Speaker 1: Welcome to the Bloomberg Markets Podcast.
Speaker 2: I'm Paul Sweeney.
Speaker 1: Alongside my co host Matt Miller.
Speaker 3: Every business day, we bring you interviews from CEOs, market pros,
Speaker 3: and Bloomberg experts, along with essential market moving news.
Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
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Speaker 1: A lot of news out of Washington, DCT on the
Speaker 1: legal front. I mean we started off the day looks
Speaker 1: like President Trump faces an August twenty twenty three trial
Speaker 1: in the classified documents case, so we've got some clarity there.
Speaker 1: Then just breaking recently, Hunter Biden de plete guilty to
Speaker 1: tax charges. So we want to get to the bottom
Speaker 1: of this news coming out of Washington. Nick Ackerman, former
Speaker 1: assistant special Watergate prosecutor, joins us.
Speaker 4: Nick.
Speaker 1: Let's start with the news first on President Trump. If
Speaker 1: nothing else, it's he's going to receive a speedy trial,
Speaker 1: if you will. I mean, this is happening very quickly.
Speaker 5: Yeah, no, I mean Florida, the southern district of Florida
Speaker 5: is known for its rocket dockets, and clearly he's on there,
Speaker 5: and I think it answers a lot of questions that
Speaker 5: people were concerned about with this particular Judge Cannon, who
Speaker 5: wasn't a Trump appointee, that somehow she would drag this
Speaker 5: out and delay it for Trump. That is not going
Speaker 5: to happen. I think one of the overriding themes that
Speaker 5: comes out of our news this morning is really the
Speaker 5: rule of law and how it has been enforced with
Speaker 5: both of these developments today. One you've got a Trump
Speaker 5: appointee as a judge who is moving this case along
Speaker 5: and bringing it to trial. And two you've got the
Speaker 5: Hunter Biden a guilty plead that was done and overseen
Speaker 5: by a former Trump appointee as US Attorney in Delaware
Speaker 5: who was purposely kept on in order to deal with
Speaker 5: this matter, and he had the final ultimate decision as
Speaker 5: to how it would be taken care of. The Attorney
Speaker 5: General kept himself out of it for fear of some
Speaker 5: kind of a conflict between the fact that he was
Speaker 5: appointed by President Biden and he would be making the decision. Instead,
Speaker 5: he delegated it completely to this Trump appointed US attorney,
Speaker 5: And in the same way, the decision to indict Donald
Speaker 5: Trump on the classified document case was delegated to a
Speaker 5: special prosecutor that was totally out of the politics and
Speaker 5: was removed from the attorney general. So I think today
Speaker 5: was a good day for the rule of law.
Speaker 6: So, Nick, has the Biden administration responded to either case yet?
Speaker 5: I know, and there's no reason for them to. I mean,
Speaker 5: they have should have absolutely nothing to do with either case.
Speaker 5: It's important that they keep their distance and that the
Speaker 5: public understands that the decisions being made on this case
Speaker 5: are being made by totally independent individuals, whether the prosecutors
Speaker 5: or the judges.
Speaker 1: So all right, Nick, let's I guess focus on, presumably
Speaker 1: what is the more important case here.
Speaker 2: What is your expectation.
Speaker 1: I mean, this is going only going to be They
Speaker 1: announced a two week trial, so that seems very expeditious
Speaker 1: if nothing else, How do you expect this to play out?
Speaker 4: Oh?
Speaker 5: I think it's likely to play out just the way
Speaker 5: she's got it set up. I mean, there may be
Speaker 5: a little bit of a delay in here, but this
Speaker 5: is not a difficult case. It's fairly straightforward. The number
Speaker 5: of classified documents I think is somewhere around thirty that
Speaker 5: are an issue here. There's testimony by witnesses, there's going
Speaker 5: to be pre trial motions, all of which are, for
Speaker 5: the most part, as far as I can tell, it
Speaker 5: pretty frivolous and will take no time to dispose of.
Speaker 5: So there's no reason why this case can't be put
Speaker 5: on trial in August. I mean, this judge is spot on.
Speaker 5: This is the way the case ought to be handled.
Speaker 1: Nick, Should we expect a plea deal from president former
Speaker 1: president Trump's campus that's something that we should expect, or
Speaker 1: do you think he prefers or he should go to trial?
Speaker 5: Well, I think he's a fool to go to trial
Speaker 5: because the evidence, at least as it's set forth in
Speaker 5: the indictment, is extraordinarily powerful, and his statements, even his
Speaker 5: statement last night on Fox News, he keeps digging himself
Speaker 5: in deeper to this and creating more fodder for the
Speaker 5: prosecution in the case. The best thing that I would
Speaker 5: advise any client to do under these circumstances is to
Speaker 5: somehow get a plea deal. But knowing Donald Trump, I'd
Speaker 5: say that's pretty unlikely.
Speaker 6: How does this affect the election.
Speaker 5: Well, that's the whole point. If this case is done
Speaker 5: by early September, it's not going to affect the election
Speaker 5: at all. I mean, if he's convicted. You know, good
Speaker 5: luck to the Republican Party if they want to nominate
Speaker 5: somebody for president who's convicted for mishandling and obstructing classified documents.
Speaker 5: I mean, I just don't see that happening here, so
Speaker 5: I think it by doing this on this schedule, this,
Speaker 5: this is a good thing in terms of the election.
Speaker 1: Nick, thanks so much for joining us.
Speaker 2: Really appreciate it. Jumping on with us.
Speaker 1: Nick Ackerman, former assistant special Watergate prosecutor, giving us his
Speaker 1: thoughts and analysis on what's been some pretty busy news front.
Speaker 7: This morning, you're listening to the Team Ken's are Live
Speaker 7: program Bloomberg Markets weekdays at ten am Eastern.
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Speaker 7: App, and the Bloomberg Business App, or listen on demand
Speaker 7: wherever you get your podcast.
Speaker 1: Jess Met and Paul Sweene Here in the Bloomberg Interactive
Speaker 1: Brokers Studio, we're streaming live on YouTube starting today.
Speaker 2: You can go check that out. Jess.
Speaker 1: You know I've said it before, I'll say it again.
Speaker 1: You know, my next life, I want to come back
Speaker 1: as a care m and a bank because this just
Speaker 1: deals left and right. We've got another one today, Lily
Speaker 1: to pay two point four Yeah, two point four billion
Speaker 1: dollars for immune drug developer Dice. Breaking down force is
Speaker 1: our good friend Sam Vizzelli. He's head of European Research.
Speaker 1: He's also got a side hustle where he's presumably reportedly
Speaker 1: a pharmaceuticals analyst for Bloomberg Intelligence. So we'll check in
Speaker 1: with Sam. Sam, thanks so much for joining us here again,
Speaker 1: another deal here for Lily. You know your big farmer companies.
Speaker 1: I know they do a lot of R and D, Sam,
Speaker 1: but boy, they're really active on the M and A front,
Speaker 1: buying drugs and therap therapies. What are they getting here
Speaker 1: with Dice?
Speaker 4: Hey, Paul, just just one comment before we go to Dice.
Speaker 9: I think your life as a media analyst back in
Speaker 9: the days wasn't that bad, was it?
Speaker 4: No? It was.
Speaker 2: We had a good role there for a while.
Speaker 4: Oh yes, No, so Dice.
Speaker 9: Basically, what Lily is doing here is that it's acquiring
Speaker 9: a novel therapeutic approach or novel drug development approach to
Speaker 9: treating dermatological disease. In this particular case, I think the
Speaker 9: target's going to be a psariasis, which I think a
Speaker 9: lot of people are familiar with in which Lily's already active.
Speaker 4: So they have a product called Tolts.
Speaker 9: It's doing really well, but it's coming off patent in
Speaker 9: twenty in the late twenties, let's say, and it does
Speaker 9: make sense for them to be backing into it other products.
Speaker 9: And let's not forget a lot of farmer company products
Speaker 9: to fifty percent of them originate outside of the farmer company.
Speaker 9: You can't own every science, every new methodology for developing drugs,
Speaker 9: which is something that Dice has got a new approach
Speaker 9: to doing small molecule pill type drugs. So that's what
Speaker 9: I think we got. We're seeing and we continue to see.
Speaker 6: Sam. How are investors reacting to this? Because if you
Speaker 6: look at shares of Dice as tickersymbol DIICE up about
Speaker 6: thirty eight percent on Peaceport's best days since October of
Speaker 6: last year. Looking at Eli Lillly tickersymbol l l Y
Speaker 6: up about one percent.
Speaker 9: Yeah, well, so, I mean usually the acquired when they're
Speaker 9: doing such a small de Let's not forget Eli Lee. Now,
Speaker 9: at least last time I checked, was the largest farmer
Speaker 9: company in the world. They overtook Johnson and Johnson. Although
Speaker 9: I think they're vying for that position like who's the
Speaker 9: wealthiest man in the world kind of situation.
Speaker 4: But so, really, what difference does it make to them?
Speaker 9: Yes, it changes a little bit of the dynamics of
Speaker 9: potential downside in their immunology franchises and rices franchise seven
Speaker 9: years at.
Speaker 4: Down the road. Great planning.
Speaker 9: But what really is driving in the stock today is
Speaker 9: the excitement around as we all know, obesity, diabetes, and
Speaker 9: Alzheimer's disease. So this is not surprising to me the
Speaker 9: way the share prices that mod What is interesting is
Speaker 9: that the share price I'm just watching it now on
Speaker 9: my screen here for Dyce.
Speaker 4: This company presented.
Speaker 9: Data for this drug way back in nine months ago
Speaker 9: October last year, and it's interesting that it's taken this
Speaker 9: long for them to be taken out. And I have
Speaker 9: to also say it's not the biggest premium I've seen
Speaker 9: with recent deals.
Speaker 4: So Mark bought Prometheus for.
Speaker 9: Around a seventy seventy five percent premium, and the Chinook
Speaker 9: was acquired or at least announced to be acquired by
Speaker 9: Novartists just a few days ago last week for a
Speaker 9: sixty six percent premium or sixty percent premium depending on
Speaker 9: where you start so at this thirty eight percent premium
Speaker 9: is not the biggest we've seen, and it does make
Speaker 9: me wonder how why this it took so long for
Speaker 9: somebody like Lily to actually close the deal, and perhaps
Speaker 9: they could have paid less.
Speaker 4: Who knows?
Speaker 1: Hey, Sam, talk to us about kind of that risk
Speaker 1: for patent expirations. I mean, I know you guys as
Speaker 1: analysts and investors, you probably follow that closely, are there.
Speaker 2: Do you have a pretty good certainty.
Speaker 1: When drugs come off patent and then when that revenue
Speaker 1: may be a risk, And are certain companies more vulnerable
Speaker 1: to that risk than than others?
Speaker 9: Yeah, I think, Paul, it happens that sometimes some companies
Speaker 9: go through a wave of them and then others are
Speaker 9: pretty immune for a while to go yet, and I
Speaker 9: think Lily is one of those that's relatively immune. Pfizer,
Speaker 9: I think, more exposure than others currently, But then of
Speaker 9: course they come and go and then they move on
Speaker 9: to a new base. And with patterns, yes, it's relatively
Speaker 9: relatively easy because you can get fantastic pattern analysts like
Speaker 9: our own old Girsbacker who digs deep on these things
Speaker 9: to try and guestimate when the patent expirer would come.
Speaker 4: What has muddied the water here.
Speaker 9: Of course, is the Inflation Reduction Act, which is saying
Speaker 9: that some of your drugs, especially these small molecules, these
Speaker 9: pills that I've been talking about, will be negotiated in
Speaker 9: terms of price to get them into a world that
Speaker 9: looks like as if they're becoming generic in terms of
Speaker 9: pricing way before the patent expires. And so that creates
Speaker 9: an extra layer of uncertainty, which is why I'm actually
Speaker 9: quite interested in this deal today because it is a
Speaker 9: small molecule dealer, it is a pill, and it does
Speaker 9: fall into the IRA.
Speaker 6: Trap, same with healthcare. Deer deals on a tear this year.
Speaker 6: Is this a sign of optimist in the M and
Speaker 6: A market?
Speaker 4: Yeah, it's interesting, isn't it?
Speaker 9: If you think back to last year interest rates pretty
Speaker 9: much close to zero here and there, it was a
Speaker 9: deal that these are not big numbers. You know, three
Speaker 9: billion dollars. What's that to a four hundred billion dollar company?
Speaker 9: But it does it's make me kind of chuck a
Speaker 9: little bit when interest rates are shooting up, But you
Speaker 9: think that MNA would be less likely. These companies are
Speaker 9: stepping in into introduers, which of course, it's telling you
Speaker 9: that they don't need any debt to do this. I mean,
Speaker 9: Lily is very clear. He said, we're just going to
Speaker 9: finance this through our massive cash flow. So what is
Speaker 9: happening though, is that I think they're coming to a
Speaker 9: point of thinking more and more.
Speaker 4: Valuations are where they are. They haven't moved very much.
Speaker 9: They've taken their time, and they're finding the assets that
Speaker 9: they feel are the right quality for their pipelines.
Speaker 1: Hey, Sam, as analysts and investors in these pharma companies,
Speaker 1: does a market care whether you know, the the Lilies
Speaker 1: of the world, the marks of the world, whether they
Speaker 1: do all of their therapeutics and drugs internally via R
Speaker 1: and D or they go out and buy it, do
Speaker 1: you guys even care?
Speaker 4: No, not really at the end of the day.
Speaker 9: I mean, obviously, if the R and D engine of
Speaker 9: the company they were spending ten billion a year and
Speaker 9: they were getting nothing out of it, that's not a
Speaker 9: good thing. But let's not forget this product isn't done yet.
Speaker 9: It still needs to go through. What a lot of
Speaker 9: people don't think about or contemplate is that it's not
Speaker 9: just about discovering a molecule. It's about then manufacturing it.
Speaker 9: Make sure you've got the right manufacturing footprint, make sure
Speaker 9: you've got the right package.
Speaker 4: To go to the FDA, et cetera, et cetera.
Speaker 9: So there's a lot of R and D that still
Speaker 9: needs to go in here that Lily will be spending
Speaker 9: on this product. So but nobody really cares as long
Speaker 9: as internal R and D, which is where the Munjaro
Speaker 9: drug there's appetite has come from, which is where there
Speaker 9: alzhemazrugs have come from, are delivering something.
Speaker 6: Any chatter of other companies that Eli Lilly might be
Speaker 6: potentially in the sort of looking here to see potential
Speaker 6: buying as far as wor could potentially obviously continue this
Speaker 6: behemoth of a company that we've been seeing.
Speaker 9: Yeah, so I think the best way to figure that
Speaker 9: out is to look at the products that are facing
Speaker 9: competition in the longer term and look at what else
Speaker 9: is available in the biotech sector. So you know, a
Speaker 9: lot of these deals are not coming into the mid
Speaker 9: stage development companies. There was a time where everybody wanted big,
Speaker 9: big revenue generators to basically do a little bit of
Speaker 9: financial engineering on that. But what we're seeing more than
Speaker 9: names I read off to Chinuk Prometheus, this company dies.
Speaker 9: These are more midstage pipeline fillers, which are therefore going
Speaker 9: to be tied to what the company is either developing
Speaker 9: a new therapeutic franchise or it's got a drug like
Speaker 9: Tolts in the case of Lily that's going off pattern.
Speaker 4: What you should really.
Speaker 9: Be looking for is to marry that with good data
Speaker 9: that comes out of the companies as they report them.
Speaker 1: Hey, Sam, thanks so much for joining us. Really preciated
Speaker 1: as always, Sam Fazzelli. He's head of European Research. He's
Speaker 1: also the senior pharmaceuticals analyst, one of the top analysts
Speaker 1: in the city of London.
Speaker 7: You're listening to the tape Cats are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 6: Jess Mitt and Paul Sweeney here in the Interactive Brokers studio,
Speaker 6: and we're going to change things up with a C
Speaker 6: suite conversation with someone who I here actually went to
Speaker 6: a school in Texas. Yes, well, so I'm excited. Matt Road,
Speaker 6: chief revenue officer at the auto lending enable to firm
Speaker 6: Open Lending. He's going to chat with us about the
Speaker 6: auto market, carloans, credit crunch, all things about that. Matt,
Speaker 6: thanks so much for joining us.
Speaker 2: Yeah, thank you, guys, Thanks palm Jess.
Speaker 6: I have to get your thoughts when it comes to
Speaker 6: the auto space and with the backdrop obviously with the
Speaker 6: Federal reserve in the direction of the economy. Are you
Speaker 6: noticed seeing any sort of red flags pop up so
Speaker 6: far when it comes to auto lending, you.
Speaker 2: Know, not at this time.
Speaker 10: I mean, I think everybody is curious in watching. You know,
Speaker 10: we've seen used car values over the last couple of years,
Speaker 10: you know, induced by the pandemic and the shortage of
Speaker 10: supply of vehicles, drive car values to the highest we've
Speaker 10: ever seen. And we've seen the biggest drop last year
Speaker 10: in the Mannheim index on records. I think, you know,
Speaker 10: cautiously watching what you use car values are doing, and
Speaker 10: then I'll be ever looming, you know, recession that we
Speaker 10: may or may not be in has lenders thinking about
Speaker 10: you know, from a strategy standpoint, you know, how can
Speaker 10: they still drive some growth but not you know, avoid
Speaker 10: some of the risk that may be out there today.
Speaker 1: Hey, Matt, we may be in a recession or coming
Speaker 1: into recession. People have been talking about it for more
Speaker 1: than a year. What are you seeing in terms of
Speaker 1: the credit quality of your portfolio? Are are your borrowers
Speaker 1: are there? Are they struggling?
Speaker 10: You know, so we tend to focus more on the
Speaker 10: near prime consumer, and what we have typically seen even
Speaker 10: through the Great Recession is that near prime consumers can
Speaker 10: weather you know, economic storms better than than prime consumers.
Speaker 10: And so, you know, from a from a risk standpoint,
Speaker 10: we encourage you know, banks and in any auto lender
Speaker 10: to diversify their portfolio because you know, again typically you know,
Speaker 10: what we saw in the in the Great Recession was
Speaker 10: that prime consumers defaulted at a much higher anticipated rate
Speaker 10: than the near prime consumers. So, you know, we have
Speaker 10: not seen anything out of the norm as of yet
Speaker 10: as it relates to higher than expected delinquency at this
Speaker 10: point in time, but it's something that we continue to monitor.
Speaker 2: Matt.
Speaker 1: Do you guys lend directly to borrowers or do you
Speaker 1: provide financing for the dealerships?
Speaker 2: How does your business model work.
Speaker 10: Yeah, So so we actually are lending enablement platform solution
Speaker 10: that allows auto lenders to better assess risk at origination.
Speaker 10: So we work directly with the banks, credit unions, any
Speaker 10: auto lender on their near prime auto lending strategy to
Speaker 10: help them price and assess risk better at the time
Speaker 10: of origination of that of that auto loan.
Speaker 6: Something that struck me is the car shopping website Edmunds
Speaker 6: was talking about how the thousand dollars auto loan payment
Speaker 6: is actually becoming more common. In about seventeen percent of
Speaker 6: people who bought new cars in the first three months
Speaker 6: of the year have an auto loan payment of about
Speaker 6: one thousand dollars or more. How is that possible? You know,
Speaker 6: it's even sustainable.
Speaker 8: Yeah, it's pretty wild.
Speaker 10: I mean I think, you know, obviously a lot of
Speaker 10: that was driven by the shortage of car car vehicles
Speaker 10: out there, right, So, I mean, when the pandemic, you know,
Speaker 10: caused the auto manufacturers to stop making new cars the
Speaker 10: cars that were available, the price of those just obviously
Speaker 10: went up. So you know, coupled that with you know,
Speaker 10: rising indust rates over the last year, it's just exacerbated
Speaker 10: some of the affordability issues that the consumers are having
Speaker 10: out there today. So so from a from a bank
Speaker 10: and a credit union standpoint, we advise them to take
Speaker 10: ways to to although payments have gone up, you know,
Speaker 10: how can they protect themselves from a risk standpoint of
Speaker 10: that of that increased payment. But you know a lot
Speaker 10: of times, you know, from a from a near prime consumer,
Speaker 10: you know, payment is everything, and so as long as
Speaker 10: they're assessing the collateral value and that residual value appropriately
Speaker 10: on the front end, it puts the bank and the
Speaker 10: credit union in a better position to withstand some of
Speaker 10: this some of these things that we are seeing, you know,
Speaker 10: as it relates to affordability in the economy.
Speaker 1: Hey man, I seem to remember in the news in
Speaker 1: the last several weeks a bank or multiple banks just
Speaker 1: kind of pulling back from the auto lending business. What
Speaker 1: do you what are you seeing in the marketplace in
Speaker 1: terms of the number of lenders actually out there providing
Speaker 1: credit to this segment of the economy.
Speaker 10: You know, I think today, you know, I think what
Speaker 10: most banks and credit unions are trying to do from
Speaker 10: an asset liability management perspective is focus on shorter duration
Speaker 10: loans obviously, given what's happened with you know, Silicon Valley
Speaker 10: banks collapse, you know, they need to focus on lending
Speaker 10: to those consumers that you know have a greater value.
Speaker 10: So are they achieving a return that exceeds.
Speaker 2: Their cost of capital?
Speaker 10: Because of what's happened with interest rates, obviously, everybody's cost
Speaker 10: of capital has gone up, and so you know, maintaining
Speaker 10: balance sheets is what's the most important things and pricing
Speaker 10: those loans correctly, you know, and that really ties back
Speaker 10: to using correct data and to be able to predict
Speaker 10: loan performance ahead of time and ensuring that they're again
Speaker 10: hitting those yield targets that that that they need to
Speaker 10: hit today.
Speaker 6: Right, What indicator are you watching to see if more
Speaker 6: Americans are falling behind on their car loans?
Speaker 10: Yeah, so we we obviously monitor sixty day delinquencies very closely.
Speaker 10: I mean, that is sort of the standard for any
Speaker 10: auto lender out there today in terms of monitoring risk.
Speaker 10: And you know, is that that that's kind of the
Speaker 10: leading indicator for you know, what is my defaults or
Speaker 10: is this barwer's ability actually going to make their next payment?
Speaker 10: And so I think that's that's obviously one that that
Speaker 10: most of the industry watches just as a sort of
Speaker 10: the leading indicator for future losses.
Speaker 1: And Matt just about thirty seconds here. Just overall, I mean,
Speaker 1: it looks like Detroit settled on this annual manufacturing figure
Speaker 1: of maybe fifteen million vehicles per year versus maybe the
Speaker 1: seventeen or seventeen million plus before.
Speaker 2: Do you think that's a new normal.
Speaker 10: I think that it's it's it's getting back to where
Speaker 10: we I do think the seventeen million years is where
Speaker 10: we're going to get back to. I mean, you know,
Speaker 10: the auto manufacturer, you know, need to make cars, and
Speaker 10: so they're.
Speaker 8: Going to do that.
Speaker 10: And I think what we're seeing on the incentive side
Speaker 10: is that those incentives are coming back, and so that
Speaker 10: will drive new car prices down. As we've started to
Speaker 10: see that. I think we just saw the first time
Speaker 10: in a couple of years that the average car sale
Speaker 10: for a new vehicle was below HIMSRP. So I do
Speaker 10: think we're going to get back to normal levels, pre
Speaker 10: pregnement levels.
Speaker 1: All right, Matt, thanks so much for joining us. I
Speaker 1: really appreciate getting some of your thoughts there. Matt Rowe,
Speaker 1: he's a chief revenue officer for open lending. Open lending provides,
Speaker 1: you know, lending solutions for auto dealers, so really focusing
Speaker 1: in on that auto business, and that's one of the
Speaker 1: areas that economas said, they really focus on to see
Speaker 1: some cracks in the consumers will continue to pay attention there.
Speaker 7: You're listening to the teenth Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 6: Of course, what else can we continue to talk about, Paul,
Speaker 6: But obviously the Federal Reserve with Fed Shair Jerome Palll
Speaker 6: going to Capitol Hill on Wednesday and Thursday. So I
Speaker 6: want to bring in our next guest, Danielle di Martino Booth,
Speaker 6: who's the CEO and chief strategist at QI Research, joining
Speaker 6: us to of course talk about the FED. Danielle, how
Speaker 6: are you?
Speaker 11: I'm doing great today.
Speaker 6: How are you doing well? So I want to get
Speaker 6: your take now that we got off the FED decision
Speaker 6: last week and obviously going to hear from the man
Speaker 6: himself again this week, what were your expectations as far
Speaker 6: as going into this and also what was your sort
Speaker 6: of take now that we've gotten past the FED decision
Speaker 6: last week.
Speaker 11: Well, from the perspective of a former FED insider, to
Speaker 11: say that it's exceedingly rare to see the FED truly
Speaker 11: pause and then resume rate hikes.
Speaker 5: I will believe it.
Speaker 11: When I see it, and I'm happy to be corrected.
Speaker 11: And that's where the market is pricing in right now.
Speaker 11: But this is a highly unusual situation. But again, the
Speaker 11: markets are sitting at about seventy four percent probability that
Speaker 11: there's another go come July. But there's a heck of
Speaker 11: a lot of data between now and then. You know,
Speaker 11: starting off on the terminal this morning, you see that
Speaker 11: private equity firms are having a very hard time hedging,
Speaker 11: and at the same time, you know, used car loans
Speaker 11: are upside down. This is a story that we would
Speaker 11: have read about in two thousand and eight, but about homes.
Speaker 11: For the average loan to value is one hundred and
Speaker 11: twenty five percent on used cars in the first three
Speaker 11: months of twenty twenty three, according to TransUnion. Clearly, the
Speaker 11: fed's campaign has had an effect in many different places.
Speaker 1: It seems to me, Danielle, I mean you're you're the
Speaker 1: expert to hear, having been at the Dallas FED. But
Speaker 1: it just feels like from a optics perspective, I wouldn't
Speaker 1: want if I were on the FED, I would want
Speaker 1: to pause and then just kind of restart next meeting.
Speaker 1: It sounds like I don't have much conviction one way
Speaker 1: or the other.
Speaker 11: Well, you know, it was interesting because Powell definitely threaded
Speaker 11: that needle in what he said at the podium. He said,
Speaker 11: the data that we have over a six week period
Speaker 11: that's much different the data we have over a three
Speaker 11: month period, which is more trend like. So he was
Speaker 11: actually answering your question in advance, saying that the time
Speaker 11: we get to the July meeting, we will have enough
Speaker 11: to establish whether or not the lag effect has created
Speaker 11: a trend in the data or whether it's a blip,
Speaker 11: and we still have a lot more work to do
Speaker 11: on the inflation front. I was his answers were extremely
Speaker 11: choreographed and extremely careful, but he did make that distinction.
Speaker 6: Danielle, are you managing money?
Speaker 11: We advise institutional investors, so we I think our most
Speaker 11: are what they thought was our craziest call was in
Speaker 11: June of twenty twenty one, we said that the yield
Speaker 11: curve would invert to triple digit negative levels and stay there,
Speaker 11: when the entire street was saying no, no, we're going steeper,
Speaker 11: We're going steeper. We're of the mind right now that
Speaker 11: higher for longer is being reflected in the persistence of
Speaker 11: the negative inversion in the two year tenure, which pushing
Speaker 11: one hundred basis points again today.
Speaker 6: How are you advising clients to position whether or not
Speaker 6: there's a couple more interest rate hikes or not.
Speaker 11: Well, what we're telling telling clients right now is that
Speaker 11: time is on their side. If you have the optionality
Speaker 11: of actually making a return on your cash right now,
Speaker 11: then there's absolutely nothing wrong with being having a little
Speaker 11: bit of dry powder, having some cash on the sidelines.
Speaker 11: By the same token, we think that given what we're
Speaker 11: hearing about household finances and this aha moment in October
Speaker 11: when student loan payments resume, we think that a lot
Speaker 11: of the consumer discretionary doocs and names and sectors have
Speaker 11: gone way way over their skis right now on the
Speaker 11: assumption that everything's going to be fine and the FED
Speaker 11: is going to rise right into the rescue with rate cuts.
Speaker 11: We don't see that as happening. But yet we are
Speaker 11: seeing some severe distress emanating from the US household sector.
Speaker 1: So again, I love to get further thoughts there, I mean, Danielle,
Speaker 1: because I'm not sure really how to handle or phrase
Speaker 1: or characterize this economy.
Speaker 2: How tough is it out there?
Speaker 1: I find myself stuck here in New York and if
Speaker 1: I go to work to San Francisco, But how is
Speaker 1: it out there?
Speaker 2: What's the data telling you?
Speaker 11: Well, the data you know. Actually, this week's quill, I'm
Speaker 11: writing on big ANNEC data because it's more of the
Speaker 11: anecdotes that you're hearing that tell the bigger story. We
Speaker 11: have to recall it's advertised on every medium known in
Speaker 11: financial media. The employee retention credit is pumping about twenty
Speaker 11: billion dollars a month into the US economy. That makes
Speaker 11: it really hard to tease out spending trends when the
Speaker 11: highest income earners are getting twenty billion dollars a month
Speaker 11: from Uncle Sam in leftover Carezact spending through the IRS.
Speaker 11: So that's a really big swing factor about two hundred
Speaker 11: billion dollars in the last three years or so. Marginal
Speaker 11: increase to high net worth individuals if you will you
Speaker 11: parse that out. There was a documentary that aired a
Speaker 11: few months ago about a Phoenix food bank, for example,
Speaker 11: the local TV station just revisited that same food bank,
Speaker 11: and prior volunteers at that food bank are now going
Speaker 11: to the feed bank for food. So we're seeing a turn.
Speaker 11: There's a huge bifurcation in the US economy right now
Speaker 11: where the haves really have it and the haves not
Speaker 11: are really struggling. But it's hard to pick up in
Speaker 11: the data right.
Speaker 6: In the bifurcation. Just looking at some of the housing
Speaker 6: data this morning, with housing starts surging the most since
Speaker 6: twenty sixteen, and so that's suggesting that residential construction could
Speaker 6: be on track to really help fuel economic growth. But
Speaker 6: to your point, how do you square some of that
Speaker 6: data away where you start to see some cracks with
Speaker 6: the consumer even though we've seen other consumer data like
Speaker 6: retail sales still keep up.
Speaker 11: Well, we are seeing retail sales keep up, and we
Speaker 11: should given we're seeing month after month of record uptake
Speaker 11: on credit cards as well as the extra twenty billion
Speaker 11: dollars that I just said is being pumped into the
Speaker 11: economy via the ERC tax credit. So we should be
Speaker 11: seeing these numbers given the amount of money that's being
Speaker 11: taken out and or given away by Uncle Sam. But
Speaker 11: when you see housing starts a hat tip to Randy
Speaker 11: Woodword for pointing this out to me, when you see
Speaker 11: starts at the highest level compared to permits since the
Speaker 11: nineteen nineties, there's something funky in the data, especially when
Speaker 11: we learned that thirty one point two billion dollars of
Speaker 11: residential loans saw a negative in the Fed's H eight
Speaker 11: on Friday after the clothes when everybody had long since
Speaker 11: left for the long weekend. So, from what I'm hearing
Speaker 11: from home builders and from people who study the industry,
Speaker 11: right now, builders are buying down points, so you're still
Speaker 11: borrowing in the four percent range if you're buying a
Speaker 11: new home. The assumption is that the FED is going
Speaker 11: to lower interest rates, making it that much easier to
Speaker 11: push this spec supply out in into the housing market
Speaker 11: and for there to be people who can actually afford it.
Speaker 11: But again, a lot of people, whether you're talking about
Speaker 11: home builders or you're talking about individuals making loans, loan
Speaker 11: officers at banks, a lot of the decisions are being
Speaker 11: predicated on the assumption of said rate cuts. Going forward.
Speaker 1: So on that front, there rate cuts, I mean keeps
Speaker 1: getting pushed out, pushed out. What is your call given
Speaker 1: the data right now?
Speaker 11: Well, I don't If any of you are Star Wars fans,
Speaker 11: you know these aren't the droids you're looking for. When
Speaker 11: Powell was asked by Politico dot com about quantitative tightening,
Speaker 11: he basically gave her that answer, These are not the
Speaker 11: droids you're looking for. We're not talking about the balance sheet.
Speaker 11: It's going to continue to run off in the background. Now,
Speaker 11: he can only do that if he maintains high interest rates.
Speaker 11: You cannot cut interest rates and have quantitative tightening going
Speaker 11: on at the same time. They're by definition contradictory policies.
Speaker 11: So for him to keep shrinking that balance sheet, all
Speaker 11: I ask to do is not hike anymore. Just keep
Speaker 11: breaks where they are.
Speaker 6: All right, Well, it was really great having you, Danielle,
Speaker 6: as far as just breaking down the Federal Reserve, all
Speaker 6: things FED ahead of Fedchair Jerome Pal's testimony on Capitol
Speaker 6: Hill on Wednesday and Thursday. Thank you so much for joining.
Speaker 11: Us, Thank you for having me today.
Speaker 7: You're listening to the tape Cans Are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 1: All right, let's pivot over to lay great boondoggle over
Speaker 1: in Paris. That would be the Paris Air Show. They
Speaker 1: buy and sell airplanes there, like you know, we change socks.
Speaker 1: George Ferguson's over there. He's a senior aerospace and defense analyst,
Speaker 1: and it's so important that George is there, so we
Speaker 1: send him there every other year there than the odd
Speaker 1: year they go to London.
Speaker 2: George, thanks much for joining us Boeing Airbus.
Speaker 1: How's it playing out for those two big aerospace companies?
Speaker 12: Thanks for having me? It's I'd say it's I'd say
Speaker 12: it's playing out kind of weekly this year, weekly as
Speaker 12: in W E A K L. I think there's no
Speaker 12: E in there. Why, you know, we've seen a lot
Speaker 12: of the orders we've seen are really wheels out of
Speaker 12: previous orders that were undisclosed, and so they disclose them
Speaker 12: at the air show, and you know, they try to
Speaker 12: get someone to put them in the tally. Airbus started
Speaker 12: the show out with a five hundred airplane order from Indigo,
Speaker 12: the largest order ever, which was that was pretty exciting.
Speaker 12: I mean when you when you look at the order
Speaker 12: books right now, Indigo, you know, the largest air in India,
Speaker 12: fast grower. Indigo has four hundred airplanes on order already,
Speaker 12: so I guess they'll add the five hundred to four hundred.
Speaker 12: Have about nine hundred airplanes on order. They said they're
Speaker 12: taking care of in the order book well into the
Speaker 12: next decade. It didn't surprise us. They took about fifty
Speaker 12: airplanes last year, so I think they were looking to
Speaker 12: make a big splash. But you know, if you knock
Speaker 12: that order out, there's just not a lot going on
Speaker 12: the show. But don't tell my bosses, because I want.
Speaker 6: What are these orders tell us about the trajectory of
Speaker 6: the global economy?
Speaker 12: You know, I think what they tell us is, look,
Speaker 12: aerospace is one of the last recovering areas of the
Speaker 12: global economy. And everyone we talked to over here we
Speaker 12: asked the same question, how's your supply chain, How's your
Speaker 12: supply chain? How's your supply chain? And we're hearing stories
Speaker 12: from it's not getting any worse, but it isn't. We
Speaker 12: still have a lot of problems. So we're getting you know,
Speaker 12: incremental improvement. This industry isn't performing at the level it
Speaker 12: was performing before the pandemic. It's going to take them
Speaker 12: a bunch more years to get there. And so what
Speaker 12: that means is that backlogs are already large. They're already
Speaker 12: stretching into the next decade actually for the Neo and
Speaker 12: the Max, right, the two narrow body people movers, and
Speaker 12: so I think you didn't wait for the show. If
Speaker 12: you had in order to place, you got it placed
Speaker 12: right away because you had to get in that backlog
Speaker 12: and hope that these two manufacturers figure out how to
Speaker 12: get more airplanes pumped through their factories. But they're still
Speaker 12: so I haven't supply chain problems. Labor is the big issue.
Speaker 2: So all right, I want to get to like, what
Speaker 2: is the problem.
Speaker 1: I'm not hearing about semiconductor problems anywhere these days. You know,
Speaker 1: it feels I haven't heard from the auto guys in
Speaker 1: a while, So what really for aerospace. I understand it's
Speaker 1: long lead time and it's you know, building the planes
Speaker 1: a pretty big deal, but what are the supply chains
Speaker 1: and kind of is there any fix out there?
Speaker 12: You know, it's really hard, I think for aerospace because,
Speaker 12: like I said, the big problem is labor, labor, labor,
Speaker 12: and it's not just hiring labor, right, this is sophisticated manufacturing.
Speaker 12: You have to hire it, train it, and get it
Speaker 12: to perform at the level of performed pre pandemic. All
Speaker 12: of this in the backdrop of a global economy where
Speaker 12: during the pandemic people learn to work from home, liked it,
Speaker 12: want the quality of life. And so now you say
Speaker 12: to yourself, do I want to go back to my
Speaker 12: aerospace job. I got to go there five days a week.
Speaker 12: My neighbor's going in three days a week, and you're
Speaker 12: sleeping in at six o'clock in the morning. I'm not
Speaker 12: taking that job. I'm going to go with attack or
Speaker 12: something like that.
Speaker 4: Wow.
Speaker 6: So, especially when it comes to pilot pay, that has
Speaker 6: been a particular issue.
Speaker 8: Right, Yes.
Speaker 12: Absolutely. The funny thing too is the pilots even in
Speaker 12: their agreement, they wanted quality of life issues. And I
Speaker 12: was like, wow, you got to get my cockpit five plane.
Speaker 12: But us pilots especially, I think I have a really
Speaker 12: good year, right, Delta has already signed an agreement with
Speaker 12: their pilots eighteen percent immediately retroactive to the beginning of
Speaker 12: the year, five more percent in pay at the end
Speaker 12: of the year, and then I think it's another five,
Speaker 12: four and four in the out years. So if you
Speaker 12: want the school to be a pilot, you know, your
Speaker 12: ship has come in.
Speaker 1: Your ship has come in so Georgia over there in Paris.
Speaker 1: I know it's always a fight, and you know, between
Speaker 1: Boeing and Airbus, but I want to talk about kind
Speaker 1: of talk about the big jets that I like, the
Speaker 1: big wide body jets, you know, the old seven four
Speaker 1: sevens or even the you know, the triple sevens and
Speaker 1: all that kind of stuff.
Speaker 2: That the Airbus three, I don't know, was it three eighty?
Speaker 2: This monsters.
Speaker 1: Are they even gonna be making those things anymore?
Speaker 2: Is at all?
Speaker 1: Like you said, the people movers the smaller planes, you know.
Speaker 12: So what we saw during the pandemic is that the
Speaker 12: big four engine airplanes three eighty and the seven four
Speaker 12: seven they were sunset. So they're done with the seven four.
Speaker 12: I think we're fully done with the three eighty, though
Speaker 12: there might be one or two coming off the line. Still,
Speaker 12: but they're done. The two big the wide bodies that
Speaker 12: are going to rule the day, I think, you know,
Speaker 12: post pandemic, are going to be the seven eight seven
Speaker 12: and the A three fifty, and we've seen orders for
Speaker 12: those airplanes here at the show. Long haul travel has
Speaker 12: taken a little bit longer to come back. China is
Speaker 12: still not sort of wide open. There's not much capacity
Speaker 12: going in and out of there from Europe in the US,
Speaker 12: you know, long haul capacity, so that's kind of slowed
Speaker 12: down that recovery. I still think there's some willing to
Speaker 12: dealing dealing to do here at the show on wide bodies,
Speaker 12: because that's one of the areas of the backlogs, the
Speaker 12: you know, the three fifteen to seventy eighty seven that
Speaker 12: Bolli and everybody would like to grow. They want to build.
Speaker 12: They want to build more rate on that they could make.
Speaker 12: They could be more profitable toy build more per month,
Speaker 12: and so I think there's probably some wheeling and dealing
Speaker 12: to be done, maybe last minute dinners tonight, you know,
Speaker 12: to try to coerce people to buy one hundred and
Speaker 12: thirty million dollar jets.
Speaker 2: You know, all right, you.
Speaker 1: Flew over to Paris, I'm guessing you went business. How
Speaker 1: was it in terms of was this sold out? Tell
Speaker 1: it to us about the flight and kind of what
Speaker 1: you learned.
Speaker 12: Yeah, I mean flight was pretty full. Is United flight
Speaker 12: on a triple seven a big steal that you'd like? Yeah,
Speaker 12: and those will continue to remain in you know, in production.
Speaker 12: I think they're Heyday. That day we'll come back and
Speaker 12: have a Hey Day again because that'll be the biggest
Speaker 12: people movers. But the flight was full, you know, I
Speaker 12: think this year is going to be pretty busy when
Speaker 12: it comes to this summer. When it comes to European travel,
Speaker 12: there's a lot of bounce back. You know, here in
Speaker 12: Paris we have you can see a lot of Americans
Speaker 12: on the streets, not a lot of Asians, you know,
Speaker 12: not a lot of Chinese and Koreans and Japanese from
Speaker 12: other times I've been here, a lot a lot more
Speaker 12: Americans a dollars strong. So they're filling airplanes and they're all,
Speaker 12: you know, they're trying to get that revenge travel. And
Speaker 12: they got to go back to Paris two or three
Speaker 12: more times since they had to go through a pandemic,
Speaker 12: and so they're you know, they're full they're in the airplanes.
Speaker 6: George, we only have thirty seconds left. When do you
Speaker 6: think corporate travel will return to its pre pandemic levels.
Speaker 12: Yeah, so our last look it was seventy percent back.
Speaker 12: I think we got to get back to a world
Speaker 12: where people are going to the office five days a
Speaker 12: week and it's maybe not so much quality of life exactly.
Speaker 1: That's coming from a former Army officer, you know, quabi
Speaker 1: of life, Get back to work. George Ferguson, thank you
Speaker 1: so much. We appreciate it as always. George Ferguson. He
Speaker 1: covers the global airspace industry, the airline business, and as
Speaker 1: I mentioned, he is a veteran of the US Army,
Speaker 1: so we of course thank him for his service. But again,
Speaker 1: you know, when I was working with George, I'd see
Speaker 1: this request come in. Oh, I got to go to
Speaker 1: Paris for the Paris Air Show next year. I need
Speaker 1: to get in London for the farms where I'm like,
Speaker 1: really you got to go, say yeah, this is where.
Speaker 6: It all happens, you know, and then Hearriet.
Speaker 1: There is yeah, I mean, and they just it's amazing
Speaker 1: the you know the amount of money that gets committed.
Speaker 2: At those air shows.
Speaker 1: Just huge orders from airlines, and he was mentioning Indigo
Speaker 1: talking about a fast growth market of India.
Speaker 2: So that's interesting to learn.
Speaker 7: You're listening to the tape cans are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot Com, and.
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Speaker 7: flagship New York station, Just Say Alexa playing Bloomberg eleven.
Speaker 6: Jess Mitten and Paul Sweeney here in the Interactive Broker
Speaker 6: studio and Paul and I we were just talking about
Speaker 6: that Kava ipo last week that debuted. It actually ended
Speaker 6: up being the sixth largest IPO of the year after
Speaker 6: it raised three hundred and seventeen million dollars at around
Speaker 6: a two hundred actually a two point five billion dollar valuation.
Speaker 6: But once you saw that open up, Paul obviously closer
Speaker 6: to a five billion dollar valuation and being up to
Speaker 6: about forty two dollars per share notes trading around thirty eight.
Speaker 6: But who better to bring in to chat about this
Speaker 6: ipo as well as what the outlook is when it
Speaker 6: comes to the IPO market. Brian Lynch, who's the head
Speaker 6: of market insight at Equiti z in Brian talk to
Speaker 6: us about this IPO last week and what you think
Speaker 6: this means as far as what the trajectory is for
Speaker 6: the IPO market moving forward this year next year.
Speaker 13: Thanks for having me. I think the IPO market was
Speaker 13: really seeing the benefits of the Mediterranean diet. As you've
Speaker 13: said that. Kava ipo traded up ninety two percent on
Speaker 13: its first day and holding on to that IPO pop
Speaker 13: and I think they've set a really strong example for
Speaker 13: what a company needs to show to have a successful IPO.
Speaker 13: So public market investors are looking for companies generating significant revenue,
Speaker 13: so Kava generating over five hundred million, and then also
Speaker 13: a mix of growth and profitability. So they stated how
Speaker 13: the majority of their IPO proceeds would go to opening
Speaker 13: more stores, and while they're not profitable, they have strong
Speaker 13: unit economics and they're on a near term path to that.
Speaker 13: So they've kind of laid out the path for the
Speaker 13: boxes other companies will need to check as well.
Speaker 1: So Brionn, I mean, you know, the S and P
Speaker 1: five hundred is a you know, a good chunk this
Speaker 1: year ten eleven twelve percent, why haven't we seen more deals?
Speaker 1: Because the deals we've seen ken View, Kava have been
Speaker 1: wildly successful, and there's got to be a a you know,
Speaker 1: a backlog that you know is incredibly huge. Now for
Speaker 1: most of these underwriters, I.
Speaker 13: Would think absolutely, you have globally over twelve hundred unicorn companies.
Speaker 13: So these are private companies valued at over a billion dollars,
Speaker 13: many that are sitting on the sidelines and we're waiting
Speaker 13: for the market to turn around. So while the market's
Speaker 13: down a bit today, the SMPS at a fourteen month high,
Speaker 13: the VIX is at its lowest level since February of
Speaker 13: twenty twenty, and as you said, we've seen a few
Speaker 13: successful IPOs, So I think companies who have strong business
Speaker 13: fundamentals and have put the right hires in place really
Speaker 13: should start to think about capitalizing on this market opportunity.
Speaker 6: And Paul and I were actually just talking about a
Speaker 6: story Lena Popoina Dita on our US Equities team about
Speaker 6: how Goldman Sachs was saying, the IPO bus looks like
Speaker 6: it's ready to boom once again looking at that data,
Speaker 6: do you think that is when you're seeing a call
Speaker 6: like that from Goldman Sex that you'll see more firms
Speaker 6: kind of jump in and join that kind of call.
Speaker 13: I think it's certainly in encouraging, and there is a
Speaker 13: lot of pent up demand both for liquidity from early
Speaker 13: employees and shareholders of these companies who have been waiting
Speaker 13: ten fifteen years for an IPO, but then also for
Speaker 13: investor access. I think there is this desire to participate
Speaker 13: in innovation and growth, and with companies staying private longer,
Speaker 13: that's happening in the private market. So once these growing
Speaker 13: companies do make their public market debut, I think they
Speaker 13: will be warm received, will be received warmly, So I
Speaker 13: would say that, like the Goldman Report is painting the
Speaker 13: right picture.
Speaker 1: So the last eighteen months have been the slowest initial
Speaker 1: public offering market really since a great financial crisis. I
Speaker 1: guess I'm just wondering what the catalyst is going to
Speaker 1: be here brand because it feels like, you know, just
Speaker 1: by judging by recent deals, i'd be hitting a market
Speaker 1: right here.
Speaker 2: I'm not sure why people are waiting.
Speaker 13: We're starting to see more companies confidentially file or you know,
Speaker 13: make the indications that they're preparing for an IPO, so
Speaker 13: maybe hiring a new head of investor relations, hiring a
Speaker 13: new CFO. But there are companies you know who are
Speaker 13: in the process that I think public market investors will
Speaker 13: be excited about. Arm Is one. This is the British
Speaker 13: SoftBank backed microchip company that tried to merge with Navidio
Speaker 13: last year. That didn't work out for regulatory reasons, but
Speaker 13: they were looking at a forty billion dollar valuation at
Speaker 13: that time and they've confidentially filed for a USIPO. They're
Speaker 13: looking to raise eight to ten billions. So I think
Speaker 13: that's an exciting one that we'll see coming down the
Speaker 13: pipe at some point this year, and more of these
Speaker 13: examples will kind of, you know, give that nudge to
Speaker 13: additional companies to test the markets.
Speaker 6: To Paul's point talking about the IPO market, especially last year,
Speaker 6: it was facing its worst year in about two decades.
Speaker 6: Is given the backdrop of inflation and then higher interest rates,
Speaker 6: how does the Federal Reserve in their interest rate path
Speaker 6: play into this as far as if they're getting close
Speaker 6: to this peak point here, what that means for the
Speaker 6: trajectory of the IPO market.
Speaker 13: Yeah, we saw that rate increases have slowed down, so
Speaker 13: I think that's a positive. It's showing that inflation is
Speaker 13: getting a bit more under control and there will be
Speaker 13: likely future rate hikes, but there's a little less uncertainty
Speaker 13: around that. But I think it really backonds to the
Speaker 13: point of investor interest in growth. So they want, you know,
Speaker 13: large growth opportunities and the ability to really capitalize on
Speaker 13: greater returns, you know, in a higher interest rate environment
Speaker 13: where your cash could be making more.
Speaker 1: So brandis are there any industries that the market might
Speaker 1: be more receptive to right now? Because I'm just saying
Speaker 1: that Cava was a restaurant business, ken View was healthcare.
Speaker 1: I mean, these aren't like the super sexiest things like
Speaker 1: technology or something. So what are you hearing from the
Speaker 1: bankers in terms of what industries might be, you know,
Speaker 1: most receptive of by the public.
Speaker 13: Yeah, So in the private markets, we're seeing a few
Speaker 13: sectors with the greatest investor interest. Those are AI and
Speaker 13: machine learning companies. Not surprisingly, fintech is generating a lot
Speaker 13: of interest, and then software as a service businesses as well.
Speaker 13: So those are some categories to think about where there
Speaker 13: may be public market interest as well for the right
Speaker 13: candidates to go public. But that's what we're seeing in
Speaker 13: the private markets at equity zen, What.
Speaker 6: Are the next IPOs that are on your radar?
Speaker 13: Yeah, arm is one I'd mentioned that I think could
Speaker 13: be interesting. Sheen is another one, the Chinese fast fashion retailer.
Speaker 13: They just raised more capital at a down round just
Speaker 13: earlier this year after raising at you know, a very
Speaker 13: aggressive hundred billion dollar value back in April of twenty
Speaker 13: twenty one. But this is the profitable, fast growing company
Speaker 13: with a global market that is said that they're looking
Speaker 13: to IPO later this year, So I think that's another
Speaker 13: one people will have their eye on.
Speaker 1: You bring up a good point here, just wondering about
Speaker 1: the types of names that could come public here. And
Speaker 1: valuation is a big issue here because I could I
Speaker 1: can imagine me being an IPO banker going into with
Speaker 1: evaluation that would represent a down round for a lot
Speaker 1: of these companies and that's a problem.
Speaker 2: So are we seeing that in the market.
Speaker 13: I think it's just a reality of where we are,
Speaker 13: where companies raised capital at these aggressive valuations in twenty
Speaker 13: twenty and twenty twenty one, and on equity Zience platform,
Speaker 13: we're seeing the average company trading at a forty to
Speaker 13: fifty percent discount to that last primary round reflection or
Speaker 13: reflecting that correction in the market. So I think some
Speaker 13: companies may choose to raise additional primary capital as a
Speaker 13: means of also reset adding their valuation before they go
Speaker 13: to IPO. Others may rip off the band aid and
Speaker 13: understand that they may be you know, raising out a
Speaker 13: lower valuation in an IPO. So it's different paths that
Speaker 13: different companies will take. But I think ultimately they need
Speaker 13: to come up with the solution, you know, both for
Speaker 13: liquidity and broader access.
Speaker 1: Hey, Brian, thanks so much for joining us. Really appreciate
Speaker 1: getting a few minutes of your time. Brian Lynch, head
Speaker 1: of Market Insight at Equity Zen.
Speaker 7: You're listening to the tape cancer live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
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Speaker 1: Lots going on in terms of global geopolitics, if you will.
Speaker 1: Mc muloy joins us. He's co founder of the Lobo Institute,
Speaker 1: former senior fellow at Middle East Initiative Formula Deputy Assistant
Speaker 1: Second Defense for the Middle East at the US Department
Speaker 1: of Defense. And also he is a former US Marine
Speaker 1: Infantry officer, so we thank him for his service. Hey, Mick,
Speaker 1: there's a lot to talk about here. We appreciate getting
Speaker 1: some more of your time. Let's start with China and
Speaker 1: Secretary of State Blincoln, how would you kind of characterize
Speaker 1: that visit the success or lack thereof.
Speaker 14: So great to be with you, I think right now
Speaker 14: we can say it's somewhere in between. It's good that
Speaker 14: it happened. It's important that the superpowers of the world,
Speaker 14: particularly those with nuclear weapons, are talking and not going
Speaker 14: more towards the potential for our conflict. But one of
Speaker 14: the main things that we wanted to do here was
Speaker 14: to get military to military communications back started. That's something
Speaker 14: that during the entirety of the Cold War, the United
Speaker 14: States and sovi Union did mostly because we wanted to
Speaker 14: avoid a misinterpretation that led to an engagement that could
Speaker 14: lead to a conflict. So that's why I think Secretary
Speaker 14: blink And has been so emphatic about that. And it
Speaker 14: looks like that did not happen, but they did have
Speaker 14: agreement to carry on and have another engagement between the
Speaker 14: Foreign Minister and our Secretary of State and potentially have
Speaker 14: our presidents meet at st the G twenty. So it
Speaker 14: wasn't a failure, but it wasn't what we needed, which
Speaker 14: was to make sure that our militaries have the ability
Speaker 14: to talk to one another to avoid an escalation that
Speaker 14: need Cutter would want.
Speaker 4: Nick.
Speaker 6: There were reports earlier this year that the US was
Speaker 6: planning to increase the number of US troops training Taiwanese forces,
Speaker 6: not confirmed though obviously by the government. Have we gotten
Speaker 6: new indication on that front from his visit this week.
Speaker 14: So one of the things that I think has irritated
Speaker 14: China so much is that we have new agreements with
Speaker 14: the Philippines, for example, to put four new or four
Speaker 14: bases where less military will be, what the Marine Corps
Speaker 14: doing with the lictoral Regiment. And now to your point
Speaker 14: that we are actively increasing the number of trainers in Taiwan,
Speaker 14: that is in our interest, it's in the interest of
Speaker 14: our allies in the region. But it's obviously something that
Speaker 14: China doesn't want to see if they still have a
Speaker 14: design on taking Taiwan. So that's going to be attention.
Speaker 14: I don't think we could have one hundred diplomatic engagements
Speaker 14: and we're never going to see the eye to eye
Speaker 14: on the issue of Taiwan, but it is something that
Speaker 14: we need to address and then focus on the areas
Speaker 14: where the United States and China do have an interest,
Speaker 14: which is largely economics. Our economies are tied, not economists.
Speaker 14: But I think I know I can say that, and
Speaker 14: it's important that we focus on those areas, understanding that
Speaker 14: there's certain areas that will never agree on.
Speaker 1: All Right, Mick, let's switch gears because I know we
Speaker 1: can do that with you. Ukraine, I guess the counter
Speaker 1: offensive is underway. If it is kind of how would
Speaker 1: you characterize it and what are your thoughts given that
Speaker 1: situation over there?
Speaker 14: So I would characterize it as smart. From the Ukrainian perspective,
Speaker 14: they could they could have gone all in, and they
Speaker 14: could have had a catastrophic failure. What I think they've
Speaker 14: done is they've probed the Russian lines. They've retaken some
Speaker 14: territory I think around one hundred and fourteen square kilometers
Speaker 14: right now, about eight pounds, But they haven't committed the bulk,
Speaker 14: the mass of their force because They're really trying to
Speaker 14: find out where the Russians are most runnable and then
Speaker 14: exploit it to a point where it puts them so
Speaker 14: much on their back, but that they can start regaining
Speaker 14: a lot of territory. So I think it is going
Speaker 14: where the Ukrainians expected it to, maybe not what everybody
Speaker 14: expected it, where it would be a more massive attack
Speaker 14: acts of attacks. But I think they're doing it the
Speaker 14: right way because they have skill, they have the better equipment,
Speaker 14: but they also have a problem and they don't have
Speaker 14: as many soldiers, so they have to be very cautious
Speaker 14: one where they bend those soldiers and try to find
Speaker 14: the vulnerabilities, the gaps and teams, if you will, in
Speaker 14: the Russian defenses. So I think this is going to
Speaker 14: be something that builds rather than a big big bang
Speaker 14: at the beginning.
Speaker 6: What is it going to take to get Russia out
Speaker 6: of Ukraine?
Speaker 14: It's going to be tough. I think what the Ukrainians
Speaker 14: are trying to do is get to a point where
Speaker 14: they challenge their ability to maintain their presence in Crimea
Speaker 14: something they had thought they had harready gotten. They've done
Speaker 14: it in twenty fourteen and never thought that that would
Speaker 14: be challenged, and it is very strategically important to them
Speaker 14: if the Ukrainians can get to a point where they
Speaker 14: challenge their ability to stay there. That's why they're trying
Speaker 14: to cut off the land bridge by pushing all the
Speaker 14: way through Zaparicha to be able to cut them off.
Speaker 14: The only way they can get to Crimea after that
Speaker 14: is that bridge, which is vulnable. But if they get
Speaker 14: to that point, perhaps they'll be at times they can negotiate.
Speaker 14: I don't know if the Ukrainians will be willing to
Speaker 14: give any territory, including Crimea, but Russia might get to
Speaker 14: a point where they realized that they might lose Crimea,
Speaker 14: something they never thought would happen when they launched this invasion.
Speaker 1: Mike Holt important are critical? Are fighter jets for Ukraine?
Speaker 1: Are they a game changer or not.
Speaker 4: So much so.
Speaker 14: I think that with all the other items that they've gotten,
Speaker 14: you know, from the M one tanks, the other main
Speaker 14: battle tanks, the infantry fighting vehicles, this is just one
Speaker 14: more piece of the puzzle that's going to give them
Speaker 14: the ability to go on the offensive and to the
Speaker 14: point where they can take back key terrains. F sixteams.
Speaker 14: They're good in the air. They can knock incoming missiles,
Speaker 14: they can knock enemy fighters, but they can also do
Speaker 14: qulose air support, and that's something desperately needed when you're
Speaker 14: trying to attack fortified positions in which the Russians have
Speaker 14: been in for so long. Developing so game changer close
Speaker 14: to it, But I think the game changers of all
Speaker 14: the things that you've given recently that have really given
Speaker 14: them the ability to do this counter offensive in a
Speaker 14: way that could be really meaningful, that really put Russia
Speaker 14: in a position where they might not be able to
Speaker 14: stay stay in the positions that they had occupied for
Speaker 14: so long.
Speaker 6: Nick Willy have about thirty seconds left, but have to
Speaker 6: get your take about this Titanic vessel. What do you
Speaker 6: think is going to happen there?
Speaker 14: Well, I certainly hope that we can get out and
Speaker 14: find these individuals and rescue them. It's obviously you know,
Speaker 14: thoughts to them and their families, but it's going to
Speaker 14: be difficult. I mean, they're going to have to find
Speaker 14: If you think about it, look how long it took
Speaker 14: to find the Titanic itself. Well, the Titanic is nine
Speaker 14: hundred feet fall. How long is the Titan. That's the
Speaker 14: name of the submersible lends is twenty feed long. So
Speaker 14: they're going to have to figure out where it was,
Speaker 14: which is difficult because it doesn't have any communications. And
Speaker 14: then they're going to have to get all the way
Speaker 14: down there and figure out how to tether it to
Speaker 14: another subversible and bring it to the surface. Let's hope
Speaker 14: they can do it, but it is not going to
Speaker 14: be easy.
Speaker 5: It's going to be a challenge, all right, Nick, thank
Speaker 5: you so much.
Speaker 2: We appreciate it.
Speaker 1: McK mouloy, co founder of the Lobo Institute, getting his
Speaker 1: thoughts on some geopolitical issues.
Speaker 3: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 3: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 3: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 3: at Matt Miller nineteen seventy three.
Speaker 2: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.