1 00:00:01,440 --> 00:00:05,320 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 2 00:00:05,400 --> 00:00:08,080 Speaker 1: weekdays at ten am Eastern on Apple car Play and 3 00:00:08,080 --> 00:00:11,080 Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand 4 00:00:11,160 --> 00:00:15,240 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 5 00:00:16,440 --> 00:00:18,560 Speaker 2: All right, so it's in thick of earning season and 6 00:00:18,600 --> 00:00:20,599 Speaker 2: there's a lot of interesting company stories coming out. What 7 00:00:20,720 --> 00:00:23,080 Speaker 2: we want to highlight right now is Baker Hughes. It's 8 00:00:23,079 --> 00:00:25,960 Speaker 2: an oil field services company with really two main businesses. 9 00:00:26,000 --> 00:00:29,800 Speaker 2: One is legitimately just oil field services. You're helping oil 10 00:00:29,880 --> 00:00:33,080 Speaker 2: producers make more oil out of the ground offshore and onshore. 11 00:00:33,159 --> 00:00:36,199 Speaker 2: The other one is called Industrial and Energy Technology. That's 12 00:00:36,240 --> 00:00:39,840 Speaker 2: new energy, that's LNG, it's export facilities, two big businesses. 13 00:00:40,080 --> 00:00:42,080 Speaker 2: Revenue came in for the fourth quarter at about six 14 00:00:42,120 --> 00:00:45,160 Speaker 2: point eight four billion dollars. Earnings came in a fifty 15 00:00:45,200 --> 00:00:48,080 Speaker 2: one cents a share. And we're joined now by Lorenzo Simonelli. 16 00:00:48,120 --> 00:00:51,760 Speaker 2: He's chairman, president and CEO of Baker Hughes. Lorenzo, it's 17 00:00:51,800 --> 00:00:53,840 Speaker 2: so good to see you. Thanks for joining us today. 18 00:00:54,800 --> 00:00:57,000 Speaker 3: Alex. Good to be with you as always. 19 00:00:56,680 --> 00:00:57,200 Speaker 4: So listen. 20 00:00:57,240 --> 00:00:59,880 Speaker 2: The stock is down three percent. The commentary from analyst 21 00:01:00,120 --> 00:01:03,280 Speaker 2: is your outlook isn't as rosy as your peers like 22 00:01:03,320 --> 00:01:04,800 Speaker 2: Halliburton and Slumberge. 23 00:01:04,800 --> 00:01:05,600 Speaker 4: What do you say to that? 24 00:01:07,240 --> 00:01:09,280 Speaker 3: I would say, first of all, we're coming off some 25 00:01:09,319 --> 00:01:12,240 Speaker 3: great results in twenty twenty three, and also we've laid 26 00:01:12,240 --> 00:01:15,759 Speaker 3: out a clear strategy, as Baker hughes, over the coming years. 27 00:01:16,080 --> 00:01:18,520 Speaker 3: As you look at twenty twenty four, we've given a 28 00:01:18,560 --> 00:01:21,520 Speaker 3: guidance that is the balanced approach with all of the 29 00:01:21,560 --> 00:01:25,520 Speaker 3: geopolitical and also uncertainty that's happening around the globe. So 30 00:01:26,080 --> 00:01:28,560 Speaker 3: we stick to our guidance and we think that we're 31 00:01:28,640 --> 00:01:31,160 Speaker 3: executing and as you look at the guidance, we've got 32 00:01:31,200 --> 00:01:35,320 Speaker 3: considerable growth in twenty twenty four and great performance as well. 33 00:01:35,640 --> 00:01:39,360 Speaker 2: So what's the biggest question mark? I guess so if 34 00:01:39,400 --> 00:01:43,240 Speaker 2: you're more conservative than your peers, where is the question mark? 35 00:01:43,440 --> 00:01:46,399 Speaker 2: Is it going to be the new energy orders? Is 36 00:01:46,440 --> 00:01:48,600 Speaker 2: it going to be on shore demand or is it 37 00:01:48,640 --> 00:01:51,160 Speaker 2: going to be offshore? Is it domestic or international that 38 00:01:51,240 --> 00:01:54,400 Speaker 2: has you thinking questioning the most? 39 00:01:55,480 --> 00:01:57,920 Speaker 3: You know, you look at what's happening around the world, 40 00:01:57,920 --> 00:02:01,040 Speaker 3: and you see the geopolitics, you see what's happening from 41 00:02:01,080 --> 00:02:04,400 Speaker 3: the OPEC cuts, you see what's happening from the consolidation 42 00:02:04,920 --> 00:02:08,800 Speaker 3: in North America, and that leads some uncertainty relative to 43 00:02:08,960 --> 00:02:13,560 Speaker 3: the activity levels within North America Land. We still see 44 00:02:13,880 --> 00:02:18,799 Speaker 3: that North America should be flatish, but US Land will 45 00:02:18,919 --> 00:02:22,240 Speaker 3: likely be negative for the year given some of the consolidation, 46 00:02:22,360 --> 00:02:25,960 Speaker 3: and also some of the activity international again will be 47 00:02:26,040 --> 00:02:28,520 Speaker 3: in the high single digits, So we still see that 48 00:02:28,600 --> 00:02:31,600 Speaker 3: being robust. And I think again, as we look at 49 00:02:31,639 --> 00:02:35,639 Speaker 3: giving guidance, we're taking a balanced approach to what's taking 50 00:02:35,680 --> 00:02:38,600 Speaker 3: place around the world at this moment and also giving 51 00:02:38,840 --> 00:02:42,519 Speaker 3: a predictability to our investors on what can be achieved 52 00:02:42,520 --> 00:02:44,680 Speaker 3: and also confidence in what we can achieve. 53 00:02:45,200 --> 00:02:47,680 Speaker 5: Lorenzo, I just looking at your business here, and I 54 00:02:47,720 --> 00:02:49,560 Speaker 5: see that about three quarters of your revenue as comes 55 00:02:49,560 --> 00:02:52,640 Speaker 5: from outside of the United States, So obviously you are 56 00:02:52,639 --> 00:02:55,160 Speaker 5: attuned as much as anyone to the geopolitical risks around 57 00:02:55,240 --> 00:02:58,440 Speaker 5: the world. What are you telling your investors about what's 58 00:02:58,480 --> 00:03:01,560 Speaker 5: happening in Eastern or if it's happening in the Middle East, 59 00:03:01,560 --> 00:03:03,200 Speaker 5: and how that may impact your business. 60 00:03:04,760 --> 00:03:08,520 Speaker 3: We're telling them that we've taken every caution and also 61 00:03:08,600 --> 00:03:12,440 Speaker 3: we're managing the situation. We haven't seen any impact and 62 00:03:12,919 --> 00:03:16,720 Speaker 3: we don't anticipate a big impact, but we do think 63 00:03:16,840 --> 00:03:20,280 Speaker 3: some of the development plans may be delayed slightly over 64 00:03:20,280 --> 00:03:23,640 Speaker 3: the long term. No change in what the NOCs and 65 00:03:23,720 --> 00:03:27,079 Speaker 3: also large customers are laying out from a capital spend, 66 00:03:27,400 --> 00:03:30,160 Speaker 3: but there may be some I would say delays. Again, 67 00:03:30,320 --> 00:03:34,000 Speaker 3: as we look at the outlook internationally, we're still anticipating 68 00:03:34,400 --> 00:03:38,360 Speaker 3: high single digit growth and we think that internationally is 69 00:03:38,360 --> 00:03:40,320 Speaker 3: a key place for us to be and we look 70 00:03:40,360 --> 00:03:41,920 Speaker 3: to perform there over the coming years. 71 00:03:42,440 --> 00:03:46,320 Speaker 2: Lorenzo, what's your take on the demand side? I guess 72 00:03:46,360 --> 00:03:48,360 Speaker 2: that would focus more on oil and it does also 73 00:03:48,680 --> 00:03:51,160 Speaker 2: hit on the red sea issue. But what's the man 74 00:03:51,240 --> 00:03:53,400 Speaker 2: going to look like for twenty twenty four? I'm getting 75 00:03:53,440 --> 00:03:56,320 Speaker 2: notes about twenty twenty five, but I have no idea 76 00:03:56,440 --> 00:03:57,680 Speaker 2: what's going to happen this year? 77 00:03:59,280 --> 00:04:02,040 Speaker 3: Wow, Alex, it's so always difficult to predict some of 78 00:04:02,080 --> 00:04:04,840 Speaker 3: these elements, just like it is oil price and you 79 00:04:04,920 --> 00:04:09,280 Speaker 3: know this space well. I think demand continues to be robust. 80 00:04:09,680 --> 00:04:12,600 Speaker 3: A lot of it's going to depend on the economic 81 00:04:12,760 --> 00:04:15,680 Speaker 3: situation as you look at some of the events unfolding 82 00:04:15,720 --> 00:04:21,080 Speaker 3: also globally, and we anticipate that again demand will increase 83 00:04:21,160 --> 00:04:24,640 Speaker 3: this year and continue to be strong, especially in the 84 00:04:24,680 --> 00:04:25,479 Speaker 3: developing world. 85 00:04:26,120 --> 00:04:28,760 Speaker 5: What are your customers telling you here I know obviously 86 00:04:28,800 --> 00:04:31,839 Speaker 5: close contact with them. What are they telling you about 87 00:04:31,839 --> 00:04:35,919 Speaker 5: their spending plans over the next couple of years. 88 00:04:37,600 --> 00:04:42,440 Speaker 3: Again, it varies. You've seen in North America obviously some consolidation, 89 00:04:42,640 --> 00:04:45,719 Speaker 3: so people are going through that consolidation and they'll be 90 00:04:45,800 --> 00:04:49,000 Speaker 3: looking to adjust some of their spending plans in the 91 00:04:49,040 --> 00:04:53,039 Speaker 3: short term, but again continuing to be robust on the 92 00:04:53,080 --> 00:04:55,520 Speaker 3: long term as you continue to see the demand be 93 00:04:55,600 --> 00:05:00,480 Speaker 3: there on the international side, these NOCs have more year 94 00:05:00,600 --> 00:05:04,359 Speaker 3: projects that they're executing. There'll be some variation in the 95 00:05:04,440 --> 00:05:07,520 Speaker 3: timing of those, but again the long term continues to 96 00:05:07,520 --> 00:05:10,559 Speaker 3: be solid, and as you look at our guidance, again 97 00:05:10,600 --> 00:05:14,919 Speaker 3: we're anticipating that maybe there's some tempered view on some 98 00:05:15,040 --> 00:05:18,280 Speaker 3: of the case of the development, but the developments are 99 00:05:18,320 --> 00:05:18,960 Speaker 3: going to happen. 100 00:05:19,800 --> 00:05:23,320 Speaker 2: OC Paul just you know, national oil companies just pull 101 00:05:23,440 --> 00:05:27,960 Speaker 2: up with the oil jargon there. Lorenzo, you mentioned the 102 00:05:28,040 --> 00:05:30,440 Speaker 2: M and A situation, and I find that so interesting 103 00:05:30,480 --> 00:05:32,479 Speaker 2: because that was one of my questions to all these 104 00:05:32,480 --> 00:05:35,359 Speaker 2: CEOs when they announce these big mergers, is are you 105 00:05:35,440 --> 00:05:38,240 Speaker 2: actually going to be slowing your oil production growth over time, 106 00:05:38,240 --> 00:05:40,800 Speaker 2: and they're all like, no, no, no, no, no, it's going 107 00:05:40,880 --> 00:05:43,200 Speaker 2: to be really good. It's going to keep growing. What 108 00:05:43,279 --> 00:05:45,680 Speaker 2: do you think that timeline actually looks like? In the 109 00:05:45,680 --> 00:05:47,680 Speaker 2: beginning their synergies, they get more out of the ground, 110 00:05:47,680 --> 00:05:48,680 Speaker 2: but then that tapers off. 111 00:05:48,800 --> 00:05:49,920 Speaker 4: What do you notice? 112 00:05:51,560 --> 00:05:54,880 Speaker 3: So as you look at the normal evolution of consolidation 113 00:05:55,040 --> 00:05:58,320 Speaker 3: we've seen this cycle before, you are going to continue 114 00:05:58,360 --> 00:06:01,240 Speaker 3: to see a production increases, but you're also going to 115 00:06:01,279 --> 00:06:04,680 Speaker 3: see synergies between the consolidation and as they go through 116 00:06:04,680 --> 00:06:09,000 Speaker 3: their integration activities, I think you'll likely see some temperate 117 00:06:09,680 --> 00:06:13,039 Speaker 3: measures relative to some of their procurement, but again production, 118 00:06:13,200 --> 00:06:16,480 Speaker 3: they're going to seize the opportunity to continue to increase 119 00:06:16,520 --> 00:06:18,479 Speaker 3: production as the demand is there. 120 00:06:19,120 --> 00:06:21,520 Speaker 5: Yeah, I mean, you know, I'm not an expert in 121 00:06:21,560 --> 00:06:24,280 Speaker 5: this unlike Alex. But a term I you see here 122 00:06:24,320 --> 00:06:26,159 Speaker 5: a lot and I don't hear it that much anymore 123 00:06:26,240 --> 00:06:28,600 Speaker 5: is peak oil? When are we going to be at 124 00:06:28,600 --> 00:06:30,640 Speaker 5: peak oil? Are we at peak? I don't hear that 125 00:06:30,680 --> 00:06:34,760 Speaker 5: discussion anymore. So when you're talking to investors, how do 126 00:06:34,800 --> 00:06:37,320 Speaker 5: you talk to them about the long term kind of 127 00:06:37,360 --> 00:06:39,120 Speaker 5: demand for oil? 128 00:06:40,920 --> 00:06:42,800 Speaker 3: You've got to look at it from a standpoint of 129 00:06:42,960 --> 00:06:47,039 Speaker 3: the energy transition is going to be multi decades and 130 00:06:47,120 --> 00:06:50,839 Speaker 3: it's going to require an energy mix that is abundant 131 00:06:50,839 --> 00:06:56,479 Speaker 3: of providing as clean as possible fuel sources to the public, 132 00:06:57,000 --> 00:06:59,080 Speaker 3: and that means oil is going to have a role 133 00:06:59,120 --> 00:07:02,919 Speaker 3: to play. And we see oil and gas in particular 134 00:07:03,240 --> 00:07:06,240 Speaker 3: having a strong robust outlook as we go forward. And 135 00:07:06,680 --> 00:07:09,400 Speaker 3: the question on pea coil has been asked many times. 136 00:07:09,800 --> 00:07:12,520 Speaker 3: There will be a time when pea coil comes. I 137 00:07:12,560 --> 00:07:16,080 Speaker 3: think it's not at this stage, and we continue to 138 00:07:16,120 --> 00:07:19,200 Speaker 3: focus very much on gas and also LNG. 139 00:07:19,400 --> 00:07:21,960 Speaker 4: Well i'm speaking of so Llen G. Paul is huge 140 00:07:22,160 --> 00:07:22,920 Speaker 4: for Baker Hughes. 141 00:07:22,960 --> 00:07:25,640 Speaker 2: So they helped to build the export terminals that you 142 00:07:25,720 --> 00:07:28,160 Speaker 2: get and that has been a humongous driver here in 143 00:07:28,200 --> 00:07:30,320 Speaker 2: the US. And just to focus on that for a second, 144 00:07:30,680 --> 00:07:32,800 Speaker 2: they booked about one hundred and sixty nine million dollars 145 00:07:32,840 --> 00:07:34,920 Speaker 2: worth of new energy orders in the quarter and overall 146 00:07:34,960 --> 00:07:36,960 Speaker 2: for the year seven hundred and fifty million. Like that's 147 00:07:36,960 --> 00:07:42,640 Speaker 2: growing at a very rapid clip, Lorenzo. Somehow, restricting ler 148 00:07:42,680 --> 00:07:45,440 Speaker 2: G exports in the US is becoming something people are 149 00:07:45,480 --> 00:07:49,920 Speaker 2: talking about. The permit process has gotten a lot slower. 150 00:07:49,960 --> 00:07:53,480 Speaker 4: What is going on, Alex. 151 00:07:53,600 --> 00:07:57,360 Speaker 3: It has gotten slower, and again we're monitoring the situation, 152 00:07:58,000 --> 00:08:02,120 Speaker 3: and I'm disappointed because as you look at the benefits 153 00:08:02,160 --> 00:08:06,120 Speaker 3: of USLNG not only for the US but also for 154 00:08:06,280 --> 00:08:09,640 Speaker 3: the world, and also what's been achieved with the geopolitical 155 00:08:09,720 --> 00:08:13,360 Speaker 3: uncertainty and also providing to Europe, there's been commitments that 156 00:08:13,400 --> 00:08:17,600 Speaker 3: have been made and we should continue the USLNG exports 157 00:08:17,600 --> 00:08:21,080 Speaker 3: and also the permitting of these projects. That being said, 158 00:08:21,360 --> 00:08:24,960 Speaker 3: international projects are continuing to move forward, and we have 159 00:08:25,000 --> 00:08:28,280 Speaker 3: an expectation that again in twenty twenty four there'll be 160 00:08:28,400 --> 00:08:34,440 Speaker 3: sixty five mtpa FIDD, and we're again seeing about thirty 161 00:08:34,480 --> 00:08:38,360 Speaker 3: to sixty mtpa FIDD in twenty five and twenty six, 162 00:08:38,440 --> 00:08:42,240 Speaker 3: and by twenty thirty there'll be a global capacity in 163 00:08:42,320 --> 00:08:45,600 Speaker 3: place of eight hundred mtpa. So, you know, we'll monitor 164 00:08:45,679 --> 00:08:49,200 Speaker 3: the US situation. It's disappointing. I think it will sort 165 00:08:49,240 --> 00:08:51,240 Speaker 3: itself out. There's been a lot of commitments that have 166 00:08:51,320 --> 00:08:54,520 Speaker 3: been made to international partners. 167 00:08:54,040 --> 00:08:57,480 Speaker 5: Because you know, again, Lorenzo, I've learned so much just 168 00:08:57,520 --> 00:09:00,800 Speaker 5: from talking to Alex about the energy business. Now that 169 00:09:00,840 --> 00:09:05,160 Speaker 5: we're the US is a net energy exporter, it just 170 00:09:05,200 --> 00:09:08,640 Speaker 5: seems like the natural gas part of the liquified natural 171 00:09:08,640 --> 00:09:09,199 Speaker 5: gas part of. 172 00:09:09,120 --> 00:09:11,480 Speaker 6: It has to grow, you know. 173 00:09:11,600 --> 00:09:13,360 Speaker 5: So I guess my question is if I wanted to 174 00:09:13,440 --> 00:09:15,760 Speaker 5: go down to Corpus Christy and hire you guys to 175 00:09:15,760 --> 00:09:18,280 Speaker 5: build me a LNG facility, could you do it? 176 00:09:18,360 --> 00:09:21,320 Speaker 4: Yeah, you have to wait a while. Their backlogs really deep, Lorenzo. 177 00:09:22,200 --> 00:09:24,560 Speaker 3: We have a very good backlog and we continue to 178 00:09:24,559 --> 00:09:28,560 Speaker 3: grow our backlog in LNG, and yes, we can build. 179 00:09:28,600 --> 00:09:32,800 Speaker 3: We have the most versatile portfolio of solutions around LNG, 180 00:09:33,400 --> 00:09:39,959 Speaker 3: small scale, large scale, stick modular, onshore, offshore floating. So 181 00:09:40,400 --> 00:09:43,280 Speaker 3: you're coming to the right place, Baker Hughes for LNG, 182 00:09:44,240 --> 00:09:44,440 Speaker 3: and I. 183 00:09:44,400 --> 00:09:47,440 Speaker 2: Should point out MTPA million tons per annum, So it 184 00:09:47,520 --> 00:09:49,880 Speaker 2: just basically means the capacity, like how much you can 185 00:09:49,920 --> 00:09:52,760 Speaker 2: actually process an export because you got a cool natural 186 00:09:52,760 --> 00:09:56,560 Speaker 2: gas down before you export. Lorenzo, I am going to 187 00:09:56,559 --> 00:09:58,840 Speaker 2: see you next week for the annual meeting. In your 188 00:09:58,840 --> 00:10:02,680 Speaker 2: annual meeting in Florence, the talk will definitely be Italy. 189 00:10:03,320 --> 00:10:04,760 Speaker 4: Really, I know you are to me right. 190 00:10:04,720 --> 00:10:08,200 Speaker 6: Not Florence, South Carolina, Florence, Italy. They hate Lorenz nice. 191 00:10:08,760 --> 00:10:10,600 Speaker 2: And the talk is definitely going to be revolving a 192 00:10:10,640 --> 00:10:14,040 Speaker 2: lot around that LNG story for investors. Just looking at 193 00:10:14,040 --> 00:10:16,400 Speaker 2: the numbers today, the stock doown three percent. What's your 194 00:10:16,440 --> 00:10:18,960 Speaker 2: main message before we get to the broader outlook next week. 195 00:10:20,559 --> 00:10:23,760 Speaker 3: The main message is we're coming off a terrific twenty 196 00:10:23,840 --> 00:10:27,880 Speaker 3: twenty three where we posted some record results. Our strategy 197 00:10:28,000 --> 00:10:31,160 Speaker 3: is very clear. We set out guidance that continues to grow. 198 00:10:31,240 --> 00:10:35,839 Speaker 3: The business continues to post improvements in our embat homogen rates. 199 00:10:36,360 --> 00:10:39,600 Speaker 3: We're expecting OFSC to be a twenty percent for twenty 200 00:10:39,640 --> 00:10:42,760 Speaker 3: twenty five, it to be a twenty percent by twenty 201 00:10:42,800 --> 00:10:47,000 Speaker 3: twenty six. We're not changing those expectations and we're taking 202 00:10:47,000 --> 00:10:49,840 Speaker 3: a balanced approach to twenty twenty four. But when you 203 00:10:49,880 --> 00:10:52,360 Speaker 3: look at the guidance, it continues to move the company 204 00:10:52,400 --> 00:10:54,960 Speaker 3: forward and also posts very good results. 205 00:10:55,280 --> 00:10:58,920 Speaker 2: Lorenzo, I really appreciate that the conservative approach and then 206 00:10:58,960 --> 00:11:01,160 Speaker 2: sort of moving a lot faster in the next couple 207 00:11:01,200 --> 00:11:01,439 Speaker 2: of years. 208 00:11:01,480 --> 00:11:01,960 Speaker 4: Thanks a lot. 209 00:11:02,160 --> 00:11:04,560 Speaker 2: I look forward to seeing you next week in Florence, Italy. 210 00:11:04,679 --> 00:11:08,680 Speaker 2: Thank you, Lorenzo Semonelli. He's chairman, CEO and president of 211 00:11:09,160 --> 00:11:11,520 Speaker 2: Baker Hughes. Now we're going to do something that only 212 00:11:11,600 --> 00:11:14,360 Speaker 2: Paul and I can do. Talk to a CEO, then 213 00:11:14,400 --> 00:11:16,880 Speaker 2: bring a Bloomberg Intelligence analyst who's been covering the company 214 00:11:16,920 --> 00:11:18,959 Speaker 2: for years on to then talk about it. This is 215 00:11:18,960 --> 00:11:21,319 Speaker 2: what we can offer you on the Bloomberg Intelligence Show 216 00:11:21,800 --> 00:11:26,080 Speaker 2: every day, Scott Levine, he covers oil services for Bloomberg Intelligence. 217 00:11:26,840 --> 00:11:28,560 Speaker 2: What did you make of the move today the numbers 218 00:11:28,600 --> 00:11:30,640 Speaker 2: and just talking with Lorenzo in the last ten minutes. 219 00:11:31,040 --> 00:11:33,800 Speaker 7: Yeah, now, I think so. The stock is down a 220 00:11:33,840 --> 00:11:38,800 Speaker 7: bit today, and we've seen Halliburton and SLB up on 221 00:11:38,880 --> 00:11:44,240 Speaker 7: earnings over the past week. Frankly, the guidance that Baker 222 00:11:44,320 --> 00:11:48,040 Speaker 7: gave today for mid teens EBIT dog growth is almost 223 00:11:48,040 --> 00:11:51,640 Speaker 7: identical to what SLB gave. I think the difference here 224 00:11:51,720 --> 00:11:56,920 Speaker 7: is probably the conservatism around the messaging number one, certainly 225 00:11:57,000 --> 00:12:00,840 Speaker 7: the mid load to mid single digital client that they're 226 00:12:00,840 --> 00:12:05,040 Speaker 7: calling for, spending growth in North America, high single digit 227 00:12:05,120 --> 00:12:08,360 Speaker 7: growth in international trails what we saw out of both 228 00:12:08,400 --> 00:12:12,760 Speaker 7: of those two companies. And then secondarily, you know, LNG, 229 00:12:12,880 --> 00:12:15,480 Speaker 7: as you mentioned, is a really big driver for Baker 230 00:12:15,559 --> 00:12:18,280 Speaker 7: that's unique to them, certainly much more so for them 231 00:12:18,800 --> 00:12:23,320 Speaker 7: as a producer of modules for LNG plants, which neither 232 00:12:23,440 --> 00:12:26,000 Speaker 7: SLB and Hell do and I would say that the 233 00:12:26,400 --> 00:12:29,839 Speaker 7: commentary there was maybe a little bit more downbeat as well. 234 00:12:29,880 --> 00:12:34,800 Speaker 7: They're looking for modest growth and FID capacity this year 235 00:12:35,760 --> 00:12:38,120 Speaker 7: they focused more on some of the businesses outside of that. 236 00:12:38,200 --> 00:12:41,360 Speaker 7: So I think it's probably more so the tone out 237 00:12:41,360 --> 00:12:45,360 Speaker 7: of Baker being a bit more sober than the guidance 238 00:12:45,440 --> 00:12:48,320 Speaker 7: per se, which was in line with consensus, and the 239 00:12:48,320 --> 00:12:51,360 Speaker 7: growth outlooks similar to what we saw at the piers there. 240 00:12:51,720 --> 00:12:57,000 Speaker 5: So I'm looking at the A n R function for Baker, Hughes, Halibert, 241 00:12:57,160 --> 00:12:57,840 Speaker 5: all the comps. 242 00:12:58,600 --> 00:13:03,160 Speaker 6: Street likes this stuff. They like these oil services companies. 243 00:13:03,440 --> 00:13:04,839 Speaker 6: What's the bull call on this? 244 00:13:04,920 --> 00:13:05,160 Speaker 5: Is this? 245 00:13:05,720 --> 00:13:07,120 Speaker 6: People? You're going to need oil forever? 246 00:13:07,960 --> 00:13:10,440 Speaker 7: Yeah, well they're you know, they are investing in the 247 00:13:10,480 --> 00:13:13,600 Speaker 7: future with the energy transition and the new energy business 248 00:13:13,679 --> 00:13:14,320 Speaker 7: as well. 249 00:13:14,880 --> 00:13:15,880 Speaker 4: But I think, you. 250 00:13:15,800 --> 00:13:18,320 Speaker 7: Know, so look two years ago twenty twenty two, this 251 00:13:18,440 --> 00:13:22,200 Speaker 7: group was outstanding, right, you know, the group was up 252 00:13:22,240 --> 00:13:25,040 Speaker 7: sixty percent, the market was down closed to twenty percent. 253 00:13:25,559 --> 00:13:29,680 Speaker 7: Last year the group performed okay in a much stronger market, 254 00:13:30,360 --> 00:13:33,800 Speaker 7: and the growth expectations for the group have moderated and 255 00:13:33,840 --> 00:13:38,360 Speaker 7: are moderating still in twenty twenty four. I think within 256 00:13:38,440 --> 00:13:44,040 Speaker 7: that context, Folks are still comfortable with large cap globally 257 00:13:44,200 --> 00:13:49,600 Speaker 7: diversified oil field service companies like Baker Hues, like SLB 258 00:13:49,840 --> 00:13:52,600 Speaker 7: to a lesser extent, Haliburton because they're more focused on 259 00:13:52,640 --> 00:13:56,840 Speaker 7: North America. But they're still comfortable with these companies. They're large, 260 00:13:56,880 --> 00:13:59,719 Speaker 7: they're global, the balance sheets are in good shape, that 261 00:13:59,760 --> 00:14:03,040 Speaker 7: we're turning more than fifty percent of the free cash 262 00:14:03,480 --> 00:14:07,240 Speaker 7: to investors, and so that appeals to investors that kind 263 00:14:07,280 --> 00:14:12,120 Speaker 7: of are attuned to this new energy environment where it's discipline, 264 00:14:12,160 --> 00:14:16,880 Speaker 7: growth and capital returns rather than the wildcatter mentality. So 265 00:14:16,920 --> 00:14:17,720 Speaker 7: I think it's what I like. 266 00:14:17,880 --> 00:14:18,840 Speaker 6: I like the wildcatter. 267 00:14:19,120 --> 00:14:19,680 Speaker 7: I like that. 268 00:14:20,280 --> 00:14:22,720 Speaker 4: Yeah, I called SLB slummers. I'm definitely gonna hear from 269 00:14:22,720 --> 00:14:24,040 Speaker 4: them later, but SLB. 270 00:14:24,800 --> 00:14:27,240 Speaker 2: So to that point, though, I feel like if you 271 00:14:27,240 --> 00:14:30,840 Speaker 2: talk to SLB, they'll talk a lot about digitalization and 272 00:14:30,880 --> 00:14:33,760 Speaker 2: all that kind of stuff, whereas Baker Hughes talks really 273 00:14:33,800 --> 00:14:37,920 Speaker 2: about LNG and they build these big terminals they help 274 00:14:38,000 --> 00:14:40,240 Speaker 2: to do that, like with the likes of Bechtel, for example, 275 00:14:41,640 --> 00:14:43,400 Speaker 2: do you feel like at some point these guys are 276 00:14:43,440 --> 00:14:45,520 Speaker 2: gonna be you can really bet on them different ways, 277 00:14:45,600 --> 00:14:47,600 Speaker 2: Like I'm gonna bet On Baker Hughes for LNG. I'm 278 00:14:47,600 --> 00:14:50,400 Speaker 2: gonna bet an SLB for an AI component and digitalization, 279 00:14:50,520 --> 00:14:51,480 Speaker 2: like can I do that yet? 280 00:14:52,480 --> 00:14:53,040 Speaker 6: You can? 281 00:14:53,320 --> 00:14:56,880 Speaker 7: And I think those are accurate depictions of the business. 282 00:14:57,080 --> 00:15:01,440 Speaker 7: But I wouldn't overstate their signs magnificance, like I feel 283 00:15:01,480 --> 00:15:06,080 Speaker 7: like Halliburton gets maligned a lot for the North American exposure. 284 00:15:05,600 --> 00:15:08,040 Speaker 4: And they're all some solid international. 285 00:15:07,720 --> 00:15:09,200 Speaker 7: It's over half their business. 286 00:15:09,280 --> 00:15:11,640 Speaker 4: I totally didn't know that until yeah no the other day. 287 00:15:11,800 --> 00:15:15,440 Speaker 7: But SLB is eighty percent international, and these guys are 288 00:15:15,720 --> 00:15:18,120 Speaker 7: closer to SLB than they are to HOL in terms 289 00:15:18,160 --> 00:15:22,560 Speaker 7: of that geographic split. So, you know, while the statement 290 00:15:22,640 --> 00:15:27,560 Speaker 7: is true, I think it's it's equal parts branding as 291 00:15:27,600 --> 00:15:30,320 Speaker 7: it is the business mix, and investors are naturally going 292 00:15:30,320 --> 00:15:32,840 Speaker 7: to look for ways to differentiate between the companies, and 293 00:15:32,880 --> 00:15:35,560 Speaker 7: so they'll, you know, they'll gravitate towards the differences more 294 00:15:35,560 --> 00:15:38,120 Speaker 7: than they will the similarities. But I think there are 295 00:15:38,120 --> 00:15:40,440 Speaker 7: a lot of similarities in the balance sheet. All the 296 00:15:40,480 --> 00:15:45,440 Speaker 7: companies are focused on global markets to more or lesser extent, 297 00:15:45,640 --> 00:15:50,560 Speaker 7: and so with with Baker, the LNG emphasis is a differentiator. 298 00:15:50,640 --> 00:15:54,200 Speaker 7: For sure, they have a much bigger equipment business than 299 00:15:54,200 --> 00:15:58,560 Speaker 7: either SLB or Halliburton does. And so it's natural folks 300 00:15:58,560 --> 00:16:02,160 Speaker 7: to focus on that specifically. And and some of the 301 00:16:02,200 --> 00:16:04,560 Speaker 7: weakness and demand out of Europe maybe is weighing on 302 00:16:04,600 --> 00:16:06,760 Speaker 7: that story a little bit, but it's still a very 303 00:16:06,800 --> 00:16:08,360 Speaker 7: strong business for them. 304 00:16:08,400 --> 00:16:11,080 Speaker 5: And if I were an investor, I would prefer my 305 00:16:11,240 --> 00:16:15,040 Speaker 5: oil field services and equipment companies to be more international 306 00:16:15,120 --> 00:16:17,200 Speaker 5: rather than less, given how tough it is to get 307 00:16:17,240 --> 00:16:19,080 Speaker 5: stuff done here in the US. 308 00:16:19,160 --> 00:16:19,560 Speaker 8: Is that right? 309 00:16:20,000 --> 00:16:20,200 Speaker 1: Yeah? 310 00:16:20,240 --> 00:16:23,920 Speaker 7: I think certainly there's much more visibility. 311 00:16:23,160 --> 00:16:25,800 Speaker 4: On it years ago statement. 312 00:16:25,960 --> 00:16:27,960 Speaker 7: Yeah, I guess it depends what time we're talking about. 313 00:16:28,040 --> 00:16:30,400 Speaker 7: And and and you know, look, shale had the year 314 00:16:30,440 --> 00:16:33,200 Speaker 7: that the energy you know, blew the lights out twenty 315 00:16:33,240 --> 00:16:37,320 Speaker 7: twenty two. Shale came back much stronger from COVID than 316 00:16:37,360 --> 00:16:40,600 Speaker 7: international markets did they get tough faster, but they got 317 00:16:40,680 --> 00:16:43,600 Speaker 7: crushed more significantly, And so that was a little bit 318 00:16:43,600 --> 00:16:48,760 Speaker 7: of a one year snap back and shale and and 319 00:16:48,840 --> 00:16:52,160 Speaker 7: so you know, we've now we're now past that. International 320 00:16:52,360 --> 00:16:56,880 Speaker 7: really reaccelerated and overtook shale toward the middle of last year, 321 00:16:56,920 --> 00:16:59,720 Speaker 7: and the expectation is that they'll they'll do so again 322 00:16:59,760 --> 00:17:01,400 Speaker 7: this year. So I still think there's much more of 323 00:17:01,440 --> 00:17:06,280 Speaker 7: a multi year growth visibility on international including. 324 00:17:05,840 --> 00:17:08,640 Speaker 2: Offshore energy is definitely going to be a talking point 325 00:17:08,680 --> 00:17:09,760 Speaker 2: in the presidential election. 326 00:17:10,440 --> 00:17:11,800 Speaker 4: The reality is a little different. 327 00:17:13,200 --> 00:17:15,920 Speaker 2: When we say, drill, baby, drill, We're gonna unleash American 328 00:17:16,160 --> 00:17:19,359 Speaker 2: energy independence. My question is is that not happening? And 329 00:17:19,440 --> 00:17:21,240 Speaker 2: then my other question is are we going to see 330 00:17:21,280 --> 00:17:26,440 Speaker 2: restrictions or any sort of slowing down of LNG exports. 331 00:17:26,560 --> 00:17:30,479 Speaker 7: Regarding the latter, I don't think so, no, and I 332 00:17:30,520 --> 00:17:32,359 Speaker 7: don't you know, yes, we've already heard some of the 333 00:17:32,440 --> 00:17:36,080 Speaker 7: drill baby drill mantra, and I think you know, they're. 334 00:17:35,960 --> 00:17:37,480 Speaker 4: Ten million barrels a day and good. 335 00:17:37,359 --> 00:17:40,440 Speaker 7: Enough that hearkens back to a different time. That's you know, 336 00:17:40,800 --> 00:17:45,800 Speaker 7: I think the intent there is is for for voters 337 00:17:45,840 --> 00:17:49,000 Speaker 7: to see that messaging, right. But the area where you 338 00:17:49,040 --> 00:17:52,239 Speaker 7: think you probably see the most difference, frankly, is in 339 00:17:52,320 --> 00:17:57,560 Speaker 7: the energy transition technologies. And you know, for example, we 340 00:17:57,880 --> 00:18:01,480 Speaker 7: you know, plug Power yesterday was a thirty percent as 341 00:18:01,480 --> 00:18:04,639 Speaker 7: a you know, based on enthusiasm for them getting a 342 00:18:04,680 --> 00:18:09,919 Speaker 7: loan from the Department of Energy, and so you know, 343 00:18:10,080 --> 00:18:14,680 Speaker 7: there's been some concern and pushback regarding the incentives around 344 00:18:14,760 --> 00:18:17,760 Speaker 7: hydrogen development, et cetera. And so if we were to 345 00:18:17,800 --> 00:18:22,400 Speaker 7: see a change anywhere, I think, you know, if indeed 346 00:18:22,400 --> 00:18:25,840 Speaker 7: we see a change in the Republican Party getting the 347 00:18:25,880 --> 00:18:29,359 Speaker 7: president presidency in twenty four, it'll be with regard to 348 00:18:29,400 --> 00:18:32,639 Speaker 7: the er the incentives for the energy transition, and maybe 349 00:18:32,760 --> 00:18:36,879 Speaker 7: that getting some throat cold water thrown on it. But 350 00:18:37,200 --> 00:18:40,120 Speaker 7: as far as US oil, you know, during the Biden administration, 351 00:18:40,240 --> 00:18:43,120 Speaker 7: production has grown fine. Despite some of the tough talk 352 00:18:43,200 --> 00:18:45,960 Speaker 7: you heard about cracking down on leases in the Gulf 353 00:18:46,000 --> 00:18:49,560 Speaker 7: of Mexico, offshore is done just fine, and I don't 354 00:18:49,560 --> 00:18:52,679 Speaker 7: think it's much of a difference factor in terms of 355 00:18:52,760 --> 00:18:54,120 Speaker 7: conventional oil and gas. 356 00:18:54,520 --> 00:18:57,119 Speaker 4: So great, Scott, thank you so much. I appreciate it. 357 00:18:57,160 --> 00:18:59,160 Speaker 2: Thanks for all answering all my emails with my chickens 358 00:18:59,560 --> 00:19:01,000 Speaker 2: running too earlier in the day. It Scott of being 359 00:19:01,000 --> 00:19:04,000 Speaker 2: a Bloomberg intelligency covers all the oil field services. 360 00:19:05,640 --> 00:19:09,520 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 361 00:19:09,600 --> 00:19:13,120 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 362 00:19:13,160 --> 00:19:15,960 Speaker 1: Auto with the Bloomberg Business app. You can also listen 363 00:19:16,040 --> 00:19:19,160 Speaker 1: live on Amazon Alexa from our flagship New York station 364 00:19:19,520 --> 00:19:22,560 Speaker 1: just say Alexa playing Bloomberg eleven thirty. 365 00:19:24,040 --> 00:19:30,840 Speaker 5: Annett Rathbund cio at CBIZ maybe SEBIZ Investment Advisory Services, Independence, Ohio. 366 00:19:30,880 --> 00:19:33,520 Speaker 5: That sounds like really right smack in the middle of Ahio. 367 00:19:33,520 --> 00:19:34,639 Speaker 5: If I had to guess, I don't know. 368 00:19:34,880 --> 00:19:36,960 Speaker 6: And thanks so much for joining us here. 369 00:19:37,600 --> 00:19:41,160 Speaker 5: Again, I thought we might take a meaningful pause here 370 00:19:41,160 --> 00:19:44,040 Speaker 5: in the first quarter with these markets, given the real 371 00:19:44,160 --> 00:19:47,600 Speaker 5: rip we had in November and December. What do you 372 00:19:47,600 --> 00:19:49,320 Speaker 5: make of this market here as we you know, kind 373 00:19:49,320 --> 00:19:51,640 Speaker 5: of get into the back half of January and twenty 374 00:19:51,640 --> 00:19:52,080 Speaker 5: twenty four. 375 00:19:53,359 --> 00:19:57,119 Speaker 8: Sure, thanks for having me. And actually, Independence, Ohio is 376 00:19:57,560 --> 00:20:03,480 Speaker 8: ten minutes south of cleveland'srection we go, so they should 377 00:20:03,480 --> 00:20:07,200 Speaker 8: really said Cleveland, Ohio. But anyway, you know, SMP, it's 378 00:20:07,640 --> 00:20:10,320 Speaker 8: kind of surprising after all the bearish talk last year 379 00:20:10,359 --> 00:20:13,320 Speaker 8: that we would be reaching record highs multiple days in 380 00:20:13,320 --> 00:20:15,120 Speaker 8: a row. It looks like today might be another one 381 00:20:15,160 --> 00:20:18,640 Speaker 8: of those days. But it's important to remember what's driving this, right. 382 00:20:18,640 --> 00:20:21,960 Speaker 8: I mean, everyone's talked about tech driving this magnificent seven 383 00:20:22,080 --> 00:20:25,480 Speaker 8: becoming even more magnificent, But you know, there may be 384 00:20:25,520 --> 00:20:29,000 Speaker 8: a reason why if you look at the underlying trends 385 00:20:29,040 --> 00:20:31,800 Speaker 8: in the SMP five hundred you do have tech leading, 386 00:20:32,320 --> 00:20:36,280 Speaker 8: but how many stocks and how many sectors or sub 387 00:20:36,320 --> 00:20:39,520 Speaker 8: industries are actually hitting those record highs along with the 388 00:20:39,640 --> 00:20:44,080 Speaker 8: SMP five hundred, the cyclical parts of the sectors that 389 00:20:44,119 --> 00:20:47,680 Speaker 8: represent the cyclical parts of the economy, they're not reaching 390 00:20:47,960 --> 00:20:51,000 Speaker 8: record highs, right, So this is a reflection of some 391 00:20:51,160 --> 00:20:54,280 Speaker 8: of the changes or the bifurcation that we see in 392 00:20:54,320 --> 00:20:57,960 Speaker 8: the economy being reflected here. So do I think that 393 00:20:58,280 --> 00:20:59,520 Speaker 8: tech can continue to run? 394 00:20:59,560 --> 00:20:59,760 Speaker 9: Well? 395 00:20:59,760 --> 00:21:02,919 Speaker 8: Look, I mean I think that tech is a part 396 00:21:03,080 --> 00:21:06,800 Speaker 8: of utilities. The pandemic has taught us that it is 397 00:21:06,840 --> 00:21:09,320 Speaker 8: a part of infrastructure. We can't live without it. It 398 00:21:09,359 --> 00:21:12,199 Speaker 8: is part of our daily lives. It's I mean, some 399 00:21:12,240 --> 00:21:14,520 Speaker 8: people might say Netflix is a part of their you know, 400 00:21:14,560 --> 00:21:18,880 Speaker 8: social infrastructure as we thought today. I don't think tech 401 00:21:18,960 --> 00:21:21,080 Speaker 8: is going away, and there's a reason why they're doing 402 00:21:21,160 --> 00:21:24,520 Speaker 8: so well during the earning season. So I don't know 403 00:21:24,720 --> 00:21:27,720 Speaker 8: if it can continue to run at such high valuations. 404 00:21:27,760 --> 00:21:30,240 Speaker 8: We might be expecting more than perfection from them for 405 00:21:30,280 --> 00:21:32,760 Speaker 8: the rest of the year. But certainly this isn't some 406 00:21:32,880 --> 00:21:34,399 Speaker 8: kind of a bubble. That's for me. 407 00:21:34,800 --> 00:21:37,280 Speaker 2: Well, So I love your idea that tech is safety 408 00:21:37,320 --> 00:21:39,879 Speaker 2: like it's utility. From that end, because I've wondered that 409 00:21:39,920 --> 00:21:42,840 Speaker 2: over the last six to eight months, and I do 410 00:21:42,920 --> 00:21:46,320 Speaker 2: wonder if earnings then matter. I know that's like sacrilege 411 00:21:46,320 --> 00:21:47,200 Speaker 2: and earning season. 412 00:21:47,240 --> 00:21:49,280 Speaker 4: But then if that's the case, just buy the dip. 413 00:21:49,320 --> 00:21:51,879 Speaker 2: And that's why basically the market just doesn't want to 414 00:21:51,920 --> 00:21:52,840 Speaker 2: go down. 415 00:21:54,280 --> 00:21:54,480 Speaker 7: Right. 416 00:21:54,600 --> 00:21:56,680 Speaker 8: And also, you know, if you think about how far 417 00:21:56,800 --> 00:21:59,080 Speaker 8: we've come with tech, I mean, they're taking up so 418 00:21:59,320 --> 00:22:01,880 Speaker 8: much of that. So if there is buying the dip, 419 00:22:01,880 --> 00:22:05,600 Speaker 8: it's actually also magnified. Now one risk is if we 420 00:22:05,680 --> 00:22:08,840 Speaker 8: do hit a soft landing patch where you know, we 421 00:22:08,880 --> 00:22:11,560 Speaker 8: may we're maybe pricing in a soft landing, but maybe 422 00:22:11,560 --> 00:22:14,760 Speaker 8: there is actually growth happening. If the FED lowers rates 423 00:22:15,200 --> 00:22:18,800 Speaker 8: maybe March, probably not, maybe in May, then we may 424 00:22:18,840 --> 00:22:23,560 Speaker 8: have recurrence of m and a activity some more exciting 425 00:22:23,640 --> 00:22:26,560 Speaker 8: opportunities that can be financed at a cheaper of cost. 426 00:22:26,880 --> 00:22:29,960 Speaker 8: If that happens, then then there is a risk that 427 00:22:30,080 --> 00:22:31,800 Speaker 8: some of the money that went into the by the 428 00:22:31,840 --> 00:22:33,960 Speaker 8: dip may be going back into some of the cyclical 429 00:22:33,960 --> 00:22:36,000 Speaker 8: sectors because they are so cheap. 430 00:22:36,840 --> 00:22:41,679 Speaker 5: Speaking of technology, meta platforms formerly known as Facebook, it 431 00:22:41,760 --> 00:22:45,200 Speaker 5: is up about one point eight percent today, all time high. 432 00:22:45,320 --> 00:22:47,560 Speaker 5: Now has a market cap once again of one point 433 00:22:47,680 --> 00:22:52,160 Speaker 5: zero one trillion dollars, So the tech play is still 434 00:22:52,160 --> 00:22:52,480 Speaker 5: in play. 435 00:22:52,520 --> 00:22:54,520 Speaker 6: Netflix up fourteen percent as well, not. 436 00:22:54,480 --> 00:22:57,400 Speaker 2: Even that, but asml yep a tech playover in Europe 437 00:22:57,560 --> 00:23:00,280 Speaker 2: is also set for a record close like it's sort 438 00:23:00,280 --> 00:23:03,119 Speaker 2: of encompassing many different types of tech it is. 439 00:23:03,200 --> 00:23:05,719 Speaker 6: It's kind of a cross the board. Hey, and what 440 00:23:05,760 --> 00:23:06,120 Speaker 6: do you think? 441 00:23:06,880 --> 00:23:09,480 Speaker 5: What do you think or what are you guys discounting 442 00:23:09,480 --> 00:23:12,600 Speaker 5: in terms of FED cuts in twenty twenty four. I mean, 443 00:23:12,640 --> 00:23:15,080 Speaker 5: the market is anywhere from five to six and a 444 00:23:15,080 --> 00:23:16,560 Speaker 5: lot of folks are saying, whoa, whoa, whoa, that's a 445 00:23:16,560 --> 00:23:17,560 Speaker 5: little too much. 446 00:23:17,640 --> 00:23:18,680 Speaker 6: How do you guys think about that? 447 00:23:19,960 --> 00:23:22,920 Speaker 8: Yeah? I do think that five to six is probably 448 00:23:23,000 --> 00:23:26,480 Speaker 8: too much. When it was really pricing in six, I thought, way, 449 00:23:26,680 --> 00:23:29,720 Speaker 8: maybe something might go wrong if we need six rate cuts. 450 00:23:30,160 --> 00:23:34,040 Speaker 8: But here's the thing. The FED officials have been slowly 451 00:23:34,160 --> 00:23:37,159 Speaker 8: walking things back right, so I feel like they're trying 452 00:23:37,200 --> 00:23:40,040 Speaker 8: to set us up or set the expectations so that 453 00:23:40,280 --> 00:23:43,679 Speaker 8: it wouldn't be such a surprise if they don't cut rates. 454 00:23:44,000 --> 00:23:46,560 Speaker 8: They don't wait until the second half of the year 455 00:23:46,880 --> 00:23:50,600 Speaker 8: to start cutting rates. So maybe in March, maybe we 456 00:23:50,600 --> 00:23:52,919 Speaker 8: don't get a rate cut, but maybe we get a 457 00:23:52,960 --> 00:23:55,720 Speaker 8: repositioning of the where the FED might be. I think 458 00:23:55,760 --> 00:23:58,399 Speaker 8: the biggest surprise is going to be if the FED 459 00:23:58,760 --> 00:24:02,520 Speaker 8: actually says we're revisiting the two percent target. Maybe it's 460 00:24:02,520 --> 00:24:04,240 Speaker 8: two and a half, maybe it's three. 461 00:24:04,400 --> 00:24:05,119 Speaker 4: Well, but that would be here. 462 00:24:05,119 --> 00:24:05,359 Speaker 6: Okay. 463 00:24:05,400 --> 00:24:06,880 Speaker 2: If they came out and said we want to revisit 464 00:24:07,000 --> 00:24:09,240 Speaker 2: and go to three, that would be huge. 465 00:24:10,080 --> 00:24:13,120 Speaker 8: That would be huge, right. But the thing is FED 466 00:24:13,440 --> 00:24:17,359 Speaker 8: super core, which is services minus food, energy and shelter. 467 00:24:18,200 --> 00:24:20,320 Speaker 8: Month of our month has been at zero point three percent. 468 00:24:20,359 --> 00:24:22,040 Speaker 8: That is not a two percent. So if the FED 469 00:24:22,080 --> 00:24:24,479 Speaker 8: wants to start and that's been there for a while, 470 00:24:24,680 --> 00:24:26,560 Speaker 8: So if the FED wants to start earlier than the 471 00:24:26,560 --> 00:24:28,199 Speaker 8: second half of the year, they're going to have to 472 00:24:28,240 --> 00:24:32,080 Speaker 8: come up with some reason. Because they've been telling us services, services, 473 00:24:32,080 --> 00:24:35,320 Speaker 8: service is super core. We're not seeing any easing there. 474 00:24:35,359 --> 00:24:38,600 Speaker 8: And actually the PMI today right that came out, service 475 00:24:38,720 --> 00:24:40,639 Speaker 8: is still very strong and that's a larger part of 476 00:24:40,640 --> 00:24:44,760 Speaker 8: the economy and inflation and services tends to be stickier. 477 00:24:45,200 --> 00:24:48,720 Speaker 8: So we're gonna have to see some concessions somewhere to 478 00:24:48,920 --> 00:24:52,800 Speaker 8: justify an early cut. But certainly the expectations have been 479 00:24:53,720 --> 00:24:55,120 Speaker 8: heading in that direction. 480 00:24:55,680 --> 00:24:57,720 Speaker 5: All right, and I thanks so much for joining us 481 00:24:57,720 --> 00:24:59,840 Speaker 5: and a Rath, but Cio, it's ce Busy Investment Advice 482 00:25:00,160 --> 00:25:02,080 Speaker 5: Services Independence Ohio. 483 00:25:03,000 --> 00:25:06,879 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 484 00:25:06,960 --> 00:25:09,680 Speaker 1: weekdays at ten am Eastern on Apple card Playing and 485 00:25:09,800 --> 00:25:12,679 Speaker 1: broud Otto with the Bloomberg Business App. Listen on demand 486 00:25:12,720 --> 00:25:17,040 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 487 00:25:17,960 --> 00:25:21,280 Speaker 5: Wait, I'm looking at Netflix Olex really good quarter in 488 00:25:21,400 --> 00:25:23,800 Speaker 5: terms of subscribers last night. They're also talking up a 489 00:25:23,800 --> 00:25:26,639 Speaker 5: big advertising game over the next couple of years. Stocks 490 00:25:26,720 --> 00:25:30,320 Speaker 5: up thirteen percent at a fifty two week high. Here, 491 00:25:30,359 --> 00:25:32,080 Speaker 5: it's not at its all time high, but it's very 492 00:25:32,080 --> 00:25:35,399 Speaker 5: close over the last I guess twelve months is a 493 00:25:35,560 --> 00:25:39,520 Speaker 5: fifty three percent, So nice move for the folks at Netflixt. 494 00:25:39,640 --> 00:25:42,720 Speaker 5: Check in with somebody who knows this digital advertising digital 495 00:25:42,760 --> 00:25:45,800 Speaker 5: media business really really well. Front of the show, Mark Douglas. 496 00:25:45,840 --> 00:25:48,960 Speaker 5: He's a founder and CEO of Mountain. He's zooming in 497 00:25:49,040 --> 00:25:53,320 Speaker 5: from Miami. I mean, nobody zooms in from like Cleveland. 498 00:25:53,680 --> 00:25:57,560 Speaker 5: In January, they zoom in from Miami. So we literally 499 00:25:57,600 --> 00:25:59,959 Speaker 5: just had something from Cleveland. But these these you know, 500 00:26:00,080 --> 00:26:03,400 Speaker 5: these media types. Mark, thanks so much for joining us here. Boy, 501 00:26:03,480 --> 00:26:06,040 Speaker 5: let's just start with Netflix. A couple of things. One 502 00:26:06,400 --> 00:26:08,119 Speaker 5: love to get your thoughts about kind of what the 503 00:26:08,200 --> 00:26:10,679 Speaker 5: results from last night, and then two love to get 504 00:26:10,720 --> 00:26:12,640 Speaker 5: your thoughts on getting into wrestling. 505 00:26:14,680 --> 00:26:17,199 Speaker 9: Well, let's start with the wrestling. I think that's the 506 00:26:18,520 --> 00:26:21,560 Speaker 9: that's the most interesting part of it. You know, the 507 00:26:21,600 --> 00:26:25,320 Speaker 9: thing about Netflix is with every other streaming network, you 508 00:26:25,440 --> 00:26:28,240 Speaker 9: have to have a show you want to watch to 509 00:26:28,320 --> 00:26:31,960 Speaker 9: go there. With Netflix, you just go because it's Netflix. 510 00:26:32,119 --> 00:26:35,240 Speaker 9: And then they make the shows popular just because they 511 00:26:35,240 --> 00:26:38,359 Speaker 9: have this massive audience. And they essentially did that for 512 00:26:38,359 --> 00:26:41,440 Speaker 9: Formula one, and obviously Formula one was already a big 513 00:26:41,480 --> 00:26:44,840 Speaker 9: popular sport, but they made it, you know much really 514 00:26:44,880 --> 00:26:48,640 Speaker 9: expand the audience and increase the value of Formula one. 515 00:26:48,720 --> 00:26:50,640 Speaker 9: I think they're going to do the exact same thing 516 00:26:50,680 --> 00:26:53,600 Speaker 9: for WWE. Like, what was the likelihood I was going 517 00:26:53,680 --> 00:26:58,120 Speaker 9: to watch a WWE event, you know, yesterday? Very small likelihood? 518 00:26:58,200 --> 00:26:59,439 Speaker 9: Now very large. 519 00:26:59,560 --> 00:27:03,200 Speaker 2: I agree with you, Like I don't necessarily want to 520 00:27:03,200 --> 00:27:05,520 Speaker 2: watch WWE, but like if they did a documentary of it, 521 00:27:05,600 --> 00:27:08,199 Speaker 2: one hundred percent I'd be in on that. Are you 522 00:27:08,240 --> 00:27:10,600 Speaker 2: worried about content spend, like is all that just going 523 00:27:10,680 --> 00:27:13,160 Speaker 2: to cost too much for what Netflix is promising? 524 00:27:13,200 --> 00:27:13,560 Speaker 4: The street? 525 00:27:14,880 --> 00:27:17,720 Speaker 9: Well, I mean they that used to be a huge 526 00:27:17,720 --> 00:27:20,520 Speaker 9: problem with Netflix, meaning you know, on Wall Street, people 527 00:27:20,560 --> 00:27:23,080 Speaker 9: are like, this company will never make money, and then 528 00:27:23,119 --> 00:27:26,040 Speaker 9: they focused on profitability and they prove them wrong. And 529 00:27:26,080 --> 00:27:28,800 Speaker 9: so I think they have that pretty much under control. 530 00:27:28,920 --> 00:27:31,800 Speaker 9: And then obviously the app business is just pure profit, 531 00:27:32,000 --> 00:27:35,040 Speaker 9: like every dollar revenue they bring in there, you know, 532 00:27:35,200 --> 00:27:37,680 Speaker 9: net of like you know, paying their sales reps commission 533 00:27:38,160 --> 00:27:40,920 Speaker 9: is just more profit than Netflix. So I think they 534 00:27:40,960 --> 00:27:45,040 Speaker 9: have that formula very tight, and it's reflected in how 535 00:27:45,040 --> 00:27:47,359 Speaker 9: the stock market is responded, you know, the value of 536 00:27:47,359 --> 00:27:48,240 Speaker 9: the company right now. 537 00:27:48,800 --> 00:27:51,520 Speaker 5: So you know, Mark, let's just step back a little 538 00:27:51,520 --> 00:27:54,359 Speaker 5: bit because one of the growth drivers for Netflix, in 539 00:27:54,359 --> 00:27:58,960 Speaker 5: addition to wrestling, I guess, is advertising. Now, this is 540 00:27:59,040 --> 00:28:03,399 Speaker 5: something a business that but Netflix has said repeatedly and 541 00:28:03,480 --> 00:28:06,040 Speaker 5: pointedly that they're not going to get into the advertising business. Well, 542 00:28:06,040 --> 00:28:08,679 Speaker 5: now they're into the advertising business. Can you And this 543 00:28:08,800 --> 00:28:11,080 Speaker 5: is your Balily book, this is where you guys operated 544 00:28:11,160 --> 00:28:14,960 Speaker 5: Mountain and how do you think they're gonna do here? 545 00:28:15,200 --> 00:28:17,000 Speaker 5: And then what's that mean for the industry? 546 00:28:18,119 --> 00:28:21,679 Speaker 9: I think they'll do well in the long term, but 547 00:28:22,040 --> 00:28:25,560 Speaker 9: I think in the short term they're struggling, still struggling 548 00:28:25,600 --> 00:28:28,119 Speaker 9: a bit there. And the reason why is it coming 549 00:28:28,160 --> 00:28:32,640 Speaker 9: into the television advertising market with a very traditional kind 550 00:28:32,720 --> 00:28:36,680 Speaker 9: of revenue model like that like upfront and go, let's 551 00:28:36,720 --> 00:28:41,000 Speaker 9: sell only to the thousand largest advertisers. Meanwhile, you have 552 00:28:41,240 --> 00:28:45,080 Speaker 9: companies that are treating advertising like a digital advertising market, 553 00:28:45,120 --> 00:28:49,120 Speaker 9: and that's my own company, Mountain, that's Amazon in particular. 554 00:28:49,600 --> 00:28:53,200 Speaker 9: And you see Amazon's ad business for TV. They had 555 00:28:53,200 --> 00:28:56,680 Speaker 9: the confidence that next week they're just flipping their entire 556 00:28:56,720 --> 00:29:00,440 Speaker 9: customer base over to an ad supporting model. That's because 557 00:29:00,440 --> 00:29:03,160 Speaker 9: they have tremendous confidence on the ability to monetize it. 558 00:29:03,240 --> 00:29:06,120 Speaker 9: And the reason for that is they have all of 559 00:29:06,120 --> 00:29:08,880 Speaker 9: these digital app buyers on their search business on the 560 00:29:08,920 --> 00:29:12,400 Speaker 9: Amazon dot Com website. So I think Netflix to really 561 00:29:12,440 --> 00:29:15,680 Speaker 9: grow the app business, they have to stop operating in 562 00:29:15,680 --> 00:29:18,480 Speaker 9: the past on the business, you know, using an old 563 00:29:18,960 --> 00:29:22,200 Speaker 9: kind of traditional media business model. They have to enter 564 00:29:22,240 --> 00:29:24,640 Speaker 9: the future. That's what Amazon's doing, That's what Mountain has 565 00:29:24,720 --> 00:29:26,960 Speaker 9: led the way up. And if they do that, they're 566 00:29:26,960 --> 00:29:28,680 Speaker 9: going to be very successful. As a matter fact, I 567 00:29:28,720 --> 00:29:31,320 Speaker 9: think if they do that, the stock the company can 568 00:29:31,360 --> 00:29:34,360 Speaker 9: double in size. I think Netflix is almost a start 569 00:29:34,400 --> 00:29:36,480 Speaker 9: when you look at you know, in terms of like 570 00:29:36,520 --> 00:29:39,040 Speaker 9: they Jef's IPO, when you look at the potential on 571 00:29:39,080 --> 00:29:41,040 Speaker 9: the app business if they if they do it right. 572 00:29:41,440 --> 00:29:44,520 Speaker 2: So walk me through the amount of Okay, so if 573 00:29:44,880 --> 00:29:47,240 Speaker 2: if I'm going to advertise on CBS and I'm going 574 00:29:47,280 --> 00:29:50,280 Speaker 2: to advertise on Netflix, how much am my pan for each? Like, 575 00:29:50,320 --> 00:29:53,240 Speaker 2: how is that calculus going to change? And also would 576 00:29:53,280 --> 00:29:54,160 Speaker 2: I put ads on both? 577 00:29:55,520 --> 00:29:55,760 Speaker 1: Yeah? 578 00:29:55,880 --> 00:29:59,480 Speaker 9: And so as a traditional we'll call it brand media buyer, 579 00:30:00,560 --> 00:30:03,440 Speaker 9: you will definitely you'll just go where the audience that 580 00:30:03,520 --> 00:30:06,080 Speaker 9: you're trying the reaches, you know, and and in traditional 581 00:30:06,160 --> 00:30:10,160 Speaker 9: media it's age and it's it's very traditionally targeted, and 582 00:30:10,320 --> 00:30:12,600 Speaker 9: you're happy to do both. The problem that you're kind 583 00:30:12,640 --> 00:30:16,120 Speaker 9: of alluding to is the brand advertising market is not 584 00:30:16,200 --> 00:30:18,240 Speaker 9: growing grows half a percent a year, So if you 585 00:30:18,520 --> 00:30:21,120 Speaker 9: enter that segment of the market, you are in a 586 00:30:21,200 --> 00:30:24,240 Speaker 9: market share war from day one. And you're seeing that 587 00:30:24,320 --> 00:30:28,000 Speaker 9: in Netflix growth rate on advertising it's growing relatively slow. 588 00:30:28,480 --> 00:30:30,920 Speaker 9: But if you go over the digital market where Google 589 00:30:31,040 --> 00:30:35,400 Speaker 9: and Meta and Amazon Mound operate, you know, there it's 590 00:30:35,560 --> 00:30:38,480 Speaker 9: it's like millions of e commerce companies who are eager 591 00:30:38,520 --> 00:30:40,920 Speaker 9: to be on Netflix, who are eager to be on 592 00:30:40,960 --> 00:30:43,960 Speaker 9: every TV network, and there's a lot more growth there. 593 00:30:44,280 --> 00:30:47,720 Speaker 9: So Netflix, Amazon's doing it right. I think my general 594 00:30:47,760 --> 00:30:50,720 Speaker 9: thing is Netflix will have a good year on advertising. 595 00:30:51,040 --> 00:30:54,000 Speaker 9: Amazon will have a great year, and I think eventually 596 00:30:54,200 --> 00:30:57,440 Speaker 9: Netflix will see, you know, see where the real growth 597 00:30:57,520 --> 00:31:01,240 Speaker 9: is and and pivot over to there. And that that's 598 00:31:01,240 --> 00:31:01,800 Speaker 9: how it works. 599 00:31:01,960 --> 00:31:02,200 Speaker 6: Mark. 600 00:31:02,280 --> 00:31:04,560 Speaker 5: I mean, if if you know anybody who's looked at 601 00:31:04,600 --> 00:31:07,040 Speaker 5: broadcaster cable television over the last several years, in terms 602 00:31:07,040 --> 00:31:08,240 Speaker 5: of the advertising. 603 00:31:07,760 --> 00:31:09,840 Speaker 6: It's pretty much all healthcare. 604 00:31:10,320 --> 00:31:12,720 Speaker 5: You know, it's basically letting you know of all the 605 00:31:12,760 --> 00:31:15,640 Speaker 5: conditions you're probably suffering from or could be suffering from. 606 00:31:15,680 --> 00:31:18,240 Speaker 5: And here's the little acronym we're going to put to it, 607 00:31:18,280 --> 00:31:20,320 Speaker 5: so you can remember the name. You can go ask 608 00:31:20,400 --> 00:31:25,520 Speaker 5: your doctor for this or that drug or you know, procedure. Yeah, 609 00:31:25,760 --> 00:31:28,520 Speaker 5: I mean there's no Yeah, I don't see general motors. 610 00:31:28,520 --> 00:31:30,360 Speaker 5: I don't see Coca cola anymore. I don't you know 611 00:31:30,440 --> 00:31:32,920 Speaker 5: all that kind of stuff. What is the future of 612 00:31:33,040 --> 00:31:35,520 Speaker 5: advertising for broadcasting cable television? 613 00:31:35,680 --> 00:31:40,360 Speaker 9: Is there one be well that that's what we essentially, 614 00:31:40,360 --> 00:31:43,080 Speaker 9: that's what we've been talking about. Now, compare that to 615 00:31:43,560 --> 00:31:46,840 Speaker 9: looking at ads on meta you know, on Instagram, it's 616 00:31:46,880 --> 00:31:50,040 Speaker 9: all e commerce, it's all products you may be interested in, 617 00:31:50,560 --> 00:31:53,840 Speaker 9: and you know, disruptive companies and things like that. So 618 00:31:54,320 --> 00:31:57,240 Speaker 9: the TV industry is in a transition. You know, NBC 619 00:31:57,560 --> 00:32:01,320 Speaker 9: made an interesting announcement at cs cs IS at the 620 00:32:01,320 --> 00:32:03,800 Speaker 9: start of the year in Vegas. It's a big, big 621 00:32:03,840 --> 00:32:07,360 Speaker 9: part of the show is advertising is all these big advertising companies, 622 00:32:07,440 --> 00:32:09,800 Speaker 9: and they announced that sixty percent of the ads that 623 00:32:10,000 --> 00:32:14,160 Speaker 9: run on NBC linear, you know, cable and streaming, they 624 00:32:14,200 --> 00:32:18,240 Speaker 9: expect to be targeted against people's interests and not just 625 00:32:18,320 --> 00:32:21,200 Speaker 9: their age. And that's a big, big difference because now 626 00:32:21,240 --> 00:32:24,920 Speaker 9: that starts to enable e commerce companies and other companies 627 00:32:25,160 --> 00:32:28,440 Speaker 9: to treat television like they're treating Instagram. And so that's 628 00:32:28,440 --> 00:32:32,840 Speaker 9: a transition from traditional media to digital media for television 629 00:32:33,000 --> 00:32:36,480 Speaker 9: and that that that that is happening, and you know, 630 00:32:36,880 --> 00:32:40,600 Speaker 9: going back to Netflix. Netflix kind of sees easy money 631 00:32:40,640 --> 00:32:42,840 Speaker 9: in the old way, but I think the long term 632 00:32:42,880 --> 00:32:45,280 Speaker 9: they have to be part of that. And the answer 633 00:32:45,360 --> 00:32:48,040 Speaker 9: your question is all of those TV networks are going 634 00:32:48,120 --> 00:32:50,200 Speaker 9: to adapt, They're going to go where all the emerging 635 00:32:50,200 --> 00:32:52,440 Speaker 9: companies are with the emerging ad dollars. 636 00:32:52,880 --> 00:32:56,160 Speaker 2: So anecdotally, we cut the core when my daughter was 637 00:32:56,160 --> 00:32:58,760 Speaker 2: really little, right, but we're watching Hulu and we have 638 00:32:59,160 --> 00:33:01,760 Speaker 2: as on Hulu, and she literally is like what is this? 639 00:33:02,720 --> 00:33:04,480 Speaker 4: Like why am I w And she's like what's with 640 00:33:04,520 --> 00:33:07,200 Speaker 4: all the car commercials? She's like who's buying all these cars? 641 00:33:07,280 --> 00:33:09,440 Speaker 4: Like what do I care about that? Like she literally 642 00:33:09,440 --> 00:33:11,920 Speaker 4: like blew her little brain about, like what actually was happening? 643 00:33:11,960 --> 00:33:14,080 Speaker 2: I thod that that was quite funny, But I think 644 00:33:14,080 --> 00:33:16,920 Speaker 2: it's a deeper point to what you're saying on like 645 00:33:16,960 --> 00:33:19,880 Speaker 2: how to reach younger people who have like no concept 646 00:33:19,960 --> 00:33:22,680 Speaker 2: of traditional television and what advertising actually is. 647 00:33:23,720 --> 00:33:25,960 Speaker 9: Yeah, I mean it's the death of Another way to 648 00:33:26,040 --> 00:33:29,520 Speaker 9: stated is we're going to watch the death of broadcasting 649 00:33:29,920 --> 00:33:33,240 Speaker 9: and broadcast ads and see the you know, the growth 650 00:33:33,680 --> 00:33:36,640 Speaker 9: of you know, match dads, so to say, ads that 651 00:33:36,720 --> 00:33:40,200 Speaker 9: are really tuned to your household and to your daughter's 652 00:33:40,240 --> 00:33:43,280 Speaker 9: interests and your interests and things like that, and all 653 00:33:43,320 --> 00:33:47,360 Speaker 9: the advertisers want the ladder and they're slowly amandoning forma. 654 00:33:47,480 --> 00:33:50,440 Speaker 9: They're moving away from the broadcasting and moving more in 655 00:33:50,520 --> 00:33:53,120 Speaker 9: the digitally targeted television advertising. 656 00:33:53,600 --> 00:33:55,680 Speaker 5: All right, Mark, Always good to touch base with you. 657 00:33:55,760 --> 00:33:58,440 Speaker 5: Mark dougas founder and CEO of Mountain. 658 00:34:00,080 --> 00:34:04,240 Speaker 1: Listening to the Bloomberg Intelligence Podcast. Catch us live weekdays 659 00:34:04,240 --> 00:34:07,520 Speaker 1: at ten am Eastern on applecar Play and Android Auto 660 00:34:07,640 --> 00:34:10,440 Speaker 1: with the Bloomberg Business App. You can also listen live 661 00:34:10,520 --> 00:34:13,680 Speaker 1: on Amazon Alexa from our flagship New York station, Just 662 00:34:13,760 --> 00:34:17,120 Speaker 1: Say Alexa playing Bloomberg eleven thirty. 663 00:34:18,040 --> 00:34:21,000 Speaker 5: Andrew Auerbach she joins us. She's head of private investments 664 00:34:21,040 --> 00:34:22,400 Speaker 5: at Cambridge Associates. 665 00:34:22,440 --> 00:34:25,520 Speaker 6: I guess we're a little located at Boston. There you go, Andrew, 666 00:34:25,560 --> 00:34:26,719 Speaker 6: Thanks so much for joining us here. 667 00:34:26,719 --> 00:34:28,600 Speaker 5: I love you to just kind of give us a 668 00:34:28,680 --> 00:34:32,759 Speaker 5: lay of the land about the private equity venture capital 669 00:34:33,000 --> 00:34:37,839 Speaker 5: marketplace here today. Is the money still flowing there, our 670 00:34:37,920 --> 00:34:39,480 Speaker 5: deals still getting done. 671 00:34:39,920 --> 00:34:41,520 Speaker 6: What's the lay of the land look like. 672 00:34:42,760 --> 00:34:46,880 Speaker 10: Yeah, it's great to be here again and check in 673 00:34:46,920 --> 00:34:49,200 Speaker 10: with you all on the state of the private markets today. 674 00:34:49,360 --> 00:34:51,759 Speaker 10: And the lay of the land is wintry and a 675 00:34:51,840 --> 00:34:52,799 Speaker 10: little baron. 676 00:34:52,760 --> 00:34:53,279 Speaker 4: If I might. 677 00:34:54,920 --> 00:34:59,399 Speaker 10: Transaction volumes have been pretty low for most of twenty three. 678 00:34:59,480 --> 00:35:01,320 Speaker 10: We're hoping it picks up a little. 679 00:35:01,120 --> 00:35:03,439 Speaker 4: Bit more in twenty four. But to just give you. 680 00:35:03,360 --> 00:35:07,440 Speaker 10: One one indicator of how tumbleweeds are rolling through the 681 00:35:07,480 --> 00:35:11,359 Speaker 10: town square. The rate of distributions back to limited partners, right, 682 00:35:11,360 --> 00:35:14,799 Speaker 10: they're the investors in private investment funds, private credit funds, 683 00:35:14,840 --> 00:35:18,600 Speaker 10: what have you. Distributions back to LPs are at their 684 00:35:18,640 --> 00:35:22,920 Speaker 10: lowest point in about twenty five years. That's relative to 685 00:35:22,960 --> 00:35:26,000 Speaker 10: the market size. The market's grown, but that is that's 686 00:35:26,000 --> 00:35:29,319 Speaker 10: a heavy statistic in a January, you know. And so 687 00:35:30,320 --> 00:35:32,320 Speaker 10: there's more work to be done here, and the gps 688 00:35:32,480 --> 00:35:33,879 Speaker 10: are getting at that work well. 689 00:35:33,920 --> 00:35:37,200 Speaker 5: I mean, is it primarily been driven by this interest 690 00:35:37,280 --> 00:35:39,520 Speaker 5: rate environment we've been in here? It's tough to get 691 00:35:39,560 --> 00:35:42,719 Speaker 5: deals done, to get liquidity for the LPs if I'm 692 00:35:42,760 --> 00:35:44,040 Speaker 5: sitting on an investment here. 693 00:35:44,080 --> 00:35:47,080 Speaker 6: Is it primarily driven by the interest rate environment? 694 00:35:47,200 --> 00:35:52,080 Speaker 10: Exactly? Exactly? With the with the zero interest rate environment 695 00:35:52,160 --> 00:35:57,920 Speaker 10: exiting stage left and interest costs doubling overnight, it's definitely 696 00:35:57,920 --> 00:36:02,880 Speaker 10: created a throttle back in GP's ability to work with 697 00:36:02,920 --> 00:36:07,360 Speaker 10: our companies to generate attractive exit opportunities. And then buyers 698 00:36:07,480 --> 00:36:09,720 Speaker 10: like there's a big there's a big bid ask gap 699 00:36:09,800 --> 00:36:12,120 Speaker 10: right now and you're observing this all over the place, 700 00:36:12,440 --> 00:36:15,520 Speaker 10: as are we. Because the next buyer can't borrow the 701 00:36:15,520 --> 00:36:17,880 Speaker 10: same amount of debt to buy the company, and so 702 00:36:17,960 --> 00:36:20,399 Speaker 10: they won't and they won't pay for that. They won't 703 00:36:20,520 --> 00:36:23,440 Speaker 10: they won't pay as much either, And so we're waiting 704 00:36:23,520 --> 00:36:27,840 Speaker 10: for a bit of a capitulation moment maybe to unlock 705 00:36:27,880 --> 00:36:29,920 Speaker 10: a little bit of of the pent up demand for 706 00:36:30,000 --> 00:36:32,440 Speaker 10: exits right now that the LPs are waiting for. 707 00:36:32,680 --> 00:36:35,000 Speaker 2: I mean, Andrew, I think the market would love that. 708 00:36:35,600 --> 00:36:39,040 Speaker 2: In the meantime, it does feel though there's been lots 709 00:36:39,040 --> 00:36:41,480 Speaker 2: of different ways to access money to give it back 710 00:36:41,520 --> 00:36:43,680 Speaker 2: to LPs, and LP's going to private equity be and like, 711 00:36:43,680 --> 00:36:45,200 Speaker 2: I'm not going to invest more money until you giving 712 00:36:45,200 --> 00:36:48,040 Speaker 2: my old money back and then leverage upon leverage upon leverage. 713 00:36:48,800 --> 00:36:52,400 Speaker 2: Is there trouble brewing here? Like, what's an unintended consequence? 714 00:36:53,480 --> 00:36:57,520 Speaker 10: Yeah? So you're absolutely right, and so transaction volumes are down. 715 00:36:57,719 --> 00:36:59,520 Speaker 4: Fundraising for twenty three. 716 00:37:00,040 --> 00:37:01,960 Speaker 10: I think you'd have to go back about eight years 717 00:37:02,000 --> 00:37:06,120 Speaker 10: to find another year that matched in terms of volumes 718 00:37:06,120 --> 00:37:07,959 Speaker 10: are down, Right, We have to look back eight years 719 00:37:07,960 --> 00:37:10,680 Speaker 10: to find another year that had this much capital coming in. 720 00:37:11,040 --> 00:37:14,360 Speaker 10: And you're right about the leverage on leverage, Alex's the 721 00:37:14,480 --> 00:37:17,319 Speaker 10: risk here is that gps are feeling the pressure and 722 00:37:17,360 --> 00:37:20,680 Speaker 10: they're looking for ways to deliver some kind of distributions 723 00:37:20,680 --> 00:37:24,680 Speaker 10: to LPs, and there's certain things they're doing. I'll do 724 00:37:24,719 --> 00:37:27,080 Speaker 10: anything for a distribution, but I won't do that is 725 00:37:27,080 --> 00:37:30,480 Speaker 10: sort of the environment we're in. LPs aren't liking some 726 00:37:30,560 --> 00:37:34,399 Speaker 10: of the financial engineering efforts that are going on, navloans 727 00:37:34,440 --> 00:37:37,080 Speaker 10: being one of the hotter topics, if you will, in 728 00:37:37,080 --> 00:37:39,120 Speaker 10: the LP and GP community right now. 729 00:37:39,360 --> 00:37:41,680 Speaker 5: All right, talk to us about what has been one 730 00:37:41,680 --> 00:37:43,880 Speaker 5: of the most amazing growth stories I've seen in financial 731 00:37:43,880 --> 00:37:45,839 Speaker 5: services over the last a dozen years, which has been 732 00:37:45,880 --> 00:37:51,240 Speaker 5: private credit. What's your thoughts on that marketplace, that asset 733 00:37:51,320 --> 00:37:54,359 Speaker 5: class and kind of the deals that are getting done there. 734 00:37:55,680 --> 00:37:58,640 Speaker 10: Yeah, I mean, so as we said, you know, we 735 00:37:58,640 --> 00:38:02,400 Speaker 10: were just talking about going from fourth to first gear 736 00:38:02,520 --> 00:38:05,480 Speaker 10: in the private equity markets. Because of interest rates increasing 737 00:38:05,840 --> 00:38:09,440 Speaker 10: as significantly as they have, it's really created a moment 738 00:38:09,480 --> 00:38:12,520 Speaker 10: for private credit, if you will, to shine, and in 739 00:38:12,560 --> 00:38:16,439 Speaker 10: that sense, the returns available for private credit investors because 740 00:38:16,480 --> 00:38:20,120 Speaker 10: interest rates are now what they are, because the transaction 741 00:38:20,239 --> 00:38:23,279 Speaker 10: environment is slower, private credit may be able to put 742 00:38:23,280 --> 00:38:25,640 Speaker 10: more bells and whistles in the forms of covenant actual 743 00:38:25,680 --> 00:38:30,160 Speaker 10: covenants on certain tiers of the market, and so things 744 00:38:30,200 --> 00:38:33,560 Speaker 10: are looking things are looking up from a private credit perspective, 745 00:38:33,840 --> 00:38:36,200 Speaker 10: while interest rates are staying at the levels that they are, 746 00:38:36,280 --> 00:38:39,760 Speaker 10: and in some ways, think about mezzanine think about private 747 00:38:39,960 --> 00:38:43,680 Speaker 10: middle return private credit strategies, they could deliver a thirteen 748 00:38:43,800 --> 00:38:46,719 Speaker 10: percent return to an investor. It's kind of knocking on 749 00:38:46,800 --> 00:38:51,080 Speaker 10: the door of certain private equity firms that might not 750 00:38:51,160 --> 00:38:54,560 Speaker 10: be measuring up right now. So there's we're watching some 751 00:38:54,600 --> 00:38:57,240 Speaker 10: stuff unfold this year that's going to be very interesting. 752 00:38:57,800 --> 00:39:00,239 Speaker 2: How much what do you like right now? If I 753 00:39:00,239 --> 00:39:01,920 Speaker 2: was gonna put money to work? How much should I 754 00:39:01,960 --> 00:39:02,719 Speaker 2: be putting into work? 755 00:39:02,760 --> 00:39:03,560 Speaker 4: And where. 756 00:39:06,320 --> 00:39:09,040 Speaker 10: Wonderful questions And actually there's a lot of tech. There's 757 00:39:09,080 --> 00:39:12,480 Speaker 10: a lot of discussion around this right because the public markets, 758 00:39:12,480 --> 00:39:14,719 Speaker 10: as we know, have recovered quite strongly, and you've been 759 00:39:14,760 --> 00:39:17,960 Speaker 10: talking about that, and where those pockets of opportunity are 760 00:39:18,280 --> 00:39:21,879 Speaker 10: private markets take anywhere from let's argue five, seven, ten 761 00:39:21,960 --> 00:39:25,880 Speaker 10: years to really watch those absolute returns roll in. And 762 00:39:25,960 --> 00:39:28,600 Speaker 10: so part of the debate right now, alex is should 763 00:39:28,600 --> 00:39:30,760 Speaker 10: we keep it in publics or should we move to privates? 764 00:39:30,840 --> 00:39:33,719 Speaker 10: Now I live in private, I live in privates, and 765 00:39:33,800 --> 00:39:37,400 Speaker 10: so within privates, depending on what you're looking for. That 766 00:39:37,520 --> 00:39:40,680 Speaker 10: private credit that Paul's talking about very interesting. If you 767 00:39:40,760 --> 00:39:44,319 Speaker 10: have a fixed income allocation you'd like to offset with 768 00:39:44,400 --> 00:39:46,640 Speaker 10: a little bit more of a return in the private 769 00:39:46,680 --> 00:39:49,400 Speaker 10: credit realm, I'll give you some. I'll give you an 770 00:39:49,400 --> 00:39:53,799 Speaker 10: interesting a spec from private equity. You know, venture valuations 771 00:39:53,800 --> 00:39:57,600 Speaker 10: have been coming down significantly and we're watching the returns 772 00:39:57,680 --> 00:40:00,360 Speaker 10: come down and it's definitely a lot of capitals cleared 773 00:40:00,360 --> 00:40:04,160 Speaker 10: out of that particular market. And as we talk about 774 00:40:04,200 --> 00:40:07,160 Speaker 10: it here at Cambridge Associates, venture is looking very interesting 775 00:40:07,360 --> 00:40:11,480 Speaker 10: right now, precisely because capital has been coming off to 776 00:40:11,480 --> 00:40:12,160 Speaker 10: the sidelines. 777 00:40:12,239 --> 00:40:15,120 Speaker 6: All right, Andrew, always a fascinating discussion. You always appreciate 778 00:40:15,120 --> 00:40:16,000 Speaker 6: getting some of your time. 779 00:40:16,280 --> 00:40:20,560 Speaker 5: Andrew Hourback, Head of Private Investments at Cambridge Associates. 780 00:40:20,960 --> 00:40:25,480 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 781 00:40:25,680 --> 00:40:28,600 Speaker 1: and anywhere else you will get your podcasts. Listen live 782 00:40:28,680 --> 00:40:32,280 Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot Com, 783 00:40:32,400 --> 00:40:35,800 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 784 00:40:35,920 --> 00:40:39,040 Speaker 1: You can also watch us live every weekday on YouTube 785 00:40:39,120 --> 00:40:40,960 Speaker 1: and always on the Bloomberg terminal