1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Waits, each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,360 Speaker 1: at Bloomberg dot com. Reporting earnings today better than expected, 8 00:00:21,360 --> 00:00:24,840 Speaker 1: shares up nearly two per cent, But interestingly, it said 9 00:00:25,200 --> 00:00:29,520 Speaker 1: it's showing strength everywhere in providing oil field services except 10 00:00:29,600 --> 00:00:31,840 Speaker 1: for in the United States. Joining us on a discuss 11 00:00:31,840 --> 00:00:35,519 Speaker 1: Simon Casey covering all things energy for us as a 12 00:00:35,520 --> 00:00:40,360 Speaker 1: team leader for energy team in America. UH, broadly North 13 00:00:40,400 --> 00:00:42,559 Speaker 1: and South and Middle UM. So I want to get 14 00:00:42,600 --> 00:00:45,720 Speaker 1: your sense, Simon, of how significant this is that Schlumberge, 15 00:00:45,840 --> 00:00:48,080 Speaker 1: the biggest business of its kind, said that it's seeing 16 00:00:48,280 --> 00:00:51,280 Speaker 1: less demand in North America. What it's the sign of 17 00:00:51,320 --> 00:00:55,960 Speaker 1: the times. Uh. The US is the world's largest old producer. 18 00:00:56,000 --> 00:00:58,040 Speaker 1: It wasn't the world's largest oil producer if you go 19 00:00:58,120 --> 00:01:00,880 Speaker 1: back a few years. It's had tremendous growth, but the 20 00:01:00,920 --> 00:01:06,679 Speaker 1: shale patch is it's under tremendous strain producers, they're are 21 00:01:06,720 --> 00:01:10,959 Speaker 1: failing to come through with returns for investors. Capital markets 22 00:01:10,959 --> 00:01:14,039 Speaker 1: are dried up for shells, for shell producers, for frackers, 23 00:01:14,080 --> 00:01:16,959 Speaker 1: so they've had to go on a real campaign of 24 00:01:17,080 --> 00:01:21,040 Speaker 1: cutting costs. They've been cutting jobs. The pace of drilling 25 00:01:21,080 --> 00:01:22,880 Speaker 1: in places like the Permian Basin down in the West 26 00:01:22,920 --> 00:01:28,160 Speaker 1: Texas has slow dramatically. That hurts companies like Slumberge. Now 27 00:01:28,280 --> 00:01:32,360 Speaker 1: this is not entirely new slum slumber said last year 28 00:01:33,200 --> 00:01:36,919 Speaker 1: it booked huge right downs for the third quarter thirteen billion. 29 00:01:37,040 --> 00:01:38,840 Speaker 1: A lot a lot of that was to do with 30 00:01:39,200 --> 00:01:42,759 Speaker 1: what's going on in North America. They are scrapping equipment. 31 00:01:42,800 --> 00:01:45,200 Speaker 1: They're not just idling it, mothballing it, they're sending it 32 00:01:45,240 --> 00:01:48,560 Speaker 1: to the scrapyard because they say they're never going to 33 00:01:48,760 --> 00:01:51,560 Speaker 1: use all of this stuff. Again, we've kind of hit 34 00:01:51,600 --> 00:01:55,280 Speaker 1: a sort of a peak in shale activity, and it's yeah, 35 00:01:55,320 --> 00:01:57,120 Speaker 1: when when we're not likely to see that the extent 36 00:01:57,160 --> 00:01:59,560 Speaker 1: of drilling we were seeing in recent years ever again, 37 00:02:00,240 --> 00:02:04,240 Speaker 1: ever again. So it seems like where the shell business 38 00:02:04,280 --> 00:02:07,320 Speaker 1: in the US, given work, global demand is this is it. 39 00:02:07,440 --> 00:02:09,919 Speaker 1: So if you're a Slumberge, you cannot look to the 40 00:02:10,000 --> 00:02:13,280 Speaker 1: US as a growth market anymore. That's pretty clear from 41 00:02:13,320 --> 00:02:15,200 Speaker 1: the from what they've been saying this morning. Yes. And 42 00:02:15,600 --> 00:02:18,840 Speaker 1: the flip side of this, of course, is the international 43 00:02:18,840 --> 00:02:21,400 Speaker 1: business is continuing to rebound. You're seeing a lot of 44 00:02:21,440 --> 00:02:25,640 Speaker 1: activities in places like, for example, off the coast of Guyana, 45 00:02:25,680 --> 00:02:28,520 Speaker 1: Sur and m South America, Brazil as well, that's a 46 00:02:28,560 --> 00:02:30,040 Speaker 1: real hot spot at the moment. There's a lot of 47 00:02:30,080 --> 00:02:34,200 Speaker 1: activity there. It's coming back in Asia, in in in 48 00:02:34,320 --> 00:02:38,400 Speaker 1: parts of Africa as well. So there's a lot of 49 00:02:38,440 --> 00:02:41,399 Speaker 1: their international businesses looking really positive. But they they are 50 00:02:41,560 --> 00:02:45,400 Speaker 1: Slumberge as well. It's it's based in the US, along 51 00:02:45,400 --> 00:02:47,360 Speaker 1: with Halibursa and Baker Hughes. It's one of the big 52 00:02:47,400 --> 00:02:50,920 Speaker 1: three names in this space. It's much more exposed to 53 00:02:52,120 --> 00:02:56,880 Speaker 1: markets outside of the US, unlike Haliburton, which is reporting 54 00:02:57,040 --> 00:03:00,400 Speaker 1: next week in fact, so it's going to be interesting 55 00:03:00,400 --> 00:03:03,480 Speaker 1: to see how what Haliburton says, because lumberj has kind 56 00:03:03,520 --> 00:03:05,680 Speaker 1: of managed to turn the corner a lot quicker. If 57 00:03:05,720 --> 00:03:09,160 Speaker 1: you like, it's still cutting jobs, it's saying it's still rationalizing. 58 00:03:09,760 --> 00:03:12,320 Speaker 1: I think the phrase these this morning was shrink to 59 00:03:12,480 --> 00:03:16,960 Speaker 1: fit what is going on in shale, but it's it's 60 00:03:17,000 --> 00:03:18,760 Speaker 1: still tough out there, and for for some of the 61 00:03:18,840 --> 00:03:22,120 Speaker 1: smaller names in this space, UM, it's very bad. Indeed, 62 00:03:22,120 --> 00:03:25,200 Speaker 1: it's very very difficult because their business is fundamentally shrinking 63 00:03:25,200 --> 00:03:27,120 Speaker 1: and it will continue to this year. So there's this 64 00:03:27,240 --> 00:03:30,560 Speaker 1: theme of peak shale. We've seen peak shale in a 65 00:03:30,639 --> 00:03:34,160 Speaker 1: reary window. Correct, Well, let's let's just sort of try 66 00:03:34,200 --> 00:03:37,880 Speaker 1: and define what I mean by it's peak acts drilling activity. 67 00:03:38,000 --> 00:03:41,119 Speaker 1: Production is still on an upward curve. We've seen very 68 00:03:41,480 --> 00:03:43,800 Speaker 1: literally one or two people have come out and said 69 00:03:44,240 --> 00:03:46,480 Speaker 1: production is going to peak this year. It's more likely 70 00:03:46,480 --> 00:03:50,640 Speaker 1: it's going to peak beyond. It's definitely the growth is 71 00:03:50,680 --> 00:03:53,600 Speaker 1: definitely slowing. There's a huge debate within the your market 72 00:03:53,640 --> 00:03:56,640 Speaker 1: and now the pace that that growth will will continue 73 00:03:56,640 --> 00:03:59,720 Speaker 1: out this year, and that will ultimately determine the balance 74 00:03:59,800 --> 00:04:03,560 Speaker 1: of global supply because most global supply growth this year 75 00:04:03,600 --> 00:04:07,920 Speaker 1: is coming from the US, which is a dramatic turnaround 76 00:04:07,920 --> 00:04:10,520 Speaker 1: considering where we were several years ago when US wasn't 77 00:04:10,520 --> 00:04:12,920 Speaker 1: the biggest producer, it was still a net importer. The 78 00:04:12,960 --> 00:04:15,240 Speaker 1: US is now a net exporter. So this is this 79 00:04:15,280 --> 00:04:17,760 Speaker 1: whole thing, this whole what we're talking about here schlumber 80 00:04:17,920 --> 00:04:20,479 Speaker 1: It goes beyond the company, it goes beyond the old services. 81 00:04:20,640 --> 00:04:23,279 Speaker 1: It's about the balance of supply and demand in the 82 00:04:23,279 --> 00:04:25,480 Speaker 1: global market. So, Simon, you mentioned some of the smaller 83 00:04:25,520 --> 00:04:29,440 Speaker 1: players in the oil patch suffering, which we've certainly heard 84 00:04:29,480 --> 00:04:33,200 Speaker 1: and read about. Does that suggest more consolidation is likely 85 00:04:33,240 --> 00:04:35,520 Speaker 1: to occur there and we might see slumbers in Haliburton 86 00:04:35,600 --> 00:04:39,080 Speaker 1: as net buyers. Maybe well, then maybe some consolidation among 87 00:04:39,160 --> 00:04:42,560 Speaker 1: some of the smaller, smaller names domestic players. Companies are 88 00:04:42,560 --> 00:04:46,880 Speaker 1: based almost wholly down in Texas, Texas, New Mexico. They 89 00:04:47,120 --> 00:04:51,320 Speaker 1: would not expect Haliburton or Slumberge to be picking up assets. 90 00:04:51,320 --> 00:04:54,600 Speaker 1: I mean they might pick up some sort of small 91 00:04:54,640 --> 00:04:58,240 Speaker 1: assets as Bolton acquisitions. These companies that are looking fundamentally 92 00:04:58,279 --> 00:05:00,920 Speaker 1: to upgrade their technology to knowledge as a mantra in 93 00:05:00,960 --> 00:05:03,719 Speaker 1: so many industries these days, and oil is no different, 94 00:05:03,800 --> 00:05:07,960 Speaker 1: or services is no difference. These guys are looking to 95 00:05:08,040 --> 00:05:12,280 Speaker 1: keep headcount under control, but where they can upgrade the 96 00:05:12,320 --> 00:05:17,920 Speaker 1: application of particularly of data management and and use cloud 97 00:05:17,960 --> 00:05:21,200 Speaker 1: computing to crunch vast amounts of data and figure out 98 00:05:21,240 --> 00:05:23,640 Speaker 1: what's going on underground and ultimately do the drilling and 99 00:05:23,720 --> 00:05:27,360 Speaker 1: the production much cheaper and much more efficiently. Is the 100 00:05:27,360 --> 00:05:29,680 Speaker 1: theory that we're going to see peak shale in a 101 00:05:29,720 --> 00:05:32,520 Speaker 1: couple of years at least? Is the theory behind that 102 00:05:33,040 --> 00:05:37,480 Speaker 1: driven by a lack of shale supply underground, or is 103 00:05:37,520 --> 00:05:41,960 Speaker 1: it driven by just the sort of math behind how 104 00:05:42,040 --> 00:05:44,279 Speaker 1: much it costs to drill versus what what some of 105 00:05:44,279 --> 00:05:47,799 Speaker 1: these companies are getting. It's the math. There's plenty of oil. 106 00:05:48,400 --> 00:05:51,080 Speaker 1: There is no longer any kind of idea of a 107 00:05:51,160 --> 00:05:55,400 Speaker 1: shortage out there. The shale revolution funding fundamentally means that 108 00:05:56,000 --> 00:05:59,680 Speaker 1: there's almost a limitless amount to intents and purposes. But 109 00:05:59,760 --> 00:06:04,000 Speaker 1: it's it's the economics that are in focus here. American 110 00:06:04,279 --> 00:06:07,160 Speaker 1: shail producers have been fantastic and getting huge amounts of 111 00:06:07,160 --> 00:06:09,599 Speaker 1: sail out of the ground and getting them on the 112 00:06:09,640 --> 00:06:13,119 Speaker 1: markets and indeed getting to the export markets as well. 113 00:06:13,400 --> 00:06:17,080 Speaker 1: They've generally been with some exceptions, they've been terrible at 114 00:06:17,120 --> 00:06:21,360 Speaker 1: turning it into a sustainable, profitable business that generates free 115 00:06:21,360 --> 00:06:25,360 Speaker 1: cash flow and returns that cash flow to investors. If 116 00:06:25,360 --> 00:06:27,320 Speaker 1: you look last year, it was one of the laggards 117 00:06:27,360 --> 00:06:30,279 Speaker 1: of the stock market. There was barely any sort of 118 00:06:30,440 --> 00:06:33,839 Speaker 1: price appreciation for the sector. Over all. The returns to 119 00:06:33,880 --> 00:06:39,640 Speaker 1: investors were allousy essentially burning. They're burning cash, they're burning 120 00:06:39,640 --> 00:06:42,680 Speaker 1: through cash, and basically, as what I said earlier, than 121 00:06:42,720 --> 00:06:46,880 Speaker 1: the equity markets shut to them, debt equit markets are 122 00:06:46,960 --> 00:06:50,279 Speaker 1: largely shut to these companies as well, and that's forcingments 123 00:06:50,279 --> 00:06:52,359 Speaker 1: of turning woods and realized they've got a real problem 124 00:06:52,400 --> 00:06:55,040 Speaker 1: in many cases, and that's why they're furiously cutting back 125 00:06:55,040 --> 00:06:57,640 Speaker 1: on capex. They're doing a lot of meditation and looking 126 00:06:57,680 --> 00:07:00,800 Speaker 1: into their navors and whither of my should we keep 127 00:07:00,800 --> 00:07:02,520 Speaker 1: burning it? Simon Casey, thank you so much for being 128 00:07:02,560 --> 00:07:05,200 Speaker 1: with us. Simon Casey is the team leader for Energy 129 00:07:05,240 --> 00:07:24,080 Speaker 1: America's for Bloomberg News. At stock market setting new highs 130 00:07:24,280 --> 00:07:27,360 Speaker 1: every day, it seems we've got the consumer remaining quite 131 00:07:27,640 --> 00:07:31,600 Speaker 1: confident in the economy. For questions, how's that being felt 132 00:07:31,720 --> 00:07:34,800 Speaker 1: within the c suite? Charlie Weinstein, chief executive officer of 133 00:07:34,880 --> 00:07:37,040 Speaker 1: Eisener Emperor based in New York City, joining us here 134 00:07:37,080 --> 00:07:39,680 Speaker 1: in our Bloomberg Interactive Broker Studio, has some thoughts in 135 00:07:39,720 --> 00:07:41,920 Speaker 1: the Charlie, thanks so much for joining us. I know 136 00:07:42,040 --> 00:07:45,840 Speaker 1: you guys do a survey of C suite business leaders. 137 00:07:46,400 --> 00:07:49,720 Speaker 1: What did that survey tell you? Morning Paul, good morning, listen. 138 00:07:49,960 --> 00:07:54,600 Speaker 1: Great to be here. Uh, this was very interesting survey. 139 00:07:54,720 --> 00:07:58,040 Speaker 1: And so we we host the summit series across all 140 00:07:58,120 --> 00:08:01,200 Speaker 1: our offices across the country, and as part of that 141 00:08:01,320 --> 00:08:05,360 Speaker 1: summit series we host, UH, we host the survey. And 142 00:08:05,520 --> 00:08:09,720 Speaker 1: that survey said to US seventies six percent of the 143 00:08:09,880 --> 00:08:15,400 Speaker 1: C suite and significant investors think that their companies will 144 00:08:15,480 --> 00:08:19,600 Speaker 1: be more profitable or at least as profitable as they 145 00:08:19,640 --> 00:08:22,440 Speaker 1: were in two thousand nineteen. So they see two thousand 146 00:08:22,520 --> 00:08:27,360 Speaker 1: twenty as a great year. But so the other side 147 00:08:27,400 --> 00:08:31,200 Speaker 1: of the survey very interesting, showed that our business is 148 00:08:31,280 --> 00:08:34,520 Speaker 1: going to be great. That was the common refrain. There 149 00:08:34,559 --> 00:08:38,720 Speaker 1: are problems out there won't affect us, but there might 150 00:08:38,760 --> 00:08:41,480 Speaker 1: be an economic downturn. Okay, So how much is this 151 00:08:41,720 --> 00:08:44,400 Speaker 1: just CFO is being prudent and how much is this 152 00:08:44,800 --> 00:08:49,120 Speaker 1: genuine concern about a global recession or a localized recession. 153 00:08:49,640 --> 00:08:52,600 Speaker 1: There is a there is a concern. So we have Brexit, 154 00:08:52,800 --> 00:08:55,640 Speaker 1: we have uncertainty over trade and tariffs, we have the 155 00:08:55,760 --> 00:08:58,240 Speaker 1: elections coming up this year. But this this is all 156 00:08:58,400 --> 00:09:00,480 Speaker 1: like small print that's been there for a while, right, 157 00:09:00,520 --> 00:09:03,000 Speaker 1: I mean, yes, it has so, I mean, but is 158 00:09:03,080 --> 00:09:06,959 Speaker 1: it's still really like dominant, and they're thinking not for 159 00:09:07,040 --> 00:09:09,560 Speaker 1: their own business, and so for their own business, they 160 00:09:09,640 --> 00:09:13,160 Speaker 1: are really bullish. Um I met the other day with 161 00:09:13,600 --> 00:09:18,080 Speaker 1: U an executive who runs a construction company, and they're 162 00:09:18,480 --> 00:09:22,600 Speaker 1: building out. They're branching out into managing real estate for hospitals, 163 00:09:22,960 --> 00:09:26,720 Speaker 1: and so business business leaders are looking for opportunities. They're 164 00:09:26,840 --> 00:09:30,439 Speaker 1: looking to uh deploy the profits that they've had, and 165 00:09:31,120 --> 00:09:35,400 Speaker 1: they're highly optimistic. One of the economic underpinnings of this 166 00:09:35,520 --> 00:09:37,840 Speaker 1: economy has been the strong consumer and that has driven 167 00:09:37,880 --> 00:09:40,880 Speaker 1: in large part by the fact that most Americans have 168 00:09:41,000 --> 00:09:44,960 Speaker 1: a job. Most Americans are seeing wage increases me been 169 00:09:45,000 --> 00:09:47,199 Speaker 1: as much as they like. But on the flip side, 170 00:09:47,760 --> 00:09:50,880 Speaker 1: C suite executives say one of the biggest challenges is 171 00:09:50,920 --> 00:09:53,120 Speaker 1: finding people and keeping them. Is that what did your 172 00:09:53,160 --> 00:09:55,559 Speaker 1: survey work kind of show you. Their survey had two 173 00:09:55,640 --> 00:09:59,839 Speaker 1: results and they go right along with what you're suggesting. 174 00:10:00,280 --> 00:10:03,839 Speaker 1: One is that they see fifty eight percent of the 175 00:10:04,000 --> 00:10:08,719 Speaker 1: executives see an increase a significant increase in wages for 176 00:10:08,920 --> 00:10:14,360 Speaker 1: next year for their businesses, and so getting talent is 177 00:10:14,520 --> 00:10:18,080 Speaker 1: very difficult, and they see the need to increase compensation. 178 00:10:18,480 --> 00:10:21,560 Speaker 1: Quite frankly, the nice thing about that is, the consumer 179 00:10:21,679 --> 00:10:24,520 Speaker 1: drives our economy, and if that comes to pass and 180 00:10:24,640 --> 00:10:27,600 Speaker 1: wages really do start to see an increase, that's going 181 00:10:27,679 --> 00:10:30,560 Speaker 1: to fuel our economy even more. This is really important. 182 00:10:30,760 --> 00:10:37,760 Speaker 1: Fifty percent see materially higher salaries, materially higher wages next year. Exactly. Okay, 183 00:10:40,040 --> 00:10:42,480 Speaker 1: this is actually really important because right now, if you 184 00:10:42,520 --> 00:10:45,400 Speaker 1: look at inflation expectations built into the market, they're more abound. 185 00:10:45,600 --> 00:10:47,719 Speaker 1: There's this idea that it will never take off. But 186 00:10:47,920 --> 00:10:50,079 Speaker 1: are you saying that there is a ce change in 187 00:10:50,160 --> 00:10:52,480 Speaker 1: the sentiment that is different from what we've seen over 188 00:10:52,520 --> 00:10:54,839 Speaker 1: the past decade that is going to lead to a 189 00:10:54,920 --> 00:10:58,839 Speaker 1: potentially very different dynamic come next year. I see that 190 00:10:58,960 --> 00:11:02,760 Speaker 1: there's a possible that you will see wages really increase, 191 00:11:03,280 --> 00:11:08,200 Speaker 1: and but companies are not increasing prices, and so there's 192 00:11:08,280 --> 00:11:12,959 Speaker 1: that dichonomy that inflation may be driven by increase in 193 00:11:13,000 --> 00:11:16,640 Speaker 1: prices the margin pressure. Okay, but bottom But but this 194 00:11:16,679 --> 00:11:18,240 Speaker 1: sort of goes to the key debate, right that the 195 00:11:18,280 --> 00:11:20,679 Speaker 1: stock market is not the underlying economy, right, and the 196 00:11:20,760 --> 00:11:23,719 Speaker 1: underlying economy lags the stock market. And so if the 197 00:11:23,760 --> 00:11:26,040 Speaker 1: stock market starts to see a little bit of weakness 198 00:11:26,120 --> 00:11:28,920 Speaker 1: because of margin pressure, but you have the actual consumer 199 00:11:29,000 --> 00:11:31,640 Speaker 1: continuing to do better and better because they're actually getting 200 00:11:31,679 --> 00:11:34,000 Speaker 1: paid more. You know, where does that leave the FED? 201 00:11:34,320 --> 00:11:36,320 Speaker 1: Where does that leave markets? You know, it could mean 202 00:11:36,400 --> 00:11:38,480 Speaker 1: a stock sell off, but it could mean continued strength 203 00:11:38,520 --> 00:11:41,040 Speaker 1: for the U S. I'm just saying, I'm just I'm 204 00:11:41,080 --> 00:11:44,280 Speaker 1: just extrapolating out what this could actually mean. You've gotta 205 00:11:44,280 --> 00:11:48,880 Speaker 1: pay attention in this studio pretty quick. How at tech 206 00:11:48,960 --> 00:11:53,120 Speaker 1: technology and Lisa and I we talked to executives across 207 00:11:53,200 --> 00:11:56,680 Speaker 1: the whole swath of industries. They're all investing in technology, 208 00:11:56,720 --> 00:12:00,280 Speaker 1: and I'm wondering if your respondents feel like technologies a 209 00:12:00,360 --> 00:12:02,760 Speaker 1: real opportunity for them or is it a risk to 210 00:12:02,800 --> 00:12:07,080 Speaker 1: their business. We always say invest in human intelligence before 211 00:12:07,160 --> 00:12:11,480 Speaker 1: you invest in UH technology. And so you need the 212 00:12:11,640 --> 00:12:16,520 Speaker 1: people to make value to create value out of the technology, 213 00:12:16,640 --> 00:12:19,840 Speaker 1: and so technology will only take you so far. UM, 214 00:12:19,920 --> 00:12:22,840 Speaker 1: you also need to be investing in people. Which sectors 215 00:12:23,080 --> 00:12:26,640 Speaker 1: were the most optimistic and on the on the reverse 216 00:12:26,720 --> 00:12:32,319 Speaker 1: side pessimistic. So our clients and professional services UM delivering 217 00:12:32,800 --> 00:12:38,200 Speaker 1: services are technology clients by far the most optimistic. Manufacturing 218 00:12:38,280 --> 00:12:42,360 Speaker 1: and distribution. It's interesting, even though we've had some trade 219 00:12:43,320 --> 00:12:47,280 Speaker 1: uncertainty over the last six months, year, two years um 220 00:12:47,400 --> 00:12:51,480 Speaker 1: our clients are are not finding difficulty in sourcing products, 221 00:12:52,000 --> 00:12:55,880 Speaker 1: and so they're optimistic. They're really optimistic about the potential 222 00:12:55,960 --> 00:13:03,440 Speaker 1: for who is pessimistic? Who's pessimistic? So real estate might 223 00:13:03,480 --> 00:13:07,360 Speaker 1: be a little pessimists like that. He's like whispering. While 224 00:13:07,440 --> 00:13:09,840 Speaker 1: we have so many clients in the real estate business. 225 00:13:11,280 --> 00:13:16,000 Speaker 1: It's a secret, but they're they're feeling a little more pessimistic. 226 00:13:16,280 --> 00:13:19,319 Speaker 1: They are feeling a little more pessimistic. And though, uh, 227 00:13:20,320 --> 00:13:23,760 Speaker 1: the way people use space now and the way remote 228 00:13:23,840 --> 00:13:26,679 Speaker 1: working and all the trends in real estate is just 229 00:13:26,840 --> 00:13:29,439 Speaker 1: something for real estate clients to keep an eye on. 230 00:13:29,880 --> 00:13:31,800 Speaker 1: Charlie Weinste, thank you so much for being here. This 231 00:13:31,920 --> 00:13:35,800 Speaker 1: is really terrific. Jelie West is chief executive officer of 232 00:13:35,840 --> 00:13:55,240 Speaker 1: Eisener Emper in New York and really paying close attention 233 00:13:55,400 --> 00:13:58,280 Speaker 1: to earnings this quarter because we think about the performance 234 00:13:58,280 --> 00:14:00,400 Speaker 1: in the market last year, you know, a thirty rise 235 00:14:00,480 --> 00:14:04,280 Speaker 1: in S and P really pretty much all multiple expansion, 236 00:14:04,360 --> 00:14:07,120 Speaker 1: not much earnings growth last year. So we have to have, arguably, 237 00:14:07,360 --> 00:14:08,800 Speaker 1: if you think this market is going to go higher 238 00:14:08,800 --> 00:14:12,080 Speaker 1: in twenty twenty, earnings growth coming this year To get 239 00:14:12,120 --> 00:14:14,360 Speaker 1: a sense of kind of what's driving the market here 240 00:14:14,360 --> 00:14:17,760 Speaker 1: as we get into Michael team in chief executive officer, 241 00:14:17,840 --> 00:14:21,120 Speaker 1: team and advisers think about twenty one billion dollars under management. 242 00:14:21,560 --> 00:14:24,600 Speaker 1: Michael joins us in our Bloomberg Interactor Brooker studio. So 243 00:14:24,680 --> 00:14:27,440 Speaker 1: again Michael, the SMP earnings people and also looking for 244 00:14:27,440 --> 00:14:30,360 Speaker 1: about ten percent growth that would suggest this market maybe 245 00:14:30,400 --> 00:14:33,520 Speaker 1: can go higher. How comfortable or confident are you in 246 00:14:33,560 --> 00:14:36,200 Speaker 1: that earnings number. A lot of what's driving the ten 247 00:14:36,240 --> 00:14:39,440 Speaker 1: percent projection are the cyclicals, So you will have to 248 00:14:39,520 --> 00:14:44,360 Speaker 1: see or general growth pick up in the US, and 249 00:14:45,040 --> 00:14:46,960 Speaker 1: we we don't think there's a lot of room for 250 00:14:47,120 --> 00:14:50,520 Speaker 1: error in these projections. That's that's our primary concern, in 251 00:14:50,600 --> 00:14:53,320 Speaker 1: addition to the fact that that's largely being priced in 252 00:14:53,480 --> 00:14:55,560 Speaker 1: or has been priced in over these past few months. 253 00:14:56,040 --> 00:14:59,800 Speaker 1: So right now, when you talk to clients, are they optimistic? 254 00:15:00,080 --> 00:15:02,560 Speaker 1: They feel like this rally has has legs and they 255 00:15:02,600 --> 00:15:04,920 Speaker 1: should just shift some of their allocation to bonds into 256 00:15:04,960 --> 00:15:08,920 Speaker 1: equities and take their cash out aloud into real estate 257 00:15:09,960 --> 00:15:13,680 Speaker 1: not bonds. So the framework of this market has been 258 00:15:13,720 --> 00:15:15,600 Speaker 1: set by the central bank for a decade, in really 259 00:15:15,640 --> 00:15:18,880 Speaker 1: global central banks for a decade. So they've set the 260 00:15:18,920 --> 00:15:22,400 Speaker 1: interest rate environment, the corporate credit rate environment, and then 261 00:15:23,000 --> 00:15:25,720 Speaker 1: it enables the pe to expand like last year, so 262 00:15:25,840 --> 00:15:27,720 Speaker 1: you saw the ten year ago from a three yield 263 00:15:27,800 --> 00:15:30,280 Speaker 1: to one point eight yield, and that enabled p s 264 00:15:30,360 --> 00:15:34,720 Speaker 1: to expand as they did. Um are clients comfortable? They 265 00:15:34,800 --> 00:15:40,000 Speaker 1: are discomfited by what they're seeing politically globally, They're they're 266 00:15:40,040 --> 00:15:42,920 Speaker 1: discomforted by a lot of the headline news that comes 267 00:15:42,920 --> 00:15:46,040 Speaker 1: across their desk. But I think everyone understands that the 268 00:15:46,120 --> 00:15:50,640 Speaker 1: economy in the US is on solid footing. So basically, 269 00:15:50,680 --> 00:15:53,200 Speaker 1: we make them unhappy, Paul. Basically, that's the bottom line, 270 00:15:53,280 --> 00:15:56,440 Speaker 1: is that we're driving any sense of discovers. Otherwise people 271 00:15:56,480 --> 00:15:59,920 Speaker 1: are people are feeling great exactly So, Michael, I mean, 272 00:16:00,200 --> 00:16:03,000 Speaker 1: as we think about asset allocation, given what we saw 273 00:16:03,080 --> 00:16:06,320 Speaker 1: in twenty nineteen, how are your suggesting your clients allocate 274 00:16:06,360 --> 00:16:07,920 Speaker 1: their capital. I mean, you know, we're hearing more and 275 00:16:08,000 --> 00:16:10,600 Speaker 1: more about maybe emerging markets, maybe a little bit more 276 00:16:10,600 --> 00:16:12,160 Speaker 1: out on the risk to maybe even think about some 277 00:16:12,160 --> 00:16:14,400 Speaker 1: alternative investments. How are you kind of thinking about it? 278 00:16:15,160 --> 00:16:17,320 Speaker 1: We are at the midpoint in our risk So if 279 00:16:17,360 --> 00:16:20,600 Speaker 1: you had spoken to us in December of eighteen when 280 00:16:20,640 --> 00:16:22,880 Speaker 1: everyone's concerned about a recession. We didn't see one coming 281 00:16:22,960 --> 00:16:25,080 Speaker 1: and we were actually building our equity risk at that point. 282 00:16:25,440 --> 00:16:27,560 Speaker 1: We've paired some of that back in these recent months, 283 00:16:27,680 --> 00:16:29,560 Speaker 1: and currently at the end of the month, we're going 284 00:16:29,600 --> 00:16:33,240 Speaker 1: to begin to buy some equity protection. So we have 285 00:16:33,360 --> 00:16:36,600 Speaker 1: huge embedded gains. Anyone who's owned the equity markets for 286 00:16:36,640 --> 00:16:39,760 Speaker 1: the last five ten years is enormous embedded gains. And 287 00:16:40,000 --> 00:16:43,560 Speaker 1: rather than take them, we own quality risk assis quality corporations. 288 00:16:44,400 --> 00:16:48,840 Speaker 1: We'd much rather buy hedges too, sort of diminish any 289 00:16:48,880 --> 00:16:52,720 Speaker 1: of them if there are any sense is a growing 290 00:16:53,000 --> 00:16:59,120 Speaker 1: sense of caution, valuation, evaluation. Okay, so what's your sense 291 00:16:59,360 --> 00:17:03,000 Speaker 1: of what's going to cause some sort of sell off, 292 00:17:03,320 --> 00:17:06,480 Speaker 1: some sort of decline that would encourage you to start 293 00:17:06,520 --> 00:17:10,440 Speaker 1: buying protection. Well, we try to do it in the 294 00:17:10,600 --> 00:17:14,000 Speaker 1: contrarian So if you think about the direction of markets, 295 00:17:14,080 --> 00:17:17,400 Speaker 1: we generally will spend money when markets have done very well, 296 00:17:17,880 --> 00:17:20,920 Speaker 1: we will monetize those in periods of weakness. So we 297 00:17:21,240 --> 00:17:23,520 Speaker 1: do it sort of as a contrarian way to build 298 00:17:23,600 --> 00:17:26,639 Speaker 1: in protection, embedded protection. In this there's not actually a 299 00:17:26,680 --> 00:17:30,000 Speaker 1: call in markets. It's we're not trying to time markets now, 300 00:17:30,320 --> 00:17:33,040 Speaker 1: are there sectors here, given given where we are in 301 00:17:33,080 --> 00:17:36,800 Speaker 1: the economic cycle, given what performance we saw in twenty nine, 302 00:17:37,080 --> 00:17:40,120 Speaker 1: are there some sectors that you're more bullish on versus 303 00:17:40,200 --> 00:17:44,040 Speaker 1: less bullish on. We in terms of value, if you 304 00:17:44,119 --> 00:17:47,440 Speaker 1: were looking at an industry, the energy infrastructure industry is 305 00:17:47,480 --> 00:17:50,679 Speaker 1: still quite cheap, and I think that's garnering some focus 306 00:17:50,840 --> 00:17:54,240 Speaker 1: among strategies mid cap in general, and so as you 307 00:17:54,280 --> 00:17:58,080 Speaker 1: go down market cap you see some inefficiencies and so, 308 00:17:58,359 --> 00:18:00,840 Speaker 1: and that's actually a place where active managers and great 309 00:18:01,320 --> 00:18:04,240 Speaker 1: stock selectors can add a lot of value. Large camp 310 00:18:04,320 --> 00:18:08,959 Speaker 1: of excuse me, large crab growth maintains itself as an 311 00:18:09,000 --> 00:18:11,640 Speaker 1: expensive sector. We would have said that three years ago, 312 00:18:11,720 --> 00:18:13,840 Speaker 1: two years ago, way, so it just has had a 313 00:18:13,960 --> 00:18:17,680 Speaker 1: momentum that is unending. But so those are the those 314 00:18:17,720 --> 00:18:19,520 Speaker 1: are the extremes within the u s of its So 315 00:18:19,560 --> 00:18:21,520 Speaker 1: when you came in here, Michael, you said that a 316 00:18:21,640 --> 00:18:24,960 Speaker 1: lot of the evaluation and the equity markets is predicated 317 00:18:25,000 --> 00:18:26,359 Speaker 1: on the idea of that interest rates are going to 318 00:18:26,400 --> 00:18:29,960 Speaker 1: remain low for a very long time, right, And I 319 00:18:30,200 --> 00:18:33,640 Speaker 1: was thinking, well, what if inflation expectations are too low? 320 00:18:34,200 --> 00:18:37,359 Speaker 1: What if the economy does solidify and we do start 321 00:18:37,400 --> 00:18:40,159 Speaker 1: to see wage pressure, and we actually see bond yields 322 00:18:40,280 --> 00:18:44,280 Speaker 1: rise even just you know, twenty five basis points, fifty 323 00:18:44,320 --> 00:18:48,680 Speaker 1: basis points. How much does that affect equity valuations? Well, 324 00:18:49,119 --> 00:18:52,000 Speaker 1: the only metric that the SMP does not look in 325 00:18:52,160 --> 00:18:56,200 Speaker 1: the ninety plus percentile expensive in is relative to the 326 00:18:56,280 --> 00:19:00,119 Speaker 1: tenure treasury. So that's the one, you know, are of 327 00:19:00,240 --> 00:19:04,679 Speaker 1: justification for the current multiples. The we see that as 328 00:19:04,680 --> 00:19:08,360 Speaker 1: a plausible outcome that rates As the global economy recovers, 329 00:19:08,520 --> 00:19:12,000 Speaker 1: there is pressure un rates and they begin to slowly normalize, 330 00:19:12,400 --> 00:19:17,200 Speaker 1: and that will just not enable anyone to justify multiple expansion. 331 00:19:17,520 --> 00:19:19,320 Speaker 1: So then it will really come down to earnings growth. 332 00:19:19,560 --> 00:19:23,480 Speaker 1: If earnings growth don't, doesn't you know, reach ten percent, 333 00:19:23,560 --> 00:19:25,280 Speaker 1: and we think there's a chance it couldn't. That's five 334 00:19:25,320 --> 00:19:26,800 Speaker 1: percent I think of it. There's a leverage of five 335 00:19:26,840 --> 00:19:30,600 Speaker 1: percent revenue growth broadly across every corporation. In's you know, 336 00:19:30,640 --> 00:19:33,200 Speaker 1: sort of a two to one general rule of thumb 337 00:19:34,359 --> 00:19:38,280 Speaker 1: that they're just the combination of those two's. Really we 338 00:19:38,400 --> 00:19:42,600 Speaker 1: see as a not overly exciting equity forward looking equity market. 339 00:19:43,359 --> 00:19:45,399 Speaker 1: I know you did spend some time with emerging markets 340 00:19:45,440 --> 00:19:49,760 Speaker 1: early in your career, it did any opportunities there that 341 00:19:49,840 --> 00:19:54,280 Speaker 1: jump out at you. Yeah, so emerging, So the consumer 342 00:19:54,359 --> 00:19:57,879 Speaker 1: and emerging markets has been and remains a great story. 343 00:19:58,000 --> 00:20:01,560 Speaker 1: And I'll highlight country that I lived in, which was Brazil. 344 00:20:02,320 --> 00:20:04,679 Speaker 1: The base rates have been falling in Brazil for several 345 00:20:04,800 --> 00:20:09,520 Speaker 1: years as inflation fell, and what that enables is the 346 00:20:09,560 --> 00:20:12,160 Speaker 1: knock on effect for the consumer, someone buying a TV, 347 00:20:12,440 --> 00:20:15,080 Speaker 1: a car, just the financing abilities that just was never 348 00:20:15,640 --> 00:20:17,520 Speaker 1: really was never there in the twenty five years since 349 00:20:17,560 --> 00:20:22,840 Speaker 1: I lived there. So there are valuations combined with structural 350 00:20:22,960 --> 00:20:25,320 Speaker 1: changes that are very meaningful. There's a huge amount of 351 00:20:25,359 --> 00:20:28,760 Speaker 1: money in Brazil that has been reinvested in overnight rates 352 00:20:28,840 --> 00:20:32,959 Speaker 1: for years. Portfolios were just there. Was it compounded at 353 00:20:34,359 --> 00:20:37,119 Speaker 1: that is now three two and a half three In 354 00:20:37,600 --> 00:20:41,320 Speaker 1: real terms it's even less so um when you look 355 00:20:41,320 --> 00:20:44,399 Speaker 1: at those markets. There are big structural changes, but you 356 00:20:44,480 --> 00:20:47,760 Speaker 1: also have political issues in many of these countries. In 357 00:20:48,040 --> 00:20:52,359 Speaker 1: regions as well as countries. Valuations are attractive, but we 358 00:20:52,560 --> 00:20:57,560 Speaker 1: create a threshold above SMP five hundred that a country 359 00:20:57,600 --> 00:20:59,879 Speaker 1: has to be at a discount of substantial discount in 360 00:21:00,040 --> 00:21:02,119 Speaker 1: order for us to really allocate CAPPITL there. We do 361 00:21:02,280 --> 00:21:05,800 Speaker 1: have exposure there, so we we are we think that 362 00:21:05,960 --> 00:21:10,359 Speaker 1: it's at that point, but it's not screaming is inexpensive currently. 363 00:21:11,000 --> 00:21:12,800 Speaker 1: Michael Tetaman, thank you so much for being with us. 364 00:21:12,920 --> 00:21:15,359 Speaker 1: Always great to get your thoughts on the market. Here, 365 00:21:15,440 --> 00:21:18,359 Speaker 1: chief executive officer of TITAM and Advisors, overseeing where the 366 00:21:18,440 --> 00:21:37,160 Speaker 1: twenty billion dollars, Joining us here in our interactive broker studios. Well, 367 00:21:37,200 --> 00:21:40,359 Speaker 1: technology continues to lead, this market, continues to be a 368 00:21:40,480 --> 00:21:43,080 Speaker 1: topic of M and A activity, I p O activity, 369 00:21:43,760 --> 00:21:46,800 Speaker 1: lots of big themes driving technology. For to get a 370 00:21:46,920 --> 00:21:49,520 Speaker 1: taste of kind of what we can think about for beyond. 371 00:21:49,560 --> 00:21:51,320 Speaker 1: We welcome our good friend Ted Smith, co founder and 372 00:21:51,359 --> 00:21:54,120 Speaker 1: president of Union Square Advisors based in New York City, 373 00:21:54,200 --> 00:21:57,040 Speaker 1: joining us here in our Bloomberg Interactive broker studio. So, Ted, 374 00:21:57,119 --> 00:22:00,280 Speaker 1: I know you guys came out with outlook report. What 375 00:22:00,400 --> 00:22:02,399 Speaker 1: are some of the key takeaways that you guys are 376 00:22:02,440 --> 00:22:04,520 Speaker 1: out talking about. Well, first of all, thanks for having me, 377 00:22:04,560 --> 00:22:06,840 Speaker 1: Paul and Lisa. Great to be here again. Um, we're 378 00:22:06,880 --> 00:22:09,200 Speaker 1: talking a lot right now just about the incredible amount 379 00:22:09,240 --> 00:22:11,720 Speaker 1: of capital that's still available in the market for technology 380 00:22:11,760 --> 00:22:14,840 Speaker 1: companies today, whether it be private equity firms who continue 381 00:22:14,880 --> 00:22:17,719 Speaker 1: to raise capital and deploy significant amounts of capital, as 382 00:22:17,760 --> 00:22:20,200 Speaker 1: well as strategic buyers who are out there with large 383 00:22:20,240 --> 00:22:23,280 Speaker 1: balance sheets looking to do really interesting transactions. From an 384 00:22:23,320 --> 00:22:25,480 Speaker 1: M and A perspective, So despite the fact that the 385 00:22:25,560 --> 00:22:29,280 Speaker 1: markets continue to reward technology companies with valuations that are 386 00:22:29,880 --> 00:22:33,199 Speaker 1: um perhaps unsustainable, but certainly are stratospheric and have been 387 00:22:33,280 --> 00:22:35,479 Speaker 1: for some time, we think that deal making is going 388 00:22:35,560 --> 00:22:40,119 Speaker 1: to continue. Deal making on the M and A front, right, 389 00:22:40,600 --> 00:22:42,480 Speaker 1: And I'm wondering whether you think it's going to be 390 00:22:42,560 --> 00:22:45,280 Speaker 1: specifically within the tech space or whether it's going to 391 00:22:45,359 --> 00:22:47,280 Speaker 1: be broad based. Is there a place where you're seeing 392 00:22:47,320 --> 00:22:50,040 Speaker 1: a growing amount of interest. We certainly we focus as 393 00:22:50,040 --> 00:22:52,480 Speaker 1: a firm on the technology arena. So that's where where 394 00:22:52,640 --> 00:22:56,920 Speaker 1: we're coming at this, uh, this set of opportunities. More broadly, yes, 395 00:22:57,040 --> 00:23:01,879 Speaker 1: we still see deals happening in related spaces healthcare, energy, 396 00:23:02,119 --> 00:23:05,119 Speaker 1: other places where technology is leveraged to the benefit of 397 00:23:05,160 --> 00:23:07,040 Speaker 1: sort of the core investors or the core buyers. And 398 00:23:07,119 --> 00:23:09,919 Speaker 1: how much is this being paid for by debt versus 399 00:23:10,560 --> 00:23:13,280 Speaker 1: equity buyouts? And how is it how is it being financed? Uh, 400 00:23:13,359 --> 00:23:15,639 Speaker 1: there's first of all, the again these large private equity 401 00:23:15,680 --> 00:23:19,159 Speaker 1: firms obviously primarily right equity checks themselves, but they use 402 00:23:19,400 --> 00:23:22,200 Speaker 1: leverage as part of the overall buyout scheme. In tech, 403 00:23:22,320 --> 00:23:25,040 Speaker 1: we've seen a significant uptick in the use of debt 404 00:23:25,200 --> 00:23:27,399 Speaker 1: by these buyout firms and by the companies themselves that 405 00:23:27,600 --> 00:23:31,560 Speaker 1: operate in technology. They're simply more debt available for these companies, 406 00:23:31,840 --> 00:23:34,640 Speaker 1: and explosion in the private credit markets and the availability 407 00:23:34,800 --> 00:23:37,399 Speaker 1: of debt capital to companies and to UH into private 408 00:23:37,400 --> 00:23:40,320 Speaker 1: equity firms. So a significant amount of debt being used today. 409 00:23:40,440 --> 00:23:44,480 Speaker 1: So said, you know, private companies, the historic exit for 410 00:23:44,800 --> 00:23:48,360 Speaker 1: private equity is an I p O or sale UM 411 00:23:48,640 --> 00:23:51,200 Speaker 1: I p O s. In twenty nineteen, we think about 412 00:23:51,200 --> 00:23:54,280 Speaker 1: the Ubers, the Lives and some others weren't that successful 413 00:23:54,400 --> 00:23:57,159 Speaker 1: at all. Understatement, do you think we'll see more M 414 00:23:57,240 --> 00:24:00,399 Speaker 1: and A as an exit vehicle versus I p O. 415 00:24:01,480 --> 00:24:03,760 Speaker 1: I think we've moved into an environment where, at least 416 00:24:03,800 --> 00:24:06,119 Speaker 1: within the technology space, it's going to be fairly muted 417 00:24:06,160 --> 00:24:07,959 Speaker 1: from an I p O perspective. One of the interesting 418 00:24:08,040 --> 00:24:11,720 Speaker 1: stats about nineteen and the I p O class versusen 419 00:24:11,720 --> 00:24:13,480 Speaker 1: in tech is we had exactly the same number of 420 00:24:13,520 --> 00:24:15,479 Speaker 1: Tech I p O s that were thirty eight UM 421 00:24:15,600 --> 00:24:17,679 Speaker 1: and yet the amount of capital that was raised by 422 00:24:17,680 --> 00:24:22,760 Speaker 1: the I pos greater than what was raised in So 423 00:24:22,840 --> 00:24:24,960 Speaker 1: what we're seeing is we're seeing narrowing of the I 424 00:24:25,080 --> 00:24:28,120 Speaker 1: p O window for larger and larger deals. And then 425 00:24:28,160 --> 00:24:30,080 Speaker 1: to your point, Paul, what we're seeing on our side 426 00:24:30,200 --> 00:24:32,760 Speaker 1: is a greater and greater focus on the likely exit 427 00:24:32,840 --> 00:24:35,280 Speaker 1: for these companies being an M, an M and A event. 428 00:24:35,400 --> 00:24:38,840 Speaker 1: Although we talk about last year's activities, it was also 429 00:24:38,960 --> 00:24:42,840 Speaker 1: marked by some serious potholes here. In particular, we work stands. 430 00:24:42,920 --> 00:24:44,959 Speaker 1: I'm not calling that a tech company, so you can 431 00:24:45,040 --> 00:24:48,480 Speaker 1: hold hate now, um, but I am curious how much 432 00:24:49,040 --> 00:24:51,399 Speaker 1: that incident and some others that just didn't perform that 433 00:24:51,480 --> 00:24:54,960 Speaker 1: well has sort of colored the valuations or at least 434 00:24:55,119 --> 00:24:58,359 Speaker 1: uh provide a little bit more skeptical, injected a little 435 00:24:58,359 --> 00:25:01,959 Speaker 1: more skepticism into markets about how high to value companies 436 00:25:02,000 --> 00:25:03,480 Speaker 1: that they're buying. I mean, is that is that something 437 00:25:03,520 --> 00:25:05,359 Speaker 1: you're seeing? I think there's a there's an element of that, 438 00:25:05,520 --> 00:25:09,080 Speaker 1: but I think it's important. It's probably a slightly oversimplified 439 00:25:09,160 --> 00:25:11,359 Speaker 1: view if you look at the class of I p 440 00:25:11,440 --> 00:25:13,399 Speaker 1: O s, but if you separate them into more enterprise 441 00:25:13,440 --> 00:25:17,159 Speaker 1: oriented technology companies versus more consumer oriented technology companies. The 442 00:25:17,280 --> 00:25:19,639 Speaker 1: enterprise tech companies did actually quite well. When you think 443 00:25:19,640 --> 00:25:22,560 Speaker 1: about companies like Zoom Communications and others that that had 444 00:25:22,680 --> 00:25:26,320 Speaker 1: great they made money, they make money, they didn't actually 445 00:25:26,480 --> 00:25:29,200 Speaker 1: burn cash. They these companies do make money or or 446 00:25:29,280 --> 00:25:30,960 Speaker 1: have a path to being able to make money in 447 00:25:31,000 --> 00:25:33,720 Speaker 1: the fairly short term. I think the challenges around we 448 00:25:33,840 --> 00:25:35,440 Speaker 1: Work and some of the other I p os that 449 00:25:35,480 --> 00:25:37,960 Speaker 1: actually did happen last year were in part around these 450 00:25:37,960 --> 00:25:40,119 Speaker 1: business models where it feels like you you could just 451 00:25:40,200 --> 00:25:42,480 Speaker 1: continue to light a pile of cash on fire with 452 00:25:42,560 --> 00:25:45,720 Speaker 1: respect to your lack of profitability, but also a repudiation 453 00:25:46,160 --> 00:25:49,440 Speaker 1: of these founder dominated government structures where the market finally 454 00:25:49,480 --> 00:25:51,520 Speaker 1: came out and said, enough is enough. We're not going 455 00:25:51,600 --> 00:25:53,399 Speaker 1: to allow you to have both of those things. You 456 00:25:53,480 --> 00:25:55,560 Speaker 1: can't have a business model that appears to be not 457 00:25:55,760 --> 00:25:59,600 Speaker 1: profitable for the foreseeable future and invest so much power 458 00:25:59,680 --> 00:26:01,680 Speaker 1: and it's ingle founder or single team. We have to 459 00:26:01,760 --> 00:26:04,280 Speaker 1: have some ability to control the direction of this company 460 00:26:04,280 --> 00:26:07,240 Speaker 1: as public market investors, because that's what the government structure 461 00:26:07,240 --> 00:26:09,320 Speaker 1: are supposed to be there for, which is to protect us, 462 00:26:09,640 --> 00:26:12,119 Speaker 1: not the founders. Is Airbnb going to go public in 463 00:26:12,920 --> 00:26:15,119 Speaker 1: I believe they will and that's going to be a 464 00:26:15,480 --> 00:26:18,800 Speaker 1: big deal, right, should be a very big deal. We'll perform. 465 00:26:19,720 --> 00:26:21,720 Speaker 1: I think it'll perform better than some of the worst 466 00:26:21,760 --> 00:26:23,480 Speaker 1: performers last year, and I'm not trying to damn them 467 00:26:23,520 --> 00:26:25,200 Speaker 1: with fame praise. I think it's a different company with 468 00:26:25,240 --> 00:26:27,840 Speaker 1: a different long term business model. They've obviously got some 469 00:26:27,960 --> 00:26:31,679 Speaker 1: challenges they need to sort out with respect to protecting 470 00:26:32,119 --> 00:26:34,159 Speaker 1: both the folks who put their properties for listing on 471 00:26:34,200 --> 00:26:36,480 Speaker 1: there as well as folks who rent through Airbnb. But 472 00:26:36,560 --> 00:26:38,480 Speaker 1: I think long term, that's a much better business model 473 00:26:38,520 --> 00:26:41,200 Speaker 1: than some of those who suffered in twenty nine. Really interesting. 474 00:26:41,359 --> 00:26:43,680 Speaker 1: Thank you for being here. Thanks for having me Ted Smith, 475 00:26:43,760 --> 00:26:46,879 Speaker 1: co founder and president of Union Square Advisors, joining us 476 00:26:46,920 --> 00:26:49,720 Speaker 1: here in our interactive broker studios. Thanks for listening to 477 00:26:49,720 --> 00:26:52,119 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 478 00:26:52,200 --> 00:26:55,320 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 479 00:26:55,359 --> 00:26:58,399 Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney, 480 00:26:58,520 --> 00:27:01,080 Speaker 1: I'm Lisa bram Woyd's I'm on twee at Lisa Abramo. 481 00:27:01,200 --> 00:27:03,600 Speaker 1: It's one before the podcast. You can always catch us 482 00:27:03,720 --> 00:27:05,240 Speaker 1: worldwide on Bloomberg Radio.