This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Tim, I don't know about you, but I feel like disaster has been.
Everywhere apocalyptic the past couple of years. Right, Yeah, No, it really.
Has global pandemic, wildfire's, Russian invasion of Ukraine. It's all over the place. And our next guest wants to help us prepare for that. He's the founder of an AI nonprofit that's focused on disaster preparedness, and he joins us now to discuss the product and of course the AI space, because we've got to talk about that.
Phil.
Great to speak with you. Phil Siebele joining us on zoom here. Seagull rather the founder of Captor Center for Advanced Preparedness and Threat Response Simulation. Phil, thanks again for coming on. Start by just telling us a little bit about what you're I does.
So what we are is the intersection of artificial intelligence and gaming war gaming. The basic idea is to better prepare, we need to create a set of threats that are plausible that we some of which we've experienced, some of which we haven't experienced, and then run them through simulation games to train our our crisis management personnel UH and our politicians and decision makers to make better decisions.
And I think, you.
Know, we could say, you know, with a lot of the types of crises we've had over the last several years, you know, maybe we have a fair amount of room for improvement. We use artificial intelligence both to generate these scenarios UH and also to help the quote unquote players in the game make better decisions.
What are some of the games that you've simulated?
Yeah, so we've done. We created a new virus and ran a game with the Rockefeller Foundation, like a.
Real virus, like a I mean, like a not a computer virus. We're talking like an actual you know, COVID like virus.
Yes, yes, it wasn't COVID like. It had a very different characteristic. It came from livestock in the US, which is actually quite common, but it had very different characteristics. And we ask scientists to figure out what was going on and whether or not it was going to be a high, medium, or low threat to a regional population.
We've created a game actually for City of Austin emergency management personnel to see how well the different departments that are supposed to respond to a threat like this would respond. And we're building games right now for scientists who are members of a group at the New York Academy of Sciences. So we're building a lot of games. We're using artificial intelligence to you know, really come up with some creative scenarios,
but plausible scenarios. And that's you know, what we're seeing is that with more practice, just like pilots with a flight simulator, people do a better job when they practice.
All right, So obviously you are part of the AI bucket that we have become obsessed with in the first half of this year. So I do want to get your take on the space while we have you, because it's seen so much attention, and I have to wonder if the fundamentals back up some of the prices that we've seen for these big names like the end videos
of the world. What is your calculation and your thinking when it comes to the AI rally that we've seen, and which of these names are going to continue to make it?
Yeah, So in my day job.
I'm a private equity manager, so I think that, you know, the old adage of picks and shovels kind of win in the early days is probably fairly true here. I think that I don't know whether you would say in Nvidia is over Christ, but I would say that having it run up given it to the by far leader in the chip space, which is the ultimate pick and shovel here makes a lot of sense. There's other you know, products like that, or there's other pieces like their supply chain.
You've seen a lot of run up in those stocks as well, and you know those seem we know those are going to benefit from what we're doing. Once you get past that, it gets a little murkier. I don't think we yet know whether the producers of the large language models, the the you know, the the ones that have made the big splash, are going to have viable
business models. Yet we we haven't seen that. In fact, it's not clear to me whether the large language model makers are going to be the winners or people who are experts at helping companies do small language models are going to be the winners in the space. So there's still a lot of uncertainty and cloudiness, I think for the next several years.
Well, Phil, as you mentioned your JAY job is in private equity. You've been an investor in private companies, venture backed companies, You've been a professor, you were a BCG as a managing director and partner for many years. Where does your passion for AI come from and for trying to create an organization that helps with disaster preparedness?
Yeah, so I volunteered during the pandemic to work with BCG on helping some of their government clients respond to the COVID emergency and saw through that work that we have a lot of opportunity to practice. You know, again, I kind of thought about the analogy of when you get on an airplane, if you heard that your pilot hadn't been in a flight simulator, you'd be pretty alarmed. Yet, you know, with a lot of our disaster preparedness and crisis management, we aren't doing that type of work every
year we do. You know, obviously, this group of people is highly educated and hard working, but I would like to see them every year spending time honing their skills so that they're more ready and better. And that was that was really what caused me to want to co found this, uh this this ng O if you will, or nonprofit.
Well, where does the where does the AI come from? And and are you at all concerned about AI in the sense of it being a threat to humanity?
Yeah?
I I uh, well, that's two very different questions, so I'll focus on the second. I'm I'm less worried about, you know, the scenarios we see in the movies like I Robot or Terminator to where the AI becomes sentient and on its own decides it's going to destroy humanity. I am very worried that bad actors are going to use these technologies and are already using these technologies to do bad acts, and that's what we need to be protecting against in the short term.
Thirty seconds, Phil, who are some of the companies and names that should not be jumping on AI and investing heavily into the AI space.
Yeah, it's a good question, and I'm not one hundred percent sure how to answer it other than to say I think there are some sectors where they really need to be thinking about, especially capital intensive sectors, where if they change the basic business model through investing in AI, they can lower the barriers to entry, they might have new entrants come in, whether it's the mining and exploration industry and so forth. You don't want to bring in
new entrants that you don't have to. But on the other hand, you need to lower your operating costs, and so it's a race.
Yeah, and it's all about capital allocation. At the end of the day, Phil, thank you so much for joining us. We're going to have to bring you back on. Phil Siegel, founder of CAPTORS. That's the Center for Advanced Preparedness and Threat respond Simulation, among many other resume lines.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
First, we're going to put our economist hats on Tim not Broadline today.
Did you I did?
Yeah, took it on the train with you, on the train with me. Here's the thing, a simple economics rule that helps us suss out whether the US is in a recession. It's getting called into question by its own creator. It's called the Psalm rule, and it's architects the architect rather is worried that her creation has become a monster. That's the headline of the Business Week story we're focusing on today, which you can find on the terminal, of course,
at Bloomberg dot com. Here to discuss the breakdown with us is Bloomberg BusinessWeek editor Joel Weber and the reporter on this story and occurr in Joel.
It's all in the Did you describe this as a simple economic rule?
Is there such a thing? I just want to clarify it. Is there such a thing?
I won't pretend it's simple. I won't pretend I even fully understand the mechanics of it. So that's a brave call.
Okay, all right?
So what does does he feel better? And that makes me feel better?
I honestly I had never heard of the some rule. So break it down for us? And what uh, you know what everybody's talking about here?
So the clods. First of all, she's a very accomplished economist. She had a long career at the FED. She had a stint in the White House as well, and at her time at FED. In twenty nineteen she published this this rule or this measure, which essentially looks for increases in unemployment in a real time way and looks for how it looks for the increased relatives to the average, the three month average compared to the low point of the year before. Point being, it's a real time weight
to gauge. Oh, look, the job market might be turning. Jobs are being lost. And the second part of it is that that's a warning sign to governments, or the US government in particular, that we're in a recession and so it's time to start getting money out to those who need it fast. So that's the key point about it.
It's a real time gauge. It looks at the labor market, and that's much faster than the current system of gauging when there's a recession, which is an eight member committee that come together and often don't diagnose it until a year after the event.
So how did she create a monster? Because that's the fun part exactly. Yeah.
So the issue here is that it's got it's got two things. First of all, people are kind of talking about it in the sense of forecasting that much of anted the US recession. Will it won't it? And our point is it's not a tool for forecasting recessions. It's an indicator to say when we're in a recession. And second point of it is, it's just got tied up in this whole broader tug of war of will the
US fall inter session, will it not? What's the s rule, sam Room rule telling us when her point is that this was meant to be an indicator that look, people are losing their jobs and the governments need to get money out straight away because that mitigates offsets whatever damage your session might be coming. So she she just feels that it's getting caught up in the maelstream of this whole seft landing debate.
Well, she said to you, the whole point of it was, Okay, we need to get people help, because if you can get in at the beginning of a recession, you can do so much to soften the blow. The issue is the consumer has been so resilient, The American consumer has been so resilient. So yeah, this has been pretty humbling, not just for her but for for so many economists.
Yeah. So in terms of you know, the rule itself, you know this policy advice that she was giving, say pre pandemic. Ultimately, it's what the Trumpet administration did is that when people are losing their jobs, they put money into people's households, upset the worst of their session. So it kind of did follow the policy prognosis. But you're right, the real crux of this is where we are now.
You know, the job market is softening somewhat. There's a lot of talk that the economy will soften with Claudia Aslam is making the point that, look, if unemployment was to go up somewhat and you know, mechanically trigger her rule, that suggests it's passing a threshold that the economy might be going into her session. So the jobless rate was to go up, but the actual economy doesn't go into
her session, she'll be fine with that. She doesn't mind if her rule is proven, is tested, so to speak, are even proven to be inaccurate in this occasion, as long as it means the US pulls off of self lanning. And she's in the camp that the there doesn't need to be your session to bring down inflation. At the moment, she thinks inflation is on a glide path lower. You
don't need to blow up the job's market. She said, it's still possible that happens, but she thinks it's a path for self lanning, and that's her whole that's her whole point about it. If her rule is proven wrong this time jobbles raid goes up a touch, but there is no recession, She'll be fine with that.
She also just sounds funny to me. She said that she created a monster. She said she never she was surprised she ended up at the FED, even though she's obviously a genius and created this rule. She would love to see this break. What were your impressions of her.
Clothly's very accomplished the columns, like you just mentioned, a long career in the public sector, a lot of academic research, PhD from Michigan. She's proved. She has a proven track record behind her. Clodly also was on the front line of pushing for the diversity debate at the FED when she was there. We spoke a lot about that. She said the institution has come a long way compared to
the time she was there. And of course we got into the world of social media, because that's also a big part of the story that the economic debate has moved from say the wholes of universities and maybe the opinion pages of newspapers into this real time back and forward sort of punch bowl on Twitter, et cetera.
And Clonia herself like thinks he knows he's talking about I know. That's when you know we've got a problem.
Just wait till the Stenevec rule. Just wait until that happens.
Rules called Friday five and I'm out of the area six six.
But En, you bring up a really good point, because she is, she's huge on Twitter, and she she does such spent she's I mean, I haven't I must confess I have taken a break from Twitter lately. But X whatever it's called. She she's and she writes for Bloomberg Opinion. I mean, she's out there.
He used to be very out there as well, very vocal. I mean, she wrote a blog post in twenty twenty that was highly critical of some very senior peers in the Eglamus field and she named them. So that caused a big stary at time. And you know, she was on the front edge of a lot of sharp exchanges on Twitter as well. But you know, Claudia has pulled back from Twitter. She made that point. She took a couple of breaks, a couple of months.
Off of it.
She's back on it now just to publish her research. She's not interested in getting involved in the back and forth the hot take debates. In fact, she said she stays off Twitter and the hot take days, the hot take the will obviously be the Jobs Day on Friday. She's hearing well clear of that.
She's got all these rules.
I wouldn't know the rest of the rules actually, Okay, So you right that if she get it get it right. In economics, textbooks will be rewritten, get it wrong, and the credibility of central bank will be damaged in the US economy, doomed to stagflation.
Which way is it trending so far? And when will we know?
We've got to you know, textbooks require some you know, forward planning.
Right here, right now, there's this window that the US can pull this off, that they can get inflation down, that data has been heading in the right direction, inflation is coming off, and maybe they can navigate some sort of a soft landing without the kind of massiver session that some people were warning about. Now, if that happens, that puts your own Powell in the whole of legends up there with Vulkar in terms of global central bankers
who pulled off the impossible. But there are a lot of people who push back and say it's too soon to say mission accomplished. We don't yet know what the full impact of these rate hikes will be. We don't yet know if inflation is going to come all the way back down the word it should be in people on the street. They're feeling the impact of these price rises over the past few years. So there's another camp out there saying, hang tight for another six months or so and see where we are.
Then you just didn't vote to Volker.
I'm actually curious if pulls this off, who becomes.
More of a legend, Volker or pal.
It's an interesting question. I think if Powell pulled this off, it would be seen to be quite a feat because there's a backstory. You could say, hang on, central banks missed how all this inflation was building up anyway, But when they went they went very hard to federally doing all those massive rate hikes seventy five base of points at a time. A lot of people being very critical, you're going to blow up the economy. Don't need to do this. And if they do pull this off and
get inflation, then on a glide path. It looks like, you know, would put the US in pretty good order compared to some of its peers around the world. Part of what's going on Europe, for example, And I think, well, then would maybe take something up a victory lot.
But I just retire just like I'm done.
I think Joel brings up a good point end. I mean, because you know, Vulcar had to raise rates to what close to twenty percent in the early nineteen eighties, and if Powell pulls this off with rates around five percent.
An unemployment went to eleven percent. Yeah, the Vulgar I mean. And you know, under Powell, unemployment fell to three point four percent in February, which was the lowes since nineteen sixty nine. So the fairly different circumstances. Maybe we're seeing the birth of the Powell rule here.
We don't yet know. Did you just coin that? That's good? So original? I fear that I just jinxed everything.
Oh yeah, great, Joel crash Landing, Oh Weber.
I would love for you to be the leading indicator of our economy, Joel.
Just you know, there are some people on Twitter x who have written how the Business Week covers are we are?
You know, that's really I don't know about this. Can you explain once.
We talk about it, it means it's late and and everything.
Like once on the cover I brought down the dollar.
The dollar was very strong, and then we did the cover story and it was less strong.
I will push back on that. I think it's like, there's no perfect record here, but there's like, you know, there's a couple prominent ones.
Get we get you know, every once in a while, we.
Hold you is like an oracle.
Okay, speaking of oracles, can we talk about into some more?
Because he was busy this week and he wrote about Barbie.
I was hoping, Yeah, you know, let's just stay with cool things, like, I mean, some world pretty cool. You didn't know about that, but maybe you knew about Barbie with tell us about what you wrote for today's newsletter.
End up. Yeah.
So the toy industry has been in a bit of a slowdown this year because you know, it's coming off to the highs of the pandemic when people are buying so much of that stuff. This year, stores have been running down to inventory less buying of toys, especially from Asia. Of course, so I touched base with a couple of manufacturers and said, hire are things looking and one of those I spoke to you. He's one of the biggest makers of toy dinosaurs in the world, and he said
he can't wait for this year to be over. So the thinking is that the Barbie effect, the Barbie effect, might give it all boats a lift. I mean, Mattel themselves are talking about they're expecting a lift from the
Barbie chain of products. And of course there's a thinking that might get people back in the toy stores and spending money on other products too, And that's what it's time maker I spoke to he's making the point that he's hoping for a lift towards the end of the year because certainly buying toys hasn't been an everyone shopping list so far in twenty twenty three.
Wait a second, did you say the world's biggest manufacturer of dinosaurs, one of the biggest.
Yeah, and he also makes chat him out of the talking Hamster.
He's got a rank product.
We've got questions about that, but let's stay with dinosaurs. So the dinosaur business is difficult right now.
Well, so he sells, he makes and sells for some of the biggest brands in the US, and his point was that they a lot of these stores have built up inventory. They bought so much back during the pandemic because they wanted to get ahead of supply chain problems and everything else. They needed to just get the stuck in. But now, of course I have to run down through
all of that stock. So his order book hasn't been good this year, that was the point he was making, But he's hoping that it will turn now towards the end of the year with store report that inventory are being run down, and of course the US consumer is holding up stronger and expected. Throw a bit of Barbie magic, a bit of Barbie sprinkle on top of that, and maybe people might start splashing splashing the plask again on toys this year.
Okay, what was the hamster thing?
And he also he also has a tucking hamster, which he makes all of this. He makes all of this out of me as it's an old conduct of mind, but he sells it to Europe and the US and one of his products is a tucking hamster.
Is this what does this remember? Tickle me ono?
Like?
Is this that's a throw hamster? Is this like?
Is this going to be?
Like?
What everyone wants for the holiday.
I love the arbitrage. Make this in Asia, sell you're talking himster Europe.
Don't do it in the US. Don't. You're being the big market though.
So the idea here is that people are going to say, Okay, well, Barbie's still hot right now, we're gonna add Barbie to our shopping list for the holidays. And while we're at the toy store while we're on I don't know why even say toy store, while we're online, we're going to add some other toys, some g I Joe's, some talking hamsters, and some dinosaurs.
That's certainly dinosaurs and Barbie seamless. But that's certainly the hope among a couple of manufacturers that I spoke to.
Well, I wonderful.
Materializes Mattel's biggest product sales as you know, and is it's hot wheels. It's not Barbie, right.
Yeah, but they were saying in their earnings report last week that they are hoping for pick up from Barbie increasing.
By the Barbie, by the hot wheel to go with it.
Also, it's really I p and that was, you know, exactly what the Barbie cover story in Bloomberg Business was Week was about perhaps the leading indicator of the toy economy.
We'll find out more. Yeah, and the weeks and.
Months ahead, and when we get the Super Mario Brothers movie expected in twenty twenty five, it'll it'll.
Get moved forward because it's everybody wants more. Mario shout out to two stories in one episode right now, that.
One segment that we've talked about.
Amazingly, he has more content in the magazine, like he's a busy guy.
But we're not even going to talk about that one. Maybe we'll do another segment.
Yeah, all right, well it's only Tuesday, so and you got to come back. It's good to have you business guys this afternoon. And also Joel, always great to have you that voice you're hearing Bloomberg Business We get her Joel Weber and also Bloomberg Global Economy Reporter and a current talking about the soam rule in Barbie only we can marry you know, Barbie in an economic That was a really good transition, Joel.
That you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, The Bloomberg Business app and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty.
For the past three years, something has happened in my home state of California that has never happened before. It's lost population. More than five hundred thousand residents have fled, relocating to cheaper locales like Texas and Arizona. But despite what you may have heard from some high profile venture capitalists, it's not the wealthy who are leaving. It's not the wealthy who are struggling. In fact, the wealthy are doing
really well. They're flourishing in California. This year through July, California's billionaires aut a two hundred seventy billion dollars in wealth that's acquorated to the Bloomberg Billionaires Index, attracts more billionaires in the state than in any country except for China. Bis Carson is Bloomberg News Wealth reporter. She wrote that story. She joins us this afternoon from San Francisco from our bureau in San Francisco. BIZ, good to have you with us.
You've lived in California for a while, haven't you.
Yeah, it's ten years now in California, so that's quite some time.
So how is the narrative where you've been in Silicon Valley? How has it shifted? What made you want to explore this story?
Well, I think there's been a big shift in California. I don't think you can deny. You know, there has been a historic population loss in the state, but the last ten years have been a huge time of wealth generation, particularly in Silicon Valley. You've seen it in Hollywood. The state is richer than ever and so when we got our hands on some tax data from the state of California, we realized it was something new to me, just the record number of millionaires that had been created in over
the pandemic time period. And it's a wealth creation that we haven't seen before in the state.
And I wonder too, why we're not seeing more of the Ken Griffin movement. I guess why aren't we seeing some of the wealthiest people say I don't want to pay the taxes to be here anymore.
We've seen a few people like Elon Musk and Larry Elson, I think are the two biggest names to say we're leaving, but a lot of people are staying. But it's not necessarily something that they're bragging about, like, oh, I love paying my higher taxes. I'm so excited to stay in California these days. Like it's just not part of the conversation. It's a more part of the conversation when you're looking at the weather and it's beautiful, seventy degrees compared to the rest of the country.
Way to rub it in, Yeah, it's always very it's beautiful.
I'd wear a jacket to day it was very cold. And so you're not seeing kind of this, you know, you're seeing it from a handful of people who are beating the drums saying California is time to go. But the people who are staying here, the people who are getting even richer, you know, don't have as load of a voice. And I think that was kind of the counter narrative we found in this data, is to say, wait, there's more millionaires here than ever. Even if you think that everyone's up and left.
It's wild this data that you got your hands on, biz, I'm going to read right from your story.
Okay.
In total, more than two hundred and eighty eight thousand Californians, or seven tenths of one percent of residence, So that's close to one percent of residents reported over a million dollars in income in twenty twenty one, So you almost have one every one hundred people in twenty twenty one getting a million dollars in income.
The thing that's said that's income, Ye, income, So I own a house that's a million dollars or we're talking income that they're reporting on their taxes and the caveat, Yeah, it's the caveat hoarding. Yeah, it's typically where we think it's an underestimation of the millionaires because a lot of people, when they get to a certain level of wealth, you know, they're reducing their personal income tax burden and shifting around, taking out debt, other things. So we think it's likely higher.
But this is the bare minimum of what we know who's reporting a million dollars or more in income.
The flip side of this, though, is the affordability crisis in California, And what you do not in your story is that the people who have left have have left for places that are less expensive because they found affordability challenging. In California. It's really hard to afford a house there there are no starter homes in California. What's going on?
Absolutely? I think these go hand in hand. Right We saw this record number of millionaires being created, but California also became a more inequal state. It moved up in the Ginny coefficient, which is a measure of inequality in the state. And so we've seen the state become more inequal, you know, partially as a result of this wealth. And only one in five people in California right now can afford the median home price of eight hundred thousand dollars,
so you can't. You know, this data shows an exorbitant amount of wealth, but with that you are creating an equality. It does become harder to live here. You know, the rich can buy up the houses, leaving everyone else struggling. And we see that now playing out in some of these labor strikes in Hollywood. You know, fast forwarding to twenty twenty three, labor is a huge issue. Inflation's been hard.
So this wealth is truth, it's created a ton, but it kind of exacerbates the problems in the state as well.
That's really interesting because that makes me wonder whether that is going to be the headwind for California, or if it's going to be something else, What do you think is the single biggest thing that could change this dynamic that we're seeing of the ultra wealthy continuing to stay there.
That's a great question. It's not necessarily taxes. That was something that was surprising to us. And you know, as we reported this story, taxing the rich doesn't necessarily have any effect in California, specifically on them moving out of the state. So we can't just say, well, we'll tax them and you know, decrease their wealth and everything will be fixed. That's not going to happen. What could fix California? That is a question way above my pay grade, and
I have no idea. It's a challenging state. There's a lot of people here, a lot of economic inequality, and we'll see, you know what kind of the pressure of these labor strikes, you know, how the government responds things like that will well, that will do to the state. So that's kind of an open question.
I'm wondering too about the politics there, and this isn't this isn't a politics story per se, but it's everything as political as they say, So so I wonder to what extent you know, these wealthy people are controlled or trying to control the politics in the state. We saw some high profile recalls in San Francisco, We've seen a mayoral race that's backed by some very wealthy people in the city. What can you tell us about their role in politics.
I think the wealthy you have always had an outsized role in politics, just do to be able to bankrolling it. You know, that's not unique to California necessarily. I think, you know, given we have more wealth in the state, will we see something happening in the election coming up. I don't know. I think that's going to be an interesting question. You know, will this shift any part of
the voter base? I don't know. The one interesting part of the statea is California's reliance on personal income tax and this one percent bracket. Because because the tax system, it relies on the top one percent of earners roughly fifty percent of the personal income tax revenue. So anything that does happen to the incomes of these top earners has real effects on the state budget. And so I think that is kind of almost a bigger political question of if these top earners start losing money, if the
economy swings in a bad direction. Yeah, that's going to have bigger political ramifications I think for the state than necessarily you know, wealthy millionaires donating to local political campaigns.
Because I want to end with your lead on this story. It sets the scene with a party for the Core Club. It's members only club. It opens next year for Californians who are ready to shell out fifteen thousand to one hundred thousand dollars in initiation fees. Just describe to me the vibe there or in Silicon Valley right now, at a time when you know, people have said that California and Silicon Valley just feel different.
They do feel different, but there's still, you know, still some great times here. AI Boom is centered in California right now. This party happened at the Trans America Pyramid, which is going this billion dollar renovation and a New York developer bought the building and is renovating it and it's going to be this big billion dollar project. So there's still investment, there's still excitement in California, but it's been tempered a little bit. I think the last few
years been hard, particularly in the San Francisco downtown. We've seen it with office spaces, so there's a bit of a vibe shift. But people are still you know, able to sip cocktails and champagne and pass appetizers on the thirty sixth floor and you know, be happy with their lives.
Does it still seem like more? Does it still seem like San Francisco is as empty as it was during the pandemic or are people actually going back to work and they're taking the shuttles south.
The downtown core, i'd say is still somewhat empty, you know when you're talking Union Square civic centers. But the neighborhoods are flourishing. I took the F train today down Market Street to the Bloomberg office and it was packed with people and tourists. So there is a liveliness to the city. It's just not quite the same energy of you know, all the tech workers that they're matching backpacks,
you know, flooding Montgomery Street that has gone. The lines for lunch are a little shorter than they used to be, so I may not complain about that, but you know, there is a bit of a vibe shift.
Baz Carson, it is good to have you on the program today, and you know, I gotta say, Maddie may be biased here, but I'm certainly rooting for California, and of course every state here in the US, but California is a special place. We're not buying my heart, We're not biased.
I have no opinions or thoughts on states.
Carson is Blimberg News Wealth reporter joining us from our San Francisco bureau. Thanks so much, Bez appreciate it.
I'm brother my journal.
How about you let me drive?
Oh no, no, no, no, please, I'll do.
I want to drive.
It's a good question.
This is the drive to the globe done for me? Well on Bloomberg Radio.
This is Bloomberg Business Week, And you know, let's get a quick check of the markets. We haven't checked in on those in a while. The Dow up what one tenth of one percent? The S and P five hundred down three tenths of one percent, the Nasdaq down four tenths of one percent. Well, Maddie, the stock rally that's taken a little bit of a breather has you know what, it's lost a little bit of steam in the last
couple of days. I got to tell you. The S and P five hundred up nineteen percent this year in August, it's nothing to shake a stick at. We do you get a mixed bag of corporate earnings and economic data that's leaving markets a little bit Yeah, yeah today, but we got a great guest to hear to make sense of it all.
Yeah, I'm very excited about getting someone to help me make sense of all of the movement that we're seeing. Here for our drive to the close, we've got Christopher cy On, President and CEO at Side Capital. Christopher, it's so great to speak with you, and thanks for coming in here. We're talking about the trade here today. What would you say is the single biggest thing kind of
driving this trade? Is it investors sort of taking on some profits and that's why we're seeing a little bit less green on the screen here, or is it kind of just a mixed reaction to the eco data.
I mean, we've had a credible run this year in all the major indexes. But what we try to do really at Side Capital is focused on the long term, so we really don't pay much attention to the everyday noise that is circling the markets.
Well, what would you consider everyday noise versus what you do pay attention.
To Well, we have now a twenty three year track record, and we've gone through so many different environments with noise such as inflation concerns, recession concerns. We've navigated through the Asian financial crisis, the dot com bubble, et cetera, et cetera, and there's never been really that much of great news to look at. So what we try to do is focus on the long term and focus on the individual
fundamentals of the companies that we're investing in. And it's just to us nonsensical to forego investing in a business that has a predictable long term future because of short term concerns about the market or the economy that are inherently unpredictable.
So what does that calculation look like when it comes to the fundamentals, Well.
We think that the fundamentals for many companies are actually quite strong, and our focus is really to look at the strongest of the strong, to focus on the high quality businesses that we think have great futures that are growing rapidly, and to take advantage of market weakness. Your previous guest spoke about coming out of this environment playing offense, and we think about that kind of strategy as well. So in other words, when we have a bear market
like we recently had, we've played a little offense. We added a number of companies to the portfolios that we think have great futures, that have asymmetry in the potential returns. So that's what we're trying to do, provide diversification for investors, but also to provide some offense coming out of a recession.
What are some of those companies that you've recently added to.
Yes, we added to a company called MSCI, which is a leader in data analytics. It's a company that is really integral to many money management firms and financial service organizations. We also bought a company called Zoetis, which is a leading manufacturer of pharmaceuticals for the livestock and poultry industries.
I'm going to totally switch gears here, you guys. I hope that's okay. I'm realizing in your guest note that you talk about your grandmother Ruth's side was the first woman to trade shares on the floor of the Shanehaist Exchange. That is so cool. Do you have any investment lessons that have been passed down to you both from her? And from your father of course as well.
Yeah, that's a great question. I appreciate that question because my late father has been in the press so many times. But my grandmother, Ruth was really a pioneer for women in China at her time. So, as you've mentioned, she was the first woman to trade on the floor of the Shanghai Stock Exchange from around nineteen thirty nine to nineteen forty one, and she passed on so many wonderful lessons to my father, and my father passed on so many wonderful lessons to me, So I'm really a third
generation investor. My grandmother Ruth had us saying, when the tide goes out ten feet, a large ship in a small boat both go out ten feet. I think that was her way really thinking about bear markets and how to deal with bear markets.
I love that, Hey, just in the last thirty seconds that we have with you, he brings new money to you right now, and they have a long term horizon. How are you deploying it?
That's also an amazing question because we always find that deploying capital is a lot harder than learning how to sell a company. So what we try to do is we try to scale into our scale in new capital, so we typically vest around two thirds upfront and then we try to deploy the rest of the third in a relatively short period of time. But we're trying to
get away from is timing the market. Clients come with us with a long term philosophy, so we're not trying to time one month or two months, but we do like to scale into a degree.
Christopher cy, president and CIO at PSI Capital, joining us this afternoon on zoom really appreciate you've taken the time to join us right here on a Bloomberg Business Week and this is Bloomberg.
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