Bloomberg Businessweek Weekend - June 30th, 2023

This is Bloomberg business Week 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 Stenebeck from Bloomberg Radio.

Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. Carol Masser along with Matt Miller, who is filling in for Tim. We had a week of big macro thoughts thanks to four global central bankers, including Federal Reserve Chair j Powell, reminding us of persistent inflation and the need for more interest rate hikes. Meantime, Russia appears to have avoid a disaster following last week's mutiny, although details on

Well, they usually begin with China and more recently they'll talk a little bit about India, but they will talk about the impact of Russia on those those countries. You know, India has and China both have tried to tried a pretty fine line, China a little bit more in support of Russia. India kind of trying to play both sides. Both of them are big oil importers, so it's important for them to maintain a relationship with Russia.

Does the mutiny though that we witnessed over the weekend and the I guess the solution to that problem have any impact on your markets?

I don't think so at this point. You know, it'd all wrapped up over the weekend, so we didn't really see its impact on trading. I think, you know, a lot of people were surprised overnight.

When when that protest or that rebellion or whatever it was took place, but it seemed like it was people were pretty satisfied by Monday morning.

Well, it is interesting too that you did have China's Foreign Ministry saying it supports Russia's actions to maintain national stability. A brief statement by a ministry spokesperson who said, it's Russia's internal affairs. But it's just like China saying, wait, we got stuff going on too, and it's our internal affairs.

That's one of their favorite phrases. As you know, they think that the Taiwan straight is their domestic waters. They think that the Taiwan issue is a domestic issue. Of course, they think the weaker issue, and the Tibet issue and the Hong Kong issue are all internal affairs. So they don't like the idea of people being involved in other people's domestic activities.

But I guess so just to follow internal they'll.

Have a problem with China being involved in Ukraine's domestic activities.

I know, but these people always pick and choose when it's wrong and when it's right when they're doing it, I guess.

It's okay, Well, pick and choose for us. I mean in terms of I guess we're all trying to as international investors, trying to understand which internal affairs become global affairs become global investment stories. So how do you kind of play that out?

Well, One of the things that I think we've seen over the last five years is really people questioning the sensibleness the reasonableness of having so many supply chains linked back to one country China. I think COVID and the breakdown and supply chains really reminded people how much risk we were taking on having so much of our economy

But still issues tell us about you just back, what were you doing, who were you visiting? What did you want to see? Specifically? There's stuff you can get on the ground that you can cannot get from afar.

It was fascinating. I was mostly in Bombay and the area around Mumbai and it was amazing to see how much infrastructure they're building. One of the frustrations with India for a long time was that the national government couldn't mobilize enough tax resources across the country to build the infrastructure that they needed in the big cities. India's of course,

What about the middle class? What's the trajectory looked like there? You know, China, obviously that was a massive part of the story over the past twenty years. So is it going to look the same way in India?

You know, I think it's going to. You almost always have a situation where rising wages drive the development of a middle class. If you've got enough employment for those people, that'll drive demand for motorcycles and then eventually cars, it'll drive for apartments and eventually houses, life insurance and other sort of products that come with that rising wealth. So I think you'll see pretty much the same trajectory in India that we saw in China, perhaps not as smooth

David, I'm going to probably sound pretty naive, but yeah, I'm going to just go for it. India, China, Saudi Arabia, Russia. Money trumps all. Investment opportunities trump all even if we have some problems about our concerns about internal affairs in a part of the country or in part of the world.

It does.

You know, people investors are looking for opportunities around the world, and I think they're looking for opportunities for something to surprise to the upside. I think if you look at a Saudi or something like that, that's a country that's

But I guess my point is that if there's an opportunity to make money, I'm thinking about, you know, I'm going to go back to Saudi Arabia that we all kind of forgot about, you know, our many have you know, the killing of Jamal Koshogi. And yet you know we're seeing, you know, the PGA tour and live golf. Like it's just when there's money to be made or opportunities that we kind of turn and look the other way of it.

Unfortunately. I think that's true, and I think that's been true with regard to our enthusiasm for China for many years. Really thinking that changing in involving them more in the global fabric and the global business fabric was going to change their behavior, and it really didn't. So I think that people do need to be careful who they're investing with,

All right, very interesting stuff.

India must be the best of those options that Carol listed, right, and they happen to have the best growth trajectory as far as we can see from this point, they really do.

It's amazing. A lot of people haven't followed this story, but over the last ten years they did iris scans and fingerprints of every single citizen, which created an environment where they could open four hundred million new bank accounts, and it created a system where the government can distribute all their benefits, payments and things like that electronically directly to the consumer, not through other governments which tend to

David Yes or nos is a point that my five ten years from now, we look back and We're going to say this has been the world turn from China to India.

It's going to happen. It's already happening today.

It's bound to happen, all right, listen. So good to check in with you as always. David Ridal, He's present and founder of Retal Research Group on zoom from San Francisco. I do think about this, Matt, these turning points in our world.

Yeah, it does feel like we've hit that. As David said, from his perspective, we already have.

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.

We've had a flurry of private credit and lending stories over the past couple of weeks. Just today, pe firms finding a way to get more financing for their portfolio companies while screoting provisions meant to protect existing creditors, tapping the one and a half trillion dollars private credit market. Matt, I'm obsessed with the private markets. I'm making you obsessed with it.

No, No, I love it.

I mean I used to go to Super Return every year in Berlin, which is this big private anty conference, and I know you go to Milk, and I'm a little bit jealous.

I would like to go there as well.

Well.

I brought a little bit of milk in to you.

Thank you.

We have a great voice on all of this, and someone who's got it. Really a fascinating career when it comes to finance Wall Street, including Chase and Direxelburn and we talked about it. Ken can Sell is with US, president and CEO of Churchill Asset Management. It's the forty six billion dollar private capital affiliate of Nuveene. So there's your backdrop size and scope. Like we like to do a Bloomberg. He's here in studio. It's so great to have you here.

How are you good.

Great to see you again, Carol and Matt great too great to join you here.

I feel like I have a million questions I do.

I have questions for me, and I have questions from listeners. I've been talking to people all day on the Bloomberg like IB like, oh, I got Ken can Sell later, and so you know, Ryan sent me a whole list of questions.

Okay, right.

So, Ken, first, I want to start with you. After we talked at Milkin, and we're going to get into stuff. You said you were going to go have dinner with a bunch.

Of milk and alone with milk and alumni.

That's exactly right.

So Mike hosts a dinner every year at the conference and it's it's a lot of fun.

So I am curious. I'm not going to ask you for all the details. And I'm sure there was a lot of pleasantries and fun things, But what was top of mind for you guys when it comes to kind of the business world or the financial market world. Was there something that dominated or no?

Well, I mean, first of all, Mike spent a lot of time talking about his book, right, So you know during COVID he you know, he had been working on a book on you know, you've had you had him on to talk about it. Yeah, so that's a whole nother story. But you know, it was fascinating. But no, I would say, you know, in many respects, the growth of private credit and private capital was very much a

So I the difference between the your original crew, you know, the like barbarians at the gate guys, and the kids who are in direct lending now or BDCs.

Or well many of many, many of them is still in direct lending today. In fact, many of the folks that I work directly with at Drexel who were in my class so to speak, are now you know, leading major private credit firms, Apollo for example. I mean a lot of those folks you know, were with me at Drexel in a long time ago. So it's it's great to see, you know, everyone's kind of gone out and done their things. So you know, that's been, it's been.

What I was going to ask about then, So you guys are in a great position to advise the young guys. I mean, when you started, you were a kid, right, yes, and so was everybody in your shop. You were like in your twenties or max thirties, right, and so people who are in their twenties.

And I remember was an all nighter my first day on the job at Drexelbournam. Literally I had to call my my wife and tell her that I was probably not going to come home for my first literally my first day on the job. So it's it was a different world.

This is how it's going to orientation, yeah, exactly.

But what I what I wonder is the new kids have never seen any rate cycles. I mean, they kind of have if they went like two thousand and four two six, but not really. What is this like in this business that is so affected by rates seeing you know, five hundred and twenty five basis points in a year.

Well, it's certainly I think given some of the younger folks in our business a perspective, right, I Mean if you think about, you know, the fact that we've been in basically a ten year you know bull run of you know, continual growth and low interest rates fueling that growth.

Ken higher rates though problematic for the private lending world. And I bring it up because we've done a few stories here at Bloomberg just in the last couple of weeks about you know, as these rates go up, you know, is it a problem for the portfolio companies? Too expensive? Can't manage it? Do they go under? And that certainly we have an impact on the private lenders and they're investors.

Well on one on one hand, it's good news for investors, right Suddenly those same conservative loans that we made, you know, a year ago at six percent or seven percent, are now yielding twelve percent.

Right.

So in many respects, that's why everybody wants to talk about private credit, right because they're looking at private credits saying wait a second, this is a pretty attractive dynamic it's look higher.

Returns as long as the companies can pay.

Correct.

But remember we're talking about new loans we're making today, at least for new investors, right, So if you're an investor coming into private credit, you're looking at much higher returns, lower leverage, better financial covenants, generally higher quality companies that are raising capital right now, because the lesser quality companies are probably not being sold in raising capital and more equity.

Right.

So from a credit perspective, from a new credit perspective, it's the best of time.

What about the old ones, where it's a fluid.

Correct From an old credit perspective, an existing credit perspective.

It's a different story.

Right.

So now what we're seeing are the more aggressive lenders who are out there, maybe getting slightly higher returns, kind of pushing the envelope. From a credit perspective, Suddenly those companies just don't work anymore.

Right.

You know, a company that was six or even seven times levered in the old world, you know, at current interest rates, is underwater, right. They can't meet their interesting expense. So I think there are going to be we are going to go through a time where there is is you know, kind of the Old saying, Warren Buffett saying, right, when the tide goes out, right, you realize kind of who's you know, where he's got Who's got a bang soon?

Maybe who not?

And so I think you're going to see that the more conservative lenders, the lenders that really have you know, kind of you know, been more traditional and focused on higher quality, are going to show to be shown to have performed very well, and those firms are going to raise more capital, and I would say the more marginal players are going to get washed out.

What I find fascinating is how this whole thing started in terms of the whole that was there left by banks abandoning the mid tier market, right, And so you guys got in and made an industry. Yes, are they coming back now? Like when Ken Griffin says private credit is one of the main opportunities for me in the next year, don't banks want to get in on that too?

They don't.

And I would say that if anything, the latest banking crisis and the dynamics around you know, deposits and some of the challenges of maintaining funding and deposit funding is just making making banks even more conservative and making making them really pull back further from putting out long term investments, long term financing in basically ill liquid investments right as good as a credit environment as we're in, those loans are still private and ill liquid, right, So in many respects,

Are directly You've seen that as absolutely.

Absolutely today there are really no banks that we're seeing, you know, either thinking about entering the market let alone. I mean, I would say, if anything, they're thinking about, you know, pulling back from you know, further direct lending. So we're doing more than and we're doing more as

Still the golden age of private credit very much so.

I mean, if you think about the risk adjusted returns that were able to deliver to investors twelve percent today for a regular way high quality mid market loan with lower leverage, better covenance, more equity. And I think an interesting phenomena that the quality of the companies we're seeing today is actually better than it's ever been because the marginal companies, the businesses that are more challenged, are really

Well, we talk about another shoe to drop, and I know when we were at Milk and I think I talked about you with you about transparency and concerns about not really understanding what's going on in the private lending market. I mean, is there a possibility in some of the lower tier maybe companies that maybe don't have the greatest financial system, that we could see some problems maybe not systemic, but could it be problematic.

Oh.

I think if you look across the portfolios right of existing lenders, I don't think there's any question that the you know, as we move through environment, and certainly if rates stay higher for longer, I think you will start to see cracks in those smaller companies, companies that maybe are not market leading businesses, businesses that are you know, are are facing pressure from you know, either an ability

They make a mistake in pausing, then, do you think and not continuing to.

I think it was a short pause, and I think it's really an assessment of Okay, what was the impact of the banking issues, you know, what has been the impact and some of the other external pressures. But I would expect the FED to continue to raise rates, you know, longer than maybe initially thought. I think there was a point where the number of us thought that maybe by the end of the year, you know, rates would start to crest and come back. I don't think that's going

By the way, do you have companies in your portfolio that we're looking at, you know, Live war plus five hundred, putting them at six or seven percent and now they're at thirteen?

Well, every company, at every company in our portfolio, all of our senior loans are floating rate.

Yeah.

Right, So the yield, if you will, across our entire senior loan portfolio is up, you know, roughly five hundred basis points from where it was, you know, just just a year, year and a half ago.

So are there going to be defaults? You think?

Are there specific sectors where you think we're going to see defaults more or regions?

I think that in certain sectors, I think leverage got a bit out of hand in terms of you know, you know, higher leverage. Right, So there were areas, for example, when software, you're seeing companies that were leveraged six seven times cash flow. I mean the numbers don't work at

Right.

We were never big believers and loans like that, So all of our loans are more traditional lending. But certainly areas where leverage was was was high, you're you're gonna have to be seeing a re set, no question.

I always wonder what the delta is between private and public, Like what's the interest rate or the yield differential between one of your loans and then a similarly rated you know, bought.

The public public public loan. Typically the premium that we call it the yield premium is around one hundred to two hundred basis points between a you know, a broadly syndicated loan, a publicly traded loan new issue, and a and a private a similar private credit. So and the theory is of course that it's private and a liquid and therefore you should get a yield premium for you know,

Ken just got about forty seconds or so. What's top of mind for you every morning?

My people in my firm top of mind. I'm always focused on attracting, developing, promoting, nurturing, mentoring my people. If I look back and we've grown in eight short years from zero capital to now over sixty billion, there's no question that the difference maker was the talent and the capabilities of our people. And if there's one thing I've learned from my background, it's all about looking to inspire

Thank you so much. This is a treat come back soon, great great consact, so appreciate it. Presidentcye have Churchill Asset Management, and we do highly recommend go listen to Barry Ray Hills. He had a really long, in depth conversation, but we'll get came back soon. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter 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 play Bloomberg eleven thirty.

We try to figure out when we should go apply to be a Citadel intern. In the meantime, we continue to kind of pass through economic data points headlines on a lot of things. We talked about residential housing earlier with our team, and we know the current issue of Bloomberg Business Week is all about the office real estate market and noting that it's getting scary. But then we hadessel Green yesterday selling a stake in a park a

I won't use the.

Tale of two Cities cliche, but clearly there's a difference, right if you have a great office building on Park Avenue in a place where everybody wants to be, or if you've got one of the buildings on the Third Avenue canyon down here that nobody wants to work in or will ever be able to live in.

There's a very big difference in the value of those.

Assets not apples to apples. Well, we have a great guest to comment on the commercial real estate world with us is Michael Chaveau. He is founder, chairman, and CEO of the international real estate development and investment company that bears his name. Is company owns the Transamerica Pyramid in San Francisco, brought that back in twenty twenty other properties around the world, and we welcome him in our Bloomberg Interactive Brokers studio.

Hello, Hello, Hello, good morning, good afternoon.

It's morning somewhere is it morning? Yeah?

Bloom this morning.

When when Carol and I get our Citadel internships, have you got a place for us to hang out in Miami?

By the way, the Citadel play in Miami is something that everybody's been talking about because you know, the move of Citvielle to Miami from Chicago has been a big generator of kind of other companies moving there. This whole interest thing is a phenomenal marketing tool. Right now, You've

But the fact that it was great for sl Greens.

It was amazing for Estel Green, and the fact that the building is worth more than the debt was a miracle on that specific asset. But as you said, it's not even a tale of two cities, it's it's it's a building specific today, and the separation between good and not good, or good and really bad is huge. There's no more in between. It's either your winner, which means you're a trophy building, you're generating rents of two hundred bucks a foot plus in that market's on fire, or

By the way, what do you do with those buildings on Third Avenue, because we've heard from people look into it. Not only does nobody want to work in them as office buildings, but they cannot be repurposed as residential.

I'm gonna ask you, when you open your fridge and you see the milk expired, what do you do with the mill? Throw it away exactly. And that's what's gonna happen with these buildings. So when we're looking at these buildings, we don't buy on Third Avenue because I don't really it's it's not our neighborhood. We only focus on super prime real estate. But at some point the value of those buildings is going to trade at land value and there will be an opportunity to demolish them and build

Native For example, even to the Net in London. Yeous, it was a bank and now it's a really cool hotel with like nine restaurants.

But once we take down the sour cake. Are we going to build new cakes, in other words, new offices or are we going to do something else with that lane?

Well, we're in certain cases where as there's demand, we're going to build new office. I mean, I'm a big believer that the idea that everybody's working from home is nonsense. You know, pre COVID, we all remember everybody wanted to be Google, Apple, Facebook, We all wanted big offices, hold hands, you know, and.

In collaborate years ago.

I'm just going to I.

Want to say that every time I come to this office. This was built in two thousand and five. What a visionary mic was to do this, to bring people together, forces you to come together in London as well before you go to your office. This is it's brilliant and he's a true visionary.

It's a fantastic place to work.

And our new office in London, by the way, I Norman Foster designed that as well.

So we're so I just toured that actually with Norman. Norman's designing four buildings for us. He's also doing the Trans America Pyramid in San Francisco, and you know a couple of new office buildings in Miami, The building is amazing. But just to go back here to your question, we're going to build office, we're going to build residential. We're going to build the right thing at the time. But the value of the land will start making sense.

Go to San Francisco. You bought that Transamerica Pyramid back in twenty twenty, I think it was six hundred and fifty million dollars and you're putting a ton of money in to renovate it. Any regrets about that property and help me understand San Francisco by.

Five times again if I could. It's the first thing, as I said, focuses only on elevating super prime real estate. It doesn't get more prime than the Trans America payiod.

So what's going on San Francisco. We have a cover story on Business Week at San Francisco's going through really tough.

So if you read the press, you know, and you think San Francisco is dead and it's about the sink and the cable cars are going down the ocean. You guys reported recently about the Trans America Pyramid. We've signed multiple leases between two hundred dollars to two hundred and

To get ahead of itself. Also I mean, I feel like we've been talking about that, the housing problems and situations, the expensive nature of San Francisco city like San Francisco for years. So did it just kind of need to write itself or is it the pandemic?

I think Look, I think it's a combination. It's it's the star aloge, the stars aligned in the wrong location. And that says because the pandemic took a hit, the largest groups that suffered from the pandemic, or in the sense from an office perspective, is the tech tenants because they all of a sudden figured we can work from home. But that's all changing, right You're seeing a change of that, and right now we're seeing even in San Francisco, we're

You've got to end the flow.

Or Ed Lola, who's dinner San Francisco Bureau is listening and says, ask him, what's going to happen to downtown San Francisco, Westfield and all the corporate real estate is empty. Everyone wants it rezoned.

So well they're working on but again part of part of the issue there is, as I said earlier, not every building works as as as a conversion, conversion to residential. San Francisco from all market needs it more than anything else because housing prices are out of control. You know, Plumouth in San Francisco is sub three percent today, which

I would love to hear your take on New York because San Francisco, when I see that rents are going down there, it just makes me excited because I want to live there and maybe I can afford it one day. Miami obviously it is white hot, not just Citadel. I mean even before Ken Griffin thought about moving to Miami, everybody wanted to be there. But New York feels kind of dead.

You know.

Even on this block we had all of these big tenants downstairs, and those stores are empty still, right, J Crew.

And Furry Secret and Buckle Buds.

They're all gone. So I just wonder what happens to New York.

You had the container store that went away, right, Yeah.

We had, and it's gone.

We used to have Williams Sonoma and Pottery Barn. They left and I asked, MGA, why are you leaving? It's a great place to be, and they're like, it got too expensive.

Okay, well there was an issue with obviously the cost as you said, the costs went up. They couldn't afford it. The business interruption. But you're seeing if you look at Madison Madison, rents went up from it that it was one thousand bucks a foot down to four hundred. You're back at nine hundred bucks the foot on Madison. There is a bounce back in the locations where people want to be.

We want to roll into the conversation though also our Ed Ludlow, who of course is co host of Bloomberg Technology, because we've had some news on the EV space. But before we get into it, you know, you really kind of popped in some good questions on San Francisco. You're living in the San Francisco area, do you buy that San Francisco is going to be? Okay?

I don't buy it in either direction. I asked the question because it's what the debate is here among everyone, residents, the industry. We had our Bloomberg Technology summit last week, Michael, and the future of SF was everything that people were talking about. Alongside AI and the mayor London. Breed was here and I think what we're talking about is downtown SF.

So you're asking the person that has the largest investment in downtown San Francisco. We have a billion dollars invested at the Transfermerica Pyramid Center, which is a full, full city block. I've had multiple conversation with the mayor about this whole idea. These things take time. It's not happening in five minutes. And the biggest issue of San Francisco has and has had for a long time is bureaucracy

How do you deal with that.

It doesn't seem like that will be dealt with. I remember going to San Francisco ten years ago to interview people around an Apple product release and Chris Sokka had to break up a fight between two homeless people behind us because they didn't know who owned the joint right. So, I mean, the homeless issue has been a problem for decades.

That's not going to get solved well, But you didn't feel the homeless issue when you had people on the street, right. Part of the issue with the homeless issue. When there's nobody on the street and it's mostly homeless, and you're and you're and and the ratio between homeless that the non homeless people is upside down, you feel it a lot more right. And that's where you start seeing crime. That's where you're seeing drugs. I mean the whole area

And I want to bring you in because initially we wanted to talk to you about what's going on at Stilantis, and I'm thinking about EV charging units. Right, You've got another kind of Stillantis taking a page from Tesla's playbook in terms of lining up other automakers and I and we can talk about EV infrastructure.

Tell us the news though, Okay, so summing up the news from Stilantis. They're basically making a standalone power unit, much like Tesla has, so down the road they can order, they can offer the charging at home infrastructure, energy storage, and then the charging products. The thing is, we don't know anything about it. It's going to be through third party partnerships, investments through their venture arm and in this country,

Network, Michael, how do you think about this stuff?

So we just completed the Mandarin Oriental Residences in Beverly Hills on Wilshire Boulevard, and you know, in California, obviously, as you know, evs are are extremely popular. I think you know, a quarter a third of our parking spaces are actually are actually all facilitated with private charge station and we provide that to people that move in. And that's where you're seeing. As you said, the private sector

So it's becoming a bigger, bigger part, right is it becoming a bigger part of you as you develop.

For sure on the West coast on the way I think that it's really the mindset of the consumer. The West Coast consumer is very focused and there's a lot of demand for ev for for for evs.

But don't you have to plan ahead, like if you're putting up a building or you know, re engineering a building here in New York, if you're building something in Miami, don't you have to say, like, okay, as Ed pointed out, Stillantis doesn't have electric vehicles in America this year, but in two or three years they're going to have a ton of them, and so eventually, you know, I mean, you've got to think five, ten, twenty, five, thirty years ahead, right do you?

I'm thinking about my internship at I said. But the answer to question is yes, New York is a unique market. You don't really we don't build a lot of parking here.

You know, is an energy.

Efficient building where very much like your headquarters in London, you know, being environmentally friendly and environmentally neutral.

Where's your favorite place for opportunities or to build? Right now when you look around the globe and let.

Me ask you about the US versus the rest of the world on that note, good, you know, because right now America is going through a tough time. My wife's from Spain and she has issues with our government and our people, you know, But how do you look at it as someone who immigrated here also, you know, twenty thirty years ago.

Well, that's a load of question. We don't have that many that much time left they even answer that. But if you think about how other people look at how foreigners look at at America, We're still looked at the best place to invest. And that's it goes back to the sel Green deal. The Japanese just put tremendous amount of investment in here because the US has looked at it's the safest place to invest. Europe is a disaster from an investment point of view. They have you know, Spain, Germany.

So, Michael, thirty seconds left here. So I'm not gonna poo poo some of the journalism that we've all been doing and the narrative out there about the concerns about office real estate. But do you think there is a crisis brewing? And just got about thirty seconds twenty five.

It's as you said, there's it's not a crisis. It's not an overall market. It's there's a crisis in the B and C class office and and it's not a crisis that has expired. It's got to be demolished, it's got to be a replacement.

I talked to someone who was overseeing kind of all of the old assets from like sears and so and so forth, and just saying, you know, I'm so glad we're not talking about the demise of the mall anymore. Like we've moved on to office and it just sounds like we're cleaning house at this point, just a little bit.

There's a reset and like you said, old inventory out, new inventory in, and people are paying for it. The good thing is there's a lot of money out there to pay for new inventory.

Come back soon. This was really really fun pleasure.

Thank you so much, Michel Sfoe.

He's founder, chairman, and CEO of the company that bears his name here in our interactive broker And thanks Ed, Yes, thank you, Ed Ludlow.

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.

Also obsessed with what's going on in Houston, We've been talking about how electricity demand in the second largest US state surpassed the record set during the summer of twenty twenty two as searing temperatures boosted ac use we're of course talking about Texas types of one hundred and ten

Yes, yes, absolutely, So we are watching the grid in Texas very very closely, and like you said, Narene had this fantastic story come out today. She's our grid expert. She has been looking into gas generation and how that

So what's the problem with gas plants in cold weather? Do they literally like not have insulation or you know, does somebody leave the door open?

I mean that's wrong.

Yeah, absolutely, And it is actually a number of factors that hit all of these plants in a different ways. So like the facilities aren't uniformly winterized, right, and so when it gets really cold, like, different plants perform better in different temperatures, right. Some of them rely on like a single gas pipeline for supply. So like say that pipeline has an issue, Say it's really cold in that pipeline freezes, like that can be a real problem for

Right.

It's a very cool story because not only does she kind of uncover the vulnerabilities of gas power plants for us, I had no idea that this was part of the problem, but she also kind of walks us through in a way,

Yeah, yeah, So that has been the idea has been. Gas is supposed to be sort of a bridge right between we hear about coal and then and then we think like you know, like solar, wind, et cetera, and we are there, we are building solar plants and wind plants and all. But gas has grown by so much that it's tough to just say, okay, now we're just gonna you know, not use these gas plants, right.

And we're the biggest gas producers in the world, right, the US.

Yes, yes, absolutely, And so a lot of people have a variety of ideas of how we could help solve these issues. Some of them include like building more pipelines for some of these plants so that like if one pipeline fails, you know, you can use another one. Keep keeping extra gas on hand right in case there's an issue like getting all of the gas that we need, which sometimes happens, or even like having backup fuels in

No, But in the meantime, the story points out that increasingly we're seeing what more than seven hours of power interruptions for US household on average in twenty twenty one, more than double the rate reported in twenty thirteen. And as you guys also point out the story that polar vortex, remember back in January twenty fourteen, so that's when we you know, extreme weathers unusual, don't laugh. But it's almost ten years since then and we're continuing to see problems.

And I can't believe twenty fourteen whole or ten years or tech ago, I know.

Right listen, Elizabeth, thank you so much, Elizabeth Elkin, So glad we could get to the story. Interim team leader for Bloomberg's Power Team. We do want to point out Mike Bloomberg founder majority owner of course at Bloomberg LP, parent company on Bloomberg News, has committed five hundred million dollars to be on Carbon, a campaign aimed at closing the remaining coal fired plants in the US by twenty thirty in halting the development of new net gas fired plants.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter 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 play Bloomberg eleven thirty.

Carol Master along with Matt Miller, who is in for Tim Stenovik. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including the business of sailing from the world's largest cruise line to an upstart racing league that's striving to be F one Formula one on the water. Plus we'll look at the viability of art as an investment option with author, advisor and curator

Well, thank you first of all for having me. It's a pleasure to be with you. You know, I got to be honest with you. Over the last call it nine months, ten months, our trajectory has only been in one direction, and that has been up, and that is despite you know, a good amount of geopolitical uncertainty and disco and that's you know, we're global company and so that's part of our global trade and we adapt and we evolved and we move on. I'd say, in the

For the month of June, it hasn't stopped.

And so despite the fact that there is geopolitical uncertainty, that is something that our consumers, our guests are taking in stride.

And at the end of the.

Day, they've got a desire to travel, they've got a desire for new experiences, and they have a lot of pent up demand for experience, as you know, and that plays very well into our business.

Josh, it feels like though investors maybe think it's as good as it gets, considering the bounce back that we've seen in your share price this year. You know how it goes as someone who's been at Carnival for a while now and looked at it from very several different angles. But we still have the stock down from about eighty percent from a high back in January of twenty eighteen. Is it as good as it gets? Do you think in terms of bookings and visibility?

Right?

Now, oh not at all, you know, you know, so the short answer is no.

It as a matter of fact, even though we're all the way back in our booking curve for our North American brands, we're still only about ninety percent back for our European brands, and so their trajectory is the same thing, going in the right direction, but they've got a ways

As you said, we've been.

On a pretty big tear about a one hundred percent or so since the start of the year. Our job is to focus on the business, focus on that demand generation, and continue to drive our business forward.

Josh Matt Miller here with Carol. What needs to happen to bring the stock back to pre pandemic levels or why hasn't it come back? Is it just that you took on a lot of debt that you have a lot of investment to do. I mean, you're trading in the teams right now, and be the pandemic hit you were treating more like fifty sixty seventy dollars a share.

Yeah, well, you know, our profile has definitely been impacted by what happened in twenty twenty and what we had to do to get through it. Frankly, you know, we were a company that entered in with probably about you know, the market cap and the and the debt. If you added it together, it's probably not too dissimilar to exactly where we are now if you add it together.

It's just that our debt, which used to.

Be about thirteen billion dollars, is thirty three billion dollars and hence the value of the of the equity is down and it's our job over the next you know, several years to effectively transfer that back by generating free cash flow. We have a good amount of headroom to do to take that and delever and pay down debt. We have the lowest order book of new builds in frankly my history. I've been here for twenty one years.

Can I just ask about your debt? You have a weighted average fixed coupon of six point nine four percent, which is not bad considering where we are right now, and we're I guess at about two.

Point nine billion maturing in twenty twenty four.

Which is where it would be, which is much lower than it would be if you had to refinance. Now, is my point right? You guys got in on this early and filled your coffers first. Do you think that puts you at an advantage relative to your competitors?

I think we're we're in good shape.

You know, we've we've basically gotten to a point where we ended the quarter at about seven point two billion seven point three billion of liquidity, and we've already started to de lever. As far as we're concerned, we can always be opportunistic, we can refinance, we can look at what's available, but we as far as we see the future, we have no need to go out to the markets at this point. We can delever with the liquidity buffer that we have and starting to generate again all of that cash flow.

We do have export credits as well, So for.

The new bills that we do have on order, we've got about three billion dollars of very competitively priced export credit facilities ready and waiting for us if we choose to use them between now and two years from now, in the.

Middle of twenty twenty five, when our last order.

So we're in a very strong position when it comes to our ability to manage our debt down and manage our interests expens down over time. You know, as a matter of fact, one of the one of the drivers that we had for being able to add two hundred and seventy five million dollars to the bottom line in our guidance change from March to June was in fact interest expends savings from starting that process of delevering.

So we're very we're very pleased with that. With that trajectory, Well, talk.

To us about you know, Matt and I are going back and forth. We're looking at different functions here, so tell us we want to make sure we have this right. Is it two point nine billion? Is that correct? Maturing in twenty twenty four, I was looking at some of our research.

You know what, I don't want to give you the wrong number in a live program.

That's fair.

We don't get back to you, and we'll make sure we get it squared away for you well.

And the other thing is is you talked about, you know, operating good cash flow, and forgive me, we just want to make sure we're we're hitting it right too. You know the amount that the ships are not inexpensive. You guys did a lot of replacement during the pandemic and getting rid of some of the older ships and so on. But I do wonder, Josh, can you I don't know, what's the capex that you're looking for that you can continue to spend which is really important, you know, certainly

Yeah, I mean the short answer is yes, I think we can, you know, And as far as we have new build capex and we have non new build capecks, our new build order pipeline, as I said, is the smallest we have had in anyone's memory, and so we are very well placed to be able to manage that type of capex spend.

And as I mentioned it does come with.

With export credits packaged with it, should we choose to use them as export credits are rolling off because we're paying them down every year in the normal course. On top of that new build capex, we've got, we've got maintenance capex, we've got you know, making sure our ships

That profile, that entire capex profile.

Is significantly less than what we were living with and how we were operating pre pause. And so that's why we're so bullish that the amount of cash flow that will be able to generate.

And then utilized to d lever is not insignificant.

You know, we're basically planning between twenty four, twenty five and twenty six something in the magnitude of about five billion of cash from operations, where if you net out all these with the capex, with the debt, export credits coming in, export credits getting paid off, we anticipate over over eight billion dollars will be available for us to be able to de lever. And that's on top of that, you know, couple a couple billion we're doing this year.

Josh. One thing I want to ask you, and you mentioned this too, that you know, among the different hats that you've worn at Carnival, and you've been there, I think almost twenty years. I think I'm right if I'm looking at.

It, twenty one one.

Is treasure and so you understand the importance of the financial side of that. Having said that, I am also curious when you, you know, look at what really moves the bottom line. You know, when people come on board, Yep, it's the tickets, but it's also excursions and other things. Are they upping the spend ahead of time? That gives you even greater visibility and that's where you make a lot of money.

Oh, it absolutely is. You know.

We we've made a concerted effort over you know, since since getting back in our restart to really augment the onboard spend profile.

And we can do that through several mechanisms. You know. One of them is the fact is the inflationary environment.

If you think about twenty nineteen to twenty twenty three, people are used to paying more when they go into their local restaurant, their local bar, local entertainment, and so we have adjusted our pricing accordingly for this for similar experiences, and that's taken just just fine with the consumer.

We're not being out of the ordinary.

As a matter of fact, our service levels are so much better than what you can find on land based alternatives that it's a great value. On top of that, we're finding different ways to pull forward that spend, as you are referring to, and we can do that by bundled ticket prices with onboard packages. We can sell people specific packages, whether that's beverage or spa packages, and.

They're buying it, and they're buying it ahead of time.

Oh they are, they are. It's you know, we've made about a step change for us, but a remarkable opportunities to do more. I want to say that it's about sixty percent increase per person per day the amount of our onboard spend that's being purchased before you get on the ship. Now, that's great, but it is still a

All right, don't kill me, Josh. But thirty seconds left here, do you guys think about recession? Are you factoring the possibility of a recession? Just quickly?

Yeah?

We do, you know, we do. That's part of our job.

The great thing about our business and our company is number one, we are well booked. We're about in any one time, about fifty percent book for the next twelve months, and obviously that's much more weighted in the first half. On top of that, we are an outrageous value when you compare us to land anywhere from twenty five to fifty percent, and that boats very well when people are thinking about how do I maintain commuication?

Forgive me, I got to run because the computer is going to take me out. Josh, come back soon. Josh Weinstein, President and CEO and chief Climate Officer at Carnival Corporation. On zoom in New York.

City, 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 Blomberg Business App or wants us live on YouTube.

Carol Mats along with Matt Miller. Matt, of course, as you know in for Tim here on Bloomberg Business Week. I gotta say this next guest his company. It's been described by some as Formula one on the water. It involves fast paced and high tech fifty foot hydrofoiling race boats. They're catamarans from different nations and they're all racing against one another. We're both pretty.

We're both pretty cited. I mean, I grew up sailing and haven't been lately. You go sailing all the time, and I think we both like racing.

So let's get to it. He's a five time America's Cup winner. Let's slid out there. He was three times a skipper in those winnings of the Cup. He's an Olympic champion as well. We welcome Sir Russell Coots excuse me, CEO Sale GP with us on Zoom and New Zealand. Sir Russell, it is so nice to have you here with us. Tell us a little bit about sale GP SALESGP.

Well, thanks Carolyn, thanks Matt. It's great to be here. Can you hear me okay, yes, yes, okay, well yeah, salgp, Yes, it's it's certainly exciting Grand Prix racing on water. It's I think we're one of the fastest growing new sports

Is crazy, and like I was kidding with that. I sail. I've sailed for thirty years and a top speed might be eight nuts.

That is yeah, in US terms, I guess it's sixty two. It's the equivalent of roughly sixty two miles prayer, So you know we're driving along the freeway. The speeds on water, of course, powered by nature.

That's the coolest thing. So Russell I grew up as a Formula one fan and since then have gotten smart and started watching Moto GP because it's so much better. But both of those sports are dirty, loud and dirty, right, just powered by fossil fuels. And the cool thing about Sale GP is that obviously you're powered by the wind, and in fact you're in a way an impact organization, right, you're pushing to fight climate change.

Absolutely well it we'll certainly you know, in terms of our purpose, were I think fortunate to be a sport powered by nature, and we are really champed being a world powered by nature in other words, the wind, the sun and the water, and our I guess our focus is accelerating or showcasing the accelerating the transition to clean energy as the number one global energy source. So so we're very passionate about that. I think everyone in our

Actually, how do the teams get How do the teams make money? How do the skippers get paid? You know, because we're.

Well, they get they get paid, They get paid fees like any other professional sport to compete, but they also compete for prize money, and our prize money is growing, so it's set at five million dollars at this stage for season four and with the final event being a million dollars. But they also receive either a salary or fees to race on the boat.

So how do we watch it?

You know what? Yeah, I guess.

With Formula one now in this country you can see it on TV, depending what your cable provider is, Moto GP you still have to have a subscription. DRNA sells those for one hundred and sixty pounds a year. How do we watch sale GP?

Well, Salgingp's distributed well now in season four to two hundred and twelve different territories, so in the US you can watch it on CBS or on YouTube, and we're expanding that portfolio each year. So we've just announced new deals with ITV in the UK and a five year or five season extension with Kennel Polus in France. But we are with many of the broadcasters Fox Australia, Discovery in New Zealand. You know, so each in each of

So I'm curious about you, sir Russell. Are you do you ever go out in a monohole and just a regular stale because it's such.

A Carol's a traditional sailer, it does.

I do feel like, you know, America's cup kind of got ruined years ago because it's.

I am such a harsh statement.

I'm sorry. I think it's not just about speed, it's about technique, and it's harder when you're going slower. It really is, So I'm just curious how you see it.

Yeah, I mean I like all forms of sailing, and obviously I grew up racing traditional sailboats, but these new classes are so fast and it still requires all of the same skills, but it's just happening at a much higher speed.

All right, So where do you go? I would also go back to how you started this and why you started it.

Well before souv GP, sailing didn't really have a global platform to market the sport on an annual basis. So when you look at what we're doing with salve GP, it's not that different to what is considered normal in most sports. So we put together an annual calendar of events, we obviously televised that live and promote it, you know, regularly. So really, in many ways, it's intriguing to think that

So what's the plan going forward and in terms of your growth expectations on how you want to build this out, Well, we started.

With sex teams in season one and we've grown that

So the thing that.

Gets people watching Formula One is of course the drama and the personalities, kind of the soap opera more than the races. Right, the same is true. You know, Motor GP has been so interesting in the last couple weeks. Will Mark Marquez go somewhere else and leave Honda? How come the Ducats are always winning? Do you have the same kind of storylines you think in sailing?

Yeah?

Absolutely. I mean we actually produce a behind the scenes documentary series called Racing on the Edge, which we distribute on YouTube and also our key broadcasters also distribute that as well. But we're looking to do a similar thing to what Formula One led with and other sports, which obviously their drive to survive programming was extremely successful in terms of promoting the sort of behind the scenes view of athletes and building those personalities and so we're looking

I think I'm looking at by the way video from Racing on the Edge right now and honestly have goosebumps. I mean, the sailing is so sick is it dangerous? I mean these speeds rustle and with you know, with the crew on one of these boats, if they run into another one, I can imagine injuries.

Yeah, there's a there's certainly an element of danger, and we obviously take the safety of the league. You know, really it's it's obviously a priority for us. But it's you know when people come along to our events and that or they witness soldip for the first time, that's that's surprise. You know, they've got an image of sailing. I think white triangles on a blue background would be a pretty accurate image of what most people. This is so different you know to what that image.

A lot of money to go basically nowhere. But what's interesting is you guys, with what you can do. You're close to the shore, people can really see it and feel it. And I do wonder about the speed in terms of these boats. Russell in that it attracting kind of a younger audience, right, I mean, you guys have to be thinking about that.

Sure. Well, we're also the way we format our program, so our races over two days and ninety minutes, and we have three races or fifteen minute races, three to fifteen minute races per program, so that really is tailored to the modern viewership sort of trends where audiences don't watch long form content as much as what they used to.

Can I just say I looking at Season three, episode nine, and I think somebody fell.

In the water.

Fell in the water, but it's still tied to the boat.

So he's like skimming across on the surface.

That was that was That was not Matt Gottrell from from the UK team, And he actually cracks some ribs as a result of that because you know, at those speeds, hitting the water is like getting concrete. So actually we made we reviewed that footage and obviously made some adjustment to the to the safety equipment on board, so so

How have the sponsors reacted You could see some of the sponsorship Oracle of course, and other big companies, Emirates, I see, how have the sponsors reacted after you know, four seasons.

Well, the thing is that you know, we've we've we've obviously grown pretty quickly commercially as well, and we've just announced some new partnerships with Barla and Apex and they join Rollicks, Oracle and near As as our as our big sponsors. And and what the thing that we're seeing is that these sponsorships are now or these partners are

So just from a financial basis, and I'm just we've just got about a minute or so or just under a minute left here, serve us, Well, is this I mean the goal to be profitable? Are you profitable? Like, how do you think about it on a financial basis?

Yeah, we we had a plan to be profitable by the end of season five and we're tracking ahead of that plan now, so we expect to see to be profitable as a league by the end of the season

Well, so appreciate you finding some time for us. This was really fun for us and look forward to hearing from you in the future. Hopefully about updates and how things are going. Thank you so much. Have a great weekend. So Russell Kutzi's chief executive officers also the founder of sale GP, joining us via zoom from New Zealand. And I mean check out some of the videos.

And some of the races.

I mean, they just had an event in Chicago and Los Angeles. Looks like finishes today and coming up centro Pey.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter 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.

I got to say, just as a little bit of a setup, let's just jump into it because we want to talk business and sports. But there is a most read story on the Bloomberg about the PGA Tour and the Saudi backed live golf.

What I love that. So I know, here's the thing.

So I've been working here for twenty three years and I've been old editor in chief. Matt Winkler had a number of rules. Yeah right, One of them, was that you can't say merge. He said, there's no such thing as a merger. There's always a buyer and a seller, right, And so I guess that's gone away now because everyone keeps talking about the Live Golf PGA merger and I want to get to the heart of who actually owns

Yeah, all right, So let's see how our guest what he thinks about it. Mark Patrick Coroff is founder and CEO of Patrick cough Company. Former banker, media exec. He works with athletes like Venus Williams and Aaron Rodgers, who was recently our Bloomberg invest event. We're so grateful that you found some time for us here in our studio. How are you?

I'm great?

Yeah, So what do you make?

What do you make?

It is a sunny Tuesday, well, and they're talking about it getting cloudy again because of the sky.

The clouds are going to come back.

Wildfires great, It's just great. I was in California for two months this winter.

It was warmer here for I think eleven of the fifty days out in California.

It's so crazy.

Go figure out the weather.

Like the merger, well, go figure that out. I know you talk with Jason about it at the Bloomberg invest event, like it was just hot on everybody's radar.

What do you think are this out buying?

Yeah?

I mean, look, I always think it's last money and speaks loudest and almost every transaction, so it kind of put all the noise aside, and you know, you sort of have to wonder a little bit what PIFF was thinking to begin.

With when they launched this.

I mean, there really wasn't a path to beat the LEA. It's like the USFL in the eighties.

I said this at the conference.

I mean, at the end of the day, you're sort of playing, you're kind of gaming it to see what you can get, you know, and where your money can go because of this, where maybe couldn't have gone without having funded live. So I think PIFF owns it. I don't think it's a merger I think that the optics, you know, are what the give was, at least for the time being.

Is it good or bad for the sport and for fans.

You know, it depends on I guess it depends on what you want out of the sport.

I mean, at the end of the day, the more money that goes into a sport, more money the players get paid, the more money that trickles down to training and facilities. I guess it's a net positive. I mean, I'm not I don't see why it wouldn't be at the end. You know, for me, it's a little bit about and I hear you know, Monahan was, you know, talking about twenty one terrorists from nine to eleven who are.

From Saudi Arabia.

It's a little bit it's a little bit hard to get too deep in that argument for me. I mean, look, I've driven a German car and I'm Jewish. I know it's at some point it's not entirely fair. On the other hand, you know, sports are global, and if we don't expect global investment in sports, then we sort of can't expect also have global revenue from sports. So it's kind and I'm saying I'm advocating it. I just sort of think at the end of the day, it's sort

Are Are there still though, a lot of other opportunities in golf. I mean, we've seen different variations of golf. A buddy of mine had this idea sprint golf, you know, which he thought was going to take over. And like in tennis or paddle sports, we've seen some new things, not just pickleball, but padel or whatever it's called. You know, there's so many different ways of playing it.

Like is golf the same way I don't know. I mean miniature golf is still you know, kind of a game, not a sport.

And you know his ping ponger sport, I don't know. I mean pickleball is funny. We saw every pickup ball deal. I never bought into it, and I just read saying today about how there were four hundred thousand injuries in the last twelve months and pick a ball and it's you know, impacting insurance rates. I mean, I think golf is is a very trictional sports around for a long time. I don't think I know it. It's an eighteen hole sport. It requires a certain level of skill that you know,

They want to watch day golf. Yeah, they and the money.

Well, we'll make the sport kind of you know, it'll it'll evolve.

I doubt it will change radically.

Mark what you know. I want to step away for a moment because your past does include investment banking, and I think about the investment environment and the environment for deals and Matt and I talked to lots of different folks and leaders like yourself to just kind of get a feel of where we are this market environment. Just stepping away for sports.

The cost of capital is kind of unbelievable at the moment.

Right, yes, yes, in terms of real estate, but how do you see it yeah.

I mean, I don't know that real estate necessarily is a predictor for every other asset class.

No, but just the cast he was saying, the cost of capital is vastly different than it has been for it today.

But then if you were to pull out industrial and office that might it might not be exactly the same.

So I just you know, it's a big real estate is such a big bang.

Like you know, when I was investment banking and I kind of I started my boutique in right in two thousand and eight, the end of two thousand and seven, and you know, it got very tough, very fast, because you have no choice. You know, a lot of companies are just weren't going to get funded and therefore, you know, one in the market. So there was a lot of m and A activity. I think that I think the

Was investment banking.

You know, I run a consumer focused private equity fund with you know, these pro athletes, and you know, the deal flow stopped for about a year. I mean, we did three deals in the last twelve months when we had done eight year before. But right now deal flow is back, and I would say the pricing is all over the place. We haven't seen significant discounts in these companies, but the prices are flat or down a bit.

I remember I got a phone call.

I won't I won't throw the fund kind of under the bus here, but a fun that we all know what's really working me to go into a deal dated invested in November, I mean, and they paid a ridiculous multiple and they want us to come in January and promote their investment.

You know, by whatever.

It was a couple of turns, and I was like, there's no way, it's the option go the opposite direction.

Six months so we said no. Six months later they called us.

And they need money and they understand it's going to be a down round. So you know, but that's a business that has no choice. That company, it's a it's a small box kind of health and wellness business.

It needs capital. It won't it won't make it.

So the businesses that are the solid businesses with good characteristics just don't raise money or don't exit during this market. And then one that do need money, I'll probably distressed and not that interesting unless you're a distressed buyer, which I'm sotainly not so okay.

So add it all up in terms of again just macro mark. You know, we talk recession, no recession. We're trying to figure it our way forward and get as much transparency and visibility recession. Does it feel like we're headed towards a recession? You said your deals are.

Coming when you have people way smarter than I am to answer that question here every day, Here's what I would say. I don't think the word recession is a catch all anymore. There's so many different segments, geographics. I just you know, it may be a recession in two areas and not in sex other areas.

And you know, I heard somebody talk about a rolling recession, like we had earnings recession in this sector, in the.

Segment that you're looking at, exactly.

I also think that public companies are going to be valued differently, and you know, maybe more quarter quarter than annually, and so that changes the way people look and value these companies.

So I just think that big and I don't.

I don't, by the way, as an entrepreneur, and I've been entrepreneur for a long time, running me just running my own business for twenty plus years, I don't think macro as much as you do and some other people do, only because I can't afford to.

So I sort of look in the front. Well, there's just no way to do it.

You know.

I'm worried about what I can control in my day to day business. Our business has been basically fine. I mean it's not perfect, yeah, and I'm sure it'd be better if COVID hadn't happened. And by the way, anyone who thought we weren't going to have major roadblocks after COVID, I mean, this is so predictable. I mean, and I said it on other if not here or somewhere else, you know, in middle of twenty twenty, there is no question that there are stormy times ahead.

So anyone who's surprised.

Now, of course, it takes a couple of years for the impact of business just stopping globally for a period of time.

We literally shut everything down, of course, the money and then it.

Came back right, yes, and then they're not closed all over. It's over. It's fine.

It's like you know, it's like, you know, we got back, we came through terrorism. We instead all these new rules in airports. No one, of course, things are still going to happen. I mean, there was a backlash, there was a change in lots of areas.

I was just thinking, you and I have both watched recently the movie about Michael Jordan, well, the movie about Nike at the name of It, And the coolest part about that movie I thought was, beforehand, none of the athletes had ever really owned a piece of the product. Right, they got paid for their endorsement deal, but they didn't actually get a piece of the percentage of the business.

Absolutely.

I mean I was joking with Rob Gronkowski a few years ago about his sponsorship deal with Monster and how much he made off of it versus how much they made off of him, and it wasn't equal. I mean, it wasn't it wasn't commensurate with the value that he added. I mean, I think the athletes, we're still they're making a lot more money, and it does open up more opportunities. More money you have, the more more access you have,

So sure for Messy or for you know, Aaron Rodgers.

Whomever, they're still making real money in the marketing endorsement deals, but because of kind of the diversification fracturing of the audience, and how how the value of these NBA players, for example, where they might have been when they were ten NBA superstars. Nike and deals with compete and they'd pay them millions of dollars. They don't only have to do that now because there's so many more effective ways of reaching the audience they want to reach for less money. So you know,

Said, look, if Chilula paid you.

One hundred thousand dollars to you know, do six social media posts and a television commercial and you know, whatever XYZ you do, you do it because you're a good guy, and you know, you stick to your agreements and you get your hundred thousand dollars and you move on. You might not like Chilulot Sauce on that much, wouldn't matter

You'd be more helpful a company.

They may not quantify exactly what you're going to do for it, But Dwayne ended up doing an Instagram live cooking class with his mom and it didn't have to say paid endorsement. So it's much more authentic and he has a piece of the upside of his own value.

So what kind of deals do you look for when you think about the athletes you work with and how much are they saying this is the kind of thing I'm looking for?

Is it?

I'm a to me, it's not just about returns, although that's obviously part of it.

I mean, it's mostly about returns. I mean well, no, I.

Mean look, I mean obviously obviously well, I mean if you I mean, we tell our we have two hundred and thirty athletes.

I mean there's interests across every category.

So we did the biggest e commerce and platform for musical instruments called Sweetwater, Amazing company, crushing it, not just a COVID bump, just really killing it. The athletes love music went in, but also athletes to understand that Providence is a great lead investor and here are the core metrics of the business and this is why we think it's a good value proposition long term. And they invested. You know, I think for us, the tail can't wag

That they understand and and and might be interesting to them.

So we've done everything from SpaceX to Chilula to Kodiak, which is a pancake and waffle mix. We've invested in a couple of alcohol brands. We just invested in a big travel company with KKR called Get Your Guide. So we look at a mix of things that are kind of primarily consumer facing auto travel, hospitality, food and beaverage, et cetera.

And that was the first part of our business.

We're just now getting ready to launch a separate fund, which will be a fund. Our core business is more of an advisory merchant banking model, so we go deal by deal and the athletes get exposure to the deal and they could choose which ones they want to invest in. They're on the fund that we're about to launch, which is just focus on restaurant franchises. So instead of an athlete just taking a one off Wendy's or buying, you know, to Taco Bell somewhere, we're going to get them exposure

I love hearing this because I think about the times we've done broadcasts from like Radio Row leading up to the Super Bowl, and it breaks my heart when you talk to football players and you know, who play for a few years, make a ton of money, get hurt and then they have no money, Like it's just so this idea of you know, taking athletes who are successful in helping them invest in waiting much literacy pay off.

Yeah, but you don't give you I'll give you a once quick, very quick story. So I spoke to an entire NFL team a few months ago, and I asked, I went to the room with fifty five guys, and I said how many The first thing I said was how many of you think of football as your first career?

Not one hand went up. I said, how many.

Of you plan to work after you retire from playing football? Not one hand went up. Now, now let's be clear. I'm sure a handful of them or wanted to put their hands up and were embarrassed. So there's some of that, but for the most part, no. So I said, you're going to retire somewhere between twenty five and thirty five years old. Was somewhere between a million dollars in the

We have broadcaster, you can be a coach.

You have so many opportunities, and I don't think you want to be sitting around playing video games at thirty five, even if you've got money in the bank. Setting that example for your children, I don't think you realize that you're going to live until ninety five years old and you'll be healthy barring CP in their case, and you'll have sixty years you've been working. You know, there is

They're smart, I mean, especially the playbook start somebody, any of them are super Yeah.

And they're gonna own teams. There's no question we helped Dwayne buy a piece of the jazz. We just work with JJ Watt and his investment in Burnley, the Premier League team. You're going to see more and more of that, and they should, it's their sport. Why wouldn't you see more?

Like, you know, can we do something with teams like more, you know, fractional ownership or something.

In public ownership?

Right?

You need board? How else do you get diversity?

Yeah?

I mean I think I think these teams need.

Board directors because otherwise I don't see how you'll ever get real diversity.

Representation for an NFL ownership. Yeah, of course they didn't like that.

I'm just kidding.

Although kind of annoyed me because I would never want a team of mine in one sport, I mean a coach from another sport.

You are, Jim and so much fun. Mark Patrick Coff, founder and CEO of Patrick Cough Company. You well, good to have you.

Thanks.

You're listening and watching Bloomberg Radio.

You're listening to the Bloomberg Business Week podcast. Catch us live week 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.

So we recently covered in Bloomberg BusinessWeek. It was about a reset and the collectibles and all investment world, Matt and you know, cars, watches, designer bags, art following the pandemic where people were spending on everything, which meant that values shot up in a big way.

Yeah.

Absolutely.

I mean I always have kind of an ongoing debate with John Authors about what's driving inflation, and I think people forget to talk about the demand side and the incredible amount of fiscal stimulus that flowed into consumers pockets, and certainly that's got to be acknowledged as a huge part of the driver of prices of not only houses and cars, but also collectibles. And we've been kind of focused on that.

Yeah, so let's get into it. We've got a great voice with us in our interactive Brokers studio. Maria Brito is an art advisor. She's a curator. You might recall Bloomberg BusinessWeek wrote about her book earlier this year because she is the author of a book on leadership, How Creativity Rules the World, The art and business of turning your ideas into gold so welcome, welcome you. You reminded me that when we spoke last over a year and a half ago, it was remotely because we were still

Well, thank you guys for having me. Twenty twenty was a year that saw a decrease in the sales in the art world, but there were a lot of deals to be done because when there is a lot of uncertainty, a lot of collectors start selling, which makes it a wonderful opportunity for the buyers. Twenty twenty one recovered quite a bit, and twenty twenty two was our record year were sixty seven point eight billion dollars in cells were recorded and that is the second highest number in the

To go there. Though, Yeah, like bring us to kind of what's going on nowday.

I mean, especially as you know, because in the collectibles market, when we talk about things like Michael Jordan's shoes, for example, they were worth a lot more last year than they are now. It seems to have, if not dropped off, kind.

Of flatlined a little bit of a reset.

As you know, people run out of stimulus, money interest rates rise, Crypto's dead like that whole Having said that, based about thirty one, I don't mean crypto is dead. But you know what I mean, there's a lot of the exuberance has come out of markets and has does the art market look the same.

The art market has existed for so long, and it has been so resilient for so long that it has seen a drop, but it's not so dramatic, or at least not yet.

I think that the first.

Three months of the year, people were scared for a variety of reasons. One us all the volatility of the financial markets and the uncertainty interest rates, et cetera, and crypto coming from all the debate off you know, FDx, and all the things that happened at the end of twenty twenty two.

The around April, things.

Started to recover and everything that had to do again with like these young artists having their debut shows a big galleries, which was something unheard of ten years ago, remains hot. What hasn't performed as well as they did in the last two years is the ultra contemporary segment at auction, meaning all the young artists who were basically being used in a way to flip the artwork and

Although I would say, and I got to say, you know, years ago, I had an opportunity to sit down and talk with Eli Broade, master collector not with us anymore, and in his warehouse out on the west coast of Lichtenstein's and they were unbelievable, just everywhere, everywhere, everywhere, so you know, but he also focused on up and coming artists, and there were people who became very established, and he

Well, first of all, buy at galleries because you don't want to pay the premium of twenty five percent that the auction houses are going to charge you, which happens to every year.

Is unbelievable.

The amount extra I feel like, you know, Congress is worried about Taylor Swift tickets or the extra charges that you have to pay on ticket Master. They should look at these auction houses.

And they charge the buyer and the seller. So the other thing is it is important to buy emerging artists, and I support them and plenty of my clients do too.

The thing that you have to do.

Is build the relationships with the galleries and make sure that you are following what the artist is doing. And here's why the competitive environment on primary market is such because collectors are thinking, this is the best price.

I'm ever going to get. And if I am there and I.

Am the happy winner of one of these twelve paintings in the show, even if it's one hundred thousand dollars for someone who is thirty, it's still way cheaper that if I have to go and get it at auction five years later.

Right.

But this is the thing you have to ass that new collector be paying attention to a variety of different factors.

Cause there are five thousand galleries.

In the United States alone, and only three hundred are worth buying from. So imagine how you have to filter everything that's happening. And I say this not because people are going to steal your money.

But because.

That are filters like everything, and for this artists to show in this important galleries or even in an emerging gallery that is committed to building the life of the artists, they have to have people behind them that can place them in museums, that can place them in great collections, because that is what will guarantee the legacy of the artists, and that is actually what makes the asset a real investment and not just a vanity purchase.

But so somebody like Damien Hurst, his success you're saying, isn't only because of the works he created, the esthetics or you know, the design, but because of the dealers behind him and surrounding him.

Well, part of that Damien comes from a generation of the young British artists that they are not young anymore, but that was like thirty years ago. And he's a conceptual artist who came up with a bunch of ideas. The beauty of what he does is usually is related to the title, and that makes you think a lot about you know, his decaying shark instead of the glass

So it isn't ecosystem. Not one thing is.

Going to make an artist he needs or she needs or they need a bunch of things to happen for that artist to build a career.

It's just kind of fascinating in terms.

Of totally fascinating.

Did I say Lichtenstein or Lichtenstein?

You said Lichtenstein, Yeah.

I'm mean Stein. I know, as soon as it came out, I'm like, you're talking.

About Roy Yeah, okay, yeah, I think of the principality.

Yeah, I know.

And that's why I'm like, you know, I think you were like, what, okay, really.

Cool stuff and really something to think about. And I know it kind of definitely resonates with our audience because you know, you do think about diversification. Have a great weekend. Thank you so much.

Thank you guys.

Check in with you. Maria Brito art advisor, curator and author. Check out her book How Creativity Rules.

This is the Bloomberg Business Week podcast. I'll a little Apple, Spotify, and anywhere else you can get your podcast. Listen live weekday afternoons from three to six Eastern on Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg jermanalone