Powell Leans Into Hawkish Message

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.

Let's get into it because we did hear from Jays Powell, and we've got a great twosome to talk about it. Bloomberg News International Economics and Policy correspondent and deadhead Michael McKee.

He's got his ticket.

On his phone.

I saw him walk in. He's here.

I walked in listening to last year's concert.

Oh did you realize you reading?

Yeah? The opening song? Do you remember that?

I heard? I heard I didn't go to last year's concert. It was a mistake, and I heard it was amazing.

What was the quest? The opening song was playing in the band.

I just hope there's no welcoming in the rain tonight or tomorrow.

Okay, tomorrow is the problem.

Yeah, all right, guys, let's focus focus kids.

All right, Let's get Bloomberg News Economics editor Molly Smith. She's also here in our Bloomberg Interactive Broker studio.

So Mike, let's start with you.

I did take a kind of peek into TV and we basically got the same thing from JP.

Yeah.

Well, his opening statement was exactly the same, almost word for word. They just moved a few paragraphs around, but they didn't change any of the language to keep it as we got from his opening statement last Wednesday. So I think he walked in there going I'm not going to make news, and he generally succeeded, other than perhaps on the Grateful Dead or Dead in Company.

But that was pretty funny.

But he did he did. Uh yeah, you know.

I talked to some people at the FED who were very disappointed that I and Steve Leisman from CNBC, the two big dead heads of the FED Press Corps, did not ask him at the press conference.

I can't believe you guys didn't either. Leasman plays in like a dead cover band.

Yes, and for me to do it or why.

It just didn't seem like the the right atmosphere at the time when I got called on.

I mean, Matt and I had worked on questions.

That would I know, what would incorporate the lyrics, but we didn't get a chance.

But you got to kind of know the room and if he's not in the mood for it, right, like you just kind of pass on it.

Okay, So nothing new, Molly, come on in on this. Are you a deadhead? Have you ever been to a dead concert?

I have not, and we can remedy that we would.

Yeah, tonight, I'll hear my schedule.

I'm gonna tell you it would be quite an experience knowing who's going. Okay, So what did you take away from j Powell?

Yeah, pretty boring today, honestly, which I think is Yeah, to Mike's point, mission accomplished on that. He really did get grilled a lot on both sides about the Fed's response to the banking failures in March, and I was kind of surprised, thinking, you know, we just had last week's FED meeting and that was like a couple you know, the big surprise sing like there are another two rate hikes possibly to come this year and that should be top of mind for most lawmakers, and that inflation is still,

But they really just went hard on the banking stuff.

And I think Jay generally give us a whole lot to work with on that would often defer to a Vice Chair of Supervision, Michael Barr, who prepared a report and the aftermath of SPVs collapse and also deflected some other questions to the FDIC, which has handled some of these banks that have since failed.

The bank failures actually was pointed out to me in a note today by Veronique de Rugid. You know, she's an economist at Mercadis, and you know from her perspective the fact that the FED isn't and again this is from her perspective, the fact that the FED hasn't been straight with the American people about this. The condition of the US banking system is part of the reason that they don't have credibility with the market.

How has he not been straight with them?

Because they say the banking system in this country is sound and resilient, and she points out that there are some examples that clearly show it's not sound and resilient.

Yeah, but those are to be fair, would you say those are more the exception than the rule?

Well, you asking me, or Vernique, because.

Asking you you're an intelligent guimet.

Yeah, of course, because we've only seen a couple of bank failures and they are what six thousand banks in America.

Yeah, No, there's no systemic risk really from any of them. It doesn't seem.

Yeah, as J.

Powell pointed out, there's some bad bank managers out there.

Yeah, you know.

He kept saying like, yeah, like overwhelmingly banks have handled interest rate risk well that there are a few of them that did not.

But what I'm trying to get at is why does the FED have such little credibility. We had guests on the cheap economists from the biggest banks on surveillance last week, one after the other said they don't believe the Fed's going to continue to raise rates. They think it's over history.

I mean, that's just learned behavior. The FED has always stepped in when markets get bad. And you have a whole generation of traders who grew up with no idea of what it's like to have the FED on the sideline. And you talk to the people in the old bond vigilante days who were many years before Carol and I, and they they knew. But the modern day folks, I mean, the Fed's been in the markets for twenty.

Years now, but like you look at the warp function, I mean, traders are still betting on a cut this year.

To listeners, right, warp is the world function on the Bloomberg terminal that shows.

Expects, and they're not betting on a cut anymore this year. As a matter of fact, they still have rates.

Not in December.

Nope, nope, not in December.

Most of those are fully priced out.

Here's here's the confusion.

And this is a I run under this a lot because people don't understand how WARP works.

Yeah, because I agree with Carrol, look at me, like there's gonna be one.

Carrol applied rate. It goes up to a high in November of five point three to two percent hike together, and then it gets and then it gets cut down back to where we are now. So in essence, it's not cutting rates from where we are now. And it presumes that you get up there also.

I get I get you, Carol.

I know, all right, get this boy out of here. You're out of here. Not Matt, Mike, Okay.

But the point is, and Remy made the point too in our simulcast, that markets look at where yields have kind of eased from the movement up higher earlier. So it does feel like within the trade investors see something different versus what the FEDS.

Well, the interesting thing is, and I've asked a lot.

Of used to like you, Mike, I'm just gonna put it out there.

Always loved juice, sweetie.

I've asked a lot of strategists about this, and basically what you have is the general belief among strategists at all the major banks and everywhere else is that the FED is not going to cut rates. They're basing their buying strategy in the markets on the idea the FED is not going to cut rates. But if inflation comes down fast, either because the FED does a super job or because we have a recession, then the FED would be cutting rates. And that is a possibility. So you

Also, a man's blane warped me.

I can't, I can't, can I so respect Mike?

Can you know?

I would have the.

Money, by the way, and said, what the FED is doing right now is essentially passive tightening. That's the phrase he used, right, So I to your point. Right, if inflation comes down and they don't that they just leave them where they are. That's passive tightening. And I wonder if some members of the Fed things that think that's what they should be doing right now.

Well, Jay did today then again say that not only is this not a skip, which he said last week, but then today he said it's not a pause. So I don't really know what what the terminology is. But either way, they did not hike rates last week, and the idea right now is we're going to see all the data, how it comes in and make our next move based off of that. So yeah, I like that passively tightening phrase as well, and that does seem to be what they have been communicating to us.

Do you feel like Jape Halmke has been pretty clear. I mean, I feel like they're data dependent. I believe that.

Yeah, I mean they've they've been clear to a point. I mean, they're no longer trying to give straight guidance We're going to do X on such and such a date. They don't want the markets to price and cuts, so they put in the high dot plot and they talk about the fact that we're going to raise rates more.

But they're not putting a date on it. They're not putting conditions on it.

What they need to see, anything's possible, which is a very unusual condition for people on Wall Street, let alone.

You know, whatever age they are, however long they've been around.

Might he just get this right?

Oh sure, there's a chance they can get it right.

And everybody will be gobsmacked by that and say that's never happened before, which is why they don't think they'll accomplish it, because it's never happened before.

Someday they'll write books about nineteen ninety four. They sort of did, but they have that was the only other soft land. Well, yeah, they didn't have a big inflation. They were trying to get out in front of inflation, and they did and they raise rates and they destroyed the bond market, but they did not destroy the economy.

So passive tightening is that what we're calling it?

What was it? That's what Raphael Bostic said, tightening, passive tightening. I mean they don't actually raise rates, but the real rate goes higher as inflation comes down.

And Jay also did say today too, he doesn't really know where the terminal rate is going to be like what that rate is that accomplishes getting maximum employment plus price stability? So who the heck? I we could have two more hikes, we could have two cuts, we could have nothing.

So by the way, we should have more hikes from the BOE and the ECB because their rates will still well on to watch.

That's tune in tomorrow as our friends at the Bank of England have their media.

They are having a tough fight there when it comes to inflation. All right, love you both.

Michael McKey, international economics and Policy correspondent at Bloomberg News. Off to a dead concert. Molly Smith, Economics editor at Bloomberg News. Not off to a dead concert, that is.

Too 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 right now.

It's not too right.

What are incredible musicians?

But do you love the Daryl Hall with Daryl I mean with the long hair.

Yeah, yeah, me too for sure.

But then he got a cut.

It was a little bit of a mullet. I like that.

Yeah I can. Yeah, I don't like mullets. All right.

So, Matt, we talked yesterday about a story that concerns have been highlighted when it comes to the private credit world, pressures of higher interest.

Rates, what it means for those borers floating rates. As you said, Oh my gosh.

Safe to say that you and I are both pretty well obsessed with private credit and I am.

I am anywhere where I feel like I don't have a total handle on it, and everybody's.

Like, don't worry, it's going to be okay.

So let's get into the private world, which includes of course private equity with us. As Kate Ambrose, CEO of the Global Private Capital Association, it's a nonprofit, nonprofit, independent membership organization representing private capital investors who manage some two

Is this essentially a lobbying group or when I see nonprofit together with private equity, like alarm bells go off? Why does private equity need a nonprofit?

Right?

Love that question, love it. We are a very unique organization. The organization was founded as the Emerging Markets Private Equity Association by the IFC of the World Bank over twenty years ago.

Oh my god.

It was founded by the first LPs in funds in emerging markets and grew to some prominence at the period of time that there was this idea that emerging markets was going to be an asset class in and of itself, that was going to be faster demograph younger demographics, faster growth, that would be a rising time that would lift all boats,

Office are fascinating. So essentially it was the organization was started to kind of shepherd growth through private equity in these markets exactly.

And the reposition so nonprofit, is that wrong?

We are So we are the same structure as a national Venture capital Association in the US or a private equity council, which indeeder lobby groups. The beauty, and this is why we use the word independent, is that because we cover all of these markets, we're not there to lobby on behalf of lower tax rates for or preferential regulatory treatment for our members. We're really there to evangelize

And local So where's your funding come from?

Membership dues? So over three hundred member firms pay dues to be members of the organization. We have a very dynamic research platform. I can throw some data off the top of my head in terms of fundraising and trends and as I private exit.

But so, but what I'm getting is that the World Bank said we need to shepherd growth through this mechanism private equity, and a good way to do that just put together an organization to support it. I guess what.

So the IFC is the International Finance Corporation and they were limited partners in funds, so they actually put money into funds.

See.

And there's a whole universe of development finance institutions, including the US DFC, which is what the US uses to compete with China. Frankly around the world putting money into funds. It really it's more commercial than sort of what we're describing. But we are a nonprofit organization.

YESDFC, the Development Finance Corporation. Okay, so if you had to say your top priority in your organization, number one, just one?

What is it?

Wow?

That's tough.

There's kind of twins, so I may cheat. One is to just re educate the world on the opportunities and the realities and the risks of investing in these markets. And the second would be to influence capital towards greater long term, inclusive growth and environmental private capital, yes, crivate capital.

I am obsessed, Matt, We're both obsessed.

And I feel like I keep saying this last couple of times I've been at Milka and we've done broadcasts. Doesn't seem like anybody cares about the public markets. It's all about the private markets, private credit, private.

Equall those people you're hanging around the wrong people public But well, yes.

Yes, but there's also right but so but I mean, tell us about from your perspective, because I think there's some nervousness in terms of the private capital world, especially as we see rates going out that you know, there doesn't feel like there's as much transparency and that that could be problematic interesting transancy.

But well, okay, great, I mean absolutely, the scale of capital is remarkable, and this is sort of private capital, private capital exactly. For example, last year alone one point three trillion, you know, it's one point two one point three but critically, that's just what's raised by fund managers. You've got to throw in there all the Canadian pension plans. By the way, CPP is also on our board of directors as his future fund from Australia. It's trillions and

You know, there's so much everybody wants in right now. Because the thing is, there's also so much talk of the opportunity in private credit. It's become uh, kind of the darling of investors really from retail up now.

Right Well, I was speaking across all private private capital strategies in private equity, venture capital, infrastructure, real assets. So there's a lot in there.

What's really hot right now.

So the two Well, you're mentioning private credit, which absolutely is a huge driver. So if I had to say a strategy that's going really quickly, I'd say private credit. And there was fourteen billion dollars in private credit fundraising last year. KKR had a big Asia private credit fund, Apollo had a big private credit fund, big manager in India's raising one point six billion for their private credit

Seriously absolutely different from the ESG.

Absolutely absolutely huge driver. And I would make this critical distinction ESG. It's kind of like the working with terminology like emerging markets. It can mean anything, right, what is he? What is impact? I mean, the definitions.

Really are there. There's a lot of resulais.

Particularly it's funny when you say, you know transparency. I believe that there's actually a greater opportunity for transparency and private capital strategies because you can see what's in portfolios. You can see you can look at the portfolio company.

Level, not every portfolio.

Well, in the I guess I would say in the markets that we represent going in.

But if you're a pension fund, you can look at it, right, Yeah, I mean.

Good.

So I'm speaking specifically to the markets that we're in, and in the markets that we're in, you know governance, governance and transparency and you know going in and cleaning up that type of stuff from the outset, and there's so much leverage. So I don't know, when you're thinking from a risk perspective, you're thinking about the amount of leverage that's been put on.

If KKR Apollo has a fun I don't necessarily know everything that's in it.

You know, here's another driver, ID would point right though, Yeah, I honestly can't answer that.

No.

I think Carol and I both have been grappling with UH trying to value the entire size of the private credit market, for example, and that data is difficult for us.

Private credit is going to be a much less transparent than private equity. Correct, yes, because in private equity you're talking about typically investments and so. But private credit is absolutely less private equity.

If you're not if you're getting into private firms, I guess there's announcements.

There has to be, like to say that the deal portfolio is on the website. And I would make another point, which is one of the things that I find really exciting about what I do in the opportunity. The way the industry is changing just in the space of the last five years. The level of accountability and the shift

I mean there's a lot of concentration.

Well, I got to say, just not in the markets that I focus on. So this is our platform, which is basically that there is such a scale of capital availability invested, the leverage ratios, there's virtually no leverage in the markets we represent. Each is a huge Again, you know, there's very little leverage, and you're investing in rather than sort of trading portfolio company important to manager to manager, You're investing in things from the bottom.

Come back soon.

Kate Ambrose, CEO at the Global Private Capital Association, Here in studio.

Right here on Bloomberg, you're listening to the Bloomberg Business Week podcast. Catch us live afternoons from three to six Eastern 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.

Hey.

Earlier this year, Jeff Green we caught up with and he's been reporting how women gained thirty four seats on the boards of S and P five hundred companies in the first two months of the year. It was the strongest start since at least twenty nineteen, bolstered by the naming of three female chief executive officers officers. Matt I will say, I will be so happy when we stop counting women on boards, CEOs and all that good stuff.

Well, I'll be happy when the market punishes you for not having the diversity that you need, right, because the idea is that if you increase diversity on your board in your company, then you will grow your revenues and also make you more money and profits.

Diversity means financial So at.

Some point, you know, assuming that that's true, good companies will have diverse boards words and those that don't have diverse boards won't do as well. Ask the idea, right, So let's.

See what our next guest has to say. She's got a front row to a front row seat to all of this.

Heather Spielsberry is chief operating officer at Fifty to Fifty Women on Boards. It's a nonprofit committed to quote, integrating diversity and inclusion into the fabric of corporate governance. I've got that from their website. She's with us on zoom from LA. Sorry about the frivolity, it's just one of those days, Heather.

Good to have you here.

It's not frivolous when we talk about the importance of diversity on boards direct companies. Tell us a little bit about your organization and whether or not we're making progress here.

Sure.

Well, first of all, thank you so much for having me and for having fifty to fifty Women on Boards. It's great to be here with you today and appreciate that introduction. That was fantastic. So we're a nonprofit organization that, like you said, helps elevate women in the pipeline to corporate board service. And we do this through educational programs for corporations to ensure that they understand the importance of having a diverse board and what it means for them

But as Bad says, if we you know we McKinley's been doing research for years. I mean I think I have a child as old as do you know what's been doing research.

I'll go back. Funny, Carol and I have been working together for twenty years, and about twenty years ago, Mindy Grossman I think told us both this story about when she was on the board at Nike and they were like, we need to sell more shoes to women, and she looked around the room and she was the only female there and she's like, well, maybe if you get more of me, you could sell more shoes to these women. So that reinforced my idea, that made me into a

Right, Is that true?

Is that proving to be true? Is it proving to work?

Yeah?

It is, And it's important to note that it's we start with women because women are still lacking on corporate boards, and women of color of course, so once we can get there, then we can talk about other underrepresented groups. We're not even there yet, So I think our point is really to elevate women in the pipeline because women tend to bring diversity as well with them, so they'll bring diverse candidates into the fold from a leadership standpoint

Why why Heather, Why?

And going back to the point if the research has been there for such a long time about the importance of diversity and what it can mean financially. I mean, I've always feel like, follow the money. Everybody follows the money, So why aren't we following the money if it really has a financial impact.

The thing we hear time and time again is that companies cannot find diverse candidates or can't find women candidates to fit the exact.

Is that true, expertise or it's.

Not true, But here's what happens, And it's like anything. I equate it to looking for a new employee, or even when you're looking for a restaurant right when you're so hungry you can't find anything or you don't know where to go, because it's an automatic need and a

So are you talking to corporations and showing that I mean, obviously we're talking about your your list here, but are you have you emailed the heads of hr every fortune five hundred company here's the list.

Yeah, yeah, we're doing that outreach. It's tough to reach out to every chro so sometimes you have to do it through public listings, including their investment relations team, and send them notes to ensure that they're aware that we're asking them to add more women to their boards. It's

Hey, real quickly, thirty seconds, here are female CEOs or maybe minority CEOs more likely to put women on their board?

Just very quickly.

They are, And we have research to back that up in our when women lead research. But it is true that when a women is the CEO, the board is more diverse, and the workplace culture is more diverse, and they're more apps to bringing more women up with them in the fold and diverse candidates and underrepresented groups.

Well, really cool to check in with you so appreciate it. Heather Spilsbery. She's chief operating officer at fifty to fifty Women on Boards, joining us on Zoom from Los Angeles. As we said, it's a nonprofit and they are all about diversity inclusion when it comes to corporate governors. I mean on board, you can measure it. You know exactly who's on a corporate board. If you're a publicly held entity or even most entities, right you can check out the board and get an idea if it's diverse.

Absolutely.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

Say you on a rebel? No, we all want to change the world. See a little bit of a Can we play this?

What do you mean?

I feel like you don't we have to pay somebody if we play this. I don't know why. It's specifically the Beatles, but I feel like it's expensive to play the Beatles.

I think you're allot to play a certain amount.

Like less than thirty seconds.

So you know what's really important. We're going to talk about a revolution that's going on.

Yeah, I've I've been on Reddit lately. I know what's going on.

So let's get to it, because this story it has to do with really kind of a changing world, whether it's the ad market online, whether it's AI.

There's a lot of stuff.

That we're trying to figure out in a very new environment for the social media world. And our Joshua Brustin gets into it in the new upcoming issue of Bloomberg business Week magazine.

So let's get to it.

Joshua of course here with us along with the editor of Bloomberg business Week magazine, Jil Whatever. Joshua, by the way, is Bloomberg business Week Technology Editor. So the story is very telling, right as we talk so much about AI Joel and trying to understand.

The importance of data going forward. It's important to AI generative AI.

Yeah, and then there's Reddit, which is just I think, you know, for the past couple of years, become the great hope of the Internet. It is, you know, as we've seen.

Weird so weird. I remember it is no one's hope.

You know what the genius of Reddit though, was that it reminded us of how great the Internet was, like in two thousand and two, before there were social networks and stuff, and it just was it's so basic, you know, it just puts it all out there.

Yeah.

I learned everything I know about crypto originally on Reddit, like before anyone before it was one thousand dollars bitcoin. I went on Reddit, I joined the subreddit, I got to know people. I bought my first bitcoin through the subreddit, you know, for six hundred bucks.

Yeah, what's your handle?

Like?

Leather jacket? I can't tell you. No inside joke there from yesterday. What struck me about this though?

Podcast Also, if.

You were going to swallow the internet, Reddit would be a pretty great place to start, and that sort of it's kicked off this current controversy and reminder Reddits still not a publicly traded company, which has also been part of this.

So, Josh, what happened, Well, what happened started in April when Reddit said it was going to start charging for API usage. This is basically how you would systemically ingest Reddit data for your own for your own programs and As you mentioned, one big use of the Reddit API is to take data and use it to train AI models. It's part of the model that is used to train chat GPT. I think Google's model uses it as well. And it's just this big data set of people talking.

So Reddit wants to make sure smart.

I guess start training with Reddit. I mean, actually, my wife works for a company I won't name it that scrapes places like Twitter and Reddit for data. They do that for corporations, so that for example, this is not a client. I'm just using it. If PEPSI wants to know, you know, how people on Twitter feel about them. This company goes and uses the Twitter API and scrapes all the mentions and figures out you know, which are positive, which are negative, and which are neutral.

So yeah, yeah, that's actually learning a lot about Matt. You know, I'm glad that the revolution was hinted at the beginning because yeah, you know, and.

What Reddit wants to do is make your wife's company pay for that, yes, because they're exactly some commercial use from this. And at first the announcement was made in April. You know, people said, huh, that's an interesting look at

So I mean, for example, Carol uses Twitter, not through Twitter dot com, but she has some third party tweet deck that she uses, and tweet Deck I guess would hook up to Twitter with an API as well. And you're talking about people using Reddit with such third party apps, right.

Yeah, exactly. There are some very popular Reddit readers that ingest threadit and give you a better or give you a different user interface. Those apps run ads that they don't share the revenue with Reddit, so Reddit wants some of that revenue. But also the API is used to build tools that things like the volunteer moderators that make Reddit run use just in their day to day use.

So, which is key part theree just rights, but Reddit power users or something else using the site in the way that seems more like employment than leisure, except for the getting paid part. Like this is one of the amazing things about the Internet. You find a community people who care and they will do all that work for free. Yeah, right, which also is I'm sure part of but you know, the AI swallowing it all likes.

Yeah, at the heart of it, this is a conflict between two groups of people who said, I don't want to do something without getting paid for it or getting you know, I don't want to do something for free. If you're going to exploit me. The moderator is being exploited.

By everybody else is going to get paid and being.

Exploited by the AI companies, the or the third party app companies or whoever.

I love.

There's a quote in the professor at the Institute for Advanced Study, and I guess was in the Biden Administration's

Yeah.

Absolutely, I think a lot of people are very nervous about the changes coming in the Internet, and there's a question about who creates value online and who is going to be compensated for that value and how.

Okay, so what does this mean for that IPO that never quite happened.

Well, I think it's fair to say, although Reddit will not say that part of the initial reason to do the changes were to shore up its business as it looks ahead to this IPO, and I think how it impacts it really depends on the outcome of this. There's real concern out there that if the moderators continue to be in revolt, that Reddit won't work as well and might not be as good of a business going forward. It might kind of fail to function as a service.

What it reminds me of a little bit is the Dungeons and Dragon cover story that we did not so long ago. Because has Bro also tweaked the licensing agreement before the big blockbuster came out right and the nerds did not like that. There was a revolt online. Then Hasbru ultimately had to back down, but there was so much money at stake, and here we are again. I won't call Reddit users nerds.

But they are nerds.

Okay, well you said it, but it basically creates this moment where you've got, you know, a platform that everyone has turned to. I mean, this is the hope of what it was, back to the future, bet that the future of the Internet actually maybe looked more like Reddit, and all of a sudden, the underlying value proposition is the thing that is at risk. It is pretty crazy, Mike Drop.

It's really kind of right.

It's kind of heavy thinking of like how this moves forward.

Well, AI is the the you know, the dawn of generative AI had made us all realize, oh, Reddit is worth something.

I mean, if there's real value there, highly entertaining, right.

Yeah, I mean I've loved Reddit for over a decade.

You still use it.

I use it all the time, like literally every day on multiple devices. But I always thought it was I always thought it was fairly worthless. Although I guess now that I think about it, it need answers for me, so many questions.

Time your your eyeballs, think about how much that's worth?

Right? Yeah?

What is Reddit thinking? Joshua? Inside? Internally as they work this way?

This through well, Reddit has said there have been some memos that have come out from inside the company where the executives said, you know, this is these flaps happen every once in a while. Reddit is a very restive community, and the idea is let's keep it. Let's keep our heads down, you know, we'll take our lumps and a month from now everything will be back to normal and

Wait, wait, who are the evil overlords that run Reddit? Like Alexis Ohanian is gone right now, He's like a women's soccer guy. So who who are the bosses? Who's the corporate face of Reddit?

So the CEO of Reddit is is Steve Huffman. The other co founder and Reddit, as you might remember, was bought by Conde Nass soon after it was founded, and it is now an independent subsidiary or it is it is Its majority owner remains Advanced Publications, which is Conde's parent company.

Cool, So how do we think they might attempt to navigate this, Josh? Like, what are their options really? And they You're right, they have gone through this before. I'm thinking of remember the anti work kerfuffle where like the community sort of ousted the moderator that it had, right, Like, there's been tensions like this that have simmered before. But how do you think they go about navigating this?

Yeah, this this thing, this kind of thing happened from time to time. And I think that's what Reddit is betting on. And Reddit says it's going to build a lot of moderator tools or has already released some that will replace some of these some of these third party tools that might not be able to function if they have to pay for the APIs. And I think that they'll hope that moderators will find out that, oh, these things work. Okay, maybe this isn't such a big deal

And what about for the AI companies that are at their attempting to swallow the Internet?

Like, what will they pay up?

What do you think that dialogue looks like?

It certainly seems like the AI companies are preparing to pay in some way. You know, Reddit is not the number one source of material, but there may be some licensing deals worked out, and I don't think I think the economics that are.

I would provide it. That's no, You've just provided you with another question. What is the number one source of material? If not Reddit?

Basically wonder like where do these lives come from?

Would be going?

Is Wikipedia a better source? I mean, what are these AI models?

Just all of it?

No hierarchy.

Yeah, it's it's an immense it's a large range. I actually don't know off the top of my head what the number one is number one sources. But there's you know, there's like thousands of websites that it's scraping and you know, putting together sure millions.

Even what does this mean for Elon and Twitter, potentially you're trying to figure it out too well.

One thing that this shows is that you know, Reddit users have some power over the site, whereas Twitter users don't. Really. I mean, people are mad at Elon, and Elon's like, well, go go ahead, you can leave if you want, but they can't shut Twitter down and.

They don't leave. By the way, if you look at the data, actually use to increase.

Everybody lost their checks and we're like, okay.

Everybody said, like when when Trump got elected, people are like, I'm gonna move out of this country if Trump gets elected, fast forward, nobody moved out. Same thing about with Twitter. You know, they said I'm gonna quit Twitter if Elon must take They're all still there.

I'm genuine curious here when you go to Reddit, like what are the sub threads that you traffic in?

I feel like that's such a private question, which is why I won't even tell you my handle. Like the last thing in the world I want is for anybody to see my money.

I've worked with Matt for so long and he said something earlier, and I'm like, you still surprised me twenty plus years in coming.

He's surprises you don't maintain multiple Twitter or redd it had I do have, I do have family friendly.

I mean, so I look at so I look and I look at like a leather jackets thing. Although for that I use even more embarrassing forums than Reddit, like, uh.

We learned yesterday, Matt.

I'm kind of obsessed with leather jackets. I'm also kind of obsessed with leather boots and shoes, and Reddit has a very good forum for for boots.

So we actually didn't ask you about this yesterday. In video CEO Jensen very very much one owns the leather jacket. Where do you rank his leather jacket like critique?

I don't get more than one though exactly so I don't They didn't look so amazing. I don't think he's getting them from like the best shinky horse hide tanneries in Japan.

You should reach out.

I think that was he on the Reddit forum.

Could the thing is for jackets, You've got to go to the Fedora lounge, which is even worse.

I think I think there needs to be uh, you know, fashion consulting with with Matt, I'll reach out to and video.

How come somebody put chaps in our ib chat? Did you say chaps, chaps, chaps, I don't know.

Leather pants is what he's asking about. I have a few pairs.

Of chips, you know, but that's for riding your motorcycle.

And we're good.

Are you all right? Maybe not? Okay? Talk about a revolution. We just had one.

That's a wrap, guys, Thank you so much. Josha Brustin, Tech editor at Bloomberg Business Week.

Here in studio long Till Webber.

The editor of Bloomberg Business Week, is Story and the new issue a BusinessWeek magazine on newstands tomorrow, online at Bloomberg dot com, slash business Weekend on the Bloomberg and on leather chaps.

We're taking a break. This is Bloomberg, Um, brother Marco.

A journal.

How about you let me drived? No, no, no no, who's going to drug honey? Please? I'll do the driving gravel.

Let's mate, I want to try it.

It's a good question time.

This is the drive to the Globe dot com.

I think we'll buy around yother.

Don on Bloomberg Radio.

All right, let's get to it, folks.

Just about eighteen minutes left in today's trading session. Bouncing around on the equity side, another leg down, off our highs of the session, down the most on the Nawdack because you just heard from Charlie and Bill uh In the meantime, we've seen rates also bout and around following that first day of testimony from Fetcher J.

Powell up on Capitol Hill.

We get more testimony tomorrow mat but it's usually kind of like the same old movie.

Yeah, it's always interesting to me, you know, because I guess I love it the questions that they ask sometimes, and I'm sure they are the most educated and well informed people in the country, but sometimes make me lose faith in our leaders just for a brief moment.

I used to work with who would be like really, now I do feel like it's very political and very grandstanding, right, like, of.

Course, what I'm doing for you folks, that's an understatement.

Yeah.

The interesting thing this time is that you have so many people out there who don't believe that the FED is going to raise rates again, who think that this cycle is over, even though the dot plot showed us two more increases and pal said at the last meeting that they were going to raise rates again. Now he comes back and says once again that they are going to raise rates, so they.

Like, folks, let me draw you a picture.

Yeah, let's see what the market picture is. According to our next guest, our drive to the Closed guest on this Wednesday is Phil Taves. He's CEO portfolio manager also at Tave's Asset Management, also the founder of Behavioral Investing Institute, which is an organization organization excuse me, devoted to helping advisors manage investor behavior through market challenges, which is I would say, a really timely thing and useful thing.

Right now. He's on Zoom in New York City.

Feel nice to have you here with Matt and myself on business week. This market environment a lot of momentum to the upside despite the huge short position that's out there. When it comes to the s and P five hundred, what would you bet more to the upside, more to the downside? How do you see it?

Well, I don't want to ruin by the way, it's a pleasure to be with you again always. I don't want to ruin my reputation as a doom and gloomer, but I guess I don't want to spoil that. But the reality is that sometimes you just have to embrace the boom. And I think at the moment, you know you're right. Last couple of days we've seen a move down, but we have such a huge rally before that, and there's just so much money on the sidelines. I feel like I almost bet on momentum at this moment.

Yes, sometimes I embrace a second or third glass of wine. It's not always the best thing for me. So I'm just curious, like, if you embrace it, is it?

Are you just writing the momentum?

It doesn't mean that fundamentally that supports that momentum.

No, I think fundamentally it doesn't support it. There's a great word that John Kenneth Galbreath came up with, which is bezel, from the word embezzlement, and the way Charlie Munger uses it is the difference between the price we're paying for assets and fundamental value. So if you ask that question that way, then no, we don't deserve to continue to rally because we're, you know, above where we

Yeah, you're not alone.

By the way, stop talking for sex game stax.

Well you're not alone. I noticed today that KKR chief macro strategist Henry McVeigh said investors are poorly positioned for growth, maybe unexpected growth that's going to be stronger than the market thinks this year and McVeigh also said inflation maybe tamer than the markets expect this year, only a little bit. But he said that KKR is going to embrace more risk,

There's a lot of investors who don't think it's nuts because they've been port.

So I did not say that.

So anyway, what I said is that the graph for end video looks a lot like the graph of an rc ETF did back at the end of twenty twenty one when it was just parabolic up and then we've know what happened parabolic down after that. So that tends to me what's supporting the market right now? You've got just a handful of stocks up hugely, and that's what we all know. That's all the games of the s and P five hundred, So it wouldn't take much much to tip us lower. But you know, we actually come

Wow, smackdowns. You don't want smackdowns here? Wow, you're going to lock your door there, buddy, Well it's interesting.

So then where would you put money to work in this market environment?

You just buy the cues have outperformed every active asset manager for the last fifteen years.

Yeah, I mean, I think it would be nice to have some there. One of our funds, thhlg X, has a seventy percent allocation SMP and thirty for thirty percent allocation of triple cues. But it all has options underneath it, and we can trend follow out of that into cash positions if you need to be so. I think it's great to have growth right now. You know, if you're just on small and mid has disappointed on a relative basis, although part of that could be returned to the mean.

I'm just looking at th h lg X and I see or I wonder what you can tell us about the top holdings. What do you have in THHLGX, And just got about.

It's just a hedged index strategy. So we own s and P five hundred index positions through futures contracts, and the same thing with triple ques. We just owned the futures contracts in there. But the way that works is if it trust. If markets start to roll over, they move the lower target exit level, we move to the sideline so we can be in treasury bills.

If that happens.

We spend most of twenty twenty two in t bills in that fund. The other thing we have, though, is, you know, options protection is so cheap right now later about twelve percent below market for full notional so it costs almost nothing.

So right it up and just be ready to bail and find another way out.

It sounds like Phil really fun Phil Taves, CEO at TAS Asset Management on zoomerm, New York. So he's looking over your shoulder.

Now, is Mike Wilson coming exactly?

This is Blue Worth.

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

Mm hmm