WEBVTT - Wall Street Weighs the Next Big Risk 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait 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 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.239 --> 0:00:21.880 All Right, she walks in the room, and I get 0:00:21.880 --> 0:00:24.080 excited because she is just one of. 0:00:24.000 --> 0:00:25.080 Our rock stars around here. 0:00:25.079 --> 0:00:27.440 And I know we kind of say sometimes rockstar a lot, 0:00:27.480 --> 0:00:29.080 but we really mean it with this one. 0:00:29.720 --> 0:00:31.880 Zanolie Bosik is in the house. She's a Bloomberg News 0:00:31.920 --> 0:00:32.560 Wall Street reporter. 0:00:32.600 --> 0:00:35.000 She's had quite a couple of weeks between bank earnings, 0:00:35.400 --> 0:00:38.120 interview with Morgan Stanley's James Gormant, and then tonight, no 0:00:38.280 --> 0:00:40.840 Tomorrow Night, she has the next big Risk. She also 0:00:40.880 --> 0:00:44.879 had a conversation with Blackstone John Gray. I feel like 0:00:45.000 --> 0:00:45.879 you're super there's. 0:00:45.760 --> 0:00:48.120 One person for whom hustle culture isn't. 0:00:49.760 --> 0:00:49.879 Now. 0:00:49.960 --> 0:00:51.200 It's really remarkable. 0:00:51.240 --> 0:00:53.840 And what's great is I feel like you get this 0:00:54.000 --> 0:00:56.680 wonderful big picture when you talk with these big names 0:00:56.920 --> 0:00:59.400 from different walks of the financial world about like kind 0:00:59.400 --> 0:01:00.480 of what's really going on. 0:01:00.720 --> 0:01:04.520 It's my favorite project of the year, beyond everything else. 0:01:04.600 --> 0:01:07.119 By a landslide. And it's because it's the simplest question 0:01:07.120 --> 0:01:09.319 in the world. It's what the money managers are hired 0:01:09.360 --> 0:01:12.240 to do, what is the next big risk because their 0:01:12.959 --> 0:01:16.120 business is the business of managing risks. Every time we 0:01:16.200 --> 0:01:19.640 do get different answers, this time around Boas Weinstein. He's 0:01:19.680 --> 0:01:22.760 a very famous credit manager here who is known for 0:01:22.800 --> 0:01:26.040 making money in turbulent times. He's worried about the next 0:01:26.040 --> 0:01:30.960 market sell off, partially because of quantitative tightening. You have Idolu, 0:01:31.200 --> 0:01:33.840 the head of the global private bank at City Group, right, 0:01:33.959 --> 0:01:36.880 she is frankly the first one in the three years 0:01:36.920 --> 0:01:41.560 of this project who has brought up geopolitical risks as 0:01:41.560 --> 0:01:42.120 an issue. 0:01:42.360 --> 0:01:42.720 Shocker. 0:01:42.800 --> 0:01:44.679 I mean, I feel like the last year or so 0:01:45.160 --> 0:01:47.480 easily two years, right, that it's been such a big 0:01:47.520 --> 0:01:48.360 part of our narrative. 0:01:48.520 --> 0:01:50.800 More surprising to me that every time I ask the question, 0:01:50.840 --> 0:01:52.200 this is the first time it was brought up in 0:01:52.200 --> 0:01:55.440 three years, even in the middle of a war. So 0:01:55.720 --> 0:01:58.040 you know, she brought up China tensions with the United States. 0:01:58.080 --> 0:02:02.080 And David Rubinstein, who is the co under of Carlisle Group, 0:02:02.160 --> 0:02:05.480 also billionaire himself, had you know, worked in Washington for 0:02:05.520 --> 0:02:08.680 a long time he's worked back Bloomberg Colley, he does 0:02:08.720 --> 0:02:10.280 have the two shows for Bloomberg. 0:02:10.360 --> 0:02:10.520 Right. 0:02:10.880 --> 0:02:14.760 He also believes that inequality within the United States is 0:02:14.800 --> 0:02:17.720 a big issue as well as among nations that have 0:02:17.800 --> 0:02:19.760 a lot of money and nations that do not have 0:02:19.800 --> 0:02:21.400 a lot of money, and the tension that is going 0:02:21.440 --> 0:02:22.280 to create in the world. 0:02:22.480 --> 0:02:25.040 Can we just run a little bit of the interview 0:02:25.040 --> 0:02:28.280 you do with bo As Weinstein and what he had 0:02:28.320 --> 0:02:30.200 to say about the next big market plunge. 0:02:30.240 --> 0:02:31.880 Let's play it for everybody. 0:02:32.560 --> 0:02:35.000 The next time there's a serious selloff, which is which 0:02:35.000 --> 0:02:37.079 is not just a three week affair. There are a 0:02:37.120 --> 0:02:40.400 number of aspects from the behavioral to also that the 0:02:40.400 --> 0:02:44.640 Fed is not your friend and in fact will not 0:02:44.680 --> 0:02:46.280 be able to come to the rescue of the market 0:02:46.680 --> 0:02:48.399 in the same way because of what's going on now. 0:02:49.120 --> 0:02:50.919 All right, that of course is Boas Weinstein. 0:02:50.960 --> 0:02:52.880 But I love his picture and I think that really 0:02:52.880 --> 0:02:54.639 plays to all of the money plump pumped into the 0:02:54.680 --> 0:02:57.000 economy and then as rates have gone up, just that 0:02:57.160 --> 0:02:58.720 major reset on assets. 0:02:58.880 --> 0:03:01.160 Yeah, and we started with too, because you know, on 0:03:01.160 --> 0:03:03.440 one hand, people are worried about a recession. He's it's 0:03:03.480 --> 0:03:06.720 not about a recession. It's about the market structure that's 0:03:06.760 --> 0:03:10.280 been created after so much easy money. The point he's 0:03:10.280 --> 0:03:11.800 making is there are a lot of investors that have 0:03:11.880 --> 0:03:14.200 under the market that are buying products that didn't exist 0:03:14.200 --> 0:03:17.720 ten years ago. They're buying junk bond funds in scale, 0:03:17.919 --> 0:03:20.799 each he has in scale, and you know some of 0:03:20.840 --> 0:03:23.119 the things you're seeing them buy into, even private credit, 0:03:23.160 --> 0:03:25.760 which is trying to open to retail investors. They existed 0:03:25.800 --> 0:03:28.120 in a zero rate world and in a world where 0:03:28.200 --> 0:03:30.680 rates are much higher, and some of these companies are 0:03:30.720 --> 0:03:33.359 being charged thirteen percent on their debt or more. 0:03:33.480 --> 0:03:34.920 Very different environment, very. 0:03:34.800 --> 0:03:37.560 Different environment, and it's one that most investors are not 0:03:37.680 --> 0:03:39.280 used to, which is part of the reason he thinks 0:03:39.280 --> 0:03:42.120 a saleoff, should there be a significant one, would be exacerbated. 0:03:42.400 --> 0:03:46.640 We also have continued inflation concerns or really David Rubinstein 0:03:46.680 --> 0:03:50.480 told you like inflation is our only choice since the 0:03:50.520 --> 0:03:54.840 debt of this country has grown thirty two x since 0:03:54.840 --> 0:03:55.800 he was in the White House. 0:03:55.920 --> 0:03:59.040 Yes, it's incredible because if you think about it, you know, 0:03:59.120 --> 0:04:01.160 with the Fed, we're talking about the monetary policy side 0:04:01.160 --> 0:04:04.200 of things. David not only talks about the monetary which 0:04:04.280 --> 0:04:06.440 is controlling inflation, through interest rates. What he's talking about 0:04:06.440 --> 0:04:08.720 here is the fiscal problem we've created for ourselves here. 0:04:09.000 --> 0:04:12.000 And you know, he actually brought up an issue that 0:04:12.040 --> 0:04:15.000 Muhammad Alarian had brought up in this project a while back, 0:04:15.240 --> 0:04:18.320 which is this idea that the American dream might be eroded. 0:04:18.640 --> 0:04:22.440 They both gave different reasons, but David's reason, David Rubinstein's 0:04:22.440 --> 0:04:26.760 reason is in part because inequality would be exacerbated in 0:04:26.839 --> 0:04:28.880 an era where you have to only really inflate your 0:04:28.880 --> 0:04:31.919 way out of this thirty two trillion dollars debt problem. 0:04:32.200 --> 0:04:34.240 I guess what, who's watching it now that the debt 0:04:34.240 --> 0:04:39.479 ceiling has been raised. Investors, large investors who worry about 0:04:39.480 --> 0:04:41.720 the long term future of the United States. 0:04:41.680 --> 0:04:43.960 Are the only people paying attention to Etentially. 0:04:44.200 --> 0:04:46.360 Yeah, but do you remember a time where I feel 0:04:46.360 --> 0:04:48.919 like we spent years that every conversation was about the 0:04:48.960 --> 0:04:51.000 debt load of the United States and concerns about it, 0:04:51.040 --> 0:04:52.120 and then it just kind of went away. 0:04:52.160 --> 0:04:55.080 Well, I mean the idea here that the debt servicing 0:04:55.120 --> 0:04:57.640 costs for the United States are going to surpass the 0:04:57.680 --> 0:05:01.560 defense budget of the United States. Interest rates were low then, 0:05:01.839 --> 0:05:04.040 interest rates are higher now, meaning the cost of debt 0:05:04.080 --> 0:05:07.480 is also higher. We're paying multiple more for our debt 0:05:07.640 --> 0:05:11.680 than we are for American health care, American education. Does 0:05:11.720 --> 0:05:14.560 that make sense? I think that every part of the 0:05:14.640 --> 0:05:17.320 isle that's massive, essentially in the things. 0:05:17.080 --> 0:05:20.599 That we need to can we also go towards your 0:05:20.680 --> 0:05:22.679 interview with Jonathan Gray. 0:05:22.800 --> 0:05:25.240 Yes, talk to se what a day by they what 0:05:25.360 --> 0:05:26.760 a day to interview him? 0:05:27.200 --> 0:05:31.360 I mean on the day that a Blackstones assets under management, 0:05:31.440 --> 0:05:34.320 I guess you'd call it that in private equitcase, more 0:05:34.320 --> 0:05:38.280 than a trillion dollars and I think CBC raised more 0:05:38.320 --> 0:05:40.480 than twenty six billion dollars for one fund. 0:05:40.520 --> 0:05:45.480 Apollows on their way to that level. But so much cash, it's. 0:05:45.360 --> 0:05:48.400 An incredible thing to say, oh, you know, Blackstone, instead 0:05:48.400 --> 0:05:50.880 of raising twenty five billion dollars, they're going to raise, 0:05:51.360 --> 0:05:53.080 you know, in the heighth in the you know, the 0:05:53.120 --> 0:05:56.640 low twenty some billion dollars instead for the corporate corporate 0:05:56.640 --> 0:06:00.799 private equity fund. And that's spooky to I mean, yeah. 0:06:00.600 --> 0:06:05.880 That's exactly what grip right, only in the low twenties. 0:06:06.080 --> 0:06:10.240 Yeah, you know Steve short spend, Yeah, exactly. And that's 0:06:10.279 --> 0:06:11.839 the thing about it. I mean, yes, if you have 0:06:11.880 --> 0:06:14.760 two hundred billion dollars of dry powder, which is money 0:06:14.760 --> 0:06:18.320 to spend at Blackstone, you know that extra marginal twenty 0:06:18.400 --> 0:06:20.760 dollars twenty billion dollars. I don't know, but you know 0:06:20.800 --> 0:06:23.400 John Gray's point that he's making similar to all the banks, 0:06:23.600 --> 0:06:26.360 where he really feels like we're hitting a precipice here 0:06:26.360 --> 0:06:28.960 where things can start to come back. Deal activity can 0:06:29.000 --> 0:06:30.600 come back, they can start putting money to work, they 0:06:30.600 --> 0:06:33.279 can start selling assets, and that's how they make money. 0:06:33.320 --> 0:06:36.720 Because the profitability did drop by almost forty percent, and 0:06:36.960 --> 0:06:39.719 part of that is because of that muted deal making. 0:06:40.360 --> 0:06:43.800 Can we assume if they're raising more money or new funds, 0:06:44.000 --> 0:06:46.000 that they are the finding places to put at work 0:06:46.040 --> 0:06:48.600 and they are finding exit strategies because I always wonder 0:06:48.600 --> 0:06:50.920 about the pressure that they're getting from investors to kind 0:06:50.920 --> 0:06:52.320 of put that money to work. 0:06:52.360 --> 0:06:54.720 Yeah, they're not finding exits or to. 0:06:54.720 --> 0:06:55.360 Exit, right. 0:06:55.480 --> 0:06:55.680 Yeah. 0:06:55.720 --> 0:06:58.120 Well, it's interesting that FT had a really good point 0:06:58.160 --> 0:07:01.880 about Blackstone that over time they're the best barometer to 0:07:01.920 --> 0:07:04.520 use of their returns really is above fifteen percent, and 0:07:04.600 --> 0:07:08.240 so you know they've done well by being patient. You 0:07:08.279 --> 0:07:10.120 don't want to sell into a bad market either. But 0:07:10.160 --> 0:07:13.400 if you're not Blackstone and you don't you know, have 0:07:13.520 --> 0:07:15.720 your pick of the crop with whoever you're hiring. Apparently 0:07:15.760 --> 0:07:18.880 their acceptance rate is zero zero three percent now point 0:07:19.000 --> 0:07:21.200 zero zero three percent. You know, wait so that you 0:07:21.280 --> 0:07:24.160 can point zero zero three percent to get into Blackstone. 0:07:24.280 --> 0:07:27.000 That's how hard it is. Point zero zero three percent 0:07:27.040 --> 0:07:29.080 of all analyst applicants get in. It used to be 0:07:29.160 --> 0:07:32.280 two years ago point four percent. That's how hard it 0:07:32.360 --> 0:07:34.640 is to get a job at Blackstone now. But if 0:07:34.640 --> 0:07:36.840 you are other private equity firms, it could be difficult 0:07:36.840 --> 0:07:39.200 because you have to find money to get those deals 0:07:39.240 --> 0:07:40.720 to work. You have to find debt financing. 0:07:40.840 --> 0:07:43.840 If you do have money, you can do deals. 0:07:45.960 --> 0:07:49.040 Scott Kleiman at Apollo, when he was talking about you 0:07:49.080 --> 0:07:51.400 know how much money they're raising, said that they're one 0:07:51.440 --> 0:07:54.560 of the few firms that can pay play offense in 0:07:55.080 --> 0:07:57.920 this area. And he said, our current pipeline of opportunities 0:07:58.000 --> 0:08:00.640 is about three times a year ago and growing. 0:08:01.000 --> 0:08:05.160 I love it when Matt drops names. That is indeed 0:08:05.160 --> 0:08:07.400 the co president of Apollo, one of the most longest 0:08:07.440 --> 0:08:10.880 standing private equity executives in the world. But to the point, 0:08:10.960 --> 0:08:12.800 also on private equity, that's kind of why a lot 0:08:12.840 --> 0:08:15.120 of these firms have brought and beyond private equity. Even 0:08:15.480 --> 0:08:17.440 Apollo is much bigger in private credit. 0:08:18.280 --> 0:08:21.320 Blackstone is They're massive in private credit, right massive. 0:08:21.360 --> 0:08:23.680 It's more of their business and private equity. And the 0:08:23.720 --> 0:08:25.520 point they make is there's only so much skill you 0:08:25.520 --> 0:08:27.280 could have in private equity, because you don't want to 0:08:27.360 --> 0:08:28.920 raise so much money that you can't put into work. 0:08:29.000 --> 0:08:31.080 That is, but to the point that you're making, they 0:08:31.080 --> 0:08:32.319 do have places to put it. 0:08:32.280 --> 0:08:35.480 To work, you know, on the private market. Matt's obsessed. 0:08:35.520 --> 0:08:37.400 I'm obsessed with it. I just find it fascinating. You know, 0:08:37.480 --> 0:08:39.040 we go out to milk and like it's all that 0:08:39.080 --> 0:08:40.640 anybody ever talks about. I feel like the last two 0:08:40.679 --> 0:08:44.000 years it's just been about private lending. Are there any 0:08:44.120 --> 0:08:46.880 concerns nervousness? As you say, It's like, you know, it's 0:08:46.920 --> 0:08:50.400 the interest rate picture and environment changes. It's more expensive 0:08:50.440 --> 0:08:51.400 for those companies that have. 0:08:51.640 --> 0:08:52.600 Borrowed, right Yeah. 0:08:52.640 --> 0:08:56.720 And it's you know, all of these companies, you know, Blackstone, Apollo, KKR, 0:08:56.840 --> 0:08:59.920 they have diversified well well well well beyond private equity 0:09:00.200 --> 0:09:02.520 at this point, they have huge businesses in all these 0:09:02.520 --> 0:09:05.960 other places. They're just big, massive private investment firms. You know, 0:09:06.000 --> 0:09:09.240 some of the biggest investments that that Blackstone is making 0:09:09.280 --> 0:09:13.040 outside of outside of real estate data centers. They're buying 0:09:13.080 --> 0:09:16.040 data centers because they believe that it will be fueled 0:09:16.040 --> 0:09:19.800 by AI. Right, so I think they're not investing in 0:09:19.840 --> 0:09:21.959 the ways that they used to invest in the past. 0:09:22.000 --> 0:09:26.080 They have changed. You know, what's the next trillion look like? 0:09:26.520 --> 0:09:28.120 Laststone is a much bigger firm than a lot of 0:09:28.160 --> 0:09:28.640 its rivals. 0:09:28.640 --> 0:09:31.160 By the way, I was talking with Moody's head of 0:09:31.480 --> 0:09:34.120 cohed of Banking, Global Banking this morning. 0:09:35.600 --> 0:09:37.600 After Cotigue. 0:09:39.720 --> 0:09:42.040 She told me she's not just covering banks anymore. She's 0:09:42.080 --> 0:09:45.360 covering private lenders because that area has. 0:09:45.840 --> 0:09:49.120 Also you could feel him wanting to reach outside the 0:09:49.120 --> 0:09:50.320 banks because so much lending. 0:09:50.520 --> 0:09:53.640 But I wonder for your next year series of the risks, right, 0:09:53.840 --> 0:09:55.559 is this going to be a problem if so much 0:09:55.640 --> 0:09:59.640 lending goes away from banks and into what she called 0:09:59.640 --> 0:10:00.920 the shaf banking. 0:10:00.600 --> 0:10:02.360 System, even though they don't like being called that. 0:10:02.480 --> 0:10:03.439 Isn't that a concern? 0:10:03.760 --> 0:10:06.000 I mean boas once Scene brought it up today, the 0:10:06.000 --> 0:10:08.480 private credit funds. He said it certainly said, you know, 0:10:08.600 --> 0:10:11.240 lending it seven percent is way different than Leney at 0:10:11.280 --> 0:10:13.800 thirty percent. And another thing I'm working on right now 0:10:14.040 --> 0:10:16.760 is starting to calculate just how much of the bankruptcies 0:10:16.760 --> 0:10:19.400 we're seeing or private equity backed. Because we are seeing 0:10:19.400 --> 0:10:22.200 the point a lot of bankruptcies, many of these companies 0:10:22.240 --> 0:10:24.760 are backed by private equity firms. There are going to 0:10:24.800 --> 0:10:27.920 be losses, and we don't even know to the extent 0:10:27.960 --> 0:10:29.680 to which we will see that across private aquitly. 0:10:29.720 --> 0:10:30.880 I mean, I think about regional banking. 0:10:30.880 --> 0:10:32.800 I feel like the crisis at least so far has 0:10:32.800 --> 0:10:35.400 been contained because so much lending middle market right is 0:10:35.440 --> 0:10:37.440 from these private credit firms. 0:10:37.520 --> 0:10:40.200 And I do wonder at a high price. 0:10:40.800 --> 0:10:41.760 Yeah, that's. 0:10:43.120 --> 0:10:45.360 The industry that I'm learning is that when something is 0:10:45.400 --> 0:10:47.400 going wrong, you can throw more money at it. 0:10:48.679 --> 0:10:52.080 Don't miss the Next Big Risk with Shinale Friday, eight 0:10:52.120 --> 0:10:54.400 thirty pm Wall Street Time on Bloomberg Television. 0:10:54.400 --> 0:10:57.520 Shanelli Bosik truly a rock star. This is Bloomberg. 0:10:58.640 --> 0:11:02.240 You're listening to the Bloomber Business Week Podcast. Catch us 0:11:02.240 --> 0:11:05.600 live weekday afternoons from three to six Eastern Listen on 0:11:05.679 --> 0:11:09.720 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:11:10.000 --> 0:11:11.800 or watch us live on YouTube. 0:11:12.440 --> 0:11:14.920 All right, everybody, we were all over Caravana yesterday. 0:11:15.000 --> 0:11:15.720 Weird reason. 0:11:15.760 --> 0:11:19.080 I mean it was off stratospheric if you will, right, 0:11:19.080 --> 0:11:19.600 in terms. 0:11:19.400 --> 0:11:24.040 Of closed up forty percent yesterday normal day, one thousand 0:11:24.080 --> 0:11:25.200 percent year to date. 0:11:25.360 --> 0:11:29.080 So and and it's massively profitable. 0:11:29.360 --> 0:11:32.360 No, they don't make a net profit, but they talk 0:11:32.440 --> 0:11:36.240 a lot about their EBITDA growth, which is as David 0:11:36.240 --> 0:11:39.400 Welch points out, it's kind of silly to mention ebit 0:11:39.520 --> 0:11:42.600 DA when your interest expenses are the big problem. 0:11:42.960 --> 0:11:45.920 Exactly. Good point. Well, so you had an interview today. 0:11:46.000 --> 0:11:49.479 Yeah, I spoke with the CEO of Carvana Ernie Garcia 0:11:49.920 --> 0:11:53.800 after he clinched a really important deal that's gonna reduce 0:11:53.920 --> 0:11:56.959 interest expenses by four hundred and thirty million dollars a 0:11:57.040 --> 0:11:58.760 year in the next two years and reduce their total 0:11:58.800 --> 0:12:01.240 outstanding debt by one point two billion dollars. 0:12:01.480 --> 0:12:03.040 Listen to what he had to say. 0:12:04.000 --> 0:12:06.559 We've cut over a billion dollars of expenses out of 0:12:06.600 --> 0:12:09.840 the business in the last year. That's a that's a 0:12:09.880 --> 0:12:13.160 big number, right, and you know we continue to pull 0:12:13.200 --> 0:12:15.000 the expenses out. You know, we cut over one hundred 0:12:15.000 --> 0:12:16.960 million out in Q one. We cut another twenty million 0:12:16.960 --> 0:12:19.439 of expenses out in Q two. So we've got a 0:12:19.440 --> 0:12:21.440 lot of levers. We'll keep pulling that down. We've also 0:12:21.440 --> 0:12:24.520 been driving our URGPU up. So I think the business 0:12:24.600 --> 0:12:27.160 performing really well. And again I think you know, twenty 0:12:27.160 --> 0:12:29.160 twenty two was a tough year for us, but the 0:12:29.160 --> 0:12:31.360 people inside Carbona came together and that's why we're having 0:12:31.360 --> 0:12:32.280 so much success today. 0:12:32.760 --> 0:12:36.800 Our delivery are there still delivery delays, delivery issues. I 0:12:36.840 --> 0:12:40.319 know that for a long time, even in your business, 0:12:40.320 --> 0:12:43.840 the used car business, it was a problem getting buyers 0:12:43.920 --> 0:12:46.439 their cars in a timely manner, and that's been a 0:12:46.480 --> 0:12:49.680 problem obviously for the manufacturers. 0:12:48.920 --> 0:12:51.840 As well for new cars. How does that look right now? 0:12:53.360 --> 0:12:56.320 No way, I think you know. Inside of our business, 0:12:56.320 --> 0:12:58.720 there's kind of two major steps. One step is getting 0:12:59.120 --> 0:13:01.280 the car from the point where purchase it to our 0:13:01.280 --> 0:13:03.439 inspection centers, where we put about one thousand dollars aparts 0:13:03.440 --> 0:13:05.560 in labor in every car to prepare it for the 0:13:05.559 --> 0:13:08.480 buyer WHOI ultimately buy it. And then there's our delivery 0:13:08.520 --> 0:13:10.319 to that customer when they go to our website, they 0:13:10.320 --> 0:13:12.160 buy it online and then we deliver it to their door. 0:13:12.720 --> 0:13:16.040 And we've actually been speeding those timelines up recently. We've 0:13:16.040 --> 0:13:18.560 been testing same data delivery, which is pretty remarkable. We 0:13:18.640 --> 0:13:21.200 had one customer in Phoenix the other day that actually 0:13:21.240 --> 0:13:23.280 got a car delivered an hour and fifty nine minutes 0:13:23.320 --> 0:13:27.200 after placing the order, which is pretty remarkable. So, you know, 0:13:27.240 --> 0:13:29.600 we're trying to give customers a huge selection with our 0:13:29.640 --> 0:13:32.280 online model and then build all of our operations and 0:13:32.320 --> 0:13:34.040 processes in a way that allow them to not only 0:13:34.040 --> 0:13:36.240 have that huge selection but also get the car very quickly. 0:13:36.240 --> 0:13:37.679 And I think that's something we're very proud of. 0:13:37.920 --> 0:13:42.240 How much do you expect buyers to embrace the online 0:13:42.360 --> 0:13:45.360 only model. I mean, you know a lot of people 0:13:45.440 --> 0:13:47.800 want to go into a dealership kicked the tires, look 0:13:47.880 --> 0:13:51.640 under the hood, or they have in the past. How 0:13:51.720 --> 0:13:54.320 much do you see that changing, for example, in terms 0:13:54.360 --> 0:13:57.280 of a percentage of all sales. 0:13:57.440 --> 0:13:58.600 Where do you expect it to go? 0:14:00.320 --> 0:14:02.319 Sure? So, I think different people like different things, and 0:14:02.360 --> 0:14:05.520 they'll continue like different things. I think what we're proud 0:14:05.520 --> 0:14:08.160 of is that we're giving customers a different kind of offering. 0:14:08.720 --> 0:14:10.400 They can go to our website, they can buy a car. 0:14:10.480 --> 0:14:12.200 You know, we've had people buy cars on our website 0:14:12.360 --> 0:14:14.360 and scheduled delvery and as little as ten or fifteen 0:14:14.360 --> 0:14:16.440 minutes and then, as I just told you, our fastest 0:14:16.440 --> 0:14:18.360 delivery was an hour and fifty nine minutes after that. 0:14:18.480 --> 0:14:21.000 So it can be very fast, it can be very easy. 0:14:21.040 --> 0:14:24.080 They get a huge selection of cars, tens of thousands. 0:14:24.480 --> 0:14:26.800 They generally save money. We offer our cars at lower 0:14:26.800 --> 0:14:29.640 prices than most of our competitors because our business model 0:14:29.720 --> 0:14:32.320 enables us to do that. And so it's a different 0:14:32.400 --> 0:14:36.080 kind of offering for different preferences, and different people are different. 0:14:36.120 --> 0:14:38.280 But the great news is, you know today we're about 0:14:38.320 --> 0:14:41.120 one percent of the market. So I think our view 0:14:41.240 --> 0:14:42.880 is that, you know, when you say you can get 0:14:42.880 --> 0:14:44.840 a broader selection and you can save money, you can 0:14:44.880 --> 0:14:47.000 save time, there's probably more than one percent of people 0:14:47.040 --> 0:14:47.600 that want to do that. 0:14:48.160 --> 0:14:52.320 Right I'm looking for a Dodge Challenger RT scat pack 0:14:52.440 --> 0:14:55.200 wide body. They're not super easy to find a dealers 0:14:55.240 --> 0:14:59.280 near me, so I may look to a dealer in California. 0:14:59.440 --> 0:15:02.480 Is that what people are increasingly doing? And do you 0:15:02.480 --> 0:15:05.120 expect it to be maybe two percent of the market 0:15:05.200 --> 0:15:07.720 in say by twenty twenty five, three percent of the 0:15:07.760 --> 0:15:09.000 market by twenty twenty five. 0:15:10.600 --> 0:15:11.400 Well, what I would. 0:15:11.240 --> 0:15:14.520 Say is we've at various times we've had in some 0:15:14.520 --> 0:15:16.880 of our older markets. Market shares already above three point 0:15:16.960 --> 0:15:20.680 five percent and growing very quickly, and I think, you know, 0:15:20.760 --> 0:15:23.080 our product offering is only getting better. I think customers 0:15:23.080 --> 0:15:26.960 are only getting more comfortable online, and so I think 0:15:27.000 --> 0:15:30.480 our view would be much larger than that. Over time. 0:15:30.840 --> 0:15:32.520 We'll have to see exactly where it goes. But I 0:15:32.520 --> 0:15:36.400 think again, the benefits are not being online. Online is 0:15:36.400 --> 0:15:39.000 something that enables customers to save money, to save time, 0:15:39.080 --> 0:15:40.880 to have a huge selection, so we're more likely to 0:15:40.880 --> 0:15:43.680 find that scat back for you. So I think that's 0:15:43.720 --> 0:15:45.400 what customers are really looking for, and we're trying to 0:15:45.400 --> 0:15:45.880 provide it. 0:15:46.160 --> 0:15:48.520 You've had to pull back by your inventory I see 0:15:48.560 --> 0:15:51.240 from our reporting by more than fifty percent. 0:15:52.120 --> 0:15:53.440 Are you going to be able. 0:15:53.320 --> 0:15:56.680 To bring that back because obviously you want to offer 0:15:56.760 --> 0:16:01.640 a broad array of vehicles for customers to choose from. 0:16:01.840 --> 0:16:04.440 Yeah, for sure, I think you know, twenty twenty two 0:16:04.480 --> 0:16:07.480 was about getting back in balance after car prices went 0:16:07.560 --> 0:16:09.920 up and instrates went up, and it made cars unaffordable 0:16:09.920 --> 0:16:12.440 for customers and slowed down their purchases. And I think 0:16:12.440 --> 0:16:14.240 we've done that and I think that's why our results, 0:16:14.600 --> 0:16:17.680 you know, have been so positive recently. But I think undoubtedly, 0:16:17.720 --> 0:16:20.400 as we turn back to growth, you know, which we 0:16:20.440 --> 0:16:22.760 will do in due time, we will certainly want to 0:16:22.760 --> 0:16:25.200 grow on inventory and give customers an even broader selection. 0:16:25.360 --> 0:16:28.400 But even today, with the pullback and inventory size to 0:16:28.400 --> 0:16:31.120 get back in balance, we're offering customer selection of tens 0:16:31.120 --> 0:16:32.960 of thousands of cars, so it's still a pretty great 0:16:32.960 --> 0:16:33.880 place to go check out. 0:16:34.080 --> 0:16:36.600 You know, I saw a figure that your total debt 0:16:36.640 --> 0:16:38.880 load was about two thousand dollars a car in the 0:16:38.960 --> 0:16:41.720 last quarter. I'm wondering what it looks like now after this. 0:16:41.760 --> 0:16:43.400 Deal and where you want to see it. 0:16:45.320 --> 0:16:48.440 Sure, at a high level, I think it probably decreased 0:16:48.440 --> 0:16:51.400 by fifteen to twenty percent. And again I would go 0:16:51.480 --> 0:16:54.160 back to the answer I provided before. I think the 0:16:54.160 --> 0:16:55.840 most important thing we could do as a company is 0:16:55.880 --> 0:16:58.680 just keep delivering great customer experiences, keep building the business 0:16:58.680 --> 0:17:01.320 as best we can. I think the capital choices will 0:17:01.320 --> 0:17:03.360 make over time, but I think that's very secondary to 0:17:04.200 --> 0:17:05.720 just building the core business and the best way we 0:17:05.760 --> 0:17:06.280 possibly can. 0:17:06.440 --> 0:17:10.440 So, I mean, before this happened, obviously there was a 0:17:10.480 --> 0:17:12.760 lot of speculation in the market. People were worried that 0:17:12.800 --> 0:17:17.600 you were on the brink of filing. Now you've been 0:17:17.640 --> 0:17:20.639 thrown this lifeline. Can you say, now that we're past 0:17:20.760 --> 0:17:24.639 that sort of crisis point, are you, does this allow 0:17:24.680 --> 0:17:28.080 you to avoid any chance of bankruptcy. 0:17:27.440 --> 0:17:28.000 In the future. 0:17:30.200 --> 0:17:32.080 I'll say more than that. I think we were never there, 0:17:33.000 --> 0:17:35.480 you know. I think drama always finds a bigger audience 0:17:35.520 --> 0:17:38.200 than reality, which can sometimes be a bit more boring. 0:17:38.920 --> 0:17:40.720 But we always had a great business. We were always 0:17:40.720 --> 0:17:43.960 making a ton of progress. We continue to do so, 0:17:43.960 --> 0:17:45.600 so I think this, you know, this is a great 0:17:45.600 --> 0:17:47.480 transaction for us. I think the quarter was a great 0:17:47.520 --> 0:17:49.840 quarter for us. I think we're in much better shape 0:17:49.880 --> 0:17:53.480 than many people may have believed before, and we're gonna 0:17:53.480 --> 0:17:55.320 work hard to be an even better shape in the future. 0:17:55.359 --> 0:17:57.879 So we'll just keep improving, all right. 0:17:57.920 --> 0:18:01.280 That is of course. Carvana's Ernie Garcia. 0:18:02.160 --> 0:18:04.920