Bloomberg Businessweek Weekend - May 5th, 2023

This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine.

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The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Carol Masser, we are live at the Milk and Institute Global Conference and a highlight for us right now someone well known to the Bloomberg audience. We're talking about David Hunt, President CEO of the massive Global Asset Manager PGM. They've got one point two trillion of assets enter management. One hundred and sixty two of the largest three hundred global pension funds are clients. You see a lot.

Hello, we do.

Cal is so nice to be with you.

Thank you for having me.

David, It's nice to have you here. So when you talk with your clients, you hear their concerns. What is top of mind for that?

I would say that, you know, although the media likes to cover are we going to have a recession of soft landing or hard landing? In general, our institution clients believe that the market is pretty good at pricing in those risks, and as more information comes, the kind of giant abacus will actually reprice the markets a bit. What they worry about is the things that the market doesn't price very well, and those are things which have lower probability,

But what happened, and the two.

Biggest ones that our clients are worried about right now is one, what will happen if Putin increasingly feels like he's backed into a point, and what if he does decide that he is really going to escalate things? And are we going to have the backing in that case of a lot of the non aligned countries who have been waffling more recently on a lot of these topics.

That's one to put that out there, but anyway, go ahead.

And the second one comes more from our delightful hometown of Washington, DC, where the market at the moment would say, you know, any rational person will assume that these nice people will actually reach an agreement on this, and it may take till eleven fifty nine, right before the deadline, but ultimately they'll come to another group. And that is in fact what's happened in the past.

But what if that doesn't.

Happen, what if the political calculations now in Washington have changed, and don't we need to be thinking about what is the implication of that, what's the volatility that will.

Lead into that?

On behalf of our clients. And so I would say those are the kinds of kind of scenario based work that we're doing with clients, almost beyond the classic market cycles, which the market price is in pretty well.

So, David, take us there factor those in. Let's start with whot factor that in? What would be the implications potentially for global financial markets?

Well, I think that you have to start with the obvious things there, which is that you know, we'd have energy prices that would probably really begin to rise up. You know, you would absolutely have a much bigger shift than we've had now on you know, who is actually going to align with NATO and who won't. So you know, for the most part, NATO has been I think, done a good job of staying very aligned. But they haven't

Interesting, So go all right, so game theory is through the debt seal, so in the worst case scenario.

So that's particularly fascinating one because as long as the as the market based thinks that the politicians will solve this, the politicians don't actually have any real incentive to solve it, so there's no pressure on them. The only way pressure begins to build on them is to the extent that we start to see some volatility and we start to see the market saying, wow, now maybe this doesn't get solved.

Of getting out of cash.

So we are going to see in May the beginnings of that discussion of volatilty, you'll see it covered a lot more fundamentally, and you're going to have to see some of the game theory elements of Well, if we don't reach an agreement, what are the range of things that the government will have to start scaling back line and what will their priorities in orders be.

So, if you're doing game or game theory right now, when do you know just to pull the trigger and putting those theories into.

You don't And I think that's one of the really.

You start to do it now, Well.

You don't know which of them is going to happen, which is why you need to build in some real flexibility into your strategies and into and into your portfolios, because I don't think anybody here can predict how this is going to come out.

I didn't really hear you talk about the FED. So where how does that factor in or do you feel like that's all factored into the markets already?

Well, our internal view is that the market is not pricing the FED incorrectly. Our view is that markets are too optimistic at the moment that the US economy is stronger than the markets realize. That's going to cause the FED to need to keep rates higher for longer than the markets realized. I mean, remember the markets think, you know, we're going to have actually break cuts this year. We think that's quite unlinkedly, so our view would be that markets are too optimistic for that.

But as I said before, those are.

Things that the market will reprice as it gets better and more information, as opposed to some of these other risks, which actually the market really struggles with pricing well at all.

David, you've seen a lot of market cycles. I'm not aging you.

You've just seen nice I've seen a lot of market cycles too, But I do wonder, you know, in the last year, who would have predicted, right, the war in Ukraine, the crypto collapse, what we're you know, bank runs?

Who would have thunk if you will? And you just laid out two significant things that could certainly change things dramatically. Is there something I don't know? You know, it does make your doing game theory, but it's challenging for investors. So how do they protect themselves or what do you Yeah.

No, it's it's very challenging and obviously the great protection in a world where a well, where.

Do you find that protection when we even started to question treasuries.

So the place that you find it is in diversification. And so you know, we've really been great believers that the most diversified institutional portfolios are the ones that are best positioned for resiliency in these kinds of things.

So what is diversification means?

So if you went back twenty five years, most institutional investors would be in public stocks and box and then along came this rather strange thing called private equity, which people were a little worried about in the beginning and then ultimately sort of became an asset class. And now we're actually seeing private alternatives more broadly really coming into

Well, it's interesting, you know, in terms of your institutional and global pension funds that you guys are that are investing with you, what kind of managing are you having to do of performance or not because you're not feeling any kind of performance hits in this environment by firms you mean defaults or not even defaults, but just expectations in terms of returns.

So return expectations, you know, I would say for private ac what do you have come down a little bit? Yeah, in private credit actually because much of that, particularly direct lending, is floating rate, the returns are actually going up and

Have you seen an uptick in terms of your private credit demand because of what's happened in the bank and the collapses.

We have, And that's obviously a long term trend. I mean, ever since the GFC, the banks have been lending at a much less rate because of all the new regulation that came on. But in the last four or five months, as people have had questions about banks and people began to think that rates we're going to go up, we've seen very robust demand from middle market companies for borrowing fu.

And that's where it's middle market companies in particular. Thing you really see you expect that to continue?

I do.

I do, and I think that'll be true, particularly as these regional lenders find that they aren't really able to continue to expand their lending.

Yeah, it's interesting. When we were talking about global real estate, the real concerns were about the middle market because they're just not a both the banks aren't there for them, right, So interesting you feel comfortable mid market real estate lending, to.

Our our view is first of all, everybody talks about real estate. But actually what they mean is office. Yeah, but remember real estate has got a lot of food groups in it. Yeah, and some of them are doing just great. So broadly, are we comfortable with our real estate portfolio. It's position for a recession and we're very comfortable with cover a.

Lot of ground. David Hunt, thank you so much. David Haunt, President CEO of p Jim joining us here at Bloomberg.

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A lot going on. It was so funny. We woke up this morning. We're like a good thing. It's a quiet Monday. So much to talk about with our guests, So thank you for the market setup. I do want to get to our guest because eighteen months ago our next guest told our Bloomberg team that it was the golden age of private credit. Dun Dun Dun with us as Mark at Nasio. He's a maaging partner at the

Hello, very nice to see you again.

It's great to see you again. You know, I had a question and we were talking over here. What's easier owning an MLB team, investing in today's environment or growing up in New Jersey and telling people that you're from New Jersey. I can say that because I'm from New Jersey. No, I'm just playing with you.

It's always nice to connect with the fellow jersey its.

I love New Jersey. Tell us about today's environment versus a year ago.

So I actually bothered to go back and listen to my broadcast and both on television and radio.

You have to see how badly I screwed up.

You did not not even.

I think the golden age of credit was almost eighteen months ago I talked about and last year I was worried about stagflation, and fortunately we didn't get that.

And so the.

Environment for which we will discuss, the environment for private credit is still is still quite good.

Actually for all levels for all types, because it's interesting. I just give up a real estate panel and they're saying, you know, for valued properties, trophy properties, Class A properties, you know, you're still seeing interest when you go down the scale. It's not so much private credit, no distinctions or yeah.

So real estate credit, in including real estate private credit is a whole different animal than corporate credit, which is what we focus on, right, And there's a number of structural challenges in real estate. There's a maturity wall in CMBs that's coming up very fast, right with funds that'll be you know, needing to have liquidating and need to have buyers, which we don't have. Clos for the most part, have extended maturities now.

And you know, I think all so and it's easy for me to say, and they'll say the same about us. But not sure.

And I participated in a lot of conferences like this, yeah, and managed to oversee a couple of endowments.

On charitable side.

I'm not sure the real estate marks are in the right place just yet, not yet, so that needs to sort of work its way through and and so it's challenging to find, you know, the right part in the capstack to invest in real estate now, whereas you could argue the same thing with corporate credit, and it's easier to go senior because right now senior loans you yield over ten percent, which isn't you know, it isn't bad right right with with the new you know for you know,

Well, so it's interesting, So does that does this environment continue? I'm like, I'm just curious. I think we're at this juncture mark where we're trying to figure out, you know, recession, no recession. We'll see what that we get from the Fed this week. I mean, like, first of all, with the Fed, how closely do you watch in terms of what they're doing interest rates? We always does it matter to you?

So moment to moment it doesn't.

Now, once you've had you know, four and a half, you know, four hundred and fifty bases point, you know, increase in.

The right in the last year, you have to start watching.

And so but now everybody's on the edge of their seat about whether the Fed's gonna hike and pause or not. And you know, one of the things we talked about there was a private panel here yesterday for they called them Finance leaders.

But so I crashed that.

Party, no part of it.

But you know, Mike Milken came in and the tone for the conferences and the theme is somewhat optimism, but he came in and talked.

To us about how we need to have realism and so it really we all know.

The first priority for the FED is to fight inflation, and they're going to have to beat inflation almost at any cost. So that if that's a when we're rate hike or even two in a pause, that's great.

If it has to keep going, you know, that starts to get.

Into creating real credit issues, not only in you know, corporate credit obviously, but also in.

Obviously in real estate.

Well how problematic could it be?

Well, it's it's very problematic, depending on So I was at a gathering JP Morgan had that Jamie Diamond spoke at and he was optimistic too and very bullish on America, which we all you know, I think everyone here.

Is, which is great, and we have a global audience here.

Yeah, you can feel it.

You can feel it right.

And obviously the fact I think you know that the takeover today by JP Morgan on ufr C definitely its okay now we're over that hump.

You know.

However, he left us.

With the thought everybody should go back to their offices and budget for you know what happens if short rates go to seven percent?

Well that is that.

Would put you know, right now, in our credit portfolios, for example, we have a handful of credits that are not you know, within are not covering the cash flow. Yeah, you'll hear a lot of managers like us say, like our portfolio is, for example, the average credit quality free cash flow is one point six times plenty of cushion. But the question is how many credits are when times or below?

Right now?

We have just a handful and those are the ones we focus on. If you get another two hundred basis points built into the system, it's gonna be a lot more than a handful of credits that have How much more I think it depends on, Uh, you know, we've always lent to six times cash flow, so I think, you know or under so I think we'll be okay. But the broader market is already stretched out to seven recent transactions. You've seen seven times and maybe a pick component which pick toggle, which you'll.

Pick toggle, go back to It all comes around.

It's like the USC you know, student body left, student body right off tackle play.

How likely is it we get another two hundred basis points? Does that even make sense? I mean, the FED certainly seems like they're on this mission, but you you have to ask what cost.

Here's where you get worried.

Right, everybody is lined up on the side of the trade that that's not going down. Everybody you talk to, everybody. The only in fact, the only person I've said you heard raise that was in this private session that Jamie Diamond had, And so you know, I okay, it creates all kinds of prompts for the deficity. There's the whole domino effect, well beyond what you know I do in my day job, right and sou But they've got to be they can't.

They've got to be.

Inflation, all right, they have to be inflation. It's interesting, all right. So so if they continue on the course which they seem to do, I mean, are you anticipating a recession? I mean, it's interesting this panel I just came off of, and you know, I said a year ago, what's surprised you about what happened over the past year? And one of the individuals David who is over at Hine. So global corporate real estate are global real estate of all kinds, and just said, I really thought we'd be

That's real estate rest colored classes. So it keeps getting pushed out right, And look, we can manage through a recession.

That's not an issue.

And I think there are a lot of other things now that are much greater fears that seem to be surmounted. Every banking executive here we had a dinner last night that Jane.

Fraser spoke at.

Yeah, you know, the US banking system globally is considered the strongest in the world. She pointed out this forty seven hundred banks in our country and there's three that have had issues, and so we don't have you know, the financial system is strong. And so the question is whether either rates get so high that they and we still have growth, right and pretty much everywhere labor costs are high in certain sectors by chain is actually sort of figured out. So if it just ends up being

So when you look at investments, most attractive is it high yield? Is it bank loans, direct lending?

So we you know, we're the high yel market is finally high yield. Interestingly, you know, the generic high yeal bond market is yielding only quote only eight percent.

We're delighted with that. Yeah, anything we have floating rates.

Ten percent plus. So for investors, you know, we now have concerns about credit, so we can't call it the Golden age anymore. Yeah, but for our embedded portfolios, which are in really good shape, the investors are getting hundreds of basis points more in yield now than they did eighteen months ago.

Investors are happying, not too shappy brewers. What can we expect this year? Is that easier?

No?

And I'll tell you that I got involved in English football in the last six months.

And I was going to tell you, if you say, well, what's harder investing?

I love that one, or or growing up in New Jersey, the answer would have been English football it's hard. And Todd Bowley may have a perspective and that I'm just clearly Chelsea, I'm sure. So look We're off to a good start. We're eighteen and ten. That beats ten and eighteen.

Like with credit, you just worry about everything. We've had a number of injuries.

Yeah, but the team looks you know that. You take a lot in sports from the feel of the clubhouse.

Yeah, and our clubhouse feels great.

Well. I have to say it was great to catch up with you again. Thank you for giving us all so much time. Mark Adanazio, be welcome. Good to see you.

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This is Carol Masser. So, as you know, we're at the Milky and it's a two global conference. It's an incredible gathering of so many different individuals and I'm delighted to have with us. Sheila bateels she's the vice Chairman to be Capital, former chairman of Goldman Sachs Asset Management. Because I feel like, first of all, great to have you here again and tell us to get here. I always feel like a great indicator of the economy is what's going on in the startup world. So tell us

First of all, Well, look, I think the macro environment was already difficult for venture given what had gone on in tech, and then you layer on what's going on in banking, and it's a bit of a perfect storm when you think about what founders have to go through in normal times to start a company, much less today.

So has it stopped.

It hasn't stopped. Okay, it hasn't stopped. I think the good news is when you hear about dry powder, that's not a fake thing, that's real.

Yeah.

You know, we were fortunate enough to be capital to raise a large fund last year. We still have plenty of that to deploy with our existing companies and to look for new opportunities. I think that one of the things you see experienced investors say to us right now, people that have been LPs over many vintages, is they remember what happened after the global financial crisis. They remember

Did you have any direct impact from the collapse any of your companies, your portfolio companies.

You know, we've been very lucky. We had We did not have anything particularly notable for ourselves or our portfolio companies.

All right, So talk to me about opportunities that you guys are seeing of interest right now? What's coming your way? You mentioned AI, right, we're all just talking a generative AI and it's interesting it's coming up. I'm sure a lot here in terms of panels, and we're all trying to figure out how many opportunities are coming your way? Is it a lot of them in terms of deals that you're looking at?

Look, I think there's a number of things coming, but I think there's a number of companies we already invested in. Yeah, that people and appreciate that this is AI. You know, it's like, what is that?

What is that?

No, you have it already.

It's why Google knows what you're gonna ask it before you've asked.

Right, you're tight, it's right when it fills in a letter.

It's why they know your dress size when you're you know, bought something a certain number of times. It's it's embedded slowly but surely in so many places. And so what we've what we've seen that we're excited about is there are so many mundane ways AI can make businesses do better, can achieve cost reductions, which in this environment is probably one of the primary things people are looking for in a way for your business to thrive. At the same time,

So, when you think of AI or what you're seeing in terms of, you know, possible companies to invest in or you are investing. It is a lot more it's not kind of out there, right, it's much more simplistic. As you say, maybe it makes you more productive. This is what we're talking about.

A great example is a company we invested in a while ago, not recently, but that does document analysis and management basically information management for the contracts that a company might have. And you think about a huge multinational if thousands and thousands of contracts, right, who knows what's in them, who's managing them? Like supply chain, who's checking them?

Right?

And that became important during COVID because of disruption clauses. What's important now? Well, we've done some projects with that company, and our good friends at BCG with whom we have a special relationship, work with them as well, and we realized, you know, for one of the special projects they did, a company they were pitching had CPI clauses embedded all over the place in their deals that they hadn't executed on. So they were owed higher fees for their services and

You think about something like filtering through right.

AI can find things like that in a systematic way, as opposed to you're just relying on who's the person that's most on top of their clients to figure that out.

So in this environment, are is there a valuation reset that you're seeing in terms of some of the deals and when it comes to funding.

Yeah, Look, I think roody bandies are about different percentages. Probably the most common I think that people are seeing across his face is down forty fifty percent.

Right.

In terms of valuation significant, it's significant, I think it very much depends on the stage. I think you've seen a lot more weakness in late stage.

Within the first.

Quarter, only about eight percent of funding going to late stage. Sixty seven percent went to early stage, and funding there and valuations there are much less challenged. I also think that a lot of people were reliant and hoping that M and A would come back quickly, and I think it's much slower go because even corporate M and A, even companies that were looking to maybe acquire as their source of innovation, because it's still hard for companies to

Is it still like, you know, the goal is it IPO? I mean, we've talked about for years. I feel like that there was so much funding out there and enabled startup companies to stick around for a little bit longer, which and some would argue was a good thing that they could really kind of develop themselves. But I'm just curious, what are your expectations in terms of IPO markets and what we might see.

Look, I think inevitably they'll come back, they always do, but I do think it does serve as a wake up call as to is that the best route for every company? And so when you think about growth and you think about most founders ambitions for their companies, I think IPO is the easy one that seems like, oh, I'm gonna build this and I'm gonna turn it into its standalone success. But for some companies it might make sense to stay private a lot longer and figure out

One thing I want to ask you guys are playing an enterprise, fintech, healthcare, bioit We talked there's a category opportunistic sort of my infrastructure, tech for commerce and emerging markets and more. What's the most active area right now when it comes to investing for you guys, Well, it's interesting.

I'd say it's much more about what are the most driven, interesting founders. I wouldn't say a sector stands out the most. I do think, you know, enterprise and healthcare still have a fair bit of resilience, and that's been great to see. I mean, healthcare needs so much done and there's so much value there. I feel like there's a lot of activity right now, a lot of activity. Now you have

Is climate tech? Climate tech huge interesting?

An AI plus climate We see what we learned there twenty seconds.

Climate tech because of the money we're seeing from governments, or what's what's changed? Because I feel like.

A carrot and a stick. Do you have the governments that are demanding new rules, new regulations, companies that have to comply standards that are starting you unify from a global perspective, and then you have the flip side, which is the stick. The stick is the risk.

Ye.

The stick is what you'll face by not doing something and finding that you've built a plant in a place that's subject to floods, or you've you know, in short, a risk that's truly uninsurable.

So glad we ended on that note. I went there free to check in with you and thank you so much, Thanks so much, have a great look and conference. Thanks for going on. Chilipatel, vice chairman at Being Capital.

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Just indeed, everybody, we are finishing up one more day and some more wonder full interviews Carol Mass here at the Milkin Institute Global Conference, and of course, as you know on YouTube and on our Bloomberg original streaming service. I have to say in a special edition of the BW Daily, some reporting by our team Cat Doherty and Alison McNeely, they noted the glum mood among the financial elite at the Milkin Institute conference here hasn't been limited

Welcome, great to be here, Thanks for having me.

It's great to have you here. I want to get to the capital raise in just a moment. But the stresses that we are seeing in the banking community, the regional banks, what impact are you feeling at all when it comes to I don't know your world in general, or people may be coming to you where they can't get funding elsewhere.

Sure.

Well, I think it's stratified between size of business. So our firm focuses on middle market companies, so some of those businesses might be more impacted than others. Fortunately, our portfolio has not been impacted today.

You haven't seen any impact. Okay, So tell me about this fundraise. You guys just wrapped up what fundraising from about two hundred and seventy million for a debut of your private equity fund. Tell me about it.

Yes, and it was oversubscribed right, Yes, our target.

Was two twenty five So yeah, we're sector focused on investing the supply chain and logistics, and we believe deeply in sector expertise.

So I think that was part of.

The pitch, was this is a right time to be investing in supply chain given all the challenges we saw during.

COVID because of the unshoring that's going on somewhat of the as I have some of the conversations I've hit here at Milkin, it's not that globalization is it's just moving around. Maybe it's gonna be different markets, but there is more onshoring going on.

This is absolutely true.

I think you're seeing it across the board, big Fortune, five hundreds and smaller businesses. I think people have learned and even though supply chain challenges have diminished somewhat here in this country, people have learned that there needs to be additions to the supply chain strategy, so there isn't one point of failure in the future.

What kind of companies in particular, I know trucking is among some of the companies that you guys have been involved in. What particularly is coming before you?

Yeah, so we're spending a lot of time looking at warehousing.

I think that's a trend regardless what's going on in terms of onshoing or near shoring.

Is the ACTI actual buildings or that's correct.

Yeah, the businesses that operate within warehousing facilities. We are particularly focused on investing right now in transloading or rail related services around warehousing, so moving big, heavy, bulky loads. And we're also focused on contract packaging. We have a business called Corgistics that is invested in They're a large contract packager focused on consumer brands as well as.

Industrial brands, and we're spending a lot of time in aerospace and defense as well.

What'speci Vickar there? I was curious about that.

Yeah, so we like manufacturers of parts and components that go into engines, maintenance repair of those engines. Obviously, commercial airlines were heavily impacted by COVID, but there's a major ramp up and an unfortunately because a lot of the uncertainty globally, there's also a high.

Demand for defense related aerospace services.

So it's actually the supply chains of the things that are moving things.

Around, that's correct.

Like you can break it down so many different ways. What are the valuations on things? I mean, are have they come down a bit in terms of when you're you know.

Well, I think that goes back to the size of businesses. As we discussed before.

I also think that there is a bit of a gap or a delta between what the sellers are expecting and what buyers are willing to pay for businesses, and some of that has to do with, you know, leverage capacity and what lenders are willing.

To do in favor of the buyers. Are the sellers.

I think it's been well.

I think it's sellers expectations might be a little bit higher than what what buyers are willing to pay, and you see that probably more likely in the higher higher ends of the market than the lower ends of the market. Right, But in our space, I think there's plenty of opportunities still, particularly because we're so focused.

Nick, I'm wondering. I mean, I love that you play in the middle market space. I mean, I feel like we often talk about the big, you know, publicly traded companies, but there's so many companies in the middle market space, and it's one of the areas I think that we're concerned about not being able to get the financing they need or the funding that they need. Based on the activity that you're seeing in the companies that you're seeing, what does it tell you about the economic outlook?

Yeah, I think it's mixed.

Right.

In some parts of the economy, things are very strong. As we touched on in aerospace and defense, the industries are booming and others, for instance and trucking where we do not have any investments. Currently, freight rates have been significantly impacted. Now that's again off of kind of an all time high during COVID, But I think there are some woves and that does create opportunities for investment, particularly if companies or families are looking to exit or have liquidity challenges.

Because a lot of times there are family owned businesses right in that space. Having said that, what are the exits for you guys? What's your time frame of holding? Is it typical private equity or is it maybe a sell to a company or something much more quickly.

Yeah, so we are a typical private equity firm. I think what perhaps might be a little bit different. I think this is a trend that we're seeing in private Equeen in general, is it's so hard to find the right.

Business, the right culture, the right people.

So when you find that the idea of having to flip things right away, it can be challenging. So I think what part of our thematic related investment work is to find businesses where we understand what the strategy is to grow a business before we get involved, and so what we tell sellers and families is that if the strategy is to grow over a longer period of time,

Listen, we only have unfortunately thirty forty seconds you're black owned private equity firm. It's a rarity. Yes, I know it is unfortunate. And these are some things I'm going to talk about with Hope Bryant in a little bit. But I am curious, does it also maybe help you in the middle market space to some extent are not necessarily is it? Does it help you or is it?

Sometimes I think.

Diversity is good for business, not just the right thing to do, it's good for business. Diversity of thought is incredibly powerful competitive advantage. We don't market to our firms that we're black owned. We market that we're experts in our space. But it's something we consider. And then for instance, today are our firm is about fifty percent women.

I love that.

I saw that it is also rarety improvident.

So diversity with internally as well.

Yeah, you got to you got to walk the walk right and it.

Brings you also diverse thinking, diverse ideas right in terms of investments.

That's correct.

Thank you so much. I hope we can stay in touch, love to hear more as you guys are making investments and where you're going. Logistics is always a fun space in terms of what it tells us. Nick Antoine of Red Arts Capital. Right here at Milkan, folks, you are listening and watching Bloomberg Business Week. This is Bloomberg.

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One of the more talked about topics at Milking this year is, yes, we've been talking about the regional banks, but we have talked a lot, maybe even more so about what's going on in commercial real estate, real estate in general. Yesterday I had an all star lineup on real estate, including this gentleman next to me. Sean Dobson is Chairman CEO and chief investment officer at Amherst. They've got seventeen point six billion in assets under management. I

Hold on. I've built you up and it's expectations better than that.

Please go wherever you want.

Good to see you again, Very good to see you.

So I know we're going to rehash some of the stuff we talked about on our panel, but you know, coming out of the Great Financial Crisis took what was a difficult environment, but it was really opportunistic for you. Correct, it was the bold your company. Talk to us about that time and maybe is it you know how you think about some of the crises people are talking about now?

Is it sure? That's always the question? Is this another two thousand and eight? So for us, it was interesting.

The roots of our firm are actually in analyzing mortgages, which is pretty boring, so we can kind of put everyone to sleep talking.

About the fixtrate mortgage with data is important.

But data is very important, and we tackled this sort of over twenty five years where we'd stopped thinking about the mortgage market in general and started thinking.

About each mortgage in each house.

And so now with you know, with data and analytics and the scale of operation we can we can sort of weave to together the story of what's going on with the eighty to one hundred million real estate parcels in the world and then look at sort of the larger,

This real estate?

So around post financial crisis, as okay, let's figure it out, and so we built a national platform that does all of the basics that leverage off of all of our technology.

We already were pricing the home and thinking about the.

Home as a as an investment, and so, okay, how do we activate this investment when really it's a lot of grander decisions of an acquisition and underwrite repair. So we built a national general contracting. I never thought that Amherston ended up owning trucks with people running around fixing air.

Condition Well that's what's interesting, right, I mean, because it's rental.

It's rental.

Right.

Yeah, So in the US about two thirds of people own their home, which is pretty good for a global comparison of home ownership versus rentorship. But that means about a third of American families are living in a home that they're leasing. And I spent the first sort of two thirds of my career helping and participating in the mortgage market and.

Helping people own.

And I spent about the last third of my career, the most recent third, hopefully not the last third, but the most recent third of my career, focus on that rental segment that you know, there's so such a big market.

You're talking about.

Fifteen million families live in as separately detached home right that they're leasing from an owner operator. And of those there's only like half a dozen of us that are big owner operators. The rest of them are owned by individual investries.

Does that continue in terms of the amount of people that are in rental? And you know, some of the things that can him up on the panel show, and I thought was really interesting. We talked about demographics. Right, older folks, they're not leaving their homes. They don't want to have that three percent mortgage or four percent or whatever to you know, let low mortgage. But there are some things going on. So does that stay? Does that continue where people don't buy a home?

I think I does.

I think it's here to stay. I think that there's a little lot consumer preference at stake here. Owning a home means sort of committing to stay in one location for a longer period of time. We see less that about a quarter of our residents move out every year. Wow, So some of this is it's not time to buy.

Some of this it's.

Very difficult to buy, and we have to provide them the type of services that they're accustomed to. Coming out of multi family. We have a lot more professional management. So I think there will be a lot more growth in the rental segment. One of the things that to point out, you just point out something super important that most people didn't haven't really fully adjusted for yet. I don't think so. My dad is eighty five years old. He's fantastic. He's still the smartest guy in the room.

So he's out form, which we love. But today go dad.

So today a male born in the US or UK has a life expectancy of eighty three years, so that twenty year expansion life expectancy is a third and that changes everything. And one of the things that changed was how real estate gets recycled back into the market. So the US we have a decade of underinvesting in real estate, and then we have the use case extending extending, and then on the front side we have more people choosing to rent or requiring to rent.

What happened to the GFC.

So you can just kind of see there's a lot of tailwinds behind the asset class.

This is what I find fascinating about housing, Like the supply demand. It's so basic, but it really it's.

Not that complicated that you have to have the demand the supply where people want to demand. This is another issue. Yeah, Another big issue is the age of our housing stock. The average home United States built in nineteen seventy seven, it's got less than eight foot ceilings, and it's got one bathroom for every three bedroom.

I grew up in a house in the nineteen fifties, don't even know.

Well, that's not the product that people want today. And so we have this unbelievable business that takes that home and modernizes it and basically recycles it.

Well, I guess what I'm also curious about is what happened to the oversupply of housing coming off the Great Financial Crisis where people were talking about blowing up houses, you know, increasing immigration so that immigrants could buy home, Like, what happened to that oversupply?

We bought it.

We did because it wasn't the supply demanding balance that they thought about them was geez, we lost a lot of our consumers that were.

Going to buy.

But we realized is that you didn't lose the fact that people want to live there. But someone has to institutionalize.

The equity supply to that home.

So how do you get scaled equity into these micro assets? And so that's the challenge that we took on. That's kind of thing we like to do.

So what do you do with home? Like, so talk about the building side of it. So, all right, if we need more supply. I think one of the things that also came up on the panels that there's not workers there that you need to necessarily build these.

Yeah, there are so many multiple variables that make housing so expensive to manufacture. About two thirds or maybe sixty percent of a home that's built on site cost is labor. We like to we point out to people that there are more barrels of oil in a home, and there are sticks and timber, So what do you mean just transportation cost of all the materials and the people and so you have to form up this construction site every day and then take it down when you're.

Building homes on site.

So we've really gone deep in trying to understand what can we do to bring down the cost of housing.

One of the things we're doing or innovating is.

A new type of factory where we it's the same home you would build on site, but it's built modually and then we so our labor pool is quite different.

We have tradesmen that are you know, they're really able.

To perfect what they do to build the home, and then we can sort of, if you will, export the labor cost of a small town into the real estate market of a big town, so it really unlocks it brings to American manufacturing jobs. It allows us to create really good, high paying jobs right towns of that maybe don't have as much opportunity.

How much of that is going on, that's fascinating.

It's been around for a long time, modulate right Modules's.

Been a long time, but we think that we've uncovered a little bit of our of of what's happened to the market. But the housing the the industry is to build a home and sell it, or preferably sell a home and then and then build it right. So they don't have a long demand function for their manufacturing base. So imagine if BMW or General Motors waited for.

You to order a car before they started the factory every day. That's how the US housing market works.

There's no they don't have an elongated demand cycle, and there's a lot of price risk in the asset itself as we're seeing today. So what we think we can do by having an opportunity to either sell the home or provide the home as a rental and have capital for that asset available. For years in advance, we were striking capital relationships with global investors that last five seven ten years. So now we can create a really reliable long term capital base for the asset before it's built.

Rental the business of being in renting homes versus building and selling. What's more profitable.

It depends on where you are in the cycle. The big thing that we point out to people is that you need to have a monetization.

Strategy that moves with interest rates.

And if you're just building them to sell and like you're in, affordability is really a difficult thing right now, All of a sudden, the home builder it gets concerned about their takeout and they have to shrink their capacity. So I think that the winning strategy is going to be get manufacturing right and then let the capital markets provide you a longer term, more stable exit price for your product.

All right, So affordability is tough right now, right, and lot of people can't afford a home. You've got higher mortgage rates which dampens buying. So give me an idea of what you're anticipating, like the dynamics that are sometimes conflicting, the strange that are out there, What does it mean for the residential housing market in the next six to twelve months.

Yeah, terms of.

Demand and pricing, and sure, and I know it's location location.

We have our view, Yeah, exactly, it's location dependent for sure. But the thing I get you can think about is incomes grew a lot, and that really grew affordability. Now interest rates have risen a lot, and that takes away affordability. What we think about this is that the marginal home sale is what determines the price.

So you have the stock of homes, then you have the flow of homes.

Right, the flow is down fifty percent because about seventy percent of us homeowners went out and we're able to refinance into a mortgage that was sub four percent. So that means that's seventy percent of the sixty percent of homes, so maybe forty fifty percent of all the homes in the country. The person living there would literally have to

A little bit higher.

And that's because the person leasing the home has to take on repairs and maintenance. So if you buy the home, you take on the responsibility, So your principal interest, tax, and assurance would be slightly lower than your rental payment. That's inverted now, it's inverted significant. It's way cheaper to rent than it is to buy because you just had this shock to the system. So we think that that probably you will correct itself over time. It may correct

It's interesting. So let me go back to all right, so then what worries you about the outlook?

Well, look, you have.

You have this crazy cross current now to where we're in our view, there was too much fiscal support to the.

Economy, right of an overreaction.

Now you have the Federal Reserve sort of counterbalance that with what we would argue was way too.

Fast of reaction in monetary policy. So what this does is it just slows down the velocity of capital.

So we think in ten twenty thirty year cycles, we think about affordability, we think about rent growth, income growth, national growth, what happens to each city.

And now you just have a point in time where everyone.

Is a little bit nervous to make it a big decision because you only get to capitalize your investment in these things once and you're not sure are they going to be less expensive tomorrow or more expensive tomorrow?

And when you just have this much uncertainty in the market.

You can see it in quoted volatility, you can see it in the shape of the e Oeld curve. What the real result of all this is people just don't do anything. So I think the thing that concerns this is just if capital becomes there's really no longer a penalty for not being invested, and so it just slows down long term capital formation.

We've just got about forty five seconds left here. So you're the residential guy that was on the panel. I mean, you guys do mortgage back security, should you do some commercial I'm just curious your take on office.

Since you're yeah. So we're in there.

We have a port loans, we have some loans that have defaulted, and we've taken some properties over and I sent the last year really working closely with our teams to understand what the alternative use cases are for office. Suburban office probably has more flexibility than urban office, okay, and so the suburban offices, we're taking some down and putting back logistics centers and so it's really like logistics center, it's too much supply and it's real estate.

We can take it down.

It does the day to tell you that there's more more pain to come, a lot more pain to come, a lot more pain to come about sort.

Well, I mean a lot of the pains already hear. The only question is not long before we all reckon?

But is it again like the lower tier we talked about on the panel.

Just there's like the top one percent of the office market. Everyone buys about No one vandor belt and two in a our rents. That's interesting but not really important.

Thank you, so see it flew and you kept your voice.

Thank you, thank you so much.

Fun to have you on the panel of Fun to have you back here, Shun Tops and Chairman, CEO and chief investment officer at Amherst.

Right here on Bloomberg, you're listening to the Bloomberg Business Week Podcast. Catch us live week days from two to five pm Easter on Bloomberg Radio, the Bloomberg Business App, and you too. You can also listen live to our flagship New York station, Just say Alexa play Bloomberg eleven thirty.

Carol Master live at the Milk and Institute Global Conference. And I want to get to our guests because every time I speak with him, spend some time with him. He always inspires. He reminds us that will take work and conscious decisions to bring about a more equality and equitable world. So with us. As the chairman and CEO of the nonprofit in financial literacy and Economic Conclusion, Operation Hope,

We've gotten better. The world's gotten worse.

Well that doesn't feel good.

Yeah, Well, the world's in turmoil now, so it's hard to find stable ground to sit good ideas. We've got more good ideas, we've got more proven ideas. Me yesterday, Fast Company announced that we were the World Changing We won this World Changing Ideas Award. In a more stable time, that would have been the shot the news that sort of rang around the world and have been rallying around that you know, in this environment, you're an active shooter

And yet you are getting stuff done, John.

Yet we're still getting stuff done. I'll just punched right through it, you know, over around it, through it. I go to it. And rainbow's only follows. Storms cannot have a rainbow without a storm first. I don't mind a good fight. I don't mind having to punch through the rhetoric with substance. I've been doing that my whole life. And we have a lot of substance now. And look we're here. I'm here talking to you. I mean, I'm not being pushed to the I'm not sorry. I'm not

Oh, I appreciate that. I mean, it's not perfect, because we know that. I want to ask about your partnership that you've had with Fulton Bank.

Talk to me a little bit about yah.

I feel like you know you and I've talked about this a lot of folks. There's lots of conversations. You actually take those conversations and put it into action. So tell us about this.

Yeah, PhDs are good, PhDs are betterdu So the one thing I love about this And Fulton won't appreciate the waymen to characterize this, but I think it's an important characterization. A relatively small sized bank in Pennsylvania, small by banking standards, not small by bank their standards. It's actually a big bank by their standards. For Fulton Bank, is this great institution in Pennsylvania doing great work, but they're not a

What's interesting is Right it was for people who qualified, and you talked about getting the credit scores up. I mean, these are people that you guys have worked with, right, who wanted to be homeowners and what did they have to do? And you educated them and then they did the work.

We were getting the bank out of the no business and back into the yes business by working with and I want to again, I command Fulton Banking, their leadership, their chairman. See I commend Wells Fargo. I command well as far as ordered a hundred of our Hope in Side locations plus. That's not charity, that's business. Bank of America's ordered one hundred plus.

Locations true inside the.

Inside the bank. We're the only nonprofit in US history allowed to operate inside of a bank branch. Truant once has been half of their bank branches. They have two thousand branches. You're talking about changing banking itself. But back to this example of Fulton. So we go into the bank branch and we can do what the banker can do. We can actually ask the personal direct question. Missus Jones. Yes, let's look at your credit report. This was like a

That's free.

So now you go yes, So now you go from five ninety to.

Six point twenty.

Well, what happens to listen to her, to missus Joe's self esteem, It goes up her belief in the financial system, her trust, her confidence, her sense of independence. So she now she's sitting going okay, what else can we do? So then we tackle the charge off on her credit bureau Well, that is hers. She was divorced ten years ago. It was a thousand dollars phone bill or balloons, one

What do they want?

They want one hundred percent profit, They want one hundred bucks, Miss Jones. Let's call them together. We have missus Jones here. We're looking for her. She's looking for you. We want to pay our debt. We want a hundred bucks. No, we're gonna pay you two hundred bucks. Why because we want your absolute attention to take this off her credit report after she's satisized.

We want them to fix it.

And then when it shows back up out her credit report because it's been there ten years, were got to write another letter to the credit burials to get it off again. Get they get a two hundred percent of profit. Right, she got an eighty percent discount. Fair change is no robbery. Her credit score goes up another twenty thirty forty points. So now she's an example. And she said, let's just say six fifty six to sixty. She's now in striking

Is amazing what you do.

And the thing is, you are all about financial literacy. And I think you and I've talked about it. I wish kids were starting from kindergarten that they learned about you work on it from middle school through college.

Right now now kindergarten, by the way you are doing, we're doing kids accounts in kindergarten and Lanta public schools.

I mean, and you're working with employee I mean you get you're making a difference, right. People are really learning about the financial system so understanding how they can make it work for them.

Yeah.

So now we've told major employers, So Doug McMillan and the CEO of Walmart not co sharing financial literacy for all. Our mission is a get eighty percent of the fortune five hundred to embed financial literacy into their business plan. So this is not public affairs or community affairs. This is a serious business right. We say, this is what healthcare was forty or fifty years ago, financial well being

But how great is that? Listen? Fifteen seconds left. Final thought to anybody who's listening.

You can be the change we want to see in the world. Figure out how you can help call Operation Hope. Volunteer, become a member, become a donor, become a partner. This is this is about making free enterprise work for all of God's children. This is silver rights. This is not about red or blue race. I mean politics are black or white. It's about green economics, more of it for all, GDP, for America and truly by getting more people.

In the game.

I love it, make so much sense.

Love all you guys, Appreciate you. We want you at our whole global form.

By the way, all right, JOHNA, You're special.

You're a special.

You're listening to the Bloomberg Business Week podcast. Catch us live weekdays from two to five pm Easter on Bloomberg Radio, the Bloomberg Business app and YouTube. You can also listen live to our flagship New York station, Just Say Alexa, play Bloomberg eleven thirty a lot today.

And have lots of conversations with folks at Milkin. But at the same time, things are getting done. The world is moving forward, and that is true when it comes to aviation and clean technology, which is something that's come up a lot here at Milkin. So we want to talk about that with our next guest. Delighted to bring in about Michtakoff. He's founder and CEO of Zerio Avia. They have backing for Bill Gates Breakthrough Energy Ventures and Jeff Bezos Climate Pledge Fund.

Welcome, Welcome, thank you, thank you. Great to be here.

I love talking clean technologies, I said to you, and I love talking what's going on with aviation. Till us about your company.

First of all, yeah, so we started a company five years ago. More than five years. We have built a technology in house. We're flying multiple prototypes already, the largest one flying in the UK. The company is between the West Coast US and the UK twenty seaters and we just announced with Alaska, one of our launch partners and airline investor, a large aircraft development, seventy six seat aircraft.

So tell me about your powertrain.

Yeah, So it's hydrogen electric so hydrogen on board the aircraft and then converting that to electricity using the fuel cells, and then electricity runs motors. All the critical technology we have in house, which is important because you cannot really use automotive technology. It's very hard to certify, so you need to develop everything from scratch your build to the whole base. So that's what we've done before that. Before zero, I did the electric car company and charging systems already

So so is what we're doing. The focus on evs in their current state, not the future. In terms of alternative fuel, Is it hydrogen that really makes the difference? And you think that ultimately is what takes over?

Well, I thank you. I know it depends on that your book, It depends on the type of but you know, we we like to think that we are unbiased. We're first principles based. Yeah, and my previous company was all about batteries.

I know, is that the answer because that has problems too, and you need power to fuel those batteries.

That's right, that's right. But so the secret sauce from my previous company was exactly around that. And I did apparently yesterday on the future of mobility and all that. We had a little bit of discussion around it, and the key was, yes, it requires a lot of new power. But those cars typically sits in the parking lot, either at your work or at your house for ninety five percent of the time, and if they keep kept plugged in, then you can use that battery capacity to store all

But what about some of the concerns and problems with hydrogen.

Yeah, so the main problem actually from the technology standpoints, the main problem is hydrogen takes more volume, yeah, to store. So what we are doing and we're going after the existing aircraft, existing fleets, and then existing types of aircraft, maybe new aircraft, but existing types. So what we do is we retrofit those aircraft and line fit and we're

How big can you go in terms of like the jumbo plane that I'm going to take home from lax back to New York. Is this ultimately what you can do?

Yeah, it is possible. So within ten years we're hoping to get to what's called single aisle, so Boying seven thirty seven or Airbus A three twenty in.

What's holding you back from doing it? Today?

We need to scale the technology, the fuel cells most importantly to these large power levels, high power levels. Right, So today we have the technology that powers already twenty seed aircraft and flying, and we're submitting that engine for certification later this year, right, launch in twenty twenty five, so two years out you'll be able to buy tickets fIF for that aircraft. The next size is the seventy

What's the safety?

Yeah, frequently asked question to the point that at some point I had, you know, second page on my presentations, Hindenberg, you know, just showing.

Does it get safe then?

And then you know the message there is technology has moved on, right in eighty plus years, Yeah, so we have one hundred week meaning you know society right, Yeah, worldwide. We have over one hundred thousand ground vehicles operated on hydrogen by unqualified personal You can you know, anybody can walk into Toyota dealership today and buy a hydrogen car, drive off, go into the fueling station and fuel up with hydrogen, buy herself himself without any training and no incidents.

But I don't see that anywhere, Yeah, because.

You know, hundred thousand is not a huge number with respect to you know, billions of vehicles worldwide, but they're there. O. California actually has like a third of them.

But where are we then doing more of that versus the EV batteries?

Yeah, the vehicles, the hydrogen fuel cell technology is expensive now relative to the combustion.

Cars, relative to battery is much more expensive.

So Toyota I think still loses money on every vehicle, and those are not cheap vehicles.

I think the double the cost of combustion.

It's probably ten x ten times, probably ten.

And what about EV battle part of that is volume game.

As well, right, so you know you don't you don't have a long going But in aviation everything is expensive, right, so your performance you're not based on cost, you based on performance and safety. So you have a lot more room on the cost basis, and that allows us to

You have airlines lending up to order.

Absolutely, we have pre orders for about ten billion dollars of worth of future revenues. Might have American Airlines, United Airlines pretty bigger for the bigger actually for regional planes to start with. So in the next seven years we're looking to you know, fulfill those orders, start fulfilling those orders. We are now taking deposits, booking, productions, laws, very exciting time.

Unbelievable now, it's fascinating. So you think in ten years from now it will be all over.

Well, not quite all over the big twin aisle planes. It will take more time, right, So these are what you would take you know, from Lax to London for example, Right, So that will take some time, but I think technology will be available for all aircraft within twenty years. Yeah, and then it's a you know, how how quickly will we replace and that depends on how committed the governments are, how committed the you know, the operators are, and everybody else.

We'll come back and let us know how things are going.

Of course, love this space.

Val Mitchakoff, he's stunder and CEO of Zero Avia, joining us here at Milk And you are listening and watching Bloomberg Business Week, and this is Bloomberg Radio.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekdays from two to five pm Eastern on.

Bloomberg Radio, the Bloomberg Business app and YouTube.

You can also listen live to our flagship New York station, Just Say Alexa play Bloomberg eleven.

Thirty Girl Man.

So we are live and getting ready to wrap up our first day the Milkin Institute Global Conference here in Beverly Hills. Something that seems so relevant today may the uncertainty about I feel like many things, including our outlook. So let's get to it. We'll explain it a moment. Lisa Donahue is co head of the Americas and Asian

You know, I think it is.

I think that should we be slime or is that?

Well, it depends on your perspective, right, Okay, Whenever there is risk and uncertainty, there's also opportunity, right, So I think you can be smiling because I think that, Yes, I think we're in for turbulent times. Yes, I think that there's a lot of disruption out there. But the good news is the smart CEOs that we're working with

Lisa, what are the tea leaves that are like kind of front and center for some of your clients and your executives you're working with.

Thinking about it on the disruption theme as we've kind of started out, If you think about it, things are moving so fast and from a financial environment, we've got high interest rates, we've got a tighter liquidity pool. From a disruption perspective, we have very fast paced technological change, We've got geopolitical uncertainty. We've got still in some areas dealing with some of the after effects of the global shutdown.

For COVID right, and having to deal with supply chain disruptions.

And what does that mean for onshoring, offshoring, redundant supply chains. You know, I think, if anything, what that showed us is that surety of product is at least as important as cost.

So does that mean a lot more on shoring. Is that what we're seeing? I mean, I've certainly had talked to CEOs and they definitely are thinking about it and doing it. It's not just conversations, they're changing how they do it. I think supply to it. I think that's right.

I don't let me make sure I'm clear, though. I don't believe that means the end of globalization.

However, I do think what it means is moving things closer to clients, closer to customers, so that you have more of a shorty and you're comfortable with your ability to continue to deliver your product. But I do think that smart CEOs that we're working with are really rethinking

Is it all industries that are kind of coming to you?

Yes?

Yes, not in you know a certain sector that is kind of dominating it. I'm just curious.

Well, you know, it depends on what they're trying to solve. You know, folks come to us when they want results. They come to us.

Is it when growth is stagnating or yeah, it could be growth.

It could be strategy, could be We're doing a lot of kind of business model, operational model re engineering and reimagining. Now where folks are saying, look, I need to make sure I'm fit for purpose. I need to make sure that I have the nimbleness within each of my different business units. And you know, maybe we've gotten too big, Maybe we need to get back to basics.

What is it that Mark Zuckerberg says the Year of efficiencies? But I do wonder if I think there are companies that got a little fat in terms of management and right, is that what you're saying, like stream money or is it processes? I think it's both actually, and I think it's all of the above.

And I don't know if it's if it's fat.

But we were really.

Lucky in unprecedented you know times, and when there were some bumps, we had quantitative easing, we had government intervention,

How did the bank collapses change things? Did it at all impact your world? Well?

It did initially, because you know, we have a very we've got a big TMT technology practice. And if you think about that first time period when before things got stabilized and before the xsvality jumped in, I'm thinking the best v B exactly, and before the FDIC jumped in and said, oh it's not limited to just.

Two hundred and fifty k.

There was a period of aside from over that weekend, probably another two to three days before there was certainty, and that had customer panicked because you think about the whole venture community, right, and they were a huge lender to the venture community, so our tech custom stomers were a little unsettled. But I would say that was again a blip because if you think about what actually happened is the government came in again, right, and those assets, I mean.

The estate is running through a bankruptcy, but the actual assets moved right, They're solid. So a little bit of a blip, not too much.

I always thin about Bloomberg audience when we're talking to somebody like you, like, how should what should investors be? Kind of taking away from what you are saying and what it means, I don't know in terms of opportunities or the environment. Well, I think you know, as we.

Said at the beginning, and you said, you know, should we be smiling?

Should we not be smiling? I think believes at Catholic school. I think we caught on, But we'll explain that later. Folks, we were talking about it was all good.

I feel like all my interviews, starting in with Catholic schools, there's usually nuns thrown in there somewhere too.

But what what shod they take away? If they're listening to what you're saying, So what does it mean?

I think they can take away that there's lots of opportunities because as you said, there's there's going to be folks that are reimagining what they do best and are their non core assets that they should be shedding and does it fit better.

For somebody else? And I think that they should be looking.

You know, if you're a private equity investor, you should be looking at your portfolios and making sure that your CEOs are like the smart ones we're working with and are thinking proactively and thinking nimbly and thinking about how to be financially fit and operationally fit right as we kind of continue to navigate these times because you know.

The interest rate environment alone makes it makes it a bit challenging.

Yeah, it's being like you said, preemptive about things and not kind of waiting for maybe another shoot to drop, if you will, really fascinating. Thank you so much. All right, fifteen seconds to people ask you about AI a lot.

People do, and we were talking, Yeah, and we have a huge digital practice where we're super on top of it, and the things that are coming forward and the amazing technological advances and how much more efficient and how fast we can be.

Yeah, it's exciting stuff.

This was so much fun. I hope we can catch up again in the future. Lisa Donahue over at alex Partners, joining us here at Milton.

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