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Let's go to that top story of the morning, and that is Boeing. So that's doc up. But see, I think we're just up by about one percent here as David cal Hun will be stepping down as CEO, but not until the end of the year. Apparently he's going to be intimate and intimately I made that word up, but he's going to be involved into a replacement, which I also think is quite interesting. So I want to go to George Ferguson. He's the guy. He's the airline
guy that you got to go to. He is senior aerospace, defense and airlines analysts joining us now in Princeton. All right, George, your reaction to the news that we saw earlier, and then we'll walk up to what's next.
Yeah, So my action was, you know, I think we we thought Dave Calhoun probably would be going I hate to sort of wish that in anybody. But it seemed that, you know, the problems in the manufacturing business just there were just too many of them over too long a period of time to say that he was as effectual, if that's a right word, as he as he should have been at bringing everything, you know, back into order.
It does seem weird that it's going to take them till the end of twenty twenty four define his replacement. There's a lot of things that have to happen between now and then that the company just can't wait for. Things like the purchase of Spirit Aerosystems, which should improve reporting lines should have been improved, the stability of the you know, the production process, uh, and the quality process.
That's super important.
They've got the they've got to you know, serve to the FAA their view and how they're gonna they're gonna stabilize their production process. That that's coming due here too. And at the same time, right they've got to start to increase build rates so they can improve profits and cash flow.
They can't wait a year on that either.
So there's a lot of super important things that are happening this year to wait till the end of the year to replace the CEO that doesn't seem to have been able to get that job done well. It seems like a lengthy timeline to me, But it may just be that the board was flat footed and realizing that the CEO had to go and as nowhere in a search and so they've got to start from scratch here and figure out who the next person is.
What can you tell us about Stephanie Pope, She's gonna be stepping up and taking a big role with the aircraft business.
Yeah, so she's been around for a while and she's been CFO of that aircraft business. So it seems like a logical inside choice. You know, it may not be the final choice there, although it may well be. But I think when you have a you know, a head of that department, stand deal who's leaving after thirty us heres at the company, they're hard shoes to fill, and then you know, you look around internally for who could
be the next person. The CFO is always in particularly decent shape because they understand at least all the financials about the business. She's also had, you know, had positions at blowing Boeing Global Services, which is a super successful business inside Boeing High teens margins. To me, the only thing I don't see in her background is that manufacturing
skill set. I think the next CEO and the next head of Boeing Commercial Airplanes has to really have a manufacturing engineering mindset background, and I think that's that's what I don't quite see.
There, sort of like Larry culp.
No, I mean, Lowry obviously is pretty busy, and honestly, the job he has now a GE could be better, better, profits, more fun than Boeing because there's a lot of great technology inside GE and there's a huge bow wave of a lot of maintenance coming that's really high mind margin.
I think you'd really have to work hard.
To get like But George, I mean, does he like fun or does he like a challenge? I mean he was the one that went did GE to begin.
With, Sorry you were you broke up a little bit there.
Said Oh, it's saying that does he like fun or does he like a challenge because he was the one that went to GE in the first place when it was a hot mess.
I do think he likes a challenge, and I think he showed his ability to navigate it really.
Well at GE.
But again, you know they're just kind of getting to the super fun part. I think there's still challenge inside ge but he's just getting to the point where he's got aerospace broken out and he can really make a lot of hay here. So I don't someone like him is absolutely what I think Boeing needs. I don't know, maybe he's got a you know, maybe there's a protege somewhere inside there that they could tap or something.
So thinking about who could be the next CEO, here is the expectation, George, that it'll come from an external candidate or or internally And are there any early front runners? Do you think?
Yeah?
So, I definitely think it's going to come external, right. I just think the fact that you've seen this purge of the of the CEO, you see the purge of commercial airplane president, means that we've depleted some you know, we've depleted some talent there you look, you know, there there was you know, former heads of Boeing's commercial airplanes that had left, you know when when Muhlenberg came on, they could potentially be, you know, in the running for
something like this. I know a couple of them wanted the CEO job and didn't get it, but I'm almost positive you're talking about something that's going to be outside. It's Ray Connor is the name that comes to mind. Used to be the head of Boeing Commercial. I'm not sure what he's doing now, but he might be on the list similar.
What's the culture like at a Boeing in terms of getting an outsider?
You know, I think Boeing is one of those companies.
I think you get a job and you stick around for lots and lots of years, and so, you know, I think that bringing people in from outside is something you do only when you have a breakdown like you've had now. Right under normal circumstances, there would be very clean lines of succession inside Boeing. You know, you would move up through the ranks and expect opportunities as you
as you rose. But there's been so much tumult in this business over the last I don't know, you know, four years or so, that I think that it's a time in their history where they're going they're going to be going outside a lot more to replenish some of some of these senior management ranks that they've just they've turned.
Over a bunch of it and George it seems like this is no quick fix here. It seems like it was years, maybe even decades in the making in terms of maybe the deterioration of some of their quality controls. Here when you talk to in an industry folks, people at Boeing, is there a pathway to kind of get back to where they were in terms of quality?
I think there is, But it's a lot of attention to detail. And like you said, it's slow work, so you can't you can't sort of wave a wand I think and make it, you know, happen overnight. Really, you know, I think has a lot to do with people and processes, right, And that's why I think you want someone like a Larry Koppe who loves people and processes. You need and I mean that just takes time. You need a lot more.
You need training, you need, you need you know in the interm you probably need to beef up some of the oversight. You need to get into your supply chain. You need to give them a hug, you need to help them out, you know, help them bring you quality products. I mean, it's not a it's not a hey, how are you going to make my margins work better? In the next couple of years discussion. Right, it's really like I said, it's people and processes. It's a softer side
of management. I think Boeing over the last decade or two really was more into the how do I squeeze you to get you know, you to give me products at a cheaper price so I can build my margins. There's a you know, it's what is its recipe for success? It wasn't that wasn't quite the term, but there was a term like that that Boeing was using with their suppliers.
It was all about squeezing them. So the supply chain is all you know, they've been scarred, they're you know, they're they're they're worried about when Boeing comes to talk to them. And I think they need to get to a world where when Boeing shows up that they think someone's there to help them and is looking out for their best interests partnering for success.
Sorry, I love that idea though. It's like you just need a hug and be like we got this guys, versus like squeezing out of the suppliers. It's just like a great visual for a manufacturing giant like Boeing George Ferguson joining us. He is Bloomberg Intelligence is senior Aerospace, Defense and airline analyst. I think that's gonna be so interesting, Like, how do you even start a search like this?
Yeah, you know, I guess, as George was suggesting, you know, a couple of attributes. You need engineering expertise and manufacturing expertise. This is not a marketing story, you know, it doesn't feel like it's a strategy story that you go to like a consultant or something. It's just nuts and bolts manufacturing at the as George has told us in the past, at the highest tolerance levels you can ever imagine, making an airplane's a little bit different than making an automobile
in terms of tolerances and things like that. So I would guess that there's relatively a small pool of people that kind of that kind of fifill that.
So I wonder where the timing is for that, Like knowing that there's a small pool of people, Like why do this write like today but then wait for the rest of the year.
I don't just get I think this it just feels like this was tied into the news we got Friday about oh, the certain members of the board are going to go on a listening tour with our big clients without the CEO. I think that it feels to me, at least some of these big airlines said, you know what, you need to make a change there at the top,
and you need to see that started now. And I think they probably just kind of stooed on that over the weekend, and this is the decision we come up, so we'll stay on top of that.
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Alex. I'm seeing a red headline cross to Bloomberg turmoil here. Trump bond reduced to one hundred and seventy five million dollars in New York fraud case. So I guess that's a piece of good news for the former President's a lot better than the four hundred and fifty four million he was.
There and then it was one hundred and twenty percent to post. It was even more than that. He has said last week that President Trump has almost I'm quoting five hundred million dollars in cash, and that he will use a substantial amount of that to fund his campaign to return to the White House. In a court Finally, he did claim that he'd need closer to one billion dollars in reserves to cover the bond and still have enough cash on hand to run his sprawling real estate company.
So I mean anything at that point three hundred million dollar reduction potentially helping him as well. Trump has said that the cash crunch had emerged after thirty insurance companies that arranged such bonds refused to take any of his properties as collateral. So the latest headline is that his bond reduced payment for President Trump now to one hundred and seventy five million dollars in that New York fraud case.
Remember the overall penalty was one hundred and fifty four million, and you usually have to pay more for that bond.
Yeah, So the question is does he have the cash with you know where wherewithal to make that one hundred and seventy five million dollars satisfy that seventy five hundred million bond. I guess that's the next question. But that's something I think they would have to be answered again today, right.
I have no idea. This is this is why I'm not a lawyer. And also I just pointed, but he's also a sitting for one of his criminal cases too.
Yes, the I guess. I see some video shots of the courthouse in Manhattan. I guess this on the hush money payments. Apparently that is also going on today down there. So again, so I guess I think on the margin, a piece of good news for the former president his bond reduced to one hundred and seventy five million dollars in the New York fraud case. So again, I guess the next steps will be just how do they How does former President Trump and his team, how do they satisfy that that bond?
Do they keep fighting it? Or I think he's ten days right to deliver that money? So is there anything that's needful?
Well, something was due today, I thought today was on the former bond. Maybe this is a new bond or something.
Well, this is that President Trump must pay that one hundred and seventy five million dollars bond within ten days. Yes, that's the court, So it gives him some time, I think to get it together. So I wonder like where that comes from, yep, and how that winds up coming from there? You're joining us now. As Eric Clarson, Bloomberg Legal reporter, I saw him, he literally ran from his desk, So don't mind if he's a little out of breath. Were you expecting or reduced bond here?
You know, I would have thought that if they were going to reduce it, they would have put it at the one hundred million dollar request that Trump had made, because he had said that that was the maximum he was able to actually arrange. So it'll be interesting to see if Trump says that he can go ahead and do this a larger one.
So but if nothing else, it buys him another ten days. Are we reading that correctly? That he had had to satisfy that foreurner fifty four million dollars bond today, But now with this reduction, it kind of starts to clock again.
Is that exactly?
So that definitely, for now the New York Attorney General won't be trying to seize his assets, which was the big fear of starting today.
So can you just wrap this in? So what was the argument, like how did they arrive at that one seventy five from the four fifty four, Like, what is a conversation around that? And is that the normal conversation we would hear from anybody who was going and trying to get the fine reduced.
Well, it's a pretty unusual situation to begin with, just because normally, with damage awards of this big and bonds this big, they involve like really big fortune five hundred companies or things like that. And as Trump's lawyers argued, you know, for a privately held company, the Trump organization is huge, but not you know, as massive as some big corporations. That it was just really difficult for them to arrange a bond of this size. So it's all
kind of novel. It's an unusual situation all around. I haven't had a chance to read the whole decision yet, but I think the appeals court just decided to have a little bit of mercy on him while still putting him under some pressure to arrange a bigger bond than he says he was able to.
Okay, so that's that. So we have I guess ten days to get to the next chapter here. But he's still former president shub is still going to be down in a courtroom in Manhattan today, right.
Right, that's correct.
He has a hearing in what is probably going to be his first criminal trial. They haven't scheduled the new date for that yet. It was supposed to start today, but they delayed it because of some new evidence. So he's been in court with his lawyers this morning. His lawyers are getting grilled a bit by the judge in that case. That it'll be interesting to see what happens with that trial. They could set a new date for that today, it could be as soon as next month.
And what is the argument here?
Like?
Which one is this one?
This is the so called hush money case. He's accused of falsifying business records to conceal hush money payments to a porn star before the twenty sixteen election.
And he still had such Okay, so we get this one, and there's still some other things going on right right there? I mean the January I guess that the January sixth case is that federal in Washington. And do we have any sense of timing on that?
I wish, I wish I knew we still have any dates for the other three trials, not yet other three trials you gotta keep on top of me.
I mean, do you like an Excel spreadsheet?
Yeah?
Okay, you do. Okay, he's literally not kidding. There's one more question on the on the on the bond here, What is your question now, Like, now that we know the actual number and it's in that weird spot, higher than he said he could pay, but much lower than the original what is your question?
My question now is are they going to stand by what they said, which was that there was no way in the world that could get a bigger bond than one hundred million, or are they going to say okay, fine and circle back and try to see what they can do because he said that if there was anything more than one hundred million, he'd be forced to sell some assets in order to raise that extra cash because those companies that arrange bonds won't take his real estate as collateral.
It's a head scratcher. Oh, I guess seventy five millions better than you know, adding on four hundred months, right, Yeah, I mean there is.
That'd be a good day for the for the president today, just from how the math works. Eric, thanks so much for literally running down from your news desks. To get the latest. Here, Eric covers all the legal stuff for Bloomberg News.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affo, card Play and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
On Friday, SMP posting it's best week of the year, plus last week saw the most amount of SMP fifty two week highs in nearly three years. I thought that was a really fun step, right, that's a good one.
It goes to the breath of the.
Market exactly, So it's not just about tech, and we'll kind of see you this play out as well as tech comes under attack in Europe as well as the chips in China. So joining us sound to discuss is Katerina Simonetti, a Senior vice president Private wealth advisor over at Morgan Stanley Private Wealth Management. Keterina, are we going to expect the same kind of momentum within the S and P and the overall US DOC market next quarter?
Alex, thank you for having me on the show. You know what, an incredible start of the year, but really first three months in and now is already approaching forty thousand. You know, at least we're you know, seemingly a few training sessions away, and the real question is going to be are these price levels of equities are going to be supported by earnings? You know, we're about to approach
this you know, quiet time, which usually what happens. The bit of an information vacuum is something that we see between the earning sessions. But when we come back with new earning session in mid April, you know, the question really for the the the that pricing, that that tailwind for the prices and equities to continue going higher will be all up to earnings and we're priced to perfection. Now, the question is, you know, what can we expect going forward?
So?
How how do you feel about valuation in this market?
Are you?
A lot of some folks are saying, hey, if you strip out some of those magnificent four, five, six, whateverever the name names are today, you pull those out, the market's you know that valuation seems okay? Do you do that or how do you think of that valuation?
Well, the biggest question that we get from our clients is when is it the good time to take the profits of the table. When is the good time, you know, to really realize some of these earnings. And it's a really difficult question to answer because we can never effectively pull either the top or the bottom of the market.
But we know that there are certain prices, you know, that are higher than we've expected them to be in certain areas of the market because of AI, because you know, some technologies, some companies that are you know, looking to increase their profitability through this investments in AI. You know so, but this is not the time to be enamored with growth. This is the time to take the total picture into account and not give up on value just because this bullish outlook in the market.
What does value mean to you? I feel like this is like a meal, This is like a deep question. But what is value to you right now?
Alex? You know, for many, many years, you know, one of the stables of the ever suppried portfolios have been this blue chip dividend being stocks. And this is the sector in the market that has not performed quite as well as these exciting growth names. But you know, the areas like consumer stables, healthcare, financials, materials, industrials. You know,
in the long run. When we think of AI story as a whole, all of these sectors tend to benefit and the value of having these bluechip dividend being stocks in the portfolio, you know, plays a huge role in risk management. The other side of it this is, you know, beyond your questions about the value, but also small and MidCap you know stocks and the role they play, you know, in this total portfolio construction. So there are a lot of areas in the market that did not have this
huge drawn up. So this will be a good time to take maybe a little bit of a profit and move into some of the areas that are positioned for growth.
You know, looking for maybe different sectors that might be opportunistic. You know, one of them is energy. I just look at WTI crude oil up another one point seven percent today, We're just about eighty two dollars a barrel in WTI crude oil. How do you think about the the energy space here? Again, people, I think there's a little bit of concern about where are we in this transition to green energy? Is it's slowing down? How do we think about that?
Now we're enthusiastic about the green energy and sustainable energy, but you know, we're not quite there yet, and yet the broader energy sector is under pressure because of the overall geopolitical environment, you know. With that said, the demand for energy is very strong, you know, so we like energy as this sector that plays the role in the portfolio.
Energy companies, you know, pay excellent dividends. And because of the strong demand and increasing demand in the world and the fact that we're not quite ready to switch into the green and energy sources quite yet, you know, we hope this happens soon, you know, but for now, you know, we love him and having energy exposure and our portfolios.
So to that point, Paul, for the quarter to date, we have communications services in tech. Okay, they're the top performers in the S and p right, it's an Amazon big tech story. But energy is up over eleven percent, Financials up ten percent, industrials up ten materials up six. I mean, and if you just look at the last month, it's really been those guys, the financials and energy industrials
that have really been outperforming. Do you think, Keterina, that the movement into those kind of names will help offset any weakness in tech?
Well, of course, Alex, and this is not to say that we should give up on.
Tech, sure, sure, but like but the rotation will be enough to support the headline level.
Absolutely, it is really the story. The real story, in my opinion, is really the fact that all these innovations in tech are going to have across the other industries, and the fact that when we look at the previous year, the underperformance in these sectors, the valuations that look attractive, the competitive positioning, the fact that these companies have been very smart with their costs. You know, they're running you know, the good, good models, and their prices are looking attractive.
You know, especially when we think about the environment, where we're expecting few rate cuts and you know, it will be easier for these companies to broader their profit margin in the environmental rates are a little bit lower than where they are today.
And ketterine it last week was a week of for much of us to hear from the central bankers around the world, and I guess the tone coming out of not only the FED but some other central banks is probably a little bit more dubbish than maybe people had thought going into last week. What's your take about how the FED is going to kind of behave over the coming months.
Well, it's hard to know what they're going to do it. Even if we look at the projection of expectations this year alone, we started in January expecting for rate cuts, and right now there are opinions out there that there
will not be rate cuts at all. At Morgan Stanley, we still expect that we're going to have three rate cuts, and that FED is, you know, at this point his position to do just that, you know, But what we tell our clients is that they should not necessarily, you know, adjust or make drastic changes in their portfolios based on the FED action. You know, in the going forward, of course, any type of right cuts we get is going to
be the economic stimulus. It's something that is going to benefit the economy in the long run, but in the short run it is really more earnings, labor market overall, you know, strength of the economy that is proven to be much more resilient that you know.
That we thought.
And then to that point, I wonder that if the way to express rate cuts, whether it's three, two or one, because I think it was Bostic was really talking about maybe one cut. You also have Lisa Cook speaking right now. She says disinflation has been bumpy and uneven, and cutting too late could wind up hurting, and cutting too soon could also so heard on the growth and then the inflation front. So if you're trying to gain that out, how do you express that?
Well, you know, I think that that one clear action right now is to take advantage of the higher uelds and fixed income while they're still available, because you know, the it seems like we've had money market rates at five percent forever, but it really only has been a short time the timeframe while this has been available, you know, and FED is going to react based of economic data. They I think that that we can expect some type of right cuts and there is that also immediate reaction.
Historically large cap stocks react very positively. There's almost this delayed reaction in small and midcaps, you know. So if we look at the effect of the rate cuts, you know, whether we get three this year, whether we get less, whether they're pushed into twenty twenty five. But FED is going to react to economic data, and you know, we're paying attention to the same numbers, all.
Right, Katerina, thanks so much for joining us. Really appreciate it. As always kind of read a Semonettie She's a senior vice president private wealth advisor at Morgan Stanley Private Wealth Management. Joining us from the town of Brotherly Love, Philadelphia via Zoomier.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
All right, a story that is out there for the technology companies. It seems like we've seen this play before. The European regulators they're not too happy or they take a much heavier hand in terms of a regulatory oversight to some of the big US technology companies. I'm thinking Apple, I'm thinking Google, I'm thinking Meta and that's back in the news here today. Mandy Singh joins US senior tech analyst for Bloomberg Intelligence. Joinings here in a Bloomberg Interactive
Brokers studio. So, Mandy, those of a certain vintage like myself, I can remember back to the late eighties early nineties when it was Microsoft that really was under the regulatory microscope of the European regulators. And the net result, it seems, if I think back, was just a lot of checks being written, a lot of fines being paid, but nothing more than that. To the overall business model of Microsoft. I either still that office, you know, bundle and so
on and so forth. Talk to us about what's going on from Europe today as European regulars look at some of these big US technology companies.
Yeah, and just to you know, start off with that Microsoft comparison, I think one thing that did happen was a change in behavior. So you could expect something similar with these companies, even though you know it's unlikely they're going to be broken up because of this, but you can expect a change in behavior in terms of how they operate. And the reason I say that is Microsoft was an operating system company.
YEP.
They were layering on their Internet Explorer browser. What the regulation intended to do was to decouple the two in terms of giving more choices to the users. You're seeing EU kind of pretty much play to that point where these companies Apple and Google, they have the operating system, they have the app store. They bundle a lot of their own apps, right, so you have to use their app store, give them a thirty percent commission, you have to use Safari browser, you have to use Google Maps.
So that's what I think regulators are focused on. I think they are probably five ten years too late. I mean, look at you know all these The reason why they're so big is because they operated like this for the last ten years.
This is such a great point because like, I don't want any of that to change because it'll make it more annoying for me to do stuff on my phone. So, like to your point of it being too late in the beginning when I was adopting the iPhone, maybe, but now that's just a pain. Is this going to hurt them to make this case?
I mean regulation is always an afterthought. We have seen that time and again. It comes in too late. And look in this case, they are vouching for more open app stores. So instead of Apple taking a thirty percent cut and forcing everybody to use their payments platform, it's about having third party platforms.
Now.
The one caveat there is if you bring in third party platforms, gets what Google can launch their own app store on iOS right now, Google, you know app store is used in Android. If you start opening up the platform, who does it benefit the most. I would argue Google because then they can put their app store on iOS. You can pay through the Google Android App Store on iOS.
So I think in effect, then even though the regulation is well intended, it may actually end up, you know, favoring Google if it turns out to the way I think it is because the likes of Spotify and Netflix, they're not going to create a new app store. It's peanuts when it comes to saving on payments costs, Like, what are you getting out of investing so much into your own app store. Yes, it's good to have an
open platform. That's what Epic has been arguing. And you know all the gaming companies, but I think the one company it benefits the most here is Google.
That's actually pretty funny, all right, So just for thirty seconds, how our investors thinking about this risk, the regulatory risks to these big tech companies. How are they thinking about it?
I mean it's different from different companies. I think the operating system gatekeeper analogy applies to Apple and Google specifically for meta. They want you to pay to subscribe to the apps if you don't want to be tracked. Now that's interesting, right, we are so accustomed to using social media apps as free because our data is what they use for targeting. If you don't want to be tracked, you have to pay meta, and I think that's not going to be palatable for users.
So I love Mandy cuts through it right now. I get it all right, Mandy, thanks lot really appreciate it and keep saying Joining us from Bloomering Intelligence.
You're listening to the Bloomberg and Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Otto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty.
Thirty five years on Walstreet. I've had the pleasure of working some really really good groups of people, and none better Mount Rushmore type where the people of Payne Webber nineteen eighty six and nineteen eighty nine, the Management, Audit
and Control group, don't ask, it's top secret. Mike Sullivan ran that group, and pretty much everybody in that group went on to have a pretty darn good career, and none more than my man Joe DEGROSSI he's the chairman, He's the Sea of Axis Capital I'm scared to ask what Access Capital is. But he is in Miami, Florida, and he did that decades before that it became trendy here. He's been down there kind of running money down there for a long time. Joe, thanks so much for joining us.
You're one of the off time greats. Tell us what you're up to at Axis Capital these days?
Got well, first of all, that throwback to the mid eight's just just dated me. So but it's nice here, your boy. It's been way too long. So in a few things. I've been down here in Miami twenty six years now. I moved from Paineweber and joined a private equity firm that turned out to be pretty successful, and launched my own firm some years ago, and so run a family office as well as private equity shop down here in Miami.
So what do you guys doing in the markets here today. I'm guessing you're not running a sixty forty portfolio, Joe.
Clearly not running a sixty forty portfolio. Are main focused today, as you can probably see by the background, at least for viewers who are watching the live stream, you know, we're focused on with Access Capital introducing Interval Funds really focused on this massive underserved market of accredited investors, folks with sort of one to five million that represent the mass affluent that up to now really have not been
able to invest in private investment. So we think the next big wave in the capital markets will be a significant reallocation among i'll called the mass affluent into private investing. Because they're living longer, they need to match assets and liabilities to make sure they don't outlive their income. And so we're building a suite of products that we believe will serve that accredited investor market very well.
Okay, let's just we're burying all the leads here. People. What was Paul like in the eighties.
Paul was fantastic. I mean, I have nothing but thought memories Paul. And it's been too long, and I know we're due to have a reunion pretty soon. But Paul was a great out to work with.
He really was.
It's funny we had a great group.
Again.
If I got my Pain Weber group, I've got my Chase Manhattan group, my Salomon Brothers group. That the Pain Weber group almost person for person, I'm talking to a couple dozen people went on to have really good careers. We kind of thought Joe was going to be the black cheep, but he's ended up doing the best here. He's still added here, Joe. You mentioned private credit here. That's been a market that I've been really amazed to
watch developerally over the last ten to fifteen years. It used to be kind of private equity is the place you go to for some outsize returns. How do you guys think about private credit?
Well, you know, look, I think private credit has stepped in where the banks have walked away, and regulations on the banking side have made it, you know, challenging for banks to maintain market share in that space. And so you've had a you know, a proliferation of funds credit funds getting into this space. And of course, Paul, as you know, you know, interest rates have been on the side of credit for a long time up until recently, up until twenty two, but they wrote a ten to
fifteen year wave of a declining interest rate environment. So the total returns have looked particularly strong in that space. I think what we're going to see now prospectively is, you know, the major comeback of private equity. I think that's going to be the place to be over the next five to ten years, notwithstanding a lot of talk about capital flow into that space over the years.
Okay, first of all, you guys are both serious and disappointing me of what Paul is like twenty forty years ago. But whatever, we'll let that slide. We use a private equity because because I feel like it hasn't the whole thing been none on private credit, not private equity.
Now, well, it's interesting. I mean, there's I don't know, eighty or ninety interval funds now in the credit space, maybe a dozen equity funds. So you know, people have been chasing returns and they've been looking in the rear view mirror. I think the future looking forward is is allocations to private equity. And I'll tell you for a
very simple reason. You know, people are living longer. They you know clearly, you know, there's this massive generational transfer of wealth from a risk averse generation to a risk tollering generation that I think is more informed. They know they're going to live on average three to five years longer, you know, than their parents or certainly their their grandparents,
and they're going to have to allocate capital accordingly. And that means over the long term, you know, as we know equities over the long term, you know, trounce fixed income, notwithstanding what's happened over the past ten years.
So Joe, you were, as you mentioned, you got down to South Florida way before it became trendy. Here talk to us about how Miami has changed just over the last four or five years. I mean, you know, kind of pandemic. It seems like everybody and the brothers moving down there.
It's it's really been incredible. I mean I've been down here, as I said, you know, roughly twenty six years, and we've seen more change in the past five years than we saw on the prior all of twenty twenty one years. And I think that's you know, certainly driven by COVID, A no question about it. But I think COVID, you know, in concert with technology, has made people realize and has accelerated the understanding that you can be most anywhere in the world and work and why not be in a
beautiful place. I mean when I moved down here, it was really driven by the fact that an opportunity to join a private equity shop, and it could have been in Tuscaloosa, could have been in Idaho. Now what we're seeing is is I called the sort of that Malcolm Gladwell tipping point here in Miami, where you almost have to be here as a firm, if you're in the wealth management space, if you're in the private equity space, you have to be here because this is where the
action is and it's a great quality of life. And you know, we all know taxes are far lower down here.
So now you're fairly killing him, Joe exactly.
I'm sorry, Yeah, all right, So talk to what is that you mentioned? Interval Capital, Joe, What's what is that concept?
Well, it's it's Access Capital is our firm, but we're really focused on launching a suite of interval funds, and it's really this, you know, this simple. The Investment Company Act in nineteen forty basically says, if you're super rich, qualified purchaser with five million or more, you can invest in private equity and private credit funds. There's that line
of dem otion though. If you are not a you know, a wealthy investor five million or more, you're basically shut out, and there's there's only one way to offer products to accredited investors. You know, folks with between one and five million, and that's to register your vehicles. And that's the safe harbor under the Investment Company Act of forty that says, if you register your vehicles just like sort of like an IPO, then you can bring in an unlimited number
of you know, I'll call them smaller investors. And you know, what we're seeing is there's fifteen trillion dollars among accredited investors, about one percent invested in private investments.
Uh.
Compare that to qualified purchasers, folks with five million or more, who were at ten percent allocated to private investments. Goldman Sachs's most recent Family Office report says that the family offices are twenty seven percent invested in private investment. So we believe the future is in the smaller investor.
Yeah, Joe, great to talk to you again, buddy. Always good and always knew you're doing well down there in South Florida, doing it way before anybody else. Was Joe de Grossi. He's a chairman and CEO of Access Capital based out in Miami, Florida. We both started our career as Payne Webber June sixteenth, nineteen eazing.
Okay, so what was Joe like.
Funny, the really funny guy in our group. We had a lot We actually just had a great group of people, still very tight. We get together every year or two dinner at Smith and Lenski's in mid time ahen people come in flying from all over the world to come in and kind of hook up because for a lot of us it was the first job out of college and it was a really tight group and we stayed tight throughout the throughout the year. So it's a good group, good way to start your career. Ye story. And see
that's the example I bring up. If you're working from home and you don't get that, and I don't, and I'll tell you what that's That's what it's all about for me. So good stuff checking up.
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