Milken Institute Global Conference 05/07/2024

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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.
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