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Well, the moment of truth for Apple's AI plans and for the four hundred and seventy one billion dollar rally that has rescued the stock from adul drums. We've talked about AI being a central focus of the ww DC kicked off at one pm Wall Street time today. We've been giving you updates throughout the day on that partnership with Open Ai and everything that Apple has thus far announced. We'll continue to bring those updates as we do get them throughout the week. But first, let's talk about the
stock reaction. Because Ryan Lestelica is Bloomberg News Equities reporter. He writes all about what's at stake with Apple and AI. Shares of Apple down by one point eight percent right now. Ryan joins us from the Home Bureau in Chicago. Ryan, give us what's at stake right now for Apple? Given that you know, yes, it's significantly underperformed the s andvvatpunder in the Nasdaq one hundred right now, but we've seen a rally over the last month that has investors looking pretty optimistic.
Yeah. Absolutely. So the context I would say is that Apple is really facing two key concerns. One was that it just wasn't growing all that much. I think five in the past six quarters, it'saw negative revenue growth, and a lot of the other names bintech have been showing pretty robust growth, and a lot of that is due to AI, which is an area where it felt like Apple was a little bit behind the curve. It didn't
really have a very articulated AI strategy. People were really hoping that today would really address both of those, that it would announce all these kinds of new AI features, especially for the iPhone, and then that would spur people to begin upgrading their phones and that would spur you know,
a new leg of revenue growth for the stock. So it did come out wasn't anything I think that was too surprising as far as the new features, as far as the new you know, applications and the way that it all is being integrated across the you know, the ecosystem. But I think right now we're seeing a little bit
of a pullback. Not incredibly dramatic given how much it's been coming up ahead of it, but it does seem like, you know, as far as the drecting, will this be enough for people to you know, trade in and you know, spend more than thousand dollars in a new phone.
That's what I wanted.
We wanted to get with you, and like we've been getting into some of the fundamentals off of the event on the West Coast around Apple. But Ryan, when you look at the share price in the bounce back that we have had, as we note this four hundred and seventy one billion dollar rally off of what the lows you know, that we've seen in Apple. You know that's even though the stock is a little change, it's had
quite a bounce back. How much of or what is that enthusiasm or that bounce back reflect And as you said, Apple shares a little bit lower, but maybe not such a big deal considering the bounce back we've had.
Yeah, So one thing I would say is that early in May it had its latest quarterly report and it's pretty encouraging. The forecast is seen as pretty encouraging, pointing to a return to growth kind of ease some concerns about the date of sales out of China, which is an incredibly important market for them, and there has been a lot of optimism about AI. And of course in that quarterly report, Apple did announce the largest stock buyback
program in US history, one hundred and ten billion. I think that is helping to put a flaw under the stock if nothing else, you know, and certainly if you look at Apple on evaluation basis, especially with respect to the growth, that might screen as you know, somewhat pricey.
But if you look at it as far as all the quality characteristics with respect to the buyback, with respect to cash flow, profitability, you know, all that kind of stuff that does screen is pretty you know, screen is pretty strong on those So I think that's also been you know, there is sort of a view that apples is safety and maybe it's not as pronounced as it was in past times. Growth is a little bit more robust, but certainly it's it's part of it.
Here, all right. Apple shares down one point eighty percent. Ryan lestealka Bloomberg News equities reporter, joining us there in Chicago. We're going to stay with Apple.
Let's bring in a Bloomberg News Chief Technology course, Mark German, who joins us from LA Mark. Tim Cook has wrapped up his comments. They began. The WWDC kicked off I should say, at one pm Wall Street time, so it's been a couple hours. Biggest headlines so far, give them to us.
The biggest headline is probably the open AI partnership that we have been talking about for several months.
I knew that because you told us about it, Mark, yes, ahead of time.
That was probably the highlight.
But obviously that's part of the larger AI strategy, which is Apple Intelligence.
As we also talked about now.
The way they explain Apple Intelligence is AI for the rest of us, right. That harkens back to the old Apple school, old school Apple line, which is a computer for the rest of us, right, And so this is a more friendly approach to AI. This is AI integrated deeply inside of applications, things like summarizing notifications, writing tools, image editing, much improved version of Siri. So the AI was the focus of the event. The other stuff sort of took you know, was pushed onto the back burner.
They started off by talking about more customizable home screen on the iPhone and iPad, some new gesture controls to operate the vision pro But of course the highlights were, of course the experience coming for AI to the iPhone, the iPad of the Mac and so it's going to be quite significant for Apple. It's very clear to me that they're starting off pretty slow here. They're going to expand over time.
A couple questions, so AI for the rest of us marketing our innovation in.
Your view, Well, it's marketing based on what they have available to them.
Right.
This is as far as they could take their AI feature set for the time being, and so they're going to market around that. Their AI is not as advanced as what open ai is able to offer at this point or Google Gemini. That's why they're partnering with open Ai on integrating chat GPT into a chatbot inside of the iPhone experience. That's why they're still talking to Google Gemini and Anthropic about integrating their large language models into the iPhone as well.
Do they go ahead, Carol, Well, the one thing I was going to say is, I'm a real observer. It's just kind of who I am as a personality slow and steady sometimes, but slow and steady sometimes wins the race. And do you feel that way with Apple, that you're okay that they're kind of slow going? I mean right, We often remind everybody they weren't the first out with
a smartphone, but look at where they are today. So how you understand this company, how it fits into the broader kind of bigger tech world, if you will, slow and steady okay for you.
Carol, here's the difference.
You're right that Apple's typically not the first to a new product category, but they're also always the best. The iPhone, it wasn't the first smartphone, but it blew everything before it out of the water. You saw the same thing with the iPod before it, the iPad after the iPhone. You can even say the same thing about AirPods for earbuds and the Apple Watch for smart watches. You saw
nothing today that's better than the competition. You saw nothing today that's different from the competition except marketing and a focus on privacy. Right, So that's the difference here. They're not the first, but they're also not the best, and they're not the most advance. They're here extremely late, and they showed up to the party without a gift, right, they didn't bring much new to the table here.
Who's doing what they want to be doing?
Mark?
But better right now?
Well, Google Open Ai.
Samsung's AI features were pretty impressive with the S twenty four, and Apple's are pretty much in line with that.
Now.
The interesting part is they've really teased that this is going to improve.
And get better over the next year or so.
We could be having this conversation one you're from now in the series features and the AI functionality will be so much better than.
This today right now.
This is also only starting in US English, so there's a lot of market improvements that are going to need to make to roll this out as well.
Hey, Mark gil Lorio over at d Davidson made the point to us a little earlier about the and he cited your work over the last few weeks about the iPhone fifteen pro supporting the new features, and he said this was before it was announced a little over an
hour ago. Had this could be like a moment with the iPhone, the five G iPhone, and I think it was was it the twelve mark the first iPhone that did five G A sort of the precedent for a big upgrade cycle as a result of a piece of hardware that is not backwards compatible, software that's not backwards
compatible with older hardware. Do did we see anything today that prompts people to go out and buy a new phone, even if they have a fourteen or a not a fifteen Pro, that will get them to buy new hardware.
Well, I think when they announced the iPhone sixteen, clearly their central marketing point on the devices this fall is going to be the AI features.
Right, The AI features.
Are going to come out alongside the iPhone sixteen. So if you want these AI features, you're going to have to get the sixteen unless you have a fifteen Pro already. So I definitely think that this is going to be a huge sales point and it's going to spurn upgrade cycle.
For sure.
People are going to want the AI features.
It's interesting, like I'm looking at our live blog and just you know, we take after months of mystery over Apple's AI strategy, took a step taken by nearly every other tech company integrates some open AI models into your products for features like text generation. To me, it just is like all right, everybody you wanted think AI. You got to keep thinking about open AI like that is the leader. That's the company that everybody wants to kind
of play around with. I don't know, like, as you look at AI and Apple going forward, is it something that they can innovate on their own or they've got to partner along with others at this point.
For now, they have to partner with others.
The hope internally is within a few years they could you do this entirely on their own. I anticipate that happening eventually. They need to get their large language models up the snuff. The future of the company and the future of their hardware really depends on it. So I certainly expect them to upgrade their AI capabilities over time and move away from these partnerships.
There's more stuff this week. As we were just talking with our scarlet food and she's like, you know, it's a whole week long thing. Is there anything more that you are focusing on? There's more to come or this was really kind of the big deal.
Well, it is a whole week thing, right, But the rest of the week is labs and classes for developers integrate the new features and APIs into their application.
So there's no more news coming.
Okay, So in terms of the news that that already came, what isn't again? This is mark this is the Worldwide Developers Conference. I mean, I think it's fair to say, typically, with maybe the exception of last year when they unveiled the Vision pro, typically this is really geared toward developers and it doesn't necessarily make a ton of news outside
of the developer world. What do you think we'll see from developers who are going to, you know, take advantage of what Apple's offering in terms of tools to them.
Well, I think developers are going to be curious how they can integrate AI into their applications with sort of frameworks are going to be available to sort of aiify their apps? Will they be able to use the new writing tools, will they be able to use the new image generation features?
Right?
And the answer to many of those questions is yes, and it's going to We're really looking out to see what types of new applications will be enabled by Apple rolling out these AI features. I certainly think that there's going to be a wave of new AI apps. There's not going to be an AI app store, as some have said, but you know, Apple's here integrating AI heavily across its ecosystem, and that's a positive for the market.
Okay, speaking of the ecosystem, I mentioned Vision Pro. It's been out, it's been announced for a year. Did we get updates on Vision Pro today.
Yeah, so it's going international as we've been expecting. The new Vision OS two point zero, Well, there wasn't a lot to it. Some new gestures for opening control center and opening your home screen, some upgrades to some of their applications. You can airplay content into the Vision Pro, some new environments, and the ability to see your keyboard while typing if you're using a physical keyboard. That's all, you know. Exciting, nothing breakthrough AHO, A bunch of little catchup stuff.
All right, I have two last questions for you. Your story that's out on the Bloomberg, which I highly recommend everybody check out. This was kind of the setting up but also the post. But it initially said Apple event will show whether it can be a force in the AI industry, Kennet, Did you get that? Did they show that?
Well, it can be a force in the AI industry with the right partnerships, and they made the right partnerships and with the right applications, and with their new frameworks, they're hoping they enabled the right applications. So I'd say the answer is equivocally yes.
All right, last question, you're sitting down with Tim Cook. What's the number one question this after today's event?
What's the number one question for Tim Cook? Yeah?
Where are all the other breakthrough new features? How are you going to get people to really buy these phones? Where's the shake up to iOS? I mean, we're getting Apple Intelligence, but the overall operating system still feels little stale.
Carol, I'm going to wager that Tim Cook probably has a lot of questions for Mark Germatt based on Mark supporting over the years.
Can we also ask him Mark, you know, did he do Apple intelligence like the Bloomberg Intelligence? Was he looking at us? Maybe he took a queue?
No, I think they just swapped artificial with Apple.
Just a marketing Well done, well done, listen, thank you so much. We know you've been busy in the lead up to this, so good to get some time with you. Of course, he is Mark German, He's our Bloomberg newschief technology correspond It be sure to check them out on the Bloomberg terminal. Also at Bloomberg dot Com.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on applecar Play and then brout Auto with a Bloomberg Business app, or want us Live on YouTube.
Remember everybody, how we keep reminding you that a top year, top risk for this year for investors and really kind of the world more broadly, geopolitics and global elections. On that.
After crushing defeat in the parliament elections yesterday European Parliament election yesterday, President Emmanuel Macron plunged France into political uncertainty with a snap legislative ballot that restages his perennial battle with far right rival Marine La penn So we are watching this closely, but there's a lot more going on too.
Yeah, because the election result highlights the increasing rejection of mainstream politics and left the credibility of the blocks two most important leaders in tatters economics and politics. Carol continue connect and drive outcomes they always have, but are today increasingly upbending the status quo and the expected in driving a populism wave around the world.
We're seeing it happen in real time with more on the connectivity of it all. Let's bring in Bloomberg News Global Economy reporter Enda Current he is in our DC bureau. Elections around the globe, the rise and political uncertainty take France over the weekend. Much has to do with global citizens kind of having had enough of the way it is and feeling like they are being left behind. That we are seeing increasingly around the world.
Yeah, absolutely right, as you say, this was you know, Pete up was the year of the elections anyway, and it really is playing out that there is a commonality of voters are resentful and they are punishing they're ruling governments. Not in every case, of course, but in some of the big cases. We had India last week not triggered
a big shock in financial markets. Now we have the European Parliament elections over the weekend that swing to the right, especially in France, triggering shockwaves in financial markets, especially because
mccrown is calling the legislative elections there as well. So we are now seeing the shock risk of these elections playing out, and a kind of a common underlying theme that people are expressing their discontent with governments, even in cases where broadly speaking, the economy is doing okay, which you could argue for the case of France and India, markets doing k but that's rightly wrongly not flowing down to people on the ground and they're expressing their frustration in these ballots.
So where would you say, and that discontent is coming from. Does it have to do with individual's economic situation, Does it have to do with inflation, Does it have to do with immigration? Where are we hearing and seeing in polls the discontent coming from.
Well, if you take France in the case there of Jordan Barbell in the national rally the La Penn opposition to Macron. During the European elections a common theme. There was opposition to European trade policy, opposition to European climate policy, and of course a harsher line on immigration, and that of course feeding in to discontent among populists everywhere in terms of the cost of living and economic pressures that they're under. Even as headline economic growth looks okay, France
is doing relatively okay versus other parts of Europe. It's a pro business agenda there. Under President mccron, it's been seen as somewhat as a reasonable performer. Economic performance for France, but obviously that's not transnding down to people on the ground, and the same in India. By the way, we all know, India is famous, this global star, economical performer, one of the fastest growing in the world, an alternative to China.
For foreign investment in the markets they're booming. Everyone talking about forign investment going into India. But obviously, when we saw the election results, people on the ground unhappy, and I think a lot of it is coming down to its cost of living pressures. And of course you can drop parallel with India western urban and some of the mood in the US too.
So I have to say, when Tim and I are preparing in our team or preparing for today's show, this hour and really the next two hours that follow, We've got Peter Goodman coming up later on. He's global economics
correspondent over at the New York Times. He's got a book How the World Ran Out of Everything, and really goes through some history lessons about kind of obviously what happened during the pandemic, but really how we got to that point where so much was made in one part of the world, China specifically, but also how it was all done on the backs of workers, and basically we got rid of some really well paying jobs, middle class working types of jobs, and two jobs that really paid
a lot less. And just why there are so many individuals global citizens that are feeling kind of left out despite the market growing, you know, the global economy growing, and the wealthy getting wealthier. So you know, there's another story that our team has put out by Chris Sansty and looks at the Mexico election and talks about a warning and this looks into the new economy, but talks about populism can sometimes lead to results damage the very
people who are rightfully seeking their fair share. I do wonder the pushback on globalization, the rise in populism, what that might mean ultimately, do investors look at different markets as investable not investable? I mean, what's that thinking and how you and your team are thinking about that?
Absolutely right? I mean, this goes to the core of why there is such a realignment going on in if you want to call it, the Western industrialized world. That discontent on the ground that you talk about their Carol is forcing governments to either promote more industry at home poor more subsidies or tax breaks to generate investment at home. They're also looking at shaking up their supply lines for
basic goods up to more higher value added goods. So there is a kind of very shuffling going on around the world to partly address some of these issues. Now, of course, that creates winners and losers, and that's where the investors come into it is the winners are going to be broadly speaking, the rich world who can afford to either subsidize industry at home or can four to shake up their supply lines, and they can attract investment from other parts of the world. And the investors are
looking at those rich countries. And then the concern is that the poorer countries, who may be benefited from globalization in the first place, the emerging world can't compete on the same level playing field. They won't be able to attract investment in a way they once wore. But you know that said broadly speaking, you know that there are changes going on in global manufacturing, global supply lines, global investment.
But let's just say when it comes to manufacturing, at least China and parts of the emerging world still offer a fairly compelling model. They offer scale, they offer cheaper workforces than the Western world. So you know this story, while of are changes going on, it still has a long way to go before before you could really call an end of globalization as we've known over the last twenty thirty years.
Say, but that's what I want to explore with you. Like this idea of the cheaper workforce we keep lauding it is like, that's such a great thing. You know, we reduce costs, cheaper labor. That means profits go up and shareholders are happy and we can do more difends
and buy back. So I do wonder. And then yet workers on the ground are saying, Man, I'm just I can't I can't make ends meet or not, you know, because the jobs are just not either as high paying as they used to do or there's so much pressure, and I just I do wonder. Economically, you know, this is resulting in kind of the political pushback that we're seeing.
No, it is because if you want to call it the Western world for fragments, seg or the develop economy world, they they cannot afford the kind of manufacturing and much of the manufacturing that continues to be done in the emerging world and in China in particular, and even where wages do increase are increasing in China, it's still ultimately more competitive to do businesses there, or in Mexico or in Vietnam than I bring it back to say the US or Paris, where you've got union loans, we've got
minimum wages, you've got all kinds of you know, rules and regulations to pay a living wage. So that competitive age still very much exists in favor of the emerging world. And you can argue, of course, the rights and wrongs with that, but multinationals aren't in a hurry to bring back those kinds of high paying But don't forget other factors that are played to. Automation is going to be a factor in all of this that we'll see production broad closer at home too, or in the years ahead.
Hey, and I'm wondering if we can look to the results that we've seen in recent weeks with global elections and perhaps reading into the future of our country in the US. Here in our country, the United States, come November, is there any way to sort of look at what's happened around the world and get an understanding for the way that things are moving Come November well, you.
Know, it's obviously idiosyncratic team. Everyone has their own story, their own gripes, their own complaints. But you'd have to say, you know, on the surface, at least even where countries are having a pretty good run economically, at least on a headline basis strong growth, strong investments, strong markets, that is necessarily translating into a happy mood among voters and that and that's creating discontent at the ballot box. I mean, that's showing up in the polls in the US, for example,
people are citing economic and happiness and inflation. So that's one a Crallery could draw with them. And then more broadly, it's a tough time to be an incumbent in the UK election. Look a front India's pressure on. Coleman's notubt about it.
Yeah, I was just going to say, Carol, when I knew was talking about the Bloomberg News Morning Console polls of swing state that's states that we've done here at Bloomberg News, right about the fact that many voters in these swing states. Do you think that Trump will lead better when it comes to the economy.
Yeah, it's kind of interesting considering kind of the economic backdrop but that's politics, and it makes it always very interesting and as we've seen from some of the global electric elections, a bit unpredictable to say the least. And thank you so much covered what we were hoping to do on this Monday. Bloomberg News Global Economy Report. End of current.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Well, Carol put this on my radar a little earlier. A main feature of the twenty twenty four labor market is that fewer people are quitting their jobs. A lesser known one. We knew that from the Jolts data as it quits right right. A lesser known one is that fewer are actually getting promoted.
It's really interesting. So that leaves what little room for new workers to break through, as the ranks of employees above them are staying in place, and it makes it more difficult tim for young graduates to get their foot in the door.
We got back with us. Janea senior policy advisor at Working Nation. It's a media company that focuses on the future of work. Jane also former Assistant Secretary of Employment and Training in the Obama administration. She joins us from Arlington, Virginia. Jane, how are you hey, Tim?
Good?
Nice to be back. Hi, Carol.
Hi, Yeah, it's good to have you back with us.
Hey.
I just want to start with the blow out jobs number that we got last week. It came in above all economists surveyed by Bloomberg expectations. We get that, and then still based on surveys, people are not happy with what they're doing at work and they're not happy with the economy. What's going on.
I mean, look, obviously the economy's tightening slightly. It couldn't stay where it was, you know, with with you know, three jobs for everybody looking so it's tightening a little bit. But you know, I think you're as usual, you know, you two follow the information trail. People are not moving. I mean, we saw all that stuff eighteen months ago about people quitting and people. People are not moving now
and it's creating a real logjam. You know, we have four million people leaving college this time of year, and another million and a half leaving high school that want to go right into the workforce. It's going to be tough for the next few months.
I don't get it. It's just kind of wild, right, Like we talk about a tight labor market, people need workers, and yet right, it's just these weird kind of I don't know, cross currents. It's hard to make sense to some extent about what really is going on in the labor market.
I mean, look, Carol, some of its geography. There are all these jobs open, but they're in places where there aren't people looking. Some of it's a skills mismatch, and some of it I have to tell you, you know, I like to like blame the automated software that's looking at resumes. I think that businesses are missing a lot of talented people because whatever they forgot to put in their cover letter and on their resume isn't matching the
language in the job description. So they're not getting the job.
But does it work both ways? Does it work both ways? I was talking to somebody who was doing some hiring ahead of intern season, and she told me this is a shocking number. They're basically thirty places for interns at the organization that she works in. They got thousands of applications Jane for those thirty spots, and I'm thinking to myself, how are you getting so many applicants or people just doing this automatically? Are they sending how does this work?
Yeah?
I mean I think I think people are really interested in this paid internship thing. They realize that it's work based learning at its best because they don't make a long term commitment like in a registered apprenticeship probe. But they're able to get in see if they like the employer, see if they like the work. So it is really hot right now to get a paid internship. I'm an internship of any kind, but most people need the salary
to go along with it. But I understand, I mean, you know, I hate I like business too much to hand on them. But I do think, you know, I know how conversome they have to keep their business going. They don't have time to look at thousands of applications for thirty open interns ships. You're right, Tim, I get that, all right.
So I don't know what's that. You know, it's interesting. One of the things I keep saying and forgive us audience because I keep talking about Peter Goodman his new book out How the World Ran out of Everything, And you know, I keep thinking about the future workforce because it seems like globalization has really, you know, increasingly gotten
rid of middle class, well paying jobs. It really allowed people to have a good life, buy a home, support their family, go on vacation, and that we've kind of gotten rid of a lot of those jobs in the middle sector, if you will, And I do wonder kind of if we're not fertility rates are low people, you know, where's the future workforce going to be? Is it going to be robotic automated AI? Like I'm trying to understand kind of where this all goes.
Ultimately, Well, AI is going to influence every job that's out there, and it's also going to influence.
But how we keep saying like these big broad things about AI, Jane, And I'm curious how you see specifically that AI, which has been around for decades and already impacts our world, how the next generation of AI and large language models and so on, really change significantly the workforce.
So there's going to be some media changes that are easy to see and some that are less easy to describe. But let's look at PR firms, right. PR firms used to hire lots of people, junior staff. People would come in, they'd write the first draft of something for a customer, and then somebody more senior would edit it and finesse it because they know the customer better. Right now, people are using generative AI to do that first draft. So you see real slow down in hiring. You see a
real problem in coding. You know, AI can write code faster than any human and basically all those people who went to coding camps ten years ago are looking at a very limited shelf life right now. Those are two easy examples.
Isn't it amazing how we were telling everybody, Hey, you know, learn to code, right, code to that coding school.
Yeah right, okay, so let's leave it on this last question. What should we be teaching our kids? We have about thirty seconds left.
What kind of a weekly Yeah? Should they go to college?
Should they get prompt AI? Prompt school?
Prompt engineers are getting laid off now, tim too, because people realized you didn't have to have that title. But you know, uniquely human skills. All the things that we've been we've been talking about as employability skills learned the problem solve critical thinking, learn to work in a team learn sounds like a liberal arts education.
Finally, my history put to good Liberal arts actually does.
Yeah.
Some data analytics. Put some data analytics skills.
In there, all right, that part.
I don't have my daughter's kind of doing this kind of stuff, all right for her? Good stuff? Yeah, all right. Jane Notes, thank you so much, Senior policy advisor at Working Nation, a media company that focuses on the future of work. She was a former Assistant Secretary of Employment and Training in the Obama administration.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven.
Thirty Kerrol our colleague Darrell Deliver reporting last month that three years after pandemic era funding led to a boom in black owned businesses in the US, the cohort of entrepreneurs seeking to expand is facing the same barriers to capital that hamper generations of owners before them.
Yeah, we've seen this movie before. In twenty twenty three, just thirty two percent of black owners were fully approved for a loan or line of credit, compared to fifty six percent of white entrepreneurs. That's according to a March report from the twelve regional Federal Reserve Banks. Black owners to him were also likely more likely to have to use personal funds to address financial challenges, so tapping credit cards and things like that.
Yeah.
One organization trying to address this is Momentous Capital. It's a nonprofit and it just announced a one hundred and seventy one million dollar fund to invest in small businesses that are creating social impact in underinvested communities. Irael Nilsa Lopez is managing director of Investments at Momentous Capital. She joins us from Brooklyn Eran. Also, good to have you
with us this afternoon. I think the big question I have is about the structure of the organization, because when we talk about our companies or bodies that invest in other companies by provide capital to them, so much we talk about is in the for profit space. Give me some details about the structure of Momentous Capital that allows it to be a nonprofit that makes these type of investments that's looking for return certainly.
So Momentus Capital is a brand of organizations which include mission mission driven lenders, so it includes Capital Impact Partners and includes CDC small Business lending. And these organizations have over forty years of experience lending to small businesses and also operating in the underserved community space. And so when we speak about these organizations, yes they are nonprofit. However, our fund, the Equitable Prosperity Fund, is actually a third
party fund that we came together alongside aligned investors. So we have over twenty limited partners that make up this fund, which does include Momentus Capital, but it also includes our aligned partners for many years and also from new partners. So we have financial institutions, we have high net worth individuals, family offices, corporations, and also charitable foundation. So it's sort of a blended capital structure which exists as its own fund.
That's one hundred and seventy one million dollar fund, and that's the fund that is able to make these private investments into these small businesses.
And talk a little bit about the expectation at least timeline for returns. Here we're talking expectations are three to five years to see a return.
Those are the individual investments and how they're structured. Yes, the fund itself is your standard run of the mill, ten year close ended private equity fund. The way which we structure it with our investors, each investment as a whole is structured to be along the three to five year You know, nothing's written in stone, but that's where we have found where we can provide growth capital in an adequate amount of time, do also at the same
time liquid date and provide the return to the investor. Well, at the same time, the growth capital itself can be used to grow by the entrepreneur.
Explain that the type of capital that you offer you said growth capital, but you also say it's non delutied. So does that mean you're giving loans to these companies.
Yes, Actually, that's a great question. It's a question we get almost every day. And so the next is the reason for this fund is because we have found, again the over four decades of experience, is that entrepreneurs are oftentimes the structure of a traditional debt instrument is often lacking for some of these entrepreneur Entrepreneurs that don't fit the mole either is a personal guarantee, collateral based fixed payments in payments that don't align with the businesses specific
cash flows. On the under hand, you have equity, and then you have equity where you imagine you're an entrepreneur, you've built your business to family business, and then you sort of have to give a piece of it to a new institutional provider capital provider. So our instrument lies somewhere in the middle. So it's much more patient capital.
It's revenue based repayments, profit based finance, meaning we are taking the growth risk alongside the business, and so we structure our investments so that it's a revenue based sort of repayment structure, so that if the business requires maybe a couple of years for that capital to really begin to leverage in returns, we're there with the business until it does begin doing so. And then we don't take
any shriff. We have no ownership stake, we have a preferred equity stake, and so you have What we try to do is we try to give the best of both worlds, and so it's not a traditional debt structure where there is no personal guaranty, there are no collateral,
no fixed payments expected. However we're not there forever, we have a structure that is a self liquidating in a sense, so we also hope for our own investor's stake to provide them that liquidity that also your traditional equity investments don't provide, which is oftentimes a very heavy back ended exit risk.
Ural Also, would you say that it I mean, would it be fair to call it sort of in the private credit universe?
Is a payable right, It's certainly a payable yes, I would say, we'd like to say it's it's an instrument. Well, we don't like to call it alone all because ultimately there is it's an open ended redemption period. The redemption period is defined by when we do receive these these returns. So if it takes the company a little bit longer than that five years, that's just the way we structure
the instrument. So we are there to make sure that we benefit and we are repaid when the company is inspect doing well with our capital.
So just so that I understand, So then what's typically the return to investors, and then what's the cost to those that are borrowing or partnering up with you and getting the inflation of capital.
Yeah, the return we're targeting, it's a market return. So we are targeting commercial returns and I would say, without getting too specific, of course, to it for our investors. And the cost is somewhere along between the I would say subordinated debt and equity sort of expectations. And the reason for that is because of the highly subordinate nature of our instrument.
What we want to do with.
The instrument is not just provide the capital, but also crowd in additional capital that maybe needed. So the use of our funds is for growth, but ultimately these companies will similarly have working capital needs or just other continued funding needs, and so we're not there to take up
any sort of asset planes or collateral planes. And so what we would like to do is have other lenders look at the company and say, well, we have some level of comfort that there's this institutional investor in there, and also that they have become subordinate to any senior lending. And so we're there to provide senior lenders with some comfort. And so you can imagine the risk return profile of that being somewhere in the middle.
Give us an idea. We've got about a minute left of some of the companies that you've invested in, what's the typical size that a lender or borrow or excuse me needs give us an idea and what type of businesses are we talking about?
Yeah, so we would like to target investments, particularly that serve underserved communities, but particularly we're focused on improving access to healthcare and improving access to healthy foods. So one of our investments is a a healthy food distributor that works with diverse farmers in Virginia and distributes healthy foods to underserved populations in Washington, DC. So that's one of
our investments. Another one of investments is a medical image and company where our growth investment was used to grow and develop a teles scan for maternal health screenings in healthcare deserts. So the typical size of our investments tends to be between three or five million, which does translate to companies that would begin with maybe a four million dollar revenue size.
Do all of them survive? Just got about fifteen seconds? Do they make it?
Yeah?
I mean, listen, our portfolio is healthy today. We we just closed, but we have about two years in so our cooling's doing well so far.
And Elsa Lopez, Managing director of Investments over at Momentous Capital, joining us from New York. Thank you so much.
I'm brother Marco, a journal How about you let me drive?
Oh no, no, no, no, who's going?
Alright? Please, I'll do the gravel. Let's wait, I want to drive. It's a good question. This is the drive to the clothes do well round? Should it on? On Blueberg Radio? All right, TikTok?
Everybody, jest about thirteen minutes left, just under thirteen minutes left in today's trading. We've got equities near just off their best levels of the session. And you heard Charlie breaking down some of our focal points. You've got yields. Certainly they have moved up coming off of that Fridays report. So that's kind of our backdrop, macro backdrop. As we are counting Dallas than forty eight hours away from the next FED decision.
What are you going to count down after that?
I don't know, You know me, you'll find something ning.
Hey, that chuckling you here is a polite chuckle from Carolschlife. She's chief investment officer over at the Low Family office. She's here in the studio right now. Good to see you.
How are you.
It's great to be here. It's lovely to be in New York. I love the energy.
What do you think of that?
Right now?
I love the energy? And actually I was astounded at the airport last night in Mini. It was no Minneapolis. It was so busy. And every airport I've been in, except for Milwaukee last week, every airport I've been in, it has been packed. Every plane's been packed. So it's positive for our year end expectation that we actually see the economy firmer by your end.
So are you are you using that anecdotal data to sort of inform the way you're thinking about the economy.
I think it helps contribute, But so do conversations with our commercial bankers, sort of conversations with my clients who are still active business owners in a variety of different parts of this economy, from basic manufacturing, so they're impacted by tariffs, by they were impacted definitely by trying to get imports in through the port's import you know, we've got all kinds of stuff.
Okay, So, like I said, our audience is going to hate us at this point because since we've been on air since two o'clock. All we keep talking about is this book by Peter Goodman, How the World Ran out of Everything, But it really taps into globalization and kind of where we are, and then it kind of gets into why a lot of workers don't necessarily feel good because either their jobs they don't have them anymore, they
were they were good paying jobs. Take the audio industry, and then maybe that's why you see some of the political polls or elections globally play out like they are exactly.
There's such a disconnect because you know, back from decades ago when we were all reading about the world is flat and the globalization and all the FP and A departments, we're telling everybody to outsource, outs ors, outsource right and thinking and forgetting about the second and third impacts of that, which is where, oh jeez, if the consumer decides they like blue not purple, then it's months and months and months to get it back over here. And there's a
lot of people that got left in the dust. And it's and I think when you look at the Harris Pool in terms of the people that think the markets.
I can't stop talking about this.
They think the market's down.
They what do you do with that.
I think the biggest thing we do with that is we get younger people engaged. And because you've got two different contingents, you've got the baby boom driving politics, but you've got millennials and gen z, which are bigger populations together, all turning thirty five ish wanting to buy homes which they can't afford, you know, without a co sign by mom and dad, and they can't pay off.
See co sign on the school loans and then you co sign on the house and then you like, I mean, it's kind of crazy.
Yeah, I just want to jump in real quick. If people don't know the Harris Pool that I'm talking about that Carol just mentioned, it's a Hair's poll for the Guardian shows that fifty five percent believe the economy is shrinking. It's a troubling sign.
Markets are down, yeah.
Forty nine percent believe the S and B. Veenan's stock market index is down for the year. That the index went up twenty four percent last year and it's up more than twelve percent this year. This was as of May twenty second, when the Guardian came out with this, And forty nine percent believe that the unemployment rate is at a fifty year high, though the unemployment rate has been under four percent, a year fifty year low. This
again coming from The Guardian. They teamed up with the Harris Poll last month for.
This wast it's because so much of the population has been left behind and that outsourcing and now we have a shot at bringing some of it back here. In terms of manufacturing infrastructure, one of the interesting anecdotes I picked up is that unibonded issuance is the highest in the first year to date as it's been since here early twenty tens.
Interesting stuff coming back and needing to build things out.
Yeah, which means schools, roads, bridges and so if you're pulling the funds in in the last five months that has yet to be put into the ground or people hired to build those. So I mean a lot of our basic jobs. We have to rethink our economy in general because you've got AI on the one side, but we also have huge need for welders and electricians and skilled workers to run the plants that we're going to have because these aren't going to be the old These
aren't going to be our grandfather's manufacturing plants. They're going to be new manufacturing plants with fewer tech enabled people.
So what does that mean, Like you mentioned you've been talking to commercial bankers that you work with business owners, what do the business owners say about, Okay, how if we are doing more things our supply chain back home, it's going to be a more expensive supply chain, I
would assume. So when we think about that cost side to their equation trying to run profitable businesses, and I think on the public market side of things, where investors care about things like buybacks and dividends, the cost equation change is like, how does the investment environment change?
Well, the interest thing is is if you look at a long term chart of margins, they're coming off of historic eys and they've been at highs for a very long period of time. These aren't the margins we had when we were a manufacturing dominant.
Society benefiting by globalization exactly.
Well, benefiting by globalization and technology.
Okay, And so to the extent.
That we can get AI in there and figured out how to work smarter in those factories. Yet in the long run, our suspicion is it that margins don't have to be two hit In the short run, it's tough to be a public company as opposed to a private company, because a private company you can do those sorts of investments, rearrange your business, and then go public if you want once you've done that. But it's tough for because investors
do demand that quarter to quarter, so we need CEOs. Actually, if they could get together and say, no, here's our long term vision because a lot of our lot of countries. You take a country like China that can plan for the long term and trash rarnings, well.
We know shareholders are notoriously patient.
We'll see that.
But that's the thing, like I do wonder. First of all, we Tim and I keep hearing where there's so much money in the private markets that it's like highly recommending younger companies to just stay private because they can benefit. So that it makes me wonder from what we do on a regular basis in a big way is cover the public markets. It makes me wonder about like the future of the public markets.
I suspect you'll get you may not have a ninety five to two thousand kind of a rusher in nineteen eighty two to eighty three sort of IPO boom, but I would suspect sooner or later, even that most patient capital gets itchy in good markets to see it out. We'll see the test because you know, the so called IPO window is hopefully opening. We're wishing it would open and ready to do.
Good equity folks would like for it to open.
It.
Yeah, and there are so many signs that it's opening a little bit, there are, And I mean it all depends on if you can get those deals out and they generate more deals. I mean investors are anxious for that to have.
Do you want to ask about can we ask about Apple? Do you have a thought? I know you don't. I don't know how specific you can get and drill down, but you know we've been focused on Apple AI. There's still a you know, one of the largest market cap companies. I don't know, is there a technology thought. I don't know where you want to go and how specific you can drill well.
I think the interesting thing is is like everyone wants to know what exactly this is going to do for me and how excited it's going to get did But did I know I was going to become addicted to my iPhone before they introduced it? No? I mean I want that kind of system.
I thought it was just for foc calls.
But I also do want and I was listening to you earlier and I saw those same memes go through my Instagram, because I actually have trained my Instagram to feed me funny stuff to make me laugh.
But the.
Meme about please unload my dishwasher and do the clothes, not paint my pictures and write my music and do that stuff. But we want something like that, But I also want something to organize my day, and totally to that, I need. I need to arrange for twelve people to Mexico and spring use it on the phone and figure it out and get me the room I need.
Okay, But you know it's funny you say that because we're then we only have about a minute left that we're all addicted to our phones, but we're also all probably trying to use them less.
I'm trying to use it strategically in terms of there's certain certain things that I have on because it's the only way I get pictures of the grandkids or invites to their birthday parties. And then there's other things in there that I train there specifically too, because I don't hover over certain things, and I do hover over other things to train it to make me laugh.
So yeah, I actually put it down. I actually put it down on the charger, especially on like weekends, unless I know that got something work related or something, you know, and it's not that my family. Usually I'm with most of the family that I most care about.
Yeah, you have to be very intentional about it, though, because there is an addictive component.
I think I think she said of a filter for my text messages because when I text you, Carol Master, I'm surrounded by Carol's right now.
Like check your phone, check your messages.
I'm like sending her an email, check your text, or sending our text, check your email.
Oh my god, it's complicated.
Love.
Just love Carol, Carol, all love.
All Carol's are great. I'm just gonna put it out there. I'm really fun to have you in. I hope you enjoy your time in New York and look forward to next time. Great to Ketche, thanks for having me Carol's lives. She's chief investment Officer over at BIMO Family Office, joining us in our Interactive Brokers studio.
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