WEBVTT - Bloomberg Businessweek Weekend - June 30th, 2023 0:00:01.360 --> 0:00:05.720 This is Bloomberg business Week inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.040 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.040 --> 0:00:22.959 Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. 0:00:23.160 --> 0:00:25.520 Carol Masser along with Matt Miller, who is filling in 0:00:25.560 --> 0:00:28.760 for Tim. We had a week of big macro thoughts 0:00:28.800 --> 0:00:32.400 thanks to four global central bankers, including Federal Reserve Chair 0:00:32.520 --> 0:00:36.080 j Powell, reminding us of persistent inflation and the need 0:00:36.120 --> 0:00:39.159 for more interest rate hikes. Meantime, Russia appears to have 0:00:39.200 --> 0:00:43.479 avoid a disaster following last week's mutiny, although details on 0:00:43.600 --> 0:00:46.600 all of that continue to emerge. And then, of course, 0:00:46.640 --> 0:00:51.240 geopolitics weighing on semiconductors and technology, highlighted by US plans 0:00:51.280 --> 0:00:54.120 to tighten export controls in order to restrict sales of 0:00:54.160 --> 0:00:58.360 some artificial intelligence chips to shine out, least according to sources. 0:00:58.720 --> 0:01:00.960 Now in a moment, we'll get a research and investment 0:01:01.000 --> 0:01:04.080 perspective on some of the world's largest markets, and one 0:01:04.120 --> 0:01:07.840 in particular that appears poised to enjoy the brightest economic future. 0:01:08.360 --> 0:01:11.640 Also ahead, Ken can Sell of Churchill Asset Management on 0:01:11.720 --> 0:01:15.240 the golden age of private credit, luxury real estate developer 0:01:15.280 --> 0:01:18.480 Michael schro on the market for high end commercial properties, 0:01:18.800 --> 0:01:22.600 and Carnival CEO Josh Weinstein details while the world's largest 0:01:22.600 --> 0:01:26.240 cruise line may finally be back to smooth sailing. All 0:01:26.240 --> 0:01:27.679 of that to come. We begin with a look at 0:01:27.720 --> 0:01:30.640 where the money is flowing abroad as firms and individuals 0:01:30.880 --> 0:01:34.520 seek viable options beyond Beijing. With this in mind, our 0:01:34.560 --> 0:01:37.639 first guest is just back from India. This past Monday, 0:01:37.640 --> 0:01:40.120 Matt and I spoke with David Riedel, founder and president 0:01:40.160 --> 0:01:43.040 of Retal Research Group, which has analysts on the ground 0:01:43.080 --> 0:01:46.600 around the globe in some fifteen countries covering companies in 0:01:46.640 --> 0:01:50.080 those areas. We began by asking David which ones are 0:01:50.160 --> 0:01:51.720 top of mind for his clients. 0:01:52.200 --> 0:01:56.560 Well, they usually begin with China and more recently they'll 0:01:56.560 --> 0:01:58.800 talk a little bit about India, but they will talk 0:01:58.800 --> 0:02:02.280 about the impact of Russia on those those countries. You know, 0:02:02.680 --> 0:02:05.080 India has and China both have tried to tried a 0:02:05.080 --> 0:02:07.720 pretty fine line, China a little bit more in support 0:02:07.760 --> 0:02:10.800 of Russia. India kind of trying to play both sides. 0:02:11.000 --> 0:02:14.160 Both of them are big oil importers, so it's important 0:02:14.160 --> 0:02:17.399 for them to maintain a relationship with Russia. 0:02:17.520 --> 0:02:20.520 Does the mutiny though that we witnessed over the weekend 0:02:20.639 --> 0:02:26.240 and the I guess the solution to that problem have 0:02:26.400 --> 0:02:28.000 any impact on your markets? 0:02:28.919 --> 0:02:31.240 I don't think so at this point. You know, it'd 0:02:31.240 --> 0:02:33.480 all wrapped up over the weekend, so we didn't really 0:02:33.480 --> 0:02:35.600 see its impact on trading. I think, you know, a 0:02:35.600 --> 0:02:37.600 lot of people were surprised overnight. 0:02:38.000 --> 0:02:43.240 When when that protest or that rebellion or whatever it 0:02:43.320 --> 0:02:46.840 was took place, but it seemed like it was people 0:02:46.840 --> 0:02:48.840 were pretty satisfied by Monday morning. 0:02:49.080 --> 0:02:50.960 Well, it is interesting too that you did have China's 0:02:50.960 --> 0:02:54.639 Foreign Ministry saying it supports Russia's actions to maintain national stability. 0:02:54.840 --> 0:02:57.880 A brief statement by a ministry spokesperson who said, it's 0:02:57.919 --> 0:03:00.440 Russia's internal affairs. But it's just like China saying, wait, 0:03:00.480 --> 0:03:03.239 we got stuff going on too, and it's our internal affairs. 0:03:04.080 --> 0:03:07.240 That's one of their favorite phrases. As you know, they 0:03:07.280 --> 0:03:10.120 think that the Taiwan straight is their domestic waters. They 0:03:10.160 --> 0:03:12.880 think that the Taiwan issue is a domestic issue. Of course, 0:03:12.919 --> 0:03:14.959 they think the weaker issue, and the Tibet issue and 0:03:15.000 --> 0:03:18.480 the Hong Kong issue are all internal affairs. So they 0:03:18.520 --> 0:03:21.720 don't like the idea of people being involved in other 0:03:21.720 --> 0:03:23.120 people's domestic activities. 0:03:23.440 --> 0:03:25.600 But I guess so just to follow internal they'll. 0:03:25.360 --> 0:03:28.400 Have a problem with China being involved in Ukraine's domestic activities. 0:03:29.240 --> 0:03:32.720 I know, but these people always pick and choose when 0:03:32.720 --> 0:03:34.600 it's wrong and when it's right when they're doing it, 0:03:34.639 --> 0:03:35.120 I guess. 0:03:34.920 --> 0:03:36.840 It's okay, Well, pick and choose for us. I mean 0:03:36.920 --> 0:03:38.840 in terms of I guess we're all trying to as 0:03:39.000 --> 0:03:42.400 international investors, trying to understand which internal affairs become global 0:03:42.400 --> 0:03:45.800 affairs become global investment stories. So how do you kind 0:03:45.800 --> 0:03:47.080 of play that out? 0:03:47.320 --> 0:03:48.880 Well, One of the things that I think we've seen 0:03:48.920 --> 0:03:51.760 over the last five years is really people questioning the 0:03:53.840 --> 0:03:57.440 sensibleness the reasonableness of having so many supply chains linked 0:03:57.480 --> 0:04:00.360 back to one country China. I think COVID and the 0:04:00.400 --> 0:04:03.760 breakdown and supply chains really reminded people how much risk 0:04:03.840 --> 0:04:06.640 we were taking on having so much of our economy 0:04:06.640 --> 0:04:09.520 connected back to one economy. So I think you've got 0:04:09.520 --> 0:04:11.560 a lot of people looking around the world for alternative 0:04:11.600 --> 0:04:15.440 places to manufacture, whether that's Indonesia or Brazil or Mexico 0:04:15.720 --> 0:04:19.520 a country that we really like, or increasingly India. India 0:04:19.560 --> 0:04:24.720 has made some really major fundamental changes in their policies 0:04:25.000 --> 0:04:27.359 and the way that they run their country that I 0:04:27.440 --> 0:04:31.320 think are changing the growth trajectory for that country. And 0:04:31.360 --> 0:04:34.600 they are definitely set to benefit from people diversifying away 0:04:34.600 --> 0:04:37.480 from China. They've got the large population that one point 0:04:37.480 --> 0:04:40.640 four billion people, They've got the right demographics, a lot 0:04:40.680 --> 0:04:44.039 more young people in India, and they are a positioned 0:04:44.080 --> 0:04:47.760 to perhaps take some of that manufacturing activity and some 0:04:47.800 --> 0:04:49.920 of those supply chains from China. 0:04:50.000 --> 0:04:54.560 But still issues tell us about you just back, what 0:04:54.600 --> 0:04:56.640 were you doing, who were you visiting? What did you 0:04:56.720 --> 0:04:59.240 want to see? Specifically? There's stuff you can get on 0:04:59.279 --> 0:05:01.080 the ground that you can cannot get from afar. 0:05:01.400 --> 0:05:03.479 It was fascinating. I was mostly in Bombay and the 0:05:03.600 --> 0:05:07.240 area around Mumbai and it was amazing to see how 0:05:07.320 --> 0:05:10.400 much infrastructure they're building. One of the frustrations with India 0:05:10.400 --> 0:05:13.400 for a long time was that the national government couldn't 0:05:13.400 --> 0:05:17.680 mobilize enough tax resources across the country to build the 0:05:17.720 --> 0:05:20.720 infrastructure that they needed in the big cities. India's of course, 0:05:20.839 --> 0:05:23.880 a very large democracy, largest democracy in the world. But 0:05:23.960 --> 0:05:27.960 that meant that some of those voters expected to have 0:05:28.000 --> 0:05:31.719 infrastructure projects in their provinces, in their cities, in their villages, 0:05:32.080 --> 0:05:34.919 and so that really left the capital cities Delhi and 0:05:34.960 --> 0:05:39.360 the big city like Mumbai without a lot of money 0:05:39.360 --> 0:05:42.599 for infrastructure. Boy, has that changed. They really changed their 0:05:42.640 --> 0:05:45.640 tax basis a few years ago, looking at goods and 0:05:45.680 --> 0:05:48.840 services tax that's much simplified. And they are on a 0:05:48.880 --> 0:05:53.559 building spree, building a huge elevated train through huge parts 0:05:53.560 --> 0:05:57.840 of Bombay and really spending a lot of money on infrastructure, 0:05:57.960 --> 0:05:59.040 which is sorely needed. 0:05:59.200 --> 0:06:03.599 What about the middle class? What's the trajectory looked like there? 0:06:03.839 --> 0:06:06.039 You know, China, obviously that was a massive part of 0:06:06.040 --> 0:06:08.960 the story over the past twenty years. So is it 0:06:09.080 --> 0:06:11.240 going to look the same way in India? 0:06:11.440 --> 0:06:15.080 You know, I think it's going to. You almost always 0:06:15.080 --> 0:06:19.120 have a situation where rising wages drive the development of 0:06:19.160 --> 0:06:21.880 a middle class. If you've got enough employment for those people, 0:06:22.279 --> 0:06:26.680 that'll drive demand for motorcycles and then eventually cars, it'll 0:06:26.760 --> 0:06:30.520 drive for apartments and eventually houses, life insurance and other 0:06:30.600 --> 0:06:34.880 sort of products that come with that rising wealth. So 0:06:34.920 --> 0:06:37.599 I think you'll see pretty much the same trajectory in 0:06:37.600 --> 0:06:42.200 India that we saw in China, perhaps not as smooth 0:06:42.320 --> 0:06:46.919 a road. China, having a very centrally planned and organized economy, 0:06:47.320 --> 0:06:49.640 had the advantage of really driving through a lot of 0:06:49.680 --> 0:06:53.960 the changes that they wanted to make without worrying too 0:06:54.040 --> 0:06:58.120 much about voters and the getting other people involved in 0:06:58.120 --> 0:07:02.440 the decision making. So India as a democracy, perhaps stronger institutions, 0:07:02.720 --> 0:07:05.840 but maybe a little bit a few more fits and 0:07:05.880 --> 0:07:07.839 starts on their road to ros parity. 0:07:07.920 --> 0:07:09.920 David, I'm going to probably sound pretty naive, but yeah, 0:07:09.960 --> 0:07:14.800 I'm going to just go for it. India, China, Saudi Arabia, Russia. 0:07:14.960 --> 0:07:20.000 Money trumps all. Investment opportunities trump all even if we 0:07:20.080 --> 0:07:24.920 have some problems about our concerns about internal affairs in 0:07:24.960 --> 0:07:26.840 a part of the country or in part of the world. 0:07:27.880 --> 0:07:28.320 It does. 0:07:28.480 --> 0:07:32.640 You know, people investors are looking for opportunities around the world, 0:07:32.720 --> 0:07:34.960 and I think they're looking for opportunities for something to 0:07:35.000 --> 0:07:37.400 surprise to the upside. I think if you look at 0:07:37.400 --> 0:07:39.680 a Saudi or something like that, that's a country that's 0:07:39.720 --> 0:07:42.480 pretty much a one trick pony. In most ways. It's 0:07:42.520 --> 0:07:46.880 really a hydrocarbons play it's a country like an Indonesia 0:07:47.040 --> 0:07:49.760 or a Brazil or in this case, India, has a 0:07:49.840 --> 0:07:55.280 diverse and deep and developing economy that has the ability 0:07:55.320 --> 0:07:59.120 to really create a cycle of value when money comes 0:07:59.120 --> 0:08:02.440 into the system. It has things that it can invest in, 0:08:02.480 --> 0:08:05.440 and has a domestic market that can be growing. And 0:08:05.520 --> 0:08:07.960 so that's the kind of environment you're looking for, the 0:08:08.040 --> 0:08:12.200 large population with relatively stable government that's on a new 0:08:12.240 --> 0:08:14.600 trajectory of growth. And I think that's what people are 0:08:14.640 --> 0:08:15.880 starting to see in India today. 0:08:15.960 --> 0:08:17.680 But I guess my point is that if there's an 0:08:17.680 --> 0:08:20.440 opportunity to make money, I'm thinking about, you know, I'm 0:08:20.440 --> 0:08:23.240 going to go back to Saudi Arabia that we all 0:08:23.320 --> 0:08:27.040 kind of forgot about, you know, our many have you know, 0:08:27.360 --> 0:08:32.559 the killing of Jamal Koshogi. And yet you know we're seeing, 0:08:32.720 --> 0:08:35.800 you know, the PGA tour and live golf. Like it's 0:08:35.880 --> 0:08:39.440 just when there's money to be made or opportunities that 0:08:39.520 --> 0:08:42.720 we kind of turn and look the other way of it. 0:08:43.760 --> 0:08:45.920 Unfortunately. I think that's true, and I think that's been 0:08:45.960 --> 0:08:49.000 true with regard to our enthusiasm for China for many years. 0:08:49.480 --> 0:08:53.400 Really thinking that changing in involving them more in the 0:08:53.400 --> 0:08:56.040 global fabric and the global business fabric was going to 0:08:56.120 --> 0:08:59.080 change their behavior, and it really didn't. So I think 0:08:59.120 --> 0:09:01.760 that people do need to be careful who they're investing with, 0:09:01.800 --> 0:09:06.720 who they're investing alongside. But in a growing environment, maybe 0:09:06.720 --> 0:09:08.719 you could pick some winners that don't have as much 0:09:08.760 --> 0:09:10.920 downside or as much baggage. 0:09:11.520 --> 0:09:13.480 All right, very interesting stuff. 0:09:13.840 --> 0:09:18.480 India must be the best of those options that Carol listed, right, 0:09:19.000 --> 0:09:21.720 and they happen to have the best growth trajectory as 0:09:21.760 --> 0:09:23.800 far as we can see from this point, they really do. 0:09:23.880 --> 0:09:26.040 It's amazing. A lot of people haven't followed this story, 0:09:26.040 --> 0:09:28.840 but over the last ten years they did iris scans 0:09:28.880 --> 0:09:32.600 and fingerprints of every single citizen, which created an environment 0:09:32.640 --> 0:09:35.520 where they could open four hundred million new bank accounts, 0:09:35.679 --> 0:09:38.320 and it created a system where the government can distribute 0:09:38.400 --> 0:09:42.480 all their benefits, payments and things like that electronically directly 0:09:42.520 --> 0:09:46.440 to the consumer, not through other governments which tend to 0:09:46.559 --> 0:09:49.520 foster a lot of corruption. So they've really stitched together 0:09:49.559 --> 0:09:54.480 a digitized and mostly cash lists economy that's much more 0:09:54.480 --> 0:09:57.800 efficient for taxation and for growth. 0:09:58.120 --> 0:10:00.520 David Yes or nos is a point that my five 0:10:00.600 --> 0:10:01.960 ten years from now, we look back and We're going 0:10:02.000 --> 0:10:03.600 to say this has been the world turn from China 0:10:03.640 --> 0:10:04.280 to India. 0:10:04.320 --> 0:10:06.160 It's going to happen. It's already happening today. 0:10:06.320 --> 0:10:09.040 It's bound to happen, all right, listen. So good to 0:10:09.120 --> 0:10:11.120 check in with you as always. David Ridal, He's present 0:10:11.160 --> 0:10:13.679 and founder of Retal Research Group on zoom from San Francisco. 0:10:13.720 --> 0:10:15.920 I do think about this, Matt, these turning points in 0:10:15.960 --> 0:10:16.480 our world. 0:10:16.640 --> 0:10:19.839 Yeah, it does feel like we've hit that. As David said, 0:10:19.920 --> 0:10:21.480 from his perspective, we already have. 0:10:22.080 --> 0:10:25.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:25.679 --> 0:10:29.040 live weekday afternoons from three to six Eastern Listen on 0:10:29.080 --> 0:10:33.120 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:10:33.400 --> 0:10:35.080 or watch us live on YouTube. 0:10:36.120 --> 0:10:38.240 We've had a flurry of private credit and lending stories 0:10:38.240 --> 0:10:40.880 over the past couple of weeks. Just today, pe firms 0:10:40.920 --> 0:10:43.800 finding a way to get more financing for their portfolio 0:10:43.880 --> 0:10:47.520 companies while screoting provisions meant to protect existing creditors, tapping 0:10:47.520 --> 0:10:50.319 the one and a half trillion dollars private credit market. Matt, 0:10:50.720 --> 0:10:54.319 I'm obsessed with the private markets. I'm making you obsessed 0:10:54.320 --> 0:10:54.520 with it. 0:10:54.600 --> 0:10:55.440 No, No, I love it. 0:10:56.240 --> 0:10:59.079 I mean I used to go to Super Return every 0:10:59.160 --> 0:11:02.079 year in Berlin, which is this big private anty conference, 0:11:02.160 --> 0:11:03.800 and I know you go to Milk, and I'm a 0:11:03.800 --> 0:11:04.520 little bit jealous. 0:11:04.559 --> 0:11:06.320 I would like to go there as well. 0:11:06.440 --> 0:11:06.600 Well. 0:11:06.600 --> 0:11:08.520 I brought a little bit of milk in to you. 0:11:08.679 --> 0:11:09.040 Thank you. 0:11:09.280 --> 0:11:11.800 We have a great voice on all of this, and 0:11:11.800 --> 0:11:14.120 someone who's got it. Really a fascinating career when it 0:11:14.120 --> 0:11:17.040 comes to finance Wall Street, including Chase and Direxelburn and 0:11:17.080 --> 0:11:19.000 we talked about it. Ken can Sell is with US, 0:11:19.000 --> 0:11:21.840 president and CEO of Churchill Asset Management. It's the forty 0:11:21.880 --> 0:11:24.640 six billion dollar private capital affiliate of Nuveene. So there's 0:11:24.679 --> 0:11:27.080 your backdrop size and scope. Like we like to do 0:11:27.160 --> 0:11:30.760 a Bloomberg. He's here in studio. It's so great to 0:11:30.800 --> 0:11:31.199 have you here. 0:11:31.240 --> 0:11:32.080 How are you good. 0:11:32.240 --> 0:11:34.440 Great to see you again, Carol and Matt great too 0:11:34.520 --> 0:11:35.360 great to join you here. 0:11:35.440 --> 0:11:37.199 I feel like I have a million questions I do. 0:11:37.520 --> 0:11:41.079 I have questions for me, and I have questions from listeners. 0:11:41.160 --> 0:11:43.439 I've been talking to people all day on the Bloomberg 0:11:43.520 --> 0:11:45.560 like IB like, oh, I got Ken can Sell later, 0:11:45.640 --> 0:11:47.880 and so you know, Ryan sent me a whole list 0:11:47.920 --> 0:11:48.439 of questions. 0:11:48.600 --> 0:11:48.960 Okay, right. 0:11:49.480 --> 0:11:51.600 So, Ken, first, I want to start with you. After 0:11:51.640 --> 0:11:53.920 we talked at Milkin, and we're going to get into stuff. 0:11:54.160 --> 0:11:56.480 You said you were going to go have dinner with 0:11:57.040 --> 0:11:57.600 a bunch. 0:11:57.400 --> 0:11:59.120 Of milk and alone with milk and alumni. 0:11:59.160 --> 0:12:00.000 That's exactly right. 0:12:00.120 --> 0:12:03.000 So Mike hosts a dinner every year at the conference 0:12:03.480 --> 0:12:04.840 and it's it's a lot of fun. 0:12:05.120 --> 0:12:06.680 So I am curious. I'm not going to ask you 0:12:06.720 --> 0:12:08.520 for all the details. And I'm sure there was a 0:12:08.520 --> 0:12:10.720 lot of pleasantries and fun things, But what was top 0:12:10.760 --> 0:12:13.240 of mind for you guys when it comes to kind 0:12:13.240 --> 0:12:15.719 of the business world or the financial market world. Was 0:12:15.760 --> 0:12:17.800 there something that dominated or no? 0:12:18.400 --> 0:12:20.240 Well, I mean, first of all, Mike spent a lot 0:12:20.240 --> 0:12:23.120 of time talking about his book, right, So you know 0:12:23.480 --> 0:12:26.000 during COVID he you know, he had been working on 0:12:26.040 --> 0:12:28.560 a book on you know, you've had you had him 0:12:28.559 --> 0:12:30.040 on to talk about it. Yeah, so that's a whole 0:12:30.080 --> 0:12:32.319 nother story. But you know, it was fascinating. But no, 0:12:32.440 --> 0:12:36.520 I would say, you know, in many respects, the growth 0:12:36.559 --> 0:12:40.800 of private credit and private capital was very much a 0:12:40.880 --> 0:12:42.640 topic that everyone was talking about. And if you think 0:12:42.679 --> 0:12:45.920 about when we were, you know, in our heyday at Drexel, 0:12:46.040 --> 0:12:49.840 we were doing high el bond deals and bringing companies 0:12:49.840 --> 0:12:52.800 to the capital markets hoping to raise hoping to raise 0:12:52.840 --> 0:12:56.080 money for good ideas and great companies. The fact that 0:12:56.160 --> 0:12:59.920 it's advanced so far to the point now where in 0:13:00.000 --> 0:13:03.760 individual investors can can invest directly in private credit, where 0:13:03.880 --> 0:13:06.240 you know, asset management is when we come to dominate 0:13:06.280 --> 0:13:09.880 the space. It's it's really amazing the transition. 0:13:10.679 --> 0:13:17.680 So I the difference between the your original crew, you know, 0:13:17.720 --> 0:13:21.679 the like barbarians at the gate guys, and the kids 0:13:21.720 --> 0:13:25.200 who are in direct lending now or BDCs. 0:13:24.720 --> 0:13:26.600 Or well many of many, many of them is still 0:13:26.640 --> 0:13:29.520 in direct lending today. In fact, many of the folks 0:13:29.559 --> 0:13:31.920 that I work directly with at Drexel who were in 0:13:32.000 --> 0:13:35.880 my class so to speak, are now you know, leading 0:13:36.280 --> 0:13:39.760 major private credit firms, Apollo for example. I mean a 0:13:39.760 --> 0:13:41.440 lot of those folks you know, were with me at 0:13:41.520 --> 0:13:44.000 Drexel in a long time ago. So it's it's great 0:13:44.040 --> 0:13:45.679 to see, you know, everyone's kind of gone out and 0:13:45.720 --> 0:13:48.440 done their things. So you know, that's been, it's been. 0:13:48.920 --> 0:13:50.840 What I was going to ask about then, So you 0:13:50.880 --> 0:13:54.000 guys are in a great position to advise the young guys. 0:13:54.040 --> 0:13:56.680 I mean, when you started, you were a kid, right, yes, 0:13:56.760 --> 0:13:59.880 and so was everybody in your shop. You were like 0:14:00.080 --> 0:14:03.800 in your twenties or max thirties, right, and so people 0:14:03.800 --> 0:14:04.520 who are in their twenties. 0:14:04.559 --> 0:14:07.760 And I remember was an all nighter my first day 0:14:07.920 --> 0:14:10.640 on the job at Drexelbournam. Literally I had to call 0:14:10.720 --> 0:14:13.000 my my wife and tell her that I was probably 0:14:13.000 --> 0:14:15.760 not going to come home for my first literally my 0:14:15.880 --> 0:14:18.480 first day on the job. So it's it was a 0:14:18.480 --> 0:14:19.040 different world. 0:14:19.120 --> 0:14:21.720 This is how it's going to orientation, yeah, exactly. 0:14:22.600 --> 0:14:25.040 But what I what I wonder is the new kids 0:14:25.080 --> 0:14:27.840 have never seen any rate cycles. I mean, they kind 0:14:27.880 --> 0:14:30.120 of have if they went like two thousand and four 0:14:30.280 --> 0:14:35.160 two six, but not really. What is this like in 0:14:35.240 --> 0:14:40.000 this business that is so affected by rates seeing you know, 0:14:40.160 --> 0:14:42.240 five hundred and twenty five basis points in a year. 0:14:43.080 --> 0:14:46.320 Well, it's certainly I think given some of the younger 0:14:46.360 --> 0:14:49.320 folks in our business a perspective, right, I Mean if 0:14:49.360 --> 0:14:52.520 you think about, you know, the fact that we've been 0:14:52.520 --> 0:14:56.920 in basically a ten year you know bull run of 0:14:57.880 --> 0:15:01.640 you know, continual growth and low interest rates fueling that growth. 0:15:01.960 --> 0:15:04.200 You know the fact that you know we've seen kind 0:15:04.240 --> 0:15:08.240 of a you know, a hard reset in the fed approach, 0:15:08.280 --> 0:15:10.720 and obviously what that's doing to companies I think is 0:15:10.800 --> 0:15:13.880 teaching a lot of young people in our business a lesson, 0:15:13.920 --> 0:15:16.600 which is, you know, these these times don't go on forever. 0:15:17.520 --> 0:15:19.360 You know, you need to be investing in a more 0:15:19.360 --> 0:15:23.120 conservative way financing companies for the long term. So, you know, 0:15:23.200 --> 0:15:24.920 I think it's been a bit of an education for 0:15:25.120 --> 0:15:26.640 younger people in our business for sure. 0:15:26.760 --> 0:15:29.960 Ken higher rates though problematic for the private lending world. 0:15:29.960 --> 0:15:31.480 And I bring it up because we've done a few 0:15:31.480 --> 0:15:33.320 stories here at Bloomberg just in the last couple of 0:15:33.320 --> 0:15:37.400 weeks about you know, as these rates go up, you know, 0:15:37.680 --> 0:15:40.960 is it a problem for the portfolio companies? Too expensive? 0:15:40.960 --> 0:15:44.280 Can't manage it? Do they go under? And that certainly 0:15:44.320 --> 0:15:47.200 we have an impact on the private lenders and they're investors. 0:15:47.360 --> 0:15:51.000 Well on one on one hand, it's good news for investors, 0:15:51.080 --> 0:15:54.960 right Suddenly those same conservative loans that we made, you know, 0:15:55.000 --> 0:15:58.120 a year ago at six percent or seven percent, are 0:15:58.160 --> 0:15:59.640 now yielding twelve percent. 0:15:59.760 --> 0:15:59.960 Right. 0:16:00.160 --> 0:16:02.320 So in many respects, that's why everybody wants to talk 0:16:02.320 --> 0:16:05.040 about private credit, right because they're looking at private credits 0:16:05.040 --> 0:16:07.640 saying wait a second, this is a pretty attractive dynamic 0:16:08.360 --> 0:16:09.480 it's look higher. 0:16:09.280 --> 0:16:10.840 Returns as long as the companies can pay. 0:16:10.920 --> 0:16:11.240 Correct. 0:16:11.240 --> 0:16:14.120 But remember we're talking about new loans we're making today, 0:16:14.440 --> 0:16:17.200 at least for new investors, right, So if you're an 0:16:17.200 --> 0:16:21.560 investor coming into private credit, you're looking at much higher returns, 0:16:22.040 --> 0:16:27.480 lower leverage, better financial covenants, generally higher quality companies that 0:16:27.560 --> 0:16:30.520 are raising capital right now, because the lesser quality companies 0:16:30.520 --> 0:16:34.800 are probably not being sold in raising capital and more equity. 0:16:35.080 --> 0:16:35.280 Right. 0:16:35.360 --> 0:16:39.400 So from a credit perspective, from a new credit perspective, 0:16:39.800 --> 0:16:40.800 it's the best of time. 0:16:40.920 --> 0:16:42.720 What about the old ones, where it's a fluid. 0:16:43.000 --> 0:16:48.080 Correct From an old credit perspective, an existing credit perspective. 0:16:47.880 --> 0:16:48.800 It's a different story. 0:16:48.920 --> 0:16:49.120 Right. 0:16:49.360 --> 0:16:52.920 So now what we're seeing are the more aggressive lenders 0:16:52.920 --> 0:16:56.000 who are out there, maybe getting slightly higher returns, kind 0:16:56.000 --> 0:16:59.120 of pushing the envelope. From a credit perspective, Suddenly those 0:16:59.120 --> 0:17:00.840 companies just don't work anymore. 0:17:00.920 --> 0:17:01.080 Right. 0:17:01.440 --> 0:17:04.000 You know, a company that was six or even seven 0:17:04.040 --> 0:17:07.520 times levered in the old world, you know, at current 0:17:07.520 --> 0:17:11.400 interest rates, is underwater, right. They can't meet their interesting expense. 0:17:11.480 --> 0:17:13.919 So I think there are going to be we are 0:17:13.960 --> 0:17:16.480 going to go through a time where there is is 0:17:16.520 --> 0:17:19.159 you know, kind of the Old saying, Warren Buffett saying, right, 0:17:19.160 --> 0:17:21.679 when the tide goes out, right, you realize kind of 0:17:21.680 --> 0:17:23.920 who's you know, where he's got Who's got a bang soon? 0:17:24.040 --> 0:17:24.560 Maybe who not? 0:17:24.920 --> 0:17:27.160 And so I think you're going to see that the 0:17:27.160 --> 0:17:30.199 more conservative lenders, the lenders that really have you know, 0:17:30.359 --> 0:17:33.520 kind of you know, been more traditional and focused on 0:17:33.600 --> 0:17:37.840 higher quality, are going to show to be shown to 0:17:37.880 --> 0:17:40.359 have performed very well, and those firms are going to 0:17:40.440 --> 0:17:43.240 raise more capital, and I would say the more marginal 0:17:43.280 --> 0:17:45.000 players are going to get washed out. 0:17:45.119 --> 0:17:48.280 What I find fascinating is how this whole thing started 0:17:49.840 --> 0:17:54.240 in terms of the whole that was there left by 0:17:54.320 --> 0:17:57.919 banks abandoning the mid tier market, right, And so you 0:17:57.960 --> 0:18:01.360 guys got in and made an industry. Yes, are they 0:18:01.560 --> 0:18:04.879 coming back now? Like when Ken Griffin says private credit 0:18:05.000 --> 0:18:07.520 is one of the main opportunities for me in the 0:18:07.560 --> 0:18:10.000 next year, don't banks want to get in on that too? 0:18:11.240 --> 0:18:11.840 They don't. 0:18:12.119 --> 0:18:16.040 And I would say that if anything, the latest banking 0:18:16.119 --> 0:18:20.399 crisis and the dynamics around you know, deposits and some 0:18:20.480 --> 0:18:23.800 of the challenges of maintaining funding and deposit funding is 0:18:23.920 --> 0:18:27.280 just making making banks even more conservative and making making 0:18:27.320 --> 0:18:32.560 them really pull back further from putting out long term investments, 0:18:32.600 --> 0:18:37.040 long term financing in basically ill liquid investments right as 0:18:37.080 --> 0:18:39.560 good as a credit environment as we're in, those loans 0:18:39.600 --> 0:18:42.960 are still private and ill liquid, right, So in many respects, 0:18:43.040 --> 0:18:45.480 it's just like, gee, there are great mortgages, right, but 0:18:45.520 --> 0:18:48.720 if you can't lookify them, you know, banks. 0:18:48.480 --> 0:18:51.840 Are directly You've seen that as absolutely. 0:18:51.520 --> 0:18:57.360 Absolutely today there are really no banks that we're seeing, 0:18:57.520 --> 0:19:00.520 you know, either thinking about entering the market let alone. 0:19:00.560 --> 0:19:02.879 I mean, I would say, if anything, they're thinking about, 0:19:02.960 --> 0:19:06.080 you know, pulling back from you know, further direct lending. 0:19:06.160 --> 0:19:08.560 So we're doing more than and we're doing more as 0:19:08.560 --> 0:19:11.880 a result. And I would say that the big change though, 0:19:11.880 --> 0:19:14.040 that I think you'll see over the next several years 0:19:14.119 --> 0:19:17.879 is that the larger scaled direct lenders, the firms that 0:19:18.200 --> 0:19:21.880 can deliver a five hundred million a billion dollar solution, 0:19:22.480 --> 0:19:27.000 are simply going to continue to dominate even more the 0:19:27.040 --> 0:19:31.200 business of direct lanning. So in many respects, the asset managers, 0:19:31.240 --> 0:19:34.840 the direct lenders have replaced the banks. Right twenty years ago, 0:19:35.200 --> 0:19:37.560 you go to JP Morgan or Chase Manhattan or a 0:19:37.640 --> 0:19:40.600 chemical bank and they would provide a loan package for 0:19:40.640 --> 0:19:42.520 you if you were a mid market company and they 0:19:42.560 --> 0:19:47.520 would underwrite and hold for five six hundred million dollar financing. 0:19:47.920 --> 0:19:51.680 Today banks don't want to hold that financing. The economics 0:19:51.720 --> 0:19:56.679 of middle market lending are not particularly compelling for banks, 0:19:56.760 --> 0:20:00.760 right They'd rather underwrite a deal, distribute it to investors, 0:20:01.119 --> 0:20:04.320 hold zero of the loan, and generate a much higher 0:20:04.320 --> 0:20:05.119 return on equity. 0:20:05.359 --> 0:20:08.359 Still the golden age of private credit very much so. 0:20:08.880 --> 0:20:14.000 I mean, if you think about the risk adjusted returns 0:20:14.000 --> 0:20:18.440 that were able to deliver to investors twelve percent today 0:20:18.520 --> 0:20:22.880 for a regular way high quality mid market loan with 0:20:23.119 --> 0:20:27.919 lower leverage, better covenance, more equity. And I think an 0:20:27.960 --> 0:20:31.960 interesting phenomena that the quality of the companies we're seeing 0:20:32.000 --> 0:20:35.520 today is actually better than it's ever been because the 0:20:35.600 --> 0:20:38.879 marginal companies, the businesses that are more challenged, are really 0:20:38.920 --> 0:20:41.920 not being sold. And the vast majority of the financings 0:20:41.960 --> 0:20:44.480 we're doing, our companies that are either in our portfolio 0:20:44.600 --> 0:20:47.760 or our new deals that are are being sold into transacting, 0:20:48.280 --> 0:20:51.119 and I would say that those marginal companies are not 0:20:51.240 --> 0:20:53.480 coming to market today, so the quality of the deals 0:20:53.480 --> 0:20:54.520 we're seeing is actually better. 0:20:54.600 --> 0:20:57.119 Well, we talk about another shoe to drop, and I 0:20:57.160 --> 0:20:58.320 know when we were at Milk and I think I 0:20:58.400 --> 0:21:01.440 talked about you with you about transparency and concerns about 0:21:01.480 --> 0:21:04.120 not really understanding what's going on in the private lending market. 0:21:04.359 --> 0:21:07.520 I mean, is there a possibility in some of the 0:21:07.520 --> 0:21:11.080 lower tier maybe companies that maybe don't have the greatest 0:21:11.080 --> 0:21:14.679 financial system, that we could see some problems maybe not systemic, 0:21:14.760 --> 0:21:16.360 but could it be problematic. 0:21:16.400 --> 0:21:16.520 Oh. 0:21:16.560 --> 0:21:20.000 I think if you look across the portfolios right of 0:21:20.080 --> 0:21:24.639 existing lenders, I don't think there's any question that the 0:21:25.000 --> 0:21:27.880 you know, as we move through environment, and certainly if 0:21:28.080 --> 0:21:31.480 rates stay higher for longer, I think you will start 0:21:31.520 --> 0:21:35.320 to see cracks in those smaller companies, companies that maybe 0:21:35.440 --> 0:21:38.280 are not market leading businesses, businesses that are you know, 0:21:39.080 --> 0:21:42.600 are are facing pressure from you know, either an ability 0:21:42.600 --> 0:21:45.040 to pass on price increases or otherwise. I think you 0:21:45.119 --> 0:21:49.800 will see lenders have problems in their portfolios, you know, 0:21:50.000 --> 0:21:52.840 particularly in those areas. But but I would also say that, 0:21:54.000 --> 0:21:56.879 you know, for for the largest scaled players in the 0:21:56.920 --> 0:22:00.480 business that are highly diversified, I think this is absolutely 0:22:00.480 --> 0:22:03.840 the best time to be to be investing. And we're 0:22:04.000 --> 0:22:06.040 extremely active right now. I mean, we had a very 0:22:06.040 --> 0:22:09.440 busy first quarter, but you know. I also think that 0:22:09.640 --> 0:22:12.280 you know, I alluded to this earlier. The longer this 0:22:12.359 --> 0:22:16.720 high interest rate environment goes on, the more problematic it gets, 0:22:16.880 --> 0:22:18.600 you know, And I know the FED is obviously being 0:22:18.680 --> 0:22:22.560 very aggressive about trying to get great inflation down and 0:22:22.640 --> 0:22:25.560 I think that's the reason, right the damage and the 0:22:25.640 --> 0:22:28.560 damage in the GFC was really done in that last 0:22:28.720 --> 0:22:31.760 year when you know, when we were stuck in the 0:22:31.760 --> 0:22:34.960 GFC for really three full years. I think that that 0:22:35.200 --> 0:22:37.280 is the key here, is to try to get this 0:22:37.480 --> 0:22:41.000 interest rate environment down and normalized sooner rather than later. 0:22:41.040 --> 0:22:43.040 And obviously the Fed's doing everything can to. 0:22:43.280 --> 0:22:45.040 They make a mistake in pausing, then, do you think 0:22:45.119 --> 0:22:46.080 and not continuing to. 0:22:46.880 --> 0:22:49.680 I think it was a short pause, and I think 0:22:49.680 --> 0:22:53.080 it's really an assessment of Okay, what was the impact 0:22:53.119 --> 0:22:56.439 of the banking issues, you know, what has been the 0:22:56.480 --> 0:22:59.399 impact and some of the other external pressures. But I 0:22:59.440 --> 0:23:04.320 would expect the FED to continue to raise rates, you know, 0:23:04.840 --> 0:23:07.960 longer than maybe initially thought. I think there was a 0:23:08.000 --> 0:23:09.879 point where the number of us thought that maybe by 0:23:09.920 --> 0:23:12.000 the end of the year, you know, rates would start 0:23:12.000 --> 0:23:13.720 to crest and come back. I don't think that's going 0:23:13.800 --> 0:23:15.800 to happen now. I think we're going to be you know, 0:23:15.840 --> 0:23:17.199 I think we're going to be in a higher rate 0:23:17.280 --> 0:23:19.760 environment through through the end of this year, but hopefully 0:23:19.760 --> 0:23:21.919 by early next year things will start to normalize. And 0:23:22.000 --> 0:23:24.399 I do think once they do start to normalize, you 0:23:24.400 --> 0:23:26.360 will see deal activity pick up quite a bit. 0:23:26.440 --> 0:23:28.200 By the way, do you have companies in your portfolio 0:23:28.240 --> 0:23:31.119 that we're looking at, you know, Live war plus five hundred, 0:23:31.600 --> 0:23:33.840 putting them at six or seven percent and now they're 0:23:34.240 --> 0:23:35.720 at thirteen? 0:23:36.040 --> 0:23:39.120 Well, every company, at every company in our portfolio, all 0:23:39.160 --> 0:23:40.960 of our senior loans are floating rate. 0:23:41.200 --> 0:23:41.480 Yeah. 0:23:41.560 --> 0:23:44.600 Right, So the yield, if you will, across our entire 0:23:44.720 --> 0:23:48.040 senior loan portfolio is up, you know, roughly five hundred 0:23:48.080 --> 0:23:50.199 basis points from where it was, you know, just just 0:23:50.240 --> 0:23:51.240 a year, year and a half ago. 0:23:51.400 --> 0:23:53.560 So are there going to be defaults? You think? 0:23:53.720 --> 0:23:55.639 Are there specific sectors where you think we're going to 0:23:55.680 --> 0:23:57.320 see defaults more or regions? 0:23:59.800 --> 0:24:04.080 I think that in certain sectors, I think leverage got 0:24:04.080 --> 0:24:06.280 a bit out of hand in terms of you know, 0:24:06.560 --> 0:24:09.000 you know, higher leverage. Right, So there were areas, for example, 0:24:09.040 --> 0:24:11.680 when software, you're seeing companies that were leveraged six seven 0:24:11.720 --> 0:24:14.920 times cash flow. I mean the numbers don't work at 0:24:14.960 --> 0:24:16.919 six or seven times cash flow today, right. I mean 0:24:16.920 --> 0:24:19.439 if you literally just look at the current interest rate 0:24:19.520 --> 0:24:24.439 environment against you know, against where coverage ratios were, I 0:24:24.440 --> 0:24:26.760 think you're going to see, you know, areas where leverage 0:24:26.880 --> 0:24:29.720 was was was high, they're going to be more more 0:24:29.800 --> 0:24:33.120 challenging dynamics. And certainly, you know, I would say technologies 0:24:33.119 --> 0:24:35.000 an area that we you know, we saw leverage, you know, 0:24:35.119 --> 0:24:38.520 creep up quite a bit. You saw loans that were 0:24:38.520 --> 0:24:42.440 being made based on just value, you know, aar loans 0:24:42.480 --> 0:24:45.160 that were being made based on just the underlying value 0:24:45.160 --> 0:24:47.880 in g If the company can't pay the law off, 0:24:47.920 --> 0:24:49.240 will just run off the business. 0:24:49.320 --> 0:24:49.480 Right. 0:24:50.000 --> 0:24:52.320 We were never big believers and loans like that, So 0:24:52.359 --> 0:24:55.600 all of our loans are more traditional lending. But certainly 0:24:55.720 --> 0:24:59.000 areas where leverage was was was high, you're you're gonna 0:24:59.040 --> 0:25:01.200 have to be seeing a re set, no question. 0:25:01.800 --> 0:25:05.840 I always wonder what the delta is between private and public, 0:25:05.920 --> 0:25:09.800 Like what's the interest rate or the yield differential between 0:25:09.800 --> 0:25:13.960 one of your loans and then a similarly rated you know, bought. 0:25:14.119 --> 0:25:18.639 The public public public loan. Typically the premium that we 0:25:18.680 --> 0:25:21.280 call it the yield premium is around one hundred to 0:25:21.320 --> 0:25:25.399 two hundred basis points between a you know, a broadly 0:25:25.440 --> 0:25:29.480 syndicated loan, a publicly traded loan new issue, and a 0:25:29.640 --> 0:25:32.480 and a private a similar private credit. So and the 0:25:32.480 --> 0:25:35.120 theory is of course that it's private and a liquid 0:25:35.400 --> 0:25:38.639 and therefore you should get a yield premium for you know, 0:25:38.720 --> 0:25:41.040 for ill liquidity. But I would say even more than 0:25:41.080 --> 0:25:43.520 a yield premum from a premium for illiquidity, you're getting 0:25:43.520 --> 0:25:46.160 a yeld, You're getting a credit premium, right They Now, 0:25:46.240 --> 0:25:48.600 our loans tend they have a lower leverage, they tend 0:25:48.640 --> 0:25:51.160 to have, you know, they do have you know, traditional 0:25:51.240 --> 0:25:55.280 financial covenants. You know, so structurally you're getting, if you will, 0:25:55.280 --> 0:25:58.800 a premium as well. And so that that's typically been 0:25:58.880 --> 0:26:03.679 the you know, Ben the difference and maybe even wider today. 0:26:03.920 --> 0:26:08.280 Ken just got about forty seconds or so. What's top 0:26:08.280 --> 0:26:09.440 of mind for you every morning? 0:26:10.760 --> 0:26:15.800 My people in my firm top of mind. I'm always 0:26:15.960 --> 0:26:24.920 focused on attracting, developing, promoting, nurturing, mentoring my people. If 0:26:24.960 --> 0:26:28.600 I look back and we've grown in eight short years 0:26:28.760 --> 0:26:35.159 from zero capital to now over sixty billion, there's no 0:26:35.320 --> 0:26:38.560 question that the difference maker was the talent and the 0:26:38.560 --> 0:26:42.040 capabilities of our people. And if there's one thing I've 0:26:42.119 --> 0:26:49.320 learned from my background, it's all about looking to inspire 0:26:49.359 --> 0:26:52.119 and develop those people and motivate those people. And so 0:26:52.480 --> 0:26:54.679 as much as the markets move around and change, at 0:26:54.720 --> 0:26:56.160 the end of the day, the one thing you can't 0:26:56.160 --> 0:26:59.720 replace the talent. And once you're known as a place 0:26:59.720 --> 0:27:02.240 where people want to work. For example, our firm is 0:27:02.280 --> 0:27:06.560 over fifty percent women and minorities, and so you know, 0:27:06.640 --> 0:27:10.040 people are attracted to that environment. In creating, nurturing and 0:27:10.080 --> 0:27:14.240 growing that environment and attracting talent is absolutely number one 0:27:14.240 --> 0:27:15.280 thing in my mind all the time. 0:27:15.320 --> 0:27:17.400 Thank you so much. This is a treat come back soon, 0:27:17.840 --> 0:27:22.120 great great consact, so appreciate it. Presidentcye have Churchill Asset Management, 0:27:22.160 --> 0:27:24.520 and we do highly recommend go listen to Barry Ray Hills. 0:27:24.560 --> 0:27:27.479 He had a really long, in depth conversation, but we'll 0:27:27.480 --> 0:27:29.040 get came back soon. This is Bloomberg. 0:27:31.600 --> 0:27:35.159 You're listening to the Bloomberg Business Week podcast. Catch us 0:27:35.200 --> 0:27:39.240 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:27:39.400 --> 0:27:42.720 the Bloomberg Business app, and YouTube. You can also listen 0:27:42.800 --> 0:27:45.920 live on Amazon Alexa from our flagship New York station 0:27:46.359 --> 0:27:58.199 just say Alexa play Bloomberg eleven thirty. 0:28:00.119 --> 0:28:02.720 We try to figure out when we should go apply 0:28:02.760 --> 0:28:05.679 to be a Citadel intern. In the meantime, we continue 0:28:05.680 --> 0:28:09.000 to kind of pass through economic data points headlines on 0:28:09.040 --> 0:28:11.560 a lot of things. We talked about residential housing earlier 0:28:11.960 --> 0:28:13.720 with our team, and we know the current issue of 0:28:13.720 --> 0:28:16.440 Bloomberg Business Week is all about the office real estate 0:28:16.480 --> 0:28:19.159 market and noting that it's getting scary. But then we 0:28:19.160 --> 0:28:21.720 hadessel Green yesterday selling a stake in a park a 0:28:22.400 --> 0:28:25.480 Park Avenue tower. A value of about two billion put 0:28:25.480 --> 0:28:28.119 on that skyscraper as a result of the deal, and 0:28:28.160 --> 0:28:30.959 that showed to be or was looked at Matt as 0:28:31.000 --> 0:28:33.760 some optimism when it comes to the office real estates peace. 0:28:33.840 --> 0:28:35.520 I think in certain market, certain areas. 0:28:35.560 --> 0:28:36.240 I won't use the. 0:28:36.200 --> 0:28:41.360 Tale of two Cities cliche, but clearly there's a difference, 0:28:41.440 --> 0:28:43.680 right if you have a great office building on Park 0:28:43.720 --> 0:28:47.040 Avenue in a place where everybody wants to be, or 0:28:47.080 --> 0:28:50.560 if you've got one of the buildings on the Third 0:28:50.600 --> 0:28:54.360 Avenue canyon down here that nobody wants to work in 0:28:54.760 --> 0:28:56.720 or will ever be able to live in. 0:28:57.120 --> 0:28:59.760 There's a very big difference in the value of those. 0:28:59.640 --> 0:29:01.760 Assets not apples to apples. Well, we have a great 0:29:01.800 --> 0:29:04.240 guest to comment on the commercial real estate world with 0:29:04.360 --> 0:29:06.760 us is Michael Chaveau. He is founder, chairman, and CEO 0:29:06.760 --> 0:29:10.040 of the international real estate development and investment company that 0:29:10.120 --> 0:29:12.880 bears his name. Is company owns the Transamerica Pyramid in 0:29:12.920 --> 0:29:16.400 San Francisco, brought that back in twenty twenty other properties 0:29:16.400 --> 0:29:18.680 around the world, and we welcome him in our Bloomberg 0:29:18.720 --> 0:29:19.800 Interactive Brokers studio. 0:29:19.840 --> 0:29:22.000 Hello, Hello, Hello, good morning, good afternoon. 0:29:22.840 --> 0:29:25.000 It's morning somewhere is it morning? Yeah? 0:29:25.200 --> 0:29:26.560 Bloom this morning. 0:29:26.760 --> 0:29:30.320 When when Carol and I get our Citadel internships, have 0:29:30.360 --> 0:29:32.600 you got a place for us to hang out in Miami? 0:29:32.960 --> 0:29:35.440 By the way, the Citadel play in Miami is something 0:29:35.480 --> 0:29:38.520 that everybody's been talking about because you know, the move 0:29:38.760 --> 0:29:42.520 of Citvielle to Miami from Chicago has been a big 0:29:42.600 --> 0:29:47.280 generator of kind of other companies moving there. This whole 0:29:47.280 --> 0:29:49.560 interest thing is a phenomenal marketing tool. Right now, You've 0:29:49.560 --> 0:29:54.720 got every top, every top, Yeah, coming the Citadel. But 0:29:56.040 --> 0:29:58.880 you know, when you're looking at the market and you 0:29:59.080 --> 0:30:01.280 talk about the l deal that eessel Green deals is 0:30:01.320 --> 0:30:03.720 interesting if you if you go through the details a 0:30:03.720 --> 0:30:05.960 lot of it was actually a transfer of debt, right, 0:30:06.000 --> 0:30:08.640 so the Japanese firm actually took over a bunch of 0:30:08.640 --> 0:30:09.000 the debt. 0:30:09.440 --> 0:30:12.080 But the fact that it was great for sl Greens. 0:30:12.600 --> 0:30:14.360 It was amazing for Estel Green, and the fact that 0:30:14.440 --> 0:30:16.080 the building is worth more than the debt was a 0:30:16.080 --> 0:30:18.880 miracle on that specific asset. But as you said, it's 0:30:18.920 --> 0:30:21.760 not even a tale of two cities, it's it's it's 0:30:21.760 --> 0:30:27.600 a building specific today, and the separation between good and 0:30:27.640 --> 0:30:30.440 not good, or good and really bad is huge. There's 0:30:30.440 --> 0:30:34.520 no more in between. It's either your winner, which means 0:30:34.560 --> 0:30:38.320 you're a trophy building, you're generating rents of two hundred 0:30:38.360 --> 0:30:41.480 bucks a foot plus in that market's on fire, or 0:30:41.520 --> 0:30:44.160 you're dead. There's no in between. Because, as you said, 0:30:44.200 --> 0:30:46.440 nobody wants to go to Third Avenue because those buildings 0:30:46.480 --> 0:30:50.720 have expired. The idea that real state lasts forever is 0:30:51.280 --> 0:30:54.240 something that people are now realizing is probably not true. 0:30:54.280 --> 0:30:56.080 By the way, what do you do with those buildings 0:30:56.120 --> 0:31:00.960 on Third Avenue, because we've heard from people look into it. 0:31:01.120 --> 0:31:03.600 Not only does nobody want to work in them as 0:31:03.640 --> 0:31:08.240 office buildings, but they cannot be repurposed as residential. 0:31:07.640 --> 0:31:10.320 I'm gonna ask you, when you open your fridge and 0:31:10.360 --> 0:31:12.040 you see the milk expired, what do you do with 0:31:12.080 --> 0:31:14.320 the mill? Throw it away exactly. And that's what's gonna 0:31:14.320 --> 0:31:16.880 happen with these buildings. So when we're looking at these buildings, 0:31:16.880 --> 0:31:19.000 we don't buy on Third Avenue because I don't really 0:31:19.040 --> 0:31:21.480 it's it's not our neighborhood. We only focus on super 0:31:21.480 --> 0:31:24.600 prime real estate. But at some point the value of 0:31:24.600 --> 0:31:27.120 those buildings is going to trade at land value and 0:31:27.160 --> 0:31:30.040 there will be an opportunity to demolish them and build 0:31:30.240 --> 0:31:32.320 a new office, a new building. It's not that nobody 0:31:32.320 --> 0:31:34.880 wants to live there, but you can't convert. You can't 0:31:34.920 --> 0:31:37.720 take bad stock and make make you know, you're not 0:31:37.720 --> 0:31:39.520 going to take the sour milk and make a cake 0:31:39.520 --> 0:31:41.040 out of it. It's still going to be a sour cake. 0:31:41.280 --> 0:31:43.080 And that's really the problem with a lot of these 0:31:43.080 --> 0:31:47.440 conversations about converting office to the RESI. It works in 0:31:47.720 --> 0:31:50.560 really specific cases with buildings that have the right column 0:31:50.600 --> 0:31:51.360 with and things of that. 0:31:51.320 --> 0:31:54.640 Native For example, even to the Net in London. Yeous, 0:31:54.640 --> 0:31:56.600 it was a bank and now it's a really cool 0:31:56.600 --> 0:31:58.200 hotel with like nine restaurants. 0:31:58.360 --> 0:32:00.360 But once we take down the sour cake. Are we 0:32:00.400 --> 0:32:03.120 going to build new cakes, in other words, new offices 0:32:03.160 --> 0:32:04.600 or are we going to do something else with that lane? 0:32:04.680 --> 0:32:07.400 Well, we're in certain cases where as there's demand, we're 0:32:07.400 --> 0:32:09.240 going to build new office. I mean, I'm a big 0:32:09.280 --> 0:32:14.080 believer that the idea that everybody's working from home is nonsense. 0:32:15.000 --> 0:32:17.360 You know, pre COVID, we all remember everybody wanted to 0:32:17.360 --> 0:32:21.440 be Google, Apple, Facebook, We all wanted big offices, hold hands, 0:32:21.760 --> 0:32:22.440 you know, and. 0:32:22.400 --> 0:32:23.480 In collaborate years ago. 0:32:23.520 --> 0:32:24.320 I'm just going to I. 0:32:24.200 --> 0:32:27.040 Want to say that every time I come to this office. 0:32:27.160 --> 0:32:28.800 This was built in two thousand and five. What a 0:32:28.880 --> 0:32:31.719 visionary mic was to do this, to bring people together, 0:32:32.200 --> 0:32:35.040 forces you to come together in London as well before 0:32:35.080 --> 0:32:37.000 you go to your office. This is it's brilliant and 0:32:37.280 --> 0:32:38.120 he's a true visionary. 0:32:38.160 --> 0:32:39.440 It's a fantastic place to work. 0:32:39.480 --> 0:32:41.760 And our new office in London, by the way, I 0:32:41.920 --> 0:32:43.680 Norman Foster designed that as well. 0:32:43.560 --> 0:32:45.440 So we're so I just toured that actually with Norman. 0:32:45.520 --> 0:32:47.840 Norman's designing four buildings for us. He's also doing the 0:32:47.840 --> 0:32:50.400 Trans America Pyramid in San Francisco, and you know a 0:32:50.440 --> 0:32:53.200 couple of new office buildings in Miami, The building is amazing. 0:32:53.840 --> 0:32:56.520 But just to go back here to your question, we're 0:32:56.520 --> 0:32:59.040 going to build office, we're going to build residential. We're 0:32:59.040 --> 0:33:01.280 going to build the right thing at the time. But 0:33:01.400 --> 0:33:03.920 the value of the land will start making sense. 0:33:04.440 --> 0:33:07.640 Go to San Francisco. You bought that Transamerica Pyramid back 0:33:07.640 --> 0:33:09.080 in twenty twenty, I think it was six hundred and 0:33:09.120 --> 0:33:11.840 fifty million dollars and you're putting a ton of money 0:33:11.920 --> 0:33:14.120 in to renovate it. Any regrets about that property and 0:33:14.160 --> 0:33:16.080 help me understand San Francisco by. 0:33:16.040 --> 0:33:18.719 Five times again if I could. It's the first thing, 0:33:18.760 --> 0:33:22.400 as I said, focuses only on elevating super prime real estate. 0:33:22.800 --> 0:33:25.000 It doesn't get more prime than the Trans America payiod. 0:33:25.080 --> 0:33:26.960 So what's going on San Francisco. We have a cover 0:33:27.040 --> 0:33:29.800 story on Business Week at San Francisco's going through really tough. 0:33:29.840 --> 0:33:31.840 So if you read the press, you know, and you 0:33:31.880 --> 0:33:34.480 think San Francisco is dead and it's about the sink 0:33:34.520 --> 0:33:38.560 and the cable cars are going down the ocean. You 0:33:38.600 --> 0:33:42.880 guys reported recently about the Trans America Pyramid. We've signed 0:33:42.960 --> 0:33:45.560 multiple leases between two hundred dollars to two hundred and 0:33:45.560 --> 0:33:48.880 fifty dollars a foot in the Pyramid. Now, that makes 0:33:48.880 --> 0:33:52.479 the Trans America Pyramid the third most expensive building in 0:33:52.520 --> 0:33:55.120 the country, more expensive than the building that essel Green 0:33:55.240 --> 0:33:57.400 just sold as far as rents, right, it's at the 0:33:57.440 --> 0:34:00.000 top of the market is rents and this is an 0:34:00.080 --> 0:34:02.320 San Francisco, which a market that in general has a 0:34:02.360 --> 0:34:07.160 lot of negativity. It shows you that even in difficult markets, 0:34:06.320 --> 0:34:09.719 there's there's a flight to quality. And we're getting the 0:34:09.760 --> 0:34:12.239 investment banks, we're getting you know, the vcs there that 0:34:12.280 --> 0:34:14.839 are willing to pay if you give them the right thing. 0:34:14.840 --> 0:34:17.400 And obviously with Norman Foster and we're investing hundreds of 0:34:17.400 --> 0:34:19.640 millions of dollars, we're seeing that. But San Francisco is 0:34:19.680 --> 0:34:24.600 obviously some some existential issues that that will eventually get solved. 0:34:24.680 --> 0:34:26.840 I think that there's a lot of a lot of 0:34:26.840 --> 0:34:29.320 eyes on us with what we're doing at the Pyramid, 0:34:29.440 --> 0:34:32.680 with how we're going to rejuvenate the park. We have 0:34:32.719 --> 0:34:36.120 the Redwood Park there to really ignite that whole neighborhood 0:34:36.200 --> 0:34:38.680 Jackson Square, that's going to happen towards the end of 0:34:38.680 --> 0:34:40.279 the year early next year. So there's a lot of 0:34:40.280 --> 0:34:41.880 hope that that brings life. 0:34:41.640 --> 0:34:45.000 To get ahead of itself. Also I mean, I feel 0:34:45.000 --> 0:34:47.799 like we've been talking about that, the housing problems and situations, 0:34:47.840 --> 0:34:51.080 the expensive nature of San Francisco city like San Francisco 0:34:51.160 --> 0:34:53.880 for years. So did it just kind of need to 0:34:54.000 --> 0:34:56.040 write itself or is it the pandemic? 0:34:56.239 --> 0:34:58.520 I think Look, I think it's a combination. It's it's 0:34:58.520 --> 0:35:01.160 the star aloge, the stars aligned in the wrong location. 0:35:01.400 --> 0:35:04.800 And that says because the pandemic took a hit, the 0:35:05.160 --> 0:35:08.279 largest groups that suffered from the pandemic, or in the 0:35:08.320 --> 0:35:11.120 sense from an office perspective, is the tech tenants because 0:35:11.239 --> 0:35:13.600 they all of a sudden figured we can work from home. 0:35:13.880 --> 0:35:16.279 But that's all changing, right You're seeing a change of that, 0:35:16.400 --> 0:35:20.279 and right now we're seeing even in San Francisco, we're 0:35:20.320 --> 0:35:24.480 seeing Monday to Thursday, you know, the card swipes. Right now, 0:35:24.480 --> 0:35:26.920 people are, people are at the office. Friday is still 0:35:27.280 --> 0:35:31.120 is still quite quiet. But all that really means is 0:35:31.120 --> 0:35:32.359 you've got to give people a reason to come. 0:35:32.760 --> 0:35:33.720 You've got to end the flow. 0:35:33.960 --> 0:35:36.480 Or Ed Lola, who's dinner San Francisco Bureau is listening 0:35:36.480 --> 0:35:38.400 and says, ask him, what's going to happen to downtown 0:35:38.440 --> 0:35:41.120 San Francisco, Westfield and all the corporate real estate is empty. 0:35:41.200 --> 0:35:42.600 Everyone wants it rezoned. 0:35:43.000 --> 0:35:47.560 So well they're working on but again part of part 0:35:47.600 --> 0:35:49.920 of the issue there is, as I said earlier, not 0:35:50.040 --> 0:35:54.080 every building works as as as a conversion, conversion to residential. 0:35:54.120 --> 0:35:56.440 San Francisco from all market needs it more than anything 0:35:56.440 --> 0:35:59.640 else because housing prices are out of control. You know, 0:36:00.040 --> 0:36:02.799 Plumouth in San Francisco is sub three percent today, which 0:36:02.840 --> 0:36:06.080 is something really important to understand. People are there, There 0:36:06.160 --> 0:36:08.840 is gonna be a back to work, but we will 0:36:08.880 --> 0:36:11.759 see the bad stock exactly like Third Avenue you were 0:36:11.760 --> 0:36:13.840 talking about the creators of Third Avenue. There are buildings 0:36:13.840 --> 0:36:16.800 that expired in San Francisco. In every market, Chicago is 0:36:16.840 --> 0:36:19.160 no different than New York is no different. We have 0:36:19.239 --> 0:36:21.279 to get rid, we have to get rid of the 0:36:21.280 --> 0:36:25.360 buildings that are not relevant anymore and build new buildings 0:36:25.360 --> 0:36:27.719 instead of them. And it's that's a transformation. That's what 0:36:27.800 --> 0:36:31.680 we're going right now. COVID has accelerated all this kind 0:36:31.680 --> 0:36:33.520 of all this, I would think that's gonna that was 0:36:33.560 --> 0:36:34.320 gonna happen anyway. 0:36:34.360 --> 0:36:37.319 I would love to hear your take on New York 0:36:37.320 --> 0:36:39.879 because San Francisco, when I see that rents are going 0:36:39.920 --> 0:36:41.680 down there, it just makes me excited because I want 0:36:41.680 --> 0:36:43.560 to live there and maybe I can afford it one day. 0:36:43.960 --> 0:36:48.600 Miami obviously it is white hot, not just Citadel. I 0:36:48.600 --> 0:36:51.360 mean even before Ken Griffin thought about moving to Miami, 0:36:51.480 --> 0:36:54.759 everybody wanted to be there. But New York feels kind 0:36:54.760 --> 0:36:55.200 of dead. 0:36:55.560 --> 0:36:55.759 You know. 0:36:55.880 --> 0:36:59.160 Even on this block we had all of these big 0:36:59.239 --> 0:37:04.520 tenants downstairs, and those stores are empty still, right, J Crew. 0:37:04.480 --> 0:37:06.919 And Furry Secret and Buckle Buds. 0:37:06.560 --> 0:37:09.920 They're all gone. So I just wonder what happens to 0:37:09.960 --> 0:37:10.399 New York. 0:37:10.880 --> 0:37:14.120 You had the container store that went away, right, Yeah. 0:37:13.560 --> 0:37:14.920 We had, and it's gone. 0:37:15.040 --> 0:37:17.400 We used to have Williams Sonoma and Pottery Barn. They 0:37:17.480 --> 0:37:19.160 left and I asked, MGA, why are you leaving? It's 0:37:19.160 --> 0:37:20.440 a great place to be, and they're like, it got 0:37:20.440 --> 0:37:21.080 too expensive. 0:37:21.200 --> 0:37:23.200 Okay, well there was an issue with obviously the cost 0:37:23.239 --> 0:37:26.120 as you said, the costs went up. They couldn't afford it. 0:37:26.200 --> 0:37:28.759 The business interruption. But you're seeing if you look at 0:37:28.800 --> 0:37:31.920 Madison Madison, rents went up from it that it was 0:37:31.960 --> 0:37:34.399 one thousand bucks a foot down to four hundred. You're 0:37:34.400 --> 0:37:36.399 back at nine hundred bucks the foot on Madison. There 0:37:36.440 --> 0:37:38.839 is a bounce back in the locations where people want 0:37:38.840 --> 0:37:39.000 to be. 0:37:39.360 --> 0:37:41.480 We want to roll into the conversation though also our 0:37:41.640 --> 0:37:45.080 Ed Ludlow, who of course is co host of Bloomberg Technology, 0:37:45.080 --> 0:37:47.879 because we've had some news on the EV space. But 0:37:47.920 --> 0:37:49.880 before we get into it, you know, you really kind 0:37:49.920 --> 0:37:52.200 of popped in some good questions on San Francisco. You're 0:37:52.280 --> 0:37:55.520 living in the San Francisco area, do you buy that 0:37:55.560 --> 0:37:57.440 San Francisco is going to be? Okay? 0:37:57.600 --> 0:38:00.040 I don't buy it in either direction. I asked the 0:38:00.120 --> 0:38:04.160 question because it's what the debate is here among everyone, residents, 0:38:04.280 --> 0:38:08.360 the industry. We had our Bloomberg Technology summit last week, Michael, 0:38:08.440 --> 0:38:11.759 and the future of SF was everything that people were 0:38:11.800 --> 0:38:15.440 talking about. Alongside AI and the mayor London. Breed was 0:38:15.480 --> 0:38:18.480 here and I think what we're talking about is downtown SF. 0:38:18.960 --> 0:38:21.640 That the real estate you're talking about, And the mayor's 0:38:21.680 --> 0:38:27.080 proposal is that investors buy in and redevelop existing or 0:38:27.120 --> 0:38:30.200 knock it down and do something new with what's already there. 0:38:30.239 --> 0:38:32.799 And my question to you, Mike was how attractive is 0:38:32.840 --> 0:38:35.920 that as an investor to get involved in a project 0:38:35.920 --> 0:38:38.680 to reimagine what downtown SF looks like. 0:38:39.320 --> 0:38:42.440 So you're asking the person that has the largest investment 0:38:42.480 --> 0:38:45.160 in downtown San Francisco. We have a billion dollars invested 0:38:45.239 --> 0:38:48.279 at the Transfermerica Pyramid Center, which is a full, full 0:38:48.360 --> 0:38:52.240 city block. I've had multiple conversation with the mayor about 0:38:52.280 --> 0:38:55.600 this whole idea. These things take time. It's not happening 0:38:55.600 --> 0:38:58.360 in five minutes. And the biggest issue of San Francisco 0:38:58.440 --> 0:39:01.799 has and has had for a long time is bureaucracy 0:39:01.840 --> 0:39:05.160 of getting things approved right. So now there's an emergency 0:39:05.160 --> 0:39:08.600 there trying to push everything quickly, which is good because 0:39:08.640 --> 0:39:10.080 I think that's going to make a change, but it's 0:39:10.080 --> 0:39:11.920 still going to take time. That is not going to 0:39:11.920 --> 0:39:15.400 be the immediate solution. There's a security issue in San 0:39:15.400 --> 0:39:17.799 Francisco that has to be dealt with, and it's it's 0:39:17.840 --> 0:39:21.319 this cycle where there's no people, so there's more cud. 0:39:21.360 --> 0:39:22.040 How do you deal with that. 0:39:22.080 --> 0:39:23.680 It doesn't seem like that will be dealt with. I 0:39:23.760 --> 0:39:27.520 remember going to San Francisco ten years ago to interview 0:39:28.800 --> 0:39:32.279 people around an Apple product release and Chris Sokka had 0:39:32.280 --> 0:39:36.440 to break up a fight between two homeless people behind 0:39:36.520 --> 0:39:39.239 us because they didn't know who owned the joint right. So, 0:39:39.520 --> 0:39:43.320 I mean, the homeless issue has been a problem for decades. 0:39:43.680 --> 0:39:45.759 That's not going to get solved well, But you didn't 0:39:45.760 --> 0:39:48.040 feel the homeless issue when you had people on the street, right. 0:39:48.080 --> 0:39:49.799 Part of the issue with the homeless issue. When there's 0:39:49.800 --> 0:39:52.239 nobody on the street and it's mostly homeless, and you're 0:39:52.320 --> 0:39:55.080 and you're and and the ratio between homeless that the 0:39:55.680 --> 0:39:58.880 non homeless people is upside down, you feel it a 0:39:58.880 --> 0:40:00.879 lot more right. And that's where you start seeing crime. 0:40:00.920 --> 0:40:02.560 That's where you're seeing drugs. I mean the whole area 0:40:02.600 --> 0:40:05.799 in San Francisco. That's problematic. But on the bright side, 0:40:05.880 --> 0:40:08.239 think about think about what's happening. You're asking what's going 0:40:08.320 --> 0:40:09.880 to change. What I think is going to change is 0:40:09.880 --> 0:40:12.279 that that you have voters and this tremendous amount of 0:40:12.280 --> 0:40:15.799 pressure on the mayor and on the on the entire 0:40:15.840 --> 0:40:19.600 board there to make a difference. You know, they've they've 0:40:19.640 --> 0:40:21.719 changed some of the some of some of the people. 0:40:21.760 --> 0:40:24.880 They're both on the education side and to fight crime. 0:40:25.719 --> 0:40:27.480 If you ask me if they're doing enough, it's probably 0:40:27.520 --> 0:40:30.560 not enough yet, but they're at least directionally going there 0:40:30.600 --> 0:40:33.680 because they know that that there is no option. And unfortunately, 0:40:33.719 --> 0:40:36.760 the press has been has been very brutal on San Francisco. 0:40:36.960 --> 0:40:38.960 But it does. It did give a kick in the 0:40:39.000 --> 0:40:42.279 butt to everybody there to move forward. But I think 0:40:42.320 --> 0:40:44.920 that what's interesting and why I find it fascinating is, 0:40:44.920 --> 0:40:48.240 as I said earlier, if we're getting rents between two hundred, 0:40:48.239 --> 0:40:50.359 two hundred fifty dollars a foot, which is twice the 0:40:50.400 --> 0:40:53.440 market in San Francisco pre COVID. Pre COVID that this 0:40:53.520 --> 0:40:55.800 building was at sixty five to one hundred and five dollars. 0:40:55.800 --> 0:40:58.200 Today we're at one twenty to two fifty trending to 0:40:58.320 --> 0:41:01.080 three hundred. That tells you that that there is a 0:41:01.200 --> 0:41:04.279 first thing that that San Francisco is not dead. There 0:41:04.320 --> 0:41:05.920 is there is a belief at the top of the 0:41:05.960 --> 0:41:08.840 market right that people want to be there. Right So 0:41:09.239 --> 0:41:11.840 at the relevant real state and the relevant locations, I 0:41:11.880 --> 0:41:13.640 think that we're going to see we're going to see 0:41:13.680 --> 0:41:16.399 positive news and and like I said, there's a lot 0:41:16.400 --> 0:41:18.200 of eyes on us, you know, towards the end of 0:41:18.200 --> 0:41:21.640 this year really to be the take Nite downtown San 0:41:21.680 --> 0:41:24.799 Francisco with with opening the Pyramid and opening the park 0:41:24.840 --> 0:41:26.080 and opening that whole neighborhood. 0:41:26.120 --> 0:41:27.520 And I want to bring you in because initially we 0:41:28.040 --> 0:41:30.600 wanted to talk to you about what's going on at Stilantis, 0:41:30.640 --> 0:41:33.000 and I'm thinking about EV charging units. Right, You've got 0:41:33.000 --> 0:41:37.279 another kind of Stillantis taking a page from Tesla's playbook 0:41:37.320 --> 0:41:39.799 in terms of lining up other automakers and I and 0:41:39.840 --> 0:41:41.600 we can talk about EV infrastructure. 0:41:41.760 --> 0:41:44.640 Tell us the news though, Okay, so summing up the 0:41:44.680 --> 0:41:48.520 news from Stilantis. They're basically making a standalone power unit, 0:41:48.880 --> 0:41:52.359 much like Tesla has, so down the road they can order, 0:41:52.680 --> 0:41:56.960 they can offer the charging at home infrastructure, energy storage, 0:41:57.239 --> 0:41:59.319 and then the charging products. The thing is, we don't 0:41:59.320 --> 0:42:01.359 know anything about it. It's going to be through third 0:42:01.400 --> 0:42:05.160 party partnerships, investments through their venture arm and in this country, 0:42:05.200 --> 0:42:07.880 Matt's probably thinking what is he talking about? In this country, 0:42:07.920 --> 0:42:11.920 Stillantis has no EVY offering at all, So you know, 0:42:12.000 --> 0:42:13.680 they are so behind the curve here. I think the 0:42:13.680 --> 0:42:17.359 big question for everyone is do they join the NACS club, 0:42:17.400 --> 0:42:21.239 which we discussed last week. Right, they joined Tesla's technology standard, 0:42:21.320 --> 0:42:24.319 but this is at least Stillantis making squeaks raises a 0:42:24.320 --> 0:42:26.640 good point for Michael though Carroll, which is, you know, 0:42:26.680 --> 0:42:29.000 where does the energy come from the private sector or 0:42:29.000 --> 0:42:32.000 the public sector? Always talking about the infrastructure bill, but 0:42:32.280 --> 0:42:34.840 you know, the private sector just gets going quicker. It 0:42:34.960 --> 0:42:37.440 just does it like Tesla just did it. In the 0:42:37.440 --> 0:42:38.520 case of this charging. 0:42:38.239 --> 0:42:39.760 Network, Michael, how do you think about this stuff? 0:42:39.840 --> 0:42:43.000 So we just completed the Mandarin Oriental Residences in Beverly 0:42:43.080 --> 0:42:47.840 Hills on Wilshire Boulevard, and you know, in California, obviously, 0:42:47.840 --> 0:42:52.759 as you know, evs are are extremely popular. I think 0:42:52.840 --> 0:42:56.520 you know, a quarter a third of our parking spaces 0:42:56.520 --> 0:43:00.400 are actually are actually all facilitated with private charge station 0:43:00.440 --> 0:43:03.120 and we provide that to people that move in. And 0:43:03.120 --> 0:43:05.240 that's where you're seeing. As you said, the private sector 0:43:05.280 --> 0:43:10.080 is much quicker to react because there's there's a true ROI. Right, 0:43:10.120 --> 0:43:11.719 if I have a guy that wants to buy or 0:43:11.760 --> 0:43:13.680 a family that wants to buy an apartment that the 0:43:13.760 --> 0:43:17.600 poor bedroom and needs three charging stations, there's a true 0:43:17.680 --> 0:43:20.839 ROI and providing these facilities versus you know, waiting for 0:43:20.920 --> 0:43:23.200 the you know, waiting waiting for the government to do it, 0:43:23.280 --> 0:43:25.680 or waiting for for for the for public funds for that. 0:43:25.760 --> 0:43:28.160 So it's becoming a bigger, bigger part, right is it 0:43:28.200 --> 0:43:30.440 becoming a bigger part of you as you develop. 0:43:30.760 --> 0:43:32.400 For sure on the West coast on the way I 0:43:32.400 --> 0:43:34.920 think that it's really the mindset of the consumer. The 0:43:34.920 --> 0:43:37.759 West Coast consumer is very focused and there's a lot 0:43:37.800 --> 0:43:40.240 of demand for ev for for for evs. 0:43:40.360 --> 0:43:42.000 But don't you have to plan ahead, like if you're 0:43:42.000 --> 0:43:45.680 putting up a building or you know, re engineering a 0:43:45.719 --> 0:43:48.760 building here in New York, if you're building something in Miami, 0:43:48.960 --> 0:43:51.839 don't you have to say, like, okay, as Ed pointed out, 0:43:52.000 --> 0:43:55.640 Stillantis doesn't have electric vehicles in America this year, but 0:43:55.760 --> 0:43:57.799 in two or three years they're going to have a 0:43:57.840 --> 0:44:00.560 ton of them, and so eventually, you know, I mean, 0:44:00.600 --> 0:44:03.640 you've got to think five, ten, twenty, five, thirty years ahead, 0:44:03.680 --> 0:44:04.200 right do you? 0:44:05.400 --> 0:44:09.200 I'm thinking about my internship at I said. But the 0:44:09.239 --> 0:44:11.880 answer to question is yes, New York is a unique market. 0:44:12.200 --> 0:44:14.520 You don't really we don't build a lot of parking here. 0:44:14.560 --> 0:44:16.359 And as a good point, you know, there's just a change, 0:44:16.600 --> 0:44:18.440 even this change that you see now with with the 0:44:18.480 --> 0:44:22.360 taxes on on traffic that was proposed yesterday here in 0:44:22.400 --> 0:44:24.759 New York City, but in Miami, for sure, Miami is 0:44:24.800 --> 0:44:29.000 another market that we are incorporating EV charging stations, the 0:44:29.000 --> 0:44:32.120 whole energy you know, we're the building we're building with 0:44:32.160 --> 0:44:35.880 Norman Foster in Miami Beach is in is it totally? 0:44:36.320 --> 0:44:37.400 You know, is an energy. 0:44:37.120 --> 0:44:41.120 Efficient building where very much like your headquarters in London, 0:44:42.120 --> 0:44:47.040 you know, being environmentally friendly and environmentally neutral. 0:44:47.120 --> 0:44:49.759 Where's your favorite place for opportunities or to build? Right 0:44:49.800 --> 0:44:51.399 now when you look around the globe and let. 0:44:51.320 --> 0:44:53.319 Me ask you about the US versus the rest of 0:44:53.320 --> 0:44:57.080 the world on that note, good, you know, because right 0:44:57.120 --> 0:44:59.600 now America is going through a tough time. My wife's 0:44:59.600 --> 0:45:02.600 from Spain and she has issues with our government and 0:45:02.680 --> 0:45:05.719 our people, you know, But how do you look at 0:45:05.760 --> 0:45:08.560 it as someone who immigrated here also, you know, twenty 0:45:08.600 --> 0:45:09.279 thirty years ago. 0:45:09.480 --> 0:45:10.920 Well, that's a load of question. We don't have that 0:45:11.000 --> 0:45:13.120 many that much time left they even answer that. But 0:45:13.560 --> 0:45:16.279 if you think about how other people look at how 0:45:16.560 --> 0:45:19.960 foreigners look at at America, We're still looked at the 0:45:20.000 --> 0:45:22.840 best place to invest. And that's it goes back to 0:45:22.840 --> 0:45:25.920 the sel Green deal. The Japanese just put tremendous amount 0:45:25.960 --> 0:45:28.480 of investment in here because the US has looked at 0:45:28.520 --> 0:45:31.240 it's the safest place to invest. Europe is a disaster 0:45:31.360 --> 0:45:35.000 from an investment point of view. They have you know, Spain, Germany. 0:45:35.040 --> 0:45:38.200 I mean, these markets have tremendous amount of problems. We 0:45:38.239 --> 0:45:40.480 all have the same issue with cost of capital. Right, 0:45:40.520 --> 0:45:43.720 cost of capital is expensive here, it's expensive in Europe, 0:45:43.960 --> 0:45:46.560 but there's the sense that the US is a more 0:45:46.600 --> 0:45:50.239 advanced market and it's safer market to invest. So we're 0:45:50.360 --> 0:45:52.160 just seeing, I mean, we're partners with some of the 0:45:52.239 --> 0:45:56.640 largest German state owned pension funds and insurance companies. They're 0:45:56.680 --> 0:45:59.520 still investing in the US more and more now here 0:45:59.520 --> 0:46:01.600 than they are in their in their own in their 0:46:01.640 --> 0:46:04.960 own backyard, because they do have problems there that have 0:46:05.080 --> 0:46:09.839 to do with you know, with regular regulation, and for 0:46:09.920 --> 0:46:12.759 years they were in very low return environment that now 0:46:12.840 --> 0:46:15.160 is with high cost of capital. It just kills you. 0:46:15.400 --> 0:46:18.400 So, Michael, thirty seconds left here. So I'm not gonna 0:46:18.640 --> 0:46:20.399 poo poo some of the journalism that we've all been 0:46:20.440 --> 0:46:23.399 doing and the narrative out there about the concerns about 0:46:23.400 --> 0:46:25.200 office real estate. But do you think there is a 0:46:25.239 --> 0:46:28.360 crisis brewing? And just got about thirty seconds twenty five. 0:46:28.560 --> 0:46:31.799 It's as you said, there's it's not a crisis. It's 0:46:31.840 --> 0:46:34.160 not an overall market. It's there's a crisis in the 0:46:34.239 --> 0:46:36.440 B and C class office and and it's not a 0:46:36.520 --> 0:46:39.680 crisis that has expired. It's got to be demolished, it's 0:46:39.719 --> 0:46:40.560 got to be a replacement. 0:46:40.560 --> 0:46:42.680 I talked to someone who was overseeing kind of all 0:46:42.719 --> 0:46:46.560 of the old assets from like sears and so and 0:46:46.560 --> 0:46:48.000 so forth, and just saying, you know, I'm so glad 0:46:48.000 --> 0:46:49.960 we're not talking about the demise of the mall anymore. 0:46:50.000 --> 0:46:52.000 Like we've moved on to office and it just sounds 0:46:52.000 --> 0:46:54.040 like we're cleaning house at this point, just a little bit. 0:46:54.080 --> 0:46:56.640 There's a reset and like you said, old inventory out, 0:46:56.760 --> 0:46:59.160 new inventory in, and people are paying for it. The 0:46:59.200 --> 0:47:00.839 good thing is there's a lot of money out there 0:47:00.880 --> 0:47:01.920 to pay for new inventory. 0:47:02.040 --> 0:47:04.240 Come back soon. This was really really fun pleasure. 0:47:04.280 --> 0:47:05.480 Thank you so much, Michel Sfoe. 0:47:05.520 --> 0:47:07.880 He's founder, chairman, and CEO of the company that bears 0:47:07.920 --> 0:47:10.759 his name here in our interactive broker And thanks Ed, Yes, 0:47:10.880 --> 0:47:11.960 thank you, Ed Ludlow. 0:47:12.640 --> 0:47:16.239 You're listening to the Bloomberg Business Week podcast. Catch us 0:47:16.280 --> 0:47:19.600 live weekday afternoons from three to six Eastern Listen on 0:47:19.680 --> 0:47:23.720 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:47:24.000 --> 0:47:25.799 or watch us live on YouTube. 0:47:26.920 --> 0:47:29.480 Also obsessed with what's going on in Houston, We've been 0:47:29.480 --> 0:47:32.640 talking about how electricity demand in the second largest US 0:47:32.719 --> 0:47:35.440 state surpassed the record set during the summer of twenty 0:47:35.480 --> 0:47:40.080 twenty two as searing temperatures boosted ac use we're of 0:47:40.160 --> 0:47:42.600 course talking about Texas types of one hundred and ten 0:47:43.360 --> 0:47:47.080 degrees fahrenheit. So let's get into it, because what's going 0:47:47.160 --> 0:47:50.279 on is certainly we're looking at the grid, the stresses, 0:47:50.719 --> 0:47:52.520 if you will, And there's a great story on the 0:47:52.560 --> 0:47:56.919 Bloomberg by our Bloomberg Newspower Extreme I'm sorry, by our 0:47:57.040 --> 0:48:01.319 climate crisis reporter Noreene Malick and team about what's going 0:48:01.360 --> 0:48:04.520 on in terms of our grid and really just how 0:48:04.680 --> 0:48:07.880 America's biggest power source we're talking about net gas wasn't 0:48:07.880 --> 0:48:10.160 built for it. Joining us right now though, to talk 0:48:10.200 --> 0:48:13.359 about the story is Elizabeth Elkin. She's interim team leader 0:48:13.360 --> 0:48:15.960 for Bloomberg's Power Team, and she joins us on the 0:48:16.080 --> 0:48:19.160 phone here on this Tuesday. So Elizabeth, come on in 0:48:19.200 --> 0:48:21.080 on this story because we are we talked to somebody 0:48:21.080 --> 0:48:23.880 out of Houston earlier about the temperatures. They're saying the 0:48:23.920 --> 0:48:27.279 grid is working so far, but there are stresses on 0:48:27.320 --> 0:48:30.120 the system and not gas to blame or it just 0:48:30.200 --> 0:48:31.160 isn't ready for it. 0:48:31.520 --> 0:48:35.400 Yes, yes, absolutely, So we are watching the grid in 0:48:35.440 --> 0:48:39.440 Texas very very closely, and like you said, Narene had 0:48:39.480 --> 0:48:42.720 this fantastic story come out today. She's our grid expert. 0:48:43.560 --> 0:48:47.879 She has been looking into gas generation and how that 0:48:47.960 --> 0:48:51.399 might be impacting some of these blackout risks. So there's 0:48:51.440 --> 0:48:53.400 been a lot of gas generation come on in the 0:48:53.480 --> 0:48:58.400 last fifteen or so years, right, become cheap and readily 0:48:58.440 --> 0:49:02.480 available in the US, and it's of course cleaner than coal, right, 0:49:02.560 --> 0:49:04.600 So it's not inherently a bad thing that we have 0:49:04.640 --> 0:49:08.439 all this gas generation coming online, but it does tend 0:49:08.440 --> 0:49:12.800 to perform badly in extreme weather. And so obviously the 0:49:12.880 --> 0:49:15.600 last few years we've seen it get really really cold 0:49:15.719 --> 0:49:18.520 or really really hot in Texas and that can cause 0:49:18.560 --> 0:49:21.439 problems for these these gas plants. And now we're looking 0:49:21.480 --> 0:49:24.920 at extreme weather appearing to get more and more common, 0:49:24.960 --> 0:49:27.240 and so it's it's pretty concerning. 0:49:27.840 --> 0:49:32.080 So what's the problem with gas plants in cold weather? 0:49:32.320 --> 0:49:36.640 Do they literally like not have insulation or you know, 0:49:36.719 --> 0:49:38.200 does somebody leave the door open? 0:49:38.480 --> 0:49:40.920 I mean that's wrong. 0:49:40.760 --> 0:49:45.920 Yeah, absolutely, And it is actually a number of factors 0:49:45.960 --> 0:49:48.080 that hit all of these plants in a different ways. 0:49:48.120 --> 0:49:51.920 So like the facilities aren't uniformly winterized, right, and so 0:49:51.960 --> 0:49:55.640 when it gets really cold, like, different plants perform better 0:49:55.719 --> 0:49:59.200 in different temperatures, right. Some of them rely on like 0:49:59.239 --> 0:50:02.719 a single gas pipeline for supply. So like say that 0:50:02.800 --> 0:50:05.600 pipeline has an issue, Say it's really cold in that 0:50:05.640 --> 0:50:09.360 pipeline freezes, like that can be a real problem for 0:50:09.400 --> 0:50:12.480 that plant, right. And so part of the problem is 0:50:12.480 --> 0:50:15.279 is that there's not one single problem that makes these 0:50:15.280 --> 0:50:18.680 plants either fail or not perform the way that we 0:50:18.719 --> 0:50:19.480 hope they perform. 0:50:19.560 --> 0:50:19.719 Right. 0:50:20.000 --> 0:50:24.080 It's a very cool story because not only does she 0:50:24.440 --> 0:50:27.560 kind of uncover the vulnerabilities of gas power plants for us, 0:50:27.600 --> 0:50:30.360 I had no idea that this was part of the problem, 0:50:30.560 --> 0:50:32.799 but she also kind of walks us through in a way, 0:50:32.880 --> 0:50:35.600 how these power grids work. We always talk about the grid, 0:50:35.680 --> 0:50:38.000 and I don't really know what that means out there, 0:50:38.640 --> 0:50:42.560 you know, And apparently there are different grids that serve 0:50:42.640 --> 0:50:45.720 different groups, right, And she highlights, for example, the largest 0:50:45.760 --> 0:50:48.400 power grid in the US serve sixty five million people 0:50:48.400 --> 0:50:53.400 in thirteen states in Washington, d C. So it's great 0:50:53.440 --> 0:50:57.600 to learn all of this kind of wonky detail about 0:50:58.239 --> 0:51:00.680 how the how the power market work in the US. 0:51:00.719 --> 0:51:03.600 What's the upshot though here in terms of, you know, 0:51:03.640 --> 0:51:05.600 what has to happen. Does this mean we need to 0:51:05.680 --> 0:51:09.600 rewinterize or you know, rebuild these gas power plants or 0:51:09.800 --> 0:51:13.800 it's supposed to be a bridge solution, right. The idea 0:51:13.840 --> 0:51:16.279 is that natural gas takes us from dirty coal to 0:51:16.360 --> 0:51:19.480 clean renewable So yeah, can't we just like kind of 0:51:19.480 --> 0:51:21.120 make it through to the other side. 0:51:21.520 --> 0:51:24.640 Yeah, yeah, So that has been the idea has been. 0:51:25.239 --> 0:51:27.600 Gas is supposed to be sort of a bridge right 0:51:27.960 --> 0:51:31.080 between we hear about coal and then and then we 0:51:31.160 --> 0:51:34.600 think like you know, like solar, wind, et cetera, and 0:51:34.640 --> 0:51:37.600 we are there, we are building solar plants and wind 0:51:37.680 --> 0:51:40.800 plants and all. But gas has grown by so much 0:51:40.840 --> 0:51:43.480 that it's tough to just say, okay, now we're just 0:51:43.520 --> 0:51:46.560 gonna you know, not use these gas plants, right. 0:51:47.080 --> 0:51:49.160 And we're the biggest gas producers in the world, right, 0:51:49.200 --> 0:51:49.680 the US. 0:51:50.080 --> 0:51:53.200 Yes, yes, absolutely, And so a lot of people have 0:51:53.680 --> 0:51:56.480 a variety of ideas of how we could help solve 0:51:57.000 --> 0:52:01.960 these issues. Some of them include like building more pipelines 0:52:02.000 --> 0:52:03.920 for some of these plants so that like if one 0:52:03.920 --> 0:52:08.520 pipeline fails, you know, you can use another one. Keep 0:52:08.760 --> 0:52:11.560 keeping extra gas on hand right in case there's an 0:52:11.600 --> 0:52:14.160 issue like getting all of the gas that we need, 0:52:14.280 --> 0:52:17.759 which sometimes happens, or even like having backup fuels in 0:52:17.800 --> 0:52:21.040 case like they run out of gas. But it is 0:52:21.160 --> 0:52:23.840 just really hard to change a system that has become 0:52:24.040 --> 0:52:27.960 so prominent right the last you know, fifteen or so years. 0:52:28.120 --> 0:52:30.000 No, But in the meantime, the story points out that 0:52:30.560 --> 0:52:34.200 increasingly we're seeing what more than seven hours of power 0:52:34.280 --> 0:52:37.319 interruptions for US household on average in twenty twenty one, 0:52:37.320 --> 0:52:39.719 more than double the rate reported in twenty thirteen. And 0:52:39.719 --> 0:52:42.800 as you guys also point out the story that polar vortex, 0:52:42.880 --> 0:52:45.400 remember back in January twenty fourteen, so that's when we 0:52:45.480 --> 0:52:49.760 you know, extreme weathers unusual, don't laugh. But it's almost 0:52:49.760 --> 0:52:52.400 ten years since then and we're continuing to see problems. 0:52:52.400 --> 0:52:54.360 So we haven't kind of figured our way around this. 0:52:54.440 --> 0:52:55.320 So that's worrisome. 0:52:55.400 --> 0:52:57.640 And I can't believe twenty fourteen whole or ten years 0:52:57.760 --> 0:52:59.399 or tech ago, I know. 0:52:59.600 --> 0:53:03.319 Right listen, Elizabeth, thank you so much, Elizabeth Elkin, So 0:53:03.360 --> 0:53:05.600 glad we could get to the story. Interim team leader 0:53:05.640 --> 0:53:07.759 for Bloomberg's Power Team. We do want to point out 0:53:07.760 --> 0:53:10.879 Mike Bloomberg founder majority owner of course at Bloomberg LP, 0:53:11.040 --> 0:53:15.200 parent company on Bloomberg News, has committed five hundred million 0:53:15.239 --> 0:53:17.880 dollars to be on Carbon, a campaign aimed at closing 0:53:17.920 --> 0:53:20.840 the remaining coal fired plants in the US by twenty 0:53:20.920 --> 0:53:24.280 thirty in halting the development of new net gas fired plants. 0:53:24.320 --> 0:53:26.080 So we just wanted to point that out there. Check 0:53:26.120 --> 0:53:28.359 out the story. It's online and at Bloomberg dot com. 0:53:28.400 --> 0:53:31.480 Really deep dive and explain so much. This is Bloomberg. 0:53:36.800 --> 0:53:40.359 You're listening to the Bloomberg Business Week podcast. Catch us 0:53:40.400 --> 0:53:44.400 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:53:44.600 --> 0:53:47.880 the Bloomberg Business app, and YouTube. You can also listen 0:53:48.000 --> 0:53:51.080 live on Amazon Alexa from our flagship New York station, 0:53:51.520 --> 0:53:54.600 Just Say Alexa play Bloomberg eleven thirty. 0:53:56.280 --> 0:53:58.279 Carol Master along with Matt Miller, who is in for 0:53:58.360 --> 0:54:00.800 Tim Stenovik. Plenty ahead in our second hour of the 0:54:00.840 --> 0:54:04.120 weekend edition of Bloomberg Business Week, including the business of 0:54:04.239 --> 0:54:07.000 sailing from the world's largest cruise line to an upstart 0:54:07.080 --> 0:54:09.920 racing league that's striving to be F one Formula one 0:54:10.280 --> 0:54:12.680 on the water. Plus we'll look at the viability of 0:54:12.800 --> 0:54:15.960 art as an investment option with author, advisor and curator 0:54:16.120 --> 0:54:19.200 Maria Brido. First up this hour, I check on the 0:54:19.200 --> 0:54:23.040 cruising industry courtesy of Carnival, which reported quarterly results on 0:54:23.120 --> 0:54:26.600 Monday and an annual forecast that beat estimates. Even so, 0:54:26.760 --> 0:54:29.319 shares posted their biggest one day drop in months. Right 0:54:29.360 --> 0:54:32.839 after the earnings report. Carnival's president and CEO and chief 0:54:32.840 --> 0:54:36.080 climate Officer Josh Weinstein joined Matt and Me with his 0:54:36.200 --> 0:54:38.680 thoughts on the numbers, the business, and the outlook. 0:54:39.400 --> 0:54:41.680 Well, thank you first of all for having me. It's 0:54:41.719 --> 0:54:45.319 a pleasure to be with you. You know, I got 0:54:45.320 --> 0:54:47.960 to be honest with you. Over the last call it 0:54:48.280 --> 0:54:51.920 nine months, ten months, our trajectory has only been in 0:54:51.960 --> 0:54:55.719 one direction, and that has been up, and that is 0:54:55.760 --> 0:54:59.480 despite you know, a good amount of geopolitical uncertainty and 0:54:59.560 --> 0:55:02.359 disco and that's you know, we're global company and so 0:55:02.400 --> 0:55:04.840 that's part of our global trade and we adapt and 0:55:04.840 --> 0:55:07.239 we evolved and we move on. I'd say, in the 0:55:07.320 --> 0:55:12.480 last three months it's been pretty fascinating. We usually have 0:55:13.120 --> 0:55:17.120 our peak demand in bookings in the first quarter, and 0:55:17.160 --> 0:55:21.160 our first quarter is December January February of the year, 0:55:21.800 --> 0:55:25.280 and in fact, We did have a record first quarter 0:55:25.320 --> 0:55:28.040 in bookings, highest bookings in the company's history, and we 0:55:28.040 --> 0:55:29.680 thought that was great, and then we got to our 0:55:29.719 --> 0:55:34.080 second quarter and we shattered it. And so the demand 0:55:34.120 --> 0:55:37.759 that we see is carrying on in the first three 0:55:37.760 --> 0:55:38.920 weeks of our third quarter. 0:55:39.280 --> 0:55:41.600 For the month of June, it hasn't stopped. 0:55:42.000 --> 0:55:45.640 And so despite the fact that there is geopolitical uncertainty, 0:55:46.680 --> 0:55:49.760 that is something that our consumers, our guests are taking 0:55:49.800 --> 0:55:50.320 in stride. 0:55:50.360 --> 0:55:51.120 And at the end of the. 0:55:51.160 --> 0:55:54.600 Day, they've got a desire to travel, they've got a 0:55:54.680 --> 0:55:58.160 desire for new experiences, and they have a lot of 0:55:58.600 --> 0:56:02.880 pent up demand for experience, as you know, and that 0:56:02.920 --> 0:56:05.000 plays very well into our business. 0:56:05.120 --> 0:56:07.880 Josh, it feels like though investors maybe think it's as 0:56:07.920 --> 0:56:10.480 good as it gets, considering the bounce back that we've 0:56:10.520 --> 0:56:12.600 seen in your share price this year. You know how 0:56:12.600 --> 0:56:15.520 it goes as someone who's been at Carnival for a 0:56:15.520 --> 0:56:19.160 while now and looked at it from very several different angles. 0:56:19.160 --> 0:56:21.080 But we still have the stock down from about eighty 0:56:21.120 --> 0:56:23.360 percent from a high back in January of twenty eighteen. 0:56:23.600 --> 0:56:25.200 Is it as good as it gets? Do you think 0:56:25.239 --> 0:56:27.600 in terms of bookings and visibility? 0:56:27.680 --> 0:56:27.799 Right? 0:56:27.840 --> 0:56:31.080 Now, oh not at all, you know, you know, so 0:56:31.560 --> 0:56:32.680 the short answer is no. 0:56:32.880 --> 0:56:35.080 It as a matter of fact, even though we're all 0:56:35.120 --> 0:56:36.919 the way back in our booking curve for our North 0:56:36.960 --> 0:56:39.680 American brands, we're still only about ninety percent back for 0:56:39.760 --> 0:56:42.879 our European brands, and so their trajectory is the same thing, 0:56:43.000 --> 0:56:45.000 going in the right direction, but they've got a ways 0:56:45.000 --> 0:56:47.719 to run. But to show you the strength of our 0:56:47.800 --> 0:56:52.360 portfolio of world class brands, our European brands, in the 0:56:52.400 --> 0:56:55.960 second quarter, they actually as compared to twenty nineteen, not 0:56:56.040 --> 0:56:59.520 only do they have double digit increased percentages in the 0:56:59.600 --> 0:57:01.520 volume is booked for the rest of this year, for 0:57:01.560 --> 0:57:04.080 the second half of the year, it was on double 0:57:04.120 --> 0:57:07.800 digit price increases. And so first quarter seven and a 0:57:07.840 --> 0:57:10.200 half points up in pricing, second quarter of this year 0:57:10.239 --> 0:57:13.239 seven and a half percent percent up in pricing. With 0:57:13.400 --> 0:57:17.560 that demand on a forward looking basis, as wind in 0:57:17.600 --> 0:57:19.360 our back, we're very well booked for the rest of 0:57:19.400 --> 0:57:22.200 this year into the first half of next year. So 0:57:23.040 --> 0:57:25.920 with all due respect to you know, to the market. 0:57:26.000 --> 0:57:29.080 You know, any one day you're gonna have ups, you're 0:57:29.080 --> 0:57:29.880 gonna have downs. 0:57:29.880 --> 0:57:31.200 As you said, we've been. 0:57:31.040 --> 0:57:33.600 On a pretty big tear about a one hundred percent 0:57:33.680 --> 0:57:36.200 or so since the start of the year. Our job 0:57:36.280 --> 0:57:39.000 is to focus on the business, focus on that demand generation, 0:57:39.120 --> 0:57:40.840 and continue to drive our business forward. 0:57:42.640 --> 0:57:46.640 Josh Matt Miller here with Carol. What needs to happen 0:57:46.760 --> 0:57:50.000 to bring the stock back to pre pandemic levels or 0:57:50.040 --> 0:57:51.960 why hasn't it come back? Is it just that you 0:57:52.520 --> 0:57:54.560 took on a lot of debt that you have a 0:57:54.560 --> 0:57:56.880 lot of investment to do. I mean, you're trading in 0:57:58.000 --> 0:58:01.560 the teams right now, and be the pandemic hit you 0:58:01.640 --> 0:58:05.040 were treating more like fifty sixty seventy dollars a share. 0:58:06.160 --> 0:58:09.960 Yeah, well, you know, our profile has definitely been impacted 0:58:10.000 --> 0:58:12.840 by what happened in twenty twenty and what we had 0:58:12.880 --> 0:58:15.080 to do to get through it. Frankly, you know, we 0:58:15.120 --> 0:58:17.840 were a company that entered in with probably about you know, 0:58:18.120 --> 0:58:20.720 the market cap and the and the debt. If you 0:58:20.800 --> 0:58:23.680 added it together, it's probably not too dissimilar to exactly 0:58:23.720 --> 0:58:25.400 where we are now if you add it together. 0:58:25.600 --> 0:58:27.560 It's just that our debt, which used to. 0:58:27.600 --> 0:58:31.040 Be about thirteen billion dollars, is thirty three billion dollars 0:58:31.360 --> 0:58:34.080 and hence the value of the of the equity is 0:58:34.120 --> 0:58:36.400 down and it's our job over the next you know, 0:58:36.480 --> 0:58:40.400 several years to effectively transfer that back by generating free 0:58:40.440 --> 0:58:43.320 cash flow. We have a good amount of headroom to 0:58:43.400 --> 0:58:46.720 do to take that and delever and pay down debt. 0:58:46.720 --> 0:58:49.280 We have the lowest order book of new builds in 0:58:49.880 --> 0:58:52.600 frankly my history. I've been here for twenty one years. 0:58:52.600 --> 0:58:55.120 And when I started back in November of two thousand 0:58:55.120 --> 0:58:58.200 and seven as the treasurer as one of the stops 0:58:58.200 --> 0:59:00.960 along my path here at Car Corporation, we had twenty 0:59:00.960 --> 0:59:04.800 four ships on order, and so our ability to generate 0:59:04.840 --> 0:59:06.960 a lot of cash and we will continue to do 0:59:07.040 --> 0:59:10.400 that and use it to de lever is quite strong, 0:59:10.520 --> 0:59:12.440 to tell you the truth. Now, as far as you know, 0:59:12.760 --> 0:59:15.200 what are the other factors involved? For us, it's about 0:59:15.240 --> 0:59:19.040 getting back to not only full capacity, full occupancy, but 0:59:19.120 --> 0:59:22.320 really leveraging our brands. Our brands are phenomenal. I mean 0:59:22.320 --> 0:59:24.840 they are world class. We have Carnival Cruise Line as 0:59:24.840 --> 0:59:29.520 America's cruise line. Ada in Germany created modern day cruising. 0:59:29.520 --> 0:59:32.160 They own Germany Piano Cruises in the UK they are 0:59:32.200 --> 0:59:35.720 synonymous with cruising. They have a Union Jack as their livery. 0:59:36.040 --> 0:59:39.200 We own those markets. They are very good markets for us, 0:59:39.280 --> 0:59:42.520 and they're rebounding, and so the as far as I'm concerned, 0:59:42.920 --> 0:59:45.640 there's only one way that we're going, and it's up. 0:59:45.720 --> 0:59:47.520 Can I just ask about your debt? You have a 0:59:47.520 --> 0:59:51.080 weighted average fixed coupon of six point nine four percent, 0:59:51.120 --> 0:59:53.440 which is not bad considering where we are right now, 0:59:53.520 --> 0:59:56.400 and we're I guess at about two. 0:59:56.320 --> 0:59:59.320 Point nine billion maturing in twenty twenty four. 0:59:59.480 --> 1:00:01.800 Which is where it would be, which is much lower 1:00:01.800 --> 1:00:03.560 than it would be if you had to refinance. Now, 1:00:03.680 --> 1:00:05.880 is my point right? You guys got in on this 1:00:05.960 --> 1:00:09.640 early and filled your coffers first. Do you think that 1:00:09.680 --> 1:00:12.720 puts you at an advantage relative to your competitors? 1:00:13.680 --> 1:00:15.200 I think we're we're in good shape. 1:00:15.200 --> 1:00:17.520 You know, we've we've basically gotten to a point where 1:00:17.560 --> 1:00:20.200 we ended the quarter at about seven point two billion 1:00:20.280 --> 1:00:24.600 seven point three billion of liquidity, and we've already started 1:00:24.640 --> 1:00:27.280 to de lever. As far as we're concerned, we can 1:00:27.280 --> 1:00:29.760 always be opportunistic, we can refinance, we can look at 1:00:29.760 --> 1:00:33.000 what's available, but we as far as we see the future, 1:00:33.040 --> 1:00:35.120 we have no need to go out to the markets 1:00:35.160 --> 1:00:38.720 at this point. We can delever with the liquidity buffer 1:00:38.760 --> 1:00:41.560 that we have and starting to generate again all of 1:00:41.600 --> 1:00:42.560 that cash flow. 1:00:42.640 --> 1:00:45.320 We do have export credits as well, So for. 1:00:45.280 --> 1:00:47.480 The new bills that we do have on order, we've 1:00:47.480 --> 1:00:51.520 got about three billion dollars of very competitively priced export 1:00:51.560 --> 1:00:54.640 credit facilities ready and waiting for us if we choose 1:00:54.680 --> 1:00:58.000 to use them between now and two years from now, 1:00:58.000 --> 1:00:58.160 in the. 1:00:58.160 --> 1:01:00.520 Middle of twenty twenty five, when our last order. 1:01:00.960 --> 1:01:03.720 So we're in a very strong position when it comes 1:01:03.800 --> 1:01:06.720 to our ability to manage our debt down and manage 1:01:06.720 --> 1:01:08.680 our interests expens down over time. You know, as a 1:01:08.760 --> 1:01:11.480 matter of fact, one of the one of the drivers 1:01:11.480 --> 1:01:13.439 that we had for being able to add two hundred 1:01:13.440 --> 1:01:16.480 and seventy five million dollars to the bottom line in 1:01:16.560 --> 1:01:20.560 our guidance change from March to June was in fact 1:01:21.840 --> 1:01:25.560 interest expends savings from starting that process of delevering. 1:01:25.720 --> 1:01:29.800 So we're very we're very pleased with that. With that trajectory, Well, talk. 1:01:29.640 --> 1:01:30.920 To us about you know, Matt and I are going 1:01:30.960 --> 1:01:32.920 back and forth. We're looking at different functions here, so 1:01:33.000 --> 1:01:34.720 tell us we want to make sure we have this right. 1:01:34.800 --> 1:01:37.240 Is it two point nine billion? Is that correct? Maturing 1:01:37.280 --> 1:01:39.600 in twenty twenty four, I was looking at some of 1:01:39.600 --> 1:01:40.200 our research. 1:01:41.120 --> 1:01:42.800 You know what, I don't want to give you the 1:01:42.840 --> 1:01:44.280 wrong number in a live program. 1:01:44.280 --> 1:01:44.680 That's fair. 1:01:44.680 --> 1:01:46.920 We don't get back to you, and we'll make sure 1:01:46.960 --> 1:01:48.600 we get it squared away for you well. 1:01:48.640 --> 1:01:50.400 And the other thing is is you talked about, you know, 1:01:50.520 --> 1:01:53.400 operating good cash flow, and forgive me, we just want 1:01:53.440 --> 1:01:56.720 to make sure we're we're hitting it right too. You 1:01:56.720 --> 1:01:59.440 know the amount that the ships are not inexpensive. You 1:01:59.440 --> 1:02:01.760 guys did a lot of replacement during the pandemic and 1:02:01.760 --> 1:02:04.280 getting rid of some of the older ships and so on. 1:02:04.400 --> 1:02:06.560 But I do wonder, Josh, can you I don't know, 1:02:06.600 --> 1:02:08.720 what's the capex that you're looking for that you can 1:02:08.760 --> 1:02:11.760 continue to spend which is really important, you know, certainly 1:02:11.800 --> 1:02:13.160 to your business. And can you do it with the 1:02:13.200 --> 1:02:14.600 debtload the current debtload? 1:02:15.480 --> 1:02:18.520 Yeah, I mean the short answer is yes, I think 1:02:18.520 --> 1:02:20.240 we can, you know, And as far as we have 1:02:20.360 --> 1:02:23.000 new build capex and we have non new build capecks, 1:02:23.400 --> 1:02:26.560 our new build order pipeline, as I said, is the 1:02:26.680 --> 1:02:30.800 smallest we have had in anyone's memory, and so we 1:02:30.840 --> 1:02:34.120 are very well placed to be able to manage that 1:02:34.160 --> 1:02:35.200 type of capex spend. 1:02:35.200 --> 1:02:38.040 And as I mentioned it does come with. 1:02:37.480 --> 1:02:40.360 With export credits packaged with it, should we choose to 1:02:40.480 --> 1:02:43.520 use them as export credits are rolling off because we're 1:02:43.520 --> 1:02:46.240 paying them down every year in the normal course. On 1:02:46.280 --> 1:02:49.600 top of that new build capex, we've got, we've got 1:02:49.840 --> 1:02:52.280 maintenance capex, we've got you know, making sure our ships 1:02:52.320 --> 1:02:55.320 are in good condition. That you know, we're forecasting it's 1:02:55.360 --> 1:02:57.200 going to be you know, give or take about one 1:02:57.240 --> 1:03:01.439 point five billion for this year in in twenty twenty three, 1:03:01.840 --> 1:03:05.160 and about one point seven billion on an annual basis 1:03:05.480 --> 1:03:07.480 thereafter for the foreseeable future. 1:03:07.840 --> 1:03:11.160 That profile, that entire capex profile. 1:03:10.720 --> 1:03:13.800 Is significantly less than what we were living with and 1:03:13.840 --> 1:03:18.400 how we were operating pre pause. And so that's why 1:03:18.440 --> 1:03:21.040 we're so bullish that the amount of cash flow that 1:03:21.080 --> 1:03:22.680 will be able to generate. 1:03:22.400 --> 1:03:25.240 And then utilized to d lever is not insignificant. 1:03:25.280 --> 1:03:28.600 You know, we're basically planning between twenty four, twenty five 1:03:28.640 --> 1:03:32.320 and twenty six something in the magnitude of about five 1:03:32.360 --> 1:03:35.200 billion of cash from operations, where if you net out 1:03:36.040 --> 1:03:40.400 all these with the capex, with the debt, export credits 1:03:40.400 --> 1:03:43.680 coming in, export credits getting paid off, we anticipate over 1:03:43.840 --> 1:03:47.760 over eight billion dollars will be available for us to 1:03:47.840 --> 1:03:50.160 be able to de lever. And that's on top of that, 1:03:50.440 --> 1:03:52.880 you know, couple a couple billion we're doing this year. 1:03:53.000 --> 1:03:54.280 Josh. One thing I want to ask you, and you 1:03:54.360 --> 1:03:56.439 mentioned this too, that you know, among the different hats 1:03:56.480 --> 1:03:59.080 that you've worn at Carnival, and you've been there, I 1:03:59.080 --> 1:04:01.200 think almost twenty years. I think I'm right if I'm 1:04:01.240 --> 1:04:01.720 looking at. 1:04:01.640 --> 1:04:03.320 It, twenty one one. 1:04:03.720 --> 1:04:07.800 Is treasure and so you understand the importance of the 1:04:07.800 --> 1:04:12.120 financial side of that. Having said that, I am also 1:04:12.240 --> 1:04:15.440 curious when you, you know, look at what really moves 1:04:15.480 --> 1:04:18.120 the bottom line. You know, when people come on board, Yep, 1:04:18.160 --> 1:04:21.080 it's the tickets, but it's also excursions and other things. 1:04:21.440 --> 1:04:24.680 Are they upping the spend ahead of time? That gives 1:04:24.680 --> 1:04:26.800 you even greater visibility and that's where you make a 1:04:26.840 --> 1:04:27.400 lot of money. 1:04:28.280 --> 1:04:29.760 Oh, it absolutely is. You know. 1:04:29.920 --> 1:04:33.320 We we've made a concerted effort over you know, since 1:04:33.600 --> 1:04:38.000 since getting back in our restart to really augment the 1:04:38.120 --> 1:04:39.280 onboard spend profile. 1:04:39.320 --> 1:04:41.600 And we can do that through several mechanisms. You know. 1:04:41.720 --> 1:04:45.000 One of them is the fact is the inflationary environment. 1:04:45.040 --> 1:04:47.040 If you think about twenty nineteen to twenty twenty three, 1:04:47.080 --> 1:04:49.400 people are used to paying more when they go into 1:04:49.480 --> 1:04:53.600 their local restaurant, their local bar, local entertainment, and so 1:04:53.720 --> 1:04:58.080 we have adjusted our pricing accordingly for this for similar experiences, 1:04:58.080 --> 1:05:00.640 and that's taken just just fine with the consumer. 1:05:00.680 --> 1:05:02.000 We're not being out of the ordinary. 1:05:02.080 --> 1:05:05.200 As a matter of fact, our service levels are so 1:05:05.360 --> 1:05:07.840 much better than what you can find on land based 1:05:07.840 --> 1:05:11.560 alternatives that it's a great value. On top of that, 1:05:11.800 --> 1:05:15.160 we're finding different ways to pull forward that spend, as 1:05:15.160 --> 1:05:17.439 you are referring to, and we can do that by 1:05:17.520 --> 1:05:21.360 bundled ticket prices with onboard packages. We can sell people 1:05:21.480 --> 1:05:25.560 specific packages, whether that's beverage or spa packages, and. 1:05:25.560 --> 1:05:27.800 They're buying it, and they're buying it ahead of time. 1:05:28.400 --> 1:05:31.400 Oh they are, they are. It's you know, we've made 1:05:31.480 --> 1:05:35.439 about a step change for us, but a remarkable opportunities 1:05:35.480 --> 1:05:38.200 to do more. I want to say that it's about 1:05:38.240 --> 1:05:42.840 sixty percent increase per person per day the amount of 1:05:42.920 --> 1:05:46.920 our onboard spend that's being purchased before you get on 1:05:46.960 --> 1:05:50.920 the ship. Now, that's great, but it is still a 1:05:51.200 --> 1:05:55.960 minority of our overall onboard spend revenue. So we've got 1:05:55.960 --> 1:05:59.760 a tremendous opportunity to keep that momentum going by finding 1:06:00.000 --> 1:06:02.320 different ways to get people to want to put down 1:06:02.520 --> 1:06:04.480 money for those experiences in advance. 1:06:04.520 --> 1:06:06.800 All right, don't kill me, Josh. But thirty seconds left here, 1:06:06.840 --> 1:06:09.960 do you guys think about recession? Are you factoring the 1:06:10.000 --> 1:06:11.760 possibility of a recession? Just quickly? 1:06:12.560 --> 1:06:12.760 Yeah? 1:06:12.800 --> 1:06:14.840 We do, you know, we do. That's part of our job. 1:06:15.000 --> 1:06:17.400 The great thing about our business and our company is 1:06:17.720 --> 1:06:20.560 number one, we are well booked. We're about in any 1:06:20.600 --> 1:06:23.840 one time, about fifty percent book for the next twelve months, 1:06:23.840 --> 1:06:26.360 and obviously that's much more weighted in the first half. 1:06:26.640 --> 1:06:31.840 On top of that, we are an outrageous value when 1:06:31.880 --> 1:06:34.360 you compare us to land anywhere from twenty five to 1:06:34.360 --> 1:06:37.640 fifty percent, and that boats very well when people are 1:06:37.680 --> 1:06:40.160 thinking about how do I maintain commuication? 1:06:40.520 --> 1:06:42.360 Forgive me, I got to run because the computer is 1:06:42.360 --> 1:06:45.120 going to take me out. Josh, come back soon. Josh Weinstein, 1:06:45.160 --> 1:06:47.920 President and CEO and chief Climate Officer at Carnival Corporation. 1:06:48.080 --> 1:06:49.360 On zoom in New York. 1:06:49.200 --> 1:06:53.520 City, you're listening to the Bloomberg Business Week podcast. Catch 1:06:53.600 --> 1:06:56.960 us live weekday afternoons from three to six Eastern Listen 1:06:57.000 --> 1:07:00.440 on Bloomberg dot Com. The iHeartRadio app and the Blomberg 1:07:00.520 --> 1:07:05.120 Business App or wants us live on YouTube. 1:07:04.320 --> 1:07:06.480 Carol Mats along with Matt Miller. Matt, of course, as 1:07:06.520 --> 1:07:08.760 you know in for Tim here on Bloomberg Business Week. 1:07:09.760 --> 1:07:12.400 I gotta say this next guest his company. It's been 1:07:12.400 --> 1:07:14.680 described by some as Formula one on the water. It 1:07:14.760 --> 1:07:19.160 involves fast paced and high tech fifty foot hydrofoiling race boats. 1:07:19.160 --> 1:07:22.480 They're catamarans from different nations and they're all racing against 1:07:22.480 --> 1:07:24.600 one another. We're both pretty. 1:07:24.480 --> 1:07:27.840 We're both pretty cited. I mean, I grew up sailing 1:07:27.840 --> 1:07:30.640 and haven't been lately. You go sailing all the time, 1:07:31.000 --> 1:07:32.400 and I think we both like racing. 1:07:32.480 --> 1:07:35.480 So let's get to it. He's a five time America's 1:07:35.520 --> 1:07:38.240 Cup winner. Let's slid out there. He was three times 1:07:38.280 --> 1:07:41.200 a skipper in those winnings of the Cup. He's an 1:07:41.200 --> 1:07:45.040 Olympic champion as well. We welcome Sir Russell Coots excuse me, 1:07:45.280 --> 1:07:48.040 CEO Sale GP with us on Zoom and New Zealand. 1:07:49.280 --> 1:07:51.320 Sir Russell, it is so nice to have you here 1:07:51.320 --> 1:07:55.560 with us. Tell us a little bit about sale GP SALESGP. 1:07:56.480 --> 1:07:58.880 Well, thanks Carolyn, thanks Matt. It's great to be here. 1:07:58.880 --> 1:08:04.080 Can you hear me okay, yes, yes, okay, well yeah, salgp, Yes, 1:08:04.120 --> 1:08:08.640 it's it's certainly exciting Grand Prix racing on water. It's 1:08:09.120 --> 1:08:12.960 I think we're one of the fastest growing new sports 1:08:12.960 --> 1:08:18.240 and entertainment properties. As you've described, Carol, we feature high 1:08:18.280 --> 1:08:22.960 speed racing between rival nations, close to shore racing, with 1:08:23.080 --> 1:08:27.200 an expanded calendar or expanding calendar of events as we 1:08:27.720 --> 1:08:32.920 as we develop, so our events span the globe, and 1:08:33.000 --> 1:08:35.439 we have the top athletes in the sport racing and 1:08:35.680 --> 1:08:42.240 as you said, identical very fast hydrofoiling fifty catamarants. In 1:08:42.280 --> 1:08:46.479 fact that our top speed last year was set by 1:08:46.520 --> 1:08:49.000 the French team just under one hundred kilometers per hour. 1:08:49.120 --> 1:08:50.040 I think they were That. 1:08:54.200 --> 1:08:57.760 Is crazy, and like I was kidding with that. I sail. 1:08:57.800 --> 1:09:01.360 I've sailed for thirty years and a top speed might 1:09:01.400 --> 1:09:03.400 be eight nuts. 1:09:04.479 --> 1:09:09.920 That is yeah, in US terms, I guess it's sixty two. 1:09:10.320 --> 1:09:14.080 It's the equivalent of roughly sixty two miles prayer, So 1:09:14.320 --> 1:09:18.240 you know we're driving along the freeway. The speeds on water, 1:09:18.360 --> 1:09:19.960 of course, powered by nature. 1:09:20.080 --> 1:09:23.160 That's the coolest thing. So Russell I grew up as 1:09:23.160 --> 1:09:26.200 a Formula one fan and since then have gotten smart 1:09:26.200 --> 1:09:28.840 and started watching Moto GP because it's so much better. 1:09:29.160 --> 1:09:33.479 But both of those sports are dirty, loud and dirty, right, 1:09:33.720 --> 1:09:36.320 just powered by fossil fuels. And the cool thing about 1:09:36.360 --> 1:09:41.280 Sale GP is that obviously you're powered by the wind, 1:09:41.560 --> 1:09:46.000 and in fact you're in a way an impact organization, right, 1:09:46.200 --> 1:09:48.719 you're pushing to fight climate change. 1:09:49.200 --> 1:09:52.800 Absolutely well it we'll certainly you know, in terms of 1:09:52.880 --> 1:09:56.280 our purpose, were I think fortunate to be a sport 1:09:56.320 --> 1:10:00.840 powered by nature, and we are really champed being a 1:10:00.920 --> 1:10:03.320 world powered by nature in other words, the wind, the 1:10:03.360 --> 1:10:06.559 sun and the water, and our I guess our focus 1:10:06.640 --> 1:10:11.920 is accelerating or showcasing the accelerating the transition to clean 1:10:12.040 --> 1:10:17.320 energy as the number one global energy source. So so 1:10:17.560 --> 1:10:20.000 we're very passionate about that. I think everyone in our 1:10:20.080 --> 1:10:24.640 organization is extremely passionate about it. We have what we 1:10:24.800 --> 1:10:29.160 call an Impact League. Athletes compete not only on the water, 1:10:29.200 --> 1:10:32.960 but they also we also track their their carbon footprint 1:10:33.320 --> 1:10:37.040 and they look to reduce that and they compete for 1:10:37.120 --> 1:10:41.200 points and then and prize money is awarded to their 1:10:41.840 --> 1:10:45.439 impact partner. So each of the teams has an impact partner, 1:10:45.479 --> 1:10:46.639 and we think that's pretty cool. 1:10:46.680 --> 1:10:49.320 Actually, how do the teams get How do the teams 1:10:49.360 --> 1:10:52.640 make money? How do the skippers get paid? You know, 1:10:52.720 --> 1:10:53.679 because we're. 1:10:53.479 --> 1:10:56.000 Well, they get they get paid, They get paid fees 1:10:56.080 --> 1:10:58.639 like any other professional sport to compete, but they also 1:10:58.680 --> 1:11:01.759 compete for prize money, and our prize money is growing, 1:11:01.840 --> 1:11:04.960 so it's set at five million dollars at this stage 1:11:05.000 --> 1:11:09.519 for season four and with the final event being a 1:11:09.560 --> 1:11:15.240 million dollars. But they also receive either a salary or 1:11:15.320 --> 1:11:16.880 fees to race on the boat. 1:11:17.520 --> 1:11:18.880 So how do we watch it? 1:11:18.920 --> 1:11:21.400 You know what? Yeah, I guess. 1:11:21.720 --> 1:11:23.760 With Formula one now in this country you can see 1:11:23.760 --> 1:11:27.439 it on TV, depending what your cable provider is, Moto 1:11:27.479 --> 1:11:30.519 GP you still have to have a subscription. DRNA sells 1:11:30.520 --> 1:11:32.360 those for one hundred and sixty pounds a year. How 1:11:32.360 --> 1:11:33.439 do we watch sale GP? 1:11:34.680 --> 1:11:38.280 Well, Salgingp's distributed well now in season four to two 1:11:38.320 --> 1:11:41.720 hundred and twelve different territories, so in the US you 1:11:41.720 --> 1:11:45.920 can watch it on CBS or on YouTube, and we're 1:11:46.600 --> 1:11:50.519 expanding that portfolio each year. So we've just announced new 1:11:50.560 --> 1:11:55.519 deals with ITV in the UK and a five year 1:11:56.040 --> 1:12:00.240 or five season extension with Kennel Polus in France. But 1:12:00.280 --> 1:12:04.880 we are with many of the broadcasters Fox Australia, Discovery 1:12:05.240 --> 1:12:08.240 in New Zealand. You know, so each in each of 1:12:08.280 --> 1:12:14.519 our key territories we have key broadcasters. Our audience is 1:12:14.560 --> 1:12:18.559 growing pretty rapidly, so we had a three times increase 1:12:18.680 --> 1:12:22.320 over season two and season three. So our dedicated viewership 1:12:22.439 --> 1:12:24.960 is around one hundred and seventeen or just over one 1:12:25.000 --> 1:12:30.920 hundred and seventeen million viewers, So that's just over if 1:12:30.960 --> 1:12:33.760 you look at it, it's just over what is it, 1:12:33.880 --> 1:12:39.439 ten point six million per event of dedicated viewership. And 1:12:39.479 --> 1:12:44.320 then in terms of secondary viewership, which is obviously news 1:12:44.840 --> 1:12:52.120 and magazines, we also had just under a billion views, 1:12:52.120 --> 1:12:56.839 so we're growing pretty rapidly. Of that dedicated audience, about 1:12:56.880 --> 1:13:02.200 sixty percent is linear TV and about the forty percent digital. 1:13:02.520 --> 1:13:05.519 So I'm curious about you, sir Russell. Are you do 1:13:05.600 --> 1:13:08.760 you ever go out in a monohole and just a 1:13:08.840 --> 1:13:10.479 regular stale because it's such. 1:13:10.280 --> 1:13:12.320 A Carol's a traditional sailer, it does. 1:13:12.400 --> 1:13:14.760 I do feel like, you know, America's cup kind of 1:13:14.800 --> 1:13:18.280 got ruined years ago because it's. 1:13:18.160 --> 1:13:19.439 I am such a harsh statement. 1:13:19.800 --> 1:13:23.640 I'm sorry. I think it's not just about speed, it's 1:13:23.680 --> 1:13:26.280 about technique, and it's harder when you're going slower. It 1:13:26.320 --> 1:13:28.599 really is, So I'm just curious how you see it. 1:13:30.040 --> 1:13:34.439 Yeah, I mean I like all forms of sailing, and 1:13:34.479 --> 1:13:38.400 obviously I grew up racing traditional sailboats, but these new 1:13:38.920 --> 1:13:42.320 classes are so fast and it still requires all of 1:13:42.360 --> 1:13:46.000 the same skills, but it's just happening at a much 1:13:46.040 --> 1:13:46.639 higher speed. 1:13:48.280 --> 1:13:50.200 All right, So where do you go? I would also 1:13:50.240 --> 1:13:53.519 go back to how you started this and why you 1:13:53.600 --> 1:13:54.200 started it. 1:13:55.800 --> 1:14:01.360 Well before souv GP, sailing didn't really have a global 1:14:01.400 --> 1:14:05.080 platform to market the sport on an annual basis. So 1:14:05.640 --> 1:14:07.679 when you look at what we're doing with salve GP, 1:14:07.840 --> 1:14:11.920 it's not that different to what is considered normal in 1:14:12.000 --> 1:14:17.360 most sports. So we put together an annual calendar of events, 1:14:17.439 --> 1:14:24.880 we obviously televised that live and promote it, you know, regularly. 1:14:26.040 --> 1:14:31.640 So really, in many ways, it's intriguing to think that 1:14:31.760 --> 1:14:35.000 sailing didn't have a platform like this before SALVEGP. Know 1:14:35.120 --> 1:14:40.320 that we didn't have a regular professional calendar of events 1:14:40.320 --> 1:14:42.599 where the top athletes in the sport race against each 1:14:42.640 --> 1:14:47.080 other on a regular basis, and so that's that's really 1:14:48.000 --> 1:14:52.639 enabled us to market the sport more professionally and more 1:14:52.680 --> 1:14:56.439 frequently and the growth is really a result of that, 1:14:56.880 --> 1:14:59.519 and I think in truth, we didn't really have a 1:14:59.560 --> 1:15:05.040 platform that really delivered exciting racing before these new high 1:15:05.040 --> 1:15:09.440 speed boats came along. So that's really been a transition, 1:15:09.600 --> 1:15:14.280 as has the sort of the I guess, the way 1:15:14.280 --> 1:15:18.880 that we televise it these days, with our broadcast graphics 1:15:18.880 --> 1:15:21.640 and so forth that are superimposed over the video images. 1:15:22.200 --> 1:15:25.360 That really makes the sport more understandable for the general 1:15:25.400 --> 1:15:29.080 sports fan, and in particular the racing fan. So we're 1:15:29.080 --> 1:15:32.280 not you know, with our audience growth, we're not really 1:15:32.320 --> 1:15:36.800 seeing that growth in sailing fans per se. We're seeing 1:15:36.840 --> 1:15:41.040 it in racing fans primarily and also in general sports fans. 1:15:41.040 --> 1:15:44.720 So you know, that's exciting that we're getting that sort 1:15:44.720 --> 1:15:45.719 of viewership increase. 1:15:46.280 --> 1:15:49.840 So what's the plan going forward and in terms of 1:15:49.880 --> 1:15:54.360 your growth expectations on how you want to build this out, Well, 1:15:54.400 --> 1:15:55.440 we started. 1:15:55.000 --> 1:15:58.599 With sex teams in season one and we've grown that 1:15:58.640 --> 1:16:02.240 to ten teams at the beginning of season four. And 1:16:02.280 --> 1:16:06.400 we started with five venues in season one and now 1:16:06.400 --> 1:16:09.759 we're up to twelve venues in season four, and ultimately 1:16:09.800 --> 1:16:16.200 we want to build to about like Formula one they 1:16:16.200 --> 1:16:19.640 have roughly a race every two weeks if you look 1:16:19.640 --> 1:16:22.240 at the number of races that they do in a season, 1:16:22.720 --> 1:16:26.840 and we want to achieve the same sort of consistency 1:16:26.840 --> 1:16:30.840 of events, So we're looking to build the number of 1:16:30.880 --> 1:16:34.639 events and probably build the number of teams to around twelve. 1:16:35.439 --> 1:16:39.480 Teams obviously linked with the nationalities of their countries. 1:16:40.080 --> 1:16:41.439 So the thing that. 1:16:43.000 --> 1:16:45.559 Gets people watching Formula One is of course the drama 1:16:45.640 --> 1:16:49.160 and the personalities, kind of the soap opera more than 1:16:49.200 --> 1:16:51.559 the races. Right, the same is true. You know, Motor 1:16:51.600 --> 1:16:53.679 GP has been so interesting in the last couple weeks. 1:16:53.720 --> 1:16:57.160 Will Mark Marquez go somewhere else and leave Honda? How 1:16:57.200 --> 1:17:00.080 come the Ducats are always winning? Do you have the 1:17:00.080 --> 1:17:04.280 same kind of storylines you think in sailing? 1:17:05.560 --> 1:17:05.760 Yeah? 1:17:05.760 --> 1:17:08.880 Absolutely. I mean we actually produce a behind the scenes 1:17:09.280 --> 1:17:12.800 documentary series called Racing on the Edge, which we distribute 1:17:12.840 --> 1:17:17.120 on YouTube and also our key broadcasters also distribute that 1:17:17.160 --> 1:17:21.080 as well. But we're looking to do a similar thing 1:17:21.120 --> 1:17:24.679 to what Formula One led with and other sports, which 1:17:25.200 --> 1:17:29.960 obviously their drive to survive programming was extremely successful in 1:17:30.040 --> 1:17:33.800 terms of promoting the sort of behind the scenes view 1:17:33.880 --> 1:17:38.519 of athletes and building those personalities and so we're looking 1:17:38.520 --> 1:17:42.760 to do a similar thing in the future. And you 1:17:42.800 --> 1:17:46.519 know that's I think that's pretty exciting for our sport, 1:17:46.560 --> 1:17:51.080 but any sport these days, I think people really tune 1:17:51.120 --> 1:17:54.080 into that sort of content and really engage with it. 1:17:54.160 --> 1:17:56.880 So yeah, exciting times. 1:17:56.920 --> 1:17:59.439 I think I'm looking at by the way video from 1:17:59.520 --> 1:18:02.760 Racing on the Edge right now and honestly have goosebumps. 1:18:02.800 --> 1:18:07.960 I mean, the sailing is so sick is it dangerous? 1:18:08.040 --> 1:18:11.000 I mean these speeds rustle and with you know, with 1:18:11.040 --> 1:18:12.880 the crew on one of these boats, if they run 1:18:12.920 --> 1:18:15.640 into another one, I can imagine injuries. 1:18:16.920 --> 1:18:19.559 Yeah, there's a there's certainly an element of danger, and 1:18:19.560 --> 1:18:22.800 we obviously take the safety of the league. You know, 1:18:22.880 --> 1:18:27.479 really it's it's obviously a priority for us. But it's 1:18:27.560 --> 1:18:29.400 you know when people come along to our events and 1:18:29.400 --> 1:18:32.160 that or they witness soldip for the first time, that's 1:18:32.200 --> 1:18:34.439 that's surprise. You know, they've got an image of sailing. 1:18:34.479 --> 1:18:37.920 I think white triangles on a blue background would be 1:18:37.960 --> 1:18:42.880 a pretty accurate image of what most people. This is 1:18:43.040 --> 1:18:49.120 so different you know to what that image. 1:18:47.120 --> 1:18:51.120 A lot of money to go basically nowhere. But what's 1:18:51.160 --> 1:18:53.320 interesting is you guys, with what you can do. You're 1:18:53.320 --> 1:18:55.400 close to the shore, people can really see it and 1:18:55.479 --> 1:18:57.920 feel it. And I do wonder about the speed in 1:18:57.960 --> 1:19:02.000 terms of these boats. Russell in that it attracting kind 1:19:02.000 --> 1:19:04.559 of a younger audience, right, I mean, you guys have 1:19:04.640 --> 1:19:05.639 to be thinking about that. 1:19:06.000 --> 1:19:08.559 Sure. Well, we're also the way we format our program, 1:19:08.640 --> 1:19:12.599 so our races over two days and ninety minutes, and 1:19:12.640 --> 1:19:16.040 we have three races or fifteen minute races, three to 1:19:16.120 --> 1:19:20.559 fifteen minute races per program, so that really is tailored 1:19:20.560 --> 1:19:25.479 to the modern viewership sort of trends where audiences don't 1:19:26.000 --> 1:19:28.880 watch long form content as much as what they used to. 1:19:29.040 --> 1:19:32.759 So you know, quite often our viewers you tune into, 1:19:33.080 --> 1:19:35.759 they might only tune into the final race, the final 1:19:35.800 --> 1:19:39.200 fifteen minute race, and as a result of that, we 1:19:39.320 --> 1:19:44.240 are seeing a younger demographic following this our racing. 1:19:45.000 --> 1:19:47.040 Can I just say I looking at Season three, episode nine, 1:19:47.080 --> 1:19:48.120 and I think somebody fell. 1:19:48.000 --> 1:19:48.439 In the water. 1:19:48.640 --> 1:19:50.800 Fell in the water, but it's still tied to the boat. 1:19:50.880 --> 1:19:54.080 So he's like skimming across on the surface. 1:19:54.120 --> 1:19:57.320 That was that was That was not Matt Gottrell from 1:19:57.560 --> 1:20:02.320 from the UK team, And he actually cracks some ribs 1:20:02.360 --> 1:20:04.719 as a result of that because you know, at those speeds, 1:20:04.760 --> 1:20:08.320 hitting the water is like getting concrete. So actually we 1:20:08.439 --> 1:20:12.360 made we reviewed that footage and obviously made some adjustment 1:20:12.479 --> 1:20:16.920 to the to the safety equipment on board, so so 1:20:17.000 --> 1:20:21.000 that can't happen again. But yeah, there is an element 1:20:21.040 --> 1:20:23.879 of danger for sure, but there's you know, it's obviously 1:20:24.000 --> 1:20:28.160 hy adrenaline racing and I think the top athletes, top 1:20:28.200 --> 1:20:32.280 sailing athletes in the world really love this formal racing. 1:20:32.560 --> 1:20:37.040 How have the sponsors reacted You could see some of 1:20:37.080 --> 1:20:44.040 the sponsorship Oracle of course, and other big companies, Emirates, 1:20:44.080 --> 1:20:48.240 I see, how have the sponsors reacted after you know, 1:20:48.280 --> 1:20:49.680 four seasons. 1:20:50.320 --> 1:20:53.760 Well, the thing is that you know, we've we've we've 1:20:53.840 --> 1:20:58.200 obviously grown pretty quickly commercially as well, and we've just 1:20:58.240 --> 1:21:03.120 announced some new partnerships with Barla and Apex and they 1:21:03.200 --> 1:21:08.320 join Rollicks, Oracle and near As as our as our 1:21:09.000 --> 1:21:13.439 big sponsors. And and what the thing that we're seeing 1:21:13.560 --> 1:21:17.320 is that these sponsorships are now or these partners are 1:21:17.360 --> 1:21:22.800 now extending their partnerships to long term partnerships. So we 1:21:22.840 --> 1:21:28.200 have a new tenure agreement with Rollicks, which of course 1:21:28.320 --> 1:21:32.040 is fantastic to have such a premium brand, you know, 1:21:32.080 --> 1:21:38.639 associated with our with our sport and really our format, 1:21:38.800 --> 1:21:42.000 just like other sports, is allowing these long term partnerships 1:21:42.000 --> 1:21:45.680 both with venues and you know, the commercial sponsors. 1:21:45.880 --> 1:21:49.040 So just from a financial basis, and I'm just we've 1:21:49.040 --> 1:21:50.920 just got about a minute or so or just under 1:21:50.920 --> 1:21:53.519 a minute left here, serve us, Well, is this I 1:21:53.520 --> 1:21:56.000 mean the goal to be profitable? Are you profitable? Like, 1:21:56.080 --> 1:21:58.240 how do you think about it on a financial basis? 1:21:58.960 --> 1:22:01.720 Yeah, we we had a plan to be profitable by 1:22:01.880 --> 1:22:04.559 the end of season five and we're tracking ahead of 1:22:04.560 --> 1:22:07.519 that plan now, so we expect to see to be 1:22:07.640 --> 1:22:11.840 profitable as a league by the end of the season 1:22:11.880 --> 1:22:16.320 season four. And you know, our revenue sources are made 1:22:16.360 --> 1:22:20.280 up of pretty similar to most traditional sports, so we 1:22:20.360 --> 1:22:25.559 have obviously eventually media will be a big part of that, 1:22:25.720 --> 1:22:28.519 but you know, right now, our focus is on increasing 1:22:28.560 --> 1:22:32.240 our audience rather than revenue in terms of in terms 1:22:32.280 --> 1:22:41.520 of broadcast and media, but sponsorship and obviously ticketing, merchandising 1:22:41.560 --> 1:22:46.080 and so forth, the traditional revenue sources that both sports have. 1:22:46.439 --> 1:22:49.120 Well, so appreciate you finding some time for us. This 1:22:49.280 --> 1:22:51.840 was really fun for us and look forward to hearing 1:22:51.960 --> 1:22:54.559 from you in the future. Hopefully about updates and how 1:22:54.600 --> 1:22:57.360 things are going. Thank you so much. Have a great weekend. 1:22:57.400 --> 1:23:00.360 So Russell Kutzi's chief executive officers also the founder of 1:23:00.400 --> 1:23:03.080 sale GP, joining us via zoom from New Zealand. And 1:23:03.320 --> 1:23:05.400 I mean check out some of the videos. 1:23:05.160 --> 1:23:05.920 And some of the races. 1:23:05.960 --> 1:23:08.639 I mean, they just had an event in Chicago and 1:23:09.439 --> 1:23:15.679 Los Angeles. Looks like finishes today and coming up centro Pey. 1:23:18.760 --> 1:23:22.360 You're listening to the Bloomberg Business Week podcast. Catch us 1:23:22.360 --> 1:23:26.479 live weekday afternoons from three to six Easter on Bloomberg Radio, 1:23:26.600 --> 1:23:29.880 the Bloomberg Business app and YouTube. You can also listen 1:23:29.960 --> 1:23:33.080 live on Amazon Alexa from our flagship New York station 1:23:33.520 --> 1:23:36.320 just Say Alexa playing Bloomberg eleven thirty. 1:23:38.160 --> 1:23:39.439 I got to say, just as a little bit of 1:23:39.439 --> 1:23:41.320 a setup, let's just jump into it because we want 1:23:41.320 --> 1:23:43.040 to talk business and sports. But there is a most 1:23:43.080 --> 1:23:46.200 read story on the Bloomberg about the PGA Tour and 1:23:46.240 --> 1:23:47.920 the Saudi backed live golf. 1:23:48.000 --> 1:23:50.720 What I love that. So I know, here's the thing. 1:23:50.800 --> 1:23:54.000 So I've been working here for twenty three years and 1:23:54.280 --> 1:23:56.559 I've been old editor in chief. Matt Winkler had a 1:23:56.600 --> 1:23:59.040 number of rules. Yeah right, One of them, was that 1:23:59.120 --> 1:24:01.960 you can't say merge. He said, there's no such thing 1:24:02.000 --> 1:24:05.040 as a merger. There's always a buyer and a seller, right, 1:24:05.320 --> 1:24:08.920 And so I guess that's gone away now because everyone 1:24:09.000 --> 1:24:12.320 keeps talking about the Live Golf PGA merger and I 1:24:12.360 --> 1:24:14.599 want to get to the heart of who actually owns 1:24:14.640 --> 1:24:17.080 this thing. So the cool thing about that story is 1:24:17.200 --> 1:24:19.880 it doesn't necessarily answer my question, but it does tell 1:24:19.920 --> 1:24:24.080 me the PGA Tour is going to keep a voting majority, 1:24:24.160 --> 1:24:26.519 so they're going to have voting control, right, But Live 1:24:27.000 --> 1:24:31.759 and PIF they're going to have a majority of the equity, 1:24:31.800 --> 1:24:33.280 so they're going to actually own the thing. 1:24:33.560 --> 1:24:35.800 Yeah, all right, So let's see how our guest what 1:24:35.880 --> 1:24:37.560 he thinks about it. Mark Patrick Coroff is founder and 1:24:37.600 --> 1:24:40.880 CEO of Patrick cough Company. Former banker, media exec. He 1:24:40.960 --> 1:24:44.599 works with athletes like Venus Williams and Aaron Rodgers, who 1:24:44.600 --> 1:24:47.600 was recently our Bloomberg invest event. We're so grateful that 1:24:47.640 --> 1:24:50.759 you found some time for us here in our studio. 1:24:51.120 --> 1:24:51.559 How are you? 1:24:51.920 --> 1:24:52.400 I'm great? 1:24:52.680 --> 1:24:53.559 Yeah, So what do you make? 1:24:53.640 --> 1:24:54.120 What do you make? 1:24:54.760 --> 1:24:56.679 It is a sunny Tuesday, well, and they're talking about 1:24:56.680 --> 1:24:58.519 it getting cloudy again because of the sky. 1:24:58.560 --> 1:24:59.559 The clouds are going to come back. 1:25:00.400 --> 1:25:03.280 Wildfires great, It's just great. I was in California for 1:25:03.320 --> 1:25:04.080 two months this winter. 1:25:04.160 --> 1:25:06.120 It was warmer here for I think eleven of the 1:25:06.439 --> 1:25:07.879 fifty days out in California. 1:25:07.880 --> 1:25:08.599 It's so crazy. 1:25:08.640 --> 1:25:09.559 Go figure out the weather. 1:25:09.720 --> 1:25:12.680 Like the merger, well, go figure that out. I know 1:25:12.680 --> 1:25:15.040 you talk with Jason about it at the Bloomberg invest event, 1:25:15.120 --> 1:25:16.920 like it was just hot on everybody's radar. 1:25:17.600 --> 1:25:19.280 What do you think are this out buying? 1:25:19.560 --> 1:25:19.760 Yeah? 1:25:19.760 --> 1:25:21.880 I mean, look, I always think it's last money and 1:25:22.000 --> 1:25:25.840 speaks loudest and almost every transaction, so it kind of 1:25:25.880 --> 1:25:28.840 put all the noise aside, and you know, you sort 1:25:28.880 --> 1:25:31.760 of have to wonder a little bit what PIFF was 1:25:31.760 --> 1:25:32.920 thinking to begin. 1:25:32.720 --> 1:25:34.160 With when they launched this. 1:25:34.360 --> 1:25:37.360 I mean, there really wasn't a path to beat the LEA. 1:25:37.760 --> 1:25:39.679 It's like the USFL in the eighties. 1:25:39.720 --> 1:25:40.799 I said this at the conference. 1:25:40.840 --> 1:25:42.439 I mean, at the end of the day, you're sort 1:25:42.479 --> 1:25:44.280 of playing, you're kind of gaming it to see what 1:25:44.320 --> 1:25:46.479 you can get, you know, and where your money can 1:25:46.520 --> 1:25:49.360 go because of this, where maybe couldn't have gone without 1:25:49.560 --> 1:25:53.000 having funded live. So I think PIFF owns it. I 1:25:53.040 --> 1:25:55.680 don't think it's a merger I think that the optics, 1:25:55.880 --> 1:25:58.040 you know, are what the give was, at least for 1:25:58.080 --> 1:25:58.679 the time being. 1:25:58.880 --> 1:26:01.920 Is it good or bad for the sport and for fans. 1:26:02.280 --> 1:26:04.160 You know, it depends on I guess it depends on 1:26:04.200 --> 1:26:05.360 what you want out of the sport. 1:26:05.479 --> 1:26:07.720 I mean, at the end of the day, the more 1:26:07.760 --> 1:26:10.439 money that goes into a sport, more money the players 1:26:10.439 --> 1:26:14.200 get paid, the more money that trickles down to training 1:26:14.280 --> 1:26:18.200 and facilities. I guess it's a net positive. I mean, 1:26:18.240 --> 1:26:20.960 I'm not I don't see why it wouldn't be at 1:26:20.960 --> 1:26:22.760 the end. You know, for me, it's a little bit 1:26:22.800 --> 1:26:24.680 about and I hear you know, Monahan was, you know, 1:26:24.760 --> 1:26:28.679 talking about twenty one terrorists from nine to eleven who are. 1:26:28.560 --> 1:26:29.479 From Saudi Arabia. 1:26:29.520 --> 1:26:31.439 It's a little bit it's a little bit hard to 1:26:31.479 --> 1:26:33.679 get too deep in that argument for me. I mean, look, 1:26:33.680 --> 1:26:35.640 I've driven a German car and I'm Jewish. I know 1:26:35.720 --> 1:26:39.000 it's at some point it's not entirely fair. On the 1:26:39.000 --> 1:26:42.439 other hand, you know, sports are global, and if we 1:26:42.479 --> 1:26:45.120 don't expect global investment in sports, then we sort of 1:26:45.160 --> 1:26:48.120 can't expect also have global revenue from sports. So it's 1:26:48.160 --> 1:26:50.639 kind and I'm saying I'm advocating it. I just sort 1:26:50.640 --> 1:26:51.720 of think at the end of the day, it's sort 1:26:51.760 --> 1:26:53.880 of what do you expect. I mean, wherever the most 1:26:53.920 --> 1:26:56.720 money is, If this is an appealing asset, money will 1:26:56.720 --> 1:26:57.120 find it. 1:26:57.320 --> 1:26:59.600 Are Are there still though, a lot of other opportunities 1:26:59.600 --> 1:27:05.040 in golf. I mean, we've seen different variations of golf. 1:27:05.080 --> 1:27:07.920 A buddy of mine had this idea sprint golf, you know, 1:27:07.960 --> 1:27:11.640 which he thought was going to take over. And like 1:27:11.720 --> 1:27:15.080 in tennis or paddle sports, we've seen some new things, 1:27:15.280 --> 1:27:18.280 not just pickleball, but padel or whatever it's called. You know, 1:27:18.360 --> 1:27:19.960 there's so many different ways of playing it. 1:27:20.040 --> 1:27:22.280 Like is golf the same way I don't know. I 1:27:22.320 --> 1:27:24.639 mean miniature golf is still you know, kind of a game, 1:27:24.720 --> 1:27:25.400 not a sport. 1:27:25.520 --> 1:27:28.080 And you know his ping ponger sport, I don't know. 1:27:28.120 --> 1:27:30.760 I mean pickleball is funny. We saw every pickup ball deal. 1:27:30.840 --> 1:27:32.400 I never bought into it, and I just read saying 1:27:32.439 --> 1:27:35.120 today about how there were four hundred thousand injuries in 1:27:35.160 --> 1:27:37.120 the last twelve months and pick a ball and it's 1:27:37.240 --> 1:27:41.479 you know, impacting insurance rates. I mean, I think golf 1:27:41.640 --> 1:27:44.000 is is a very trictional sports around for a long time. 1:27:44.000 --> 1:27:46.360 I don't think I know it. It's an eighteen hole sport. 1:27:46.800 --> 1:27:49.320 It requires a certain level of skill that you know, 1:27:49.360 --> 1:27:52.559 separates the kind of amateur from the pros. I don't 1:27:52.560 --> 1:27:54.639 know that you'll see a radical change. I mean, Tiger's 1:27:54.680 --> 1:27:58.200 doing his his thing and indoor golf, night golf. I 1:27:58.240 --> 1:28:00.639 mean there are ways of getting more people involved the sport, 1:28:00.680 --> 1:28:04.000 but from a professional standpoint, there's only so many eyeballs, 1:28:04.120 --> 1:28:06.880 you know, available, and not everybody wants to watch golf, 1:28:06.920 --> 1:28:10.080 and those who do want to watch the best players and. 1:28:09.479 --> 1:28:11.800 They want to watch day golf. Yeah, they and the money. 1:28:11.880 --> 1:28:14.599 Well, we'll make the sport kind of you know, it'll 1:28:15.240 --> 1:28:16.640 it'll evolve. 1:28:16.680 --> 1:28:19.120 I doubt it will change radically. 1:28:18.880 --> 1:28:21.240 Mark what you know. I want to step away for 1:28:21.240 --> 1:28:24.080 a moment because your past does include investment banking, and 1:28:24.840 --> 1:28:27.680 I think about the investment environment and the environment for 1:28:27.760 --> 1:28:29.719 deals and Matt and I talked to lots of different 1:28:29.760 --> 1:28:31.519 folks and leaders like yourself to just kind of get 1:28:31.560 --> 1:28:34.560 a feel of where we are this market environment. Just 1:28:34.600 --> 1:28:35.760 stepping away for sports. 1:28:36.520 --> 1:28:39.320 The cost of capital is kind of unbelievable at the moment. 1:28:39.120 --> 1:28:41.120 Right, yes, yes, in terms of real estate, but how 1:28:41.120 --> 1:28:42.840 do you see it yeah. 1:28:42.880 --> 1:28:45.120 I mean, I don't know that real estate necessarily is 1:28:45.160 --> 1:28:47.719 a predictor for every other asset class. 1:28:47.760 --> 1:28:49.280 No, but just the cast he was saying, the cost 1:28:49.320 --> 1:28:51.880 of capital is vastly different than it has been for 1:28:53.040 --> 1:28:53.719 it today. 1:28:53.760 --> 1:28:56.160 But then if you were to pull out industrial and 1:28:56.240 --> 1:28:58.519 office that might it might not be exactly the same. 1:28:58.560 --> 1:29:00.519 So I just you know, it's a big real estate 1:29:00.520 --> 1:29:01.280 is such a big bang. 1:29:01.320 --> 1:29:03.560 Like you know, when I was investment banking and I 1:29:03.840 --> 1:29:06.120 kind of I started my boutique in right in two 1:29:06.160 --> 1:29:07.760 thousand and eight, the end of two thousand and seven, 1:29:07.800 --> 1:29:10.320 and you know, it got very tough, very fast, because 1:29:10.320 --> 1:29:11.679 you have no choice. You know, a lot of companies 1:29:11.720 --> 1:29:13.760 are just weren't going to get funded and therefore, you know, 1:29:13.800 --> 1:29:15.080 one in the market. So there was a lot of 1:29:15.160 --> 1:29:17.600 m and A activity. I think that I think the 1:29:17.640 --> 1:29:19.559 world's different now. I think there are a lot of 1:29:19.680 --> 1:29:23.360 decent companies that have enough funding where they can ride 1:29:23.439 --> 1:29:26.200 this out. And the I and the option of by 1:29:26.240 --> 1:29:29.280 the way, costs for capital being so expensive to the 1:29:29.320 --> 1:29:34.559 companies that they'd rather hunker down, cut cost, ride this 1:29:34.680 --> 1:29:37.000 out until capital gets a little less expensive because the 1:29:37.000 --> 1:29:39.760 dilution is just just too painful. So you don't see 1:29:39.800 --> 1:29:41.800 as much growth in some of these businesses, but they're 1:29:41.800 --> 1:29:44.600 hanging on. I think we do need to see some 1:29:44.720 --> 1:29:47.280 meaningful IPOs to kind of open up the market. There 1:29:47.320 --> 1:29:49.360 was so much money raised in the last you know, 1:29:49.400 --> 1:29:52.000 a couple of cycles that you know, companies are still 1:29:52.000 --> 1:29:54.400 getting funded. I would say from my perspective, which is 1:29:54.439 --> 1:29:55.400 very different now than when I. 1:29:55.320 --> 1:29:56.200 Was investment banking. 1:29:56.520 --> 1:29:59.599 You know, I run a consumer focused private equity fund 1:30:00.400 --> 1:30:02.840 with you know, these pro athletes, and you know, the 1:30:02.920 --> 1:30:05.200 deal flow stopped for about a year. I mean, we 1:30:05.240 --> 1:30:08.120 did three deals in the last twelve months when we 1:30:08.160 --> 1:30:11.519 had done eight year before. But right now deal flow 1:30:11.600 --> 1:30:14.599 is back, and I would say the pricing is all 1:30:14.640 --> 1:30:18.679 over the place. We haven't seen significant discounts in these companies, 1:30:19.040 --> 1:30:21.800 but the prices are flat or down a bit. 1:30:22.120 --> 1:30:23.160 I remember I got a phone call. 1:30:23.200 --> 1:30:25.240 I won't I won't throw the fund kind of under 1:30:25.280 --> 1:30:27.080 the bus here, but a fun that we all know 1:30:27.640 --> 1:30:30.000 what's really working me to go into a deal dated 1:30:30.000 --> 1:30:34.120 invested in November, I mean, and they paid a ridiculous 1:30:34.320 --> 1:30:36.640 multiple and they want us to come in January and 1:30:37.479 --> 1:30:38.519 promote their investment. 1:30:38.600 --> 1:30:39.280 You know, by whatever. 1:30:39.280 --> 1:30:41.720 It was a couple of turns, and I was like, 1:30:41.760 --> 1:30:44.280 there's no way, it's the option go the opposite direction. 1:30:44.800 --> 1:30:46.760 Six months so we said no. Six months later they 1:30:46.840 --> 1:30:47.519 called us. 1:30:47.800 --> 1:30:49.600 And they need money and they understand it's going to 1:30:49.600 --> 1:30:51.439 be a down round. So you know, but that's a 1:30:51.479 --> 1:30:54.880 business that has no choice. That company, it's a it's 1:30:54.920 --> 1:30:57.360 a small box kind of health and wellness business. 1:30:57.640 --> 1:30:59.720 It needs capital. It won't it won't make it. 1:31:00.040 --> 1:31:02.840 So the businesses that are the solid businesses with good 1:31:02.920 --> 1:31:07.320 characteristics just don't raise money or don't exit during this market. 1:31:07.360 --> 1:31:09.679 And then one that do need money, I'll probably distressed 1:31:09.680 --> 1:31:11.720 and not that interesting unless you're a distressed buyer, which 1:31:11.800 --> 1:31:14.120 I'm sotainly not so okay. 1:31:14.280 --> 1:31:17.720 So add it all up in terms of again just 1:31:17.880 --> 1:31:21.840 macro mark. You know, we talk recession, no recession. We're 1:31:21.840 --> 1:31:24.080 trying to figure it our way forward and get as 1:31:24.120 --> 1:31:28.639 much transparency and visibility recession. Does it feel like we're 1:31:28.640 --> 1:31:30.720 headed towards a recession? You said your deals are. 1:31:30.680 --> 1:31:33.320 Coming when you have people way smarter than I am 1:31:33.360 --> 1:31:35.519 to answer that question here every day, Here's what I 1:31:35.560 --> 1:31:38.000 would say. I don't think the word recession is a 1:31:38.080 --> 1:31:43.320 catch all anymore. There's so many different segments, geographics. I 1:31:43.439 --> 1:31:46.000 just you know, it may be a recession in two 1:31:46.040 --> 1:31:47.920 areas and not in sex other areas. 1:31:47.960 --> 1:31:50.599 And you know, I heard somebody talk about a rolling recession, 1:31:50.600 --> 1:31:53.640 like we had earnings recession in this sector, in the. 1:31:53.640 --> 1:31:55.160 Segment that you're looking at, exactly. 1:31:55.200 --> 1:31:56.920 I also think that public companies are going to be 1:31:56.960 --> 1:32:00.320 valued differently, and you know, maybe more quarter quarter than annually, 1:32:00.479 --> 1:32:02.840 and so that changes the way people look and value 1:32:02.920 --> 1:32:03.559 these companies. 1:32:03.560 --> 1:32:06.240 So I just think that big and I don't. 1:32:06.280 --> 1:32:07.680 I don't, by the way, as an entrepreneur, and I've 1:32:07.680 --> 1:32:10.280 been entrepreneur for a long time, running me just running 1:32:10.280 --> 1:32:12.840 my own business for twenty plus years, I don't think 1:32:12.920 --> 1:32:15.760 macro as much as you do and some other people do, 1:32:15.800 --> 1:32:16.840 only because I can't afford to. 1:32:17.000 --> 1:32:19.840 So I sort of look in the front. Well, there's 1:32:19.840 --> 1:32:20.559 just no way to do it. 1:32:20.560 --> 1:32:20.720 You know. 1:32:20.800 --> 1:32:22.479 I'm worried about what I can control in my day 1:32:22.479 --> 1:32:25.240 to day business. Our business has been basically fine. I 1:32:25.240 --> 1:32:27.200 mean it's not perfect, yeah, and I'm sure it'd be 1:32:27.200 --> 1:32:29.519 better if COVID hadn't happened. And by the way, anyone 1:32:29.560 --> 1:32:33.040 who thought we weren't going to have major roadblocks after COVID, 1:32:33.080 --> 1:32:35.880 I mean, this is so predictable. I mean, and I 1:32:35.960 --> 1:32:38.400 said it on other if not here or somewhere else, 1:32:38.840 --> 1:32:41.640 you know, in middle of twenty twenty, there is no 1:32:41.960 --> 1:32:44.679 question that there are stormy times ahead. 1:32:44.720 --> 1:32:46.639 So anyone who's surprised. 1:32:46.080 --> 1:32:48.040 Now, of course, it takes a couple of years for 1:32:48.080 --> 1:32:51.120 the impact of business just stopping globally for a period 1:32:51.160 --> 1:32:51.439 of time. 1:32:51.560 --> 1:32:54.760 We literally shut everything down, of course, the money and 1:32:54.760 --> 1:32:55.080 then it. 1:32:55.040 --> 1:32:57.320 Came back right, yes, and then they're not closed all over. 1:32:57.360 --> 1:32:58.160 It's over. It's fine. 1:32:58.200 --> 1:33:00.360 It's like you know, it's like, you know, we got back, 1:33:00.439 --> 1:33:03.160 we came through terrorism. We instead all these new rules 1:33:03.200 --> 1:33:06.559 in airports. No one, of course, things are still going 1:33:06.640 --> 1:33:09.200 to happen. I mean, there was a backlash, there was 1:33:09.200 --> 1:33:10.559 a change in lots of areas. 1:33:11.000 --> 1:33:13.360 I was just thinking, you and I have both watched 1:33:13.439 --> 1:33:16.960 recently the movie about Michael Jordan, well, the movie about 1:33:17.040 --> 1:33:21.240 Nike at the name of It, And the coolest part 1:33:21.360 --> 1:33:25.680 about that movie I thought was, beforehand, none of the 1:33:25.720 --> 1:33:28.280 athletes had ever really owned a piece of the product. Right, 1:33:28.280 --> 1:33:30.559 they got paid for their endorsement deal, but they didn't 1:33:30.600 --> 1:33:33.799 actually get a piece of the percentage of the business. 1:33:33.920 --> 1:33:37.320 And now that's starting to finally become a thing, like 1:33:37.400 --> 1:33:40.280 I hope Messi is going to get a huge piece 1:33:40.360 --> 1:33:43.439 of the team that he's playing with, right, So, Mark, 1:33:43.560 --> 1:33:47.080 is this becoming something that superstar athletes are finally getting 1:33:47.120 --> 1:33:49.160 to own a piece of their own legacy? 1:33:49.479 --> 1:33:50.120 Absolutely. 1:33:50.160 --> 1:33:52.559 I mean I was joking with Rob Gronkowski a few 1:33:52.600 --> 1:33:56.280 years ago about his sponsorship deal with Monster and how 1:33:56.320 --> 1:33:58.160 much he made off of it versus how much they 1:33:58.160 --> 1:34:01.639 made off of him, and it wasn't equal. I mean, 1:34:01.640 --> 1:34:04.200 it wasn't it wasn't commensurate with the value that he added. 1:34:04.240 --> 1:34:06.160 I mean, I think the athletes, we're still they're making 1:34:06.240 --> 1:34:08.760 a lot more money, and it does open up more opportunities. 1:34:08.760 --> 1:34:11.599 More money you have, the more more access you have, 1:34:11.680 --> 1:34:13.400 the more people you know. I mean, just it's just 1:34:13.400 --> 1:34:15.360 that they're they're kind of out in the world of 1:34:15.400 --> 1:34:20.839 billionaires now and because of that, they have more control 1:34:20.920 --> 1:34:24.520 over the outcome of they do. Also, the marketing deals, ironically, 1:34:24.560 --> 1:34:26.400 to some extent, have gone down. 1:34:26.600 --> 1:34:30.240 So sure for Messy or for you know, Aaron Rodgers. 1:34:30.000 --> 1:34:32.960 Whomever, they're still making real money in the marketing endorsement deals, 1:34:33.000 --> 1:34:36.960 but because of kind of the diversification fracturing of the audience, 1:34:37.040 --> 1:34:42.560 and how how the value of these NBA players, for example, 1:34:42.800 --> 1:34:45.040 where they might have been when they were ten NBA superstars. 1:34:45.120 --> 1:34:46.920 Nike and deals with compete and they'd pay them millions 1:34:46.960 --> 1:34:48.599 of dollars. They don't only have to do that now 1:34:48.640 --> 1:34:51.400 because there's so many more effective ways of reaching the 1:34:51.439 --> 1:34:53.920 audience they want to reach for less money. So you know, 1:34:54.200 --> 1:34:56.240 it puts the athletes in the different positions. They're not 1:34:56.240 --> 1:35:00.240 giving up a million dollar endorsement deal in exchange for thing. 1:35:00.280 --> 1:35:02.360 But you know, I said this to one of our guys, 1:35:02.439 --> 1:35:04.679 Dwayne Wade, when we were talking about Chilula Hot Sauce, 1:35:04.680 --> 1:35:06.720 which is one of our first investments, and I. 1:35:06.680 --> 1:35:08.200 Said, look, if Chilula paid you. 1:35:08.200 --> 1:35:11.719 One hundred thousand dollars to you know, do six social 1:35:11.760 --> 1:35:15.439 media posts and a television commercial and you know, whatever 1:35:15.560 --> 1:35:17.679 XYZ you do, you do it because you're a good guy, 1:35:17.720 --> 1:35:20.080 and you know, you stick to your agreements and you 1:35:20.120 --> 1:35:21.760 get your hundred thousand dollars and you move on. You 1:35:21.840 --> 1:35:24.200 might not like Chilulot Sauce on that much, wouldn't matter 1:35:24.240 --> 1:35:26.400 because it would be a paid endorsement. You wrote a 1:35:26.479 --> 1:35:28.719 hundred thousand dollars check into that company, which in fact 1:35:28.720 --> 1:35:31.680 he did, and actually more you do it because you 1:35:31.720 --> 1:35:34.759 bled in the brand and you lead into it because 1:35:34.800 --> 1:35:36.639 you know that at the end of the day you're 1:35:36.680 --> 1:35:37.719 an owner of the company. 1:35:37.760 --> 1:35:38.880 You'd be more helpful a company. 1:35:38.920 --> 1:35:40.680 They may not quantify exactly what you're going to do 1:35:40.720 --> 1:35:43.559 for it, But Dwayne ended up doing an Instagram live 1:35:43.600 --> 1:35:45.320 cooking class with his mom and it didn't have to 1:35:45.320 --> 1:35:48.600 say paid endorsement. So it's much more authentic and he 1:35:48.680 --> 1:35:51.240 has a piece of the upside of his own value. 1:35:51.600 --> 1:35:55.000 So what kind of deals do you look for when 1:35:55.040 --> 1:35:56.760 you think about the athletes you work with and how 1:35:56.880 --> 1:35:58.200 much are they saying this is the kind of thing 1:35:58.240 --> 1:35:58.960 I'm looking for? 1:35:59.120 --> 1:35:59.400 Is it? 1:35:59.640 --> 1:36:01.840 I'm a to me, it's not just about returns, although 1:36:01.840 --> 1:36:03.000 that's obviously part of it. 1:36:03.200 --> 1:36:05.599 I mean, it's mostly about returns. I mean well, no, I. 1:36:05.520 --> 1:36:07.720 Mean look, I mean obviously obviously well, I mean if 1:36:07.720 --> 1:36:09.840 you I mean, we tell our we have two hundred 1:36:09.880 --> 1:36:10.559 and thirty athletes. 1:36:10.600 --> 1:36:12.719 I mean there's interests across every category. 1:36:12.800 --> 1:36:15.960 So we did the biggest e commerce and platform for 1:36:16.040 --> 1:36:19.800 musical instruments called Sweetwater, Amazing company, crushing it, not just 1:36:19.840 --> 1:36:22.840 a COVID bump, just really killing it. The athletes love 1:36:22.920 --> 1:36:25.400 music went in, but also athletes to understand that Providence 1:36:25.439 --> 1:36:27.400 is a great lead investor and here are the core 1:36:27.479 --> 1:36:29.200 metrics of the business and this is why we think 1:36:29.200 --> 1:36:32.040 it's a good value proposition long term. And they invested. 1:36:32.400 --> 1:36:34.840 You know, I think for us, the tail can't wag 1:36:34.840 --> 1:36:37.200 the dog. The athletes can't pick the investments because that's 1:36:37.200 --> 1:36:38.920 not what you know that they're you know, they're paid 1:36:38.920 --> 1:36:41.360 to do, so we're paid to do so we we 1:36:41.400 --> 1:36:44.000 do stay though, within the lanes of areas. 1:36:43.680 --> 1:36:46.240 That they understand and and and might be interesting to them. 1:36:46.320 --> 1:36:50.120 So we've done everything from SpaceX to Chilula to Kodiak, 1:36:50.439 --> 1:36:53.120 which is a pancake and waffle mix. We've invested in 1:36:53.120 --> 1:36:55.200 a couple of alcohol brands. We just invested in a 1:36:55.240 --> 1:36:57.840 big travel company with KKR called Get Your Guide. So 1:36:58.479 --> 1:37:00.639 we look at a mix of things that are kind 1:37:00.640 --> 1:37:05.200 of primarily consumer facing auto travel, hospitality, food and beaverage, 1:37:05.200 --> 1:37:05.599 et cetera. 1:37:06.240 --> 1:37:07.759 And that was the first part of our business. 1:37:07.800 --> 1:37:11.080 We're just now getting ready to launch a separate fund, 1:37:11.120 --> 1:37:13.280 which will be a fund. Our core business is more 1:37:13.280 --> 1:37:16.760 of an advisory merchant banking model, so we go deal 1:37:16.800 --> 1:37:18.479 by deal and the athletes get exposure to the deal 1:37:18.479 --> 1:37:20.240 and they could choose which ones they want to invest in. 1:37:20.479 --> 1:37:23.000 They're on the fund that we're about to launch, which 1:37:23.040 --> 1:37:26.120 is just focus on restaurant franchises. So instead of an 1:37:26.160 --> 1:37:29.920 athlete just taking a one off Wendy's or buying, you know, 1:37:30.040 --> 1:37:32.839 to Taco Bell somewhere, we're going to get them exposure 1:37:32.880 --> 1:37:35.840 to a portfolio of franchise opportunities. They'll also be able 1:37:35.880 --> 1:37:38.479 to use their own source and capabilities. And we have 1:37:38.479 --> 1:37:41.040 athletes in fifty with a footprint and fifty two markets. 1:37:41.080 --> 1:37:45.120 It's hometown, college town, and protown. So instead of doing 1:37:45.120 --> 1:37:47.280 things in a slightly less professional way, we're trying to 1:37:47.280 --> 1:37:49.919 empower them to do it in the way that generates 1:37:49.920 --> 1:37:53.120 the most return possible, but also put them in a 1:37:53.120 --> 1:37:56.120 position to learn about franchising to buy their own franchises. 1:37:56.160 --> 1:37:59.519 So it's kind of a bigger picture of thinking that 1:37:59.560 --> 1:38:01.200 we go through to pick the deal. 1:38:01.360 --> 1:38:02.840 I love hearing this because I think about the times 1:38:02.880 --> 1:38:04.960 we've done broadcasts from like Radio Row leading up to 1:38:05.000 --> 1:38:07.280 the Super Bowl, and it breaks my heart when you 1:38:07.320 --> 1:38:10.240 talk to football players and you know, who play for 1:38:10.280 --> 1:38:12.160 a few years, make a ton of money, get hurt 1:38:12.479 --> 1:38:14.559 and then they have no money, Like it's just so 1:38:14.640 --> 1:38:18.200 this idea of you know, taking athletes who are successful 1:38:18.320 --> 1:38:21.360 in helping them invest in waiting much literacy pay off. 1:38:21.439 --> 1:38:23.000 Yeah, but you don't give you I'll give you a 1:38:23.000 --> 1:38:24.760 once quick, very quick story. So I spoke to an 1:38:24.880 --> 1:38:28.280 entire NFL team a few months ago, and I asked, 1:38:28.400 --> 1:38:30.720 I went to the room with fifty five guys, and 1:38:30.760 --> 1:38:32.160 I said how many The first thing I said was 1:38:32.200 --> 1:38:35.120 how many of you think of football as your first career? 1:38:35.600 --> 1:38:38.439 Not one hand went up. I said, how many. 1:38:38.240 --> 1:38:41.200 Of you plan to work after you retire from playing football? 1:38:41.439 --> 1:38:44.439 Not one hand went up. Now, now let's be clear. 1:38:44.600 --> 1:38:46.479 I'm sure a handful of them or wanted to put 1:38:46.479 --> 1:38:48.120 their hands up and were embarrassed. So there's some of that, 1:38:48.240 --> 1:38:50.040 but for the most part, no. So I said, you're 1:38:50.080 --> 1:38:52.680 going to retire somewhere between twenty five and thirty five 1:38:52.760 --> 1:38:54.920 years old. Was somewhere between a million dollars in the 1:38:54.920 --> 1:38:57.000 bank and fifty million dollars in the bank. Do you 1:38:57.120 --> 1:39:00.240 realize you could be a doctor, a lawyer, or an 1:39:00.240 --> 1:39:01.920 investment bank or it could be an investor. 1:39:02.080 --> 1:39:03.280 We have broadcaster, you can be a coach. 1:39:03.520 --> 1:39:05.640 You have so many opportunities, and I don't think you 1:39:05.640 --> 1:39:08.320 want to be sitting around playing video games at thirty five, 1:39:08.360 --> 1:39:10.160 even if you've got money in the bank. Setting that 1:39:10.280 --> 1:39:12.960 example for your children, I don't think you realize that 1:39:13.000 --> 1:39:14.920 you're going to live until ninety five years old and 1:39:14.960 --> 1:39:18.960 you'll be healthy barring CP in their case, and you'll 1:39:18.960 --> 1:39:21.800 have sixty years you've been working. You know, there is 1:39:21.880 --> 1:39:23.679 so much more to do in life. And I think 1:39:23.840 --> 1:39:27.520 you're going to see this now with a better educated 1:39:27.600 --> 1:39:29.760 not just from an academic standpoint, but just from a 1:39:29.960 --> 1:39:34.080 mind of opening their minds perspective. You'll see many more 1:39:34.120 --> 1:39:36.479 great things accomplished by athletes going forward. And you know, 1:39:36.640 --> 1:39:38.760 our firms there first to try to facilitate that, and 1:39:38.760 --> 1:39:40.120 we do it in a whole host of ways, not 1:39:40.200 --> 1:39:43.680 just investing, certainly through some education so forth. But we 1:39:43.720 --> 1:39:46.599 won't be the only ones. And there's you know, it's 1:39:46.640 --> 1:39:48.599 an important, kind of unique group of people who are 1:39:48.680 --> 1:39:53.240 highly relevant, have unbelievable access, are interesting to others because 1:39:53.240 --> 1:39:56.240 of that. Because of that relevance, and have you know, 1:39:56.320 --> 1:39:57.760 many cases, a lot of money, and. 1:39:57.720 --> 1:40:00.519 They're smart, I mean, especially the playbook start somebody, any 1:40:00.560 --> 1:40:02.200 of them are super Yeah. 1:40:02.000 --> 1:40:04.599 And they're gonna own teams. There's no question we helped 1:40:04.640 --> 1:40:06.720 Dwayne buy a piece of the jazz. We just work 1:40:06.760 --> 1:40:09.840 with JJ Watt and his investment in Burnley, the Premier 1:40:09.920 --> 1:40:11.960 League team. You're going to see more and more of that, 1:40:12.000 --> 1:40:14.920 and they should, it's their sport. Why wouldn't you see more? 1:40:15.280 --> 1:40:17.120 Like, you know, can we do something with teams like more, 1:40:17.320 --> 1:40:19.320 you know, fractional ownership or something. 1:40:19.120 --> 1:40:20.200 In public ownership? 1:40:20.360 --> 1:40:20.559 Right? 1:40:20.680 --> 1:40:22.559 You need board? How else do you get diversity? 1:40:22.760 --> 1:40:22.920 Yeah? 1:40:23.120 --> 1:40:24.840 I mean I think I think these teams need. 1:40:24.680 --> 1:40:26.760 Board directors because otherwise I don't see how you'll ever 1:40:26.800 --> 1:40:28.000 get real diversity. 1:40:27.640 --> 1:40:31.679 Representation for an NFL ownership. Yeah, of course they didn't 1:40:31.720 --> 1:40:31.920 like that. 1:40:32.360 --> 1:40:33.040 I'm just kidding. 1:40:33.640 --> 1:40:35.680 Although kind of annoyed me because I would never want 1:40:35.720 --> 1:40:37.360 a team of mine in one sport, I mean a 1:40:37.400 --> 1:40:38.360 coach from another sport. 1:40:39.360 --> 1:40:41.479 You are, Jim and so much fun. Mark Patrick Coff, 1:40:41.479 --> 1:40:44.040 founder and CEO of Patrick Cough Company. You well, good 1:40:44.080 --> 1:40:44.439 to have you. 1:40:44.479 --> 1:40:44.839 Thanks. 1:40:45.000 --> 1:40:46.559 You're listening and watching Bloomberg Radio. 1:40:46.840 --> 1:40:50.400 You're listening to the Bloomberg Business Week podcast. Catch us 1:40:50.439 --> 1:40:53.800 live week afternoons from three to six Eastern Listen on 1:40:53.840 --> 1:40:57.519 Bloomberg dot com. The iHeartRadio app and the Bloomberg Business 1:40:57.600 --> 1:41:00.160 app or watch us live on YouTube. 1:41:01.160 --> 1:41:04.719 So we recently covered in Bloomberg BusinessWeek. It was about 1:41:04.720 --> 1:41:07.360 a reset and the collectibles and all investment world, Matt 1:41:07.439 --> 1:41:11.600 and you know, cars, watches, designer bags, art following the 1:41:11.640 --> 1:41:14.920 pandemic where people were spending on everything, which meant that 1:41:15.040 --> 1:41:16.679 values shot up in a big way. 1:41:16.800 --> 1:41:16.960 Yeah. 1:41:16.960 --> 1:41:17.520 Absolutely. 1:41:17.560 --> 1:41:22.080 I mean I always have kind of an ongoing debate 1:41:22.080 --> 1:41:24.720 with John Authors about what's driving inflation, and I think 1:41:24.720 --> 1:41:26.800 people forget to talk about the demand side and the 1:41:27.120 --> 1:41:31.479 incredible amount of fiscal stimulus that flowed into consumers pockets, 1:41:31.520 --> 1:41:34.719 and certainly that's got to be acknowledged as a huge 1:41:34.720 --> 1:41:37.559 part of the driver of prices of not only houses 1:41:37.600 --> 1:41:40.800 and cars, but also collectibles. And we've been kind of 1:41:40.840 --> 1:41:41.439 focused on that. 1:41:41.680 --> 1:41:43.760 Yeah, so let's get into it. We've got a great 1:41:43.800 --> 1:41:46.960 voice with us in our interactive Brokers studio. Maria Brito 1:41:47.080 --> 1:41:49.240 is an art advisor. She's a curator. You might recall 1:41:49.280 --> 1:41:52.519 Bloomberg BusinessWeek wrote about her book earlier this year because 1:41:52.560 --> 1:41:54.439 she is the author of a book on leadership, How 1:41:54.479 --> 1:41:57.200 Creativity Rules the World, The art and business of turning 1:41:57.200 --> 1:42:00.639 your ideas into gold so welcome, welcome you. You reminded 1:42:00.680 --> 1:42:03.640 me that when we spoke last over a year and 1:42:03.680 --> 1:42:05.840 a half ago, it was remotely because we were still 1:42:05.920 --> 1:42:09.920 kind of careful. This is a COVID, so tell us 1:42:09.920 --> 1:42:13.480 about take us back though, go back to COVID the pandemic, 1:42:13.920 --> 1:42:16.240 and people were spending on stuff because they they couldn't 1:42:16.240 --> 1:42:18.439 spend they couldn't go anywhere they could spend money that way, 1:42:18.479 --> 1:42:21.240 so people bought stuff. Tell us what you saw when 1:42:21.280 --> 1:42:23.400 it came to the art market specifically. 1:42:23.040 --> 1:42:26.920 Well, thank you guys for having me. Twenty twenty was 1:42:27.640 --> 1:42:32.200 a year that saw a decrease in the sales in 1:42:32.240 --> 1:42:34.920 the art world, but there were a lot of deals 1:42:34.920 --> 1:42:38.000 to be done because when there is a lot of uncertainty, 1:42:38.000 --> 1:42:41.920 a lot of collectors start selling, which makes it a 1:42:42.040 --> 1:42:47.719 wonderful opportunity for the buyers. Twenty twenty one recovered quite 1:42:47.720 --> 1:42:50.559 a bit, and twenty twenty two was our record year 1:42:50.800 --> 1:42:57.559 were sixty seven point eight billion dollars in cells were 1:42:57.760 --> 1:43:01.479 recorded and that is the second highest number in the 1:43:01.560 --> 1:43:07.559 history of the art market. So definitely collectibles have done 1:43:07.920 --> 1:43:13.080 wonderfully well. The particularities of the art market is are 1:43:13.800 --> 1:43:19.720 that the heat of the market continues there, particularly for 1:43:20.520 --> 1:43:25.400 young artists who are the next celebrities, if you will, 1:43:25.760 --> 1:43:30.639 and the numbers that we're seeing at auction for established artists, 1:43:30.680 --> 1:43:33.479 for example, what we saw last year with Paul Allen, 1:43:34.120 --> 1:43:39.519 the sales that reached one point six billion dollars, and 1:43:39.600 --> 1:43:42.080 that is something that has never been seen in history 1:43:42.160 --> 1:43:46.559 for example. So that type of movement in the art world. 1:43:46.840 --> 1:43:49.719 For many of my clients who are also in finance, 1:43:49.760 --> 1:43:52.800 they consider to be the asset class that has performed 1:43:52.840 --> 1:43:55.840 the best in the last ten years. That's difficult to 1:43:57.080 --> 1:44:01.639 pinpoint exactly, but I consider it to become a very 1:44:01.680 --> 1:44:04.919 important part of people's portfolios when they're trying. 1:44:04.680 --> 1:44:06.760 To go there. Though, Yeah, like bring us to kind 1:44:06.760 --> 1:44:08.120 of what's going on nowday. 1:44:08.320 --> 1:44:11.400 I mean, especially as you know, because in the collectibles market, 1:44:11.479 --> 1:44:15.719 when we talk about things like Michael Jordan's shoes, for example, 1:44:15.920 --> 1:44:18.439 they were worth a lot more last year than they 1:44:18.479 --> 1:44:22.639 are now. It seems to have, if not dropped off, kind. 1:44:22.520 --> 1:44:24.400 Of flatlined a little bit of a reset. 1:44:24.560 --> 1:44:27.880 As you know, people run out of stimulus, money interest 1:44:27.960 --> 1:44:32.479 rates rise, Crypto's dead like that whole Having said that, 1:44:32.520 --> 1:44:35.880 based about thirty one, I don't mean crypto is dead. 1:44:35.920 --> 1:44:37.200 But you know what I mean, there's a lot of 1:44:37.240 --> 1:44:41.240 the exuberance has come out of markets and has does 1:44:41.280 --> 1:44:42.360 the art market look the same. 1:44:42.760 --> 1:44:46.320 The art market has existed for so long, and it 1:44:46.360 --> 1:44:49.599 has been so resilient for so long that it has 1:44:49.840 --> 1:44:52.880 seen a drop, but it's not so dramatic, or at 1:44:52.960 --> 1:44:54.000 least not yet. 1:44:54.120 --> 1:44:55.440 I think that the first. 1:44:55.160 --> 1:44:58.080 Three months of the year, people were scared for a 1:44:58.160 --> 1:45:01.720 variety of reasons. One us all the volatility of the 1:45:01.720 --> 1:45:05.439 financial markets and the uncertainty interest rates, et cetera, and 1:45:05.520 --> 1:45:10.200 crypto coming from all the debate off you know, FDx, 1:45:10.240 --> 1:45:13.400 and all the things that happened at the end of 1:45:13.520 --> 1:45:14.320 twenty twenty two. 1:45:15.080 --> 1:45:18.639 The around April, things. 1:45:18.439 --> 1:45:22.200 Started to recover and everything that had to do again 1:45:22.280 --> 1:45:26.320 with like these young artists having their debut shows a 1:45:26.439 --> 1:45:29.760 big galleries, which was something unheard of ten years ago, 1:45:30.880 --> 1:45:36.080 remains hot. What hasn't performed as well as they did 1:45:36.600 --> 1:45:40.280 in the last two years is the ultra contemporary segment 1:45:40.520 --> 1:45:45.680 at auction, meaning all the young artists who were basically 1:45:45.720 --> 1:45:49.160 being used in a way to flip the artwork and 1:45:49.240 --> 1:45:54.439 profit and speculate. That segment saw a lot of cooling off, 1:45:54.760 --> 1:45:58.560 and I think it's because a lot of collectors realized 1:45:58.720 --> 1:46:00.439 that there is no point in space and until a 1:46:00.439 --> 1:46:03.599 million dollars in someone who's thirty five and has had 1:46:03.640 --> 1:46:05.600 a career of five years, for example. 1:46:05.880 --> 1:46:08.360 Although I would say, and I got to say, you know, 1:46:08.600 --> 1:46:11.760 years ago, I had an opportunity to sit down and 1:46:11.760 --> 1:46:15.519 talk with Eli Broade, master collector not with us anymore, 1:46:16.000 --> 1:46:18.880 and in his warehouse out on the west coast of 1:46:18.880 --> 1:46:23.720 Lichtenstein's and they were unbelievable, just everywhere, everywhere, everywhere, so 1:46:24.080 --> 1:46:27.439 you know, but he also focused on up and coming artists, 1:46:28.040 --> 1:46:31.760 and there were people who became very established, and he 1:46:31.840 --> 1:46:35.280 said that was an important part of his collecting. So 1:46:35.320 --> 1:46:37.920 I do wonder, you know, for someone who's out there 1:46:37.960 --> 1:46:40.200 and you can buy, you know, you can fractually write 1:46:40.280 --> 1:46:43.960 invest in art. What's your advice to someone who's looking 1:46:44.000 --> 1:46:46.200 to start a collection. I think first and he's in 1:46:46.280 --> 1:46:48.439 Stevie Cohen right. 1:46:48.640 --> 1:46:52.160 Well, first of all, buy at galleries because you don't 1:46:52.200 --> 1:46:54.240 want to pay the premium of twenty five percent that 1:46:54.280 --> 1:46:56.799 the auction houses are going to charge you, which happens 1:46:56.800 --> 1:46:57.479 to every year. 1:46:57.560 --> 1:46:58.840 Is unbelievable. 1:46:58.920 --> 1:47:01.240 The amount extra I feel like, you know, Congress is 1:47:01.240 --> 1:47:04.240 worried about Taylor Swift tickets or the extra charges that 1:47:04.280 --> 1:47:05.880 you have to pay on ticket Master. They should look 1:47:05.880 --> 1:47:07.439 at these auction houses. 1:47:07.320 --> 1:47:11.400 And they charge the buyer and the seller. So the 1:47:11.520 --> 1:47:15.960 other thing is it is important to buy emerging artists, 1:47:16.000 --> 1:47:19.320 and I support them and plenty of my clients do too. 1:47:19.840 --> 1:47:21.320 The thing that you have to do. 1:47:21.320 --> 1:47:24.679 Is build the relationships with the galleries and make sure 1:47:24.840 --> 1:47:27.760 that you are following what the artist is doing. And 1:47:27.800 --> 1:47:32.880 here's why the competitive environment on primary market is such 1:47:33.040 --> 1:47:36.360 because collectors are thinking, this is the best price. 1:47:36.080 --> 1:47:38.479 I'm ever going to get. And if I am there 1:47:38.600 --> 1:47:39.040 and I. 1:47:38.960 --> 1:47:42.599 Am the happy winner of one of these twelve paintings 1:47:42.640 --> 1:47:45.000 in the show, even if it's one hundred thousand dollars 1:47:45.080 --> 1:47:48.400 for someone who is thirty, it's still way cheaper that 1:47:48.520 --> 1:47:49.960 if I have to go and get it at auction 1:47:50.080 --> 1:47:50.880 five years later. 1:47:51.040 --> 1:47:51.280 Right. 1:47:51.720 --> 1:47:54.720 But this is the thing you have to ass that 1:47:54.920 --> 1:47:59.720 new collector be paying attention to a variety of different factors. 1:48:00.120 --> 1:48:04.040 Cause there are five thousand galleries. 1:48:03.560 --> 1:48:08.559 In the United States alone, and only three hundred are 1:48:08.600 --> 1:48:12.479 worth buying from. So imagine how you have to filter 1:48:13.280 --> 1:48:16.759 everything that's happening. And I say this not because people 1:48:16.800 --> 1:48:19.000 are going to steal your money. 1:48:19.000 --> 1:48:19.960 But because. 1:48:21.280 --> 1:48:24.439 That are filters like everything, and for this artists to 1:48:24.479 --> 1:48:28.040 show in this important galleries or even in an emerging 1:48:28.080 --> 1:48:31.280 gallery that is committed to building the life of the artists, 1:48:31.640 --> 1:48:34.280 they have to have people behind them that can place 1:48:34.320 --> 1:48:36.960 them in museums, that can place them in great collections, 1:48:37.120 --> 1:48:40.439 because that is what will guarantee the legacy of the artists, 1:48:40.640 --> 1:48:44.040 and that is actually what makes the asset a real 1:48:44.080 --> 1:48:46.759 investment and not just a vanity purchase. 1:48:47.200 --> 1:48:51.719 But so somebody like Damien Hurst, his success you're saying, 1:48:51.840 --> 1:48:56.040 isn't only because of the works he created, the esthetics 1:48:56.120 --> 1:48:59.120 or you know, the design, but because of the dealers 1:48:59.560 --> 1:49:01.360 behind him and surrounding him. 1:49:01.640 --> 1:49:04.840 Well, part of that Damien comes from a generation of 1:49:04.880 --> 1:49:08.080 the young British artists that they are not young anymore, 1:49:08.120 --> 1:49:10.240 but that was like thirty years ago. And he's a 1:49:10.280 --> 1:49:13.120 conceptual artist who came up with a bunch of ideas. 1:49:13.320 --> 1:49:16.559 The beauty of what he does is usually is related 1:49:16.600 --> 1:49:18.840 to the title, and that makes you think a lot 1:49:19.120 --> 1:49:22.759 about you know, his decaying shark instead of the glass 1:49:22.800 --> 1:49:26.720 and the dots and things like that. So yeah, exactly, 1:49:26.760 --> 1:49:30.920 that was his So what people like him do is 1:49:31.080 --> 1:49:36.000 create a style in a given time that creates an 1:49:36.080 --> 1:49:39.559 awareness of something or something that is innovative and unique, 1:49:39.720 --> 1:49:42.280 and he finds the right gallery. In his case it 1:49:42.360 --> 1:49:45.840 was White Cube in London, still very very important, and 1:49:45.880 --> 1:49:47.280 he finds the right collectives. 1:49:47.520 --> 1:49:50.240 So it isn't ecosystem. Not one thing is. 1:49:50.200 --> 1:49:52.719 Going to make an artist he needs or she needs 1:49:52.800 --> 1:49:55.800 or they need a bunch of things to happen for 1:49:55.920 --> 1:49:57.920 that artist to build a career. 1:49:58.640 --> 1:50:01.080 It's just kind of fascinating in terms. 1:50:00.840 --> 1:50:01.840 Of totally fascinating. 1:50:01.880 --> 1:50:03.600 Did I say Lichtenstein or Lichtenstein? 1:50:04.400 --> 1:50:06.200 You said Lichtenstein, Yeah. 1:50:06.000 --> 1:50:08.080 I'm mean Stein. I know, as soon as it came out, 1:50:08.120 --> 1:50:08.920 I'm like, you're talking. 1:50:08.800 --> 1:50:12.560 About Roy Yeah, okay, yeah, I think of the principality. 1:50:12.760 --> 1:50:13.240 Yeah, I know. 1:50:13.280 --> 1:50:15.680 And that's why I'm like, you know, I think you 1:50:15.720 --> 1:50:18.080 were like, what, okay, really. 1:50:17.800 --> 1:50:20.840 Cool stuff and really something to think about. And I 1:50:20.920 --> 1:50:24.080 know it kind of definitely resonates with our audience because 1:50:24.920 --> 1:50:27.479 you know, you do think about diversification. Have a great weekend. 1:50:27.560 --> 1:50:28.280 Thank you so much. 1:50:28.320 --> 1:50:28.920 Thank you guys. 1:50:29.000 --> 1:50:31.639 Check in with you. Maria Brito art advisor, curator and author. 1:50:31.720 --> 1:50:33.960 Check out her book How Creativity Rules. 1:50:34.520 --> 1:50:39.160 This is the Bloomberg Business Week podcast. I'll a little Apple, Spotify, 1:50:39.320 --> 1:50:42.519 and anywhere else you can get your podcast. Listen live 1:50:42.600 --> 1:50:46.639 weekday afternoons from three to six Eastern on Bloomberg dot Com, 1:50:46.720 --> 1:50:50.040 the iHeartRadio app tune In, and the Bloomberg Business App. 1:50:50.080 --> 1:50:53.160 You can also watch us live every weekday on YouTube 1:50:53.240 --> 1:51:01.800 and always on the Bloomberg jermanalone