WEBVTT - Dimon Likens AI’s Transformational Impact to Steam Engine 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week Inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.520 --> 0:00:29.480 Let's get to one of our most read stories that's 0:00:29.520 --> 0:00:31.800 definitely on our radar today, and this is the Wall 0:00:31.840 --> 0:00:35.600 Street Voice. Tim. Everyone listens to who's talking about AI 0:00:35.720 --> 0:00:37.960 and steam engines? And that's where we're going to go now. 0:00:38.120 --> 0:00:41.160 Yeah, that boy is JP Morgan Chief executive Officer Jamie 0:00:41.159 --> 0:00:44.000 dimond out with his annual shareholder letter, always a must read, 0:00:44.280 --> 0:00:47.080 of course for the investment community, and in it, Diamond 0:00:47.120 --> 0:00:50.040 devoted a chunk to the importance of artificial intelligence, saying 0:00:50.120 --> 0:00:53.280 maybe the biggest issue that his bank is grappling with. 0:00:53.400 --> 0:00:55.440 Let's get into it with Sally bake Well, Bloomberg News 0:00:55.480 --> 0:00:59.760 America's finance team leader. She joins us here into the studio. Sally, 0:00:59.760 --> 0:01:02.520 always the annual letter chock full of stuff to talk about, 0:01:02.520 --> 0:01:05.960 but AI seems to really be getting the attention right now. 0:01:06.280 --> 0:01:09.640 I'm wondering how you've seen Jamie Diamond presenting this as 0:01:09.640 --> 0:01:12.000 a challenge that his bank is dealing with rather than 0:01:12.040 --> 0:01:12.800 an opportunity. 0:01:13.520 --> 0:01:13.720 Yeah. 0:01:13.720 --> 0:01:16.240 Well, I mean, first of all, we watch Jamie Diamond, 0:01:16.240 --> 0:01:19.240 not just because he's the CEO of the biggest American bank, 0:01:19.319 --> 0:01:21.800 but because he, perhaps more than any of his big 0:01:21.840 --> 0:01:24.440 banking peers, kind of weighs in in a more forceful 0:01:24.520 --> 0:01:26.520 and powerful way, and we really listen when he does. 0:01:27.040 --> 0:01:29.160 And that's exactly what he did in this letter and 0:01:29.360 --> 0:01:33.119 with AI, which you know, he did take the moment 0:01:33.160 --> 0:01:35.600 to outline the sort of bad actors that you know, 0:01:35.640 --> 0:01:37.880 you have to be very careful of and on your 0:01:37.880 --> 0:01:40.280 guard toward. But he said that the bank has been, 0:01:40.360 --> 0:01:42.600 you know, over the past ten years, doubling down on 0:01:42.959 --> 0:01:46.560 the technology. It is a massed thousands of data science 0:01:46.600 --> 0:01:50.440 experts and AI experts, it's beginning to explore generative AI, 0:01:51.320 --> 0:01:54.560 and it's continuing to invest. So I think the opportunity, 0:01:55.480 --> 0:01:58.480 you know, probably surpasses the level of the challenge it 0:01:58.520 --> 0:02:00.920 is for them to make sure that they are using 0:02:00.960 --> 0:02:02.120 the technology in the right way. 0:02:02.280 --> 0:02:04.680 Remind us, because you know, it was Tom Ke who 0:02:04.680 --> 0:02:06.160 starting on surveillance and he's like, you know, what is 0:02:06.200 --> 0:02:08.000 in every CEO kind of write this kind of a 0:02:08.080 --> 0:02:10.400 letter and stuff. And I think it was Shanale who answered, 0:02:10.440 --> 0:02:13.000 Shanali Basuk, who's that, you know, not everybody has first 0:02:13.040 --> 0:02:15.560 of all, has seen so many different market cycles and 0:02:15.639 --> 0:02:19.359 difficult cycles and has come out shining right and has 0:02:19.400 --> 0:02:21.399 done really well, has managed them. And this is why 0:02:21.400 --> 0:02:24.440 when Jamie Diamond sally talks about something, we kind of care. 0:02:24.760 --> 0:02:25.120 That's right. 0:02:25.120 --> 0:02:27.320 I mean, he's the longest serving bank CEO of the 0:02:27.360 --> 0:02:29.560 big US banks, and he's the only one that is 0:02:29.600 --> 0:02:32.200 still there since the you know, the financial is remarkable, 0:02:32.240 --> 0:02:34.560 right indeed, and he went through the financial crisis, and 0:02:34.600 --> 0:02:38.120 he has this very expensive perspective and he has you know, 0:02:38.200 --> 0:02:42.160 the data of JP Morgan, his fingertips. The amounts of 0:02:42.160 --> 0:02:44.840 sort of economic knowledge and the breadth of economic knowledge 0:02:44.919 --> 0:02:47.799 he has is obviously worth listening to. 0:02:47.960 --> 0:02:49.880 Just to follow on AI. I mean AI not new 0:02:49.960 --> 0:02:52.120 to Wall Street, we know that, but it does sound 0:02:52.200 --> 0:02:56.480 like Jamie Diamond is spending even more attention or efforts 0:02:56.560 --> 0:02:59.440 money focus on the bank when it comes to artificial 0:02:59.480 --> 0:03:01.520 intelligence and especially when it comes to generative AI. 0:03:01.960 --> 0:03:05.519 Yeah, I think you know, he today really outlined the 0:03:05.560 --> 0:03:09.040 potential of this technology. You know, to transform essentially the world. 0:03:09.120 --> 0:03:11.560 It's not just about his business, although he said that 0:03:11.639 --> 0:03:14.360 it could completely transform some of their business lines, but 0:03:14.600 --> 0:03:17.799 it will have a huge, huge ramifications for society at large. 0:03:17.800 --> 0:03:19.799 And that's why he introduced you know, the steam engine, 0:03:20.040 --> 0:03:21.400 the printing press, the internet. 0:03:21.480 --> 0:03:24.480 He's likely had changed our worlds forever, right exactly. 0:03:24.520 --> 0:03:26.959 He's likening it, He's putting it in that bucket. Yeah. 0:03:26.960 --> 0:03:28.520 I guess one thing that I think about when when 0:03:28.560 --> 0:03:30.640 we hear that is where the opportunities are. I mean, 0:03:30.680 --> 0:03:33.279 certainly we talk a lot about Nvidia and the opportunities 0:03:33.280 --> 0:03:35.400 when it comes to tech companies, but if it really 0:03:35.400 --> 0:03:38.000 does touch every company, I mean, where does someone like 0:03:38.080 --> 0:03:40.000 Jamie Dimond see the opportunities here? 0:03:40.200 --> 0:03:42.119 Well, I mean he said today that he could see 0:03:42.120 --> 0:03:45.600 it having the potential to augment every virtually. 0:03:45.320 --> 0:03:46.440 Every job, every job. 0:03:46.720 --> 0:03:49.200 Yeah, and you know, it could make people more. He 0:03:49.200 --> 0:03:51.560 has also said if you recall that, you know, it 0:03:51.600 --> 0:03:53.200 could cut down the working day for a lot of 0:03:53.240 --> 0:03:56.160 people to about three and a half days. AI could 0:03:56.200 --> 0:03:58.080 help in that regard. I mean, I think for banks 0:03:58.120 --> 0:04:01.640 the opportunities are sort of limitless. You know, there's that 0:04:01.760 --> 0:04:05.880 trading operations, that trading algorithms and sort of from the 0:04:05.960 --> 0:04:08.600 hiring perspective and the talent perspective. You know, these banks 0:04:08.600 --> 0:04:12.800 are increasingly filing patents for AI t uesda AI in 0:04:13.000 --> 0:04:17.240 these sort of operations. So and it's just a general 0:04:17.360 --> 0:04:21.279 huge efficiency push and they are so competitive expenses matter. 0:04:21.400 --> 0:04:24.520 Anything they can do to bring those things down as 0:04:24.640 --> 0:04:26.120 an AI is one way of doing it. 0:04:26.160 --> 0:04:27.880 We talked about the four day work week last week. 0:04:27.920 --> 0:04:30.920 I was just thinking about I have to exactly, how 0:04:30.960 --> 0:04:31.560 does that sound. 0:04:31.440 --> 0:04:33.599 To any takers for two day work week? No, it's 0:04:33.640 --> 0:04:35.839 just kind of interesting from the financial community. 0:04:36.279 --> 0:04:36.880 That was. 0:04:39.160 --> 0:04:41.320 Steve Cohen, forgive me who, but also who said not 0:04:41.440 --> 0:04:44.760 his workers, anybody who's managing a portfolio. You know, market's open, 0:04:44.800 --> 0:04:46.520 you got to be there. But it is interesting to 0:04:46.560 --> 0:04:49.760 hear from these financial types that were very much especially 0:04:49.800 --> 0:04:51.600 post pandemic after a little bit a while or like 0:04:51.640 --> 0:04:53.839 we watch it back in the office. So it's interesting 0:04:53.880 --> 0:04:56.680 to hear him talk about and I get I understand 0:04:56.720 --> 0:04:58.839 he's talking about AI across a lot of different industries, 0:04:58.839 --> 0:05:02.039 how it could impact the world. What was the most 0:05:02.040 --> 0:05:05.159 surprising thing in this letter? I mean he covers a 0:05:05.160 --> 0:05:05.480 lot of. 0:05:05.440 --> 0:05:08.800 Stuff he did. I think what was surprising, was he 0:05:09.200 --> 0:05:12.440 He has come out swinging against a number of things regulation, 0:05:12.640 --> 0:05:16.360 the basel endgame proposals. He's been a long time outspoken critic. 0:05:16.680 --> 0:05:19.280 He went a little deeper on that. You know, he's 0:05:19.400 --> 0:05:22.320 he's said for a while that these regulations will harm Americans, 0:05:22.920 --> 0:05:25.359 that their arbitrary, that their rife with duplication. All of 0:05:25.400 --> 0:05:27.480 these things emerged in the letter again, but he actually 0:05:27.480 --> 0:05:31.040 this time said, you know, bank management boards and bank teams, 0:05:31.640 --> 0:05:35.440 our relationships with regulators are actually deteriorating and are not 0:05:35.480 --> 0:05:38.240 that good, which was quite a surprising, nuanced comment to make. 0:05:38.279 --> 0:05:41.359 And you also sort of implied that regulators don't necessarily 0:05:41.360 --> 0:05:43.040 know exactly what they're doing, because he said a lot 0:05:43.080 --> 0:05:45.880 of them have not been practitioners in the industry, so 0:05:45.920 --> 0:05:49.040 it's just one level above. And he also took aim 0:05:49.200 --> 0:05:55.000 at pro shareholder proxy advisory firms. He again he has 0:05:56.000 --> 0:06:00.000 sort of long lambasted investors who rely solely on those 0:06:00.120 --> 0:06:03.200 firms like Biome Major right exactly two major ones in 0:06:03.279 --> 0:06:05.920 the in the US, ISS and Glass Lewis. He says 0:06:05.920 --> 0:06:08.080 investors should do their own homework, They shouldn't rely on 0:06:08.120 --> 0:06:11.120 these firms for recommendations for how they should vote their 0:06:11.120 --> 0:06:14.680 stock on contentious issues like executive conversation or whether a 0:06:14.720 --> 0:06:17.040 merger should go through or a climate policy. I mean, 0:06:17.040 --> 0:06:19.320 he says, you know, do your own homework, and how 0:06:19.360 --> 0:06:21.480 do you know that what they're providing is accurate? Here 0:06:21.480 --> 0:06:23.960 he actually went out after the firms and said, you 0:06:24.000 --> 0:06:26.760 know that they have too much sway and undue influence 0:06:27.600 --> 0:06:27.920 his work. 0:06:28.000 --> 0:06:29.800 Interesting big picture, at least in the near term. He 0:06:29.839 --> 0:06:32.280 doesn't seem as optimistic as some others about the US 0:06:32.360 --> 0:06:34.400 economy and the idea of a soft landing being all 0:06:34.440 --> 0:06:35.160 but guaranteed. 0:06:35.600 --> 0:06:39.480 Yes, that's right. He you know, market expectations that soft 0:06:39.560 --> 0:06:41.680 landing is sort of seventy putting it at a seventy 0:06:41.720 --> 0:06:43.480 to eighty percent. He says the odds would be much 0:06:43.520 --> 0:06:45.920 lower than that. I mean, he continued to sort of 0:06:45.920 --> 0:06:49.880 couch that sort of assessment of the economy where consumers 0:06:49.920 --> 0:06:52.640 remain resilient and they're still spending, but there is this 0:06:52.760 --> 0:06:57.520 huge overhang of sort of inflationary pressures of quantitative tightening, 0:06:57.600 --> 0:07:01.080 and of course it's very fractious geopolitical background with wars 0:07:01.120 --> 0:07:03.000 in Ukraine and the Middle East and all of these 0:07:03.000 --> 0:07:05.160 things make it could could sort of add up to 0:07:05.160 --> 0:07:07.920 a very unprecedented situation which we can't predict. 0:07:07.560 --> 0:07:09.200 Any weather references this time around. 0:07:10.480 --> 0:07:15.040 Not disappointed, I will say, I mean to that point, Carol, 0:07:15.040 --> 0:07:17.360 he did talk about interest rates ranging from two percent 0:07:17.360 --> 0:07:18.920 all the way up to eight percent, so that could 0:07:18.960 --> 0:07:20.640 be looked at us the sort of weather prediction. 0:07:20.800 --> 0:07:23.080 That's true, But they're ready for any scenario. As his point, 0:07:23.400 --> 0:07:25.720 he said that they're ready to do it anything. Well, 0:07:25.760 --> 0:07:27.360 I wonder if that's kind of a setup. If I 0:07:27.400 --> 0:07:29.200 think about on Friday when we get the jobs report, 0:07:29.240 --> 0:07:30.880 that's a great way to kind of be like, hey, guys, 0:07:30.880 --> 0:07:33.360 we're on it right ahead of earnings. 0:07:33.560 --> 0:07:35.560 Right, Yeah, it's always interesting that this comes out just 0:07:35.600 --> 0:07:38.040 before earnings and they report on Friday. And I think 0:07:38.160 --> 0:07:40.200 you know, a big the big thing that we are 0:07:40.240 --> 0:07:42.960 all looking at in earnings will be how banks alter 0:07:43.080 --> 0:07:46.040 their guidance for net interest income, which is their biggest 0:07:46.240 --> 0:07:49.840 essentially their biggest source of revenue as banks, because you know, 0:07:50.440 --> 0:07:52.800 the trajectory of interest rates will have a huge impact 0:07:52.800 --> 0:07:53.080 on that. 0:07:53.280 --> 0:07:56.520 Sally Bake Well, of course, Sally is America's finance team 0:07:56.600 --> 0:07:57.400 leader at Bloomberg News. 0:07:57.400 --> 0:08:03.000 Here in studio, you're listening to the Bloomberg Business Week podcast. 0:08:03.200 --> 0:08:06.160 Catch us Live weekday afternoons from two to five pm 0:08:06.200 --> 0:08:08.920 Eastern Listen on Apple car Play and then brought auto 0:08:09.000 --> 0:08:13.320 with a Bloomberg Business act or want us live on YouTube? 0:08:14.120 --> 0:08:16.760 All right, Tim, So what happens when our Bloomberg Intelligence 0:08:17.240 --> 0:08:20.400 analysts sort through the barrel to find the good apples 0:08:20.400 --> 0:08:23.480 across sectors and regions a group of companies that come 0:08:23.520 --> 0:08:25.920 from a larger group of high confidence focus ideas that 0:08:26.000 --> 0:08:28.920 BI identifies on an ongoing basis. Do you know what happens? 0:08:29.000 --> 0:08:31.840 I know what happens because well I prepared for the 0:08:31.880 --> 0:08:34.360 segment you did. But what they do is they come 0:08:34.440 --> 0:08:36.840 up with, at least this time around the ten companies 0:08:36.840 --> 0:08:39.240 to watch in the second quarter. This story featured in 0:08:39.280 --> 0:08:41.600 the new issue of Business Week magazines, available on newsstands, 0:08:41.640 --> 0:08:44.439 on the Bloomberg terminal and at Bloomberg dot com slash business. 0:08:44.480 --> 0:08:46.320 All right, so let's get more on those ten companies. 0:08:46.360 --> 0:08:49.280 Back with us, Bloomberg Intelligence Senior European strategist and Director 0:08:49.320 --> 0:08:52.079 of Research Content, Tim craig Head. He is joining us 0:08:52.080 --> 0:08:56.320 from London. Tim. We always love going through these lists 0:08:56.320 --> 0:08:59.040 with you, so take it away. We kind of set 0:08:59.080 --> 0:09:01.160 it up. Is there anything we needed, anything else we 0:09:01.200 --> 0:09:03.520 need to know is how you guys curated this list. 0:09:05.320 --> 0:09:09.240 Thanks for having me on. And yeah, I would say 0:09:09.320 --> 0:09:12.160 that one of the things that happens when we come 0:09:12.240 --> 0:09:14.360 up and do these sort of things is that the 0:09:14.400 --> 0:09:18.760 Business Week folks come up with some really cool graphics 0:09:19.520 --> 0:09:22.920 in the magazine and in particular if you look at 0:09:22.920 --> 0:09:25.839 it on the online version. But the device to say, 0:09:26.280 --> 0:09:32.400 from Bloomberg Intelligences perspective, this list of ten you refer 0:09:32.520 --> 0:09:35.680 to it is part of a broader list of what 0:09:35.720 --> 0:09:40.280 we call focus ideas, and the focus ideas are companies 0:09:40.320 --> 0:09:45.120 where we've got a very strong fundamental view, a high 0:09:45.200 --> 0:09:49.679 conviction view that we think is differentiated from the market 0:09:49.800 --> 0:09:53.200 and what the market seems to be discounting, you know, 0:09:53.720 --> 0:09:57.480 as it relates to the stocks and whatnot. And importantly, 0:09:57.520 --> 0:10:01.320 there's a catalyst ahead that we think can change the 0:10:01.360 --> 0:10:07.640 market's point of view assuming we're correct. And importantly, with 0:10:07.840 --> 0:10:11.160 these ten companies that we focused on here, they all 0:10:11.240 --> 0:10:14.120 have really key catalysts coming up for the second quarter, 0:10:14.320 --> 0:10:17.400 and that's why we've picked these. There's two of them 0:10:17.559 --> 0:10:20.880 that are cautious views, there's eight of them that are 0:10:20.960 --> 0:10:25.120 positive views, they span sectors, they span regions, and yeah, 0:10:25.120 --> 0:10:25.880 that's the setup. 0:10:26.120 --> 0:10:28.120 Okay, So let's talk about some of those sectors. I 0:10:28.160 --> 0:10:31.120 want to start with tech in innovation because a couple 0:10:31.320 --> 0:10:33.560 and these are not. I would argue that not every 0:10:33.600 --> 0:10:35.480 one of these companies on here is a household name, 0:10:35.840 --> 0:10:38.200 and certainly some of them are on the smaller side. 0:10:38.240 --> 0:10:40.800 So talk about what you found in tech and innovation 0:10:40.920 --> 0:10:41.760 with the team found there. 0:10:42.880 --> 0:10:46.600 Yeah. Absolutely. So you know, there's an awful lot going 0:10:46.640 --> 0:10:49.680 on in the world of technology these days about AI. 0:10:50.040 --> 0:10:54.280 You can't not talk about it. And there's two companies 0:10:54.320 --> 0:10:57.479 here that we've got on the list that are related 0:10:57.559 --> 0:11:03.840 to artificial intelligence. One is Salesforce, which is the world's 0:11:03.920 --> 0:11:09.000 largest infrastructure software company. And notwithstanding how big this company is, 0:11:10.120 --> 0:11:13.400 it still actually may not be a household name given 0:11:13.440 --> 0:11:18.199 the nature of the beast. Importantly, any company that is 0:11:18.440 --> 0:11:21.880 looking at all the information they get from their customers 0:11:22.400 --> 0:11:30.240 probably relies on Salesforce and their software programs, and they're 0:11:30.240 --> 0:11:33.520 going through two things right now. One is a big 0:11:33.640 --> 0:11:38.880 tech infrastructure software spending cycle that we think is gaining momentum, 0:11:39.040 --> 0:11:42.600 and then secondly, it's the need for information to feed 0:11:42.760 --> 0:11:46.760 AI programs. And initiatives and salesforce is right smack in 0:11:46.800 --> 0:11:49.640 the middle of all of this. The other one is 0:11:49.720 --> 0:11:51.920 a company called ten Cent, and if you're in China, 0:11:52.080 --> 0:11:55.319 you definitely know about ten Cent. It has a lot 0:11:55.360 --> 0:12:00.199 of things going on within the world of online gaming. Importantly, 0:12:00.240 --> 0:12:05.120 from our perspective, they've gotten into short videos and AI 0:12:05.440 --> 0:12:11.200 is enhancing the way that they're generating revenue from advertising. 0:12:11.400 --> 0:12:13.960 Both of those are feeding ten Cents business that we 0:12:14.000 --> 0:12:17.400 think is underappreciated by the market. The last one I 0:12:17.400 --> 0:12:20.720 would mention is a company not in the world of 0:12:20.760 --> 0:12:25.040 classic tech, but technology in the world of medicine. A 0:12:25.040 --> 0:12:26.199 company called Penumbra. 0:12:26.920 --> 0:12:28.480 That's when I was thinking of when I say, not 0:12:28.520 --> 0:12:30.960 a household man exactly. 0:12:31.440 --> 0:12:37.080 So, these guys make computer assisted vacuum technology products, and 0:12:37.120 --> 0:12:42.400 you say, what is that. Think blood clots, and usually 0:12:42.480 --> 0:12:46.960 the way you treat blood clots is with anti coagulate drugs, 0:12:47.400 --> 0:12:52.480 and they've got all sorts of other ramifications. Penumbra's computer 0:12:52.520 --> 0:12:57.079 assisted vacuum technology can go in and actually suck blood 0:12:57.120 --> 0:13:01.800 plots out of auteries and veins, even really small ones, 0:13:01.960 --> 0:13:03.959 and you don't have to take the drugs. It's great. 0:13:04.040 --> 0:13:06.520 And again all three of these we think could generate 0:13:06.600 --> 0:13:09.559 better than anticipated revenue, margins, earnings. 0:13:09.679 --> 0:13:11.600 And I just want to mention when you talked about Salesforce, 0:13:11.640 --> 0:13:15.640 we actually spoke with Alice stein Glass, executive EP Gentleman 0:13:15.960 --> 0:13:17.959 manager over at Salesforce, and they talked about the role 0:13:18.000 --> 0:13:21.920 of jen Ai and the role of data and making 0:13:21.960 --> 0:13:24.280 it ready for their customers. So she kind of got 0:13:24.280 --> 0:13:27.560 into some of the growth initiatives that you've that you 0:13:27.640 --> 0:13:30.920 referred to. Another theme we want to touch on, and 0:13:30.920 --> 0:13:33.719 that has to do with actually two Chinese companies walk 0:13:33.800 --> 0:13:34.280 us through that. 0:13:36.160 --> 0:13:41.400 Yeah, so China is certainly having its challenges. I think 0:13:41.960 --> 0:13:46.320 you still are clearly very well aware of what's going 0:13:46.360 --> 0:13:49.640 on in the world of Chinese property. It's definitely under 0:13:49.640 --> 0:13:55.560 pressure on all sorts of different fronts, and there's also 0:13:56.000 --> 0:14:01.040 other issues. The stock market has fallen and whatnot. There's 0:14:01.520 --> 0:14:05.320 regulatory measures that are being put in place to try 0:14:05.320 --> 0:14:09.320 to curtail some of these problems and change the course. 0:14:10.800 --> 0:14:15.640 Part of those are actually putting a damper on what's 0:14:15.640 --> 0:14:20.520 going on in the world of initial public offerings and 0:14:20.720 --> 0:14:26.479 secondary market offerings in the stock market. And CSC Financial 0:14:26.680 --> 0:14:30.280 is one of China's biggest brokerage firms, and we think 0:14:30.400 --> 0:14:34.800 that they are due to disappoint through the first half 0:14:34.840 --> 0:14:39.160 of the year because of this. Another one is a 0:14:39.160 --> 0:14:42.320 company called Chow Tai Fook. It's based in Hong Kong. 0:14:42.760 --> 0:14:48.320 It's the biggest Hong Kong based China jeweler retail company. 0:14:49.240 --> 0:14:52.520 If you're in Hong Kong, you definitely know Chata Fuk. 0:14:52.720 --> 0:14:56.480 And it's interesting because not only is there a negative 0:14:56.520 --> 0:15:01.160 effect because of what's going on with property and consumer 0:15:01.240 --> 0:15:06.800 sentiment on jewelry purchases, but Hong konger specifically are going 0:15:06.840 --> 0:15:10.840 to find things cheaper on the mainland, They're going across 0:15:10.880 --> 0:15:13.720 the border, and all of this we think is driving 0:15:14.680 --> 0:15:19.000 a disappointing trend for Hong Kong retail sales. And Childtai 0:15:19.120 --> 0:15:22.000 Book is a poster child for this. So both of 0:15:22.040 --> 0:15:22.920 those are concerns. 0:15:22.960 --> 0:15:25.320 As you said, great illustrations by the Bloomberg Business Week team. 0:15:25.320 --> 0:15:27.360 It's all about apples, and these apples are a little 0:15:27.360 --> 0:15:30.240 bit bruised, so kind of fun to see that go along. 0:15:30.600 --> 0:15:31.720 We've got another sector. 0:15:31.520 --> 0:15:33.960 Yeah, I want to talk construction. Here some interesting names 0:15:33.960 --> 0:15:37.840 from the Blueger Intelligence team talking about potential beneficiaries of 0:15:37.920 --> 0:15:42.600 a construction boom. What do you find, tim. 0:15:41.320 --> 0:15:45.720 Well, So, Taylor Morrison is a home builder and they're 0:15:45.760 --> 0:15:49.760 ones that focus on larger communities. They've got more and 0:15:49.800 --> 0:15:53.440 more growth coming from Arizona and Florida, and we think 0:15:53.440 --> 0:15:57.160 that there's an opportunity to see better margin improvement given 0:15:57.200 --> 0:16:02.320 the way that they're driving their business and simple Oshkosh 0:16:02.400 --> 0:16:07.040 is more on the bigger commercial side, and it's not 0:16:07.160 --> 0:16:11.320 only construction, but they also do other commercial vehicles like 0:16:11.400 --> 0:16:18.120 fire trucks or ambulances or the new postal service electric vehicle, 0:16:18.520 --> 0:16:22.040 so all sorts of projects there. But generally there's concern 0:16:22.200 --> 0:16:26.200 that on that commercial side that there's a downcycle actually 0:16:26.360 --> 0:16:30.360 that's developing, and we think Oshkosh is going to be 0:16:30.400 --> 0:16:34.400 able to actually surprise on the positive because that's such 0:16:34.520 --> 0:16:36.920 a big backlog and some of these new initiatives that 0:16:36.920 --> 0:16:38.480 are playing through to the revenue stream. 0:16:38.880 --> 0:16:41.520 All Right, Finally, a sector we love to talk about 0:16:41.560 --> 0:16:45.080 in travel. And you got two names in that walk 0:16:45.160 --> 0:16:47.440 us through those two. A Core is one of them. 0:16:48.360 --> 0:16:52.000 Yes, so there's one that's absolutely classic travel. In the 0:16:52.040 --> 0:16:55.320 other I'm stretching things a little bit by suggesting travel. 0:16:56.240 --> 0:16:59.000 So the mission was created for a reason. 0:16:59.520 --> 0:17:01.440 I think it's. 0:17:00.720 --> 0:17:01.520 Something like that. 0:17:01.720 --> 0:17:06.920 There you go. Yeah, So Acor is a hotel company, 0:17:07.800 --> 0:17:11.920 and I think a lot of the listeners here are 0:17:12.280 --> 0:17:14.880 probably stayed at one of their hotels. They go from 0:17:14.920 --> 0:17:19.360 the very high end to more modest economy brands. The 0:17:19.359 --> 0:17:22.040 thing that anybody who stayed in an hotel recently is 0:17:22.080 --> 0:17:26.640 probably found is how expensive it is. You know, it's 0:17:26.760 --> 0:17:29.679 pretty shocking sometimes what the rates are that you have 0:17:29.760 --> 0:17:34.960 to pay. That's feeding Acor's revenue. There is a global 0:17:35.119 --> 0:17:39.480 travel cycle that we think is stronger and longer, and 0:17:40.000 --> 0:17:42.680 Acor is is in the front of that, both from 0:17:42.720 --> 0:17:48.000 a europe and an Asian travel base. Interesting they are 0:17:48.080 --> 0:17:52.239 French French, their home is in France, and you know 0:17:52.359 --> 0:17:55.439 it's only a small part of their overall portfolio. But 0:17:55.480 --> 0:17:58.640 the Paris Olympics this summer are the catalyst we're looking 0:17:58.680 --> 0:18:00.560 for because pretty soon we're going to start to see 0:18:00.560 --> 0:18:03.000 the early bookings that they release in terms of the 0:18:03.000 --> 0:18:06.200 Paris Olympics, and it should be quite robust. 0:18:06.640 --> 0:18:09.240 The other one twenty seconds though, Yeah, go ahead. 0:18:09.359 --> 0:18:12.719 Yes, Hirelli. It's a tire company, and yes you have 0:18:12.800 --> 0:18:14.320 to travel if you get in your car and you 0:18:14.359 --> 0:18:18.880 spend those tires. They are moving in a production basis 0:18:18.880 --> 0:18:23.320 to Mexico and Romania. It's cheaper and they're curtailing the 0:18:23.359 --> 0:18:25.919 low end of their tires to high end, and so 0:18:25.960 --> 0:18:28.320 there's an upgrade cycle. We think both of those can 0:18:28.359 --> 0:18:29.600 create positive surprise. 0:18:29.760 --> 0:18:33.040 This is not the F one tire that we're talking about. 0:18:32.800 --> 0:18:36.400 Specific it is the F one partly tire O. Yes, okay, 0:18:37.400 --> 0:18:37.840 there go. 0:18:38.840 --> 0:18:42.240 Always love these lists, names that we know, names that 0:18:42.280 --> 0:18:44.200 we don't, but definitely you give us the reasons to 0:18:44.240 --> 0:18:47.600 keep Mono Radar. So appreciate it. Tim Tank, thank you 0:18:47.680 --> 0:18:51.280 so much. Bloom we're Intelligence Senior European Strategist, Director of Research. 0:18:51.320 --> 0:18:54.600 Content are our own Tim Craighead joining us there from London. 0:18:56.040 --> 0:18:59.840 You're listening to the Bloomberg Business Week podcast. Listen live 0:19:00.040 --> 0:19:02.880 each weekday starting a two pm Eastern to Apple car 0:19:02.920 --> 0:19:05.879 Play and Android Auto with the Bloomberg Business Ad. You 0:19:05.920 --> 0:19:09.160 can also listen live on Amazon Alexa from our flagship 0:19:09.240 --> 0:19:24.480 New York station, Just Say Alexa playing Bloomberg eleven thirty right. 0:19:24.520 --> 0:19:27.360 Well, Private equity payouts are in a slump, Carol five 0:19:27.440 --> 0:19:31.800 major alternative asset managers. We're talking Blackstone, Apollo, Carlisle, Brookfield 0:19:31.880 --> 0:19:35.840 Areas delivered about thirty seven billion dollars from cashing out 0:19:35.840 --> 0:19:38.920 private equity bets last year. That's according to Bloomberg calculations. 0:19:39.200 --> 0:19:42.239 It's a forty nine percent drop since twenty twenty one, that, 0:19:42.359 --> 0:19:45.280 of course, was the year before the FED began raising rates. 0:19:45.480 --> 0:19:47.720 Indeed, the private equity industry is banking on the FED 0:19:47.720 --> 0:19:50.640 cutting rates this year, which would spurbuyers to tap debt 0:19:50.680 --> 0:19:54.280 to grease purchases and ultimately return money to limited partners. 0:19:54.359 --> 0:19:57.480 All of that tim from a great piece back in 0:19:57.520 --> 0:20:00.280 February by our team here that covers private equity. So 0:20:00.880 --> 0:20:03.440 we've got a question, how are the leaders of small 0:20:03.440 --> 0:20:06.159 and mid sized businesses thinking about private equity in this environment? 0:20:06.160 --> 0:20:06.840 It's a good question. 0:20:07.040 --> 0:20:09.040 Don McRee is a vice chairman and head of commercial 0:20:09.080 --> 0:20:11.880 banking at Citizens Financial Group. It's the Providence Rhode Island, 0:20:11.920 --> 0:20:14.840 a based public traded bank. They've got eleven hundred branches, 0:20:14.880 --> 0:20:17.920 total assets around two internet twenty two billion dollars. Don 0:20:18.320 --> 0:20:21.520 joins us from Boston. Don, how are you very good? 0:20:21.560 --> 0:20:22.400 Good to be with you today. 0:20:22.520 --> 0:20:24.199 Yeah, it's good to have you with us. Okay, so 0:20:24.280 --> 0:20:26.000 just talk to us a little. You guys did this survey, 0:20:26.040 --> 0:20:27.399 but before we get to the results of that. I 0:20:27.440 --> 0:20:29.400 do want to talk a little bit about the environment 0:20:29.520 --> 0:20:32.679 right now that you're seeing with the economy, private equity, 0:20:32.680 --> 0:20:35.200 and notwithstanding just general economy, what you're seeing, what you're 0:20:35.200 --> 0:20:37.240 hearing from clients, and what you can tell our listeners 0:20:37.280 --> 0:20:37.879 and our viewers. 0:20:38.760 --> 0:20:39.520 Sure thing, I think. 0:20:40.000 --> 0:20:43.360 I think the economy feels quite strong to us across 0:20:43.400 --> 0:20:46.440 the board. I think the jobs numbers a couple of 0:20:46.480 --> 0:20:49.840 days ago we're testimony to that. We're hearing a lot 0:20:49.880 --> 0:20:54.000 of confidence within our small and mid sized business customers, 0:20:54.359 --> 0:20:57.359 and I think it's a sharp contrast to what we 0:20:57.400 --> 0:21:00.920 were hearing just a year ago, when people were quite concerned, 0:21:01.040 --> 0:21:05.280 quite nervous about a potential recession, still kind of adjusting 0:21:05.320 --> 0:21:09.520 their businesses from a supply chain standpoint and a labor standpoint. 0:21:09.560 --> 0:21:12.679 But the tone is really changed as we've rolled in 0:21:12.680 --> 0:21:13.760 the twenty. 0:21:13.400 --> 0:21:17.160 Twenty four So better bottom line, a lot much better, 0:21:17.560 --> 0:21:20.160 much all right, So talk to us in terms of 0:21:20.280 --> 0:21:24.479