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Let's get to one of our most read stories that's definitely on our radar today, and this is the Wall Street Voice. Tim. Everyone listens to who's talking about AI and steam engines? And that's where we're going to go now.
Yeah, that boy is JP Morgan Chief executive Officer Jamie dimond out with his annual shareholder letter, always a must read, of course for the investment community, and in it, Diamond devoted a chunk to the importance of artificial intelligence, saying maybe the biggest issue that his bank is grappling with. Let's get into it with Sally bake Well, Bloomberg News
America's finance team leader. She joins us here into the studio. Sally, always the annual letter chock full of stuff to talk about, but AI seems to really be getting the attention right now. I'm wondering how you've seen Jamie Diamond presenting this as a challenge that his bank is dealing with rather than an opportunity.
Yeah.
Well, I mean, first of all, we watch Jamie Diamond, not just because he's the CEO of the biggest American bank, but because he, perhaps more than any of his big banking peers, kind of weighs in in a more forceful and powerful way, and we really listen when he does. And that's exactly what he did in this letter and with AI, which you know, he did take the moment to outline the sort of bad actors that you know, you have to be very careful of and on your
guard toward. But he said that the bank has been, you know, over the past ten years, doubling down on the technology. It is a massed thousands of data science experts and AI experts, it's beginning to explore generative AI, and it's continuing to invest. So I think the opportunity, you know, probably surpasses the level of the challenge it is for them to make sure that they are using the technology in the right way.
Remind us, because you know, it was Tom Ke who starting on surveillance and he's like, you know, what is in every CEO kind of write this kind of a letter and stuff. And I think it was Shanale who answered, Shanali Basuk, who's that, you know, not everybody has first of all, has seen so many different market cycles and difficult cycles and has come out shining right and has done really well, has managed them. And this is why when Jamie Diamond sally talks about something, we kind of care.
That's right.
I mean, he's the longest serving bank CEO of the big US banks, and he's the only one that is still there since the you know, the financial is remarkable, right indeed, and he went through the financial crisis, and he has this very expensive perspective and he has you know, the data of JP Morgan, his fingertips. The amounts of sort of economic knowledge and the breadth of economic knowledge he has is obviously worth listening to.
Just to follow on AI. I mean AI not new to Wall Street, we know that, but it does sound like Jamie Diamond is spending even more attention or efforts money focus on the bank when it comes to artificial intelligence and especially when it comes to generative AI.
Yeah, I think you know, he today really outlined the potential of this technology. You know, to transform essentially the world. It's not just about his business, although he said that it could completely transform some of their business lines, but it will have a huge, huge ramifications for society at large. And that's why he introduced you know, the steam engine, the printing press, the internet.
He's likely had changed our worlds forever, right exactly.
He's likening it, He's putting it in that bucket. Yeah.
I guess one thing that I think about when when we hear that is where the opportunities are. I mean, certainly we talk a lot about Nvidia and the opportunities when it comes to tech companies, but if it really does touch every company, I mean, where does someone like Jamie Dimond see the opportunities here?
Well, I mean he said today that he could see it having the potential to augment every virtually.
Every job, every job.
Yeah, and you know, it could make people more. He has also said if you recall that, you know, it could cut down the working day for a lot of people to about three and a half days. AI could help in that regard. I mean, I think for banks the opportunities are sort of limitless. You know, there's that trading operations, that trading algorithms and sort of from the hiring perspective and the talent perspective. You know, these banks are increasingly filing patents for AI t uesda AI in
these sort of operations. So and it's just a general huge efficiency push and they are so competitive expenses matter. Anything they can do to bring those things down as an AI is one way of doing it.
We talked about the four day work week last week. I was just thinking about I have to exactly, how does that sound.
To any takers for two day work week? No, it's just kind of interesting from the financial community.
That was.
Steve Cohen, forgive me who, but also who said not his workers, anybody who's managing a portfolio. You know, market's open, you got to be there. But it is interesting to hear from these financial types that were very much especially post pandemic after a little bit a while or like we watch it back in the office. So it's interesting to hear him talk about and I get I understand he's talking about AI across a lot of different industries, how it could impact the world. What was the most
surprising thing in this letter? I mean he covers a lot of.
Stuff he did. I think what was surprising, was he He has come out swinging against a number of things regulation, the basel endgame proposals. He's been a long time outspoken critic. He went a little deeper on that. You know, he's he's said for a while that these regulations will harm Americans,
that their arbitrary, that their rife with duplication. All of these things emerged in the letter again, but he actually this time said, you know, bank management boards and bank teams, our relationships with regulators are actually deteriorating and are not that good, which was quite a surprising, nuanced comment to make. And you also sort of implied that regulators don't necessarily know exactly what they're doing, because he said a lot of them have not been practitioners in the industry, so
it's just one level above. And he also took aim at pro shareholder proxy advisory firms. He again he has sort of long lambasted investors who rely solely on those firms like Biome Major right exactly two major ones in the in the US, ISS and Glass Lewis. He says investors should do their own homework, They shouldn't rely on these firms for recommendations for how they should vote their stock on contentious issues like executive conversation or whether a
merger should go through or a climate policy. I mean, he says, you know, do your own homework, and how do you know that what they're providing is accurate? Here he actually went out after the firms and said, you know that they have too much sway and undue influence his work.
Interesting big picture, at least in the near term. He doesn't seem as optimistic as some others about the US economy and the idea of a soft landing being all but guaranteed.
Yes, that's right. He you know, market expectations that soft landing is sort of seventy putting it at a seventy to eighty percent. He says the odds would be much
lower than that. I mean, he continued to sort of couch that sort of assessment of the economy where consumers remain resilient and they're still spending, but there is this huge overhang of sort of inflationary pressures of quantitative tightening, and of course it's very fractious geopolitical background with wars in Ukraine and the Middle East and all of these things make it could could sort of add up to a very unprecedented situation which we can't predict.
Any weather references this time around.
Not disappointed, I will say, I mean to that point, Carol, he did talk about interest rates ranging from two percent all the way up to eight percent, so that could be looked at us the sort of weather prediction.
That's true, But they're ready for any scenario. As his point, he said that they're ready to do it anything. Well, I wonder if that's kind of a setup. If I think about on Friday when we get the jobs report, that's a great way to kind of be like, hey, guys, we're on it right ahead of earnings.
Right, Yeah, it's always interesting that this comes out just before earnings and they report on Friday. And I think you know, a big the big thing that we are all looking at in earnings will be how banks alter their guidance for net interest income, which is their biggest essentially their biggest source of revenue as banks, because you know, the trajectory of interest rates will have a huge impact on that.
Sally Bake Well, of course, Sally is America's finance team leader at Bloomberg News.
Here in studio, you're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business act or want us live on YouTube?
All right, Tim, So what happens when our Bloomberg Intelligence analysts sort through the barrel to find the good apples across sectors and regions a group of companies that come from a larger group of high confidence focus ideas that BI identifies on an ongoing basis. Do you know what happens?
I know what happens because well I prepared for the segment you did. But what they do is they come up with, at least this time around the ten companies to watch in the second quarter. This story featured in the new issue of Business Week magazines, available on newsstands, on the Bloomberg terminal and at Bloomberg dot com slash business.
All right, so let's get more on those ten companies. Back with us, Bloomberg Intelligence Senior European strategist and Director of Research Content, Tim craig Head. He is joining us from London. Tim. We always love going through these lists with you, so take it away. We kind of set it up. Is there anything we needed, anything else we need to know is how you guys curated this list.
Thanks for having me on. And yeah, I would say that one of the things that happens when we come up and do these sort of things is that the Business Week folks come up with some really cool graphics in the magazine and in particular if you look at
it on the online version. But the device to say, from Bloomberg Intelligences perspective, this list of ten you refer to it is part of a broader list of what we call focus ideas, and the focus ideas are companies where we've got a very strong fundamental view, a high conviction view that we think is differentiated from the market and what the market seems to be discounting, you know, as it relates to the stocks and whatnot. And importantly, there's a catalyst ahead that we think can change the
market's point of view assuming we're correct. And importantly, with these ten companies that we focused on here, they all have really key catalysts coming up for the second quarter, and that's why we've picked these. There's two of them that are cautious views, there's eight of them that are positive views, they span sectors, they span regions, and yeah, that's the setup.
Okay, So let's talk about some of those sectors. I want to start with tech in innovation because a couple and these are not. I would argue that not every one of these companies on here is a household name, and certainly some of them are on the smaller side. So talk about what you found in tech and innovation with the team found there.
Yeah. Absolutely. So you know, there's an awful lot going on in the world of technology these days about AI. You can't not talk about it. And there's two companies here that we've got on the list that are related to artificial intelligence. One is Salesforce, which is the world's largest infrastructure software company. And notwithstanding how big this company is, it still actually may not be a household name given
the nature of the beast. Importantly, any company that is looking at all the information they get from their customers probably relies on Salesforce and their software programs, and they're going through two things right now. One is a big tech infrastructure software spending cycle that we think is gaining momentum, and then secondly, it's the need for information to feed AI programs. And initiatives and salesforce is right smack in
the middle of all of this. The other one is a company called ten Cent, and if you're in China, you definitely know about ten Cent. It has a lot of things going on within the world of online gaming. Importantly, from our perspective, they've gotten into short videos and AI is enhancing the way that they're generating revenue from advertising. Both of those are feeding ten Cents business that we think is underappreciated by the market. The last one I would mention is a company not in the world of
classic tech, but technology in the world of medicine. A company called Penumbra.
That's when I was thinking of when I say, not a household man exactly.
So, these guys make computer assisted vacuum technology products, and you say, what is that. Think blood clots, and usually the way you treat blood clots is with anti coagulate drugs, and they've got all sorts of other ramifications. Penumbra's computer assisted vacuum technology can go in and actually suck blood plots out of auteries and veins, even really small ones, and you don't have to take the drugs. It's great.
And again all three of these we think could generate better than anticipated revenue, margins, earnings.
And I just want to mention when you talked about Salesforce, we actually spoke with Alice stein Glass, executive EP Gentleman manager over at Salesforce, and they talked about the role of jen Ai and the role of data and making it ready for their customers. So she kind of got into some of the growth initiatives that you've that you referred to. Another theme we want to touch on, and that has to do with actually two Chinese companies walk us through that.
Yeah, so China is certainly having its challenges. I think you still are clearly very well aware of what's going on in the world of Chinese property. It's definitely under pressure on all sorts of different fronts, and there's also other issues. The stock market has fallen and whatnot. There's regulatory measures that are being put in place to try to curtail some of these problems and change the course.
Part of those are actually putting a damper on what's going on in the world of initial public offerings and secondary market offerings in the stock market. And CSC Financial is one of China's biggest brokerage firms, and we think that they are due to disappoint through the first half of the year because of this. Another one is a company called Chow Tai Fook. It's based in Hong Kong. It's the biggest Hong Kong based China jeweler retail company.
If you're in Hong Kong, you definitely know Chata Fuk. And it's interesting because not only is there a negative effect because of what's going on with property and consumer sentiment on jewelry purchases, but Hong konger specifically are going to find things cheaper on the mainland, They're going across the border, and all of this we think is driving a disappointing trend for Hong Kong retail sales. And Childtai Book is a poster child for this. So both of those are concerns.
As you said, great illustrations by the Bloomberg Business Week team. It's all about apples, and these apples are a little bit bruised, so kind of fun to see that go along. We've got another sector.
Yeah, I want to talk construction. Here some interesting names from the Blueger Intelligence team talking about potential beneficiaries of a construction boom. What do you find, tim.
Well, So, Taylor Morrison is a home builder and they're ones that focus on larger communities. They've got more and more growth coming from Arizona and Florida, and we think that there's an opportunity to see better margin improvement given the way that they're driving their business and simple Oshkosh is more on the bigger commercial side, and it's not only construction, but they also do other commercial vehicles like fire trucks or ambulances or the new postal service electric vehicle,
so all sorts of projects there. But generally there's concern that on that commercial side that there's a downcycle actually that's developing, and we think Oshkosh is going to be able to actually surprise on the positive because that's such a big backlog and some of these new initiatives that are playing through to the revenue stream.
All Right, Finally, a sector we love to talk about in travel. And you got two names in that walk us through those two. A Core is one of them.
Yes, so there's one that's absolutely classic travel. In the other I'm stretching things a little bit by suggesting travel.
So the mission was created for a reason.
I think it's.
Something like that.
There you go. Yeah, So Acor is a hotel company, and I think a lot of the listeners here are probably stayed at one of their hotels. They go from the very high end to more modest economy brands. The thing that anybody who stayed in an hotel recently is probably found is how expensive it is. You know, it's pretty shocking sometimes what the rates are that you have
to pay. That's feeding Acor's revenue. There is a global travel cycle that we think is stronger and longer, and Acor is is in the front of that, both from a europe and an Asian travel base. Interesting they are French French, their home is in France, and you know
it's only a small part of their overall portfolio. But the Paris Olympics this summer are the catalyst we're looking for because pretty soon we're going to start to see the early bookings that they release in terms of the Paris Olympics, and it should be quite robust.
The other one twenty seconds though, Yeah, go ahead.
Yes, Hirelli. It's a tire company, and yes you have to travel if you get in your car and you spend those tires. They are moving in a production basis to Mexico and Romania. It's cheaper and they're curtailing the low end of their tires to high end, and so there's an upgrade cycle. We think both of those can create positive surprise.
This is not the F one tire that we're talking about.
Specific it is the F one partly tire O. Yes, okay, there go.
Always love these lists, names that we know, names that we don't, but definitely you give us the reasons to keep Mono Radar. So appreciate it. Tim Tank, thank you so much. Bloom we're Intelligence Senior European Strategist, Director of Research. Content are our own Tim Craighead joining us there from London.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Eastern to Apple car Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty right.
Well, Private equity payouts are in a slump, Carol five major alternative asset managers. We're talking Blackstone, Apollo, Carlisle, Brookfield Areas delivered about thirty seven billion dollars from cashing out private equity bets last year. That's according to Bloomberg calculations. It's a forty nine percent drop since twenty twenty one, that, of course, was the year before the FED began raising rates.
Indeed, the private equity industry is banking on the FED cutting rates this year, which would spurbuyers to tap debt to grease purchases and ultimately return money to limited partners. All of that tim from a great piece back in February by our team here that covers private equity. So we've got a question, how are the leaders of small and mid sized businesses thinking about private equity in this environment? It's a good question.
Don McRee is a vice chairman and head of commercial banking at Citizens Financial Group. It's the Providence Rhode Island, a based public traded bank. They've got eleven hundred branches, total assets around two internet twenty two billion dollars. Don joins us from Boston. Don, how are you very good?
Good to be with you today.
Yeah, it's good to have you with us. Okay, so just talk to us a little. You guys did this survey, but before we get to the results of that. I do want to talk a little bit about the environment right now that you're seeing with the economy, private equity, and notwithstanding just general economy, what you're seeing, what you're hearing from clients, and what you can tell our listeners and our viewers.
Sure thing, I think.
I think the economy feels quite strong to us across the board. I think the jobs numbers a couple of days ago we're testimony to that. We're hearing a lot of confidence within our small and mid sized business customers, and I think it's a sharp contrast to what we were hearing just a year ago, when people were quite concerned, quite nervous about a potential recession, still kind of adjusting their businesses from a supply chain standpoint and a labor standpoint.
But the tone is really changed as we've rolled in the twenty.
Twenty four So better bottom line, a lot much better, much all right, So talk to us in terms of your perspective, what customers, whether it's in the small area, small sized companies, mid sized companies, medium sized companies, what you are seeing in terms of what they need in this environment today and what are their requests most often.
You know, it's interesting they're beginning to reinvest in their businesses, and that was after a couple of years of real, real conservatism, so people not building plants, people kind of screwing down their inventory levels and really managing their working capital more tightly. We're seeing that change at the margin, not huge yet. We're seeing a lot of activity in the refinancing area. So that's both in the bank markets
and in the bond markets. So the first quarter of the year and into the second quarter has been incredibly active in terms of high yielded markets and investment grade markets, and the syndicated loan markets have had almost a you know, seventy eighty percent content of refinancing. And what that's saying to us is, you know, companies are looking at their maturities, seeing liquid and open markets and addressing those maturities aggressively as they look at over the next.
Couple of years.
Why do you think that these small and medium sized businesses are turning to private equity, Like why why is this the area that they want to turn to for potentially financing or for potentially to sell to Like what is attractive to that?
I think it's a couple issues.
So we've got a very large M and a advisory business aimed at middle market companies. We have long term relationships with those companies. They know they're companies quite well and are selling you know, anywhere from ten to twenty those companies every year.
I'd say the vast majority is ending up.
With private equity, and we take advantage of a very strong private equity relationship business that we have here at Citizens. So there's an active M and a dialogue.
That's going on.
Some of that is pent up from a long period of time where smaller companies weren't able to sell themselves because the markets weren't attractive. So a lot of these companies wanted to sell before COVID, some wanted to sell before the Great Recession. And now that liquidity is back, the company's underlying performance is improving, and the rate environment has kind of peaked. From everything we can tell, there's beginning to be a lot more activity in the marketplace.
The other thing that we've seen in a couple instances.
Is private equity being quite creative in terms of taking minority stakes or structuring equity investments into companies that may not want to sell themselves.
Outright, but but just may need.
Some growth equity or an other form of capital to help facilitate their business strategy.
How much is maybe the uptick two or the interest don at this point because the terms are better than maybe they were six months ago or twelve months ago. When it comes to private actors are.
Quite good and you know think, you know, like today where we saw the ten year back up a little bit, what we're seeing is spread tightening going.
On in the marketplace.
So while interest rates have stayed a little stubbornly high, we see credit spreads across the board come in as liquidity has been looking for a home. Other terms and conditions have stayed relatively flat. We're not seeing a lot of loosening of covenants or things or things of that nature. But it's really an attractive spread spread environment which is offsetting a little bit of the stubbornness of term rates.
How much dry powder is there around for you to do deals? And I bring it up because the way as Tim started the introduction here is we talked about you know, Blackstone, Apollo, Carlisle, Brookfield, Arias Management delivering about thirty seven billion from cash out private equity bets last year, these, according to Bloomberg calculations, a forty nine percent drop since twenty twenty one, the year before the FED began raising interest rates. That's a big drop in terms of the
cash out. And I'm just curious about just kind of the environment. How much dry powder is kind of out there looking for deals to do. Maybe investors aren't so interested in this because the returns aren't there. So that's I kind of wanted to get your view on that kind of the flip side of it.
Yeah, my sense is there's plenty of dry powder out there. It's over two trillion dollars. It's on the sidelines looking to move into the market. So you have to realize that some of the a lot of these complexes have multiple funds, so some of their older funds may be invested,
and they're a little challenge for realization. Does equity values have stayed stubborn, although that's changed a lot since the Power's speech in the fall and the rise in the public equity markets is spurrings of exit activity on private equity, but there's still a lot of un vested money in newer funds that is looking to be put to work. And you saw one big transaction announced today by Blackstone.
I believe in the real estate space, Yeah, big one.
So what happens if the Fed dozen cut rates this year?
Don I think at the margin, if they cut rates, it'll be a little bit better, but I don't think it's going to really impact what we're seeing. And remember we're talking about small and mid sized business So these are valuations of the one hundred million up to a billion dollars. They're not the ten billion dollar global transaction, so they're a little easier to get done, They're a
little easier to get financed. So the question will be leverage levels will probably be slightly lower if interest rates stay high, but valuations will probably adjust also. And it feels to us that buyer and seller expectations are beginning to come together in a more aggressive way.
I almost a curious don for you guys at citizens, I mean, how much is private equity and or private credit coming kind of important aspect and something you want to be able to offer to your customers.
We're not in either of the businesses we look at.
We look at the private equity and private credit complexes as both competitors and customers. We have very big relationships, and we often will underwrite and distribute some of our syndicated lending activity into the private credit funds, so they're buyers of some of the risks that we originate. We have great partnerships with with a lot of them. You know, we haven't We haven't set up a formal partnership the way some of our competitors have, but it's not really
stopping us from from engaging in interesting business. And on the private equity side, it's a huge part of our business. We've been active with the private equity firms for the last since we went public about nine years ago.
But on private credit, on the private credit side, do you want to guys get more involved? I mean, it feels like it's been the only thing anybody in the financial industry wants to talk about pretty aggressively in the last couple of years.
We won't.
We won't do it on our balance sheet, I don't believe, because we have no plans to, and that's largely because the leverage levels tend to be higher than we're comfortable with. So we'll we'll do it in partnership with some of our good relationships there.
How does it compare to other periods of time where you've been doing this. I mean, we talk about a lot. The high interest rate environment right now is one that hasn't been seen, at least from the FED side, in decades at this point. What has that effect been on the clients that you serve From a private equity perspective, I think.
I think deal activity has been relatively slow over the last couple of years. As you readily point out, realizations have been have been slow, and there's just has been there's been a value gap between buyers and sellers of companies. So that's been the primary problem is you have to have the buyers lower their expectations in terms of price, and the sellers, you know, might have to pay a
little bit more than they think. But deals are beginning to form, and we've seen a real uptick in activity across the private equity clients that we have over the last literally since the beginning of twenty twenty four.
Do you work with clients who would also consider going public or these companies not necessarily that profile.
No.
We we have an equity platform that we bought a few years ago, mainly focused on tech and biotech and financial technology, but also other industries you know, we were on the redd at IPO for example as a book manager. So we're beginning to see we're beginning to see the public market activity tick up slightly. It's still easier to get a deal done in the private market from my standpoint right now.
That's what I was wondering.
Yeah, I am interested too, though in private equity in general, since you guys have seen so many different cycles or seeing a fair amount of cycles. Don in terms of the types of deals, is it industry specific? You know, we talk a lot about AI. We're also you know, looking at the biotech area. There's been a lot of
activity in terms of deal activity going on. There Is there any specific verticals or industries where you're seeing a lot of interest or looking to do some kind of deal in the private equity front.
Not AI, but certainly in data centers we're seeing quite a bit, and we have it. We have a pretty big data center advisory business. We've seen a lot in healthcare, including including biotech, and then just good old fashioned manufacturing companies that are that are you know, that are performing from a solid cash flow standpoint.
We see a lot of activity there.
And in the sector we're talking about which is the medium sized business. They tend to be family owned businesses. And the driver really around activity is the next generation doesn't want to want to be involved in the company, so they're looking to realize from a from a trust in a state standpoint.
So like a liquidity event, right, they just want to get out of it. And basically exactly, Hey, how do you guys think about It's interesting We've talked a lot about the Jamie Diamond shareholder letter, and in it he covers a lot of big things like AI and also geopolitics. But I do think about something like the elections come November.
Are you concerned about the outcome and how it might impact, especially when it comes to a private equity aspect, or even financially or are for regulatory Is there things that are top of mind for you?
I think, you know, I'm a little more concerned about the volatility that could be in the markets before the election, depending on different statements or different positions that some of the candidates could take.
Hard to predict what that's going.
To be, but I think history has said that that, you know, the markets usually can can kind of move on once the results of the of an election happen. And I think it's interesting that, you know, both of the candidates that appears are pretty well known entities, so they both will have been prior president. So I think the market will be able to handicap pretty much what they're going to get regardless.
Of who the who the winner is going to be.
I think, you know, we'll see what happens in terms of, you know, geopolitical stances if if mister Trump becomes the president again, and probably the regulatory environments feels like it's a little bit chat more challenged under a democratic president the way it's been for the last couple of years, as mergers and actians have a little bit of a difficult time moving through the system.
Is that the general comtexas that you hear when you speak to like does this come up with with your clients? Is this something that you're talking about right now?
They're really not that worried about it. It's a long way away. I think they're.
Much more focused on the core functioning of their businesses and making sure that they actually you can perform and are prepared for whatever gets thrown with them. So there's not a lot of obsession among our clients around election outcome.
There's not a lot of obsession around geopolitical events. Obviously, if something goes awry in the Mid East and oil prices spike, that will affect some of the customers we deal with, but they're much more focused on the nuts and bolts of running their businesses right now.
All right, I'd be remiss if I didn't ask any obsession for you over the eclipse.
No.
I was wondering if it was going to get dark in here in the middle of our conversation, but I think I think we're fifteen minutes away.
Got a nice, nice sunny day in Boston.
Yeah, I see. I think it's ever Cleveland right now. So we're just kind of keeping a watch on it. Listen, you do keep a watch on so much, and it really gives us a great snapshot for our listeners and viewers in terms of what's going on, So so appreciate it. Don McCree joining us, Vice chairman and head of commercial Banking over at Citizens Financial Group. Joining us from Boston.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play, and then brought auto with a Bloomberg Business app or watch us live on YouTube.
It is at clips day, you know that, And it's interesting. I'm looking outside our Bloomberg windows here, lots of glass in our offices, and it's getting pretty dark out here. Reminds me of kind of an afternoon in the winter. So it's definitely coming our way. Tim Sanovich, I'm just going to say you head it up, I believe to another Florida kind of check it out as well. People throughout Texas, Arkansas, Illinois, and Ohio have already experienced it.
And as I said, right about now, it is moving here in the New York area and headed to Buffalo, New York. If the weather's good, it will in particular experience a total solar eclipse, the moen completely obscuring the view of the sun up there in Buffalo. So a lot may happen. Julie Fine is Bloomberg News Texas Bureau chief. She's been following it all day, joining us from Dallas, our Dallas bureau. Julie, we have been following it the
live feed off of NASA Dallas. Tell us about what it looked like from your perspective earlier today.
I mean, it was almost pitch black here. It's interesting because it was a cloudy day and there were questions on how dark it would get. It got really, really dark. We actually went down to the park near our offices, and overall, the Mayor guests that there was about or estimated about four hundred thousand people came to the Dallas area,
so it was definitely really packed down there. I would say it started to get dark within about forty five minutes before we hit totality, and then it it really covered and it was really dark for about five minutes and then it was like light again. It just went back to the regular day. So it's a really interesting phenomenon to be able to see in the amount of people that came into the city. I mean, you think about a Super Bowl, Okay, that's one hundred thousand people
in a stadium. That doesn't equal four hundred thousand people. So in the city of Dallas alone, it's been very crowded all weekend. But it was certainly a sight to see.
Yeah, it's been a sight to see too, to see so many Americans right throughout across the country. Across it moved across certain parts of the country, it feels like come together for one thing. So it's pretty cool, I should say. Right now, it's over Tupper Lake, which is an area in the Adironducks. I've been up in there. It's gorgeous and it looks like we're getting the total eclipse there. Is this your first one? I'm just curious about, you know, for you to be seeing it, what it was like.
It's my I saw partial eclipse here in twenty seventeen, but this was my first to hit totality. I mean, it got pretty dark in twenty seventeen, but this was my first one to see totality. Interesting today because here I am in Dallas, Texas, and it's on its way to Buffalo, New York. That's where I'm from originally. So I've got all kinds of friends and family getting ready for it there and I can tell them this is what it's like right now. So it's definitely very interesting.
I have to tell you.
It's been really good for this city and basically any city where it goes through.
Yeah, I mean, that's the interesting. I mean, we have a great story about the impact on New York in particular, which has been hit so hard by the loss of its industrial base. I mean, this has really been a big boon. Whether it's hotels, whether it's restaurants, you name it. Everybody's been chiming in here.
Absolutely and four. I mean, to get a flight into here, or to get a flight into any of those areas so expensive, but people are going out, they're eating. It was interesting here. You almost get the feeling of like a tailgate for a football game. People on the street corner with the glasses selling food. We had food trucks all over the place, so you definitely could feel the financial aspect of it. And it was you know, there's so many times where you're here are reporting on difficult
financial news or difficult national news. This one's just been a nice one to be involved with, to be able to see how many people got out there and really enjoyed it.
The news has been heavy, and this one feels like what we all needed, certainly as a country. Julie, thank you so much. Julie Fine, Bloomberg News Texas bureau chief on the latest of the eclipse, And of course, my partner in crime here, Tim Stanovic, not in the studio because he went to check out the eclipse. Tim's joining us on zooms and tell us about it.
There you are, I got.
I got the glasses on. I'm doing this safely. It's pretty cool. I mean, it's definitely cooler out here than it usually is. It's darker out here, it doesn't feel like it's you know, in the middle of the three o'clock hour right now. A lot of people I don't know if you can see behind me, but a lot of people have gathered. There were more here earlier when they were kind of watching it get the moon set
right in front of the sun. But it feels like one of those moments where you know, New Yorkers come together to do something in common, and there are, as Julie was saying, there are a few, and these are few and far between right now, and it kind of feels like everyone's on the same page.
Down and Carol, I gotta say, Tim, you've been so excited leading up to it. You have a young son, and I know you've been excited for him as well, collecting glasses, I mean, as a city, and it feels like anybody along the path who were just talking to Julie, fine, anyone along the path of this has been all in and you know, lining up places for people to watch and so on and so forth. I mean, it's really been interesting to watch here.
Yeah.
So a lot of attention has been paid to the so called path and fatality, where Julie is and where you know, so many Americans have gone right now. But doesn't mean that people who are, you know, hundreds of miles away from that path and fatality can't actually experience
something that's pretty darn cool. I gotta say. So, even if you are, you know, to the northeast of us right now, and you could still get a chance to go and check it out, I highly encourage you do, even if you're not in the path of the brutality, because hey, it's a solar eclipse. This stuff doesn't happen, you know, every few months.
All right, did you actually see though it was partially I'm assuming or what? Did you actually see?
Yeah?
I actually saw it. So these glasses I got these from the local library here in New York City. They were giving them out in the days leading up to this, and I actually got to see what it kind of looks like, you know, what the moon would look like when the moon is a crescent moon. The glasses give it like an orange tint, and that's really the best way to describe it. It was actually hard to find a space down here where I where I could see it.
I had to kind of run around with justin my trust the camera van right now, who's holding up the phone, to find a space where we could actually see it between buildings. So that was the issue, is just making sure that you could see it between buildings. After all, it is Manhattan, to be fair.
It's a nice day here in New York City, and I'm looking at you, looking behind you. You know where we sit. It's an all glass studio. We have a bunch of glass behind us, and it reminds me of you know, those winter night winter afternoons, like when it's like three thirty and you and I are sitting in here and we're like, oh my god, that's what it looks like in here.
Well, that's exactly what it feels like in Scientists have said that this confuses, especially in the path of fatality, confuses animals. So dogs and other animals, birds especially that you know, will experience darkness at a time that they normally would experience the daytime, So it kind of confused as the animal census, all right.
So what are you going to ask your son when you go home.
It has to be made sure to stay inside during this because you can't trust a five year old and keep glasses on. And we'll watch replays on YouTube, that's what we'll do.
All right, Listen, We're going to give you some time to get back here in this studio, but so glad you could be out there and see it. So really good stuff.
Hey, thank you for holding down the board.
I appreciate that anything for you, You know that, all right, Tim Stanovic, of course my co hosts. He's going to come back in a little bit. But getting a chance to see this, and you know, we talked with our Julie Fine, who was there obviously in Texas and got to see that earlier. But we talked a little bit about New York and New York State in particular, and I'm looking at it right now watching the NASA live
feed and it's now over main if you will. But we talked about for a place like upstate New York, it really has had some really tough economic times, and we talked specifically about the loss of its industrial base. The manufacturing sector in New York shrank by more than sixty percent between the nineteen forties and two thousand and nine, pretty much cut in half, if you will. That was
a report by the state comptroller. But as a result of the eclipse and the totality that you could see up in the Buffalo, New York area, Buffalo being one of the biggest beneficiaries of this of the eclipse, the state's second biggest city, is anticipating as many as a million visitors. So we'll wait for some numbers, maybe later on today or tomorrow to see whether or not that happened. And that's the same as the entire population of Erie County,
so so many people coming into the region. You know the stories leading up to this, whether it's the hotel sites. More than half of US cities along the eclipses path are fully booked or were fully booked for the night of April seventh. That's according to data from air DNA, it's a data analytics company, with thousands of airbnbs in the path of totalities slated to reach one hundred percent occupancy. That in the Anerontics in North Country. So there was
a lot going on. We know about the traffic stories, but I got to say just watching this live feed and we've got it up for you guys who are watching on YouTube and also on our Bloomberg Original streaming service. Pretty cool to see and it's still kind of dark a little bit outside Bromco.
Journal.
Now about you let me drive?
Oh no, no, no, no's drive alright please, I'll do the gravel.
Wait, I want to drive. It's a good question.
Good. This is the drive to the globe thing well by around Yeld on Bloomberg Radio.
All right, everybody, just about eighteen minutes left in today's trading session, getting ready to wrap up the Monday trade. The eclipse trade frutality.
Yeah, I think moved quickly.
It did?
It moved quickly? Yeah?
Is it fun?
Like?
Yeah, it was cool.
But I mean just to see.
It go from Mazaala in Mexico during the two o'clock hour all the way to Maine right now.
It's pretty cool.
Yeah.
It was amazing to someone say, science, it's amazing. How these things did you ever get up? I have gotten up many times to see a sunrise and it's like dark, dark, dark, and then all of a sudden it breaks and it's like it's like up and it's just it's really what a.
What a world we live in? It's pretty pretty cool.
Yeah, it's actually planet Earth. Kind of love you all right, Also really really like Our next guest our drive to the closed. Guest back with us is carolsh Life. She's chief investment officer at Female Family Office, joining us from Chicago, where I believe you did see the eclipse? How are you?
I did?
It was great. I flew in last night and realized I was going to see a lot more eclipse here in Chicago than I would have seen in Minneapolis today.
So it was fun.
And they handed out glasses this morning, so we all got to be get was he your first one?
Yeah?
It was, it was we we kind of we see a lot of northern lights up there though, so I have that advantage all summer long.
That is actually a really sweet thing, very very cool. So, speaking about seeing things, what are you seeing when you look at Sorry nice kidding away, So what do you say when you look at today's market environment? Not just Monday, but just really I feel like Carol, the rethink once again in terms of the narrative around what the Fed might do this year.
Well, I think it's not only that rethink, but I think this week in particular, people don't want to get in front of the Cpippi Bank earnings. It's a very interest rate sensitive week, and so you could see some volatility later in the week. But we were never in the camp expecting six to seven cuts, like the market
got ahead of itself. We think late last year we had in our annual update we wrote two maybe three excuse me cuts as our base case, and now thinking that it really doesn't matter realistically for the intermediate and longer term how many cuts we get this year. It's directionally where we're going. And the important thing is is the reason we don't see the bed anxious to start cutting is because economies in great shape.
So if we get no rate cuts, who cares because the economy is a great shape. Isn't that simple?
Yeah, I don't.
I wouldn't say who cares. You'll probably get some volatility we get no cuts this year, but you know, if you get a cutter to push towards the end of the year and if you have some visibility on there. And we also have a very big election that comes between here and the end of the year, so there'll
be a lot of issue over that. But I think the important thing is is this secular trend we've got going on from and you've had a lot of guests on in the last couple of weeks in particular, talking about how important that secular trend of the infrastructure rebuild that we're doing here, the rebuild, the build out you know news this morning with funding for TSMC and news out a couple of weeks ago for funding for Intel that' stop seventy five percent of it isn't even out the
door yet. So we've got a lot of build intermediate and longer term to focus on keeping this economy pretty healthy.
I feel like that was something that was kind of I agree with you that people were, some of our guests were coming on was it late last year, early this year, just reminding us that, all right, everybody knew you're a little nervous about maybe you know this market rally, but that there's still a lot of spend going on in the economy because of some of the federal government programs, especially when it comes to infrastructure, and as you say,
they're not all out that door. That money's going to go somewhere, and that goes somewhere, it means it goes into the economy.
Right well, and I definitely right there. And I think the other thing to watch us we're an earning season is look at those big, big tech companies and look at how much they're spending on a quarterly basis for infrastructure build out for data centers. And we can't even hook all those data centers to the grid. So we've got to get accelerated on that green grid, or not just green grid, but on the transition grid or existing grid.
We've got infrastructure here. We've got major gas pipes and electricity pipes that were put in in what the late eighteen hundreds, early nineteen hundreds. We've got a lot of serious infrastructure we build we need to do. You know, you've got the key bridge and then focus on that infrastructure. We had our very own bridge in Minnesota go down a decade and a half ago, and the thing that amazed me is they got it put back up in
a year and a half. Yeah, and so I think that's one of Yeah, that's one of the things that's really amazing. But you marshal those national and local resources, and that's what's got to happen in a lot of this industrial spend.
Well, I get that there is the political will to do that for one off projects and for tragedies like that one, and for the most recent one that you talk about, Carol. But I'm wondering if there's you know, if there is the political will to actually do this on a nationwide basis, because well, you have a lot of competing factions. It's not like lawmakers are necessarily going to fight for other for other states to get funding.
Yeah, and it's a very valid point. It's difficult to get things permitted here. It's one of the reasons why we've seen the delay in the build up because the Chips Act, I think was passed in twenty one twenty two,
so it's a couple of years out there. So getting the money out of the door is difficult because then you've got to get it permitted, you've got to go through environmental review, You've got you know, and that's one of the things that you know, Congress has talked about trying to trying to address too, is can we get this stuff permitted more quickly. You know, in certain downtowns where they're trying to permit higher density housing, they're getting
pushed back. So there is a lot of that going on. But the will is there, and if we all want to continue to use chat GPT, we've got to get we've got to be able to hook that processing power to the grids.
How much do you use CHATTYPT? I wonder.
I actually am a late adopter on that. But the interesting thing is is I think looking at the number of places that that artificial intelligence is already being used. I had a scan done last week and when I got noticed within twelve hours that it had been read. You could tell from the the doctors known initially that they had used artificial intelligence to do that initial screening.
To actually screen so manjor to write through the write up to do it.
To screen the image okay wow yeah.
And so you know a use case is is you look at a lot of those initial, those routine screens that people have and to feed them through artificial intelligence where they can say to the radiologist, oh, these are the fifteen that look like they might have something going on. Your view needs these fifteen first. So use cases all the way through the system in terms of already there, because artificial intelligence companies have been building use cases for
a decade. It's just the generative AI that we're all getting access to now.
Right right, it takes it to a whole other level, right in terms of the information it can use. How is that just thirty seconds? It's just going through that personal experience and seeing that and realizing, wait a minute, Okay, this stuff is not just something we continue to talk about, but people are not only made the investment, but they're actually putting it to use. Is it shaping your investment thesis or think? And just got about thirty centies? Yeah, I think.
It does all the way through, because our research team definitely uses some of the various things and they're pulling out for us. How the companies that they cover are building use cases and in some cases in the energy industry, for example, one of the companies couldn't lure enough AI engineers through so they sent their own engineers to Mit for two hundred of them to build their own Well.
Jamie Diamond likens ais transformational impact of steel like to the steam engine and the impact it had on our economy. So everybody's all over it.
This is the Bloomberg Business Week Podcast, a little Apple, Spotify and anywhere else you can get your podcast. Listen live weekday afternoons from two to five pm Easter on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal MHM