Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
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Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Let's get to one of our most read stories that's
Speaker 2: definitely on our radar today, and this is the Wall
Speaker 2: Street Voice. Tim. Everyone listens to who's talking about AI
Speaker 2: and steam engines? And that's where we're going to go now.
Speaker 3: Yeah, that boy is JP Morgan Chief executive Officer Jamie
Speaker 3: dimond out with his annual shareholder letter, always a must read,
Speaker 3: of course for the investment community, and in it, Diamond
Speaker 3: devoted a chunk to the importance of artificial intelligence, saying
Speaker 3: maybe the biggest issue that his bank is grappling with.
Speaker 3: Let's get into it with Sally bake Well, Bloomberg News
Speaker 3: America's finance team leader. She joins us here into the studio. Sally,
Speaker 3: always the annual letter chock full of stuff to talk about,
Speaker 3: but AI seems to really be getting the attention right now.
Speaker 3: I'm wondering how you've seen Jamie Diamond presenting this as
Speaker 3: a challenge that his bank is dealing with rather than
Speaker 3: an opportunity.
Speaker 4: Yeah.
Speaker 5: Well, I mean, first of all, we watch Jamie Diamond,
Speaker 5: not just because he's the CEO of the biggest American bank,
Speaker 5: but because he, perhaps more than any of his big
Speaker 5: banking peers, kind of weighs in in a more forceful
Speaker 5: and powerful way, and we really listen when he does.
Speaker 5: And that's exactly what he did in this letter and
Speaker 5: with AI, which you know, he did take the moment
Speaker 5: to outline the sort of bad actors that you know,
Speaker 5: you have to be very careful of and on your
Speaker 5: guard toward. But he said that the bank has been,
Speaker 5: you know, over the past ten years, doubling down on
Speaker 5: the technology. It is a massed thousands of data science
Speaker 5: experts and AI experts, it's beginning to explore generative AI,
Speaker 5: and it's continuing to invest. So I think the opportunity,
Speaker 5: you know, probably surpasses the level of the challenge it
Speaker 5: is for them to make sure that they are using
Speaker 5: the technology in the right way.
Speaker 2: Remind us, because you know, it was Tom Ke who
Speaker 2: starting on surveillance and he's like, you know, what is
Speaker 2: in every CEO kind of write this kind of a
Speaker 2: letter and stuff. And I think it was Shanale who answered,
Speaker 2: Shanali Basuk, who's that, you know, not everybody has first
Speaker 2: of all, has seen so many different market cycles and
Speaker 2: difficult cycles and has come out shining right and has
Speaker 2: done really well, has managed them. And this is why
Speaker 2: when Jamie Diamond sally talks about something, we kind of care.
Speaker 2: That's right.
Speaker 5: I mean, he's the longest serving bank CEO of the
Speaker 5: big US banks, and he's the only one that is
Speaker 5: still there since the you know, the financial is remarkable,
Speaker 5: right indeed, and he went through the financial crisis, and
Speaker 5: he has this very expensive perspective and he has you know,
Speaker 5: the data of JP Morgan, his fingertips. The amounts of
Speaker 5: sort of economic knowledge and the breadth of economic knowledge
Speaker 5: he has is obviously worth listening to.
Speaker 2: Just to follow on AI. I mean AI not new
Speaker 2: to Wall Street, we know that, but it does sound
Speaker 2: like Jamie Diamond is spending even more attention or efforts
Speaker 2: money focus on the bank when it comes to artificial
Speaker 2: intelligence and especially when it comes to generative AI.
Speaker 5: Yeah, I think you know, he today really outlined the
Speaker 5: potential of this technology. You know, to transform essentially the world.
Speaker 5: It's not just about his business, although he said that
Speaker 5: it could completely transform some of their business lines, but
Speaker 5: it will have a huge, huge ramifications for society at large.
Speaker 5: And that's why he introduced you know, the steam engine,
Speaker 5: the printing press, the internet.
Speaker 2: He's likely had changed our worlds forever, right exactly.
Speaker 5: He's likening it, He's putting it in that bucket. Yeah.
Speaker 3: I guess one thing that I think about when when
Speaker 3: we hear that is where the opportunities are. I mean,
Speaker 3: certainly we talk a lot about Nvidia and the opportunities
Speaker 3: when it comes to tech companies, but if it really
Speaker 3: does touch every company, I mean, where does someone like
Speaker 3: Jamie Dimond see the opportunities here?
Speaker 5: Well, I mean he said today that he could see
Speaker 5: it having the potential to augment every virtually.
Speaker 3: Every job, every job.
Speaker 5: Yeah, and you know, it could make people more. He
Speaker 5: has also said if you recall that, you know, it
Speaker 5: could cut down the working day for a lot of
Speaker 5: people to about three and a half days. AI could
Speaker 5: help in that regard. I mean, I think for banks
Speaker 5: the opportunities are sort of limitless. You know, there's that
Speaker 5: trading operations, that trading algorithms and sort of from the
Speaker 5: hiring perspective and the talent perspective. You know, these banks
Speaker 5: are increasingly filing patents for AI t uesda AI in
Speaker 5: these sort of operations. So and it's just a general
Speaker 5: huge efficiency push and they are so competitive expenses matter.
Speaker 5: Anything they can do to bring those things down as
Speaker 5: an AI is one way of doing it.
Speaker 3: We talked about the four day work week last week.
Speaker 3: I was just thinking about I have to exactly, how
Speaker 3: does that sound.
Speaker 2: To any takers for two day work week? No, it's
Speaker 2: just kind of interesting from the financial community.
Speaker 1: That was.
Speaker 2: Steve Cohen, forgive me who, but also who said not
Speaker 2: his workers, anybody who's managing a portfolio. You know, market's open,
Speaker 2: you got to be there. But it is interesting to
Speaker 2: hear from these financial types that were very much especially
Speaker 2: post pandemic after a little bit a while or like
Speaker 2: we watch it back in the office. So it's interesting
Speaker 2: to hear him talk about and I get I understand
Speaker 2: he's talking about AI across a lot of different industries,
Speaker 2: how it could impact the world. What was the most
Speaker 2: surprising thing in this letter? I mean he covers a
Speaker 2: lot of.
Speaker 5: Stuff he did. I think what was surprising, was he
Speaker 5: He has come out swinging against a number of things regulation,
Speaker 5: the basel endgame proposals. He's been a long time outspoken critic.
Speaker 5: He went a little deeper on that. You know, he's
Speaker 5: he's said for a while that these regulations will harm Americans,
Speaker 5: that their arbitrary, that their rife with duplication. All of
Speaker 5: these things emerged in the letter again, but he actually
Speaker 5: this time said, you know, bank management boards and bank teams,
Speaker 5: our relationships with regulators are actually deteriorating and are not
Speaker 5: that good, which was quite a surprising, nuanced comment to make.
Speaker 5: And you also sort of implied that regulators don't necessarily
Speaker 5: know exactly what they're doing, because he said a lot
Speaker 5: of them have not been practitioners in the industry, so
Speaker 5: it's just one level above. And he also took aim
Speaker 5: at pro shareholder proxy advisory firms. He again he has
Speaker 5: sort of long lambasted investors who rely solely on those
Speaker 5: firms like Biome Major right exactly two major ones in
Speaker 5: the in the US, ISS and Glass Lewis. He says
Speaker 5: investors should do their own homework, They shouldn't rely on
Speaker 5: these firms for recommendations for how they should vote their
Speaker 5: stock on contentious issues like executive conversation or whether a
Speaker 5: merger should go through or a climate policy. I mean,
Speaker 5: he says, you know, do your own homework, and how
Speaker 5: do you know that what they're providing is accurate? Here
Speaker 5: he actually went out after the firms and said, you
Speaker 5: know that they have too much sway and undue influence
Speaker 5: his work.
Speaker 3: Interesting big picture, at least in the near term. He
Speaker 3: doesn't seem as optimistic as some others about the US
Speaker 3: economy and the idea of a soft landing being all
Speaker 3: but guaranteed.
Speaker 5: Yes, that's right. He you know, market expectations that soft
Speaker 5: landing is sort of seventy putting it at a seventy
Speaker 5: to eighty percent. He says the odds would be much
Speaker 5: lower than that. I mean, he continued to sort of
Speaker 5: couch that sort of assessment of the economy where consumers
Speaker 5: remain resilient and they're still spending, but there is this
Speaker 5: huge overhang of sort of inflationary pressures of quantitative tightening,
Speaker 5: and of course it's very fractious geopolitical background with wars
Speaker 5: in Ukraine and the Middle East and all of these
Speaker 5: things make it could could sort of add up to
Speaker 5: a very unprecedented situation which we can't predict.
Speaker 2: Any weather references this time around.
Speaker 3: Not disappointed, I will say, I mean to that point, Carol,
Speaker 3: he did talk about interest rates ranging from two percent
Speaker 3: all the way up to eight percent, so that could
Speaker 3: be looked at us the sort of weather prediction.
Speaker 2: That's true, But they're ready for any scenario. As his point,
Speaker 2: he said that they're ready to do it anything. Well,
Speaker 2: I wonder if that's kind of a setup. If I
Speaker 2: think about on Friday when we get the jobs report,
Speaker 2: that's a great way to kind of be like, hey, guys,
Speaker 2: we're on it right ahead of earnings.
Speaker 5: Right, Yeah, it's always interesting that this comes out just
Speaker 5: before earnings and they report on Friday. And I think
Speaker 5: you know, a big the big thing that we are
Speaker 5: all looking at in earnings will be how banks alter
Speaker 5: their guidance for net interest income, which is their biggest
Speaker 5: essentially their biggest source of revenue as banks, because you know,
Speaker 5: the trajectory of interest rates will have a huge impact
Speaker 5: on that.
Speaker 2: Sally Bake Well, of course, Sally is America's finance team
Speaker 2: leader at Bloomberg News.
Speaker 1: Here in studio, you're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch us Live weekday afternoons from two to five pm
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Speaker 2: All right, Tim, So what happens when our Bloomberg Intelligence
Speaker 2: analysts sort through the barrel to find the good apples
Speaker 2: across sectors and regions a group of companies that come
Speaker 2: from a larger group of high confidence focus ideas that
Speaker 2: BI identifies on an ongoing basis. Do you know what happens?
Speaker 3: I know what happens because well I prepared for the
Speaker 3: segment you did. But what they do is they come
Speaker 3: up with, at least this time around the ten companies
Speaker 3: to watch in the second quarter. This story featured in
Speaker 3: the new issue of Business Week magazines, available on newsstands,
Speaker 3: on the Bloomberg terminal and at Bloomberg dot com slash business.
Speaker 2: All right, so let's get more on those ten companies.
Speaker 2: Back with us, Bloomberg Intelligence Senior European strategist and Director
Speaker 2: of Research Content, Tim craig Head. He is joining us
Speaker 2: from London. Tim. We always love going through these lists
Speaker 2: with you, so take it away. We kind of set
Speaker 2: it up. Is there anything we needed, anything else we
Speaker 2: need to know is how you guys curated this list.
Speaker 4: Thanks for having me on. And yeah, I would say
Speaker 4: that one of the things that happens when we come
Speaker 4: up and do these sort of things is that the
Speaker 4: Business Week folks come up with some really cool graphics
Speaker 4: in the magazine and in particular if you look at
Speaker 4: it on the online version. But the device to say,
Speaker 4: from Bloomberg Intelligences perspective, this list of ten you refer
Speaker 4: to it is part of a broader list of what
Speaker 4: we call focus ideas, and the focus ideas are companies
Speaker 4: where we've got a very strong fundamental view, a high
Speaker 4: conviction view that we think is differentiated from the market
Speaker 4: and what the market seems to be discounting, you know,
Speaker 4: as it relates to the stocks and whatnot. And importantly,
Speaker 4: there's a catalyst ahead that we think can change the
Speaker 4: market's point of view assuming we're correct. And importantly, with
Speaker 4: these ten companies that we focused on here, they all
Speaker 4: have really key catalysts coming up for the second quarter,
Speaker 4: and that's why we've picked these. There's two of them
Speaker 4: that are cautious views, there's eight of them that are
Speaker 4: positive views, they span sectors, they span regions, and yeah,
Speaker 4: that's the setup.
Speaker 3: Okay, So let's talk about some of those sectors. I
Speaker 3: want to start with tech in innovation because a couple
Speaker 3: and these are not. I would argue that not every
Speaker 3: one of these companies on here is a household name,
Speaker 3: and certainly some of them are on the smaller side.
Speaker 3: So talk about what you found in tech and innovation
Speaker 3: with the team found there.
Speaker 4: Yeah. Absolutely. So you know, there's an awful lot going
Speaker 4: on in the world of technology these days about AI.
Speaker 4: You can't not talk about it. And there's two companies
Speaker 4: here that we've got on the list that are related
Speaker 4: to artificial intelligence. One is Salesforce, which is the world's
Speaker 4: largest infrastructure software company. And notwithstanding how big this company is,
Speaker 4: it still actually may not be a household name given
Speaker 4: the nature of the beast. Importantly, any company that is
Speaker 4: looking at all the information they get from their customers
Speaker 4: probably relies on Salesforce and their software programs, and they're
Speaker 4: going through two things right now. One is a big
Speaker 4: tech infrastructure software spending cycle that we think is gaining momentum,
Speaker 4: and then secondly, it's the need for information to feed
Speaker 4: AI programs. And initiatives and salesforce is right smack in
Speaker 4: the middle of all of this. The other one is
Speaker 4: a company called ten Cent, and if you're in China,
Speaker 4: you definitely know about ten Cent. It has a lot
Speaker 4: of things going on within the world of online gaming. Importantly,
Speaker 4: from our perspective, they've gotten into short videos and AI
Speaker 4: is enhancing the way that they're generating revenue from advertising.
Speaker 4: Both of those are feeding ten Cents business that we
Speaker 4: think is underappreciated by the market. The last one I
Speaker 4: would mention is a company not in the world of
Speaker 4: classic tech, but technology in the world of medicine. A
Speaker 4: company called Penumbra.
Speaker 3: That's when I was thinking of when I say, not
Speaker 3: a household man exactly.
Speaker 4: So, these guys make computer assisted vacuum technology products, and
Speaker 4: you say, what is that. Think blood clots, and usually
Speaker 4: the way you treat blood clots is with anti coagulate drugs,
Speaker 4: and they've got all sorts of other ramifications. Penumbra's computer
Speaker 4: assisted vacuum technology can go in and actually suck blood
Speaker 4: plots out of auteries and veins, even really small ones,
Speaker 4: and you don't have to take the drugs. It's great.
Speaker 4: And again all three of these we think could generate
Speaker 4: better than anticipated revenue, margins, earnings.
Speaker 2: And I just want to mention when you talked about Salesforce,
Speaker 2: we actually spoke with Alice stein Glass, executive EP Gentleman
Speaker 2: manager over at Salesforce, and they talked about the role
Speaker 2: of jen Ai and the role of data and making
Speaker 2: it ready for their customers. So she kind of got
Speaker 2: into some of the growth initiatives that you've that you
Speaker 2: referred to. Another theme we want to touch on, and
Speaker 2: that has to do with actually two Chinese companies walk
Speaker 2: us through that.
Speaker 4: Yeah, so China is certainly having its challenges. I think
Speaker 4: you still are clearly very well aware of what's going
Speaker 4: on in the world of Chinese property. It's definitely under
Speaker 4: pressure on all sorts of different fronts, and there's also
Speaker 4: other issues. The stock market has fallen and whatnot. There's
Speaker 4: regulatory measures that are being put in place to try
Speaker 4: to curtail some of these problems and change the course.
Speaker 4: Part of those are actually putting a damper on what's
Speaker 4: going on in the world of initial public offerings and
Speaker 4: secondary market offerings in the stock market. And CSC Financial
Speaker 4: is one of China's biggest brokerage firms, and we think
Speaker 4: that they are due to disappoint through the first half
Speaker 4: of the year because of this. Another one is a
Speaker 4: company called Chow Tai Fook. It's based in Hong Kong.
Speaker 4: It's the biggest Hong Kong based China jeweler retail company.
Speaker 4: If you're in Hong Kong, you definitely know Chata Fuk.
Speaker 4: And it's interesting because not only is there a negative
Speaker 4: effect because of what's going on with property and consumer
Speaker 4: sentiment on jewelry purchases, but Hong konger specifically are going
Speaker 4: to find things cheaper on the mainland, They're going across
Speaker 4: the border, and all of this we think is driving
Speaker 4: a disappointing trend for Hong Kong retail sales. And Childtai
Speaker 4: Book is a poster child for this. So both of
Speaker 4: those are concerns.
Speaker 2: As you said, great illustrations by the Bloomberg Business Week team.
Speaker 2: It's all about apples, and these apples are a little
Speaker 2: bit bruised, so kind of fun to see that go along.
Speaker 2: We've got another sector.
Speaker 3: Yeah, I want to talk construction. Here some interesting names
Speaker 3: from the Blueger Intelligence team talking about potential beneficiaries of
Speaker 3: a construction boom. What do you find, tim.
Speaker 4: Well, So, Taylor Morrison is a home builder and they're
Speaker 4: ones that focus on larger communities. They've got more and
Speaker 4: more growth coming from Arizona and Florida, and we think
Speaker 4: that there's an opportunity to see better margin improvement given
Speaker 4: the way that they're driving their business and simple Oshkosh
Speaker 4: is more on the bigger commercial side, and it's not
Speaker 4: only construction, but they also do other commercial vehicles like
Speaker 4: fire trucks or ambulances or the new postal service electric vehicle,
Speaker 4: so all sorts of projects there. But generally there's concern
Speaker 4: that on that commercial side that there's a downcycle actually
Speaker 4: that's developing, and we think Oshkosh is going to be
Speaker 4: able to actually surprise on the positive because that's such
Speaker 4: a big backlog and some of these new initiatives that
Speaker 4: are playing through to the revenue stream.
Speaker 2: All Right, Finally, a sector we love to talk about
Speaker 2: in travel. And you got two names in that walk
Speaker 2: us through those two. A Core is one of them.
Speaker 4: Yes, so there's one that's absolutely classic travel. In the
Speaker 4: other I'm stretching things a little bit by suggesting travel.
Speaker 3: So the mission was created for a reason.
Speaker 2: I think it's.
Speaker 3: Something like that.
Speaker 4: There you go. Yeah, So Acor is a hotel company,
Speaker 4: and I think a lot of the listeners here are
Speaker 4: probably stayed at one of their hotels. They go from
Speaker 4: the very high end to more modest economy brands. The
Speaker 4: thing that anybody who stayed in an hotel recently is
Speaker 4: probably found is how expensive it is. You know, it's
Speaker 4: pretty shocking sometimes what the rates are that you have
Speaker 4: to pay. That's feeding Acor's revenue. There is a global
Speaker 4: travel cycle that we think is stronger and longer, and
Speaker 4: Acor is is in the front of that, both from
Speaker 4: a europe and an Asian travel base. Interesting they are
Speaker 4: French French, their home is in France, and you know
Speaker 4: it's only a small part of their overall portfolio. But
Speaker 4: the Paris Olympics this summer are the catalyst we're looking
Speaker 4: for because pretty soon we're going to start to see
Speaker 4: the early bookings that they release in terms of the
Speaker 4: Paris Olympics, and it should be quite robust.
Speaker 2: The other one twenty seconds though, Yeah, go ahead.
Speaker 4: Yes, Hirelli. It's a tire company, and yes you have
Speaker 4: to travel if you get in your car and you
Speaker 4: spend those tires. They are moving in a production basis
Speaker 4: to Mexico and Romania. It's cheaper and they're curtailing the
Speaker 4: low end of their tires to high end, and so
Speaker 4: there's an upgrade cycle. We think both of those can
Speaker 4: create positive surprise.
Speaker 3: This is not the F one tire that we're talking about.
Speaker 4: Specific it is the F one partly tire O. Yes, okay,
Speaker 4: there go.
Speaker 2: Always love these lists, names that we know, names that
Speaker 2: we don't, but definitely you give us the reasons to
Speaker 2: keep Mono Radar. So appreciate it. Tim Tank, thank you
Speaker 2: so much. Bloom we're Intelligence Senior European Strategist, Director of Research.
Speaker 2: Content are our own Tim Craighead joining us there from London.
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Speaker 3: Well, Private equity payouts are in a slump, Carol five
Speaker 3: major alternative asset managers. We're talking Blackstone, Apollo, Carlisle, Brookfield
Speaker 3: Areas delivered about thirty seven billion dollars from cashing out
Speaker 3: private equity bets last year. That's according to Bloomberg calculations.
Speaker 3: It's a forty nine percent drop since twenty twenty one, that,
Speaker 3: of course, was the year before the FED began raising rates.
Speaker 2: Indeed, the private equity industry is banking on the FED
Speaker 2: cutting rates this year, which would spurbuyers to tap debt
Speaker 2: to grease purchases and ultimately return money to limited partners.
Speaker 2: All of that tim from a great piece back in
Speaker 2: February by our team here that covers private equity. So
Speaker 2: we've got a question, how are the leaders of small
Speaker 2: and mid sized businesses thinking about private equity in this environment?
Speaker 2: It's a good question.
Speaker 3: Don McRee is a vice chairman and head of commercial
Speaker 3: banking at Citizens Financial Group. It's the Providence Rhode Island,
Speaker 3: a based public traded bank. They've got eleven hundred branches,
Speaker 3: total assets around two internet twenty two billion dollars. Don
Speaker 3: joins us from Boston. Don, how are you very good?
Speaker 6: Good to be with you today.
Speaker 3: Yeah, it's good to have you with us. Okay, so
Speaker 3: just talk to us a little. You guys did this survey,
Speaker 3: but before we get to the results of that. I
Speaker 3: do want to talk a little bit about the environment
Speaker 3: right now that you're seeing with the economy, private equity,
Speaker 3: and notwithstanding just general economy, what you're seeing, what you're
Speaker 3: hearing from clients, and what you can tell our listeners
Speaker 3: and our viewers.
Speaker 6: Sure thing, I think.
Speaker 7: I think the economy feels quite strong to us across
Speaker 7: the board. I think the jobs numbers a couple of
Speaker 7: days ago we're testimony to that. We're hearing a lot
Speaker 7: of confidence within our small and mid sized business customers,
Speaker 7: and I think it's a sharp contrast to what we
Speaker 7: were hearing just a year ago, when people were quite concerned,
Speaker 7: quite nervous about a potential recession, still kind of adjusting
Speaker 7: their businesses from a supply chain standpoint and a labor standpoint.
Speaker 7: But the tone is really changed as we've rolled in
Speaker 7: the twenty.
Speaker 2: Twenty four So better bottom line, a lot much better,
Speaker 2: much all right, So talk to us in terms of
Speaker 2: your perspective, what customers, whether it's in the small area,
Speaker 2: small sized companies, mid sized companies, medium sized companies, what
Speaker 2: you are seeing in terms of what they need in
Speaker 2: this environment today and what are their requests most often.
Speaker 7: You know, it's interesting they're beginning to reinvest in their businesses,
Speaker 7: and that was after a couple of years of real,
Speaker 7: real conservatism, so people not building plants, people kind of
Speaker 7: screwing down their inventory levels and really managing their working
Speaker 7: capital more tightly. We're seeing that change at the margin,
Speaker 7: not huge yet. We're seeing a lot of activity in
Speaker 7: the refinancing area. So that's both in the bank markets
Speaker 7: and in the bond markets. So the first quarter of
Speaker 7: the year and into the second quarter has been incredibly
Speaker 7: active in terms of high yielded markets and investment grade markets,
Speaker 7: and the syndicated loan markets have had almost a you know,
Speaker 7: seventy eighty percent content of refinancing. And what that's saying
Speaker 7: to us is, you know, companies are looking at their maturities,
Speaker 7: seeing liquid and open markets and addressing those maturities aggressively
Speaker 7: as they look at over the next.
Speaker 6: Couple of years.
Speaker 3: Why do you think that these small and medium sized
Speaker 3: businesses are turning to private equity, Like why why is
Speaker 3: this the area that they want to turn to for
Speaker 3: potentially financing or for potentially to sell to Like what
Speaker 3: is attractive to that?
Speaker 6: I think it's a couple issues.
Speaker 7: So we've got a very large M and a advisory
Speaker 7: business aimed at middle market companies. We have long term
Speaker 7: relationships with those companies. They know they're companies quite well
Speaker 7: and are selling you know, anywhere from ten to twenty
Speaker 7: those companies every year.
Speaker 6: I'd say the vast majority is ending up.
Speaker 7: With private equity, and we take advantage of a very
Speaker 7: strong private equity relationship business that we have here at Citizens.
Speaker 7: So there's an active M and a dialogue.
Speaker 6: That's going on.
Speaker 7: Some of that is pent up from a long period
Speaker 7: of time where smaller companies weren't able to sell themselves
Speaker 7: because the markets weren't attractive. So a lot of these
Speaker 7: companies wanted to sell before COVID, some wanted to sell
Speaker 7: before the Great Recession. And now that liquidity is back,
Speaker 7: the company's underlying performance is improving, and the rate environment
Speaker 7: has kind of peaked. From everything we can tell, there's
Speaker 7: beginning to be a lot more activity in the marketplace.
Speaker 6: The other thing that we've seen in a couple instances.
Speaker 7: Is private equity being quite creative in terms of taking
Speaker 7: minority stakes or structuring equity investments into companies that may
Speaker 7: not want to sell themselves.
Speaker 6: Outright, but but just may need.
Speaker 7: Some growth equity or an other form of capital to
Speaker 7: help facilitate their business strategy.
Speaker 2: How much is maybe the uptick two or the interest
Speaker 2: don at this point because the terms are better than
Speaker 2: maybe they were six months ago or twelve months ago.
Speaker 2: When it comes to private actors are.
Speaker 7: Quite good and you know think, you know, like today
Speaker 7: where we saw the ten year back up a little bit,
Speaker 7: what we're seeing is spread tightening going.
Speaker 6: On in the marketplace.
Speaker 7: So while interest rates have stayed a little stubbornly high,
Speaker 7: we see credit spreads across the board come in as
Speaker 7: liquidity has been looking for a home. Other terms and
Speaker 7: conditions have stayed relatively flat. We're not seeing a lot
Speaker 7: of loosening of covenants or things or things of that nature.
Speaker 7: But it's really an attractive spread spread environment which is
Speaker 7: offsetting a little bit of the stubbornness of term rates.
Speaker 2: How much dry powder is there around for you to
Speaker 2: do deals? And I bring it up because the way
Speaker 2: as Tim started the introduction here is we talked about
Speaker 2: you know, Blackstone, Apollo, Carlisle, Brookfield, Arias Management delivering about
Speaker 2: thirty seven billion from cash out private equity bets last year, these,
Speaker 2: according to Bloomberg calculations, a forty nine percent drop since
Speaker 2: twenty twenty one, the year before the FED began raising
Speaker 2: interest rates. That's a big drop in terms of the
Speaker 2: cash out. And I'm just curious about just kind of
Speaker 2: the environment. How much dry powder is kind of out
Speaker 2: there looking for deals to do. Maybe investors aren't so
Speaker 2: interested in this because the returns aren't there. So that's
Speaker 2: I kind of wanted to get your view on that
Speaker 2: kind of the flip side of it.
Speaker 7: Yeah, my sense is there's plenty of dry powder out there.
Speaker 7: It's over two trillion dollars. It's on the sidelines looking
Speaker 7: to move into the market. So you have to realize
Speaker 7: that some of the a lot of these complexes have
Speaker 7: multiple funds, so some of their older funds may be invested,
Speaker 7: and they're a little challenge for realization. Does equity values
Speaker 7: have stayed stubborn, although that's changed a lot since the
Speaker 7: Power's speech in the fall and the rise in the
Speaker 7: public equity markets is spurrings of exit activity on private equity,
Speaker 7: but there's still a lot of un vested money in
Speaker 7: newer funds that is looking to be put to work.
Speaker 7: And you saw one big transaction announced today by Blackstone.
Speaker 6: I believe in the real estate space, Yeah, big one.
Speaker 3: So what happens if the Fed dozen cut rates this year?
Speaker 7: Don I think at the margin, if they cut rates,
Speaker 7: it'll be a little bit better, but I don't think
Speaker 7: it's going to really impact what we're seeing. And remember
Speaker 7: we're talking about small and mid sized business So these
Speaker 7: are valuations of the one hundred million up to a
Speaker 7: billion dollars. They're not the ten billion dollar global transaction,
Speaker 7: so they're a little easier to get done, They're a
Speaker 7: little easier to get financed. So the question will be
Speaker 7: leverage levels will probably be slightly lower if interest rates
Speaker 7: stay high, but valuations will probably adjust also. And it
Speaker 7: feels to us that buyer and seller expectations are beginning
Speaker 7: to come together in a more aggressive way.
Speaker 2: I almost a curious don for you guys at citizens,
Speaker 2: I mean, how much is private equity and or private
Speaker 2: credit coming kind of important aspect and something you want
Speaker 2: to be able to offer to your customers.
Speaker 6: We're not in either of the businesses we look at.
Speaker 7: We look at the private equity and private credit complexes
Speaker 7: as both competitors and customers. We have very big relationships,
Speaker 7: and we often will underwrite and distribute some of our
Speaker 7: syndicated lending activity into the private credit funds, so they're
Speaker 7: buyers of some of the risks that we originate. We
Speaker 7: have great partnerships with with a lot of them. You know,
Speaker 7: we haven't We haven't set up a formal partnership the
Speaker 7: way some of our competitors have, but it's not really
Speaker 7: stopping us from from engaging in interesting business. And on
Speaker 7: the private equity side, it's a huge part of our business.
Speaker 7: We've been active with the private equity firms for the
Speaker 7: last since we went public about nine years ago.
Speaker 2: But on private credit, on the private credit side, do
Speaker 2: you want to guys get more involved? I mean, it
Speaker 2: feels like it's been the only thing anybody in the
Speaker 2: financial industry wants to talk about pretty aggressively in the
Speaker 2: last couple of years.
Speaker 4: We won't.
Speaker 7: We won't do it on our balance sheet, I don't believe,
Speaker 7: because we have no plans to, and that's largely because
Speaker 7: the leverage levels tend to be higher than we're comfortable with.
Speaker 7: So we'll we'll do it in partnership with some of
Speaker 7: our good relationships there.
Speaker 3: How does it compare to other periods of time where
Speaker 3: you've been doing this. I mean, we talk about a lot.
Speaker 3: The high interest rate environment right now is one that
Speaker 3: hasn't been seen, at least from the FED side, in
Speaker 3: decades at this point. What has that effect been on
Speaker 3: the clients that you serve From a private equity perspective,
Speaker 3: I think.
Speaker 7: I think deal activity has been relatively slow over the
Speaker 7: last couple of years. As you readily point out, realizations
Speaker 7: have been have been slow, and there's just has been
Speaker 7: there's been a value gap between buyers and sellers of companies.
Speaker 7: So that's been the primary problem is you have to
Speaker 7: have the buyers lower their expectations in terms of price,
Speaker 7: and the sellers, you know, might have to pay a
Speaker 7: little bit more than they think. But deals are beginning
Speaker 7: to form, and we've seen a real uptick in activity
Speaker 7: across the private equity clients that we have over the
Speaker 7: last literally since the beginning of twenty twenty four.
Speaker 3: Do you work with clients who would also consider going
Speaker 3: public or these companies not necessarily that profile.
Speaker 4: No.
Speaker 7: We we have an equity platform that we bought a
Speaker 7: few years ago, mainly focused on tech and biotech and
Speaker 7: financial technology, but also other industries you know, we were
Speaker 7: on the redd at IPO for example as a book manager.
Speaker 7: So we're beginning to see we're beginning to see the
Speaker 7: public market activity tick up slightly. It's still easier to
Speaker 7: get a deal done in the private market from my
Speaker 7: standpoint right now.
Speaker 3: That's what I was wondering.
Speaker 2: Yeah, I am interested too, though in private equity in general,
Speaker 2: since you guys have seen so many different cycles or
Speaker 2: seeing a fair amount of cycles. Don in terms of
Speaker 2: the types of deals, is it industry specific? You know,
Speaker 2: we talk a lot about AI. We're also you know,
Speaker 2: looking at the biotech area. There's been a lot of
Speaker 2: activity in terms of deal activity going on. There Is
Speaker 2: there any specific verticals or industries where you're seeing a
Speaker 2: lot of interest or looking to do some kind of
Speaker 2: deal in the private equity front.
Speaker 7: Not AI, but certainly in data centers we're seeing quite
Speaker 7: a bit, and we have it. We have a pretty
Speaker 7: big data center advisory business. We've seen a lot in healthcare,
Speaker 7: including including biotech, and then just good old fashioned manufacturing
Speaker 7: companies that are that are you know, that are performing
Speaker 7: from a solid cash flow standpoint.
Speaker 6: We see a lot of activity there.
Speaker 7: And in the sector we're talking about which is the
Speaker 7: medium sized business. They tend to be family owned businesses.
Speaker 7: And the driver really around activity is the next generation
Speaker 7: doesn't want to want to be involved in the company,
Speaker 7: so they're looking to realize from a from a trust
Speaker 7: in a state standpoint.
Speaker 2: So like a liquidity event, right, they just want to
Speaker 2: get out of it. And basically exactly, Hey, how do
Speaker 2: you guys think about It's interesting We've talked a lot
Speaker 2: about the Jamie Diamond shareholder letter, and in it he
Speaker 2: covers a lot of big things like AI and also geopolitics.
Speaker 2: But I do think about something like the elections come November.
Speaker 2: Are you concerned about the outcome and how it might impact,
Speaker 2: especially when it comes to a private equity aspect, or
Speaker 2: even financially or are for regulatory Is there things that
Speaker 2: are top of mind for you?
Speaker 7: I think, you know, I'm a little more concerned about
Speaker 7: the volatility that could be in the markets before the election,
Speaker 7: depending on different statements or different positions that some of
Speaker 7: the candidates could take.
Speaker 6: Hard to predict what that's going.
Speaker 7: To be, but I think history has said that that,
Speaker 7: you know, the markets usually can can kind of move
Speaker 7: on once the results of the of an election happen.
Speaker 7: And I think it's interesting that, you know, both of
Speaker 7: the candidates that appears are pretty well known entities, so
Speaker 7: they both will have been prior president. So I think
Speaker 7: the market will be able to handicap pretty much what
Speaker 7: they're going to get regardless.
Speaker 6: Of who the who the winner is going to be.
Speaker 7: I think, you know, we'll see what happens in terms of,
Speaker 7: you know, geopolitical stances if if mister Trump becomes the
Speaker 7: president again, and probably the regulatory environments feels like it's
Speaker 7: a little bit chat more challenged under a democratic president
Speaker 7: the way it's been for the last couple of years,
Speaker 7: as mergers and actians have a little bit of a
Speaker 7: difficult time moving through the system.
Speaker 3: Is that the general comtexas that you hear when you
Speaker 3: speak to like does this come up with with your clients?
Speaker 3: Is this something that you're talking about right now?
Speaker 6: They're really not that worried about it. It's a long
Speaker 6: way away. I think they're.
Speaker 7: Much more focused on the core functioning of their businesses
Speaker 7: and making sure that they actually you can perform and
Speaker 7: are prepared for whatever gets thrown with them. So there's
Speaker 7: not a lot of obsession among our clients around election outcome.
Speaker 7: There's not a lot of obsession around geopolitical events. Obviously,
Speaker 7: if something goes awry in the Mid East and oil
Speaker 7: prices spike, that will affect some of the customers we
Speaker 7: deal with, but they're much more focused on the nuts
Speaker 7: and bolts of running their businesses right now.
Speaker 2: All right, I'd be remiss if I didn't ask any
Speaker 2: obsession for you over the eclipse.
Speaker 4: No.
Speaker 7: I was wondering if it was going to get dark
Speaker 7: in here in the middle of our conversation, but I
Speaker 7: think I think we're fifteen minutes away.
Speaker 6: Got a nice, nice sunny day in Boston.
Speaker 2: Yeah, I see. I think it's ever Cleveland right now.
Speaker 2: So we're just kind of keeping a watch on it. Listen,
Speaker 2: you do keep a watch on so much, and it
Speaker 2: really gives us a great snapshot for our listeners and
Speaker 2: viewers in terms of what's going on, So so appreciate it.
Speaker 2: Don McCree joining us, Vice chairman and head of commercial
Speaker 2: Banking over at Citizens Financial Group. Joining us from Boston.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play, and then brought auto with a
Speaker 1: Bloomberg Business app or watch us live on YouTube.
Speaker 2: It is at clips day, you know that, And it's interesting.
Speaker 2: I'm looking outside our Bloomberg windows here, lots of glass
Speaker 2: in our offices, and it's getting pretty dark out here.
Speaker 2: Reminds me of kind of an afternoon in the winter.
Speaker 2: So it's definitely coming our way. Tim Sanovich, I'm just
Speaker 2: going to say you head it up, I believe to
Speaker 2: another Florida kind of check it out as well. People
Speaker 2: throughout Texas, Arkansas, Illinois, and Ohio have already experienced it.
Speaker 2: And as I said, right about now, it is moving
Speaker 2: here in the New York area and headed to Buffalo,
Speaker 2: New York. If the weather's good, it will in particular
Speaker 2: experience a total solar eclipse, the moen completely obscuring the
Speaker 2: view of the sun up there in Buffalo. So a
Speaker 2: lot may happen. Julie Fine is Bloomberg News Texas Bureau chief.
Speaker 2: She's been following it all day, joining us from Dallas,
Speaker 2: our Dallas bureau. Julie, we have been following it the
Speaker 2: live feed off of NASA Dallas. Tell us about what
Speaker 2: it looked like from your perspective earlier today.
Speaker 8: I mean, it was almost pitch black here. It's interesting
Speaker 8: because it was a cloudy day and there were questions
Speaker 8: on how dark it would get. It got really, really dark.
Speaker 8: We actually went down to the park near our offices,
Speaker 8: and overall, the Mayor guests that there was about or
Speaker 8: estimated about four hundred thousand people came to the Dallas area,
Speaker 8: so it was definitely really packed down there. I would
Speaker 8: say it started to get dark within about forty five
Speaker 8: minutes before we hit totality, and then it it really
Speaker 8: covered and it was really dark for about five minutes
Speaker 8: and then it was like light again. It just went
Speaker 8: back to the regular day. So it's a really interesting
Speaker 8: phenomenon to be able to see in the amount of
Speaker 8: people that came into the city. I mean, you think
Speaker 8: about a Super Bowl, Okay, that's one hundred thousand people
Speaker 8: in a stadium. That doesn't equal four hundred thousand people.
Speaker 8: So in the city of Dallas alone, it's been very
Speaker 8: crowded all weekend. But it was certainly a sight to see.
Speaker 2: Yeah, it's been a sight to see too, to see
Speaker 2: so many Americans right throughout across the country. Across it
Speaker 2: moved across certain parts of the country, it feels like
Speaker 2: come together for one thing. So it's pretty cool, I
Speaker 2: should say. Right now, it's over Tupper Lake, which is
Speaker 2: an area in the Adironducks. I've been up in there.
Speaker 2: It's gorgeous and it looks like we're getting the total
Speaker 2: eclipse there. Is this your first one? I'm just curious about,
Speaker 2: you know, for you to be seeing it, what it
Speaker 2: was like.
Speaker 8: It's my I saw partial eclipse here in twenty seventeen,
Speaker 8: but this was my first to hit totality. I mean,
Speaker 8: it got pretty dark in twenty seventeen, but this was
Speaker 8: my first one to see totality. Interesting today because here
Speaker 8: I am in Dallas, Texas, and it's on its way
Speaker 8: to Buffalo, New York. That's where I'm from originally. So
Speaker 8: I've got all kinds of friends and family getting ready
Speaker 8: for it there and I can tell them this is
Speaker 8: what it's like right now. So it's definitely very interesting.
Speaker 2: I have to tell you.
Speaker 8: It's been really good for this city and basically any
Speaker 8: city where it goes through.
Speaker 2: Yeah, I mean, that's the interesting. I mean, we have
Speaker 2: a great story about the impact on New York in particular,
Speaker 2: which has been hit so hard by the loss of
Speaker 2: its industrial base. I mean, this has really been a
Speaker 2: big boon. Whether it's hotels, whether it's restaurants, you name it.
Speaker 2: Everybody's been chiming in here.
Speaker 8: Absolutely and four. I mean, to get a flight into here,
Speaker 8: or to get a flight into any of those areas
Speaker 8: so expensive, but people are going out, they're eating. It
Speaker 8: was interesting here. You almost get the feeling of like
Speaker 8: a tailgate for a football game. People on the street
Speaker 8: corner with the glasses selling food. We had food trucks
Speaker 8: all over the place, so you definitely could feel the
Speaker 8: financial aspect of it. And it was you know, there's
Speaker 8: so many times where you're here are reporting on difficult
Speaker 8: financial news or difficult national news. This one's just been
Speaker 8: a nice one to be involved with, to be able
Speaker 8: to see how many people got out there and really
Speaker 8: enjoyed it.
Speaker 2: The news has been heavy, and this one feels like
Speaker 2: what we all needed, certainly as a country. Julie, thank
Speaker 2: you so much. Julie Fine, Bloomberg News Texas bureau chief
Speaker 2: on the latest of the eclipse, And of course, my
Speaker 2: partner in crime here, Tim Stanovic, not in the studio
Speaker 2: because he went to check out the eclipse. Tim's joining
Speaker 2: us on zooms and tell us about it.
Speaker 4: There you are, I got.
Speaker 3: I got the glasses on. I'm doing this safely. It's
Speaker 3: pretty cool. I mean, it's definitely cooler out here than
Speaker 3: it usually is. It's darker out here, it doesn't feel
Speaker 3: like it's you know, in the middle of the three
Speaker 3: o'clock hour right now. A lot of people I don't
Speaker 3: know if you can see behind me, but a lot
Speaker 3: of people have gathered. There were more here earlier when
Speaker 3: they were kind of watching it get the moon set
Speaker 3: right in front of the sun. But it feels like
Speaker 3: one of those moments where you know, New Yorkers come
Speaker 3: together to do something in common, and there are, as
Speaker 3: Julie was saying, there are a few, and these are
Speaker 3: few and far between right now, and it kind of
Speaker 3: feels like everyone's on the same page.
Speaker 2: Down and Carol, I gotta say, Tim, you've been so
Speaker 2: excited leading up to it. You have a young son,
Speaker 2: and I know you've been excited for him as well,
Speaker 2: collecting glasses, I mean, as a city, and it feels
Speaker 2: like anybody along the path who were just talking to Julie, fine,
Speaker 2: anyone along the path of this has been all in
Speaker 2: and you know, lining up places for people to watch
Speaker 2: and so on and so forth. I mean, it's really been
Speaker 2: interesting to watch here.
Speaker 1: Yeah.
Speaker 3: So a lot of attention has been paid to the
Speaker 3: so called path and fatality, where Julie is and where
Speaker 3: you know, so many Americans have gone right now. But
Speaker 3: doesn't mean that people who are, you know, hundreds of
Speaker 3: miles away from that path and fatality can't actually experience
Speaker 3: something that's pretty darn cool. I gotta say. So, even
Speaker 3: if you are, you know, to the northeast of us
Speaker 3: right now, and you could still get a chance to
Speaker 3: go and check it out, I highly encourage you do,
Speaker 3: even if you're not in the path of the brutality,
Speaker 3: because hey, it's a solar eclipse. This stuff doesn't happen,
Speaker 3: you know, every few months.
Speaker 2: All right, did you actually see though it was partially
Speaker 2: I'm assuming or what? Did you actually see?
Speaker 1: Yeah?
Speaker 3: I actually saw it. So these glasses I got these
Speaker 3: from the local library here in New York City. They
Speaker 3: were giving them out in the days leading up to this,
Speaker 3: and I actually got to see what it kind of
Speaker 3: looks like, you know, what the moon would look like
Speaker 3: when the moon is a crescent moon. The glasses give
Speaker 3: it like an orange tint, and that's really the best
Speaker 3: way to describe it. It was actually hard to find
Speaker 3: a space down here where I where I could see it.
Speaker 3: I had to kind of run around with justin my
Speaker 3: trust the camera van right now, who's holding up the phone,
Speaker 3: to find a space where we could actually see it
Speaker 3: between buildings. So that was the issue, is just making
Speaker 3: sure that you could see it between buildings. After all,
Speaker 3: it is Manhattan, to be fair.
Speaker 2: It's a nice day here in New York City, and
Speaker 2: I'm looking at you, looking behind you. You know where
Speaker 2: we sit. It's an all glass studio. We have a
Speaker 2: bunch of glass behind us, and it reminds me of
Speaker 2: you know, those winter night winter afternoons, like when it's
Speaker 2: like three thirty and you and I are sitting in
Speaker 2: here and we're like, oh my god, that's what it
Speaker 2: looks like in here.
Speaker 3: Well, that's exactly what it feels like in Scientists have
Speaker 3: said that this confuses, especially in the path of fatality,
Speaker 3: confuses animals. So dogs and other animals, birds especially that
Speaker 3: you know, will experience darkness at a time that they
Speaker 3: normally would experience the daytime, So it kind of confused
Speaker 3: as the animal census, all right.
Speaker 2: So what are you going to ask your son when
Speaker 2: you go home.
Speaker 3: It has to be made sure to stay inside during
Speaker 3: this because you can't trust a five year old and
Speaker 3: keep glasses on. And we'll watch replays on YouTube, that's
Speaker 3: what we'll do.
Speaker 2: All right, Listen, We're going to give you some time
Speaker 2: to get back here in this studio, but so glad
Speaker 2: you could be out there and see it. So really
Speaker 2: good stuff.
Speaker 3: Hey, thank you for holding down the board.
Speaker 2: I appreciate that anything for you, You know that, all right,
Speaker 2: Tim Stanovic, of course my co hosts. He's going to
Speaker 2: come back in a little bit. But getting a chance
Speaker 2: to see this, and you know, we talked with our
Speaker 2: Julie Fine, who was there obviously in Texas and got
Speaker 2: to see that earlier. But we talked a little bit
Speaker 2: about New York and New York State in particular, and
Speaker 2: I'm looking at it right now watching the NASA live
Speaker 2: feed and it's now over main if you will. But
Speaker 2: we talked about for a place like upstate New York,
Speaker 2: it really has had some really tough economic times, and
Speaker 2: we talked specifically about the loss of its industrial base.
Speaker 2: The manufacturing sector in New York shrank by more than
Speaker 2: sixty percent between the nineteen forties and two thousand and nine,
Speaker 2: pretty much cut in half, if you will. That was
Speaker 2: a report by the state comptroller. But as a result
Speaker 2: of the eclipse and the totality that you could see
Speaker 2: up in the Buffalo, New York area, Buffalo being one
Speaker 2: of the biggest beneficiaries of this of the eclipse, the
Speaker 2: state's second biggest city, is anticipating as many as a
Speaker 2: million visitors. So we'll wait for some numbers, maybe later
Speaker 2: on today or tomorrow to see whether or not that happened.
Speaker 2: And that's the same as the entire population of Erie County,
Speaker 2: so so many people coming into the region. You know
Speaker 2: the stories leading up to this, whether it's the hotel sites.
Speaker 2: More than half of US cities along the eclipses path
Speaker 2: are fully booked or were fully booked for the night
Speaker 2: of April seventh. That's according to data from air DNA,
Speaker 2: it's a data analytics company, with thousands of airbnbs in
Speaker 2: the path of totalities slated to reach one hundred percent occupancy.
Speaker 2: That in the Anerontics in North Country. So there was
Speaker 2: a lot going on. We know about the traffic stories,
Speaker 2: but I got to say just watching this live feed
Speaker 2: and we've got it up for you guys who are
Speaker 2: watching on YouTube and also on our Bloomberg Original streaming service.
Speaker 2: Pretty cool to see and it's still kind of dark
Speaker 2: a little bit outside Bromco.
Speaker 6: Journal.
Speaker 2: Now about you let me drive?
Speaker 3: Oh no, no, no, no's drive alright please, I'll do
Speaker 3: the gravel.
Speaker 4: Wait, I want to drive. It's a good question.
Speaker 1: Good. This is the drive to the globe thing well
Speaker 1: by around Yeld on Bloomberg Radio.
Speaker 2: All right, everybody, just about eighteen minutes left in today's
Speaker 2: trading session, getting ready to wrap up the Monday trade.
Speaker 2: The eclipse trade frutality.
Speaker 3: Yeah, I think moved quickly.
Speaker 2: It did?
Speaker 3: It moved quickly? Yeah?
Speaker 2: Is it fun?
Speaker 4: Like?
Speaker 5: Yeah, it was cool.
Speaker 6: But I mean just to see.
Speaker 3: It go from Mazaala in Mexico during the two o'clock
Speaker 3: hour all the way to Maine right now.
Speaker 2: It's pretty cool.
Speaker 1: Yeah.
Speaker 2: It was amazing to someone say, science, it's amazing. How
Speaker 2: these things did you ever get up? I have gotten
Speaker 2: up many times to see a sunrise and it's like dark, dark, dark,
Speaker 2: and then all of a sudden it breaks and it's
Speaker 2: like it's like up and it's just it's really what a.
Speaker 3: What a world we live in? It's pretty pretty cool.
Speaker 2: Yeah, it's actually planet Earth. Kind of love you all right,
Speaker 2: Also really really like Our next guest our drive to
Speaker 2: the closed. Guest back with us is carolsh Life. She's
Speaker 2: chief investment officer at Female Family Office, joining us from Chicago,
Speaker 2: where I believe you did see the eclipse? How are you?
Speaker 4: I did?
Speaker 9: It was great. I flew in last night and realized
Speaker 9: I was going to see a lot more eclipse here
Speaker 9: in Chicago than I would have seen in Minneapolis today.
Speaker 4: So it was fun.
Speaker 9: And they handed out glasses this morning, so we all
Speaker 9: got to be get was he your first one?
Speaker 4: Yeah?
Speaker 9: It was, it was we we kind of we see
Speaker 9: a lot of northern lights up there though, so I
Speaker 9: have that advantage all summer long.
Speaker 2: That is actually a really sweet thing, very very cool. So,
Speaker 2: speaking about seeing things, what are you seeing when you
Speaker 2: look at Sorry nice kidding away, So what do you
Speaker 2: say when you look at today's market environment? Not just Monday,
Speaker 2: but just really I feel like Carol, the rethink once
Speaker 2: again in terms of the narrative around what the Fed
Speaker 2: might do this year.
Speaker 9: Well, I think it's not only that rethink, but I
Speaker 9: think this week in particular, people don't want to get
Speaker 9: in front of the Cpippi Bank earnings. It's a very
Speaker 9: interest rate sensitive week, and so you could see some
Speaker 9: volatility later in the week. But we were never in
Speaker 9: the camp expecting six to seven cuts, like the market
Speaker 9: got ahead of itself. We think late last year we
Speaker 9: had in our annual update we wrote two maybe three
Speaker 9: excuse me cuts as our base case, and now thinking
Speaker 9: that it really doesn't matter realistically for the intermediate and
Speaker 9: longer term how many cuts we get this year. It's
Speaker 9: directionally where we're going. And the important thing is is
Speaker 9: the reason we don't see the bed anxious to start
Speaker 9: cutting is because economies in great shape.
Speaker 2: So if we get no rate cuts, who cares because
Speaker 2: the economy is a great shape. Isn't that simple?
Speaker 6: Yeah, I don't.
Speaker 9: I wouldn't say who cares. You'll probably get some volatility
Speaker 9: we get no cuts this year, but you know, if
Speaker 9: you get a cutter to push towards the end of
Speaker 9: the year and if you have some visibility on there.
Speaker 9: And we also have a very big election that comes
Speaker 9: between here and the end of the year, so there'll
Speaker 9: be a lot of issue over that. But I think
Speaker 9: the important thing is is this secular trend we've got
Speaker 9: going on from and you've had a lot of guests
Speaker 9: on in the last couple of weeks in particular, talking
Speaker 9: about how important that secular trend of the infrastructure rebuild
Speaker 9: that we're doing here, the rebuild, the build out you
Speaker 9: know news this morning with funding for TSMC and news
Speaker 9: out a couple of weeks ago for funding for Intel that'
Speaker 9: stop seventy five percent of it isn't even out the
Speaker 9: door yet. So we've got a lot of build intermediate
Speaker 9: and longer term to focus on keeping this economy pretty healthy.
Speaker 2: I feel like that was something that was kind of
Speaker 2: I agree with you that people were, some of our
Speaker 2: guests were coming on was it late last year, early
Speaker 2: this year, just reminding us that, all right, everybody knew
Speaker 2: you're a little nervous about maybe you know this market rally,
Speaker 2: but that there's still a lot of spend going on
Speaker 2: in the economy because of some of the federal government programs,
Speaker 2: especially when it comes to infrastructure, and as you say,
Speaker 2: they're not all out that door. That money's going to
Speaker 2: go somewhere, and that goes somewhere, it means it goes
Speaker 2: into the economy.
Speaker 9: Right well, and I definitely right there. And I think
Speaker 9: the other thing to watch us we're an earning season
Speaker 9: is look at those big, big tech companies and look
Speaker 9: at how much they're spending on a quarterly basis for
Speaker 9: infrastructure build out for data centers. And we can't even
Speaker 9: hook all those data centers to the grid. So we've
Speaker 9: got to get accelerated on that green grid, or not
Speaker 9: just green grid, but on the transition grid or existing grid.
Speaker 9: We've got infrastructure here. We've got major gas pipes and
Speaker 9: electricity pipes that were put in in what the late
Speaker 9: eighteen hundreds, early nineteen hundreds. We've got a lot of
Speaker 9: serious infrastructure we build we need to do. You know,
Speaker 9: you've got the key bridge and then focus on that infrastructure.
Speaker 9: We had our very own bridge in Minnesota go down
Speaker 9: a decade and a half ago, and the thing that
Speaker 9: amazed me is they got it put back up in
Speaker 9: a year and a half. Yeah, and so I think
Speaker 9: that's one of Yeah, that's one of the things that's
Speaker 9: really amazing. But you marshal those national and local resources,
Speaker 9: and that's what's got to happen in a lot of
Speaker 9: this industrial spend.
Speaker 3: Well, I get that there is the political will to
Speaker 3: do that for one off projects and for tragedies like
Speaker 3: that one, and for the most recent one that you
Speaker 3: talk about, Carol. But I'm wondering if there's you know,
Speaker 3: if there is the political will to actually do this
Speaker 3: on a nationwide basis, because well, you have a lot
Speaker 3: of competing factions. It's not like lawmakers are necessarily going
Speaker 3: to fight for other for other states to get funding.
Speaker 9: Yeah, and it's a very valid point. It's difficult to
Speaker 9: get things permitted here. It's one of the reasons why
Speaker 9: we've seen the delay in the build up because the
Speaker 9: Chips Act, I think was passed in twenty one twenty two,
Speaker 9: so it's a couple of years out there. So getting
Speaker 9: the money out of the door is difficult because then
Speaker 9: you've got to get it permitted, you've got to go
Speaker 9: through environmental review, You've got you know, and that's one
Speaker 9: of the things that you know, Congress has talked about
Speaker 9: trying to trying to address too, is can we get
Speaker 9: this stuff permitted more quickly. You know, in certain downtowns
Speaker 9: where they're trying to permit higher density housing, they're getting
Speaker 9: pushed back. So there is a lot of that going on.
Speaker 9: But the will is there, and if we all want
Speaker 9: to continue to use chat GPT, we've got to get
Speaker 9: we've got to be able to hook that processing power
Speaker 9: to the grids.
Speaker 2: How much do you use CHATTYPT? I wonder.
Speaker 9: I actually am a late adopter on that. But the
Speaker 9: interesting thing is is I think looking at the number
Speaker 9: of places that that artificial intelligence is already being used.
Speaker 9: I had a scan done last week and when I
Speaker 9: got noticed within twelve hours that it had been read.
Speaker 9: You could tell from the the doctors known initially that
Speaker 9: they had used artificial intelligence to do that initial screening.
Speaker 3: To actually screen so manjor to write through the write
Speaker 3: up to do it.
Speaker 4: To screen the image okay wow yeah.
Speaker 9: And so you know a use case is is you
Speaker 9: look at a lot of those initial, those routine screens
Speaker 9: that people have and to feed them through artificial intelligence
Speaker 9: where they can say to the radiologist, oh, these are
Speaker 9: the fifteen that look like they might have something going on.
Speaker 9: Your view needs these fifteen first. So use cases all
Speaker 9: the way through the system in terms of already there,
Speaker 9: because artificial intelligence companies have been building use cases for
Speaker 9: a decade. It's just the generative AI that we're all
Speaker 9: getting access to now.
Speaker 2: Right right, it takes it to a whole other level,
Speaker 2: right in terms of the information it can use. How
Speaker 2: is that just thirty seconds? It's just going through that
Speaker 2: personal experience and seeing that and realizing, wait a minute, Okay,
Speaker 2: this stuff is not just something we continue to talk about,
Speaker 2: but people are not only made the investment, but they're
Speaker 2: actually putting it to use. Is it shaping your investment
Speaker 2: thesis or think? And just got about thirty centies? Yeah,
Speaker 2: I think.
Speaker 9: It does all the way through, because our research team
Speaker 9: definitely uses some of the various things and they're pulling
Speaker 9: out for us. How the companies that they cover are
Speaker 9: building use cases and in some cases in the energy industry,
Speaker 9: for example, one of the companies couldn't lure enough AI
Speaker 9: engineers through so they sent their own engineers to Mit
Speaker 9: for two hundred of them to build their own Well.
Speaker 2: Jamie Diamond likens ais transformational impact of steel like to
Speaker 2: the steam engine and the impact it had on our economy.
Speaker 2: So everybody's all over it.
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