaker 3: Sad thing is if I look at what we need
Speaker 3: to do in the US, you have a pretty good
Speaker 3: road wrap. Just look at China's done for the last
Speaker 3: ten years, right, They've basically done prosec on steroids, and
Speaker 3: we're just starting to do it. But it's exciting and
Speaker 3: I think some of it will last past an election
Speaker 3: cycle because Biden did do the chipsack, right, So why
Speaker 3: doom was not immune to like understanding we.
Speaker 2: Did a lot of President Trump in his first term
Speaker 2: is China strategy, right?
Speaker 3: So I think this is now truly going to replace
Speaker 3: ESG as a major policy tool, as a major way
Speaker 3: corporations think and how investors think. Right, if everything was ESG,
Speaker 3: I think where we were really is if you think
Speaker 3: about Masso's hierarchy of needs one probably you know psych
Speaker 3: one on one it proves I took it. But we
Speaker 3: were kind of at this kind of high self actualization period,
Speaker 3: like what would we like sustainability look like. But it
Speaker 3: was all based on the premise that we had the
Speaker 3: basics covered. Well, we really have the basics covered if
Speaker 3: we're dependent on China for those basics. So I think
Speaker 3: this is a pullback to say, to be truly sustainable
Speaker 3: and independent and resilient, you need to do some core
Speaker 3: level of this self yourself. And that's where I think
Speaker 3: we are. It's that evolution.
Speaker 2: What are the implications of that in terms of cost
Speaker 2: to society? In terms of does it make things more
Speaker 2: expensive if we're doing more manufacturing in the United States, Well,
Speaker 2: labor isn't cheap here, so I'm just curious what are
Speaker 2: the implications What does it mean for economic growth maybe
Speaker 2: in the United States.
Speaker 3: So I think it's going to be potentially a little
Speaker 3: bit higher on some prices. So it's very good that
Speaker 3: oil and some of these energy costs are coming down.
Speaker 3: That will help on this. At the flip side of that, though,
Speaker 3: is if people can go back to working for you know,
Speaker 3: I hate to say the word about say it like
Speaker 3: national champions right where you feel that your industry, your
Speaker 3: job is important to the country, you probably go home
Speaker 3: feeling slightly safe about your job. I think there's a
Speaker 3: lot of benefits from this we've been talking about. The
Speaker 3: Spider Marks is great. He kind of coined the phrase
Speaker 3: for us by the rough spider Marx General Spider Marks.
Speaker 3: He's quite awesome. But he coined the phrase. We're in
Speaker 3: a pre war environment, and we've always been in a
Speaker 3: post war environment until recently. And I think pre war
Speaker 3: sounds a little bit scary, but it's just like deterrens.
Speaker 3: If you understand that you're in a pre war and
Speaker 3: you do the preparation properly, you deter the enemy. And
Speaker 3: I think the things that to me are really crucial
Speaker 3: about a pre war is it creates a sense of
Speaker 3: urgency which we're seeing and self sacrifice.
Speaker 5: We're speaking with Peter Cheer, head of Macro Strategy, at
Speaker 5: Academy Security. So he joins us here in the Bloomberg
Speaker 5: Interactive Broker's studio. Peter, you mentioned a few We went
Speaker 5: through a little bit around the globe and we talked
Speaker 5: about Iran, We talked about Venezuela, We talked about Greenland, Cuba, Panama.
Speaker 5: What about Mexico and what about Colombia. Have they been
Speaker 5: put on notice?
Speaker 3: I think Colombia has been put on notice. I've been
Speaker 3: much more focused on Mexico. So one of the things
Speaker 3: that we believe to some degree is we been changing
Speaker 3: the rules of engagement with Venezuela. Right, if you go
Speaker 3: back four months ago, who would have thought we would
Speaker 3: shoot a drug boat we're now doing that. I think
Speaker 3: the world would have gone ballistic if we did that
Speaker 3: in the Gulf of Mexico or Golf of America now
Speaker 3: though it's now standard operating procedure. Right, we've attacked some
Speaker 3: of the drug facilities. I suspect that somewhere in Q one,
Speaker 3: Q two Lake Qan early Q two we approach Mexico
Speaker 3: very serious and tells jion Bo, I'm like, we can
Speaker 3: work with you to get rid of your cartels, or
Speaker 3: we can get rid of the your cartels without you,
Speaker 3: and to me, the one thing we haven't talked to
Speaker 3: I know we've been talking about so much oil. If
Speaker 3: we can solve Venezuela's drug problem and cartel problem and Mexico,
Speaker 3: it makes both of those countries safer, more viable countries,
Speaker 3: Fewer people need to migrate all those countries. So I
Speaker 3: think it fits perfectly.
Speaker 2: But then in terms of drugs, maybe I'm crazy here
Speaker 2: and I know we've only got about forty seconds left here.
Speaker 2: What about China and fentanyl? Like have we covered that?
Speaker 2: If we're talking about narco terrorists. I think some might say,
Speaker 2: wait a minute.
Speaker 3: I'm looking at this more from the ability to kind
Speaker 3: of make those countries safer where you have some ability
Speaker 3: to influence it so that people don't want to leave.
Speaker 3: A lot of people who you talk to, people coming
Speaker 3: from Mexico, their choice is letter sob Yeah, you either
Speaker 3: fight the cartel and die or you join.
Speaker 2: The Cartnezuela eight million people or something.
Speaker 3: So I think if you can do that, and on
Speaker 3: top of that, if you cut the head off the snake,
Speaker 3: maybe the drug cartels and their activities in the US
Speaker 3: do slow down.
Speaker 2: So are you're positive about the year. Are you upbeat?
Speaker 3: I am, Actually I'm very positive. I think again, this
Speaker 3: buildout's going to be very interesting. The biggest risk to
Speaker 3: me is China threatening and doing something about rarest and
Speaker 3: critical minerals because we're not there yet where we need
Speaker 3: to be.
Speaker 2: Ten seconds, if President Trump wasn't in the White House
Speaker 2: again for a second term, will we be having this conversation.
Speaker 3: No. I think he actually really kind of planned ahead
Speaker 3: of this though some of it. I think we would
Speaker 3: have finally seen because we've been talking about rarest crtical
Speaker 3: minerals for years and years. We're finally realizing the Chips
Speaker 3: Act realize some of this. This is what progression. How
Speaker 3: we're doing it is just stronger and more aggressive.
Speaker 2: Such a great conversation. Peter Cheer over at Macro Strategy
Speaker 2: and Academy Securities.
Speaker 5: Stay with us more from Bloomberg Business Week Daily coming
Speaker 5: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five eastering. Listen
Speaker 1: on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 5: Bloomberg spoke with economists, US politicians, and heads of trading
Speaker 5: firms and hedge funds to understand really what's at stake
Speaker 5: in the prediction markets. Boom Tanisa Sikova and Lydia Bayoud
Speaker 5: are part of the team behind the story. Danitza is
Speaker 5: Bloomberg News cross Asset reporter. Lydia is Bloomberg News Financial
Speaker 5: Regulations reporter Denisa Here in our Bloomberg Interactive Broker studio,
Speaker 5: Lydia joins us from Bloomberg's Washington, DC bureau. Lydia, I
Speaker 5: want to start with you in Washington because you cover
Speaker 5: financial regulations prediction markets. Is it fair to call it gambling?
Speaker 6: I think these days people increasingly are seeing a blurredline there.
Speaker 6: To your point about marketing speak, the companies are very
Speaker 6: keen to describe themselves one way, but certainly within Washington,
Speaker 6: I don't think a lot of people are seeing much
Speaker 6: of a difference. And for sure in the sports gaming world,
Speaker 6: they see them as direct competitors.
Speaker 2: Yeah, it's interesting gaming gambling. What exactly is this underneath
Speaker 2: the common in for those who maybe have been living
Speaker 2: under a rock, which is kind of fine. I like
Speaker 2: to kind of hibernate every once in a while. Remind
Speaker 2: us what these prediction markets are all about who are
Speaker 2: the big players.
Speaker 7: Yeah, twenty twenty five was a year of prediction markets.
Speaker 7: We had two big firms kind of dominate the space
Speaker 7: of cos Kaushi and Poet Market. Their valuation went through
Speaker 7: the roof. They started from like one to two billions
Speaker 7: and both end of the year in the double digits
Speaker 7: off billions, so really really rapid growth. And we're seeing
Speaker 7: not only those tech city convolling names, We're seeing a
Speaker 7: lot of traditional finance names. We're seeing Ceme, We're seeing
Speaker 7: a lot of those traditional finance players getting.
Speaker 8: Involved in the space.
Speaker 7: So clearly this is interest more beyond city convul.
Speaker 2: The volumes are crazy. So but tell us how it works,
Speaker 2: can Tim or I? Can we go out and place
Speaker 2: the bet? Like how who determines who can do what
Speaker 2: on the platform?
Speaker 7: Super simple, super easy. So obviously sports betting you have
Speaker 7: to be twenty one for this.
Speaker 8: Eighteen is enough.
Speaker 7: It's very accessible. You go the bet is like as
Speaker 7: cheap as like a few cents or a door and
Speaker 7: you just go and create it. Other thing just very shrimple.
Speaker 2: You can create the bet.
Speaker 7: No, you cannot create the bet.
Speaker 2: You can place that. You can ask it.
Speaker 7: Oh, yeah, there is a way to claim a market,
Speaker 7: but of course it's up to the platform to create.
Speaker 7: But as we have seen in recent months, there is
Speaker 7: a lot of variety of bets on things that you know,
Speaker 7: anywhere else you cannot bet from the bet on Nicolas
Speaker 7: Maduro being outed to any type of pop culture thing
Speaker 7: and any top.
Speaker 5: Artists on Spotify this year is on.
Speaker 8: Yeah, of course that's very popular.
Speaker 2: Any type of mentioned market.
Speaker 7: People are watching like politicians stole on TV and betting
Speaker 7: on every word they say, every twist, like people are
Speaker 7: even making front of this. We famously had the coin
Speaker 7: based CEO knowing that people are watching what he says
Speaker 7: on the learning cloth, so he was he was crashing
Speaker 7: the market.
Speaker 5: So that's where I want to bring in Lydia, because
Speaker 5: when you're in a world Lydia Bayud where there is
Speaker 5: one person in control, like a CEO of a company
Speaker 5: like Elon Musk, if the number of tweets that he
Speaker 5: sends between a certain period of time, that's a bet
Speaker 5: on poly market right now, or prediction on poly market
Speaker 5: that one can make. What is the slippery slope that
Speaker 5: opens when one person is in control of the outcome.
Speaker 6: Here, So that's something that I think regulators and policymakers
Speaker 6: are really grappling with. Particularly, I think the Majuro example
Speaker 6: that we highlight on the story has really made that
Speaker 6: so salient for everyone right now. Generally, federal rules prohibit
Speaker 6: federal employees from trading on non public information for their
Speaker 6: own financial game. I think Representative Richie Torres is planning
Speaker 6: to introduce legislation if he hasn't already this week, that
Speaker 6: would like very clearly prohibit that type of trading on
Speaker 6: prediction markets. But really we're kind of facing like a
Speaker 6: different regime compared to how I think a lot of
Speaker 6: people think about insider trading that is regulated in equities
Speaker 6: markets or markets overseen by the securities in exchange competition.
Speaker 6: Because you know, if you're in the derivative space and
Speaker 6: you are an energy producer, an agriculture producer, you're expected
Speaker 6: to trade on knowing you know, my crop's really great
Speaker 6: this year, or we're pumping so much oil and gas
Speaker 6: out of out of the ground. You know, I'm able
Speaker 6: to hedge my position and sort of let my knowledge
Speaker 6: that I have inform both me and then the market.
Speaker 6: You know, there's kind of a market utility argument that
Speaker 6: is made in those traditional markets, and we're seeing that
Speaker 6: again sort of these blurred lines shift into prediction markets
Speaker 6: and people sort of grappling like okay, well, what's okay
Speaker 6: insider information like what benefits everyone to have insiders trading
Speaker 6: and kind of you know, as they like to say,
Speaker 6: drawing on the wisdom of the crowd and doing price improvement,
Speaker 6: but so not.
Speaker 2: Exactly you know machines.
Speaker 6: Right, Well, that is the big debate about how are
Speaker 6: you going to draw that line about you know, if
Speaker 6: you are Elon Musk in your there are mention markets
Speaker 6: and what you might say to your you know, not
Speaker 6: to pick on Elon anyone, any executive, right and you're
Speaker 6: gonna you know, there are mention markets, and what you
Speaker 6: might say in your quarterly call? Do you swing a
Speaker 6: market just for funzies? Do you swing it knowing that
Speaker 6: you know your buddies, buddies, buddy might have some money
Speaker 6: writing on the line. And then how does anyone catch
Speaker 6: that should they be catching it? There's so many open
Speaker 6: policy questions that are being asked, I think around Washington
Speaker 6: right now because of these markets.
Speaker 5: Yeah, there's an interesting you know, I'm just going through call.
Speaker 5: She you could spend. I know not both of you
Speaker 5: did this, Like you get some hours going through this,
Speaker 5: but like, does it really serve the market? Aniza to
Speaker 5: ask if will Taylor Swift and Travis Kelcey be married
Speaker 5: before January?
Speaker 3: First?
Speaker 2: That's important stuff.
Speaker 7: It is important stuff. We had a lot of Bloomberg
Speaker 7: headlines on this as well, but we did, we do,
Speaker 7: but it is important. So what a lot of those
Speaker 7: prediction micro believers says, We're going to bring a lot
Speaker 7: of people through sports. So for example, kou Shei has
Speaker 7: ninety percent of their volumes very often coming from sports.
Speaker 7: So it's pretty hard to make the argument that this
Speaker 7: is a truth machine at the moment. But what some
Speaker 7: people hope and believe is that eventually some of those
Speaker 7: casino elements and of those betting elements will bring people
Speaker 7: who want to bet on things like economic data, things
Speaker 7: like maybe people want to hedge, Like the hedging scenario
Speaker 7: is something that has come up a lot talking to people.
Speaker 7: It seems like it's not coming anytime soon, but people
Speaker 7: are saying, oh, maybe I want to.
Speaker 8: Hedge the weather in Florida.
Speaker 7: Maybe I have a house and I can't buy insurance.
Speaker 5: Well, I don't understand that I keep going on topic
Speaker 5: and I'm trying to take them off topic. Like here's
Speaker 5: another one. For example, what will Rachel Maddow say during
Speaker 5: Jimmy Kimmel Live.
Speaker 2: Right, Okay, that's a classic mentioned.
Speaker 5: Mark Epstein, corrupt slash corruption, Ice, Russia, Ukraine, affordable affordability healthcare?
Speaker 2: All right, but there's serious stuff like the FED decision
Speaker 2: in January.
Speaker 5: I say, help for what we do, and we talked
Speaker 5: about this.
Speaker 2: Doing elections in different things.
Speaker 7: For sure, elections have proven to be one pretty good time.
Speaker 2: Help me understand though, and well, you know, Lydia come
Speaker 2: on back in here. One of the things I'm curious
Speaker 2: about is like who is checking who is making these trades?
Speaker 2: Is calshi or is polymarket? Are they actually checking, especially
Speaker 2: when it could be potentially insider trading? Do they know
Speaker 2: exactly who's making these trades? Are they doing due diligence?
Speaker 6: So these exchanges are structured as self regulatory organizations, so
Speaker 6: they're supposed to kind of self monitor, monitor trades and
Speaker 6: root out any potential for market manipulation. Again, the sort
Speaker 6: of where you draw the line between what's okay and
Speaker 6: what's not okay on insider trading, that's a judgment call,
Speaker 6: I think, except in all but the most clear cut instances.
Speaker 6: But you know, exchanges can self report information to the CFTC.
Speaker 6: The CFTC can look into it. Again, it operates differently
Speaker 6: than the Securities Exchange Commission.
Speaker 2: But what's the bandwidth for regulators to want to take
Speaker 2: this on.
Speaker 6: The CFTC is chronically underfunded. They have I think roughly
Speaker 6: five hundred staff. The SEC has four or five times
Speaker 6: maybe ten times that number are not quite but they
Speaker 6: are understaffed for the task at hand, and there are
Speaker 6: more applicants. I think we mentioned in the story that
Speaker 6: there are there's a lot of interest driven heavily by
Speaker 6: sports trading, but also in the economics, also in other spaces,
Speaker 6: and so they are kind of underwater in terms of
Speaker 6: all that there is to do for market demand for
Speaker 6: this space. So I think a lot of people are
Speaker 6: wondering what the CFTC will do. But if we look
Speaker 6: at the new chairman, Michael Sellig, when he was an
Speaker 6: attorney in private practice, he wrote a comment letter that
Speaker 6: was pushing back during the Biden administration on any effort
Speaker 6: to reign in sports prediction markets for example, or really
Speaker 6: most prediction markets, So I think you've got someone who's
Speaker 6: very you know, he said he's going to defer to
Speaker 6: the courts on how the courts might eventually rule on
Speaker 6: this topic. But at least when he was an attorney
Speaker 6: representing clients, he was very much in favor of them.
Speaker 5: Before we let you guys go Tanizza. If we think
Speaker 5: about the universe of prediction markets, Robin Hood's getting into it,
Speaker 5: Calsh and Polymarket are the big ones, and they count
Speaker 5: I think a Trump as advisors to both of those.
Speaker 5: Are these all regulated the same way or is one
Speaker 5: regulated differently than the others.
Speaker 7: So also obviously they have the Trump as advisor, and
Speaker 7: Trump Media is looking into launching a prediction American and
Speaker 7: a lot of the sports betting companies are looking to
Speaker 7: also getting into prediction market the way so Kaushi so
Speaker 7: far is obviously under the CFTC. Pully Market is just
Speaker 7: entering the US. They have this beta test so they're
Speaker 7: only onboarding some users. So currently most of the bets
Speaker 7: on Polly Market are actually in this weird regulatory space
Speaker 7: where a lot of them are coming from a world
Speaker 7: and isn't necessarily regulated under the CFTC. We've seen very
Speaker 7: different decisions. For example, there was a market connected with
Speaker 7: the United Care CEO killing and CFTC asked how she
Speaker 7: to remove that market, But polling market who is not
Speaker 7: under that jurisdiction, actually kept the market. So you can
Speaker 7: see there are very different outcomes depending on the regulation.
Speaker 2: Well, a human land on Mars before California starts a
Speaker 2: high speed rail nineteen percent chance costs twenty cents for yes,
Speaker 2: eighty five cents for no.
Speaker 5: Well, what counts as the high speed rail?
Speaker 4: Is it?
Speaker 2: Like I'm just reading?
Speaker 5: Okay, stay with us more from Bloomberg Business Week Daily
Speaker 5: coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to fives during it,
Speaker 1: listen on Applecarplay and Android Otto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 5: Vid Royal as chief financial and investment Officer over at
Speaker 5: Thrive and the firm has close to two hundred billion
Speaker 5: dollars in AUM, probably more as of now. That's a
Speaker 5: number from a little over a year ago. David, what
Speaker 5: did you what did you think of what we heard
Speaker 5: from Mike McLoone just now, I mean, this is this
Speaker 5: what happens in a late stage bull market.
Speaker 8: Yeah, I think so, and I was amused absolutely. You know,
Speaker 8: I've never gotten more questions about gold and silver from clients,
Speaker 8: and I regularly meet with clients and our and our advisors.
Speaker 8: I think it's fears of currency debasement. So the retail
Speaker 8: clients are really interested in metals right now. And the
Speaker 8: question I always ask in response when I get a
Speaker 8: question about gold, is what problem you're trying.
Speaker 5: To solve gold or silver?
Speaker 8: If you're worried about currency debasement, you could have a
Speaker 8: diversified portfolio of commodity stocks. There are probably better ways
Speaker 8: to deal with inflation or currency risk than just owning
Speaker 8: gold or silver. But you know, silver is behaving like
Speaker 8: high bit of gold right now. I mean, and it's
Speaker 8: us feel very technical.
Speaker 2: That currency debasement the dollar mostly or current.
Speaker 8: Bold I mean dollar weakness early in the year that'll
Speaker 8: strengthen later in the year. I think it's it's general
Speaker 8: concerns about the deficit and and the federal budget.
Speaker 5: That's so interesting. I mean, I go back to this
Speaker 5: idea of you hearing from clients more about metals than
Speaker 5: ever before. Is that indicative of something within the markets
Speaker 5: right now. I mean you set you mentioned the currency
Speaker 5: debasement is a concern of theirs, but is there something
Speaker 5: else happening to you? You think like this is sort
Speaker 5: of a yolo by everything rally or beyond.
Speaker 2: The beyond the concerns about the data deficit.
Speaker 8: I think it's less yolo and more. You know, it's
Speaker 8: a very uh, you know, bifurcated economy.
Speaker 1: Uh.
Speaker 8: You know, a lot of concerns, a political turmoil. People
Speaker 8: are just very concerned right now. Consumer confidence is very
Speaker 8: weak despite the economy being and yet.
Speaker 2: You know, I've got to tell you how many people
Speaker 2: have come around this table and said, well, wait a minute.
Speaker 2: You know, the stock markets hitting records, the wealthier consumer,
Speaker 2: which is so important in terms of consumer spending doing
Speaker 2: just fine. I agree with you that lower rung of
Speaker 2: the case shape. I'm concerned Tim's concern. You sound concerned,
Speaker 2: and we also be concerned, right because that's a big
Speaker 2: part of certainly America. So I just do wonder, and
Speaker 2: I wonder when when people care more broadly and when
Speaker 2: it does really matter in terms of the overall economic
Speaker 2: health of this country.
Speaker 8: Yeah, you know, I certainly get a lot more questions
Speaker 8: about metals than you know, than crypto these days, and
Speaker 8: I would say it was the reverse maybe twelve months ago.
Speaker 8: There's a lot less interest in crypto, probably because bitcoin's
Speaker 8: been weaker recently and it seems to have shifted. But
Speaker 8: I think there's just sort of a general generalized concern.
Speaker 8: And that's again why I say, what problem are you
Speaker 8: trying to solve? I mean, metals and even crypto have
Speaker 8: probably a place in a diversified portfolio, but again, you know,
Speaker 8: what role does that have in your overall portfolio?
Speaker 5: Talk about the interests or lack there that you're seeing
Speaker 5: in crypto right now. I mean, do you actually that
Speaker 5: thrive in Is it a part of a recommendation that
Speaker 5: you have for clients portfolio?
Speaker 8: We don't broadly. I mean, they have access to it
Speaker 8: through brokerage. Clients could buy cryptot it and I'm sure
Speaker 8: some do. It's not part part of our centrally managed
Speaker 8: portfolios that I oversee.
Speaker 5: What more so is like more traditional more traditional? If
Speaker 5: somebody wants alternative exposure, what are the alternatives that you recommend?
Speaker 8: So we you know, would would you know look at
Speaker 8: you know, potentially metals rates and things like that within
Speaker 8: our mixed asset products, our asset allocation funds. We actually
Speaker 8: have an allocation of private equity within our daily liquidity
Speaker 8: mutual funds. It's a small allocation, but we actually do
Speaker 8: give retail clients fifty dollars a month. You can get
Speaker 8: access to private equity at thrive. That's a pretty cool thing.
Speaker 2: What do Yeah, where are flows going at this point?
Speaker 2: Where are investors either asking you to commit or where
Speaker 2: are you guys recommending? Where's money going into? Money coming out?
Speaker 8: You know, we're seeing strong flows into our managed accounts.
Speaker 8: There's still a lot of interest in equities overall across
Speaker 8: the industry. You're seeing strong fixed income flows as we have.
Speaker 5: In recent years.
Speaker 8: Continuing to see that, continuing to see that, yeah.
Speaker 2: Right, because it was it was an interesting year and
Speaker 2: where you saw both stocks and bonds do well, right,
Speaker 2: which is not typical. It always makes me a little
Speaker 2: nervous and cautious.
Speaker 9: You know.
Speaker 8: One other observation on flows is, you know, across the industry,
Speaker 8: money market assets have you know, roughly doubled from four
Speaker 8: trillion four years ago to eight trillion. Our own money
Speaker 8: market fund is quadrupled over the last three years.
Speaker 5: But rates are coming down.
Speaker 8: The rates are coming down, So I keep telling clients,
Speaker 8: you've got to be extending duration right now, lock in
Speaker 8: these attractive years.
Speaker 5: Okay, So where's the right place for a client to
Speaker 5: put money that's been in a money market. They want
Speaker 5: access to it, but they also want yield that's higher
Speaker 5: than four percent. Where can they go?
Speaker 8: You know what I've been recommending lately in taxable accounts
Speaker 8: as munis. You're going to of course through me that No.
Speaker 8: I love munis. Right now, they're not quite as attractively the.
Speaker 5: Right way for an investor, like a retail investor to
Speaker 5: buy munions, especially if they live in a high tax state.
Speaker 8: I buy an actively managed municipal bond fund, and because
Speaker 8: you know you do need I think active management in
Speaker 8: that space. You know, we offer two We have a
Speaker 8: core unity bond fund and we have a high yield
Speaker 8: unity fund. So I often recommend clients split their assets
Speaker 8: between a regular union.
Speaker 5: A high How high yield are we talking about?
Speaker 8: You can get about four and a half, which on
Speaker 8: a taxi billot bases in tax free in about four
Speaker 8: at a little less than four that's that's very attractive because
Speaker 8: you know, if you look at corporate bonds. You know,
Speaker 8: you're going to get about five ish percent of a
Speaker 8: half and you're paying taxes on that, so you know,
Speaker 8: to get a similar tax equivalent yield of you know,
Speaker 8: seven seven and a half, you be you'd be well
Speaker 8: into the high yield space.
Speaker 5: This is what happens, Caroly in a rate environment where
Speaker 5: rates are coming down.
Speaker 2: Yeah, exactly. We'll see whether it continues. I mean, what
Speaker 2: are your expectations in terms of rates and how that
Speaker 2: impacts kind of the investment environment.
Speaker 8: So I think I think it's going to be interesting
Speaker 8: this year. You know that we're pricing in, you know,
Speaker 8: I think last I looked, of course on my Bloomberg terminal,
Speaker 8: about a sixteen percent chance of a January rate cut.
Speaker 8: Market's not expecting that, but we are seeing some pretty
Speaker 8: significant employment weakness, and January is probably off the table.
Speaker 8: But I wouldn't be surprised if we see a couple
Speaker 8: of cuts in the first half of the year. Of course,
Speaker 8: we're going to have a new FED share announce fairly soon,
Speaker 8: so that May meeting is starting to look like we'll
Speaker 8: get a cut. But I think, you know, the average
Speaker 8: rolling three month jobs added was twenty thousand and even
Speaker 8: If you back out the one hundred thousand or so
Speaker 8: government jobs that were lost, it's only fifty thousand and
Speaker 8: three months over the last three months. Polelan twenty twenty
Speaker 8: four at Jackson Hole said any further weakening in the
Speaker 8: labor market would be unwelcome, and they were averaging one
Speaker 8: hundred and twenty thousand a month back then and actually
Speaker 8: one hundred and seventy before revisions based on the information.
Speaker 5: Yet, But do we have to look at that comment
Speaker 5: in the context of a lower no illegal immigration world like,
Speaker 5: do we have to completely reset what a healthy number
Speaker 5: looks like in an environment to use?
Speaker 8: The reason I think we're seeing some increased weakness is
Speaker 8: really other indicators. So over the last three months, we've
Speaker 8: had nine hundred thousand people moved to part time employment
Speaker 8: for economic reasons they would like a full time job.
Speaker 8: That's gone from about four and a half million to
Speaker 8: almost five and a half million the last three months.
Speaker 8: That's the sign of a weakening labor market. And wage
Speaker 8: growth last month was almost zero.
Speaker 5: So what does that look like for thou that group
Speaker 5: of individuals you talked about, does that people who want
Speaker 5: a full time job and maybe they're doing gig work instead. Yeah,
Speaker 5: this is what Daniel de Martino Booth talks to us about. Yeah,
Speaker 5: she's concerned about the weakness. She's talked about this over
Speaker 5: the summer.
Speaker 2: I'm not listening because I've been thinking about this stock.
Speaker 9: Sea.
Speaker 2: No, I'm really sorry.
Speaker 5: I'm so sorry. Didn't you, Carol? Were you thinking about Well?
Speaker 2: I was looking at the notes and David like, at
Speaker 2: the stocks that you like, Shark Ninja, build a Bear.
Speaker 2: I mean, these are not names we talk about.
Speaker 5: Carl talks a lot about build a Bear.
Speaker 8: So I'll give you a boot Bards in there too,
Speaker 8: and we love boot barn. I loo if that was
Speaker 8: on my list. So I'll give you the theme that
Speaker 8: we like within concerned folks, a lot on the consumers.
Speaker 2: I do listen to most things you guys said they're.
Speaker 8: But anyway, Yeah, so the theme is, well, you know,
Speaker 8: we talked a little bit about the K shaped economy.
Speaker 8: The upper and consumer is doing better than the lower
Speaker 8: and consumers, and and but the upper and consumer is
Speaker 8: still looking for value. So you know, you get a
Speaker 8: trade down like Shark Ninja, compete with other firms like
Speaker 8: a Dyson, but at a little lower price point. The
Speaker 8: other thing we want is companies with product niches or
Speaker 8: innovation that can drive sales and that aren't relying on
Speaker 8: macro tail ones because, as I said, we're seeing some
Speaker 8: economic weakness. So you want companies that drive growth through
Speaker 8: product innovation and not just relying on the macro environment.
Speaker 2: You prefer small cap mid cap space.
Speaker 8: You know, I like small cap I mean small caps
Speaker 8: are relatively inexpensive now. They're also behaving differently over the
Speaker 8: past year. So on days when we've had some economic
Speaker 8: weakness where small caps normally you expect small caps are rally,
Speaker 8: I think second quarter of twenty twenty one, you're coming
Speaker 8: out of a bottom and rip roaring economy. That's when
Speaker 8: you expect small caps to outperform. They've been doing well
Speaker 8: on days of economic weakness where rates come down. I
Speaker 8: think small caps are behaving much more rate sensitive than
Speaker 8: they used to. So I think with the FED cutting
Speaker 8: and I think we're going to get a couple of
Speaker 8: cuts this year, I think that could really benefit small caps.
Speaker 8: They're more levers in large caps and they tend to
Speaker 8: borrow short.
Speaker 5: David Royle, great to see you.
Speaker 8: Great to see you.
Speaker 5: Thanks for stopping us, for having me Chief Financial and
Speaker 5: investment officer over at Thrive In Stay with us. More
Speaker 5: from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast, which
Speaker 1: is live weekday afternoons from two to five these during
Speaker 1: this listen on Applecarplay and Android Otto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 5: And it's our weekly Women, Money and Power segment. We
Speaker 5: speak with some of the most influential women from across
Speaker 5: the business world. We welcome back Christina Lee, Managing director
Speaker 5: and co portfolio manager for US private debt Strategy at
Speaker 5: oak Tree Capital Management. She joins us here in the studio.
Speaker 5: Happy new year, How are you?
Speaker 4: Thank you well, thank you so much for having me
Speaker 4: back on. I think twenty twenty six is a new year,
Speaker 4: and I think, as you can tell from the public markets,
Speaker 4: there's enthusiasm. I think from the private side there's enthusiasm
Speaker 4: as well.
Speaker 5: What's the enthusiasm that you're seeing.
Speaker 4: I think it's about M and A demand, you know,
Speaker 4: twenty twenty four. So when we were sitting back and
Speaker 4: twenty twenty four, think about twenty twenty five, everyone said,
Speaker 4: with the new administration coming in, M and A is
Speaker 4: going to have a boom year in twenty twenty five.
Speaker 4: That didn't really happen right the first nine months Emina
Speaker 4: stalled predominantly because there was so much uncertainty, for example,
Speaker 4: around tariffs, et cetera. But now I think where we're
Speaker 4: seeing that enthusiasm, as especially on private equity side, is
Speaker 4: private equity is held on to their investments for too long.
Speaker 4: Now they need exits. They need to provide distributions back
Speaker 4: to the limited partners. So we're seeing a backlog of
Speaker 4: deals to hit for twenty twenty six, which should help.
Speaker 5: They are they good deals if the backlog is that
Speaker 5: they need to return money to clients, they need to exit,
Speaker 5: like having to force sales is never a good thing.
Speaker 4: I think from a credit perspective, they're good deals. And
Speaker 4: why I say that is I think there has been
Speaker 4: a bit of a mismatch between buyers and sellers in
Speaker 4: terms of price. What we've seen is those that will
Speaker 4: sell for twelve times, fifteen times, eighteen times sell. Doesn't
Speaker 4: necessarily mean a business that's going to sell for ten
Speaker 4: to eleven times is a bad business from a credit perspective,
Speaker 4: And that's why I think for private credit, seeing that
Speaker 4: increased demand should be a benefit to the industry because
Speaker 4: in Q four what we saw was heightened competition because
Speaker 4: there was a supply demand imbalance, a lot more private
Speaker 4: debt dry powder versus M and A deals. Even if
Speaker 4: you look at pop markets in twenty twenty five, the
Speaker 4: majority of the volume was actually reprising some refinancings. There's
Speaker 4: very little new issues last year, So this is our year.
Speaker 2: So of new issues exactly, big deal. So how much
Speaker 2: dry powder though is out there? Like how much needs
Speaker 2: to be worked off?
Speaker 9: Still?
Speaker 4: Yeah, if you look at dry powder and private credit
Speaker 4: versus private equity, everyone's like, Wow, there's so much dry
Speaker 4: powder and private credit. There's still a lot in private
Speaker 4: equity too, there's multiples, and so that's why we think one,
Speaker 4: not only is there dry powder for private equity, a
Speaker 4: lot of that dry powder is aging. They need to
Speaker 4: deploy it. These are closed end fens. They have a
Speaker 4: certain set investment period, right, so they're going to be
Speaker 4: also looking to more deploy as well, and there's going
Speaker 4: to be more companies out there for them to buy.
Speaker 5: Is there a specific type of company that you're seeing
Speaker 5: that's going to be doing this out there?
Speaker 2: Yeah?
Speaker 4: I think what we've seen so far is thematically those
Speaker 4: that can only get very high purchase price multiples. And
Speaker 4: what do I mean by that?
Speaker 5: For so, it's not necessarily a certain industry, it's not.
Speaker 4: A certain industry. I think certain industries have benefited, for example,
Speaker 4: from very high public valuations. For example, everyone talks about AI,
Speaker 4: everyone talks about data center. We saw a good number
Speaker 4: of deals come out in the market for M and
Speaker 4: A last year around data centers, around AI. Because they
Speaker 4: were going for such expansive multiples, we saw less what
Speaker 4: I call it kind of notlts and bolts industrial businesses.
Speaker 4: They're not bad businesses, They're just not going to go
Speaker 4: for fifteen to eighteen tumes. So I think people reserved
Speaker 4: and helped onto their deals, maybe to do some add ons,
Speaker 4: build some growth in to then sell it for this year.
Speaker 2: So how much of the activity that you think will
Speaker 2: go on is the result of just pent up, couldn't
Speaker 2: do anything for so long, versus Wait, it's a good environment,
Speaker 2: it's indicative of a good business environment, deal environment, economic environment.
Speaker 4: I think it's a combination. It's probably fifty to fifty.
Speaker 4: And the reason I say that is, if you think
Speaker 4: about it, have we had a normal year in terms
Speaker 4: of M and A what is normal normally year?
Speaker 2: It wasn't twenty twenty five.
Speaker 4: It wasn't twenty twenty five. Really wasn't twenty four normal year?
Speaker 4: I mean, like a steady pace where expectations were met.
Speaker 4: Really hasn't in a couple of years we had supplay
Speaker 4: chain issues.
Speaker 9: All right, we're just I think we're just done with normal, right, yes, yeah, yeah,
Speaker 9: normal is done in general, right, you know, so we
Speaker 9: haven't had quote unquote that normal M and A year,
Speaker 9: And so if you think about the pent up demand,
Speaker 9: it just wasn't twenty twenty five.
Speaker 4: It's been since twenty twenty really twenty twenty two when
Speaker 4: there was a break in the public markets. Remember first
Speaker 4: half of twenty and twenty two you saw the public
Speaker 4: markets break even the private markets started to break. Right,
Speaker 4: So it's been multiple years, and I think that's grow,
Speaker 4: having this pent up demand grow. And then second we
Speaker 4: have a falling rain environment. It's better to get debt capital, right,
Speaker 4: that's beneficial for these companies and the economy. Granted there's
Speaker 4: cracks in it, but it's still holding up.
Speaker 2: So what if that doesn't continue? Though, I think that's
Speaker 2: one of the big questions. I mean, we're seeing investors
Speaker 2: a little bit enthusiastic as we wait a bunch of
Speaker 2: economic data this week and hopefully for some more clues
Speaker 2: about what the Fed's going to do this year. But
Speaker 2: I feel like people keep pulling back their expectations about
Speaker 2: Fed easings because there are inflationary concerns if we don't
Speaker 2: get a lot more in the way of rate cuts.
Speaker 2: I mean, what do we need to do to kind
Speaker 2: of keep the market as you describe it now? Yeah,
Speaker 2: I think or the level of activity. Yeah, I think.
Speaker 4: The economy has to hold up. I think one of
Speaker 4: the things that will spook investors and I think we'll
Speaker 4: spook the m and A market is any type of downturn.
Speaker 4: We haven't had a real downturn since two thousand and nine.
Speaker 2: It's kind of amazing, right, COVID was too short.
Speaker 4: There's just massive bound to black.
Speaker 5: Guy, there was a lot of people got scared then, Yeah,
Speaker 5: a lot of people in the markets got scared, a
Speaker 5: lot of people sold, But that didn't count in your view.
Speaker 4: I don't think that counted because I think what was
Speaker 4: happening in twenty twenty was COVID was quote unquote short lived.
Speaker 2: I think you.
Speaker 4: Saw kind of March through September really m and A
Speaker 4: dry up. But then as things started to normalize and
Speaker 4: there was so much dry powder again to support that
Speaker 4: M and A market, twenty twenty one was like a
Speaker 4: banner year. Back half of twenty twenty. Twenty twenty one's
Speaker 4: banner year for M and A credit.
Speaker 5: What's the relationship between your world and equity market performance?
Speaker 4: Yeah, I think part of it is on evaluation side, right,
Speaker 4: and spurring M and A the better the equity markets,
Speaker 4: So doing that supports higher purchase price multiples for the
Speaker 4: private markets as well, which spurs therefore M and A
Speaker 4: deal flow, which helps us because that's a big driver
Speaker 4: of demand when there's not enough deals in the market.
Speaker 4: What happens with private credit is you have a lot
Speaker 4: more competition. What does that mean, Decrease spreads, increase leverage.
Speaker 2: Yeah, you need to see like it all kind of
Speaker 2: flow through here. Your new fund that you guys launched
Speaker 2: in October, the oak Tree Direct Lending Evergreen Fund institutional
Speaker 2: clients completed your first Clothes at about two point thirty
Speaker 2: five billion in committed capital. How much of that has
Speaker 2: been lent out? Deployed at this point.
Speaker 4: Yeah, I think just thinking about that product in general,
Speaker 4: when you think about an Evergreen fund, it's kind of
Speaker 4: a newer product and direct lending and you're raising money
Speaker 4: every quarter.
Speaker 2: It's open end.
Speaker 4: Fund, and so from a deployment stand point, right, you're
Speaker 4: always going to be looking to deploy.
Speaker 2: And one of.
Speaker 4: The things that we found is a growth factor in
Speaker 4: private credit. Are these newer types of vehicles. If you
Speaker 4: think about for direct lending, it has been always kind
Speaker 4: of closed end funds. Yeah, I think LPs are asking
Speaker 4: for evergreen funds. They want someplace to get income, to
Speaker 4: be diversified and a safe pair of hands and consistently deployed.
Speaker 4: And that's what Evergreen and frankly Oaktrey provides.
Speaker 9: Well.
Speaker 2: Good stuff like we were so looking forward to catching
Speaker 2: up with you. Happy New Year, Good to see you.
Speaker 4: Again, Happy New Year as well. Thanks for having me.
Speaker 2: We'll see you soon. Christina Lee, Managing director, co portfolio
Speaker 2: manager for US Private debt.
Speaker 8: Over at Oaktree Capital.
Speaker 1: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live weekday
Speaker 1: afternoons from two to five pm Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and all ways on the Bloomberg terminal
Speaker 3: MHM