This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Yes, indeed, everybody, we are finishing up one more day and some more wonderful interviews Carol Masser 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 to bankers.
They talked about the lousy environment for private equity fundraising, but as our next guest will tell you, they were actually putting the finishing touches on a capital raise while at Milkin. So we're going to get into it with us on site here at Milkin is one of the co founders of the Private from Red Arts Capital, Nick and Twan, and he joins us. Welcome, 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 maybe 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 in 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 the 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 in the supply chain and logistics, and we believe deeply in sector expertise.
So I think that was part of.
The hitch was this is the 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 milk and it's not that globalization is it's just moving around. Maybe it's gonna be different markets, but there is more onshoing 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 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 actual actual buildings.
Or that's correct.
Yeah, the businesses that operate within warehousing facilit 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 Courgistics that is invested in They're a large contract packager focused on consumer brands as well as industrial brands.
When we're spending a lot of time in aerospace and defense.
As well, what specifically 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, 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. Or 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 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. If we touched on in aerospace and defense industries are booming and others for instance and trucking, where we do not have any investments currently. Freight rates have been significantly impacted, and now that's again off of a kind of an all time hide 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 the trend that we're seeing in private dect BEE 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 bit 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.
We can help provide the solutions to do that.
If it's really just they're looking for the liquidity and they're looking for stewardship for the business for the future, that's a different strategy as well.
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 John O'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?
Why I think diversity is good for business, not just the right thing to do, it's good for business. The 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 that we consider and then for instance, today our firm is about fifty percent women.
I love that. I saw that.
It is also a rarety improvidence.
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 right in terms of investments.
That's great.
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 Antwine of Red Arts Capital. Right here at Milkin, Folks, you are listening and watching Bloomberg BusinessWeek. This is Bloomberg.
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.
Carol Master live at the Milken 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, He's
involved in so much to close the gap. He's also a vice chair of former President Bush's Council on Financial Literacy. I mean, you've worked with President Obama Council on financial capability. You've done so much of You're hands in so much financial literacy. You're thinking about, you know, housing access, what's top of mind as you had I'm sure a million conversations here at milkon and have we gotten better in terms of equity?
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 in Atlanta.
You've got a bank going bus, you gotta you got a stalemate in Washington, d C. On the debt crisis. You've got so there's so many things distracting people. The urgent is crowding out the important.
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 and 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'm not being pushed to the I'm not sorry. I'm not at the edges of the conversation. I'm often at the center of a conversation, right That's where I've wanted to be. That's where the issue needs to be. We're just there
in a very chaotic, crazy times. I think that we're sitting in a moment in history right now, Carol. The history does not feel historic when you're sitting in it. It just feels like another day. But I think that what happens between now and twenty thirty, between the pandemic and George Floyd's murder and the attack on our capital which reset everything, and the end of twenty thirty, is what I call the third reconstruction and this next ten this ten year period will decide the quality of life
for the next one hundred years. So I don't mind being exhausted, worn out from work from cancy in the morning and can't see at night. I think it's relevant. I think it matters what I'm saying, what you're doing matters. You cannot have a movement without the media. Doctor King never would have had a movement if it wasn't for the media being amplifying his good message. So I think that all this.
Is Oh, I appreciate that. I mean, it's not perfect.
If we know that.
I want to ask about your partnership that you've had with Fulton Bank. Talk to me a little bit about 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, pH d's are better. So the one thing I love about this, And Fulton won't appreciate the way I'm going 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 standars. Fulton Bank is this great institution in Pennsylvania doing great work, but
they're not household name. This relatively small market cap bank based on the banks we hear on TV or in Bloomberg all the time. Did a billion dollars in mortgage creation for African American not just minority, not women, not
some super group of underserved, just African Americans. A billion dollars through Operation Hope in our Hope and sides, proving that you can do well and do good, proving that you can move the needle on forty one percent of af Americans who own a home, and when seventy five percent of Whites own a home, that delta thirty percent is the loss of wealth creation, the loss of tax base,
the loss of our opportunity lasts. So the fact that one bank that is not yet a household name, they mean they will be after this interview, right, did a billion dollars of credible, well underwritten structured home ownership. Tying it to our coaching work at Hope Inside, where we got credit scores up, debt down, savings up. Some people could qualify. So did it in a safest down basis. We just did the hard work together. A billion dollars. That's a real number.
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?
Yes?
And what did they have to do?
Yes?
And you educated them yes, and then they did the work.
So we're getting the bank out of the no business and back into the yes business by working with and I want to again a command Fulton Bank in their leadership, their chairman, see, I command 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 outside the bank.
Inside the bank. We're the only nonprofit in US history allowed to operate inside of a bank branch. Truist 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't do we can actually ask the personal direct question, missus Jones. Yes, let's look at your credit report. This is like a
bus accident. And we both have a nice laugh because miss Jones knows that she knows her history. Yeah, I haven't looked at my credit at score in a while. Okay, what's that? I don't know, John, what that's called an error? Okay? The law states that if the credit bureaus, three of them can't confirm that that's yours, they must remove it. How about we write a letter to the credit bureaus together and challenge them. Yes, we write that letter together.
What's banking a trust business? It's about belief, It's about confidence. Credit comes to the work the Latin word credit od which is credibility capital from the Latin word capitas knowledge in the head. Now that this is about money, it's about how you feel. So we get the letter to the credit bureaus. They can't confirm that it's hers. They are removing it. In thirty days, her credit score pops thirty points. So now you go, yes, so now you go from five ninety to six twenty. Well, what happens
to listen to her? To missus Jones 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 thousand dollars. They chased her, couldn't find her. That was sold to a credit repair agency, a debt collection agency for five
cents on the dollar. We know that it's fifty bucks. 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 to
fix it. And then when it shows back up on her credit report because it's been there ten years, we're got to write another letter to the credit burias and get it off again. They get it, They get a two hundred percent profit. She got an eighty percent discount. Fair exchange 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 sixty, she's now in striking distance of a six to eighty
prime rate mortgage. We work on our budget, we work on a few other things, and all of a sudden, she's a shiny pinny.
John, I am like, it 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 it. 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 Atlanta public schools.
I mean, and you're working with employee. I mean, you're making a difference. Right, people are really learning about the financial system and 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 again 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. We say, this is what healthcare was forty or fifty years ago, financial well being inside the workplace. So then Delta CEO comes to us and says, this
is something relevant to our people. There are folks who said this is important. We'll give a thousand dollars, sorry, invest one thousand dollars to every one of our workers who go through financial coaching for an emergency savings account. Because sixty four percent of Americans, Carol, don't have four hundred dollars for an unplanned event that affects their ability to focus on the job, their ability. They're stressed out on the job, they're not paying attention. So he's like,
I want there, I want all share of mind. I don't want them stressed out. He achieved a year's worth of financial well being coaching targets in two months with this program. So he had ninety thousand employees at Delta, and I can't go through an airport now without two things happening. A Delta employee is saying, I got my thousand dollars or I'm in my coaching sessions right now. Thank you or the TSA agents screaming out the credit score to me.
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 show. 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, John O'Brien, you're special.
You're a special 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, and I want to get right.
To our next guest. He's the co founder of the French asset manager TKO Capital. They've got over fifteen billion US in assets under management. We welcome Matthew Chabron. He is here with us on site, so nice to have you here with us.
Thanks for cool.
Let's start with the FED policy. You know, we're talking to interest rates. I feel like, you know, we really need to do global interest rates because banks globally are on fighting inflation. How does that impact you in your thinking?
Well, I think the first message is, you know, the confirming that liquidity will have a cost for longer. And that was not the case obviously for the past ten years. And had we had this discussion a year ago, I think I was saying that we were coming out of the model of all a p howur you know, And right now they're telling us effectively, the ball might remain closed, you know, for a little bit longer. So get used to it. Get used to it, you know, in the
cost of liquidity, in the cost of credit. Maybe we'll touch base on that, but you know, now, you know, what was maybe a three percent cost of funding right maybe close to eight or nine and guess what, you know what we learned at school when you know, interest rate goes up as the prices go down. So it's may be a bit simplistic, but that's an environment we're in.
But Matthew, it doesn't mean that deals don't get done and things don't get done and investments don't get done, right because it's not as high as it could be and we've had in certain environments.
Yeah, so it's about you know, your underwriting assumptions, your anti entry price. And I think there's still a little bit of adjustments to be to be made. I think we went Carol from let me phrase, I think that there is a fine line between between comfort and complacency, and I think that's that's where we are. It was very comfortable to have this whole liquidity and now we're like, okay, there's less liquidity, but let's pretend still a little bit.
And I think we should not pretend. We should readjust you know, just do it already, right, I think so? Yeah, I think so, And I think the private market law that effectively.
Well so the value of credit. I know that was something before we got go and you were talking about talk to us a little bit about that. What that means, well, it's what we need to think.
About who's providing credit, banks, capital markets, uh, private markets. Now Here in the US we with the BDCs. In many places of the world we don't have that. And what about bank telling us that they're tightening credit. I want you to elaborate on year of regional banks in a situation here, but I can tell you in Europe, the CB just came out with the report saying that crede conditions are as worse as twenty eleven, which is right after the GFC and the euro crisis. The capital market
are extremely selective. Not everyone can tap the captain market if you're an SMP company or CAC forty or foot see, it's okay. But an economy is not just made up of all these companies, right so, and.
The backbone is often not absolutely.
In particular when it comes to employment and jobs, which is you know what you know public policies are all focusing on. So I think there is effectively this opportunity for an alternative source of capital to step into this what was the cyclical opportunity the pastenos I think it's becoming a bit more structural.
So but when you see where capital flows are going or who is demanding some of that private capital, where is it so certain industries or is it just every body in that kind of smaller space.
Now, I think it's it's a bit of everybody. So if we who are the asset owners today's insurance company globally, they've been operating in a very low interest rate environment. They can relyfform that, so they're deperying capital there. Hear in North America, public pension funds, endowments long term, you know, asset owners, family offices. You know, a lot of family offices are shifting you know, into this into this asset class because effectively the public market cannot provide the recurring
income they may need, like an endowment of foundation. By the way, so we're seeing all of the above. Obviously here in North America. In the US were much more advanced than you know, the part of the world. Asia was, you know, Korea, Japan very well positioned on the market. Europe was lacking, you know, by by far. So you know, even if they move by five ten percent, it's a lot of capital coming in. And I think it's a good news to address the liquidity is shortage is enough.
To kind of keep the globe economy, the US economy, European economy, from slowing down too much or hitting a recession, which I feel like we debate constantly.
It's very interesting because very often we oppose recession and inflation.
In this debate.
We like to add the third dimension, which is liquidity. And where does this liquidity contry is really valuable?
I think it is.
I mean, what again, going back to the banks, yeah, saga, you know, the past few a few weeks, it's pure. You know, how much are you giving me for the money I gave you? And if I can find better elsewhere, you know, I will go elsewhere. Right, you know, what do I get in front of my deposit?
You know?
And so coming back to interest rate, you know, once again, that's the environment where we're in. Part of the inventory may be a little bit age or dated, defined as it does not pay what it should pay in this market. So let me allocate to this market. I think it's
relatively healthy. I'm not seeing some kind of systemic risk you know, around that, But it's healthy because capital capital flows and liquidity, you know, we'll have a much more a much higher price than you had for the past ten years, you know.
And I'm looking at a headline crossing the Bloomberg about PacWest set to waigh strategic options, including a sale. So we continue to see the stress in the US regional banks. What you're saying is here's an option, right, and that will keep potentially liquidity going and flowing.
At least four available, at least for the clients of those banks who might not be there. You know, it's great that JP Morgan is taking over you know, one of those banks. Maybe you know more banks, but we know that if you are ten twenty, maybe even your fifty million a BDA business across the US or across Europe, you don't bank with many of these large institutions, so you need alternative. So once again, I think it's it's it's relatively healthy.
I would love to ask you, because we have about a minute left here. One of the things that I know that you've been thinking about are working within is opportunities and sustainability and decarbonization. And I do feel, like Matthew, that there has been a bigger focus on that finally clean technology. It's really happening.
Yeah, because you know, when we started five years ago it was nice to have and today's I must have. So you know there's no debate.
Anymore around that.
And yes, you need the return on capitol you deployed to that, but there's also the impact embedded, you know, with what to do. And uh, we've been relative early a ticko. You know, five years ago, we've been deploying across private equity, credit, asset finance here and here at.
More so than you were doing maybe a year ago.
Oh yeah, yeah, yeah, because you know it has become it's a it's no longer an option. It's not long an option. You know, your clients, that's what they're asking I mean, our client, that's what they're asking us to do. There's no other alternaty.
If I had to ask you in twenty seconds, and I am going to because I have twenty seconds, are you more optimistic about the next twelve to twenty four months or more cautious?
All right, here's the answer. I'm optimistic because I'm an entrepreneur. I'm relatively pessimistic because I'm a leveraged finance banker by background, and so you know, we have to put all that together and hopefully be right in the swimming line.
Kind of the French version of J. Powell right like, kind of covering it all. Enjoyed this look forward to hopefully catching up with you again in the future. Met you Show Brown. He is, of course, the co founder of the French asset manager TKO Capital. Joining us here on Bloomberg pac Quest shares in the aftermarket down thirty one percent.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio Bromarco Journal.
Now about you, Let me drive? Oh no, no, no no, who's going to honey Please?
I'll do gravels.
Let's I want to drive.
It's a good question time. This is the Drive to the Globes.
Dot Commutek Well Brier up Ladn on Bloomberg Radio three forty nine on Wall Street. This is a special edition of Bloomberg Business Sweek on this FED Decision Day. I'm Doug Prisner at the Bloomberg Interactive Broker Studio in New York. Carol Master is live from the Milk and Institute Global Conference in Beverly Hills. We'll be checking in with Carol at the top of the hour. In the meantime, let's get to John Cadunas. He is president and CEO of
Kalamos Investments. He joins us live from the Milk and Institute Global Conference in Beverly Hills. John, thanks for being with us. Glad you could make time to chat with us. Yeh absolutely, So I want to get your reaction to this. The Fed movement today as expected, twenty five bases point rate hike and the suggestion now the implication that the Fed is ready to pause in its tightening. Have we seen enough contraction in credit to keep the economy from going into recession.
Well, we need more data points to say whether we go into recession or not. In my opinion, we've been having a rolling recession. And I call it rolling because last year we saw that we had a couple of consecutive quarters of negative GDPs. So we're at the cusp and we're gonna have to wait to see if we fall back into that. But every month, every quarter, we get more data, and that's what Powell and the rest of the governors are looking at.
Is this an opportunity for private credit? One of the things that FED Scher has said today is that the FED is going to be monitoring credit conditions very tightly. We know the story when it comes to some of the regional banks. Even before the SVB situation, credit was contracting. Is this an opportunity for the private market to step in.
I think it's a huge opportunity for private credit. If you see the evolution I mean here at the Milking conference, we look at the origins of Michael who started his own asset class basically high yield or junk bonds back in the eighties that gave liquidity and money to mid sized companies. To you see the transformation of Las Vegas. It went into corporate because of the financing of a high yield and then the big banks were giving money after that the next couple of decades till they got
overregulated with dot frank and whatnot. That pulled the liquidity out of the system instead of into the system, and it went to the smaller banks. And so now we've seen what's happened with the smaller banks. So who's going to replace that? Private credit is ripe to become a huge lender of last resort, if you will. So, I think private credit is going to be a very, very very strong asset class here going forward in the next couple of years.
When you look at opportunities, John, are there industries right now that you really feel represent opportunity to kind of build relationships, provide credit and to benefit in the long run.
Well, I mean, if you look at just what's been performing this year, it's a little bit of the similar story of a couple of years ago, where the Fang stocks we're doing really well. We look at there's approximately eight stocks that's providing almost ninety percent of all the upside this year in the S and P five hundred and some of those underlying stocks, of course aren't in
tuck and whatnot. And you know, a lot of the buzz here in the conference too has been AI and there are a couple of these companies that are heavily invested in AI. So I think that's also another big opportunity in growth.
What is the conversation at milk and when it comes to commercial real estate, I mean, when we talk about the stress that some of these regional banks have been faced, saying the finger goes right to the property market, particularly office buildings. Is that part of the conversation.
That is part of the conversation. Everybody's looking at all the resets right with these loans coming due and at higher rates here, so we'll see how how some of these uh cnbs commercial workers backed securities do that are going to be stressed now because some people will be able to take the payments of higher rates and others won't and no flesh out some of this stuff, so they are anticipating bracing for some some fallout here in that market.
So will there be opportunities then in terms of distressed debt for some of these real estate companies.
There's always is, But once again, the landscape has changed too since COVID, So the the amount of office space that may have been needed in the past, now it's being transformed into something different and so there may not be the same amount and it's used differently than it has in the past because of the a lot of work from home kind of mentality, which at this point we don't know how long that will last. We are starting to see a lot more companies going back full time,
but it's not nearly as robust as it was. Obviously pre covid.
You mentioned earlier the conversation at Milkin around artificial intelligence. I'm curious. I mean, there's been so much debate when it comes to this technology. We know that companies like Alphabet and Microsoft are already playing. There has been many many folks who have raised a lot of concern and I would place Jeffrey Hinton, who left Google recently. I don't know if you saw the article in the New
York Times the other day. He was very very cautious and advising companies on kind of slowing down the pace of their adoption of this technology. Is that something that concerns you. If you had to put money to work as a credit investor and you're talking about artificial intelligence, how would you extend credit? What would your criteria be?
Well, the first part of your question, it is concerning. It is concerning where this technology is going, and you know, all the good that it does, there's definitely fallout in terms of some of the bad that it may do. There's concerns that there's no question that technology over the years has brought efficiency, but also efficiency has brought you know, loss of jobs, right, and so you can do so much more with so much less because of the technology,
and AI is a form of technology that allows for that. Now, having said that, things have transfer, people has transformed, jobs have transformed and filled in there's more jobs in other areas that have taken place, and so as long as there continues to be a transformation with new types of jobs for people to fill, it's not going to be as concerning as it could possibly be.
Well, you mentioned technology. One of the things that I think of relations between the US and China. We know the semiconductor story. How do you view that relationship right now? The geopolitics is that of concern to you when you're making decisions these days?
I think geopolitics is a huge concern. I think fiscal policy is a huge concern, almost more of than monetary policy. I think that some of the moves in fiscal policy has definitely helped and hurt unfortunately as of late, hurt a lot of what's going on with the economy and so bringing these jobs back home, bringing manufacturing back to the United States, not being dependent on other countries for some of the really important things, whether it be the microchips,
whether it be pharmaceuticals. I think it's really important that we incentivize companies to do and manufacture in the United States so we don't have to be dependent like we are right now. And I think this administration has definitely dropped the ball on that.
We'll leave it there.
Thanks so much. Great conversation, John Codunas. He is president's CEO of Kalamos Investments, Live from the Milk and Institute Global Conference.
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