WEBVTT - SPACs Capitalize on Private Market Boom: Evercore's Schlosstein 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEO, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.919 and on Bloomberg dot com. Legendary on Wall Street, Ralph 0:00:21.920 --> 0:00:24.200 Shlastin is the co chairman of the board and co 0:00:24.400 --> 0:00:29.320 CEO of Evercre, but has a huge, huge reputation and 0:00:29.560 --> 0:00:32.800 history on Wall Street. See was co founder of black 0:00:32.880 --> 0:00:37.280 Rock black In. He was an investment banker at Lehman, 0:00:37.479 --> 0:00:41.760 started the firm's investment or at least interest rate swap business, 0:00:41.800 --> 0:00:44.200 and so much more so, we're thrilled to have Ralph 0:00:44.200 --> 0:00:47.680 Schlastin joining us now. Ralph, thanks some Bollian for joining. 0:00:47.840 --> 0:00:49.840 Talk to us about the deal landscape. But we've seen 0:00:49.960 --> 0:00:52.560 so many SPACs raised since the beginning of the year, 0:00:52.960 --> 0:00:55.720 and so many sort of deals that we haven't seen 0:00:55.760 --> 0:00:58.520 in a long time, you know, not your regular mergers 0:00:58.560 --> 0:01:02.440 and acquisitions. What's going an other? Well, there are two things. 0:01:02.560 --> 0:01:07.240 Number one uh m and a activity is back. Uh 0:01:07.480 --> 0:01:11.800 It went on pause from the beginning of March until 0:01:12.120 --> 0:01:17.240 probably the beginning of July with only very sporadic activity, 0:01:17.440 --> 0:01:20.960 and over the last three months. Uh, if you look 0:01:21.040 --> 0:01:25.600 today at the level of activity and dialogue between CEOs, 0:01:26.480 --> 0:01:29.000 it's quite a bit higher than and more intense than 0:01:29.040 --> 0:01:30.760 it was a month ago. And a month ago it 0:01:30.840 --> 0:01:33.720 was higher and more intense than a month before, and 0:01:33.760 --> 0:01:35.959 the same would have been true two months ago. So 0:01:36.480 --> 0:01:41.720 there's no question, uh that activity is starting to return. 0:01:42.560 --> 0:01:45.440 And with respect to the SPACs, UH, you know, they 0:01:45.480 --> 0:01:51.520 have become essentially another way. Who are companies become public? 0:01:52.080 --> 0:01:55.880 H they're really three alternatives now that a company can 0:01:55.920 --> 0:01:59.000 become public. One is a direct listing where they don't 0:01:59.040 --> 0:02:02.640 raise additional capital, they just list their stock. The second 0:02:02.720 --> 0:02:05.720 is a traditional I p O. And the third is 0:02:05.800 --> 0:02:10.840 to merge into a spact and become a public company. UH. 0:02:10.880 --> 0:02:14.280 That way and spacts have been uh you know, a 0:02:14.280 --> 0:02:17.320 lot of money has been raised. Uh. They have to 0:02:17.360 --> 0:02:20.520 do a transaction within a two year period of time. 0:02:20.600 --> 0:02:26.160 There's some very qualified uh business leaders who have raised 0:02:26.160 --> 0:02:30.079 this capital and many cases they will be helpful to 0:02:30.200 --> 0:02:33.680 the companies that they buy to help them grow. Ralph 0:02:33.680 --> 0:02:37.080 typically in an m N a scenario. UH. You know, 0:02:37.160 --> 0:02:41.040 a CEO and his or her board need presumably have 0:02:41.520 --> 0:02:43.960 a fair amount of confidence in their business model, in 0:02:44.040 --> 0:02:47.080 their sector, and their economy. So as I saw the 0:02:47.120 --> 0:02:50.040 sixty nine billion dollars worth of deals announced on Monday, 0:02:50.200 --> 0:02:52.760 I kind of said to myself, where can that confidence 0:02:52.800 --> 0:02:55.360 come from? Given what's going on in the world. What 0:02:55.440 --> 0:02:57.600 are you hearing from some of your clients as they 0:02:57.600 --> 0:03:01.360 think about h M and A activity. Yeah, Well, first 0:03:01.360 --> 0:03:05.720 of all, the transactions that were done this week, we're 0:03:06.000 --> 0:03:13.119 in sectors that were either largely or completely unaffected by 0:03:13.160 --> 0:03:18.920 the pandemic. UH. The Navidia arm deal in technology, the 0:03:19.000 --> 0:03:24.040 Guilelead deal in biopharma. UH. Those are two sectors that, 0:03:24.800 --> 0:03:29.400 if anything, and certainly in technology has benefited moderately from 0:03:29.680 --> 0:03:33.840 this stay at home or work at home environment, and 0:03:33.919 --> 0:03:39.640 biotech is a long term growth sector. So there's been 0:03:40.160 --> 0:03:42.960 you know, the pickup and activity has been to a 0:03:43.080 --> 0:03:49.120 greater degree in sectors that have pretty clear visibility as 0:03:49.160 --> 0:03:54.000 to the future uh, economic and revenues and profits of 0:03:54.080 --> 0:03:56.840 their business. You haven't seen as much pick up yet 0:03:56.880 --> 0:03:59.960 in things like industrials, where there's a lot more uncertainty. 0:04:00.400 --> 0:04:03.240 We are speaking with Ralph Sholstein of Ever Court, Ralph, 0:04:03.280 --> 0:04:06.600 are there enough private companies out there that would look 0:04:06.640 --> 0:04:09.280 to go public in this kind of environment to take 0:04:09.280 --> 0:04:13.040 advantage of all these books? Well, the thing that people 0:04:13.080 --> 0:04:18.359 don't realize is, uh, you look back twenty years ago 0:04:18.760 --> 0:04:26.680 there were roughly undred public companies h and about thirty 0:04:26.760 --> 0:04:30.560 five hundred private companies of some scale, and I think 0:04:30.560 --> 0:04:35.000 it's a billion dollars or more in revenues. Today the 0:04:35.080 --> 0:04:37.960 reverse is true. There are seventy five hundred or so 0:04:38.400 --> 0:04:43.720 maybe eight thousand private companies uh and four thousand public companies. 0:04:43.760 --> 0:04:46.760 There aren't even enough companies to populate the Russell five 0:04:46.800 --> 0:04:52.960 thousand uh. So Uh. The answer is the ratio of 0:04:53.839 --> 0:04:59.400 opportunity in the private company world has literally reversed from 0:05:00.240 --> 0:05:02.560 one to two to two to one, and SPACs are 0:05:02.600 --> 0:05:06.200 taking advantage of that. So there's some concern in the 0:05:06.240 --> 0:05:10.880 marketplace that SPACs uh, combined with maybe kind of the 0:05:11.040 --> 0:05:16.360 robin Hood retail investor the day trader, suggesting speculation is 0:05:16.600 --> 0:05:20.640 creeping into this market it may not be healthy. How 0:05:20.640 --> 0:05:25.840 do you view that? Well, there's uh, no question in 0:05:25.880 --> 0:05:29.720 my mind. At least two things are true. Number One, 0:05:31.080 --> 0:05:35.160 the stock market is a bit ahead of the real economy. 0:05:35.760 --> 0:05:42.200 It's anticipating a v shaped recovery, which we certainly don't 0:05:42.240 --> 0:05:45.280 have yet. We're not back to where we were pre 0:05:45.360 --> 0:05:49.920 covid by any stretch of the imagination. Uh So one 0:05:49.960 --> 0:05:53.159 of the two one is wrong, the stock market is wrong, 0:05:53.400 --> 0:05:57.040 or the economy will catch up to the stock market. Um. 0:05:57.200 --> 0:06:00.560 I tend to think that the econom me is going 0:06:00.600 --> 0:06:03.839 to continue to do well. I'm not sure it's quite 0:06:03.880 --> 0:06:05.960 where the stock market will get to. Quite where the 0:06:05.960 --> 0:06:09.360 stock market is, so I think there's some vulnerability there. 0:06:09.800 --> 0:06:14.080 And then you have a uh tremendous concentration of the 0:06:14.120 --> 0:06:17.080 gains in the stock market in a handful of stocks 0:06:17.120 --> 0:06:22.960 which happened to be particularly appealing to retail investors. So 0:06:23.680 --> 0:06:27.000 these are great companies there. It's not it's not like 0:06:27.040 --> 0:06:30.799 the dot com bubble where anybody with forty three eyeballs 0:06:30.839 --> 0:06:35.800 to go public. But these are phenomenal companies that are 0:06:35.839 --> 0:06:38.120 going to be long term winners. But they're trading it, 0:06:38.400 --> 0:06:42.720 you know, reasonably stemming multiples compared to history. There's some 0:06:42.760 --> 0:06:45.240 talk of pivots at the moment, pivot to value and 0:06:45.279 --> 0:06:48.760 so on, and then there's also a concern about everything 0:06:48.760 --> 0:06:51.400 the Federal Reserve is doing in the longer term impacts. 0:06:51.560 --> 0:06:54.400 What concerns you out there, elephant, And do you see 0:06:54.440 --> 0:07:00.600 pivots in the stock market? Well, I think the right 0:07:00.640 --> 0:07:05.160 now we have a stock market and an economy UH 0:07:05.279 --> 0:07:09.920 that are definitely supported, you could say, propped up by 0:07:10.280 --> 0:07:15.040 UH monetary and fiscal policy. I mean, people don't realize 0:07:15.760 --> 0:07:19.559 both the magnitude and the speed of what was done 0:07:20.560 --> 0:07:24.680 by both the Congress and the President and by the 0:07:24.720 --> 0:07:28.680 Federal Reserve. You know, first fiscal policy, we had two 0:07:28.680 --> 0:07:34.440 and a half trillion dollars of UH stimulus passed before 0:07:34.520 --> 0:07:39.880 the first down quarter of g d P was reported officially. UH. 0:07:39.920 --> 0:07:43.760 In the financial crisis in two thousand and eight, we 0:07:43.800 --> 0:07:47.360 had eight hundred and fifty million billion dollars of stimulus 0:07:47.400 --> 0:07:50.520 and it didn't get passed by the Congress must much 0:07:50.600 --> 0:07:55.520 less implemented until the third quarter of decline. So this 0:07:55.640 --> 0:08:00.560 came much more quickly and three times the scale monetary policy. 0:08:00.840 --> 0:08:04.600 The first week, our first day, the Federal Reserve brought 0:08:04.600 --> 0:08:07.800 a hundred billion dollars of treasuries and mortgage backed securities. 0:08:08.360 --> 0:08:12.680 The most that they bought in the fiscal fiscal financial 0:08:12.680 --> 0:08:17.520 crisis was a hundred billion in a month, So this 0:08:17.600 --> 0:08:21.520 is huge. The Federal Reserve has been there, Roth Slaustein, 0:08:21.520 --> 0:08:22.960 We've got to leave it there because the time. Thank 0:08:23.000 --> 0:08:25.200 you so much for joining us. We really appreciate your time. 0:08:25.280 --> 0:08:29.640 Roth Slaustein, co chairman co CEO of ever Corps, giving 0:08:29.720 --> 0:08:33.920 us his thoughts on the markets UH equity markets, including 0:08:34.160 --> 0:08:39.960 M and A. It is time for Bloomer Opinion today. 0:08:40.000 --> 0:08:43.640 We're joined by Claude Gussam, director of macro economic Policy 0:08:44.040 --> 0:08:47.120 for the Washington Center for Equitable Growth, also a Bloomberg 0:08:47.120 --> 0:08:50.840 Opinion columnist. Claudia is a former Federal Reserve economists and 0:08:50.840 --> 0:08:54.000 creator of the SOM Rule, a recession indicator. Claudia, thanks 0:08:54.040 --> 0:08:55.960 so much for joining us here. You have a fascinating 0:08:56.360 --> 0:09:00.439 column out widening education gap may tear the economy apart. 0:09:01.160 --> 0:09:04.800 What did you find in your reporting? Well, first of all, 0:09:04.800 --> 0:09:07.040 thank you for having me on today. I really appreciate 0:09:07.120 --> 0:09:09.440 the chance to talk through the piece in a little 0:09:09.480 --> 0:09:13.000 more detail. Yeah, so, I think the biggest thing I 0:09:13.040 --> 0:09:17.280 want to draw people's attention to is back to school. 0:09:17.360 --> 0:09:22.319 What's happening right now in our elementary schools, in our colleges. 0:09:22.640 --> 0:09:26.400 This is a pivotal moment for the inequalities that we've 0:09:26.440 --> 0:09:29.040 been living with and have increased over time in the 0:09:29.120 --> 0:09:33.120 United States, and we know this from the Great Recession. 0:09:33.200 --> 0:09:36.319 We are seeing this train wreck all over again, and 0:09:36.360 --> 0:09:41.000 we have to pay attention to those who are less fortunate, 0:09:41.120 --> 0:09:45.840 lower income, not in the fancy Harvards and Ivy League schools. 0:09:45.920 --> 0:09:50.040 They need our support right now. Yeah, I mean some 0:09:50.080 --> 0:09:52.800 of us, I'm sure have seen those really horrific and 0:09:53.040 --> 0:09:56.240 really sad pictures on Twitter and elsewhere of kids gathered 0:09:56.240 --> 0:09:58.960 outside places like Walmart and Target in order to try 0:09:59.000 --> 0:10:02.240 to use free internet because they just don't have it 0:10:02.320 --> 0:10:06.120 at home. This isn't just one problem, It's a money 0:10:06.320 --> 0:10:10.120 headed problem, Caudia. Is there any kind of even partial 0:10:10.200 --> 0:10:15.560 solution that could be implemented immediately the such a situation 0:10:15.640 --> 0:10:18.760 that we are in is not inevitable, it is not 0:10:18.880 --> 0:10:23.400 set in stone, and yet it will take money. The 0:10:23.480 --> 0:10:27.600 federal government needs to get money out to state and 0:10:27.679 --> 0:10:31.520 local governments. Those are the primary funding sources of education 0:10:31.640 --> 0:10:36.719 United States, particularly our public schools, are public colleges and 0:10:36.840 --> 0:10:41.280 our community colleges, which are so important, are always underfunded. 0:10:41.520 --> 0:10:45.079 And right now the municipal just don't have the money 0:10:45.120 --> 0:10:49.080 for Congress can send the money, and they haven't yet, 0:10:49.160 --> 0:10:52.720 and they absolutely have to if we are going to 0:10:52.760 --> 0:10:58.200 get to a better place because really here, uh, it's interesting, 0:10:58.640 --> 0:11:03.040 a lot of these state and city colleges, they rely 0:11:03.280 --> 0:11:07.240 very heavily upon that kind of state and city funding. 0:11:07.520 --> 0:11:11.079 So what are they doing right for this academic year? 0:11:11.120 --> 0:11:15.040 How stretched are they? Well, so if you think about 0:11:15.120 --> 0:11:18.720 just broadly, what's happening at state and local governments, and 0:11:18.920 --> 0:11:22.480 the vast majority of them have balanced budget requirements, right, 0:11:22.520 --> 0:11:24.320 so they have to make what comes in meet what 0:11:24.400 --> 0:11:28.640 goes out. Tax revenues plunged during the crisis. There are 0:11:28.800 --> 0:11:33.000 estimates that they state and local governments are facing a 0:11:33.120 --> 0:11:36.959 twenty percent shortfall in their budgets for this fiscal year 0:11:37.000 --> 0:11:42.120 we're in now, Like that is incomprehensible, right, So a 0:11:42.160 --> 0:11:46.040 lot of the adjustments are just getting started, and what 0:11:46.080 --> 0:11:49.240 we've already seen is very painful, and the funding cuts 0:11:49.320 --> 0:11:53.280 again for places like community colleges that already had pretty 0:11:53.280 --> 0:11:58.120 tight funding, like, it's going to get worse, and that 0:11:58.120 --> 0:12:02.280 that has repercussions of us for those students, and it 0:12:02.360 --> 0:12:06.120 has repercussions for all of us. Education is a big 0:12:06.240 --> 0:12:10.600 driver of shared prosperity. Right, So if you hit another 0:12:10.679 --> 0:12:16.960 generation with um less educational opportunities, a massive amount of 0:12:16.960 --> 0:12:19.760 student debt that doesn't you know, come along with a 0:12:19.760 --> 0:12:24.320 great degree, then like you're we're going to destroy a 0:12:24.720 --> 0:12:27.400 generation of students and we're really going to step back 0:12:27.640 --> 0:12:32.440 the potential of the whole economy. So all students are affected, 0:12:32.480 --> 0:12:37.160 as our old teachers, but presumably those in lower income 0:12:37.280 --> 0:12:40.560 areas and also those in public schools as opposed to 0:12:40.960 --> 0:12:44.840 private schools are worse affected. Clodia. So as you say, 0:12:44.880 --> 0:12:48.800 the inequality of this is just so you know, unfair, 0:12:49.200 --> 0:12:52.680 What will it take? Will it take protests on the streets? 0:12:52.960 --> 0:12:55.080 I mean, what what can be done in order to 0:12:55.120 --> 0:12:59.400 get some help, some funding, even just some support, whether 0:12:59.440 --> 0:13:03.000 it's from their schools, you know, other communities, to these 0:13:03.080 --> 0:13:08.840 kids that are just going to get lost in the system. So, 0:13:09.200 --> 0:13:11.720 as I said before, money from Congress would go a 0:13:11.800 --> 0:13:14.760 really long way. I don't expect that money to come. 0:13:15.200 --> 0:13:18.400 It has been extremely frustrating to see that get mayred 0:13:18.400 --> 0:13:21.440 down in partisan politics, but that is it is what 0:13:21.559 --> 0:13:24.400 it is. So I think at this point it's going 0:13:24.480 --> 0:13:30.360 to take a lot of creative solutions. People being like 0:13:30.440 --> 0:13:33.920 thinking blue guy, like, how do we pull this off? 0:13:34.240 --> 0:13:37.440 I'm actually speaking tomorrow at a conference of mayors, and 0:13:37.480 --> 0:13:39.719 one of my tasks is to come exactly what's the 0:13:39.800 --> 0:13:43.360 question you asked? Okay, so given where we are, what 0:13:43.400 --> 0:13:46.040 do we do, like, how how do we get through 0:13:46.080 --> 0:13:50.680 this situation in the best way possible? And and it's tough, right, 0:13:50.679 --> 0:13:54.120 So it's blue sky thinking. It is trying to find 0:13:54.120 --> 0:13:57.680 ways to be more effective, efficient, making sure that you 0:13:57.880 --> 0:14:01.560 target the resources. Just said in the very beginning, there 0:14:01.600 --> 0:14:06.719 are students who don't they lack the ability to go online, 0:14:06.960 --> 0:14:11.079 to go hybrid, you know, their connectivity issues, there's access 0:14:11.120 --> 0:14:13.840 to high speed WiFi. There's also a lot of issues 0:14:13.880 --> 0:14:16.679 with parents who have to get back to work, right 0:14:16.720 --> 0:14:19.800 and so they're just there's a lot of complexity, there's 0:14:19.840 --> 0:14:24.200 a lot of need um, you know. But local governments 0:14:24.240 --> 0:14:26.640 they know what their people need best like and how 0:14:26.640 --> 0:14:30.000 to implement it. It It ought to becoming local instead of federal. 0:14:30.400 --> 0:14:33.360 But the federal government should be getting them the money 0:14:33.360 --> 0:14:36.360 they need to do these blue sky creative Well, let's 0:14:36.360 --> 0:14:39.440 hope something happens very soon because we're already into the 0:14:39.440 --> 0:14:42.200 school year. It's a great peace Scaldia, thank you for 0:14:42.240 --> 0:14:45.440 writing it. It all needs to be said. Some of 0:14:45.480 --> 0:14:48.840 course is former Federal Reserve economist, creator of the recession 0:14:48.880 --> 0:14:51.720 indicator of the some rule, and we appreciate her coming 0:14:51.720 --> 0:14:56.000 on well. When I was in business school many moons ago, 0:14:56.120 --> 0:14:58.800 we were taught that the purpose of a corporation, particularly 0:14:58.920 --> 0:15:03.240 public corporation, is that maximize profits for shareholders. Now, in 0:15:03.240 --> 0:15:05.440 the age of E s G investing, where there's focused 0:15:05.480 --> 0:15:09.360 on environmental, social, and governance, I think that's being expanded 0:15:09.400 --> 0:15:12.800 upon to maybe include more stakeholders. To talk more about that, 0:15:12.840 --> 0:15:16.480 we welcome Michael O. Leary, former economic policy advisor in 0:15:16.520 --> 0:15:19.360 the United States Senate and a founding team member of 0:15:19.440 --> 0:15:23.040 Bane Capital Social Impact Fund UH. Michael's also the co 0:15:23.320 --> 0:15:26.880 author of a new book entitled Accountable, The Rise of 0:15:26.960 --> 0:15:29.520 Citizen Capitalism. Michael, thanks so much for joining us here. 0:15:30.000 --> 0:15:34.880 So again, maximize profits for shareholders or corporations need to 0:15:34.880 --> 0:15:39.400 think about broadening that out to other stakeholders. I think 0:15:39.480 --> 0:15:42.760 you're seeing right now or just changing focus from I 0:15:42.760 --> 0:15:45.040 think we've had fifty years of this focus on the 0:15:45.080 --> 0:15:49.160 corporation's purposes to maximize profits for shareholders. And with the 0:15:49.200 --> 0:15:52.400 Business Roundtable statement, last summer, the Davos Manifesto coming out 0:15:52.400 --> 0:15:55.400 of the World Economics Forum last winter. You're seeing business 0:15:55.480 --> 0:15:57.840 leaders investors starting to recognize that the purpose of a 0:15:57.880 --> 0:16:03.440 corporation can extend beyond just maximized share price. How about 0:16:04.480 --> 0:16:07.360 furthering that? What what would be the best way to 0:16:07.360 --> 0:16:11.280 go about things like that? Well, the problem right now 0:16:11.400 --> 0:16:15.200 is that if this sort of stakeholder capitalism mindset is 0:16:15.280 --> 0:16:18.280 winning the battle of ideas, it's losing the war stuffs 0:16:18.320 --> 0:16:20.840 into action. And so at the same time that you'd 0:16:20.840 --> 0:16:23.280 be hard pressed to find many business leaders today who 0:16:23.320 --> 0:16:25.600 don't at least pay lip service to this idea of 0:16:25.600 --> 0:16:29.800 serving their communities, their workers, the environment. You're not seeing 0:16:29.840 --> 0:16:33.040 the sort of substant action they'll ast you push that forward. 0:16:33.040 --> 0:16:35.720 And I think the the response to the pandemic was 0:16:35.760 --> 0:16:37.680 a good example where at first you saw a lot 0:16:37.720 --> 0:16:42.840 of companies pulling together, shifting from manufacturing perfume to manufacturing 0:16:42.880 --> 0:16:48.000 hand sanitizer, from luxury gowns to hospital gowns. But you're 0:16:48.000 --> 0:16:49.840 seeing all that start to pull back, and I think 0:16:49.880 --> 0:16:52.680 that kind of the the decoupling of the financial markets 0:16:52.680 --> 0:16:55.440 from the real economy. It's just forcing a lot of 0:16:55.440 --> 0:16:58.800 people to question whether or not these pronouncements of stakeholder 0:16:58.800 --> 0:17:02.080 capitalism are actually showing up in their lives. Well, Michael, 0:17:02.080 --> 0:17:05.400 I remember thinking when I first saw that Business Roundtable 0:17:05.920 --> 0:17:08.879 letter or statement from last year, my first thought was, 0:17:09.040 --> 0:17:13.800 unless you align executive compensation to these goals, some of 0:17:13.840 --> 0:17:16.680 these e s G goals stakeholder goals, you're not gonna 0:17:16.680 --> 0:17:19.240 get any substant action. How do you go about that? 0:17:21.200 --> 0:17:24.280 It's a great point, I mean, business leaders, CEOs are 0:17:24.280 --> 0:17:28.679 the largest corporations, are compensated mainly on stock price, and 0:17:28.720 --> 0:17:32.000 so to extend their compensation still requires them to maximize 0:17:32.440 --> 0:17:35.000 their stock price. Their incentive structure is not going to 0:17:35.160 --> 0:17:37.840 change just by changing their rhetoric. Now, what I think 0:17:37.840 --> 0:17:43.080 business leaders are recognizing is that today employees, customers, government's 0:17:43.119 --> 0:17:46.000 regulators are expecting more out of corporations, and so the 0:17:46.040 --> 0:17:48.720 best way to maximize share price over the long term 0:17:48.880 --> 0:17:51.840 is by focusing on things like a deeper purpose, on 0:17:51.920 --> 0:17:56.240 serving your stakeholders. But but following the Roundtable statement, you 0:17:56.280 --> 0:18:00.359 had this kind of horrible PostScript, which was the Council 0:18:00.400 --> 0:18:02.919 of Institutional Investors, which represents a lot of the largest 0:18:02.920 --> 0:18:05.760 asset owners in the country, released the statement of their 0:18:05.800 --> 0:18:09.520 own reminding the business roundtable which represents CEOs, Reminding those 0:18:09.560 --> 0:18:13.399 CEOs that CEOs work for shareholders, you know, and the 0:18:13.560 --> 0:18:16.560 shareholders mocks do we have where shareholders elect boards and 0:18:16.560 --> 0:18:20.520 boards appoint CEOs. CEOs ultimately have to to reflect the 0:18:20.560 --> 0:18:24.680 interests of their underlying shareholders. And and uh, the statement 0:18:24.760 --> 0:18:28.720 said accountability to everyoneted accountability to no one, and and 0:18:28.760 --> 0:18:31.600 reminding CEOs that they work for shareholders. And so, I 0:18:31.600 --> 0:18:34.119 mean that's part of what's gonna hold back real action 0:18:34.160 --> 0:18:37.639 here is and tell shareholders investors get on board with 0:18:37.720 --> 0:18:40.800 this sort of stakeholder approach to running companies, you're not 0:18:40.840 --> 0:18:43.160 going to see a sort of change. So actually show 0:18:43.240 --> 0:18:45.360 up in the lives the stakeholders. Yeah, the sentence are 0:18:45.359 --> 0:18:48.640 not aligned. I mean, it's partially why Jeff Alben went 0:18:48.720 --> 0:18:50.600 his own way and sort of after all these years, 0:18:50.720 --> 0:18:54.639 started as you know, another of his own shops in 0:18:54.720 --> 0:18:56.840 order to do E. S G. The way he wanted to, 0:18:57.000 --> 0:19:00.360 the way he thought it should be done. We need 0:19:00.440 --> 0:19:03.359 more of that, because if people are worried about having 0:19:03.960 --> 0:19:06.680 enough of a return so they can retire someday, which 0:19:06.720 --> 0:19:08.720 is probably already going to be later than they ever 0:19:08.840 --> 0:19:14.159 thought before, then why should social justice come out of 0:19:14.200 --> 0:19:16.320 their retirement if you like, that's the way they're going 0:19:16.359 --> 0:19:19.439 to look at it, right. This is kind of the 0:19:19.440 --> 0:19:23.120 traditional view that that any focus on society the environment 0:19:23.400 --> 0:19:26.439 must come at the cost, come at the expense of 0:19:26.800 --> 0:19:29.760 shareholder returns. That there is this trade off, and I 0:19:29.800 --> 0:19:31.960 think what up and is doing with inclusive Capital Partners, 0:19:32.000 --> 0:19:34.040 but a lot of major prova equity funds are now 0:19:34.119 --> 0:19:37.440 doing and launching impact funds like a TVG or being 0:19:37.440 --> 0:19:40.960 Capital Ride Work or KKR if they're saying we can 0:19:41.000 --> 0:19:44.760 actually generate alpha by focusing on these areas because the 0:19:44.880 --> 0:19:47.359 sorts of companies are gonna succeed in the long term 0:19:47.680 --> 0:19:50.680 are sorts of companies that are focused on the material 0:19:50.760 --> 0:19:54.639 financial risks and opportunities that come from looking at social 0:19:54.760 --> 0:19:56.920 environmental issues. This is what you saw with the French 0:19:56.920 --> 0:20:00.440 food giant dan On that put social purpose into its 0:20:00.480 --> 0:20:03.800 corporate charter. It became the equivalent of a benefit corporation 0:20:04.200 --> 0:20:06.280 in France. And they weren't doing that to say this 0:20:06.320 --> 0:20:08.720 is going to come at the expensive profits. They're making 0:20:08.760 --> 0:20:10.840 assessment that this is what was best for shareholders in 0:20:10.920 --> 0:20:14.080 long term. Is we've seen this this crazy transition, where 0:20:14.320 --> 0:20:17.800 at the same time that average holding period for a 0:20:17.840 --> 0:20:20.639 stock has declined from eight years in the sixties to 0:20:20.760 --> 0:20:24.959 eight months today. The needs, as you said, of future 0:20:25.000 --> 0:20:28.080 retirees has elongated. You know, the media shareholder in America 0:20:28.160 --> 0:20:30.760 is fifty years old. They can't even access their frore 0:20:30.760 --> 0:20:33.840 owen K accounts for the next fifteen years. And so 0:20:34.000 --> 0:20:36.280 when they need capital marks to be thinking longer term, 0:20:36.359 --> 0:20:39.280 not shorter term, and I think inclusive Happita Partners, Jeff 0:20:39.320 --> 0:20:41.280 up and spawned a lot of these impact funds are 0:20:41.280 --> 0:20:43.440 recognizing that the best way to do that, the best 0:20:43.440 --> 0:20:45.439 way to focus on the long term, is by focusing 0:20:45.440 --> 0:20:49.359 on stakeholders. So, Michael, I guess I first heard about 0:20:49.880 --> 0:20:53.639 E s G investing in was from Europe, maybe ten 0:20:53.720 --> 0:20:55.840 or fifteen years ago, years before I really heard about 0:20:55.840 --> 0:20:59.520 it from UH. US. Institutional investors. Are other parts of 0:20:59.560 --> 0:21:05.480 the world incorporating the stakeholder approach better than perhaps the US. 0:21:07.160 --> 0:21:09.520 I think you are c that you're seeing that Europe 0:21:09.520 --> 0:21:12.399 for sure is leading. Japan has always taken a slightly 0:21:12.400 --> 0:21:17.199 different approach. UH Germany, you'll have more companies that are 0:21:17.200 --> 0:21:20.360 owned by majority shareholder, less of the sort of intermediated 0:21:20.359 --> 0:21:22.480 capitalism we have in the U S where most companies 0:21:22.640 --> 0:21:26.200 are not owned by a majority shareholder, Europe and many ways. 0:21:26.200 --> 0:21:28.840 He's been leading the charge from the investing front. So 0:21:29.040 --> 0:21:32.080 United Nations Principles for Responsible Investing, which is a set 0:21:32.119 --> 0:21:34.800 of six principles saying that you're going to incorporate E 0:21:34.960 --> 0:21:37.440 s G in some way into investing philosophy, is now 0:21:37.480 --> 0:21:40.959 aggregated ninety trillion dollars of asset, many assets coming from 0:21:41.000 --> 0:21:42.480 the US or Asia, but for the most part of 0:21:42.520 --> 0:21:46.480 these are focused in Europe, in the Nordics and the 0:21:46.480 --> 0:21:49.800 major pension funds, sovereign wealth funds. And the problem is 0:21:49.840 --> 0:21:51.800 that at the same time that you're seeing that sort 0:21:51.800 --> 0:21:54.960 of commitment to these principles of I'm going to integrate 0:21:55.080 --> 0:21:57.960 E s G into my investing philosophy, there's been some 0:21:58.040 --> 0:22:01.320 recent research coming from air In Unit Kellogg and others 0:22:01.640 --> 0:22:04.520 that shows that there's not much difference between investors who 0:22:04.720 --> 0:22:07.680 investors who have signed onto these principles and investors who 0:22:07.720 --> 0:22:10.240 have not. There's not much difference between investors before and 0:22:10.280 --> 0:22:13.399 after they saw to this principle. So what we're seeing 0:22:13.440 --> 0:22:16.240 is we're seeing a lot of commitment, which is a 0:22:16.240 --> 0:22:19.480 good first step we're not seeing that falls through into 0:22:19.560 --> 0:22:22.920 a different wage of actually investing divested being one one 0:22:22.960 --> 0:22:26.760 particular exception to that where the divestment movement where university 0:22:26.840 --> 0:22:29.840 damads are divested from oil and gas. Michael, that's really 0:22:30.280 --> 0:22:32.639 we have to talk about this again very soon. Michael 0:22:32.680 --> 0:22:36.199 O'Leary joining us, their author of Accountable The Rise of 0:22:36.280 --> 0:22:41.680 Citizen Capitalism. Well, as we know, it's only a few 0:22:41.680 --> 0:22:44.439 hours to d time, and that is the f O 0:22:44.560 --> 0:22:48.119 m C meeting and press conference. Jerry J. Powell be 0:22:48.119 --> 0:22:50.480 getting up there along with all of a Zoom companions 0:22:50.520 --> 0:22:53.200 and talking about the economy. Let's bringing somebody who can 0:22:53.200 --> 0:22:55.480 give us a bit of a an insight into what 0:22:55.520 --> 0:22:57.639 we might hear today, because there does seem to be 0:22:57.960 --> 0:23:00.199 no consensus about what that might be. For were the 0:23:00.200 --> 0:23:02.680 first time in a long time, Daniel D. Martineau Booth, 0:23:02.720 --> 0:23:06.320 the CEO of Quill Intelligence and of course a columnist 0:23:06.359 --> 0:23:09.320 for Bloomberg Opinion, former advisor to the Dallas Fed as well, 0:23:09.720 --> 0:23:12.480 danielle for the first time in a long time, I'm 0:23:12.520 --> 0:23:15.359 hearing different interpretations as to what might happen today. It 0:23:15.520 --> 0:23:18.040 seems like it's it's been forever since fed water has 0:23:18.080 --> 0:23:21.280 got into the details, and and you know, try to 0:23:21.320 --> 0:23:23.720 forecast what the FED chair might say. Yeah, I'm not 0:23:23.800 --> 0:23:25.399 sure we have daniel She might have dropped off the 0:23:25.400 --> 0:23:28.080 line by should be back in just a moment. But well, 0:23:28.080 --> 0:23:30.240 paul I, I'll ask you the same thing. Yeah, but 0:23:30.320 --> 0:23:32.680 it'll be you know, it'll be interesting to see kind 0:23:32.680 --> 0:23:35.920 of what tone we get from a chairman, pal, because 0:23:35.920 --> 0:23:37.520 I think the market, you know, as we heard from 0:23:37.520 --> 0:23:41.160 some uh Elena Letia from Bloomberg Economics this morning, maybe 0:23:41.160 --> 0:23:43.159 a little bit more explanation on what they thinking was 0:23:43.200 --> 0:23:47.280 behind that inflation policy, i e. The Fed might allow 0:23:47.560 --> 0:23:50.800 the UH go above two percent, right, And of course 0:23:50.800 --> 0:23:53.320 there's always a statement, and there's always a comparison of 0:23:53.359 --> 0:23:56.639 this statement and the previous statement. Will this statement have 0:23:57.160 --> 0:23:59.760 a whole new template to it? I mean it's very unlikely, 0:23:59.800 --> 0:24:04.000 but there are likely to be different phrases, different you know, 0:24:05.640 --> 0:24:08.240 wording about the mondays, you know, and what the Fed 0:24:08.320 --> 0:24:10.679 will do. As you say, yeah, we now have Danielle. 0:24:10.880 --> 0:24:13.040