Barrie.
All right. Welcome back to day two of our special
coverage from the 27th annual Milken Institute Mobile Conference here in a
very warm Beverly Hills, California. A mash up once again of two of your
favorite programs. I'm not going to say which one is their
favorite, but it is a mash up of the close at Bloomberg Businessweek.
I'm Romaine Bostick. I thought you going to say two of your
favorite talents, but I didn't want to go there.
I'm Carol Massar Tillman Alix Steel. Don't tell them.
All right. We spent a lot of time yesterday talking
to folks from the world of private capital.
Today, we're going to expand things a bit with a broader cross-section of
finance, including sitting right next to us.
Carmen de Syria is CEO. We're talking about some of the big
changes in the world of consulting. I'm curious, though, what CEOs, what
they want to know for him from him. Right.
And his team about what's top of mind for them.
A lot going on in that space, a lot going on in the media space as well.
Byron now is going to be stopping by to give us his thoughts here on that long
shot bid for Paramount. I'm really excited, too.
We're talking a lot about real estate today.
David Stone back at the real estate investment giant sites to talk
single-family rental strategies. They have such a great global
perspective. So curious to see what he has to say.
Katie Kopp, CEO over at TCW. Going to be stopping by as is white.
And they had some news. Yes.
Oh, yeah, that is right. Now, let's talk about the private
credits itself. Right.
Also with us, we're going to check in with Greg McGuire, president of the
investment bank Lazard. So that's going to be pretty cool.
And then I guess I think I know that you've been really excited to talk about
you're really into this neuroscience stuff.
Yeah, exactly. Dr.
Ali resigned. He is over at West Virginia University,
Rockefeller Institute, 60 Minutes just did a piece with him.
So fascinating to see what he has to say.
And we're doing this on a day where we see the markets up again.
S&P popping up about 5200. There's a lot more optimism when we talk
to people. There's a lot more optimism whether it's
on public markets, private markets, deal making, consulting.
Yeah, maybe. Well, that's what we're going to find
out. We often talk with disruption or about
disruption here at Milken, investing in business and technology.
It is also happening, as Maureen just said, in the world of consulting, where
firms have headcount delayed start dates and slow the pace of hiring over the
past year amid declining demand from their clients.
So we have a great voice to talk about. The industry changes at his own firm and
more broadly, Carmen Disappearance, global chairman and CEO of the
consulting firm E Y here with us at Milken.
Thank you so much for being with us. Great being here.
I've been here all through the year. Let's start with the headlines.
You know this industry, you started at the industry d y out of college back in
85. The headlines, you know, cutting
workers, it's feels like that they're are pulling back in a big way.
What is going on in the consulting industry?
Well, first of all, you got to step back.
A couple of years ago, we were all growing at 20 above 20%.
E Y was going above 20% in consulting because of the pandemic, and that there
was some pent up demand from the pandemic.
But also there was confidence, low interest rates, which I'll get into and
companies are spending right now. What's happened with rates going higher
and there being uncertainty in terms of where rates are going, companies are
holding back on spending and it's a little bit more of an expectation versus
what the rates actually are, because historically speaking, the rates are not
that high, but the expectation was cut, cut, cut a certain time period.
So I think companies have been waiting and therefore not spending as much as
they were, and that's caused a slowdown. It's an industry slowdown.
We were growing rolling through 24, 25%. Now we're growing in the mid-single
digits. How much is a cut back on the private
equity side of things? You guys consult a lot of the p e firms.
We talked to a lot of key here. They are kind of finding their way
forward. How much of the slowdown as a result of
that? Well, it is some of the slowdown has to
do with transactions, whether it's PE or strategic transactions.
There have been less of them. Obviously, the overall economy and rates
have impacted that. When there's less transactions, a lot of
our businesses are slower. Our transactions business, our due
diligence business, even our tax business, and certainly consulting
transformations, the integration, there's less.
So the volume is down. What about the size of deals that are
being done at the moment? But they're also lower because obviously
big spends, huge technology spends that are in the hundreds of millions of
dollars. They're expensive.
Companies have held back in terms of really investing the way they were.
What sort of like a buy for boost to that space because you talk about
interest rates. I mean, interest rates have been stable,
relatively speaking, for the last year now, I guess more or less here.
And most people pretty much assume we're pretty much going to stay here or maybe
some tweaks around the edges. Yeah.
So a couple of things that will give it more base.
One is a high. So companies right now are looking at
how do they deploy A.I. and we're at the very beginning stages
of generative. So when people say, Oh, I've been around
for 20 years and so forth, machine learning has been around for 20 years.
Generative AI at a scale that it could be, has not been around for 20 years.
So we look at A.I. in three different buckets, and this is
the way we really have our clients look at it as well.
First of all, you have to look at it at a strategic level.
Your board, your CEO has to know what is going to do the business.
It can't be just your chief information officer.
But we look at number one is how do we help our clients where they are.
So that involves a lot of use cases in different sectors around the world.
We have thousands of use cases that we're working with our clients, but
these projects are small. We're getting used to them.
Know the middle bucket is around. How do you make your business better?
That includes us as well. That's around productivity.
You try to make the business better by spinning off the consulting unit.
It didn't happen. Are you disappointed and disappointed in
that? It didn't work out?
I am disappointed. But the reason why we're doing it, the
complex in terms of really unlocking value, is still there.
So I truly believe we've learned a lot from our process, the profession overall
in terms of what we've seen, private equity now investing in accounting firms
and consulting firms, they weren't before because they're seeing a cash
flow on the value. And you're also going to see that going
forward. And I wonder, like going through your
own restructuring and issues, if you will, why does that help you in terms of
working with clients? Or does it make them say, Well, wait,
you guys sound like you got some stuff going on?
I'm sure it was incredibly helpful. We were going through this
transformation and we learned a lot and we've changed a lot even though we
haven't done the actual transaction. But I was talking to CEOs that were
going through the transactions, transformations, comparing notes,
helping each other during the entire process.
I do want to go back to AEI because obviously that's been the talk of a lot
and specifically how companies build those strategies.
The idea of do you build it yourself or do you just find another company that's
doing it and buy them? What type of questions are you getting
from clients about the best approach to take?
Well, I think I think companies right now certainly are looking at companies
like Microsoft. Microsoft has this concept called
co-pilot, which helps in a lot of different areas, but it helps an
individual in terms of their work everyday and so forth.
And so, you know, Microsoft's doing this at scale.
Others are doing some scale. We have an alliance at Microsoft, so
it's really helpful to help to use others that have invested in us for
those kinds of tools. A lot of companies are asking about
developing their own large language model for their company using their
data. We have one of those.
That is why it's called BYU. It's fantastic.
Our people love it. So forth.
But you have to have claims data to be able to do that.
Yeah, absolutely. And to start off, Carl gave away your
age by saying when you started out there, but it's actually kind of fitting
because we talk about these things that we did.
Finished. Yeah, the overachiever.
But it gets to this idea of these big structural changes, right?
You're on your way out as a CEO. You're handing over the reins in a
couple of months, I believe, right at the end July here.
What are you leaving your successor? I mean, what are the big issues that you
think she's going to have to deal with that are going to be most important for
you to build UI? So let me just go back for a second.
When I when I became global managing partner,
which is the number two, when I was 2013, we were at $25 billion in revenue
per year and we were about 200,000 people.
We're $50 billion now and almost 400,000 people.
So there's been tremendous growth in unionization by my successor, Janet
Trump. She's absolutely fantastic.
As the first woman global chairman and CEO of a big four firm, and she will
have a huge scale of a firm to run and she will have to wrestle with.
What's the strategy going forward? Are the conflicts too great?
Do we have to relook at transactions? Do we have to look at how do we carry
value private capital being invested in the business?
These are all things that not only hurt all our competitors.
And now it's interesting we talk about the growth is why we need to be a leader
in some ways going forward. It absolutely does.
And it will be because of A.I. And, you know, technology will help to
be leaner. We're looking at 20, 30% productivity
help as soon as we get all the technology in.
And so it will be leaner people. Our partners are asking for that.
Technology to be a big is that technology that's primarily doing a lot
of the sort of more rote tasks. There's been a lot of discussion about
entry level jobs in this space, some consulting or investment banking, the
types of tasks wrote tasks that were given to those new entrants or some
other technologies doing that. What type of training are those folks,
those new folks going to have as they come into the industry?
They will have training and a lot of training in A.I.
tools. We already do that.
We offer many hours of training. That's one of the big advantages of
starting at a firm, like why it's training.
Some people think it's a continuation of school we train.
If you look at corporates today and you look at finance functions and
corporates, many, many people have had a start in the big four or five years and
we really train the world when it comes to finance, accounting, auditing,
consulting firm, studio. Thank you so much.
We really appreciate. Good luck to all of you to come.
It's great being here, but really enjoyed it.
Eric White joining us right here at Milken.
All right. A lot going on here and a lot going back
in New York headquarters and a lot in terms of the markets.
Look, an update on the trading day in New York, here in Cincinnati.
Hey, good morning. I guess I could say to you guys for
about 50 more minutes, we are seeing stocks lose a little bit of steam.
Yields are lower across the curve as we check in with the S&P 500 at the NASDAQ
100 and the Dow Jones Industrial Average right now, Dow right now is higher by
about five. I will go ahead and run that up to 1/10
of 1%, as is the S&P 500. We can go ahead and call that 1/10 of
1%. As I mentioned, stocks moving a little
bit lower just in the last half hour or so.
Nasdaq 100 just down fractionally. S&P 500, if it does finish in the green
today, it's its longest winning streak going back to March today, led higher by
mega-cap tech companies. The rebound in.
Risk assets that we've seen in general over the last week, really driven by two
things a rates reset following a Fed friendly jobs report and most recent Fed
meeting better than expected earnings. Speaking of earnings, we're seeing some
big equity moves today as a result of Disney, as a result of earnings, I
should say. Chief among them, Disney.
Look at this. Disney down close to 10%, falling the
most in a year and a half after the company reported a not so great outlook
for growth in Disney plus subscribers in the current quarter and also said that
visits to parks are expected to moderate from peak post-COVID levels.
Remember Bob Iger? He's in the midst right now of this
yearslong effort to reorganize Disney in the age of streaming.
The company is losing subscribers to cable TV.
He's been under pressure from activist investors.
He's aggressively cut costs. He's propped up ESPN.
He's pumped new life into Disney Studios after some big box office misfires.
I also want to check in on shares of Apple.
They're higher by half a percentage point right now.
This after the company announced a larger version of the iPad Air.
It's aiming to reinvigorate its iPad lineup.
It's gone without an update going back to 2022.
And this is the first redesigned version of the iPad Pro going back to 2018.
The new models thinner includes a crisper screen.
It's got a faster import chip that can handle air tasks.
Finally, Tesla shares of Tesla also lower.
A couple of pieces of news on the stock today.
Chief among them, though, the company is facing increased federal scrutiny of
autopilot. The National Highway Traffic Safety
Administration looking for info that will help determine whether the
company's biggest ever recall made its driver assistance.
Systems safety are down by three 3.5% right now, dragging down the Nasdaq 100
and the S&P 500. Nitzan opened a recall query last month
after 20 crashes occurred in vehicles Tesla tried to fix with an over-the-air
software update back in December. Well, coming up, we've got Byron Allen,
the founder of Allen Media Group and Entertainment Studios, joining us from
the Milken Institute Global Conference. This is Bloomberg. Back to our live coverage from the
Milken Global Investment Conference in Beverly Hills, California.
Romaine Bostick here alongside Carol Massar now alongside Byron Allen, who
founded Allen Media Group in Entertainment Studios in the 1990.
He expanded it from a few late night syndicated programs to ownership of more
than 3000 broadcast network affiliates, a dozen individual properties, including
the Weather Channel, as well as digital news platforms like The Grio recently
added a movie distribution company and gone public with proposals by local TV
giant Tegna in 2022, a pitch to buy ABC and Disney assets in 2023 and this year
interested in bidding for Paramount Global.
Byron joins us right now here from the Milken stage.
You're always bidding on something Byron.
It's about back. I'm going to bid on this flower on your
lapel right now. Well, my wife.
Thank you. Okay, I'm thinking $1,000,000,000, but
I'm going to say 30 billion. Okay, I'm out.
According to Bloomberg Intelligence, that's the amount that you are prepared
to put up for Paramount. Are you interested in buying Paramount?
And if so, at what price? You know, we remain interested.
We think it's a phenomenal asset and we think Sheri and our management team,
they're well positioned to continue their path.
Or if she wants to sell, we're happy to help.
And I have a lot of faith in Shari Redstone, and I have a lot of faith in
George Cheeks and Brian Roberts and Chris Harvey.
They are excellent managers, and if she decides that's the path she wants to
take, have them run things, that's great.
If she's still interested in selling, we are very interested in sitting down to
figure out if we can get something done. A lot has occurred over the last 6 to 8
weeks, events that we're not used to seeing happen so rapidly, but we do have
strong interest in buying all or some of paramount global.
Do you think your bid can be competitive both in terms of what it offers
strategically as well as the financing to do it?
You know what, capital is not the issue. There's plenty of capital available to
support our bid and to buy the asset. The real commodity here is certainty of
flows and the great investor Mario Gabelli said it best this deal will live
or die at the FCC. My advice would be to walk into the FCC
with somebody that is FCC approved, somebody who owns and operates
television stations. Sony can do that.
Well, when you are a foreign owner, that's tough to own television station.
I think you can own up to 20%. You know where they don't they don't
allow that. So we've invested about $1,000,000,000
by ABC, NBC, CBS and Fox affiliates around the country.
We are broadcasters first and we are FCC approved.
And that is the key to this deal, approval and regulatory approval.
There's plenty of capital just in this lobby alone.
There's about $80 trillion looking to invest in something.
As a matter of fact, I can step off this podium and raise another 30 billion in
about 5 minutes. Just go talk to her, him and her and
we're all well, capital isn't the issue. Approval is the commodity.
And that's the thing that everybody needs to be mindful of.
You don't you want to be respectful of the process?
I don't think you want to go into DC saying, I don't.
I've never owned and operated television station.
Yeah, I think that's important. And having said that, it sounds like
you're pretty far along in the process. Do you have bankers lined up?
What can you share with us in terms of who you're working with when it comes
to, as you say, lots of capital out there.
So what are you working with in terms of lining up the financing to actually do a
deal? Well, that I can't share with you, but I
will tell you this, that the capital is very much available not just to me but
others that are skilled in this area buying and running media companies.
And I think that's what's going to come out in the whole process.
What you don't want to do, what you don't want to do is tie up the asset for
a year or two and not get approved. How far along are you, though, in
actually the specifics on a deal in terms of getting something done?
So quite a bit of our capital has already been investment committee
approved, so we're good to go in that regard.
You know, I think we want it to be respectful.
Skydance and Redbird Capital, they have a 30 day exclusive
and so we want to see what the story is and confirm whether or not that
exclusivity has expired. We're not you know, a very smart banker
said to me, Byron, you don't have to do a thing.
All roads lead back to you because there are assets there that we want that
others don't. We want the linear networks.
Why? Would I believe in the linear network
business? I think it's the majority of their
revenue and their iPads. Yeah.
You know, they're both you know, that's the contrarian approach.
Everyone's trying to get rid of linear. I bought the Weather Channel at work.
I bought the Weather Channel six years ago and they.
Clinton I bought it from Bain, Blackstone and NBC Universal.
They couldn't wait to give me the keys. And thank you very much.
And those six years we pushed up the top line revenue and we pushed up the effort
and we're running the Weather Channel at a 50% margin.
So we're very comfortable in the linear business.
We believe that a number of these linear assets are running a little heavy on
both. And the linear business that I think
there is, I think the Weather Channel has enormous opportunity to grow.
I think you're going to see us continue to grow.
People are not, especially in the wet weather business is a big business
because climate change and global warming is the one thing we check every
day. It's the one thing and I will tell you,
it's going to be more I'm not trying to be Debbie Downer here, but the weather
has to be more and more extreme going forward to get by.
And whenever we have extreme weather, we are pretty much number one in that
category. Because you are so upbeat about the
linear TV business, if you will. What is it that other folks who didn't
get wrong when they're all saying this is is this this is the time has passed.
It doesn't make sense anymore. You know, a lot of times people just
don't see what you see and that he and investing what people want to see is
double digit growth. They're fascinated by the double digit
growth. That's what they're attracted to.
But is all New York television, do you think, can have double digit growth or
is there something special about the Weather Channel?
As you said, climate change and different things make us want to look at
it? Yeah, I think what what happens I think
the sub I think the sub count will come down, but I also think that it will
migrate to streaming. You know, when I bought the Weather
Channel six years ago, you didn't have YouTube and Hulu.
So now you know there are millions of subs that didn't exist before.
Content will be consistent and folks will always want premium content.
They just want to pay their price for it.
I think what's happening as you're watching the consumers say, I want this
content, I just don't want to pay this much for it.
And I think you're going to see our content survive and do very well because
it's being priced correctly and it's packaged with other content that they're
willing to pay for. So we're not worried about that.
That's the least of our concern in the last six years.
If the revenue was going to go down and if our if our EPA dollar was going to go
down, it should have happened in the last six years, but it didn't went up.
But you're not immune to what else is going on in the world and what's
affecting some of your competitors. You just recently announced some cost
cutting, some degree of cost cutting out not the exact numbers, but you've had to
trim that. You've got some.
Well, we have approximately. I started the company from my dining
room table 31 years ago, and we've had our 31 years.
We've never had, you know, don't have that dining room that I do.
You got to see it that the company might do that.
I'm going to submit it. And more importantly, the chairs that
will hold sitting there. But we have a we had about 2500
employees and we reduced our workforce by 300.
And it was very painful because we've never done that before.
During the pandemic, I didn't lay anyone off because I didn't want anybody going
out into that cold, ugly world of the pandemic.
Unemployment now is that low, and there's plenty of opportunity out there
for folks to go and get other jobs and continue to flourish.
So that wasn't easy. And our focus now is more on streaming.
We have local now, which is something very special, which is a free streaming
service that uses artificial intelligence and provides local news and
sports and traffic app geofence to the user's zip code.
And the most important thing here, it's free.
The world premier has over 20,000 movies and everything else.
So if I were going to have to leave it
there, always want to thank thank you. Thank you for having me.
Byron Allen over at Allen Media and we continue our coverage here from the
milking stage. And you know we talked about linear TV.
Let's face it, we have a personal TV, You know, I mean, I want to put him
on the spot, but he's always been a big believer and he's built a business going
in places that other people didn't want to go if they didn't see the value of
going there. And that's why I kind of wonder what
Paramount ends up bringing to the table and sticking with it.
It's not like he's bought it only for a little bit getting out of it.
So it'll be interesting to see ultimately how the deal works out.
All right, everybody, we do have to go back to the markets on that.
Let's go back to our New York headquarters here once again to send it
back. Hey, thanks, guys.
Long live linear shares of Paramount, by the way, down about 3% right now.
On a bigger level, those stocks are mixed.
The S&P 500 barely higher right now for a fourth day.
We see the S&P 500 up just fractionally right now.
This rally losing a little bit of steam. The Dow still in the green, the Nasdaq
100 higher, down by about 1/10 of one. We are seeing a yield on the ten year
lower by four basis points. S&P 500, if it does close in the green
today, will be the longest winning streak since March.
It's led higher today by Alphabet, Apple, Eli Lilly and Visa.
The S&P 500 just about 1% off its March highs.
Now, the rebound that we've seen in equities over the last week or so comes
from optimism about what the Fed will do.
Following that Fed friendly jobs report that we got on Friday in the most recent
Fed meeting on Wednesday. Also, better than estimated earnings got
quite a few companies on my radar today. One of those companies reported earnings
after the bell yesterday. Its Palantir shares having their worst
day in nearly two years, down 15%. This even after the company boosted its
revenue forecast for the full year. Expectations going into the print were
high. The stock tripled in the past year.
It was up around 40% going into yesterday's report just so far this
year. Palantir's roots are in government sales
number. It develops software and analysis tools
for companies and government agencies that it says are allied with American
interests. The company's CEO, though, said that
demand from U.S. companies for its AI software now drives
the business. Also among the best performers on a
percentage basis in the S&P 500 is ten view.
It's the consumer health company that spun off from J and J.
Shares higher today after it announced a roughly 4% reduction in its global
workforce right now by 4.7%. This all part of a plan that's intended
to make it more competitive. The company also reaffirmed its full
year forecast and reported quarterly profit in sales for the period that
ended in March that beat expectations. Today, after the bell, we get earnings
from Reddit, Lyft and Rivian, among others, will bring those numbers to you
as soon as they cross can be shares higher by about 4.6%.
Guys, back to you in Beverly Hills. All right, We're back out here.
You got to let me know when they get their way.
What can I tell you? All right, everybody.
Philanthropy is one of the main areas of discussion here at Milken.
And our next guest is participating in a panel with him later on today.
So we're talking about gender equality and so much more.
We are delighted to have joining us, Erin Harkless Moore.
She's senior director of investment at Pivotal Ventures, founded by Melinda
French Gates. And their goal, their mission to
accelerate the pace of social progress in the US so that removing the barriers
that really hold people back, which is so important.
Welcome, welcome, welcome. Thank you for having me.
Tell us a bit more about what you guys are doing specifically at Pivotal
Ventures. We understand the broad vision that
drill down for us. So Pivotal Ventures was founded in 2015
to increase equality and opportunity for people here in the United States.
Gender is a huge component of that, and we've made a $1 billion commitment to
advance its power and influence. What does that mean?
That means getting more women in the positions to make decisions about
resources and capital and influence the policies that impact their homes, their
workplaces and their communities. So we pull multiple levers, including
philanthropy and also investing. We're trying to get more capital in the
hands of women founders and investors. So we're going to build the next
generation of transformative companies that are going to shape economic growth
in the United States. Well, I want to hear more about the
investing side of this for obvious reasons here.
I mean, how successful have you been? Or more importantly, how do you measure
the success of those investments? Because it can't just be about the
return. Return is important.
We are returns first investors, but we're also really focused on the impact
that we're driving. We've worked closely at the demographic
data of the firms that we're investing in and the companies that we're
investing in to ensure that they're building diverse and inclusive teams.
Because again, when you have more diverse decision makers at the table,
you'll have better outcomes like the supply chain, the pipeline chain of it.
Exactly. Exactly.
And, you know, the sad fact is, only 16% of tech writers at U.S.
venture capital firms are women. 2% of venture capital funding goes to
women led teams. It's a huge opportunity if we get more
capital in the hands of women. And we're really focused on doing that
at pivotal ventures. You know, interesting that you say that.
I think go back a few years and we did a story here at Bloomberg that even in
female led venture capital firms are female venture capitalists, they were
still less inclined to invest in female owned businesses.
Is it getting better? What are you seeing in terms of
improvement in that area? No, it's it's a challenge for sure.
But I think we are seeing more and more women launching funds, raising larger
funds. We've backed 20 firms at pivotal
ventures that have cumulatively raised over $5 billion.
So it's a huge opportunity. And I think founders want people that
can help them drive value and add value to their companies.
And that requires a diverse set of stakeholders, including women at the
table. All right.
I got to ask you. So will you invest in a woman or man led
company that is doing incredible things for women?
Yeah. Yeah, we will.
And one example of that is our work in the care economy.
It's a $648 billion market that's larger than the pharmaceutical industry.
And we think it's ripe for innovation. Many caregivers are women, but they're
also men. We're all caregivers at some point in
our lives. So really, we're willing to invest in
and male led teams that are innovating in that space.
One recent example is a company called Summer Health just raised their series
A, They're disrupting pediatric care in this country.
Female CEO, male cofounder. And they're going to build a huge
business that's going to make it simpler for parents like myself to get the care
they need for their kids. Erin, I have to ask you, though, about
some of the pushback to these initiatives.
Are they're talking about formal DNI initiatives or something that's a little
bit more fluid like what you guys are trying to do.
We've seen the pushback and it's not just, you know, people waving their
fists or lawsuits out there here. How do you deal with that?
Because there is a legal issue in some cases that has to be addressed, whether
the lawsuit is bunk or not. But but you have to devote time and
resources to defending that. Yeah, no, you do.
And that's what's the challenge in this environment is.
I think it takes our eyes off the ball of the opportunity that we are missing
by not getting more capital in the hands of women and diverse individuals are the
pie is big for everyone. It's not small.
And I think if we can bring more voices to the table, well, we'll see that in
our returns and our impact and in the outcomes.
So we remain focused on doing the work that we set out to do at Pivotal and
investing in women using our levers around social impact, strategic
partnerships, philanthropy to unlock that power of women in all spheres.
Now, but it is interesting, like this whole idea of if we believe you can kind
of invest, you know, the push back in terms of if you have money to invest,
that it just can't go towards women, you know, started firms if you're well, I
mean I don't know. It's just part of kind of the
conversation we're having now. What do you say to that?
People are pushing back and filed lawsuits.
Filed lawsuits. I say, look, we're going to keep doing
the work right. When women have the opportunity to build
businesses, that raises up our whole economy.
Black women in particular prior to the pandemic were responsible for starting
40% of the net new businesses in the space, which is huge.
And so, you know, if folks want to push back and file lawsuits, that's going to
happen. But pivotal and for me personally, I'm
going to keep searching for great talent, great investment ideas.
And, you know, those can be led by men, but a lot of them are going to be led by
women, too. Yeah, it's a great place to end at Erin
Harkness for over at Pivotal Ventures five, You're on the Milken stage.
And Carol, we continue our coverage. We actually had a chance just a little
while ago before we started our official broadcast, the three to catch up with
the Minneapolis president, Neel Kashkari.
We actually asked him about the state of the economy and the pace of the Fed's
fight against inflation. Here's what he had to say.
I think the Fed can and will achieve 2%.
The question is, if disinflation is still underway, then maybe it'll
continue on its own and we can then take that on board if we need to hold rates
where they are for an extended period of time to tap the brakes on the economy,
or if we ever needed to raise, we would do what we need to do to get inflation
back down. I have to ask you though, about 2% and I
know why the Fed stands by that 3%. But I talk to people around the world
this week here and their cost of capital, they're basing that more on
closer to a 3% rate. And the idea is they're saying, look,
the 2% target that needs to come up. That's not the reality long term,
structurally, at least not for the folks in this room.
Yeah, I disagree with that. I mean, I think that ultimately the
central bank, whether it's the Fed or the ECB or the Bank of England, can
determine whatever the inflation rate is.
And over time, if they conduct their policy appropriately, people will come
to understand that, well, adjust their behavior.
We're committed to 2%. We will get to 2% and we will get an
interest rate environment necessary in order to achieve 2%.
And that was Minneapolis Fed President Neel Kashkari.
And he was really talking about the fight to get inflation down to that 2%
target, because, remember, elevated inflation, it's really had an elevated
interest rate that's really had a big effect here on the economy, including
the housing market. Just last week, Treasury Secretary Janet
Yellen, she actually testified before Congress.
And when asked about housing affordability, she didn't mince words
that financing conditions in home supply are so poor that it's almost impossible
for first time buyers to buy a property. Now, what that poses a lot of major
challenges for her and for government policy in the long term.
It is opening up investment opportunities in the short term.
Shaun Dodson is transport regional broker dealer Amherst, holding into a
trailblazing real estate investment platform with a big focus on single
family rental homes, acquiring more than 50,000 homes over the year with a
combined property value of $10 billion. John joins us now, the chairman, CEO and
CIO over at Amherst Holdings. And John, I do want to start off talking
about that opportunity here. There's always two sides to every point.
You know, when there's pain in one sector that can often sort of bring
about opportunities to invest. You've found a way to do that with
typically in buying up single family homes.
That's right. It's been very exciting.
It's been a little complicated over the last 15 years since the financial
crisis. But now we're very excited, very proud
of the access that we provide to families who are having a difficult time
buying in the best neighborhoods in the country.
For this to be a successful investment strategy, you have to have a belief in
what's going on in the housing market. It's structural and will be persistent
for some time. That's right.
When we started the platform post Financial Crisis, we realized that the
access to credit was going to become very, very difficult.
And now with interest rates so higher and so much higher, the access front has
become a price issue as well as an access issue.
So for those families that are trying to move into those those opportunities,
neighborhoods of opportunity, there's really two ways to get there.
If you're fortunate enough to have the financial wherewithal to have a down
payment and qualify for a mortgage. Buying is a is a is an option.
But today, that's probably less than a third of families there will be closing.
So at that point in your life where it's time to live in that in that type of
product of three bedrooms and nine school district, you need to get there.
And if the capital is available, then we supply the capital.
So what kind of deals are you doing in this environment?
You guys did find opportunity coming off of the great financial crisis, really,
and it paid off really well. Is there a similar type opportunity
like. Talk to us about the environment today.
It's more subtle and we're not really worried about sort of the obviously not
depressed properties now. Right.
So there's not there's really a scarcity of issues.
I'll tell you what I'd like to say is that you can think about the residential
housing market in sort of three ways. There's there's those that are locked
in, those that are locked out. And then we have the market itself is
kind of locked up. What I mean by that?
As we've never seen mortgage rates move so quickly that there's such a large
spread between the available mortgage rate and the mortgages that people have,
that creates a significant locking effect and that's brought down the flow
of the supply of homes to sell by a third.
This is the largest asset class in the world and the supply of available for
sale dropped by a third. It's historic.
So then you have the lock out, which is the people that were originally post GFC
unable to qualify for a mortgage because mortgages aren't available unless you
have a very high credit score. Now you have an affordability instance
brought about by price and you have a large group of families that are locked
out of the bottom. And then my third bomb, the whole thing
I made up for for you is that the market itself is locked up because the interest
rates have risen and investor return expectations have risen and yet asset
prices have risen. It doesn't sound good.
Oh, it's it's. It's a.
Yes. How do we boost supply?
Neel Kashkari talked about this and the concerns about how this plays into the
inflationary picture, that there isn't enough houses out there that's pushed up
prices and that is put pressure on inflation and it's made it stickier.
That's right. How do we improve supply?
I think supply of supply is an issue because it takes a long time.
So it's zoning by partnership with the local governments.
It's land and two thirds of the price to build a home in today's market is labor.
And the labor costs have been rising and rising across the.
So there's not like the easy button here.
This is going to take some time and it's going to take collaboration by everyone
involved, including the credit capital markets, to allow that family that
doesn't have a perfect final score, a chance to go to work in terms of being
able to acquire these properties. What is the cooperation right now with
builders? Are they realistic on prices right now
or is there still a bit of a gulf? Builders are in a very bull cycle for
their business. Their business can be a boom bust
business and they're in a boom because they're the ones that have the land and
they have the build capacity and they have the demand.
There are still a lot of consumers buying and borrowing at these price,
paying these prices and borrowing at these rates.
They're really satisfied. The builders product.
Now, the builders have a very difficult time providing services to that entry
level home, which is where we specialize.
That's sort of the 300, $350,000 home between Charlotte and Texas in the smile
the United States. Yeah.
So they have a very difficult time producing that home at a profit margin.
I do have to ask you and this there was a great Bloomberg story about kind of
the challenges of single family rental investment.
This probably applies more to smaller players rather than behemoths like
yourself. But this idea of keeping tabs on
properties, dealing with squatters and other legal issues that come up that
really affect your cash flow here and you are you are, quote, in the story.
But Amherst was mentioning it. I know this is something you guys have
had to deal with. Like the other day, we manage one home
in one neighborhood and we're providing services to one family.
You have to get that right every day. So if the water doesn't turn on you, if
a squatters moved in while it's in the market, we have to solve it.
Now. We have a thousand people across the
nation focused on the issue and automation and a lot of software.
We don't get it right. Every time we get it right, a lot more
often we don't get it right. But that's the nature of the business.
And for us, that's the opportunity. This is a complicated business and not
everyone is well situated to tackle. So what is the opportunity in today's
environment for you? It's really for us, it's it's expanding
the access to capital so that capital really understand this.
Supporting the renter renters are important.
It's a it's always been a third of our economy.
So we need to give them better choices. Right?
That's that's the opportunity to expand access to capital.
And we build a lot of building factories.
So it really is a demand. We're very different than a lot of real
estate sectors. We have really high fundamental demand.
So for us, it's about building more efficiently, building our space,
renovating more assembly, and then getting investors comfortable that this
is the thing to do to support these families and get them into new
neighborhoods. Longer term, when you talk about housing
supply mismatch between supply and demand, whether it's on the brighter
side or on the purchase side here. Do you see a moment, I guess, I don't
know, ten years out where we will see meaningful equilibrium there or is that
just like true? It's funny.
It's funny you mention this because a year ago we were looking at the
fertility rates in United States and forecasting a decline in population.
And that would be one way for this to bounce.
And so then we have 3 million new immigrants in
the United States now in the year. And those are people are going to put
more demand on housing. So the housing market is going to deal
with a lot of confluence of where the demand comes from, more than supply
consumption. But what's really important for
policymakers to think about is, like you said, this is a ten year plan, a 15 year
plan, and you have to be out in front of it.
So cities have to operate in the way that people want to live there so they
know that ten years now they have demand.
What about geographic location? Does that not help at all?
It helps a little bit, but what we've seen is people leave the the for the big
cities, the gateway cities, and move to these smaller cities.
And the smaller cities are sort of bursting at the seams when everything's
going south, aren't they? Everybody's more sun and maybe less
taxes based on. Try to drive to their other place, like
driving down Fifth Avenue. Everybody's in the Carolinas.
Thank you. Thank you, guys.
John Dobson over at Amherst holds a nice look really, at residential real estate
market and more importantly, the investment opportunities in it.
I think it's so interesting, like coming off of Neel Kashkari and talking about,
you know, the shortage of supply of housing, what that means for inflation.
Talking with Shaun is in the thick of it and talking about some of the dynamics
that's needed to come together to be able to build out supply and how data
driven that. I mean, you talk about them being a
pioneer in that space. You're really taking something that's
very local, very by the gut and applying real data to it, and I guess that makes
it a better investment. Great insight.
A lot more coming up here on our special coverage here from the milk and sage
Seth Berle, managing partner over at home.
A Provo standing in the wings. Stick with us.
We'll be back in a moment. From Beverly Hills, California, this is
Bloomberg. I'm. I. Welcome back, everybody, to our live
coverage of the Milken Global Investment Conference.
I'm Carol Massar alongside Romaine Bostick.
Well, I've got to say that among the stocks that we've been watching in
today's session, A.I. software firm Palantir, it's falling in
today's session, step up 14%. This is that sales forecast failed to
impress investors. This is a company that's in the middle
of the play, but a software company. And Tom, a Bravo, is one of the largest
software focused investors in the world. So we're going to talk about the
software space. Right now.
They've got over 138 billion in assets under management as of the end of last
year. So let's bring in Seth Mauro.
He is managing partner at the company SAP.
Great to have you here with us. Thank you so much for having me.
When you see the results of Palantir, what do you think?
Does it mean anything in terms of the software area related or other?
Our view on on software is that it is an incredible long term space to be
invested in. And what we're seeing right now, at
least in our portfolio, is that this next phase of AI Gen AI, which of course
we're talking a lot about at this conference, is driving all sorts of
interesting use cases for our portfolio companies, customers.
And the innovation we're seeing is pretty incredible.
What kind of software related are they specifically looking for?
For us, where we see most of the innovation, it's organic inside of our
portfolio today. So we're buying within software the the
most innovative companies in the sectors that we're focused on.
What does innovation mean to air space? Because air on its own is kind of
innovative, right? Thing about air that's so interesting is
that it has been a foundational technology in cyber and infrastructure
software for the last decade. Today, we've now find ourselves in the
Gemini phase of A.I., which is the next phase, which is all that we're talking
about. Fundamentally, A.I.
has driven all of our cyber portfolio and application and infrastructure
portfolio to be able to operate at scale and do really incredible things.
Today, what we see is that our development teams inside of our
portfolio companies are now leveraging this next generation of artificial
intelligence with Gemini to really deliver incredible applications to their
customers. So is that sort of the investment
opportunity, meaning the A.I. product gets put out for whoever that
consumer is, or is it the companies that might be leveraging A.I.
for their own internal things, whether it's drug makers or even finance
companies that might start to rely on a lot more?
It's a great question. So we really see it today on multiple
fronts. One is delivering more value to our
companies customers. It's incredible the types of
applications that are being developed in very short order.
Second is in the world of cyber, for example, now the cyber threats are much
more incrementally intelligent, but they use it with the usage of AI defending
those threats with A.I.. So it's really a battling A.I.
and it's really complex cyber world that we're living in.
And the third is driving a lot of efficiency in organizations.
We really view Jenn-air as an enabler of talent, and we think that what really
talented people can do, of course, is a lot of those individuals within the
software market in every industry, it's fundamentally expanded through this new
technology. I part of what's made Tom a problem so
successful in particularly in the technology and software space, is the
ability to properly value a potential deal.
How difficult is that right now? Because there's so much hoping, there's
so much hype around the AI that at least from an outsider looking at it, it's
hard to know what's sort of substantive and what is just kind of that sizzle.
So how do you come to a proper valuation when it really is just trying to be
models out like 30 years into the future that nobody really knows what it's going
to be in the in the world that we live in and operate in the US.
It's it's much more about what the company will do and how it will perform
over time, how much cash flow the business will generate within all of our
companies, which are very established, very innovative businesses.
You're right, there is a component always of innovation, and we need to be
partnered with those businesses that are the most innovative.
And so we look at this new capability that the company has and it is table
stakes to have a strategy today, but it's part of the overall
business. And so for us, at the end of the day,
it's much more about company performance over the long term than it is about a
valuation at a given point in time. Well, that's interesting because they
were thinking about Gen AI and its real impact is maybe a decade in coming or
it's going to take multiple years. How much of a runway are you going to
give a company? When you look at investing in something
like are you willing to kind of pay up in terms of multiple with the
expectations that it might take three years, four years, five years or longer?
And the businesses that we are investors in, of which we generally are the
control investor, these companies always have a segment of their development
budget that's very, very forward looking.
So it's a combination of what we're doing today and also looking in the
forward. You always have to be funding that
innovation cycle. Customers want it.
It's exciting for employees. And today, the big difference with this
new technology that really has come to the surface in the last year, it's
usable today. Products are being delivered today to
our company's customers and the payback is actually relatively quick.
Can you shed light into exactly what companies are doing with all of this?
Because I feel like some of Gen Z is going to be somewhat mundane tasks, but
they're now done by software or whatever.
Give us an idea. Right.
In terms of in terms of the broad macro, we get it like it's going to change a
lot of things and processes. What specifically, I'm curious about
some of what you're saying and how it's playing out.
Yeah, you're right. I mean, today what you're hearing a lot
about and what you're seeing is that larger organizations are able to use the
technology really to drive efficiencies in their organizations back office and
things like that. Back offices is is a great example.
The way we think about it in the world that we're living in is that it's an
incremental value to our company's customers.
So it really makes our products that our companies are building and selling much
more usable in new ways to more members of an organization.
We're really optimistic about it as as a use case in cyber.
It provides our companies customers the ability to prevent threats that detect
threats much quicker and anomalies much quicker.
And it's again, it's an extension of already what's going on in machine
language for really the last decade. I want to ask you a little bit about
just the broader private equity space right now, particularly in the context
of regulation. There's been a lot of rumblings in
Washington about some of the strategies firms have taken roll ups.
Martha has been kind of a staple of that.
And the idea that at least certain folks in Washington want to clamp down on
that. How in-tune are you right now with some
of those regulatory wins circling and how much of that is going to force you
to maybe rethink some of the strategies that you've taken in the past?
I think certainly we're in a different regulatory environment than we have been
in the past. For us, we're operating in markets that
are just so huge and enormous with a lot of growth ahead of it and
that are very fragmented, that it's it's certainly something that we're thinking
about and that, of course, you have to, but it's not something that's taking up
a lot of our time on a day to day basis as we're making new investments.
Does the election change that? Maybe the regulator guessing via your
guess is as good as mine could it in terms of the outcome you think it could
potentially? There could be.
I think every time that there's a change right there, there is certainly a change
in regulatory environment. We don't plan on that.
We don't try to predict that ever. It's you know, it's it's it's just part
of, you know, the landscape today. And you're right that the landscape
today is different than it was in the past.
Do you have another question, Carl? Because I want to pivot to sports.
All right. I got to ask you about the Ottawa
senators. You know, there's a lot of history
behind the purchase of the senators. A few back back when that
Bloomberg Bloomberg was out in front reporting that you were behind that bid.
Here. Are you?
So I am. I am.
I grew up in Ottawa. Yes, I am a lifelong hockey fan.
And I played hockey my whole life. Yeah.
And I'm very passionate about it. And I am part of the ownership group of
the Ottawa senators, but I am certainly not the controlling shareholder in the
Ottawa senators still. That's got to be like your childhood
dream come true. Even out of my 20 states.
An incredible amount of fun and something I'm very passionate about.
Well, sir, thank you so much. Thank you so much.
I really appreciate you stopping by. So for Optimum, Bravo joining us here
now talking sports. I do, too.
I mean, you know, everyone's out. And look, if you had I don't know.
I mean, I don't know who you rooted for as a kid.
I mean, you're New Jersey, the Giants, the chance to get a minority stake in
you, I take it? Totally.
It's so much like like my father. Sure.
You might change your mind and tell us something.
All right, We got to run. All right.
Coming up, David stormed out of CIA heights.
Man, they have a big global view when it comes to reality.
Yeah, and this is I mean, we're talking with with John Dobson little bit about
real estate. Real nice take coming up here.
What's going on in the commercial real estate space.
So much gloom and doom out there. Yeah, but I think what we're going to
hear from him is a little bit more optimism.
Curious what he has to say about his properties in China.
That's coming up next. You are listening and watching
Bloomberg. We are live from a global conference,
the Milken Conference in Beverly Hills. More to come right here on television
and radio and. I. Welcome back to our special coverage
from the Milken Global Conference in Los Angeles, California.
Romaine Bostick, you're alongside Carol Massar broadcasting live on television
and radio. You're used to that.
We're everywhere. Like the global cyber class.
You do it for like 7 minutes. So we thought it'd be a good idea.
For us. It's bad.
It's a 3 hours and it's. I forgot.
Yeah. So that's again, we've been talking a
lot about the real estate sector today. I think this is so great.
Yesterday was so much about private credit, which is really important to get
a gut check on that. But real estate so important.
We started off the day, you know, talking with Neel Kashkari of the
Minneapolis Fed, the importance of supply of housing here in the United
States, the inflationary pressures we are seeing.
But that's the residential side. I'm really also curious about the office
side. Something we keep feeling like is
another shoe going to drop? We keep waiting.
Yeah, absolutely. And actually just listen to some of the
comments I've got on this space here. I'll be a nice set up here for our next
guest. Let's take a listen.
We're very bullish on real estate. It is the biggest industry in the world.
It's not going anywhere. We can't have events like this.
People have nowhere to live. People have nowhere to work in less.
There is great real estate. We will continue to invest and we think
it's a fantastic time to be putting money to work.
What we focus on is where the population migration is growing, so we love the US
writ large, where that where the businesses are out moving their
businesses. They're like rich people can move to
Aspen and other places like that, but you can't move a whole business there.
So Florida, Tennessee, Texas, all of the states that you see positive migration I
think is a great place to put your capital.
The sentiment in real estate, particularly commercial real estate,
particularly office buildings, is so negative, it's so awful that I am just
attracted to it. Yeah.
Commercial real estate is really the talk milk in this year.
As of last year, with roughly 20% of the $4.7 trillion in US commercial mortgages
held by lenders investors coming due this year.
The reason why everyone's talking about it, I might create some pain out there
for some folks who need to refinance, but it has lured a slew of investors
armed with hundreds of billions of dollars to target commercial real estate
deals. One of the most active players is Hines,
which last month announced a new platform called Hines Private Wealth
Solutions that seeks to capitalize on some of those troubles in the real
estate industry. David Steinbock, the global chief
investment officer at Hines, joining us right now.
This is got to be one of the biggest opportunities you've seen in your
career. Yeah, these only come around a few times
in our career and we definitely have a moment where there's going to be real
opportunity. So it is exciting to see kind of what's
ahead this year. But how do you sort of cut through all
the gloom and doom? No one's going back to the office.
None of these buildings can be repurposed.
How do you look at that sentiment and then look at those properties and decide
there's something of value? Yeah.
So Hines is a global investment manager. We have about 100 billion under
management and we're about 30 countries around the world.
So it's a pretty unique perspective in terms of seeing real estate through a
global lens. And I'll say it's not the same
everywhere in terms of just different dynamics.
Not only macroeconomic policy but also physically what's going on on the ground
in different places. And so even the experience of office has
been very different around the world over the last few years.
Let's go around the world. Let's start with the U.S.
property and the office space. Your exposure, what are you seeing?
Is there going to be another shoe to drop?
Yeah, look, I mean, I think it's important to remember that what's
happening right now is really two years in the making since interest rates
started going up. Right.
So we're over two years into that. And so what this has felt to me, it's
been a lot more of a controlled managed process.
Certainly, there's a lot of pain in the system, but people have had time to work
through the issues. And so I think time has been the key
ingredient here to finding a way forward.
So what we're doing now is much more looking on the horizon for what's ahead
and where those opportunities are. Certainly, there's a lot of things that
need to get fixed. Still, I think private credit is a part
of that, but I know equity is going to be part of the solution as well.
Do Even having said that, people talk about some of the office properties like
Midtown Manhattan in the garment district, nobody's going to ever want
them in terms of office space. Will they have to be?
What do we do with that? Some have said maybe the government
needs to come in to help kind of clear some of that out.
Is it fair to say that there's going to be office space that never is going to
be used again? Sure.
I mean, look at the offices. There's a big sector in the United
States. There's a lot a lot to that.
Right. I think what first needs to happen now,
I think we're going to see it this year, actually.
I think we need to see some transactions in the trophy space.
So the real the best of the best, we need to see some real trades and have
price discovery there. I think that would be a huge signal to
the market once we really start seeing that.
Right now, I mean, we're we're in conversations with people where there
are discussions, there's still a bit of spread.
I think that did spread well. Well, we'll close this year and we'll
finally start to see some transactions. And that's what the market really needs
to understand how to price the sector. So does that mean, yes, there will be
some properties that will just never be used again?
Office space? Yeah.
Look, I'm in New York. Yeah, just like in the retail sector,
you know, 15 years ago. I mean, there's certainly going to be
some things that aren't are going to be repurposed heavily or or torn down.
But but I know that there are high quality office buildings where the rents
are performing, the fundamentals are there, but the capital markets are not.
So what we need to see is the transactions to be able to have some
certainty for how to price the rest of the space.
As far as your investment strategy. Do you take a hard look at the
properties that need to be repurposed or you primarily sort of focus more on
those lines that are already set to go? Yeah, Look, I mean, part of our our
operating model is really tapping into what we see as a much bigger change in
real estate investment right now. I mean, there's regime change and
interest rates and it is it's going to be a different world.
The way I've described it this last 40 years, it's been downhill skiing in
terms of a sport. And it's going to be cross-country
skiing for for now, probably for for quite a while.
And so I think that, you know, in that new sport, it really is a new sports, a
new mindset, new muscle. And I think there's going to be a real
shift from a search from data to a search for alpha.
Yeah. And alpha generation really is that
local execution. And it takes a a very clear eyed view on
what office or whatever the real estate product is, what's going to make it
work? What's going make it work in this new
era of investing? You know, cross-country skiing is really
hard on if you haven't done it, but it's it's hard work.
I was going to say, with climate change, there isn't a lot of snow out there, So
it sounds like it's going to be a little rough either way.
I am curious. I mean, we are all kind of aware of the
issues in the US commercial real estate. You have an international footprint here
but cannot compare and contrast that with what's going on overseas.
Yeah, look, I mean, it's definitely it depends on where you are.
So last year, certainly Europe was leading the recovery.
In many ways. There's more transactions, there's more
price discovery points to for investors to get comfortable with.
But we're seeing opportunities still in Europe.
Our our business is pretty balanced. Last year, we were about a third in
Asia, third in the US, started Europe. I think the US will now be more of our
business this year and we're certainly going to chase that in in Asia.
There is a lot of opportunity and Japan Australia
built a rets is a significant investment.
We see around the world United States is about 3 million houses short.
The theme is elsewhere as well. And there's real reasons for that.
And we we think we can help solve some of the problems and bring bring new
product to a lot of these countries. Greater China, you've been there since
1996. What can you tell us about the real
estate market in Greater China right now and the government?
Do they ultimately need to do something to move this along finally?
Yeah, look, it's definitely been a tough situation and we do have a presence
there for a long time. We've been we're still there.
I'd say we're very cautious and be very careful, as everybody would be.
We've actually begun to focus a lot more in India.
The last, let's say, even 24 months in India has been a huge area of growth for
us. We see a lot of expansion plans for a
lot of us. Companies, frankly, are setting up a lot
of deeper presence there. So that's one significant pool of
opportunity for us. Do you still want to have a presence in
China, Greater China? I think I mean, China is going to be one
largest economies in the world. I think it's just a matter of what it
looks like. You know, we're still there.
So but we see a lot of opportunity in the entire region, frankly.
And all of that region feeds off of each other in terms of how the broader
economies work. What is the price discovery and price
transparency look like over there right now?
In Asia, move on to supply in Greater China.
Yeah, look, I mean, it's it's like a lot of other people there, I'd say.
So it just hasn't been a lot of significant trades yet for the for the
trophy type of assets. So but that's the same thing.
I'd say it's we're waiting for that. Like I was saying earlier, we're waiting
for that as well. Other distortions like government
distortions, given how much involvement they have in the property market.
Look, I mean, I mean, the within the Chinese economy, certainly the local
Chinese insurance companies, there is a lot of local capital there that I know a
lot of a lot of sponsors are looking to now to backfill where institutional
capital, international capital was. So certainly within that context, the
risk and quality. David, you have a massive team, massive
presence and you see so much. You mentioned India.
I think that's really fascinating. If you had to pick one market globally
where you're like investors, I think about the Bloomberg audience I keep an
eye on. Is it India?
I think yeah. I mean, I mean, look, India is the place
of dramatic change without question. And we're putting a lot of resources
around that. We have a lot of opportunities that were
lacking. But I see opportunity everywhere,
obviously. And like I said earlier, the United
States to me, I think is going to be where a lot of investors focus most of
its stock. We're going to see most of the U.S.
US next 12 months, the next four months, next months.
Yeah, I think we'll start with credit moving to equity.
So I think that's how investors are looking at it.
I have to ask you about the interest rate question and the Fed question.
We came into this year with expectations.
We're going to get multiple rate cuts. People are still holding out to get
something. How much of your business right now
would be dependent on a meaningful shift in interest rates, whether it goes down
or. Yeah, look, so one data point, the if
you look at the last 17 elections, 17 election cycles, what did the Fed do?
About two thirds of the Fed actually raised rates, only about six of them.
The Fed lowered rates and one of them at held steady.
So it's interesting knowing that that's this is see the patterns, right, in
terms of like where past elections were. So I would say the Fed is likely going
to take the right view of the economy and whether or not rates have gone up
almost 500 basis points in our business last years.
Whether or not there's a slight cut, it's flat even slide up, it just it's
not going to matter that much in the scheme of our our total business
relative to where we them. So we're much more focused on how do we
create income, how do we create value, how do we make the right investments
today for a long term horizon in real estate is a longer term horizon
investment. So it's, you know, 5 to 10 years is
often how investors are holding it. And so so that's how we're underwriting
right now. You know, it's fascinating.
David, thank you so much. But I just feel like so many of our
guests here at Milken have said a little bit higher, a little bit lower.
It really doesn't matter. This is kind of the environment we think
you have to operate with, right? Yeah.
I mean, you know, the other the other analogy I thought of, it's almost like
like car racing, right? So NASCAR, the economy is like we
weren't we weren't NASCAR. We're just going around the circle
really, really fast. Now we're shifting into F1 where we just
don't know what's around the corner, but we're still going really fast.
Yeah. And so I think I think again, it's a new
sport to play and I think in this in this market, we just have to be a lot
smarter about how we're going to navigate whatever corner might be around
the corner. So.
All right. We're going to have to leave it there.
And you're so smart. Kevin Steinbock, the CIO over at Hines.
We're really not sure about this piece. You, but you love it so much.
You have some extra time right now. Sorry.
I know they're all going to be mad at me.
Did you know? Our producers do not know that?
And that means one more question, All right.
I'm not us here on the milk and sage out in Beverly Hills, California.
The thoughts back to Tim Saturday, I think, you know, I.
Studio to check on what's happening in the morning.
Always, always keeping things serious here in New York.
Stocks were higher across the board earlier, struggling to gain traction
this afternoon. The S&P 500 did rise above 5200.
It was up around 4/10 of 1% before we saw a bit of selling late in the
session. Right now, the Nasdaq 100 is flat.
The yield on the ten year right now, 4.4 or 5%, down two basis points.
Bitcoin right now at 63,000. I want to talk a little bit about in
video because it's lower today after Stanley Druckenmiller told CNBC that he
further cut his in video position in late March, he said, quote, I might be a
little overhype now, but under hyped in the long term.
Down 1.7% right now. He did repeat that.
He's long bullish in the long term on a high as he's ever been.
And he noted that the big payoff might be 4 to 5 years away from now.
I should note in video, up more than 80% so far this year, about 5% off of all
time highs. Just to put today's move in perspective,
a bigger move coming from Walt Disney today.
Also weighing on the S&P 500. Shares falling the most in a year and a
half after the company reported a not so great outlook for growth in streaming
subscribers in the current quarter. Also said that visits to parks are
expected to moderate post-COVID levels. Iger is in the midst of a years long
effort to reorganize Disney in the age of streaming, as the company does lose
subscribers. He's been under pressure from activist
investors. He's aggressively cut costs, he's
propped up spin, and he's tried to reinvent invigorate Disney Studios.
On the upside, Apple, the company announcing today a larger version of the
iPad Air, aiming to reinvigorate their iPad lineup.
It's gone without an update since 2022. It's the first redesigned version of the
iPad Pro since 2018. Look at that apple up by 4/10 of 1%.
And Peloton is surging right now. This after CNBC reported earlier today
that a number of private equity firms are in talks to take the company
private. Well, coming up, our coverage continues
from the Milken Institute Global Conference.
Lisa Donohue, co-head of the Americas in Asia at Alixpartners, is going to join
us in Beverly Hills. This is Bloomberg. And
welcome back to our live coverage of the Nokia Global Investment Conference at
Carol Massar, along with Romaine Bostick.
Right now, we have another line up. They're waiting for Magic Johnson
Johnson. Yeah, pretty cool stuff.
So we'll follow it. I hope you're keeping count, but we have
to figure out who is the longest line with Elon Musk, Magic Johnson, David
Beckham, Harvey Out west, you couldn't even get in.
It was kind of crazy. All right.
We're going to get back to the markets because we've got a great indicator of
what is going on in the financial and business environment.
It is through the world, the restructuring and turnarounds.
And we've got a great voice on that with us as we sit down here.
She's Alixpartners, co-head of Americans in Asia, joining us from Beijing myself.
You're welcome. Welcome, welcome.
Nice to be talking with you. Great to be here.
I do think this is a great indicator, right?
We look at different metrics about the business environment, what's going on
more broadly, What are you seeing and what does it tell you about the macro?
Look, you know, we're we're talking a lot.
We see hundreds of companies. We work with C-suite executives.
And what we're seeing is forward thinking leaders are getting prepared.
If you think about CEOs in the C-suite, they've been dealing with disruptive
forces for years now. Covid run wars, technological
disruption, lots, a lot. So forward thinking.
Leaders are thinking about flexibility, agility, how to take some of these
challenges and look for the opportunities in these forward looking.
And then there's the cumulative effect of a great financial crisis, a pandemic
disruption. Having said that, are more companies in
trouble? Are they looking to do restructurings
and turnarounds? I think more companies are trying to
think smartly about how to operate in this high interest rate environment and
how to deal with whether it's a capital R recession, smaller recession, but
really changing consumer behavior. And if you think about some of the
economic drivers of certainly the US economy, it's the consumer.
So thinking about if that starts to be a slow trickle, what management teams can
do to get ahead of that and to be prepared and to think about how to pivot
and think about how to react. And also the whole issue that what's
ailing the economy, if you will, even just typical, there are structural
changes as well. So I would think that means as a
corporation you have to take a structural look at your business,
whether that's side that cements or acquisitions or whatever, or a complete
turnaround here. What type of questions are you getting
on that front? You know, that's that's an excellent
question. And you hit the nail on the head.
We're working with so many executives on what should their business model look
like, What should they be doing to be kind of fit and ready, fighting,
fighting ready when more disruption comes.
We're talking a lot about carve outs. We're thinking about what five years ago
may have made sense as part of your conglomerate.
Now it doesn't. And what isn't right for you may be a
jewel for someone else. We're looking at customers.
I mean, the simple truth is all customers are created equal.
Is it time to fire a few customers? So take a look and really understand the
long to serve? Yeah.
And on that point, though, as these companies sort of make these assessments
here, there's this idea that what's happening now is slow moving, at least
relative to, say, global financial crisis.
Some of the big shots were all the pain of happened at once.
They have a little bit more of a luxury of time on their side this time around
versus past crises. You know, I don't know that I'd call it
a luxury because I think the C-suite of today is dealing with faster and faster
change. We're dealing with two brand wars, the
emergence of more assessable. I mean, the truth is has been around for
over a decade. But when you think about what chat she'd
be teammates with some large language models, what a lot of our companies are
thinking about is how can I use that? How can I use that to be more efficient?
But working with a very healthy company and what they're trying to think about
is how do I use customer fragmentation, How do I use team to enhance the
customer experience, target the customers in the right way, not in a
robotic way, but in a human, authentic way.
So there's some really cool things, I think, coming out of AI.
And again, I go back to the forward thinking executives, the executives that
are thinking, okay, this might be a little rough sledding, but I'm going to
be ready for it. I'm going to be lean, I'm going to be
forward thinking. I'm going to think about opportunities
versus just crisis. So we saw one of the featured speakers
was, of course, last night, Elon Musk, who did not talk about Tesla.
No, we waited, but it didn't happen. But you are saying something when it
comes to the electric vehicle space. Give us an idea because it does feel
like, yep, there's still growth, but it's at a slower pace.
What do you see? You know, I do a lot We do a lot of
thinking about energy transition and what that means not just for electric
vehicles, but across the whole electric. And I think one of the biggest
indicators of possibly not maybe a little bit of a slowdown, I think,
folks, everyone knows where we want to go and everyone knows that ultimately
we're going to get there. The question is, how long does it take?
What are the steps in the interim? And in my mind, what is the required
infrastructure to support it? I mean, think about what happened with
homes and the pullback on their electric sweep as a result of the primary market
prices going down, which then, of course, affect the secondary market,
prices going down. And maybe the consumer wasn't quite
ready for longer hauls, not feeling comfortable with the charging stations
and understanding what the infrastructure looked like.
I think we're still getting there. I think we will get there.
I think that the the hybrid is is the now and the easy is the future.
But are you doing restructurings and working with companies that kind of need
to reset their metrics and give you space where we're working with companies
that are trying to think more broadly about from a macro perspective, what's
happening? And what does that mean to me?
And importantly, what does it mean to my customers and my competitors in that
space, in that space. But honestly, energy transition that
impacts all of us. So it's not just uniquely that space,
but but in that space, helping them think through how to be more efficient,
how to speak to the customers, and then what that transition means to you as a
CEO, as a as a C-suite executive. Another big change that's been going on
over the last few years is the refocus on supply chains.
Obviously, here in the U.S., we had the big disruption for the whole, but we got
the big disruption from the pandemic. There's been a big push to nearshore
because of trade, wars and other geopolitical issues here.
This is going to also potentially be, I guess, a new avenue, what business or an
expanded avenue of business for you? One of the things that's as you know,
you mentioned that I focus on Asia as well, and I've spent in the last 18
months, I've been there five times across China, Singapore,
Tokyo, etc.. And there's a couple of things that
we're seeing as it relates to supply chains.
Number one, and I get asked this question a lot, I don't think that we're
going to be globalizing and moving completely away from China, where too
interconnected, it's too big a market to ignore.
But what I am seeing is a lot of large global manufacturers are thinking about
redundant supply chains. They're thinking about keeping what they
have in China and looking at Vietnam, Japan and Mexico has been a huge
beneficiary of that, that type of movement.
But I think and what we're seeing and what we're working with folks on is,
yes, it's about cost, but it's only about cost.
It's not only about cost, it's about surety of delivery and making sure that
you actually get the piece so you don't shut down your manufacturing line
because of uncertainty with a long supply chain.
Yeah, fascinating. I do think about the redundant costs of
maintaining our supply chain, especially when you bring it back.
Yeah. You know, some of them, they have no
choice to do that, right? Absolutely.
I think the least is quite the idea that it's more than just the financial or
financial cost. Right.
It's a lot of that, too. And some of the technology battles are
the geopolitical battles that we are having, he said.
Great to get some talk with you. Thanks.
I appreciate it. Thank you, guys.
This is a Donahue. She is that co-head of the Americas and
Asia at Alex Harper. Yeah.
And and then she brought up Mexico, too. I mean, let's see.
So, I mean, Derek, we have to get well, we have to do a whole show on that.
But I'm fascinated by that. How much is her move back towards the
border? I remember we went through this before
and after days, and they kind of they kind of died down.
We caught up with the architect, Gensler, and they are global and they
talked about all of the activity in facilities that they're building
specifically in South America, Mexico in particular.
So it's happening. Absolutely.
Will you be around for that? So do or do I need to check with them?
I don't know. I mean, think about it.
Let me ask. My schedule are a lot more coming up
here from the Milken stage in the lobby of the Beverly Hilton here in Los
Angeles, California. Magic Johnson lined up here.
But, you know, we got a line on the other side you can't see.
It's not quite as long, but they all want to hear from our next guest.
Kept the beer to her credit group over at Arias.
A lot to talk about with them after the break.
Stick with us. This is Boulevard. Welcome back to our special live
coverage of the Milken Institute Conference in Beverly Hills, California.
I'm Romaine Bostick alongside Carol Massar big focus today, not just on the
broader investment stuff, but really on direct lending and alternative credit.
What are the specialists in that space? Harry's management still seeing
opportunities out there and bodes well. Even helping buyout shops like the
companies they backed against higher interest rates while at the same time
providing cash back to fund investors without necessarily having to sell those
underlying assets. I'm pleased to say that the Head of
Areas credit group is joining us right now, Jeff, to be our ally here on the
opposite. Jeff, great to see you.
Thanks. Thanks for having me.
Where are you finding opportunities right now?
So we're actually finding a pretty good constructive backdrop for everything
that we do. Just as a reminder, credit, real estate,
private equity secondaries. And we play in a host of different
geographies, obviously our largest business in the US, but we're in Europe
and Asia as well. So I think my my quick takeaway is we're
actually seeing the economy better than we might have expected at this point.
The US economy, the US economy are shrinking.
I think the global economy is safe for a few, but the US economy in particular
for sure. We've been questioning a little bit as
in transaction activity down a lot. And then when we go back and look at the
deployment that we've had in our businesses, it would actually tell you
that we're doing fine. To me, that means we're picking up
market share and just continuing to be more and more relevant.
And all the businesses that we're in with some of those transactions that
we're primarily talking about, kind of middle mid-tier, middle market type
companies, are something there? Yeah.
I mean, we have a pretty broad credit business today.
It's about 300 billion of assets in five different businesses.
I mean, it ranges from the lower middle market, which can be probably as small
as 20 million of you bottom. But increasingly we're able to finance
is much, much larger companies that you all are writing about at Bloomberg.
So, you know, multi-billion dollar deals as well.
What are those deals looking like? And I'm curious at a higher rate
environment how that kind of impacts the financial structure a little bit.
So how can you say that, you know, what kind of in terms of a higher rate
environment, how is it impacting a little bit the financial structure of
the deal? It is fairly large.
You know, I mean, I think what the good news is, higher rate environment means
that assets are worth less and that's true real estate, corporates, etc..
So you're starting to see a reduction, I would say, in purchase prices on
corporate assets and certainly on real estate.
And of course, with higher rates that helps because you don't need to set
these companies up with as much debt. What kind of deals are getting done in
real estate particular? I think we continue we've had a couple
of conversations on the residency side of things, also on global properties in
general and office as well. So what kind of deals are happening are
you find? My interest in my day to day is not
frankly living in the real estate business, but I think if we surveyed
everybody in real estate in areas, it's really important that you don't take too
broad a price on real estate. Right.
So office is very, very different than we think.
Industrial, multifamily or most of our portfolios are both on the lending side
and on the side. I think office is tougher and it's a bit
of a we'll see. Although, you know, we're all in New
York. You've probably read the article, the
properties in New York are fully leased up and the properties are not.
So I think it's just you really have to be a good asset, selecting a good
lender, going in and doing the fundamental work, depending on the asset
class and depending on really know it. Yeah, with some of the strike you are
seeing in the economy and some of the stability, we're finally seeing the
right environment and it's beyond just healthy overall,
but that helping facilitate more transactions.
There are all sorts of and we talked about this on our earnings call last
week, there are all sorts of contributors that should lead to
increased deal activity. So the we think plateauing of rates or
the continued rise in rates is one, we've talked about this a lot publicly
that most investors, our LPs are really have significant appetite to get capital
back. And there's a lot of money in the ground
in leveraged finance space when private equity in and elsewhere that's going to
need to compel transaction opportunities.
The economic backdrop being good, obviously, is one of them as well.
What does fundraising look like for you right now that more difficult?
I didn't really talk about it in any specificity, but we mentioned this on
the earnings call last week. We raised 17 billion capital last
quarter at areas about 14 billion, and that was incredible.
So the good news is a lot of the places where we live, it has it has not been
any harder. I think there's a real change in the way
that investors have approached their portfolios.
Public versus private, liquid liquid versus liquid, etc..
And that's continuing to create tailwinds for us.
You know, Kip, 14 billion on the credit side, that's a nice bucket, if you will,
to put to work. 14 billion.
How quickly do you think you put that to work in this environment?
What do you want? I mean, we try to be thoughtful,
obviously, as we raise capital and the way that we justify capital raises with
our investors and certainly with our beliefs and we hope we think there
believe that we can obviously deploy along with what we've raised in terms of
the capital. So
I think if New Deal activity really does pick up a bit, it'll be even easier.
But we've been hitting our deployment targets, as I mentioned earlier,
regardless, so we wouldn't be raising the capital.
We didn't think that we could deploy it over a reasonable period of time.
That being said, having dry powder is really nice.
The markets are always transitioning where investor expectations.
I talk a little bit about the higher rate environment, an environment where
you get 5% on a ten year, you know, just like I think as we think about
expectations of what investors want longer term.
Look, I mean, the reality is a lot of the businesses that we're in, we're in a
spread product. So we need to provide, you know,
attractive risk reward relative to the risk free rate.
And that's how we think about that. So there's no doubt and base rates going
up is help, because a lot of what we do is floating rate assets.
But the private markets in particular have to share with the risk free rate
and with the public markets. I want to talk about areas of the
business. You guys have been expanding into Asia.
You have new the new wealth management offering here.
First, talk about Asia and the opportunities there that where the most
of the growth is going to be. Do you think so?
Well, I mean, we have some really well-established
platforms in Asia. It obviously represents a tremendously
large market. But I'd say in our businesses it's
probably less sophisticated. And certainly what we have here in the
U.S. and also in Europe.
So I just view it as earlier stage there.
We basically have a credit business that does performing credit and also special
situations. And we recently acquired a private
equity manager based in Singapore there that I think can provide growth in Asia.
We're focused on other areas, whether it's real estate infrastructure and real
assets as we try to grow into our larger footprint there.
But, you know, it's interesting, we bring up Asia.
You know, obviously you go back a few years.
I feel like we always talked about China, but Japan is all of a sudden,
especially here at Milken, we're hearing many investors bring up the Japanese
market the opportunity that it presents for you guys specifically.
I mean, with that. But the reality is it's an enormous
economy with a very sophisticated business
community that is massively under allocated relative to the rest of the
world in terms of alternatives. And the reason for that is obviously
just the required rate of return that they need over there has historically
been lower based on the way that their economy works.
That's probably changing, but I think they're also getting more sophisticated
and frankly more interested about wanting to really roll up their sleeves,
do the work and get invested in alternatives.
When you talk about a 1% shift in the portfolios over there from traditional
to alternative, the numbers get very large very quickly.
But what is what is the differential right now in terms of the allocation
that you see that market is in the US versus say in Asia, particularly Japan
or Europe? Yeah, I mean, I think it depends,
depends who you are, whether you're, you know, pension
funds is a sovereign and an endowment which will typically have a much, much
longer range and then much longer or much higher allocation to alternatives.
The allocation in Japan today is virtually zero.
Yeah. What about how you structuring deals
right now? There's been a lot of discussion about
how alternative asset managers by the credit funds are partnering with a lot
of the bigger money center banks, more traditional banks to get deals done.
I mean, they're basically calling you and that nephew.
Are you going to them? Is this going to be kind of the
structure of deals for the foreseeable future?
I mean, I think because on the new transaction front, we're a natural
partner for banks. We obviously buy loans and buy high
yield and syndicated transactions for banks in the regular way.
We're also a good junior capital provider, which is a business today.
So that less and less interest, you know, over the years.
But I do think over the next couple of years banks will keep rationalizing the
types of businesses that they're in, and we'll probably sell a portion of this
business for that business. We think we can be a very good buyers in
those businesses. Private credit isn't getting crowded at
all. It feels like everybody's allowing
different tie ups and link ups, if you will, between traditional finance and
something like. I mean, I've been doing this for 20 plus
years, so the market has just grown substantially, right?
So when we started, we talked about financing 10 to $50 million businesses.
And as I mentioned to you earlier, we can now talk to much, much larger
companies because of our capital base. We think it's a business that actually
gets easier as you get. Larger I their real scale advantages.
So is it more crowded? Is it more discussed?
It is. But when you look at the risk reward and
you look at the results that we're generating for investors, it's still
pretty compelling. What can you give us in terms of insight
about returns to investors? Returns to investors?
Very little. Come on.
I think being more demanding, though, I mean, we've heard a lot of we've talked
fees ourselves. They've talked about this idea of either
wanting to hook a return of capital or wanting to see better returns and what
was promised when that when they first entered into both.
Yeah. I mean, I think and I just got here last
night, but apparently everyone's been talking about TCI, which is obviously
how much capital you can return your fees.
I think what the office want first and foremost today is more return on capital
because they're mismatched in terms of how they want to be able to reallocate
within their portfolio. Yeah,
I don't know. These are always tough ideas to generate
good returns. If we don't generate good returns, don't
fire us one off and stuff like that, I suppose.
But I just about your existing portfolio here, I mean, I know you guys kind of
write that that hold system type like 1 to 4 or something, but when you talk
about the quality of what you already have.
Yeah. Are you comfortable with that?
Yeah. We've said this over and over here and
over the last couple of months. Things from an economic perspective are
better than we probably would have thought.
Yeah, defaults and loan and alternative credit portfolios are still materially
below historical averages. Yet the question a lot of you expect
they'll go up. And if rates remain higher for longer,
and the answer is probably yes. So we're not forecasting, you know,
anything other than probably a traditional credit cycle.
And that's lead to, I think, just dispersion of results.
We think the really high quality firms have great origination and great risk
management will continue to succeed. And the smaller folks who haven't done
that since quite as long could have a harder time.
All right. We got to leave it there.
We're excited to bump you to the front of the line for Magic Johnson here
over at our areas of credit. And
the bottom line is a big deal as you get right to the
front of the line. All right.
I think we've got to go back to your colleague, Tim Geithner.
You are probably a nice guy. He's a fantastic guy.
Really nice. Really nice.
And he's really nice oriented to go back to New York on.
You can come back, Carol. Stocks were higher across the board
earlier, struggling, though, to gain traction as we get later into the
session. The S&P 500 did briefly move past 50.
200 was up around 4/10 of 1% before saw a bit of selling late in the afternoon.
Right now, the Dow higher by 1/10 of 1%, the S&P 500 higher by about the same,
while the Nasdaq is lower by more than 1/10 of 1% yield on the ten year 4.46%.
Some breaking news just in the last hour or so, the U.S.
has revoked export licenses that allow Intel and Qualcomm to supply Weiwei with
semiconductors, This according to the F.T., citing unidentified people
familiar with the matter. The US Commerce Department's move
affects the supply of chips for Weiwei's laptop.
Shares of Qualcomm took a leg lower on the news, down by half a percent right
now. Also weighing on the S&P 500 and NASDAQ
100 today. Tesla shares lower after investors
learned that the company is facing increased federal scrutiny of autopilot.
The National Highway Traffic Safety Administration is looking for
information that will help determine whether the company's biggest ever
recall made its driver assistance systems safer.
Nissan opened a recall query last month after 20 more crashes occurred in
vehicles Tesla tried to fix with an over-the-air software update in
December. Shares also did move lower after we got
some data from China that showed shipments from its Shanghai factory
dropped 18% year on year in April. In other news, Palantir shares having
their worst day in nearly two years, even after the company boosted its
revenue forecast for the year. Expectations were high.
Going into the print, Palantir shares down by close to 15%.
We've got much more coming up live from the Milken Institute Global Conference
out there in Beverly Hills, California. Don't go anywhere, because coming up
next, Katie Kotch is going to be out there in Beverly Hills.
She's the CEO of TCW. She's going to be joining Romaine
Bostick and Carol Massar at the Beverly Hilton.
This is Bloomberg and. Welcome back to our live coverage of the
Global Investment Conference at Carol Massar alongside Romaine Bostick.
And we are just watching everybody kind of travel again to see magic.
So we'll see what he has to say at the event.
I do want to remind you that a recent Bloomberg News morning consult polling
voters in seven battleground states this month showed that more than half expect
the economy to be worse by the end of the year.
And at least half of voters say they expect the inflation rate and borrowing
costs to rise even higher than they are now.
But we're going to get another read on inflation next week.
High prices are causing some consumers to change their spending habits.
Fareed, on that and more, we caught up with the CEO of Whole Foods, Jason, that
vehicle. We talked with him earlier.
Here it is for me.
One most important areas for us to think about is how do we protect our food
systems into the future and making sure that our future generations can enjoy
the products that we know and love today.
And that's Whole Foods Market. Sounds kind of dire.
What what? I mean, what do we need to protect?
Protecting supply or quality or both? Yeah, both.
You know, one of the things that we're currently in a situation of is our the
nutrient density in our soil today is not in a state to sustain itself for
future generations. So the products that we know and love
are at risk of not being available for future generations.
And so for us, this Whole Foods Market, one of the things that's been very
important since our very first store opened in 1980 is helping to support the
environment and areas like regenerative agriculture, which is something really
passionate about today. Going back to our very roots, we led the
industry in organics and what we want to do is continue to make sure there's
awareness for our consumers that we have to protect our resources to ensure that
our food systems are protected for future generations.
Do you know, Jason, as a farmer at the age of seven, I believe, doing gardens,
I started gardening, yeah, when I was seven.
I was actually doing a lot about that. But you also know that trying to do that
on a national scale is hard. Right here we got a lot more local,
don't you? Not necessarily just local, but a big
part of this is making sure that we're doing the work to protect our soil and
ensure that it can support regenerative into the future.
And one of the other things that I think is really challenging for customers is
understand the difference of various climate friendly agriculture practices.
How are you doing that? Are you working with your suppliers?
You're working with the farmers? Are you going in directly and doing this
yourself? Yes.
So the reality is it takes an entire network of stakeholders in this space to
help support this work. First and foremost, we're working with
our suppliers who are working with their farmers to help support this work as we
led organics since our very first store. This is something that's really part of
our DNA and being able to work upstream in supporting processes that can help
take these practices into fruition. It's interesting.
Like organics, they're starting to mark things, right, that are, I think,
regenerative farming. They're starting to let consumers know
that when they buy something, that that's the way that one of the things we
have to ask you is how is the consumer doing and what is once again, the
consumer policies? Yeah, So I think the consumer right now
is wanting a balance of quality and value.
And that's something that we've been really focused on as Whole Foods Market.
One of things that we're really proud of is the work we've done investing in our
price points so we can be accessible to all customers.
Since being part of Amazon, this has been a key initiative for us to help
improve our price points. Recently, we've done a lot of work in
helping also amp up the number of promotions that we're doing.
We know customers right now are looking for value, so we've increased our number
of promotions, made investments in areas like our opening price points and like
our 365 items. So customers have a great opportunity
for value and quality at the same time. Talk about the private label, the 365,
because that's been a big initiative in bringing kind of that average price
point down in the stores. Yeah, absolutely.
So for us, this has been a key way to connect with customers.
We've continued to expand the number of items across all different parts of our
store and also providing choice. We have 365 can have conventional
products as well as 365 organic, so giving customers choice and options
along the way. And that was Whole Foods CEO Jason
vehicle earlier today. Well, yesterday, a deal between PNC
Financial Services Group and the TCW group I'm partnering to develop to
deliver, excuse me, private credit solutions to middle market companies,
private credit. There's a lot going on.
Continues to be great to be talking again.
Katie catch actually CEO of the Global Assocation from TCW, which manages
approximately 200 billion in client assets.
We've been busy. Thanks for having me on.
Yes. Tell us about this deal with PNC.
Yeah, sure. We're just by background.
You mentioned TCW as a $200 billion global asset manager.
We were an early and trying to private credit that is led for us by the
extraordinarily talented Rick Miller, our CIO of Private Credit, a 23 year
track record in that asset class of conservative lending that's allowed us
to outperform with a low loss ratio. And we're really proud to be partnering
with PNC, which is, of course, one of the leading U.S.
financial institutions. They're ranked fourth and middle market
lending. They have an extraordinarily talented
and tenured management team, a strong balance sheet and great client
relationships. And this has been a partnership.
Just answer a question how it came about.
It's actually 15 years in the making, so we've worked together very closely for a
long period of time. Over that period, we've done 40
co-financing. And it is also true that they are a
number one fund finance partner, which means that actually PNC had to
underwrite TCW and our capabilities in order to provide leverage to our fund.
So this is a very, very strong partnership.
And I wanted to just end by saying that there are this is different than other
partnerships that have been announced. And this strong relationship we have
with each other has allowed us to create something really differentiated for
three quick reasons. The first is that it's very middle
market focused. So we're going to target loans to
companies with about 15 to 75 billion in the door.
The second is that it's a shared investment approach.
So we're both putting in investors to this partnership.
We're going to work together on the underwriting.
And the origination, of course, will be shared by Rick.
And that's because we have a shared credit culture of conservative lending
that allows us to do to share the investment approach.
And then finally, it's shared economics. We're targeting two and a half billion
dollars of equity this year, and it will be strong contributions both from PNC
and from TCW and our affiliates, so that economic alignment aligns our interests
with PNC and also, of course, with our clients.
So K targeting two and a half billion, how big could this partnership that we
think this partnership could expand significantly over time?
And that's important because private credit managers and banks, we think
those partnerships with us and others will continue because banks are under
some regulatory pressure and private credit managers, they have the capital
to allocate into loans and banks have great origination capabilities.
And those two things are going to have to cooperate so we can continue to put
credit out into the US market what is significantly major.
But I'm not going to give you the exact billions of dollars, but I will say the
double from the initial two and a half or many times actually for our credit
alternative platform broadly, we've already double the use of that platform
over the next couple of years, and we're expecting it to be many multiples over
that. And this is going to play a very
important role in the growth of TCW Alternative Credit Platform.
Carroll mentioned at the start that you've been busy.
Yeah, just deal, if you will, with the conversion of two mutual funds.
Yes. In the air space.
Up a little bit about why. Sure.
Well, first of all, mutual funds in general, we think that they have a place
content will continue to have a place in the market.
Very important part of our business. Still a big part, a very big part of
fees and will continue to be a relevant vehicle.
It is also true that clients are looking at the exchange traded fund vehicle
because of the liquidity, the tax efficiency and the transparency and ease
of trading of those vehicles. And so we are going to convert several
funds and launch new ETF. We did one and I, I do want to emphasize
I am a believer in generative AI. We have been managing our strategies for
seven years. So this isn't something we just launched
because it's cool. It's we saw that transformative
technology almost a decade ago and launched a strategy on that.
We're investing in the technology enablers of AI and also the companies
that will. That's what I'm curious is what is a
portfolio of stocks? If you ask someone else that question,
they would just say, well, Nvidia, maybe Microsoft, that's it, That's on the
spot. We have some of those in there.
So these companies that are driving the technology of AI, but then also the
companies that are the beneficiary and what it's actively managed and it's
relatively focused. And so what we're going to do is shift
the shape of the portfolio as that narrative of AI changes over time.
I do just want to say one thing because I think it's important to be balanced on
these issues. I do believe in the transformative
potential of AI, but it is a story that's going to play out over the very
long term and so a vehicle like this is appropriate for.
People who can take that long horizon. And this is said a lot, but I think it's
a very good reminder. The Internet was also an incredibly
transformational technology, but that didn't happen in year one or two and it
took 20 years. Have you stuck with that narrative for a
couple of decades? And many of our clients have that type
of durability of capital. It was one of the greatest wealth
creation opportunities for the US economy, and so we are excited about it.
But balance and telling people this is a great vehicle, be active, be selective,
which we are. Be with a manager that can evolve with
the narrative, but also be long as. As you know of our investment narrative,
generally speaking. Take the big broad macro.
Katie, what are you seeing right now? How would you describe the environment?
I would say that we are long dispersion. The idea of dispersion across all of our
portfolios, it's really hard to predict this in short increments.
But what I would say to you, whether it's private credit or it's public
credit, we think that the spreads I'm going to talk about this is a little
easier to point to valuations, which are at record types in credit markets, REITs
in their post global financial crisis history, at record types.
That valuation is inconsistent with some of the obvious challenges that we have
in this economy, regardless of whether or not we get a recession.
Let's take the scenario where we've muddle forward and have some type of
soft landing, but rates we all believe will stay elevated because inflation
still pressure that is, could create a credit event, right when rates are this
high. And these companies were already
starting to see stress in certain parts of the credit market, not priced into
credit spreads. So in our liquid portfolios, where we do
take macro views, which is in the pork or plus space, remember that's people's
retirement money. So we're managing that for their
retirement assets over many decades. We're conservatively physician, we're
overweight agency MDS, which is carrying over the index, and we're being very
patient. And eventually this is going to break.
And when it does, we'll lean into those specific credit opportunities.
If, on the other hand, we do get the recession, then we're going to have a
credit event anyway in both public or private markets, and that will create
dispersion. Are you suspicious that the default rate
is in something different than what it is today?
So this is a good point. Default rates are actually where we
would expect them to be in the traditional levered loan market.
They're low and actually went down in the first quarter in the private credit
market. And I'm glad you asked that because we
think that's really masking some serious liquidity challenges in in the private
credit market now. And what we and you so the obvious
question is, is why? Why is this happening?
Well, I would ask first, why is there stress?
The reason that we think there's actual stress that's not showing in default
rates yet is because from from 2019 to 22, these capital structures were highly
levered with the view that rates would stay zero forever.
Right. And that didn't happen.
And now that's taken over and they're under pressure now.
Why haven't the defaults gone up? My answer to you on that is that if you
look at last year, the amendments of these loans were 3 to 4 times normal.
And we don't generally amend loans when things are going well.
So this cannot be extended forever and eventually those default rates will
rise. I'm going to end with just bring it back
to dispersion. If you look at the last 15 years in the
private credit world, the dispersion between the top and bottom quartile
manager is about 15 basis points. This is not high dispersion.
That number could ten X or more over the next couple of years as these default
rates rise. And that's why you obviously want to be
with a manager like TCW that does conservative lending diligence, very
high levels of diligence, very significant underwriting, and we feel
really great about how we're going to manage this environment for our clients.
All right, Katie, we have to leave it there.
Thank you so much that you have done for us.
Katie Price Elite at TCW. I took the time to talk with us here on
the milk and sage. Yeah.
What's it about? Looking at the markets, bouncing around
here, looking like we're about 5200. We're not going to make it here, but
just a few seconds of trading. But we did pop above that on the S&P
500. A little bit of talk about
sustainability of that rally here. And I think that's exactly what a see
Tim sent back has been keeping an eye on that back in New York, ten us down to
the closing bells. Yeah, just about 30 seconds to go.
We're going to start hearing those bells very soon.
But as you mentioned, stocks bouncing around a little bit on this Tuesday
afternoon. We did hit 5200 on the S&P 500, but we
are not looking like we're going to be closing above that on the day today.
I also did see later in the session, the Nasdaq moved lower from gains to losses
just this afternoon. All right.
As we wait for things to get settled on this Wednesday, looks like the Dow Jones
Industrial Average will close higher by just 1/10 of 1%.
We can go ahead and round that up the S&P 500 higher by just over 1/10 of 1%,
while the NASDAQ 100 Nasdaq composite, I should say, closing down by 1/10 of 1%,
seeing a little bit of outperformance like we did yesterday on the Russell
2000, that higher by close to 2/10 of 1%.
Using the IMF function for the S&P 500. We can see the different areas of the
S&P 500 that did move higher or lower today, led by materials, materials,
utilities and consumer staples, materials higher by more than 1% today.
Consumer discretionary. Rounding out the bottom lower by half a
percentage point, as is information that technology.
I do want to talk about a couple of the gainers and the decliners on the day
today, starting with Apple among the best performers in the S&P 500 today,
higher by more than half a percentage point, up 4/10 of 1%.
This after the company announced a larger version of the iPad Air aiming to
reinvigorate their iPad lineup. It's been a couple of years since
they've gotten an update to the iPad. This is the first redesigned version of
the iPad Pro since 2018. The new moderate model, as you may
guess, thinner, crisper screen led technology also got a faster AM4 chip
that can handle tasks. Also want to check in on shares of
Alphabet because they were higher all day today, though they did move higher
after Google rolled out a new version of its low end pixel smartphone.
It's called the pixel eight starts at $499 comes a year after the seven inch
model. Funny how that works.
It's a faster processor, a brighter screen, also an option for double the
storage and new features for the camera. Starting to get a theme here.
When it comes to new hardware from these companies, everyone's leaning in to A.I.
Alphabet trying to take on Apple and Samsung.
Also, as far as decliners go. Shares of Walt Disney falling the most
in a year and a half after the company reported a not so great outlook for
growth in streaming subscribers in the current quarter also said that visits to
theme parks are expected to moderate from peak post-COVID levels.
A reminder, Bob Iger is back and he's in the midst right now of a years long
effort to reorganize Disney in the age of streaming, as the company does lose
subscribers from its cable programs. He's been under pressure from activist
investors. He's aggressively cut costs.
He's propped up ESPN and pumped new life into Disney Studios after some box
office misfires. Also checking in on shares of Palantir
to the downside today by the double digits, having their worst day intraday
in nearly two years. This after the company boosted its
revenue forecast for the full year. Expectations were high.
The stock did triple in the past year, it was up around 40%.
Going into the report, which came after the close yesterday.
Palantir's roots are in government sales.
It develops software and analysis for companies and government agencies.
The company CEO, though, said demand from U.S.
companies for its software now drives most of the business.
We do have a lots of coming after the bell.
We have lots of earnings. I'm going to bring those all to you live
as they do come across. Carol and Ramon, back to you.
At the Beverly Hilton. All right.
We continue our special coverage here from the Beverly Hilton.
And as the titans of private credit circle, the hallways here of the Beverly
Hilton, the legends of private equity. They want to remind you they haven't
gone anywhere. And if anything, you've actually
graduated Carol Massar to the next phase of growth.
At least that's the view of our next guest, who says he has now evolved into
a, quote, form of business versus just origins as a form of finance.
And that actually lays the foundation potentially for better returns through
building businesses and governance rather than just leverage and risk.
Steven Chlumsky co-founded Goldman's original private equity group back in
the eighties before branching out on his own in the late 1990 with New Mountain
Capital. Please to say he joins us here.
Definitely a legend in the business. Great to have you here.
Thank you both for having me. Let's talk about this idea of the
evolution of the and the idea of a form a business like you're this so much.
This isn't about cutting checks anymore. Maybe it never was, but it's much more
now about the hand-holding, about the business building.
Yeah. You know, I'm one of the original
private equity people around. And you said I came in 1981 when the ten
year Treasury was 15.8%. There was lots of inflation, and it was
about leverage in those years. 40 years later,
there used to be 20 private equity firms.
Now there are 5000 private equity firms owning 30,000 companies, employing 12
million people. And the best private equity firms do
have all the advantages of being like a family business where you're close to
the ground, to shareholders. But all the scale of a big organization,
you're not under 90 day reporting. You can get the best managers who build
the businesses. So, you know, the real success is it's
not what's what interest rates 25 basis points higher or lower.
It's how you took the company from good to great.
And that's what we try to do and that's what I think other good firms try.
What does that take your heart? Let me rephrase that.
What are the companies themselves asking for from someone like a new mountain or
any. Yeah, you know, we buy we have mega fund
strengths, but we buy midmarket companies.
So let's say it's a $500 million value business.
The founder's retiring. He may never have done an acquisition,
may never have gone global, may never have thought about a I may never have
thought about Salesforce construction. So we take businesses that are already
safe and sound. We've never had a bankruptcy or miss an
interest payment, but the key is building them up to a much, much higher
likelihood of bankruptcy. Have you ever had a bankruptcy?
Never miss an interest payment. And we have now a team of 250 people at
my firm and many, many more affiliated with the firm.
So we we can put in large sets of operators to assist the management at
the company. And that's what it's about.
You don't want to be good just in one interest rate environment and bad in
another or good one, you're in bad another year.
It's all weather business building. I love how you came out of the gate and
started because we keep saying, Oh my gosh, I've got to go back to like zero
interest rate environment. That's the abnormal part of it out of
the gate. And so 15, 16, 17%, you know, talk to us
about the constructive conversation. We all need to be happy about today's
rate environment, what it means for the investment landscape.
Yeah. You know, look, when rate at any given
interest rate, private equity functions fine, as rates go up, things get
cheaper. So it's easier to buy the new company, a
little harder to sell what you bought before rates went up.
So but then it stabilized. So when you actually go back to the
early eighties, when interest rates were crazy high because of stagflation, that
was the best time to buy companies because they were so cheap.
And my firm actually had a very active year, both buying and selling last year.
And I think we got some of the best things you've ever bought in the last 12
months when some other people were out of the market.
So it's you're always buying and selling as mature a private equity fund.
Well, tell us about what you are buying or what's of interest at this point.
I'm blown away that never, you know, finally bankruptcy.
So what is kind of the secret special sauce, if you will, in terms of what you
look for in a company, what you are committing to?
Yeah. Yes.
What we do is we pick sectors proactively that are not cyclical growth
sectors like life science supplies, health care, I.T.
So, for example, years ago we had a business called the box Board that
started it to 90 million. It's now worth about 20 billion.
It's second biggest to Thermo Fisher life science supplies.
So a year ago we did a big carve out for Perkinelmer where we bought all of their
life science supplies, businesses, their their legacy, crown jewels and
spectrometry and chromatography and very complicated carve out.
They wanted certainty in a bad market and I think we can add a lot of value to
that company or we just we have a lot of good success
with a company called Citrin Cooperman in Accounting.
We're in the process of buying Grant Thornton, which is one of the seven
largest accounting firms. Wonderful firm.
We just bought BMI, which represents 1.4 million songwriters from Taylor Swift
and everyone else. It's a business service that collects
the royalties and we think we can have. A lot of technology and growth to
improve it. So we're in these industries.
We have my firms now. I've been around for about 24 years, so
we've gotten stronger and stronger in these spaces.
Yeah. And and we don't depend on debt, so we
could just get some good buys or a common thread with a lot of those
companies you mentioned is kind of in a similar, not cyclical nature.
Totally. So that is the core strategy.
We have two big ideas in my firm, we call it defensive.
And it changes as the decades go on. But what sector can grow non second
seeing high recap high barrier to entry for the next 5 to 10 years.
That's where we focus. We have teams working in these sectors.
And then when we find a nice safe company, we then spend years building it
to get the return. So and that's what we do.
All right. I have to leave it there.
Great to talk to you. Great to have his perspective here.
Really all one of the titans in private equity.
I'll see you with plenty of new amount in capital here.
And it really to I when you get a chance to really ask them about the interplay
now that you really see between the private markets and the public markets
which to a certain extent it's intensified.
I'm not sure who's more dependent on you now.
I don't know. But I just think that companies in
general just have so many options in terms of their either financing or
credit needs at this point. And it really gives them, I don't know,
potentially, you know, some different lifelines, if you will, and pursuing
your business. So I just think it's fascinating the
optionality that's out there. All right.
We're going to continue our conversations here from the milk and
sage. And we have some breaking news out going
on to send it back, back in New York. Tim, take it away.
Yeah, A reminder that we're still in the midst of earnings season.
We've got Lyft earnings crossing the bell crossing just moments ago.
Shares are surging in the after hours. I do want to start with Reddit, though.
Higher by more than 15%. We're seeing shares move higher because
they reported revenue for the first quarter that beat the average analyst
estimates. Revenue come in at $243 million versus
the estimate of $211.9 million. Daily active users, a key metric here
for Reddit coming way past expectations, 82.7 million versus estimates of 77.35
million daily active users. Remember, this is the company's first
report. As a publicly traded company, though,
investors did get a good idea of the financials when it did its roadshow.
I do want to move on over to lift, as I mentioned, Lyft surging in the after
hours as well, up more than 5% right now is up as much as 10% a little earlier.
First quarter results financial guidance beat investors expectations.
GROSS bookings jumped 21% to 3.69 billion for the first three months of
the year, surpassing analyst estimates of $3.59 billion on average.
The number of active riders came in at 21.9 million, and that also exceeded
expectations and it grew at the fastest pace, going all the way back to 2022.
As far as that guidance look also came in solid for the current quarter.
The company does expect to post approximately 4 billion to $4.1 billion
in IT gross bookings just above what analysts expected.
Different different side of things for the videogame publisher down after it
forecasts net bookings for the first quarter.
The guidance missed the average. Analysts estimate the company sees
adjusted earnings per share at $7.05 to $7.85.
The estimate was for $7.52. Still, investors in the after hours
sending the stock lower by about 4.3%. Carol, remain.
Back to you at the Beverly Hilton. I will stand by here and keep watching
for the latest when it comes to those numbers crossing.
All right. So appreciate it.
Tim, stand back. Back there at Bloomberg headquarters in
New York City. Well, City CEO Jane Frazier was here at
Milk and she expects the equity rally to continue.
That was among her comments at Milk It yesterday appearing at a on a panel, a
wide discussion about the market environment.
Another member of her team also at Milk. And with us is Andy Serwer.
He is head of wealth management over at Citigroup.
And we're delighted to have him join us. Hey, great, Terrific to be here.
As you said, there's a bullish sentiment here at the conference.
So it's great to hear. Are you see that among your wealth
management clients? Give us an idea.
Are we see we see people very front footed in terms of looking for
opportunities in the markets. Obviously, you know what's been
happening in the US market as attention around the world.
Our business is very global. We see a lot of discussion, of course
about the US election, but honestly I don't think it's really driving investor
decision making. They're looking through that to just the
underlying fundamental strength in the US economy and value they see in our
equity markets even after this run. And you get into some specific
investments at the wealth management area that clients really are interested
in. You know, we talk about private credit,
here's another year, feel good. We talk a lot about private credit.
AIG is once again dominating the investment themes.
I'm curious what those clients are asking for.
Well, you put your finger on it. I mean, the Covid number one topic that
our clients in the private bank around the world are
the real change makers in the world. They're very high net worth individuals.
They've got a their investors with great acumen.
So the focus on alternative investments is at the top of their list.
We happen to have one of the strongest alternative investment teams in the
market, and so a lot of firms here at the conference are ones that we work
with. The clients in the US equity market,
Health care is is a topic that investors are very focused on.
What specifically in health care. So just it's very it's very broad based
because when you think about where a I and so many other technology trends are
going to have their secondary and tertiary impact, it's going to be in an
area like health care. So I think we're entering an era of
innovation in health care, which is going to be mind blowing and investors
see that they understand it. We think it's a very durable trend and a
place people in front of capital against it are up.
Coming up, talking about we do innovation in how you talk to them
exactly about that. I do want to ask you, though, I've heard
you talk in the past about getting sort of a larger sort of volunteer, if you
will, out of existing clients. What gets you there?
Well, I mean, hey, with with our clients, as you said, Citi's business
today, it's an outstanding business, but we've got a tremendous opportunity with
our clients to do more with them. And so some of that is is getting to
know them more deeply, trying to connect the dots in situations where we're a
corporate banker or an investment banker with a family office or otherwise
wealthy family and introduce the investment capabilities in city.
This is a a powerful and broad based investments business.
It's not just alternatives we were talking about earlier with some of the
industry's most sophisticated capital market solutions.
We work with asset managers across the traditional space, and so a lot of this,
honestly, is just ensuring that our dialogue is as broad based as possible.
We've got many clients who know us for our banking strength.
Yeah, and our sophistication as a lender.
We're reintroducing them to what we can do on the advice.
But with regards to the wealth business, I mean, how do you sort of improve the
performance? I mean, the last couple of quarters have
disappointed to a certain extent, and I know that's just kind of the short time.
But as you look long term here, what gets gets investors a more consistent
return? Well, I mean, from a
from a shareholder perspective, I mean, this business, we've got a very strong
focus on what the business model should be in wealth manager.
There should be a business with pre-tax margins approaching 30% returns in the
twenties and strong organic growth. And so we're setting out in a very
disciplined way to deliver that. First up, you know, this business has to
be more fit. We're taking a lot of topics that
honestly are hobbies and we're sunsetting those or readjusting the
expense base in the business. And that's something investors are going
to see. You know, in this quarter.
We're shifting the focus of the businesses to your earlier question
around the investment solutions and investment advice we can offer to
clients. We can't just be our client's lender or
their banker. We need to be their investment advisor
and we're elevating the the quality of the experience that we offer clients
around the world. Heavy investments in our digital
platforms focus on the training of our people in personnel, more disciplined in
terms of and intensity around how we cover clients.
And I think that all adds up to a powerful proposition.
And you're going to see us unify this business around the world in a way that
ensures that regardless of where you're touching sitting, you have access to the
best in class capabilities that this firm represents.
But there's a lot going on and a lot of competition, too, out there, that's for
sure. And that's why that's why the power of
this brand and the strength of the client franchise.
You know, our challenge is different than most.
We're not out trying to. Our clients.
First and foremost, we're trying to do more with our existing clients.
Makes sense. Andy, thank you so much.
Every day, of course, of Citigroup, folks, it is all about private credit
here at Milken. Investors and bankers expect private
markets to keep growing even after rapid expansion in recent years.
Here's what some of our guests have said about the private credit market.
We think credit is interesting. I think as the private market has grown,
it's become a very real competitor to the liquid market.
It has been an excellent time to be in the space, and that's because of one
where base rates are now, spreads are good, but when the base
rate is at five and a half percent versus 1%, that obviously makes an
enormous difference in terms of yield. And second, I would say the willingness
of companies to engage in a private credit solution now compared to five or
even ten years ago. It's matured.
And I think that's a good thing. When markets mature, there's many more
participants and and so there's less, you know, one sense, there's less
inefficiency. The question we like to invest over 34
years and things are inefficient, but there's plenty of opportunity
in the world right now. And I think some of the stability we've
seen in the capital markets and interest rates and so forth is enhancing that.
Historically, I think people have thought of the public markets as safe
and private markets maybe as riskier. When we look at the potential nature of
the public markets, what we realize is that they are safe and risky at the same
time that the private markets are as well.
And it's really construction of the portfolio that matters.
All right. Some of the great voices that we've had
here on the Milken stage. And we continue those conversations
right now with the focus on investment banks, which have been signaling
upswings in two business lines that don't usually take off at the same time,
advising ambitious companies on expansions while helping others still
drowning in debt. Now, those simultaneous waves of
dealmaking and restructurings, they've been the talk of earnings conference
calls that firms like Evercore like most as well as Lazard, right?
McGuire knows more about this space than anyone having run Citigroup's investment
banking business for more than a decade before.
That helped run M&A over at Morgan Stanley, as well as other banking roles
at First Boston, Walter Dean, Perella. And for the past year, he served as the
president of the ZAR, the world's largest independent investment bank.
Ray McGuire joins us here on the Milken stage.
Good to have you here. You have a you have a pretty long
resume. I'm with you guys.
This is that's a big time. Is business good right now and the
investment banking world is it or is it better?
You know we we just announced first quarter record earnings in the first in
the first quarter of this year. So the answer is yes, business is good.
And I say that with cautious optimism. There's still headwinds out there, but
we think that the tailwinds are pretty strong.
And so we'll see how this evolved. And you're right to point out that we
have both the restructuring business and eliminate business, which historically
have not worked so much at the same time.
But today we see that it's a little different as the economic backdrop
supportive of that is good or good enough.
The way I would look about that, the economic backdrop is, you know, look at
where Fed rates are today. We think that's going to be higher for
longer with the corporates.
That translates into making certain that they got the right strategic profile,
the right strategy for the asset managers, which are 30 to 40% of the
overall free wallet. We're figured out what they're going to
do. Right.
Many of them are active. Restructuring, as you said, is an active
part of the business, and we expect for both to continue.
Really, it's fascinating year their record quarter.
And then you like cautious optimism. That's kind of a span.
Why why are you so cautious in this environment?
Because you still have some tailwinds out, I mean, some headwinds out there.
So what what next? What next?
Well, you know, interest rates being one.
Yeah, the interest rate, what's in front of us today, our interest rates and the
state of the economy, inflation remains sticky.
The Fed is looking closely at the data. That's what's in front of us that we
have to manage. What's ahead of us is what's taking
place do economically and geopolitically.
In there, I'm looking at five different trends that we need to manage.
A.I. is one energy transition another.
The globalization or reshoring is another.
What takes place with cybersecurity is another.
And then what takes place with Asia. The largest growing part of the American
demographic is 65 and over. And if you look at the American story as
the the the kind of the anchor to the global north, and then you look at the
global South, we're the largest growing population.
It's 30 and below. So we have to take all those factors in
consideration. As you think about the trends that are
taking place, that distinctiveness, one distinction between a trend and between
a cycle, that's a lot. That's it's certainly a full plate,
right? And so I get the classic optimism is
it's something that as we kind of deal with all of those and some of the
disconnections we might see play out in the marketplace, does it ultimately lead
us to some downturn at some point to kind of find our way through it?
I guess I can't see a downturn. I can't I can't tell you that the
headwinds you that's from the tailwinds are probably a little stronger than the
headwinds, but they exist. So I can't predict a downturn at all.
I'm looking at where the market has traded.
The S&P for the past 15 years is now traded at, you know, one of its historic
highs for the past 20, 5000 years. That close to 14%.
The dollar is the strongest it has been in 15 years.
I look at that and I look at what's going to take place cross border as an
example. The North American wallet still remains
the largest, notwithstanding some of the headwinds.
I think the tailwinds are pretty constructive as well.
And do you think you have a good read, though, on the economy?
I was listening to the Pat, you're on a panel earlier today and I was listening
to some of the comment that you made with some of your colleagues made about
the state of the U.S. economy specifically, and how what we're
seeing in the data doesn't necessarily reflect the true pain that we're seeing
on the ground. How much does that matter that there is
a disconnect between some of that top line data and maybe what's happening?
I mean, you know, the markets have been able to perform, notwithstanding what we
see with inflation. And I've just cited to you what's taken
place over the past 15 years. You look over the past five years,
you're going to see commensurate data that suggests that at least the markets
are performing clearly some volatility to.
If you look at the VIX index, up and down, not as high as it's been doing the
great financial crisis, but you know, it's up and down.
That's. We need to pay particular attention to
what the Fed is doing. That's what's taking place on Main
Street, which is inflation, which is the value of the apartment up or, you know.
Yeah. Or doesn't it.
Real. That's real.
So we can't ignore that. And as you think about how you manage a
portfolio of assets, either corporate assets or assets that exist in the asset
management world, you've got to be mindful, but you've got to be mindful of
the implications on valuations, if you will.
And we don't see that that that's that togetherness yet, at least with some of
the asset managers. Well, it's interesting you say that
about valuations. All right.
So I don't know when you look at deal activity over the next 6 to 12 months,
what are you anticipating? You know, we have we have pretty good
momentum today, but volatile. So our expectations that you're going to
continue to see strategics, they need to grow.
They need to remain competitive. And if you see a lot of the activities
taking place by the strategics, including mergers and acquisitions,
great stock transactions, and the cost of financing is pretty high.
And I don't think the market has actually digested that from the
standpoint of using cash or borrowing capacity as currency.
But the rates are so high, we are seeing a lot of the currency being used in
stock. You can benefit from that.
It's the appreciation, the value of the combination plus the benefit from
synergies. All right.
A colleague of mine, you got 20 seconds. You going to run for mayor again?
Oh, gosh, you went there. I am quite comfortable.
And, you know, my objective today is to do whatever I can to add value to Lazard
and the Lazard shareholders and be a partner with Peter as we set the
strategy out. Now, objectives, go execute.
All right. Well, now, that was a good way to go.
And she actually stole my last question, which was going to be about it.
No, not about being mayor, but about his involvement at Studio Museum of Harlem
Chair City Museum of Harlem and the Whitney.
I want to talk about arts with him, but she took it away from me.
Ray McGuire, guys, president of Lazard, now really off a lifetime of experience
on Wall Street. And Carol, when we talk about his
perspective and you contrast that with the respect of perspective for some of
the other folks and talk to play in the world of venture capital as well here.
Now, be interesting to see how they diverge, if at all.
Yeah, absolutely. And on that, we've got a great guest
coming up. We're going to see what his view is.
Victor Post, the founder and CIO Strategic Value Partners.
See what lens he is looking for and whether he's running for mayor.
I don't know. Maybe I'll ask.
This is Good morning, everyone. We're live in Beverly Hills.
We'll be right back. And I
am. I.
Welcome back, everybody, to our live coverage of the Milken Global Investment
Conference here in Beverly Hills. I'm Carol Massar alongside Romaine
Bostick. Now, at the beginning of the year, our
next guest said there's more pain coming for commercial real estate as the
unwinding of years of easy money begins taking its toll on the sector.
He is Victor Khosla, founder and chief investment officer of Distressed Debt
Specialist Strategic Value Partners. They are an $8 billion global
alternative investment firm focused on distressed and deep value opportunities.
Joining us right here at Milken. How are you?
Very well, thanks. Thanks for having me.
Well, it's great to have you back. So distressed, how distressed are some
of the assets that are out there? You know, we are today.
It looks like a wonderfully sedate world, right?
High yield spreads are 350 basis points. Technology, equities, stocks are off,
right? Yeah.
So that's awesome. On the face of it, it's like docks
that's holding its legs.
They're just like, Oh, yeah, you know, so what?
What people miss a little bit. There's $4 trillion of private equity
assets invested in the ground. That's $5 trillion of people they have
borrowed to make. And where we are today.
High interest rates, a sluggish economy outside tech and Europe near
recessionary, oh, more of maturities over the next three or four years.
So I think what you miss is, oh, boy, there's a lot there's a slowdown.
You kind of want to. All right.
So when does that I'm looking at our live blog here on the Nielsen
conference. And that's one of the things that they
highlighted that you see the companies hitting that debt maturity wall.
So when does it start to come undone? It started.
So, you know, when we look at when you look at what we do, if you use our
sizing as an example. Right.
Starting about 12 months ago, we started to speed up the pace of investing.
But so this is not like it's coming next year or something, because what happens
is the maturity long term is there's very
little and 2024 it 2025, 26, 27 is six 700 billion a year, six 700 billion a
year. And you've got to address it early.
Right. So the maturity while people are
addressing it, it started. But you've seen some of the creative
tactics now that we're starting to see some funds take to make sure that we
don't see that default right now, whether it's doing or selling to another
fund, just peeling off the stake you're having.
I wonder, like, what do you make of that in terms of the sustainability of that
strategy and protecting those companies until in theory, we get to the other
side of whatever we're going through? And it is, you know, private equity
investors are really smart and they wrinkle.
Yeah, well, vaguely.
But I think when we look at that, well, how big it is, our view has $500 billion
of what we would call adventurous financing.
Yeah. Which is required, which will be that
all our help push it off. Yes.
But they'll pay a pretty price for pushing it off.
Right. And there's 300 billion or so we
estimate, which is going to be just like I give up.
And just to be clear, the values we're talking about to those have been
inflated because of some of these new agreements and some of these new
extensions. But it gets to the question, though, do
we need, say, like a recession or some real huge economic shock to shake this
out? If not, if we don't get that shock, you
think this will still play out in your favor?
You know, our view would be they don't really expect some headline grabbing
recession. That is a chance that is tail risk in
this economy. Our base case in the United States is
it's a little bit of a slog. Yeah.
And so we're not expecting oh, my gosh, there's a credit market crash or
anything like that. But just to deal with what we have, you
know, for somebody like us, we've got a broad set of skills, right?
We don't just buy debt at $0.50. We have the operating skills to fix it,
to take control of a company, to manage it better.
But somebody when we buy assets we have we own operating platforms to own the
asset and to fix it with somebody like us.
It's really a. Would you want to own commercial real
estate assets? You know, we've been looking the most
interesting investments we probably made in commercial real estate, the most one
of the two best investments we've ever made.
An offer was in commercial real estate two or three years ago.
But but what I would tell you as last ten months, we are seeing that slide.
We are in the process of making our first ones.
But, boy, you've got to be careful. You know, when you look at these office
properties. Yeah, those $2 trillion of office
mortgage debt in the US and Europe, but you don't know is the occupancy.
Hey, it's 40%. How much money does it take?
Yeah, you've got a problem. You've got to be careful.
You got to do your homework, that's for sure.
All right. Thank you there.
I think they're both over at SBP and it gets to this idea of of where those
opportunities are. And we talk about both sides of the
equation, the folks that might be forced to sell them more by the folks who are
there to buy. When talking with Victor or someone like
him, you know, just a reminder, two sides of the equation, like there is
something a distressed asset to somebody.
That's a good opportunity. But you've got to really know that asset
that you're buying. Yeah, I think I just said that.
That was a good point. Yeah.
Carol Massar Romaine Bostick, you're live at the Milken.
Say just talk is back to New York right now.
Okay. Listen, Nick is standing by.
Tim, I got Carol here. It sounds great coming from either one
of you or both of you. It just doesn't matter.
Hey, we're still getting earnings crossing.
We're in the midst of earnings season, certainly.
I do want to check in on shares of Rivian because they're bouncing around
in the after hours right now. They were lower, but now higher by.
Let's go ahead and call that one point. 4%.
The company did post a wider than expected adjusted loss of $1.24.
Estimates refer a dollar 15 revenue did come in above estimates at 1.2 billion
versus estimates of 1.18 billion. They delivered 13,588 vehicles,
surpassing estimates of just over 12,000.
And also for the year forecast, they see CapEx to 1.2 billion.
Estimates were for 1.66 billion. So a pullback in CapEx, they're now
seeing shares move lower, higher, unchanged.
Investors trying to make up their mind ahead of this earnings call.
Reddit shares that direction is certainly clear and that direction is
higher, up 17%. The company reported quarterly sales
that topped analysts estimates. Remember its first earnings report as a
publicly traded company. Revenue increased 48% to $243 million
from the most recent quarter, above the estimate compiled by Bloomberg of $212
million. The company sees second quarter revenue
of between 240 to $255 million, again surpassing estimates of 228 million.
First quarter daily active users came in above estimates at 82.7 million remain.
Back to you out there in Beverly Hills at the Beverly Hilton.
Saudi Arabia. All right, guys, we're back here.
I have the milk on stage here at the Beverly Hilton.
Let's talk about Capitol Hill. But is homegrown right here in Los
Angeles. And it's probably best known for its
prowess in picking stocks. But as of late, it's been putting up
some of the best results among actively run bond funds as of last year.
Manager of two and a half trillion dollars in assets had amassed almost 500
billion in fixed income holdings. That's more than double what they were
less than a decade ago. It's EL, but it's way past fixed income
rivals or still in during siege from cheaper index funds and rising interest
rates. Here to talk about the state of the
market is Mike Gitlin is the president and chief executive officer over at
Capital Group. Great to have you here, Mike.
Good to see you again. Let's start talking about the bond side
of the equation. We're going to stocks in a second here
and talk about the evolution of it, because the growth there has really
picked up in recent years. What was behind that?
What was behind that really was investment results.
Our team tried to generate a predictable pattern of returns.
We have a really strong team. They were able to do that over one,
three, five, ten years, and clients appreciated that journey.
You know, clients in the bond market, they don't want a wild ride.
And the team was able to generate those kinds of outcomes and the assets
followed. You were working your team was working
with financial advisors to push this as well.
You had new products, ETF products too, right?
If I'm correct, why don't we launch a bunch of new investment services, mutual
funds, ETFs, collective investment trusts, whatever the vehicle of choice
for the client was institutional, separate accounts.
But the real difference was beating benchmarks after fees.
If you look over five and ten year periods, 100% of our bond strategies
beat the benchmarks net of fees. That's a good story to tell for our
clients. The fixed income environment today, is
it like a once in a generation event in your ear?
I don't know if it's a once in a generation event.
There is a real opportunity, though. If you look at the bond markets right
now, you can generate anywhere between 5 to 7% yield without taking a tremendous
amount of either interest rate risk or credit risk.
It's a heck of a lot different than it was five and ten years ago when we had
zero interest rate policy. So we see a lot of interest in the bond
markets. Even year to date, we have about
$1,000,000,000 in net new flows per week into our strategies.
I actually think that's going to accelerate once we get the first Fed cut
and people can get real income. In the previous decade, the income
wasn't in fixed income. Yeah, now it is again and there's a lot
of opportunity. Did you think we're going to get that
first Fed cut, though, soon this year? Look, I think we're looking for the
inflection point, not the month. I think later this year we'll get our
first cut back. And I think that's where you have to
lean in and start being comfortable owning duration again in bond
strategies. What her clients in 2022 was earning
duration rates went up so fast. Yeah, it works the other way around too.
So as rates get cut, clients are going to benefit not just from income but from
total return by owning duration. So as we get that first rate cut,
there's going to be a lot of opportunity in bonds and also cash as an instrument.
Cash is going to decay in value. Once you start getting rate cuts.
That's just around the corner. How much are you still seeing in cash
right now? So right now, globally, there's
literally $10 trillion in money. The baseline for that is about 3
trillion. So there's about 7 trillion of excess
cash sitting on the sidelines. That cash will come into the bond market
before it runs into growth equities. So that's what we're already starting to
see that kind of flow. And again, I think that will accelerate
as you get to the end of this year and into 25.
Well, explain that why you think that line will flow more into fixed income
rather than into growth. You know, if you've been hanging on to
cash and you've been comfortable getting 5%, you don't necessarily leap directly
from cash into more risky assets. You tend to take a little stop over in
fixed income where you're generating better return than cash.
But on a risk adjusted basis, a little bit more a calmer environment.
So I think it will stop there. Ultimately, we'll see equity flows.
Yeah, and we're beginning to see some of those as well.
And I think you'll see the first stop into the bond market with all that money
that's sitting in money market accounts, cash accounts right now, that level that
you sign potentially globally, whatever it is here in the U.S., it's been at
that level now for a while. So, I mean, it's got to be more than
just the Fed cut has a shake set up and get that money out.
You know, it's it's market volatility, it's concern about elections.
It's concern about geopolitics. All of those things when you're getting
paid, 5% may convince you to sit on the sidelines.
Right? Why not?
And that's what some people are saying. The reality, though, is once you start
getting these Fed cuts, that 525 cash yield goes to 475 and 450 and for 25 and
at the same time different you. Have this opportunity to generate better
income and total return in active bonds. One last question, just quickly.
You said money is starting to go into the equity side.
All that cash that's sitting on the sidelines.
Where in equity is it going? You know, in equities, we're going to
see a broadening a broadening beyond a very narrow benchmark in the S&P 500.
You're going to see a broadening to small and mid-caps into dividends into
international stocks where MSCI Ex, the US over the last 15 years has done half
as well as the S&P 500. A lot of opportunities outside the U.S.
So I think you'll see that spread around in a lot of different areas.
So when we talk to you a year from now, we're going to be talking about the full
on embrace here. You got the fall of the equity, you
know, equities and enduring a long duration of cash.
Too much money in cash. Yeah.
All right, Mike, got to leave it there. Great to talk to you.
Thanks for taking time for us. Mike Gitlin, who leads the Capital Group
and always like to talk to folks. I hope you get like a homegrown company
soon here in L.A. So I love it.
And kind of fascinating. All of these kind of alt investment
strategies, private credit that we've talked to, just kind of really get a
good view in terms of what's going on in fixed income and also a little bit on
the equity side. Absolutely.
We've got a lot more to talk about. We're going to take a big pivot come
out. And I know this is a topic near and dear
to your heart. Yeah.
Dr. Ali Rezai, he's director of the
Rockefeller Neuroscience Institute. It's interesting what's going on in
health care. We talked earlier conversations about
innovation, how it could change things dramatically going forward.
That conversation with Romain myself is coming up right here from Milk.
And you are listening and watching Bloomberg.
I am. Welcome back to our live coverage of the
Milken Global Investment Conference. I'm Carol Massar alongside Romaine
Bostick. Well, the annual Milken Global
Conference is dominated by leaders in finance.
You know that another category that always factors into the speakers and
conversations is health and wellness. Our next guest here at Milken was
featured recently in a 60 Minutes piece on the work he's doing at the
Rockefeller Institute at West Virginia University.
We welcome neurosurgeon Dr. Ali Rezai.
He is the associate dean of neuroscience at West Virginia University.
He's also executive chair and director of the Rockefeller Neuroscience
Institute. So nice to have you here with me.
And myself, I have to say, when we were planning for Milken and your name came
up, I'm like, yes, yes. 60 Minutes did recently feature some of
the work you've been doing, but you've been studying the brain, neuroscience
and biology for a long time, many decades.
How much have we learned about the brain and its connection to maybe future
health care treatments? How much more do we have to learn?
So neurological conditions are growing as the population is aging and we have
more people with Alzheimer's disease or addiction, people with ALS, people with
different types of dementias. And we need to find solutions and we
need to work together between industry, public, private sector in the same way
we came up with a solution for the COVID vaccine and to build teams together that
are accelerating the pace of discovery because Alzheimer's is not going away.
Addiction is not going away. We need to find solutions quickly.
Well, the pharmaceutical industry is really trying to find solutions for
Alzheimer's. You have figured out something.
And also with addiction and it's using. I'm going to be very basic, but
sonograms. So talk to us a little bit about what
work you are doing. So we're using ultrasound technology at
this point universally there, when you look at a baby in a room which is out.
Exactly, says one ultrasound looks at a baby in the womb of the heart doing
echocardiography. In this case, we have 1000 ultrasound
hopes that we're delivering the energy that goes through your hair, through
your scalp, to different parts of the brain and converging on different parts
to stop the tremor from Parkinson's to open the blood brain barrier.
Some more drugs can get into the problem area or to reset parts of the brain
involved with substance use disorder addiction.
So the application hasn't been happening before with Alzheimer's, right, Because
the drugs, they don't penetrate quickly enough.
Exactly. So we have the pharmaceutical industries
doing great job and accelerate discovery so drugs are able to go in.
But 99% of the drugs have difficulty crossing the blood brain barrier, which
is in the brain's blood vessels. And that's why you have to get higher
doses of frequency, a lot of drugs. But what is now we can open the blood
brain barrier, noninvasively with an outpatient procedure temporarily to
allow much more drugs to get into the area of the problem.
And that can potentially help really accelerate and make drugs even more
effective and safer. How close are we to that to seeing that
actually deploy? We have other groups have demonstrated
that we can noninvasively, for example, somebody with Alzheimer's, they have had
this protein build up in the brain so we can open the blood brain barrier in the
areas with beta amyloid plaques and then deliver the antibody.
So now the antibody can get in faster because the barriers open and that do
its job. So we found the initial stage that we
can increase the removal of these plaques by 53% more as compared to
antibody alone. Is that going to be effective on people
who are in advanced stages of all time, or is this only going to work on people
or maybe at the earliest? Right now, studies have the early stage,
but this has potential for Parkinson's, for people with frontotemporal dementia
is a lot less and many other conditions. So we think this is important for the
pharmaceutical industry in partnership to now provide a new way where we can
deliver the drugs to the brain, to the problem area, exactly where it is,
deliver the payload and then the process so the drugs can become more safe and
more effective potentially. Dr.
Resi Alzheimer's is one thing, addiction is another one.
And we probably all know someone who's had to deal with addiction on some
level. Tell us about the same kind of
treatment. Similar or I should say, it's also being
effective when it comes to addiction. Yes.
So the same technology is being used as a part of your brain deep in the brain.
That's your addiction set of reward settings.
So this countries have a big problem with substance use disorders fentanyl,
heroin, cocaine, meth. And there are more than 40 million
people with substance use disorder. So the solutions can be effective, but
they're not good enough. Last year, sadly, hundred and 10,000
people die from overdoses and it's only getting worse.
So we need to explore new technologies in partnership with science and industry
to help people with addiction. And the work that we did were able to
show initially that we can deliver the ultrasound beam and reset the brain.
The creating parts of the brain to the cravings are dramatically reduced and
people are now able to deal with the addiction of the cravings better and not
taking as much drugs. So we're very excited about this
opportunity. I do think about here at Milken mind,
it's all about capital, lots of money. Here, invest in going to different
places, capital flows and medicine and treatments and discovery.
Tell us what you are seeing on that front and what more you would like to
see. So what I discuss with you about
Alzheimer's work and the addiction, it was all developed by philanthropy and
foundations giving us a seed capital. And that seed capital raises all the
other sectors coming in, and only with combining philanthropy, the science and
technical expertise, industry, governments all together, once they come
together, magic can happen. And we've already shown that for Covid,
for example, with COVID vaccine. And this needs to also happen for
neurological conditions because many of them, we don't have a solution for
populations getting older and we have people that we need to help.
So we should be very impatient and try to collaborate together to help people
find cures and also find ways to improve the quality of life with the money
that's been raised, particularly the money that's not coming from
philanthropic organizations here. Obviously, there's a demand of return at
some point here. What exactly are those folks asking for?
So once we do the initial work, this is all technology that leads to new
innovations that can build new businesses so you can find new
businesses. Dozens of companies making ultrasound
systems combination therapy will enable the
pharmaceutical industry to have better solutions to deliver the drug to the
exact area. So you may not need years of treatment.
You may need just a few treatments. So this actually will accelerate
discovery and innovation and will lead to more technology commercialization
opportunities. I have to ask you, you know, as someone
who had to watch firsthand on a couple of occasions, people dealing
with dementia, Parkinson's in a very slow process,
watching that unfold. We've seen sort of these potential
breakthroughs that promise that this would be the last generation of folks
really suffer from this. And we've seen we've seen that come up
short. How do we make sure that we don't run
into that again? Right now, we're having some good
solutions at helping people improve the quality of life.
We need to search for the cure, but only, in my opinion, by bringing teams
together with a passion and purpose and an impatience and a sense of urgency.
Because you're right. Alzheimer's is not going away.
Parkinson's is not going away. So we need to bring in more capital from
foundations, from philanthropy. We need more collaboration with the
industry and the private sector. We need government collaboration.
And fundamentally, it's about patient suffering, many patient advocacy groups.
Once that all comes together, we can provide solutions.
We may not have the answer, but we've got to give it our best shot and help
quality of life and seek for two years. How do you think of that?
And kind of going back to where I started, I think there's so much we've
learned about the brain, so much we still are learning.
I mean, when you think about innovation in health care, what will be kind of the
next frontier here we are talking about the diet drugs that seem to be fixing
everything that ails us. But how do you think about it, the smart
frontier going forward? I think for the brain, we need to
understand diagnostics detect Alzheimer's earlier because Alzheimer's
and Parkinson's for 20 years, the brain is degenerating.
You're not aware of it. But what if you can get checked, tested
ten months before you first have the first manifestation of it, or to be able
to treat people better than ever before. So, number one, detect it earlier,
change lifestyles, or participate in clinical trials and have new solutions.
This technology, like the ultrasound it's used for looking at a baby or the
heart, but now it's used to treat brain conditions.
So embrace it, partner, and then we can accelerate the pace of discovery and do
rapid cycle innovation. So I think the future is bright, but we
need more partnership and cooperation. Yes.
All right. Well, listen, so delighted to get some
time with you. I really appreciate it.
Dr. Ali Rezai.
He is, of course, at the Rockefeller Neuroscience Institute.
He's the director of that at WVU. Yeah.
Yeah. And I think Neil say everybody is
rooting for him, even if they don't know yet.
This is something that I think is I've played so many families and everyone
really is holding out hope that we finally see that.
And I don't like what he said, too. It's not just about what the scientists
are doing. You need government buying.
You're not selling topic organizations and you need the private sector.
And that helped push this along. You saw what we were able to do with
COVID vaccines during the pandemic, what we were able to do so quickly.
But everybody got together. And this is what's kind of interesting
about Milken. We're going to be back tomorrow.
We got more interviews, but it really is this cross-section of, yes, finance, but
it's health care, it's wellness. It's everything that's kind of going on
in society. And how do we find the money that's
needed to find the right solutions? Yeah, well, maybe we'll hear some of
that. Yeah, we have a lot of big guests.
I'll probably see a grandma. I'm really interested in talking to a
new media ventures and Walsh over at Guggenheim.
She's going to have a lot to say as well.
Yeah, exactly. And CEO El Al, Bravo.
Over came Anderson. We're going to talk with him and New
Media Ventures President Lisa Graham. So we have got more conversations,
cross-sections of our economy in our world at Bloomberg but from Beverly
Hills that will do it for me and Romaine Bostick.
Have a good evening, everybody. And this is bill
and. I
am.
