WEBVTT - Fed Shift Rates Debate From ‘How High’ to ‘How Long’ 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 --> 0:00:18.960 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.120 --> 0:00:22.280 Yeah, how long has this been going on? And then 0:00:22.280 --> 0:00:24.520 the question is we just talked about with our TV colleagues, 0:00:24.520 --> 0:00:27.760 this whole idea that the FED is no longer you know, 0:00:27.880 --> 0:00:31.600 talking about how high. It's more about how long? So 0:00:31.640 --> 0:00:33.400 how long do we stay at those higher rates? And 0:00:33.600 --> 0:00:35.920 you know, you look at something like the retail sales 0:00:35.960 --> 0:00:39.199 report that's out there and folks are shopping on stuff. 0:00:39.400 --> 0:00:41.800 The question I have, Carol, is is this because the 0:00:41.920 --> 0:00:45.239 long and variable lag of raid hikes have not yet 0:00:45.320 --> 0:00:48.040 hit the consumer in certain areas? 0:00:48.040 --> 0:00:50.520 So much for joining us this afternoon, or is it. 0:00:50.440 --> 0:00:54.160 Because the consumer is just so resilient having built up 0:00:54.160 --> 0:00:54.880 a cash cushion? 0:00:55.040 --> 0:00:59.000 And J Powell again, thank you so much for I 0:00:59.000 --> 0:01:01.200 could see the presco are the comments coming out of 0:01:01.240 --> 0:01:02.360 Jackson Hole next week? 0:01:02.520 --> 0:01:05.880 Those are real questions though, like why why are consumers 0:01:05.880 --> 0:01:06.480 so resilient? 0:01:06.560 --> 0:01:06.800 Still? 0:01:06.920 --> 0:01:09.119 I don't know, balance, I don't know why. 0:01:08.959 --> 0:01:10.520 Are housing price is not coming down? 0:01:10.560 --> 0:01:11.479 What are you? A two year old? 0:01:12.240 --> 0:01:13.000 Just have questions? 0:01:13.360 --> 0:01:15.080 Well, we have somebody to help us with some answers, 0:01:15.080 --> 0:01:17.360 Bloomberg News Economics editor Molly Smith. She's here in our 0:01:17.360 --> 0:01:18.920 Bloomberg Interactive Broker studio. 0:01:19.360 --> 0:01:19.600 Molly. 0:01:19.720 --> 0:01:22.080 So, let's start with the retail sales data. Since it 0:01:22.160 --> 0:01:24.120 came out this morning, we all knew that there was 0:01:24.160 --> 0:01:26.840 going to be at least initially some upside pressure on yields, 0:01:26.840 --> 0:01:28.080 and it definitely played out that way. 0:01:28.400 --> 0:01:31.240 Yeah, And I mean, really, Tim, you just I think 0:01:31.240 --> 0:01:33.240 you just stole the cake from Jay and Jackson Hole 0:01:33.319 --> 0:01:35.679 right here. So these are well I think you perfectly 0:01:35.720 --> 0:01:39.199 scripted so that only had grateful to you know, sweat 0:01:39.360 --> 0:01:39.760 shirt on. 0:01:40.840 --> 0:01:42.280 I'm going to be I am not going to be 0:01:42.319 --> 0:01:45.080 fly fishing in Jackson Hole anytime soon. I'm going to 0:01:45.120 --> 0:01:46.119 be here working all right. 0:01:46.040 --> 0:01:48.720 Jo, just like the rest of us. But you know, yeah, 0:01:48.760 --> 0:01:51.120 I mean I think it really is. It still is 0:01:51.160 --> 0:01:53.240 a question that we would all love the answer to of, 0:01:53.280 --> 0:01:56.200 like is this because like the policy lags haven't hit 0:01:56.200 --> 0:01:58.360 the consumer yet or they really just are that strong? 0:01:58.480 --> 0:02:00.320 And I think there's reasons to believe, but it could 0:02:00.360 --> 0:02:00.680 be true. 0:02:00.720 --> 0:02:02.840 Well, take a step back. How strong was the retail 0:02:02.880 --> 0:02:04.680 sales data give us some perspective because there were also 0:02:04.760 --> 0:02:06.840 some revisions right to previous reads. 0:02:06.920 --> 0:02:09.520 I think that was probably what gave me the most 0:02:09.720 --> 0:02:12.440 you know, upbeat read on this report, because you know, 0:02:12.480 --> 0:02:14.919 we always say you shouldn't look too much into one 0:02:14.960 --> 0:02:17.000 month's worth of data, but when you see that there's 0:02:17.240 --> 0:02:20.359 big upward revisions the prior to months, and it's like, okay, wait, 0:02:20.360 --> 0:02:23.760 maybe that kind of boosts some of the optimism around 0:02:23.760 --> 0:02:26.079 this and gives you some more confidence. And a big 0:02:26.160 --> 0:02:27.680 number like today's was okay. 0:02:27.720 --> 0:02:31.040 But these are goods, not services. That's another thing to 0:02:31.120 --> 0:02:31.640 keep in mind. 0:02:31.760 --> 0:02:34.919 Mostly goods. Yes, there is one services spending category here, 0:02:34.960 --> 0:02:38.359 and it's also not inflation adjusted. But the reason why 0:02:38.400 --> 0:02:41.240 that actually in this case makes it look almost better 0:02:41.360 --> 0:02:44.040 is because in the last CPI report for this month, 0:02:44.280 --> 0:02:48.440 we saw more disinflation and goods as in prices price 0:02:48.480 --> 0:02:51.240 growth being lower. So you would think, then if you 0:02:51.280 --> 0:02:54.720 see this bigger retail sales number, then that has to 0:02:54.760 --> 0:02:59.800 be also greater actual spending to combat lower prices or 0:03:00.120 --> 0:03:01.880 lesser price growth. I should say, all. 0:03:01.880 --> 0:03:04.080 Right, so I want to bring Ara Jersey into the conversation. 0:03:04.120 --> 0:03:06.880 He's Bloomberg Intelligence chief US interest rates strategist on the 0:03:06.919 --> 0:03:10.280 phone in New Jersey. So Ira, you know, Molly setting 0:03:10.320 --> 0:03:12.000 the tone in terms of what we got from the 0:03:12.000 --> 0:03:15.560 retail sales data, including those revisions, which is largely the 0:03:15.600 --> 0:03:17.720 reason why we got that kick in yields. Hired talked 0:03:17.720 --> 0:03:21.280 to us about the trade today, specifically the significance of 0:03:21.760 --> 0:03:23.760 one day's trade in the trade. We've been seeing the 0:03:23.880 --> 0:03:25.400 US government dead. I feel like I keep asking me 0:03:25.440 --> 0:03:26.040 the same question. 0:03:26.600 --> 0:03:31.680 Yeah, yeah, So we you know, started the day actually 0:03:31.720 --> 0:03:34.440 with higher yields, primarily because of better data in Europe. 0:03:34.480 --> 0:03:36.680 So we had a big sell off in Europe, and 0:03:36.720 --> 0:03:39.200 Treasury followed that, and it was you know, there was 0:03:39.200 --> 0:03:43.160 a continuation of that weakness right after the retail sales report. 0:03:43.760 --> 0:03:45.880 But then I think, you know, the market kind of 0:03:45.920 --> 0:03:48.560 woke up and said, you know, does this really change 0:03:48.600 --> 0:03:52.160 the forward outlook of what we were thinking where we're 0:03:52.160 --> 0:03:54.280 going to have a soft landing or at least a 0:03:54.320 --> 0:03:59.040 delayed recession. The Fed might not cut as aggressively as 0:03:59.080 --> 0:04:02.120 we thought, but at the same time, they're going to 0:04:02.200 --> 0:04:04.040 cut at some point, So then you wind up having 0:04:04.080 --> 0:04:06.920 a bit of a reversal and people taking advantage of 0:04:07.000 --> 0:04:09.560 four and a quarter percent ten year yields and five 0:04:09.600 --> 0:04:13.320 percent two year yields. So and the market's very over 0:04:13.360 --> 0:04:15.080 sold right now as well. So I think it was 0:04:15.160 --> 0:04:17.560 just kind of an opportunity that people took to cover 0:04:17.640 --> 0:04:20.760 some shorts, you know, at somewhat higher yields. 0:04:21.400 --> 0:04:23.720 How high do you think we'll see on the short. 0:04:23.600 --> 0:04:27.799 End, Yeah, so we could get up towards five point 0:04:27.839 --> 0:04:31.120 one percent, five point one five percent. It really depends 0:04:31.120 --> 0:04:35.800 on the scenario for the Fed and how long and 0:04:35.880 --> 0:04:37.680 if they're good, well, firstly if they're going to hike 0:04:37.720 --> 0:04:39.720 again this year, and then secondly, how long they're going 0:04:39.760 --> 0:04:42.719 to hold the gist rates at at the current level. 0:04:43.760 --> 0:04:47.279 You know, when when the market wakes up. I think 0:04:47.279 --> 0:04:49.120 eventually the market will wake up to the idea that 0:04:49.160 --> 0:04:51.840 the Fed might not be cutting interest rates until the 0:04:51.880 --> 0:04:54.720 fourth quarter of twenty twenty four. And if that's the case, 0:04:54.760 --> 0:04:57.400 you could easily get another you know, fifteen twenty twenty 0:04:57.400 --> 0:04:59.599 five base points to sell off up to around five 0:04:59.600 --> 0:05:02.760 point one percent. We put that in a note actually 0:05:02.880 --> 0:05:06.040 last week about different scenarios that could occur depending on 0:05:06.720 --> 0:05:08.560 you know, what the Fed could do. But that being said, 0:05:08.560 --> 0:05:11.520 I think at some point in the next three to 0:05:11.600 --> 0:05:14.839 six months will start to get a pretty significant rally 0:05:14.839 --> 0:05:16.599 in two year yields, and you'll see two year yields 0:05:16.680 --> 0:05:19.200 much lower on the idea that at some point in 0:05:19.240 --> 0:05:21.159 the in the future will start the price for very 0:05:21.200 --> 0:05:22.320 aggressive Federal reserve. 0:05:22.640 --> 0:05:24.119 I don't know if you got this story, but with Carolyn, 0:05:24.160 --> 0:05:28.520 I interviewed Katherin Kaminski yesterday over at Alpha Simplex and 0:05:28.600 --> 0:05:31.599 she saw ten years. She sees ten years going to 0:05:31.680 --> 0:05:32.840 six percent. What do you make of that? 0:05:35.040 --> 0:05:38.240 There's so Molly just past. 0:05:38.200 --> 0:05:39.520 Molly just passed out. 0:05:40.080 --> 0:05:41.599 Sorry, I think that I don't know if that was 0:05:41.680 --> 0:05:42.480 audible to that. 0:05:42.480 --> 0:05:46.560 That was it's all live, everybody, all right, Yeah, well 0:05:46.680 --> 0:05:47.039 go ahead. 0:05:48.040 --> 0:05:51.400 I think that's an amazing tail risk. And the only 0:05:51.480 --> 0:05:54.880 real realistic way that you get to ten year yields 0:05:54.920 --> 0:05:57.359 at six percent, firstly, is that the Federal Reserve increases 0:05:57.360 --> 0:05:59.520 interest rates more in the front end and at number one, 0:05:59.720 --> 0:06:04.000 or the FED doesn't do anything and inflation accelerates, which is, 0:06:04.400 --> 0:06:07.880 you know, not a realistic possibility in my view, at 0:06:07.920 --> 0:06:11.839 least not not with this FED or reserve. So so 0:06:11.960 --> 0:06:14.080 to get to six percent is really a hard nut. 0:06:14.360 --> 0:06:17.719 You remember, what the reason why ten year yields are 0:06:17.760 --> 0:06:19.600 so much lower than two year yields right now is 0:06:19.680 --> 0:06:22.679 just on the anticipation that even if the Fed hikes 0:06:22.680 --> 0:06:25.080 another twenty five or fifty basis points, at some point, 0:06:25.120 --> 0:06:27.480 they're going to be cutting interest rates, you know, even 0:06:27.480 --> 0:06:29.480 if it's not until twenty twenty six. So that's again, 0:06:29.520 --> 0:06:31.479 that's another scenario that we put out, like what if 0:06:31.839 --> 0:06:34.599 the Fed doesn't cut for two years, you know what, 0:06:34.600 --> 0:06:36.760 what then would the ten year be pricing? And it 0:06:36.760 --> 0:06:39.160 turns out the tenure would be pricing around three point 0:06:39.160 --> 0:06:41.480 eight five percent if they cut down to three percent 0:06:41.880 --> 0:06:45.360 in twenty twenty five, So you know, you still have 0:06:46.040 --> 0:06:48.960 you know, unless the Fed hiking ten year yields aren't 0:06:49.000 --> 0:06:51.160 going to probably break much higher than four and a 0:06:51.200 --> 0:06:51.640 half percent. 0:06:51.720 --> 0:06:54.600 Well, why we get Molly's smelling, sal smelling Molly. I'm 0:06:54.600 --> 0:06:56.720 going to continue and just at one thing I do 0:06:56.760 --> 0:06:58.800 want to ask you Ira, when the Fed you know, 0:06:58.960 --> 0:07:02.280 puts their you know, makes their rate moves and obviously 0:07:02.320 --> 0:07:03.839 what we're now at a five and a quarter to 0:07:03.880 --> 0:07:06.440 five and a half, I mean, is there something that 0:07:06.480 --> 0:07:08.000 the treasury if you take a look at the two 0:07:08.040 --> 0:07:13.840 year that it won't normally go x amount above that range. 0:07:14.320 --> 0:07:16.480 So well, yes, the correlation that we. 0:07:16.440 --> 0:07:20.360 Can assume that it can't go to that six percent, right, 0:07:20.400 --> 0:07:21.040 So well. 0:07:20.880 --> 0:07:23.800 If the Fed hikes the six percent and then two 0:07:23.880 --> 0:07:26.760 year yields will probably go a bit higher, you know, 0:07:26.800 --> 0:07:29.080 five and a half percent and something like that. So 0:07:29.440 --> 0:07:32.720 that really depends on how the market prices for the future. 0:07:32.840 --> 0:07:34.680 If you think about what the two year yield is, 0:07:35.000 --> 0:07:38.520 it's the average of the overnight rate for the next 0:07:38.520 --> 0:07:42.120 two years. So if the markets at five percent and 0:07:42.280 --> 0:07:44.480 the Fed fund rates at five and a half, then 0:07:44.680 --> 0:07:47.400 the market's telling you that at some point the market's 0:07:47.440 --> 0:07:50.880 mainly going to be pricing for at some point the 0:07:50.960 --> 0:07:54.240 Fed cutting interest rates in the future. And you know 0:07:54.280 --> 0:07:56.360 the reverse is true too, right, Like, let's imagine a 0:07:56.440 --> 0:07:59.320 scenario where the economy is falling out of bed, we 0:07:59.400 --> 0:08:02.400 see some jobs, inflation still high, and the Fed doesn't 0:08:02.400 --> 0:08:04.800 cut well, then maybe you could see two years yields 0:08:04.840 --> 0:08:07.040 above the Fed fund rate. You saw that for example 0:08:07.560 --> 0:08:09.920 in twenty twenty one when the market was preparing for 0:08:09.960 --> 0:08:12.720 the Fed to increase interest rates to so two year 0:08:12.760 --> 0:08:15.400 yields go much higher, right in anticipation of the fat 0:08:15.440 --> 0:08:16.280 actually hiking rates. 0:08:16.320 --> 0:08:18.360 All right, so let's go to the fundamentals. Molly, that's 0:08:18.440 --> 0:08:20.720 your game in terms of what we're seeing on the 0:08:20.720 --> 0:08:24.840 economic backdrop. I mean, this economy continues to surprise us 0:08:24.920 --> 0:08:26.320 in terms of its sustainability. 0:08:26.680 --> 0:08:28.800 Yeah, and I think that's you know, still feeding into 0:08:28.800 --> 0:08:31.360 a lot of this soft landing argument. And you know, 0:08:31.400 --> 0:08:34.520 people definitely saw a bit of reason to keep being 0:08:34.520 --> 0:08:37.360 optimistic on that today. But of course there is the 0:08:37.440 --> 0:08:39.080 risk on the other side of that that if this 0:08:39.200 --> 0:08:41.560 is like proving to be an economy that's too hot, 0:08:41.640 --> 0:08:46.200 that is feeding into inflationary pressures again, then the FED 0:08:46.240 --> 0:08:48.080 certainly is not going to let off and let that 0:08:48.400 --> 0:08:50.360 six percent treasury come to fruition. 0:08:50.600 --> 0:08:55.520 Doesn't the stickiness of like wages and rents or home costs, 0:08:55.679 --> 0:08:57.920 that's gonna that's what's weighing a little bit on inflation 0:08:58.000 --> 0:08:58.319 right now. 0:08:58.400 --> 0:09:00.240 Yeah, all these things, and this is why people been 0:09:00.240 --> 0:09:02.880 saying that last mile, you know, of getting from three 0:09:02.920 --> 0:09:05.120 to two is going to be the hardest and the longest. 0:09:05.200 --> 0:09:07.480 So I think that's that could be taking some of 0:09:07.480 --> 0:09:10.120 this euphoria out of this what some people are calling 0:09:10.160 --> 0:09:12.080 the immaculate disinflation story. 0:09:12.160 --> 0:09:15.240 Okay, well, speaking of euphoria being removed, US home builder 0:09:15.280 --> 0:09:18.240 sentiment declining for the first time this year. Molly, please explain. 0:09:18.640 --> 0:09:22.720 Yeah, so there's, uh, you know, the mortgage rates are 0:09:22.760 --> 0:09:25.440 still really high, and I think it's finally catching up 0:09:25.480 --> 0:09:29.640 to you know, affordability as well. That you know, we 0:09:29.679 --> 0:09:31.840 had seen some months of home prices coming down, but 0:09:31.880 --> 0:09:35.840 that seemed to be you know, not didn't really provide 0:09:35.840 --> 0:09:38.080 a whole lot of help on the affordability side. And 0:09:38.160 --> 0:09:41.000 especially since mortgage rates are now you know, staying above 0:09:41.000 --> 0:09:44.280 seven percent for a bit longer here and more talk 0:09:44.320 --> 0:09:46.760 of like the FED that it could very well hike 0:09:46.880 --> 0:09:49.640 rates again. And this discussion you guys were having as well, 0:09:49.679 --> 0:09:52.760 if not how high, but how long that that's really 0:09:52.800 --> 0:09:57.120 putting some damp or into the housing market activity. So uh, yeah, 0:09:57.240 --> 0:10:01.720 builds sentiment came down because of current sales, because future expectations, perspective, 0:10:01.720 --> 0:10:05.160 buyer traffic, all those main indices that builders look. 0:10:05.040 --> 0:10:07.600 For a right, just real quickly, thirty seconds left here 0:10:07.880 --> 0:10:10.079 next week at Jackson Hall. You think the FED is 0:10:10.120 --> 0:10:11.680 just going to work overtime to kind of get some 0:10:11.720 --> 0:10:13.840 of the volatility out of the markets or what you taking, 0:10:13.920 --> 0:10:15.120 just quickly I. 0:10:15.320 --> 0:10:17.920 Don't think volatility. I think that they'll probably focus on 0:10:17.920 --> 0:10:20.000 the how long question that we've been talking about at 0:10:20.000 --> 0:10:22.920 Bloomberg all day today. You know, we've been talking about 0:10:22.960 --> 0:10:26.200 that really since since May of this year. You know, 0:10:26.240 --> 0:10:30.040 will you know, how can they jawbone taking some of 0:10:30.080 --> 0:10:31.800 the cuffs that are priced out of the market. 0:10:32.240 --> 0:10:35.400 Any last thoughts here, Molly Jackson Hall next week. 0:10:35.800 --> 0:10:37.319 You know, I'm thinking about the US Open. 0:10:37.679 --> 0:10:38.000 Right, I know. 0:10:39.160 --> 0:10:39.560 That's okay. 0:10:39.600 --> 0:10:41.520 It's why we done one of the reasons, many of 0:10:41.520 --> 0:10:44.320 the reasons I always have to sneak it in. Mollie Smith, 0:10:44.720 --> 0:10:47.199 Economics editor at Bloomberg News. The US Open is a 0:10:47.240 --> 0:10:49.679 great indicator of the economy. I got to tell you 0:10:49.679 --> 0:10:52.599 our Jersey chief US Interest Rate Strategies at Bloomberg Intelligence 0:10:52.840 --> 0:10:54.040 on the phone in New Jersey. 0:10:54.040 --> 0:10:54.400 It is. 0:10:54.520 --> 0:10:56.480 It is a kind of ish. 0:10:56.720 --> 0:11:00.600 You're listening to the Bloomberg Business Week podcast just live 0:11:00.640 --> 0:11:04.280 weekday afternoons from three to six Eastern Listen on Bloomberg 0:11:04.320 --> 0:11:07.760 dot com, the iHeartRadio app, and the Bloomberg Business app 0:11:08.040 --> 0:11:09.760 or wants us Live on YouTube. 0:11:10.600 --> 0:11:13.280 So back in early twenty twenty one, Spacks, we're really 0:11:13.320 --> 0:11:15.400 having a moment, to say, the least, but today we 0:11:15.480 --> 0:11:18.040 had a bit of a different story and environment. Of 0:11:18.080 --> 0:11:21.280 the roughly four hundred d SPACs on US exchanges, those 0:11:21.440 --> 0:11:23.920 are companies that have merged with a SPAC like we 0:11:24.040 --> 0:11:26.760 work wheels up in a few more. The median performance 0:11:26.800 --> 0:11:30.719 here to date is down fifty percent. That's according to 0:11:30.800 --> 0:11:32.000 data compiled by Bloomberg. 0:11:32.040 --> 0:11:34.560 Tim Yeah, and about fifteen percent have gone bankrupt since 0:11:34.559 --> 0:11:36.480 the peak in early twenty twenty one. So let's get 0:11:36.480 --> 0:11:40.120 a spack update and Tuck Moore, We've got Isabelle Freedheim 0:11:40.120 --> 0:11:43.560 with a CEO and founder of Athena Consumer Acquisition Corporates, 0:11:43.559 --> 0:11:46.040 an all women let's spack platform. You have recall we've 0:11:46.040 --> 0:11:48.720 talked with members of the Athena team in the last 0:11:48.720 --> 0:11:52.640 few months. Isabelle is on zoom from Aspen, Colorado. Isabelle, 0:11:52.640 --> 0:11:55.760 how are you good? Thank you well, it's good to 0:11:55.760 --> 0:11:57.160 have you with us. Carolyn and I were talking about 0:11:57.160 --> 0:11:58.760 this as we prepared for the segment, and we thought, 0:11:58.760 --> 0:12:00.720 you know, it's so interesting, becase it would make sense 0:12:00.760 --> 0:12:03.360 to be talking so much with SPACs in twenty twenty one, 0:12:03.400 --> 0:12:07.240 maybe early twenty twenty two. But today's news of the 0:12:08.640 --> 0:12:12.560 ev SPAC, notwithstanding SPACs aren't really happening much anymore. 0:12:14.000 --> 0:12:17.760 Why is that, Well, actually they are. There have been 0:12:17.840 --> 0:12:22.200 nine SPACs announcements in the last couple of weeks. That's 0:12:22.320 --> 0:12:24.920 ninety four up to ninety four now year to date. 0:12:25.440 --> 0:12:29.839 The prior year we saw about three hundred closed SPAC transaction. 0:12:29.559 --> 0:12:31.960 So big decline from even last year. 0:12:34.440 --> 0:12:36.440 So far, year to date we're at ninety four. I 0:12:36.480 --> 0:12:39.720 expect that we will see tremendous activity in the fall 0:12:39.840 --> 0:12:43.600 as well. There's no question that the IPO window remains 0:12:43.800 --> 0:12:48.000 shut for now and spacks continue to provide access to 0:12:48.400 --> 0:12:52.959 public markets. It's unquestionably challenging. That being said, for companies 0:12:52.960 --> 0:12:56.240 that want to go public, we are proving that there 0:12:56.320 --> 0:12:58.120 is a viable path through spas. 0:12:58.679 --> 0:13:01.200 Tell us what that viable path is, because, as you know, 0:13:01.320 --> 0:13:03.440 SPACs you know, in general, have been around for a 0:13:03.480 --> 0:13:06.679 long time, but they definitely have very distinct up and 0:13:06.720 --> 0:13:11.520 down cycles, up extremes and down extremes. So where are 0:13:11.559 --> 0:13:14.960 the opportunities that are actually going to create companies that 0:13:15.000 --> 0:13:17.480 are with us for the long haul and that actually 0:13:17.600 --> 0:13:21.080 you know, will ultimately provide good liquidity events for those 0:13:21.240 --> 0:13:22.760 founders and their companies. 0:13:23.640 --> 0:13:26.760 I think the supply and demand forces of the market 0:13:26.880 --> 0:13:31.480 have created a new equilibrium such that now investors are 0:13:31.559 --> 0:13:35.640 interested in companies that are generating revenues that are close 0:13:35.760 --> 0:13:38.440 enough to profitability. And that's just a result of demand 0:13:38.640 --> 0:13:41.959 on the investor side, and that is what created this 0:13:42.960 --> 0:13:45.920 abundance of SPACs in twenty twenty and twenty twenty one 0:13:46.160 --> 0:13:49.200 was really demand from investors. We saw a lot of 0:13:49.200 --> 0:13:53.640 institutional investors who were starting to invest in pre IPO 0:13:54.640 --> 0:13:58.520 companies because they wanted access to these kinds of yields 0:13:58.559 --> 0:14:03.520 that were at the time not elsewhere. So SPAX created 0:14:03.600 --> 0:14:07.439 an answer to this demand from investors. And it wasn't 0:14:07.720 --> 0:14:12.720 just institutional investors, it was also retail investors. The demand 0:14:12.800 --> 0:14:15.480 was there for earlier stage high growth. 0:14:15.840 --> 0:14:17.320 Do you think that do you think that demand comes 0:14:17.360 --> 0:14:19.000 back though from retail investors. 0:14:20.840 --> 0:14:26.320 Retail investors tend to shy away from highly volatile products, right, 0:14:26.560 --> 0:14:31.200 and what we see here we continue to see some volatility. 0:14:31.320 --> 0:14:33.280 There may be interests, and I think there are companies 0:14:33.320 --> 0:14:36.920 that continue to answer that demand, but that demand has changed. 0:14:37.360 --> 0:14:40.560 And the poor performance that we saw as a result 0:14:40.600 --> 0:14:43.440 of combinations that close in twenty twenty and twenty twenty 0:14:43.480 --> 0:14:46.480 one is really the result of investors pulling it out 0:14:47.000 --> 0:14:53.520 and going into a risk off mode. So you continue 0:14:53.520 --> 0:14:57.320 to see now transactions that are performing much better than 0:14:57.320 --> 0:14:59.720 they were in the past because the valuations have adjusted 0:14:59.760 --> 0:15:02.359 to the new reality of the market. They're often benchmarked 0:15:02.440 --> 0:15:07.480 to commps publicly traded comps, and in the companies that 0:15:07.520 --> 0:15:11.080 we see that have closed recently actually perform much better. 0:15:11.240 --> 0:15:14.520 And there's no question that SPACs are going to continue 0:15:14.560 --> 0:15:18.240 to be in the current form or in variation of SPACs, 0:15:18.360 --> 0:15:21.160 but they will continue to be an answer for companies 0:15:21.160 --> 0:15:23.720 that do want to access the public equity market because 0:15:23.760 --> 0:15:26.800 we're clearly not there with the IPO market yet and 0:15:27.040 --> 0:15:29.720 not that we compete directly with IPOs, but it continues 0:15:29.760 --> 0:15:31.520 to offer a number of advantages. 0:15:31.960 --> 0:15:34.520 So talk to us about deals that you guys have 0:15:34.600 --> 0:15:36.520 completed where you found opportunities. 0:15:38.440 --> 0:15:42.440 Yes, So, for example, we closed a combination last year 0:15:42.680 --> 0:15:47.200 or eighteen months ago with a company called Heliogen in 0:15:47.440 --> 0:15:52.960 artificial intelligence company for the solar industry. We continue to 0:15:53.520 --> 0:15:57.480 announce combinations with announcer combination with an electric vehicle company 0:15:57.520 --> 0:16:02.120 based in Germany called Ego. We have recently announced another 0:16:02.200 --> 0:16:06.800 transaction with a company based in Abu Dhabi that makes 0:16:06.920 --> 0:16:10.960 water from humidity, and we continue to see very exciting 0:16:11.440 --> 0:16:15.560 companies that are attractive, well valued, both in the US 0:16:15.600 --> 0:16:16.080 and Lebron. 0:16:16.600 --> 0:16:19.280 Do you think the spec because SPACs weren't new in 0:16:19.280 --> 0:16:21.640 twenty twenty twenty twenty one, SPACs had been around, but 0:16:21.680 --> 0:16:24.560 they've gone through cycles. Do you think this cycle is 0:16:24.600 --> 0:16:26.600 different in the sense of, like SPACs are here to stay. 0:16:28.360 --> 0:16:30.720 It's not a cycle. So what you need is to 0:16:30.840 --> 0:16:32.240 ride sponsor what happened? 0:16:32.360 --> 0:16:33.960 How is it not a cycle if you have them, 0:16:34.240 --> 0:16:37.600 you know, spike in one year and almost completely disappear 0:16:37.600 --> 0:16:38.200 in another year. 0:16:42.160 --> 0:16:45.600 They well, it was a cycle, but I wouldn't say 0:16:45.640 --> 0:16:47.120 that now we're in a cycle. I think we're in 0:16:47.160 --> 0:16:50.400 more steady states with regards to spas. And what happened 0:16:50.480 --> 0:16:53.280 is that many SPACs were launched simply because they could, 0:16:53.640 --> 0:16:57.720 and that's not a sustainable formula nor a sustainable business model. 0:16:58.120 --> 0:17:02.160 In the surviving SPAC sponsors will be platforms of true 0:17:02.240 --> 0:17:05.000 value creation for the partner companies, and that is how 0:17:05.000 --> 0:17:09.280 we have positioned ourselves with our platform of multiple SPACs 0:17:10.560 --> 0:17:14.400 as well as our fund. It's being able to provide 0:17:14.440 --> 0:17:17.560 long term assistance to the company and provide a service. 0:17:17.600 --> 0:17:20.640 So we position ourselves as service providers. Many SPACs were 0:17:20.680 --> 0:17:23.760 launched by sponsors who we're doing this part time on 0:17:23.800 --> 0:17:26.040 the side, and that doesn't work when you hire someone 0:17:26.080 --> 0:17:28.280 to do a job. When you hire an investment banker 0:17:28.359 --> 0:17:30.480 to take a company public, they don't do it part time. 0:17:30.760 --> 0:17:32.240 So it has to be that we have full time 0:17:32.280 --> 0:17:36.320 management teams and dedicated members. So in our SPACs we've had, 0:17:36.320 --> 0:17:40.080 for example, among various boards, we've had board members of 0:17:40.400 --> 0:17:45.480 Fortune one hundred companies like City Group, Comcast at now Blackrock, 0:17:45.520 --> 0:17:49.600 American Airlines, and we bring all of these resources along 0:17:49.640 --> 0:17:53.720 with a number of CEOs, operators and as well as 0:17:53.760 --> 0:17:56.480 founders of companies who have gone through the journey themselves. 0:17:56.480 --> 0:17:59.119 So the service that we can provide is completely different 0:17:59.160 --> 0:18:01.080 than what you may have seen in twenty twenty one. 0:18:01.200 --> 0:18:04.120 Isabel so like and the exit strategies are so important. 0:18:04.160 --> 0:18:06.119 Just got about twenty five seconds left here. So for 0:18:06.200 --> 0:18:08.840 something like air Water, does it go public soon or 0:18:08.960 --> 0:18:10.679 is it a twenty twenty four story? 0:18:10.800 --> 0:18:14.919 Just very quickly we've announced the transaction. I would expect 0:18:14.960 --> 0:18:20.640 it to close in twenty twenty four, but there are 0:18:20.960 --> 0:18:24.399 deals that are closing in twenty twenty three. You're a 0:18:24.480 --> 0:18:26.440 number in the pipeline and I think we will see 0:18:26.480 --> 0:18:27.720 exciting performance. 0:18:27.960 --> 0:18:30.199 Okay, well, we'll be definitely looking out for them. So 0:18:30.240 --> 0:18:32.400 good to get some time with you. Isabel Freedom. She's 0:18:32.400 --> 0:18:34.960 founder and CEO at Athena from Aspen. 0:18:37.200 --> 0:18:40.760 You're listening to the Bloomberg Business Week podcast. Catch us 0:18:40.800 --> 0:18:44.840 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:18:45.000 --> 0:18:48.320 the Bloomberg Business app, and YouTube. You can also listen 0:18:48.400 --> 0:18:51.520 live on Amazon Alexa from our flagship New York station, 0:18:51.960 --> 0:18:54.720 Just say Alexa play Bloomberg eleven thirty. 0:18:56.400 --> 0:18:59.240 Today, in a statement from China's Taiwan Affairs Office, China 0:18:59.280 --> 0:19:03.879 called him a complete trouble maker making also because of 0:19:03.920 --> 0:19:07.680 his seeking Taiwan independence. The hymn, of course, is Lya chingd, 0:19:08.119 --> 0:19:11.120 Taiwan's vice president and a leading presidential candidate who sat 0:19:11.119 --> 0:19:15.159 down with Joel Weber, the editor of Bloomberg BusinessWeek, in 0:19:15.320 --> 0:19:18.919 an exclusive interview that is actually Business Week's international cover stories, 0:19:18.920 --> 0:19:21.480 also Today's Bloomberg Big Take, and a most read on 0:19:21.520 --> 0:19:22.480 the Bloomberg terminal. 0:19:22.720 --> 0:19:25.440 Yeah, that exclusive conversation is why China is commenting today. 0:19:25.440 --> 0:19:29.600 After the interview became public, also saying Live's comments on 0:19:29.840 --> 0:19:33.040 so called maintaining the peaceful status quo are totally a lie. 0:19:33.080 --> 0:19:36.560