Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We got some new forecasts from JP Morgan in the
Speaker 2: last twenty four hours and they're looking for yields to
Speaker 2: go even higher. They're looking for five forty on thirties,
Speaker 2: four eighty five on ten's and Barclay's say there's room
Speaker 2: for long term rates to move even higher. What does
Speaker 2: it mean for this competition for capital, this race to
Speaker 2: raise money? Joining us now Madison Company vice chair and
Speaker 2: former House Majority leader Eric Canterer, Eric at Mornig, It's
Speaker 2: good to see it, great to be here. We've got
Speaker 2: a major competition for capital. I haven't seen anything like
Speaker 2: this for a long long time. What do you see
Speaker 2: in your business?
Speaker 3: Look, some people say that we are in the biggest
Speaker 3: investment cycle since the late eighteen hundreds. I mean, it
Speaker 3: is amazing to see sort of the pivot into this
Speaker 3: incredible digital infrastructure surge around data centers and really the
Speaker 3: standing up of new industries are most I mean this
Speaker 3: is I think we're every conversation that we're having at
Speaker 3: Morris is somehow downstream from this incredible cycle we're seeing.
Speaker 3: And you know, listen, the markets are still constructive for
Speaker 3: the m and a deal environment. As you said just now,
Speaker 3: the resiliency is pretty stunning on the consumer end, although
Speaker 3: people will say it's a case shaped consumer market. But
Speaker 3: for now, again, I think you've got Washington poise such
Speaker 3: that it wants to see this growth continue given everything
Speaker 3: else that's going on in the world.
Speaker 2: We were speaking to Cisco to G two Pateau in
Speaker 2: the last week or so, and I've been somewhat concerned
Speaker 2: about where the technology might be heading for several different reasons.
Speaker 2: And he asked me if I was still skeptical concerned,
Speaker 2: and I said I was becoming more concerned about where
Speaker 2: financial markets were going, the amount of debt that's being issued,
Speaker 2: the amount of debt that will be issued over the
Speaker 2: next year, and perhaps even beyond. Have we entered the
Speaker 2: more creative stage on Wall Street that might be of concern.
Speaker 3: Look, there's no question, Number one, there's a super cycle
Speaker 3: for the megacaps. I mean there's no question. And we've
Speaker 3: seen this with hyper scaleers. We're seeing this with everyone
Speaker 3: you know on the board level, at the senior management level,
Speaker 3: who come into their jobs every day and say, hey,
Speaker 3: how are we going to position given this technological revolution
Speaker 3: that we're facing and given where the constructive nature of
Speaker 3: the regulatory environment, I think that there is a willingness
Speaker 3: and a desire to want to transact.
Speaker 1: You know.
Speaker 3: On the private equity side, you know, there's a lot
Speaker 3: of dialogue that continues, and I know that we and
Speaker 3: Molis are continuing in all kinds of discussions with our
Speaker 3: sponsor clients as well. And there's just availability of capital
Speaker 3: for good companies, you know, as we know, there's been
Speaker 3: a thematic in the sponsor world about trying to return
Speaker 3: more capital to LPs and if there isn't a traditional
Speaker 3: exit strategy, there are all kinds of creative solutions to
Speaker 3: help these investors access capital so they can return to
Speaker 3: LPs and start a new fund. So it is pretty
Speaker 3: remarkable the resiliency of what we're seeing.
Speaker 1: How active do you expect deals to be in the
Speaker 1: second half, I mean, is it going to be accelerating
Speaker 1: actually even from the first half because of the smaller
Speaker 1: corporate action from LPs from these exits that are getting creative.
Speaker 3: Well, I just think in general, the markets are still
Speaker 3: looking fairly healthy. As you noted, the earning season has
Speaker 3: been pretty stunning on the part of those that have reported,
Speaker 3: and I think that is indicative of where the mindset
Speaker 3: is that we are continuing an upward trend just in
Speaker 3: the macro level of the market. So, you know, you
Speaker 3: have midterms looming out there, and people always like to say,
Speaker 3: will that or won't that impact transaction activity? We'll have
Speaker 3: to see.
Speaker 1: Do you think that good corporates are competing for capital
Speaker 1: with the US government?
Speaker 3: Look, I don't think there's any question, But if you
Speaker 3: look at the spreads between you know, the ten year
Speaker 3: corporate investment grade instrument versus the ten year I think
Speaker 3: if historically it's one hundred and fifty bases points spread,
Speaker 3: I think we're under one hundred now, which could tell
Speaker 3: you one or two things. Either corporates are getting a
Speaker 3: lot more healthy or the government's getting a little less healthy.
Speaker 3: So I do think there is a race for capital.
Speaker 3: And as we said before, we're in the super cycle
Speaker 3: of investment. The preferred choice of financing currently has been
Speaker 3: this issuance of debt on the private side, and yet
Speaker 3: we have this increasing populism around the world that is
Speaker 3: forcing governments to have to take a look at how
Speaker 3: much and how they're going to figure out to finance
Speaker 3: the needs of their government and their population.
Speaker 2: The increasing and grime. Majority of that all in yield
Speaker 2: is the treasury, and I think that's tiws you about
Speaker 2: where the concern might be more recently.
Speaker 1: Well, and that's really the ultimate question. Are we getting
Speaker 1: to that Liz trust moment in the United States? Do
Speaker 1: you see us as getting closer to it?
Speaker 3: I don't tell me. I have a lot of faith
Speaker 3: in America. And you know, look at.
Speaker 2: Eric, I've got tons of faith in America. I love
Speaker 2: this country. Do I have faith in your Washington? I
Speaker 2: have far less faith in your Washington.
Speaker 3: Look. I've always said that this country, more so than
Speaker 3: any where else in the world, relies on the growth
Speaker 3: and the innovation in the private sector. And we've always
Speaker 3: found a way to try and rise the occasion. And
Speaker 3: the private sector puts the pressure on Washington.
Speaker 2: Right, there's the issue, and private sector's on this job.
Speaker 3: The private sector.
Speaker 2: But the economy, this economy, the US economy is grand
Speaker 2: tons when you're intically, when you just want to finish
Speaker 2: the thought it's important. It's done fantastically well, and we're
Speaker 2: still running deficits around six percent percent.
Speaker 3: And that's why I think that all this discussion around
Speaker 3: Kevin Morrison. You know, I happen to be a big
Speaker 3: fan of his, and I happen to think he's been
Speaker 3: unequivocal on his desire to beat inflation. He said, where
Speaker 3: we are is not success.
Speaker 2: Uh.
Speaker 3: And the markets and the let's just say, the observers
Speaker 3: are throwing a tantrum that he's not being more like
Speaker 3: Jay Powell, but he's not being like Alan greens fan,
Speaker 3: like which way are we going to go? And I
Speaker 3: think there is a space in the middle for him
Speaker 3: to go. And he said he doesn't like the mission
Speaker 3: creep of the Federal Reserve. He wants to get back
Speaker 3: to basics. He wants to make sure that there is
Speaker 3: some discipline about the regulatory construct of the federal zero.
Speaker 3: But all that having been said, I'll tell you that
Speaker 3: the net interest costs, and we've talked about this before,
Speaker 3: the net interest costs of the federal government is at
Speaker 3: a point now where in history, markets, bond markets, and
Speaker 3: others begin to pay attention and Washington wakes up and
Speaker 3: it will do its job when it has to, because
Speaker 3: the political cost of inaction will become more than acting.
Speaker 3: And that's I think when it does work, and it
Speaker 3: will in this country.
Speaker 1: Just based on what you're seeing in the companies that
Speaker 1: you do business with, do you think it's appropriate for
Speaker 1: the Fed to hike rates to try to restrain some
Speaker 1: of what we're seeing with respect to inflation?
Speaker 3: Again, I just think, you know, from you know, a
Speaker 3: firm like Arison Mollis, you know, we are looking at
Speaker 3: where management teams, boards take a view of their own company,
Speaker 3: and they are receivers of what the policy makers are
Speaker 3: doing in Washington. And so I think that the Federal
Speaker 3: Reserve and other are looking at it from a much
Speaker 3: more macro level, and that is where are we going
Speaker 3: to be long term? What does this mean? And when
Speaker 3: you're in an election year, what does this mean? Not
Speaker 3: just for the businesses that we advise, but it's really
Speaker 3: about the people who are waking up this morning and
Speaker 3: looking at those gas prices and what does that mean
Speaker 3: and how does that figure into inflation? You know, we've
Speaker 3: got a real shortage of refined product. You know, there's
Speaker 3: been a lot of controversy about the earnings of the
Speaker 3: super majors in the oil and gas sector, but again,
Speaker 3: it's really about the market. It is. People have been
Speaker 3: saying for months now that this conflict in the Middle
Speaker 3: East is going to result in a shortage of supply.
Speaker 3: I mean, we know that that was coming, and I
Speaker 3: think we're here now