WEBVTT - First Republic Rescue May Rely on US Backing 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:29.640 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. 0:00:31.280 --> 0:00:33.200 All right, I'm gonna say I'm so glad that we're 0:00:33.200 --> 0:00:35.640 doing this segment next because I feel like coming off 0:00:35.640 --> 0:00:39.440 that discussion. Yeah, it's all about banks and what happens next, 0:00:39.640 --> 0:00:41.600 So let's get to it. Because we did have some headlines. 0:00:42.479 --> 0:00:45.560 Let's get to our Bloomberg News Finance reporter Shree Natarajan. 0:00:45.840 --> 0:00:48.360 He's here in our Interactive broker studio along with Herman Chance, 0:00:48.400 --> 0:00:51.720 senior analyst for US Regional banks at our Bloomberg Intelligence team. 0:00:51.760 --> 0:00:54.640 Because we did have pack West sharing up it's liquidity first, 0:00:54.680 --> 0:00:57.360 Republic again under pressure, and then you had Janet yell 0:00:57.400 --> 0:01:00.480 and want wanta sure. Let me start with you, what 0:01:00.520 --> 0:01:03.320 are the headlines as you look at this situation that 0:01:03.360 --> 0:01:05.319 you think we need to be sharing with our audience. 0:01:05.720 --> 0:01:08.120 Look as I walked over to the radio booth, you 0:01:08.160 --> 0:01:10.400 could see the markets taking a nose dive into the close. 0:01:10.880 --> 0:01:12.399 But that's not all. When you look at someone like 0:01:12.440 --> 0:01:16.000 First Republic going down sixteen percent. That's a stock that's 0:01:16.600 --> 0:01:19.319 been beaten up this month, down ninety percent. This was 0:01:19.319 --> 0:01:21.399 a three digit stop. Now that long ago, the start 0:01:21.400 --> 0:01:23.279 of the month, this was around one hundred and thirty dollars. 0:01:23.440 --> 0:01:25.600 Why aren't things coming down for this one with all 0:01:25.640 --> 0:01:28.640 the assistance it's gotten so far? Well, the question is 0:01:28.640 --> 0:01:30.480 is that enough? And we have a very good story 0:01:30.600 --> 0:01:33.400 on Bloomberg right now if you read it, which gives 0:01:33.440 --> 0:01:36.160 you a very good explainer as to why there is 0:01:36.600 --> 0:01:39.520 such reluctance in any sort of White Knight coming forward. 0:01:39.560 --> 0:01:42.399 There is a big gaping hole in that balance sheet. 0:01:42.560 --> 0:01:45.640 They break it down there. Their securities portfolio has taken 0:01:45.680 --> 0:01:48.160 a four billion dollar hit their loan book. And this 0:01:48.240 --> 0:01:51.160 is a bank, First Republic, that has a big presence 0:01:51.200 --> 0:01:53.040 in the real estate market, is a big player in 0:01:53.080 --> 0:01:56.680 sort of that jumbo mortgage loans. Think about the dynamic there. 0:01:56.720 --> 0:01:59.920 They must have met so many major loans with two 0:02:00.000 --> 0:02:02.840 percent three percent fixed rate long term marketges that have 0:02:02.960 --> 0:02:05.640 obviously taken a hit. So you have a situation where 0:02:05.640 --> 0:02:09.240 there's this twenty six point five billion dollar hole, and 0:02:09.880 --> 0:02:12.320 tangible common equity is probably worth thirteen billion dollars, So 0:02:12.360 --> 0:02:14.760 there's still the hole that needs to be filled. So 0:02:14.880 --> 0:02:17.960 it's not quite easy for anyone to come in without 0:02:18.040 --> 0:02:21.200 possibly some sort of government backing. We've talked about that idea. 0:02:21.240 --> 0:02:24.680 We believe that is at least being studied, but is 0:02:24.720 --> 0:02:28.480 a solution on the horizon that's unclear to us. And 0:02:28.560 --> 0:02:30.639 at three pm, in the middle of a market day, 0:02:30.880 --> 0:02:34.520 in the middle of the Treasury Secretary speaking to the Senate, 0:02:34.680 --> 0:02:36.799 in the middle of a J. Paul press conference, when 0:02:36.800 --> 0:02:38.760 the bank has to put out a filing that says 0:02:38.800 --> 0:02:41.120 their top executives, their CEO, the chairman, and a few 0:02:41.160 --> 0:02:44.360 other executive officers are going to zero their bonus for 0:02:44.400 --> 0:02:46.760 the year, are going to take a salary cut. That 0:02:46.880 --> 0:02:49.760 doesn't really instill a lot of confidence, does it. Yeah? 0:02:49.880 --> 0:02:52.840 Three luck, I mean you know SVB signature first Republic 0:02:52.919 --> 0:02:54.560 Pack West term and feel free to jump in here. 0:02:54.600 --> 0:02:57.120 There are fifty banks in the KBW regional banking induction 0:02:57.160 --> 0:02:59.560 from Bank of Hay which is down thirty percent this year. That's, 0:03:00.000 --> 0:03:01.400 by the way, a few hours like I think I 0:03:01.480 --> 0:03:03.400 ran that thirty minutes ago to the New York Community 0:03:03.400 --> 0:03:05.079 Bank Work, which is up like ten percent in the year, 0:03:05.680 --> 0:03:10.280 which other banks seem most vulnerable to you? That's a 0:03:10.440 --> 0:03:13.480 risky question to answer, and in fact I would I 0:03:13.480 --> 0:03:15.400 would probably sort of try and get at that by 0:03:15.400 --> 0:03:17.440 looking at what has happened to the stock So what 0:03:17.560 --> 0:03:19.960 are equity invest is seemingly most concerned. But and some 0:03:20.000 --> 0:03:22.200 of the names that we flagged, our names like pack 0:03:22.280 --> 0:03:26.600 West and Western Alliance Bank of why pack West at 0:03:26.639 --> 0:03:28.800 least some good news this morning they put out a 0:03:28.919 --> 0:03:32.679 detailed press release which a at least indicated that they 0:03:32.760 --> 0:03:35.960 have showed ab liquidity measures. They've got help from Atlas 0:03:36.080 --> 0:03:40.080 sp fun fact backed and owned by Apollo, which recently 0:03:40.160 --> 0:03:43.240 bought the Securitized Products group from Credit SUAE rest in 0:03:43.320 --> 0:03:46.800 Peace and spun it off as the standalone investment firm 0:03:47.000 --> 0:03:49.000 that is now stepping in here to be a little 0:03:49.000 --> 0:03:52.720 bit of a rescue entity for pac West, if you may. 0:03:52.760 --> 0:03:54.800 They're not doing any of the capital race, but for 0:03:54.960 --> 0:03:58.960 now they have more cash than uninsured deposits, and that's 0:03:59.000 --> 0:04:04.640 good news. Hermann a PacWest issue. The big deposit outflow 0:04:04.760 --> 0:04:09.040 was in the venture banking business, which is what SPB does, 0:04:09.080 --> 0:04:12.880 what Silicon Valley Bank does. So when PacWest had venture 0:04:12.920 --> 0:04:16.600 banking deposits down forty three percent. It just shows that 0:04:16.839 --> 0:04:20.360 the herd mentality of the VC community affected SVB is 0:04:20.400 --> 0:04:24.440 affecting Pac West. And we also did a rid across 0:04:24.640 --> 0:04:28.360 in our research today looking at Westerner Alliance, which also 0:04:28.440 --> 0:04:32.120 has some technology related deposits. It's only fourteen percent of 0:04:32.520 --> 0:04:36.720 the total deposit base, which it should insulate them going 0:04:36.800 --> 0:04:39.840 forward if we do see a similar deposit outflow from 0:04:39.920 --> 0:04:43.840 the technology clients. So how are you guys? I mean, 0:04:44.480 --> 0:04:47.000 it's interesting because we were also just talking about kind 0:04:47.000 --> 0:04:49.120 of real estate exposure to and then you wonder, you 0:04:49.160 --> 0:04:52.400 know what that implications will be sore? The what do 0:04:52.520 --> 0:04:55.600 we need to be thinking about that should we expect 0:04:55.680 --> 0:04:58.000 there's going to be more problems? Tree, I mean, I 0:04:58.000 --> 0:05:00.200 don't know what are you hearing from your sources, But 0:05:00.320 --> 0:05:02.240 the FED chair was out there talking about the fact 0:05:02.279 --> 0:05:04.960 that there are some small banks that they are concerned about. 0:05:05.839 --> 0:05:09.159 At this point, everyone is focused on First Republic because 0:05:09.240 --> 0:05:11.479 as as the term they all likely use is it's 0:05:11.520 --> 0:05:14.039 a real bank. And the reason they say that it's 0:05:14.080 --> 0:05:15.760 not a small entity it has It had about one 0:05:15.800 --> 0:05:19.000 hundred and seventy five billion dollars in deposits at the 0:05:19.160 --> 0:05:21.160 end of at the end of the year, right, So 0:05:21.720 --> 0:05:24.240 it's a reasonably sized bank. It's clearly going through a 0:05:24.279 --> 0:05:26.760 lot of problems. Not just that, but it also had 0:05:26.800 --> 0:05:29.559 this consocium eleven of the country's biggest banks coming forward 0:05:29.600 --> 0:05:32.600 and trying to provide it. That might just have been 0:05:33.600 --> 0:05:36.640 financial hug. If you wear it is the ultimate financial hug. 0:05:36.720 --> 0:05:41.719 But did it really? Not very heavy though? Exactly thirty 0:05:41.960 --> 0:05:45.240 billion dollars when we estimate the whole in their deposit 0:05:45.320 --> 0:05:48.160 outflow was eighty nine billion, So it gives them a 0:05:48.200 --> 0:05:50.760 short term bridge to a longer term solution, which we're 0:05:50.800 --> 0:05:53.640 still waiting to hear what that is. Janet Yellen's comments though, 0:05:53.640 --> 0:05:56.480 it took out the banking sector again today, So did 0:05:56.560 --> 0:05:58.440 she make a mistake? Why did she do that? She 0:05:58.560 --> 0:06:00.440 had to know that there might be that impact. She 0:06:00.640 --> 0:06:05.120 spoke recently at the American Baker's conference on Tuesday and 0:06:05.360 --> 0:06:09.800 said that if there were a smaller institution that would fail, 0:06:10.720 --> 0:06:14.279 the regu layers would step in and guarantee of the deposits. 0:06:14.320 --> 0:06:17.480 So the market was working under the assumption that that 0:06:17.640 --> 0:06:21.840 was the case. But then she came out today near 0:06:21.920 --> 0:06:25.160 the market closed and said there's no blanket guarantee. So 0:06:25.600 --> 0:06:29.760 those two concepts aren't directly opposed to each other, but 0:06:29.839 --> 0:06:31.840 it just doesn't instill a lot of confidence with the 0:06:31.880 --> 0:06:34.360 broader market. I will point out that it is a 0:06:34.480 --> 0:06:36.600 common that was made in Washington, d C. It is 0:06:36.640 --> 0:06:38.120 a common that was made in front of a lot 0:06:38.160 --> 0:06:41.400 of politicians, and in that city, every single word matters, 0:06:41.440 --> 0:06:44.680 and there is careful word choice going on their blanket. 0:06:44.800 --> 0:06:47.680 For once, I am not considering for others, because we 0:06:47.760 --> 0:06:50.560 have reported that her stuff is actually considering measures on 0:06:50.680 --> 0:06:53.800 how they could perhaps have a temporary increase in deposits. 0:06:53.800 --> 0:06:57.280 They've certainly given a thought considering it. Not considering a 0:06:57.440 --> 0:07:00.440 blanket increase in deposit guarantee could well will mean that 0:07:00.560 --> 0:07:03.600 nothing zimminine. We're not planning to do that, but are 0:07:03.680 --> 0:07:06.920 the scenario planning perhaps so you mentioned Washington d C. Herman, 0:07:06.960 --> 0:07:09.080 you mentioned Apolo. I have to ask this. Apolo's rescue 0:07:09.080 --> 0:07:10.840 of pack West comes on the heels of the UBS 0:07:10.880 --> 0:07:14.240 acquisition of CS. My question is this he got talked 0:07:14.280 --> 0:07:16.720 now Warren Bethett trying to get back involved with some 0:07:16.800 --> 0:07:19.080 of these bailouts, right, I mean, if you remember the GFC, 0:07:19.240 --> 0:07:20.880 I mean he was involved with all the ZACS and 0:07:21.040 --> 0:07:23.560 made a killing. How do you think these deals are 0:07:23.560 --> 0:07:25.560 going to work out for people like Ubs, for some 0:07:25.680 --> 0:07:27.760 of these other banks out there that are the acquirer. 0:07:27.920 --> 0:07:30.559 I mean to me, it seems like things are setting 0:07:30.640 --> 0:07:33.240 up pretty nicely. Yeah. I would say that the UBS 0:07:33.360 --> 0:07:35.560 credit Sweet Steel. It was a bit different than what 0:07:35.960 --> 0:07:39.480 Apollo's doing. Apollo is doing a lunch back deal where 0:07:39.720 --> 0:07:42.560 if things go bad, they at least own the deposits 0:07:42.680 --> 0:07:47.160 and can monetize, so their risk is much lower versus 0:07:49.200 --> 0:07:51.520 taking an equity stake in a regional bank that is 0:07:51.600 --> 0:07:55.320 feeling some pressure. So that there are going to be 0:07:56.200 --> 0:08:00.680 other types of deals like what Apolo was doing, but 0:08:01.200 --> 0:08:03.680 they're not putting equity skin in the game at this point. 0:08:03.800 --> 0:08:06.760 No surprise. First Republic haut to be from w by 0:08:06.840 --> 0:08:11.239 Fitch maybe cut further, No surprise. Surely if First Republic 0:08:11.320 --> 0:08:15.960 can figure something out and there is something done, um, 0:08:16.400 --> 0:08:21.200 does it start to calm down? Yes? Because if if, if, if, if, 0:08:21.240 --> 0:08:24.520 the current thinking across the spectrum is there is no 0:08:24.600 --> 0:08:27.320 obvious solution, there is no easy solution. Suddenly tomorrow morning 0:08:27.360 --> 0:08:28.680 you come and tell me that they have found out 0:08:28.720 --> 0:08:32.280 a solution that should help even with the broader sector. Yes, 0:08:32.400 --> 0:08:36.199 because when this is, this has been sparked by a 0:08:36.280 --> 0:08:41.200 crisis of confidence, not not sort of any obvious irresponsible 0:08:41.480 --> 0:08:44.520 risk taking to the hilt, right like these these people 0:08:44.559 --> 0:08:46.920 are talking about hits to their security s portfolio, which 0:08:46.960 --> 0:08:49.640 is which is not because they invest in the riskiest 0:08:49.720 --> 0:08:53.360 stuff out there, but afford to let First Republic fall 0:08:54.360 --> 0:08:58.880 real quick hard to say, but the obvious answer I 0:08:58.920 --> 0:09:01.440 would have to assume is no they would because then 0:09:01.559 --> 0:09:03.760 if you have to find a whackamole solution, it then 0:09:03.840 --> 0:09:07.200 becomes a whackamle literally because then okay, then another FDIC 0:09:07.320 --> 0:09:09.400 has to step in. Then every investors then go and 0:09:09.480 --> 0:09:11.599 see which other bank would be most pressure. Then you 0:09:11.679 --> 0:09:13.160 go from one to one to one to one to 0:09:13.200 --> 0:09:15.440 the next, and that's not a fun game to play. 0:09:15.559 --> 0:09:18.960 I wish we had half an hour more, but folks, 0:09:19.080 --> 0:09:20.880 that's what you needed to know when it comes to banks. 0:09:20.920 --> 0:09:24.440 That's where we are. Four seventeen pm. Moll Street, Time Street, 0:09:25.360 --> 0:09:30.680 Thank you so much. You're listening to the Bloomberg Business 0:09:30.720 --> 0:09:34.200 Week podcast. Catch us live week the afternoons from three 0:09:34.240 --> 0:09:37.559 to six Eastern Listen on Bloomberg dot com, the Ihard 0:09:37.640 --> 0:09:40.600 radio app, and the Bloomberg Business App or watch us 0:09:40.679 --> 0:09:44.880 live on YouTube. So, by one measure, do you know, 0:09:44.880 --> 0:09:47.079 at a bit of research ahead of this segment, the 0:09:47.160 --> 0:09:50.080 global cloud communication platform market likely to reach more than 0:09:50.120 --> 0:09:53.240 fifty one billion by twenty thirty compound annual growth rate 0:09:53.240 --> 0:09:55.920 of nearly twenty percent. So one player in that market 0:09:56.200 --> 0:09:58.680 is the cloud based communications provider you know, the name 0:09:59.080 --> 0:10:01.839 Vantage are owned by Ericson and with us here in 0:10:01.880 --> 0:10:04.959 her Bloomberg Interactor Broker studio, Rory Reid, he is a 0:10:05.040 --> 0:10:08.720 CEO of on It. She's also a senior VP at Ericson. Welcome, Welcome, 0:10:08.880 --> 0:10:11.040 Nice to have you here with Damien and myself here 0:10:11.120 --> 0:10:13.640 in our studio. How are you and how do you 0:10:13.760 --> 0:10:18.640 feel the business environment is amid what we're seeing continued 0:10:18.679 --> 0:10:21.319 volatility in parts of the financial market. Well, I'm great. So, 0:10:21.480 --> 0:10:23.280 first of all, thank you for having me here in 0:10:23.360 --> 0:10:25.520 New York at the beginning of spring tonight. And I 0:10:25.640 --> 0:10:28.199 suppose you know, in the macro level it's going to 0:10:28.240 --> 0:10:31.080 be choppy. There's no question and volatility, but there's choppy. 0:10:31.320 --> 0:10:35.280 There's financial crisis choppy, there's choppy, Like I'm not short choppy, 0:10:35.440 --> 0:10:38.800 you know, I'm you know, three four decades in the 0:10:38.880 --> 0:10:41.920 tech space. I've seen all these cycles before. Yeah, one 0:10:42.000 --> 0:10:44.280 thing is the market's going to turn, particularly in tech, 0:10:44.360 --> 0:10:46.720 and when it does, it turns hard and it turns well. 0:10:47.920 --> 0:10:49.559 It's going to be choppy for a couple, a few 0:10:49.600 --> 0:10:52.520 more quarters, whatever it is. But in the meantime, what 0:10:52.679 --> 0:10:55.320 we have to do is focus on cash flow management. 0:10:55.400 --> 0:10:59.200 Make sure you're managing your cash. Invest where you can 0:10:59.679 --> 0:11:02.640 in market dislocations, in M and A and in your 0:11:02.679 --> 0:11:06.880 product get differentiation right now because the market's there. The 0:11:07.400 --> 0:11:11.360 long term tech trend is intact, and the opportunities are 0:11:11.480 --> 0:11:14.360 right now to take advantage or right North America advantage 0:11:14.440 --> 0:11:16.280 is core market, right. I wonder if you could just 0:11:16.360 --> 0:11:19.679 help me understand what scares you more the thought of 0:11:19.679 --> 0:11:23.800 our recession or persistently higher inflation. You know, from a 0:11:23.880 --> 0:11:27.040 standpoint of the business, our business is actually a third 0:11:27.120 --> 0:11:30.160 or third or third across the globe. I think from 0:11:30.720 --> 0:11:34.280 a business perspective, inflation has a long term negative impact 0:11:34.360 --> 0:11:36.520 on everything. It's just not good. You have to clean 0:11:36.640 --> 0:11:40.040 it up. A recession is temporary, it doesn't usually last 0:11:40.120 --> 0:11:42.760 a long time. I'm hopeful that we can move through 0:11:42.840 --> 0:11:45.400 this period of volatility and what you're going to see 0:11:45.440 --> 0:11:48.720 with Ericson support, we're in a very unique position. Many 0:11:48.760 --> 0:11:53.320 of our editors won't make it through this issue. We've 0:11:53.400 --> 0:11:56.080 got the support of a company like Ericson. We can 0:11:56.160 --> 0:11:59.319 double down, we can build in the better products at differentiations. 0:11:59.320 --> 0:12:02.040 Why won't they make it down, make it through. Well, 0:12:02.360 --> 0:12:04.600 many of them in the tech space have lived off 0:12:04.679 --> 0:12:06.840 of cheap money for a long time, so they've been 0:12:07.000 --> 0:12:10.160 very speculative. So this big moving rate to the past 0:12:10.280 --> 0:12:13.160 hurt them and then the Valley Bank, right, I mean, 0:12:13.160 --> 0:12:14.959 how does that impact that? It hurts them, So you 0:12:15.040 --> 0:12:18.120 want what you're seeing is we've always had a positive 0:12:18.200 --> 0:12:21.240 cash flow and we've managed because we had that historic 0:12:21.440 --> 0:12:24.360 voiceover of IP business. And then we have the vantage 0:12:24.400 --> 0:12:27.960 communication platform business. That's the future, that's the cloud. We'll 0:12:28.080 --> 0:12:30.520 use that cash flow to make sure we have the support. 0:12:30.800 --> 0:12:33.520 Now you also have a huge corporate parent, right right, 0:12:34.160 --> 0:12:36.920 Ericson waters for six point two billion dollars last year. 0:12:37.440 --> 0:12:40.000 They then give us the support underneath that we make 0:12:40.040 --> 0:12:42.840 the investment. Not only can we grow a core business 0:12:42.960 --> 0:12:44.959 now it's not growing at the same rate it was 0:12:45.000 --> 0:12:48.920 a year ago, probably half, but we'll see somewhere between 0:12:49.040 --> 0:12:52.240 fifteen and twenty business and residential both not growing equally 0:12:52.400 --> 0:12:55.680 or residentials definitely on a decline. That's just a cash 0:12:55.720 --> 0:12:58.439 flow engine for us. The cloud is the future that 0:12:58.559 --> 0:13:00.880 have been growing at thirty thirty five percent right now, 0:13:00.920 --> 0:13:04.120 it's probably grown somewhere between eighteen and twenty percent. Still 0:13:04.160 --> 0:13:06.599 a great business, yeah, and it's going to continue to 0:13:07.120 --> 0:13:12.600 be critical because those multimodal communications you interact with companies 0:13:12.679 --> 0:13:15.720 now twenty four to seven anywhere around the world, whether 0:13:15.800 --> 0:13:20.240 it's voice, video, you want support, you want commerce, that's 0:13:20.320 --> 0:13:23.160 just the way of the future. Every industry, you know, 0:13:23.320 --> 0:13:25.840 every vertical is going to need this, and that's why 0:13:25.880 --> 0:13:28.480 we got to invest now to create the differentiation for 0:13:28.600 --> 0:13:31.480 our audience and those who are unaware. Eric's inquired voltage 0:13:31.480 --> 0:13:33.240 just last year in July, right for six point two 0:13:33.240 --> 0:13:36.280 billion dollars. My question is, you know, talk to us 0:13:36.280 --> 0:13:38.880 about the AGM that's coming up next week for Ericson. 0:13:38.960 --> 0:13:41.760 Where does vantage fit into the company's you know, the 0:13:41.840 --> 0:13:44.160 company enterprise five G market, Where does that fit into 0:13:44.200 --> 0:13:47.720 the company's future plans. You know, Ericson's amazing company. They're 0:13:47.960 --> 0:13:51.319 they're they're driving almost half of the traffic and the 0:13:51.400 --> 0:13:54.480 five G space outside of China around the world. I 0:13:54.520 --> 0:13:58.640 mean this is a technology leader. They see an opportunity 0:13:58.760 --> 0:14:03.120 to take our communication APIs that's really the cloud base, 0:14:03.720 --> 0:14:08.200 bits of code that allows every enterprise to interact with customers, 0:14:08.240 --> 0:14:11.280 whether it's telling you your coffee's ready or having a 0:14:11.400 --> 0:14:15.679 telemedicine environment. What they see is now we can take 0:14:15.760 --> 0:14:19.680 the network. What's in the network that we can expose 0:14:19.760 --> 0:14:24.440 to these APIs so we can create better quality of service, 0:14:24.880 --> 0:14:28.880 we can create location, we can create silent authentication. Now 0:14:28.960 --> 0:14:31.440 instead of you just having to type in six digits, 0:14:31.680 --> 0:14:35.120 it'll know who you are by traversing the information that's 0:14:35.160 --> 0:14:37.560 in the network. We're going to create a whole new 0:14:37.680 --> 0:14:42.200 generation of APIs based on the network. That's a first mover. 0:14:42.600 --> 0:14:45.000 And if you were at Mobile World Congress in Barcelona 0:14:45.400 --> 0:14:47.360 a couple of weeks ago, yeah, this was a big 0:14:47.480 --> 0:14:50.040 theme in the industry. This is going to drive that 0:14:50.280 --> 0:14:54.120 TELECOO space for the next five ten years. API you 0:14:54.200 --> 0:14:57.080 mean application programming interface right, what they are is, that's 0:14:57.160 --> 0:14:59.320 exactly what it is, Carol. And there bits of code 0:14:59.440 --> 0:15:04.920 that allows enterprises like you know, chocolate companies, ride sharing companies, 0:15:05.240 --> 0:15:10.720 telemenacing companies to embed video voice messaging into their applications 0:15:10.800 --> 0:15:14.320 to reach anyone around the world who has a smartphone, 0:15:14.440 --> 0:15:17.480 and the smartphone what five billion of them? Yeah, there's 0:15:17.480 --> 0:15:19.240 a few out there, Okay, just a few. I want 0:15:19.240 --> 0:15:20.960 to ask you, because you were talking about geography. You 0:15:21.040 --> 0:15:23.800 are global, so when you look around the world, it's 0:15:23.840 --> 0:15:25.920 great when we have somebody like you in studio when 0:15:25.960 --> 0:15:28.320 we are at this moment of we talk recession, we 0:15:28.400 --> 0:15:30.400 talk hard landing, we talk soft landing, certainly here in 0:15:30.440 --> 0:15:34.440 the US, but we're looking around the world. Are the 0:15:34.560 --> 0:15:39.080 stronger markets geographically we're the weaker markets. Sure, in the 0:15:39.200 --> 0:15:43.040 tactical time frame. I still like the US it's strong 0:15:43.200 --> 0:15:46.720 because it's growing. It's definitely growing. All our businesses are 0:15:46.760 --> 0:15:49.920 growing in all geographies right now. Where the rate? Okay, 0:15:49.960 --> 0:15:52.480 where's it not growing there as strongly? I think if 0:15:52.560 --> 0:15:55.720 you thought about it in terms of Europe and China 0:15:55.840 --> 0:15:58.480 are probably the most under pressure. For sure. Would you 0:15:58.560 --> 0:16:00.440 think that that has something to do with data privacy 0:16:00.480 --> 0:16:02.880 concerns and piracy issues and all the things that are 0:16:02.880 --> 0:16:08.280 going Yeah. Sure, where Europe, I think there's been more 0:16:08.360 --> 0:16:12.520 pressure because of the inflation, the Ukraine Russia war, that's 0:16:12.560 --> 0:16:16.720 put some pressure on it. Still growing India, strong, Africause, 0:16:17.080 --> 0:16:22.200 reasonably strong, parts of Asia good. But it's all temporary. 0:16:22.320 --> 0:16:26.240 There's definitely kind of a dislocation that's occurring, but it's 0:16:26.320 --> 0:16:29.240 going to turn and we have to be prepared for 0:16:29.320 --> 0:16:32.200 that term. Even China and Gia politically, we certainly have 0:16:32.320 --> 0:16:35.320 lots of conversations around this table about that. It's a 0:16:35.520 --> 0:16:39.280 different relationship with China going forward. Certainly between the United 0:16:39.280 --> 0:16:41.240 States and ship it seems that way. But we have 0:16:41.320 --> 0:16:44.440 a good you know, we're going to continue to deliver 0:16:45.120 --> 0:16:49.120 messages for multinationals wherever they need to get that multimodal 0:16:49.200 --> 0:16:53.280 communication out there. You know, it seems like a problem, 0:16:53.360 --> 0:16:58.720 but again, thirty forty years things change rather quickly. Two 0:16:58.840 --> 0:17:01.320 years from now, I think things could be very different 0:17:01.360 --> 0:17:04.680 than they are today. I'm an optimist, for sure, but 0:17:04.800 --> 0:17:08.080 I also plan. I'm an optimist. I cover emergent markets 0:17:08.119 --> 0:17:09.600 and I'm a I'm a New York Jet fan, so 0:17:09.680 --> 0:17:12.199 I'm a I'm an ever optimist, but I've managed by 0:17:12.240 --> 0:17:15.640 opics and I make sure I keep the headcount under 0:17:15.680 --> 0:17:19.360 continent political pressures between the US and China. And yet 0:17:19.520 --> 0:17:21.800 as a global company, you guys still have a lot 0:17:21.840 --> 0:17:24.159 of business in China or with China. We have a 0:17:24.240 --> 0:17:27.399 reasonable presence in China, but you can say that the course, 0:17:27.600 --> 0:17:30.240 even though there can be that disconnect between you never know. 0:17:30.680 --> 0:17:32.359 So you never know. But what we have to do 0:17:32.520 --> 0:17:35.760 is continue to grow, continue to deliver the value to 0:17:35.880 --> 0:17:41.600 our multinationals, the digital natives around the planet, and continue 0:17:41.680 --> 0:17:44.800 to create the differentiated product solutions that they need. Well, 0:17:44.880 --> 0:17:46.600 let's bring it back today. I mean, let's bring it 0:17:46.640 --> 0:17:48.119 back close at a home there. Let's talk about the 0:17:48.160 --> 0:17:50.920 reason the US banking system and SVB in particular. You know, 0:17:51.040 --> 0:17:53.720 I mean, are there any lasting damage that you see, 0:17:53.760 --> 0:17:56.119 maybe not to your company, but to your clients that 0:17:56.240 --> 0:17:57.520 this is going to leave them with? I mean, do 0:17:57.560 --> 0:17:59.520 you see do you potentially see some of these venture 0:18:00.000 --> 0:18:03.400 in early stage growth companies going under because of US? Well, 0:18:03.960 --> 0:18:08.280 I don't think Silicon The bank issue, particularly that one, 0:18:08.480 --> 0:18:10.480 is huge. I think what they have to do is 0:18:10.560 --> 0:18:12.359 contain it now, and I think they're working to make 0:18:12.400 --> 0:18:15.480 sure they do that. I think the bigger pressure is 0:18:16.240 --> 0:18:19.600 companies that were able to survive on a very marginal 0:18:19.760 --> 0:18:23.440 business model. Yeah, because money was so cheap. They need 0:18:23.680 --> 0:18:28.080 to create business models that are more cash flow positive 0:18:28.160 --> 0:18:30.600 and with less burn, and I think because of the 0:18:30.760 --> 0:18:34.159 market entreprenturnialists will adjust so orrige just ten seconds or 0:18:34.200 --> 0:18:35.720 does that mean because of some of the cracks you 0:18:35.840 --> 0:18:38.040 may be seeing with a smaller competitors, I think there's 0:18:38.040 --> 0:18:41.440 an acquisition move potentially as a result, real quickly. There's 0:18:41.480 --> 0:18:45.399 no question, there's absolutely you need to take advantu Yes, 0:18:45.520 --> 0:18:50.040 And there's always an opportunity. These market issues and volatility, 0:18:50.400 --> 0:18:53.720 they're opportunities. Find them. The market will change and it 0:18:53.840 --> 0:18:56.640 will return, and it will return fast and strong. Well, 0:18:56.680 --> 0:18:58.000 you were fun with us, and we were a little 0:18:58.000 --> 0:18:59.840 bit of a rapid fire, but we really appreciate it. 0:19:00.000 --> 0:19:03.800 Thank you so much. Rory Reid, Chief Executive Officer A vantage. 0:19:03.880 --> 0:19:07.760 Here in our Bloomberg Interactive Broker studio, you're listening to 0:19:07.840 --> 0:19:11.959 the Bloomberg Business Week Podcast. Catch us live weekday afternoons 0:19:12.040 --> 0:19:15.440 from three to six Eastern on Bloomberg Radio, the Bloomberg 0:19:15.520 --> 0:19:18.639 Business App and YouTube. You can also listen live on 0:19:18.720 --> 0:19:22.080 Amazon Alexa from our flagship New York station. Just say 0:19:22.160 --> 0:19:30.720 Alexa play Bloomberg eleven thirty. I'm bro bloom a journal. 0:19:31.760 --> 0:19:33.840 How about you let me drive? Oh no, no, no, no, 0:19:34.040 --> 0:19:37.399 who's going to drug home, honey, please, I'll do the 0:19:37.520 --> 0:19:44.720 bride rebels. Lest I want to drive. It's good question drives. 0:19:47.240 --> 0:19:50.760 This is the Drive to the closet. Punk music. Well, 0:19:51.520 --> 0:19:55.560 jog down on Bloomberg Radio. All right, very good afternoon, everybody. 0:19:55.640 --> 0:19:58.679 You are listening and watching Bloomberg Business Week Karl Masser 0:19:58.840 --> 0:20:03.080 along with Damien's ass hour watching the markets making sense 0:20:03.119 --> 0:20:05.880 of the FED decision. And it's been an interesting trade, 0:20:05.960 --> 0:20:08.600 no doubt about it. Yeah, yeah, no, all right, all right, 0:20:08.640 --> 0:20:10.400 all right, I mean we are down across the curve. 0:20:10.520 --> 0:20:12.639 The two year is down below four percent again, I 0:20:12.720 --> 0:20:14.479 mean a twenty three basis point move on the two year, 0:20:14.520 --> 0:20:16.119 but it's also extending into the belly. I mean the 0:20:16.160 --> 0:20:18.920 five years down another twenty three BIPs. So yeah, you know, 0:20:19.040 --> 0:20:21.880 I mean we're seeing you know, we're seeing buying a bonds. Yeah, 0:20:21.960 --> 0:20:23.639 it's really interesting, right, and you look at the markets 0:20:23.720 --> 0:20:25.959 and I feel like the treasury trade telling you one thing. 0:20:26.040 --> 0:20:29.080 The equity trade, which rallied initially on that FED decision, 0:20:29.560 --> 0:20:31.679 has come on down and now we're below the levels 0:20:31.720 --> 0:20:33.600 and we're seeing losses across the board. So let's get 0:20:33.640 --> 0:20:36.560 to it with Aaron Kennon, co founder and chief executive 0:20:36.760 --> 0:20:39.800 at the registered investment advisory firm, Clear Harbor Asset Management. 0:20:39.800 --> 0:20:42.200 They've got over a billion in assets under management. Aaron 0:20:42.240 --> 0:20:45.440 back with us on the phone in Stanford, Connecticut. Actually, 0:20:45.440 --> 0:20:48.240 I think via zoom, Hey Aaron, good to have you here. 0:20:49.320 --> 0:20:52.760 Market reaction. What is it telling you in terms of 0:20:52.840 --> 0:20:55.160 what we've seen with stock reaction? And then the Treasury 0:20:55.200 --> 0:20:59.240 trade post fed decision. Well, I wouldn't call today a 0:20:59.320 --> 0:21:04.440 pivot earl, but certainly a pause, and I think a 0:21:04.600 --> 0:21:07.040 justified one. And I say a pause because yes, they 0:21:07.119 --> 0:21:09.560 went twenty five basis points, but if you look at 0:21:09.600 --> 0:21:12.919 the SEPs or their dot plot or predictions for future 0:21:13.040 --> 0:21:16.920 rate moves, they're essentially saying we're on hold here and 0:21:17.000 --> 0:21:20.360 we're going to monitor economic conditions. There's some natural tightening 0:21:20.440 --> 0:21:23.960 occurring in the market due to the banking crisis, due 0:21:23.960 --> 0:21:30.000