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any research writing. Everyone's on the lookout for signs of an AI bubble, Yet the market continues to climb the walls of bubble worries. Joined us now for more ed Welcome to the program, sir, Two part question, what's the bubble and what is this?
Well, at this point, I think we're getting into bubble territory. For sure. We've got the forward pe of the S and P five hundred around twenty three, and the peak during the previous tech bubble in the late nineteen nineties was twenty five. So we're getting close. But you know, the earning story has been phenomenally strong, particularly this year
in the first and second quarters. Who would have thought with all the commotion coming out of Washington, And it looks us on the third quarter earning season, which is about to start, is going to be very strong as well. We're expecting ten percent a year over yere percent change, So the earnings are actually there to continue to drive this bull market higher. But I wouldn't want to see the valuation multiple go any higher than it is right now.
At that earning story part of the reason, part of many reasons why a lot of people are still looking for the potential mounts up. Typically, a mounts up is a risk people want to own. Is it a risk you want to own? And are you willing to keep your bets on this market quite concentrated to take advantage of it?
Well, you know, I think it hasn't been all valuation And the reality is again has been a earnings lead melt up, which is fine. I don't have a problem with that, and that's really not a melt up. The fundamentals are actually there. And oh, by the way, if this whole AI thing turns out to be a lot of hype and the companies that are spending all this money on AI infrastructure, have to kind of slow it down, and it's not exactly the end of the world. I mean,
these companies are using cash flow to finance this. It's not like nineteen ninety nine where telecommunications companies did seller financing and there was a tremendous amount of debt because to do that they borrowed in the jump bond market. So there's a lot of credit in the bubble back then. This time around, it's cash flow, and if they have to slow it down, their profits are suddenly going to look even better.
Well, and two of those companies, AMD and open Ai. The amdco Julie Sue said this yesterday. The more open ai deploys, the more revenue get and they get to share the upside. Does it concern you that this is so circular?
Yeah, well, you know, I'm thinking of putting a few billion dollars into open ai and doing business with them. Everybody's playing the game here, So yeah, the circularity of it has got the market's really spooked. The market's got spooked about AI back in January, remember with deep seek, and so this is kind of the latest fear that we haven't seen anywhere near the kind of correction we saw with Deep Seek. I'm not that concerned about it.
I think there is a lot of capital spending going on, and these companies, you know, unless they're misinformed, which I kind of doubt it. These hyperscalers, they know what's going on, and they know that the capacity of their system is getting stretched, is getting pushed by everybody using AI and try to figure out how to use it.
Bezos said this week as well that investors are just having a hard time in the middle of excitement to distinguish between the good ideas and the bad ideas. How do you distinguish between the good and the bad?
Well, I'm no better at it than anybody else's At this point, I'm going to assume that the hyperscalers, who basically are Magnificent seven kind of companies, know what they're doing, and they are you know, a lot of the investments
are data centers. It's not like you know, right now, there's a lot of mystery about where the spending is going, and the data centers but themselves and that are actually the data is available monthly from the construction report that the government used to put out when they was open But that showed that data centers were running around forty billion dollars, and that's at an annual rate. That's times twelve.
That's not a terrible number. Now, of course, once you build the actual structure, you've got to stuff it with all these semiconductor chiefs, and that that money is being spent. I don't think this is money down the drain. I think you know, this is for real.
And there is an additional dimension that makes this rather strange that we have the US government picking winners at the same time intow Trilogy Metals, we have open AI picking winners too. We saw evidence of that in the last twenty four hours. Does that change your approach to start picking at.
Well? You know, my attitude towards Washington is, it's amazing how well the economy does despite Washington. It's amazing how well the stock market does despite Washington. I don't I don't like the state capitalism, as you rightly called it. It doesn't it's not really necessary. The free market should be able to decide who the winners are and who the losers are. So it's more more a noise coming out of Washington. The signal we're really seeing the fundamentals
as the economy continues to be extremely resilient. That's really the word for the economy. The past four years, we've had the most widely anticipated recession of all times. That didn't happen. I didn't think it would happen. And I think that's why the evaluation multiples are high, and that's why earning this so remarkably strong.
Stay with us, multilintex Savanta's coming up off to this.
Here.
It is not a government shutdown.
It's a beautiful morning in front of a beautiful waterfront. And I'm here with Kip Deevere, who's the co president of Areas Management, which oversees almost six hundred billion dollars, And thank you so much for being with us here. I do want to start where John was talking about this idea of the tech build out. How much private
asset managers have been instrumental in that. I'm just wondering how much you are continuing to accelerate your investments into digital infrastructure, given that everyone is worried about an AI bubble? Are we investing too much? Are we seeing the fruitions of our money?
Sure, so we've sort of transitioned that business to be broader in its scope. Historically we've been largely a lender to the space, so a senior lender and a mezzanine investor as well through our dead infrastructure business. We did a recent acquisition that you may be aware of, a business focused on industrial logistics investing mostly in Japan, but it's global and they have real digital infrastructure development capability,
so we've started to roll that out. We've done two completed projects now in Tokyo.
We have a third underway.
Just on the outskirts of London, so we're getting more active on the development front. I think that the measured approach that we've taken getting into the market doesn't frankly put our investors at risk right Our goal is to generate great returns for our investors, So we think if you stay in tricky markets, hard to find entitle land, and then you're building really high quality facilities, which we
think we are. Because we have an in house team that came with the acquisition, it's pretty easy for us to find great leases from investment grade tenants like viper scalers.
Are you passing up opportunities that concern you? Do you see things out there that I.
Think we're selective, and I think if you look historically in areas like this over the last twenty or thirty years, typically when this much capacity comes online, some of it, at the end of the day is going to have to be marginal.
Right.
These trends tend to lead to overbuilds in certain places. So I think us being selective and being measured and what we build is super super important.
One thing that we've seen over the past five years is an incredible consolidation of market capitalization of the biggest asset managers, the biggest private asset managers. I'm thinking of the ones that you won't name, like Apollo and KKR, and of course areas defintely named. I'm just wondering whether you think this is the sort of path to follow, that you think the biggest are going to only get bigger and dominate this book.
We've believed since the beginning Frankly of the company, the more scaled platform, both in terms of diversity of asset classes but also diversity of geography is it was a huge advantage. So we think we get better information to participate in more markets. We probably do better due diligence
because we have better access points. So I think the both investing advantages but also the capital raising advantages are real and you'll see you see that with the growth of Varies, with the growth of Apollo, and growth of all the Blackstone KKR, all these folks that have consolidated share for you.
Just actually did see another record year for fundraising, and it feels like it's accelerating with respect to how easily it is to really get interest from investors.
What's sort of been the tipping point? Where are you seeing that interest really coming from?
Yeah, I mean, we grew up raising most of the capital from the firm from institutions, so it was pensions, sovereign wealth funds, et cetera, et cetera. And we've really diversified the way that we raise capital today. So I would say an increased focus on the wealth channel for sure, an increase focus on what our insurance clients are looking for because they're very challenged in a tight spread, lower rate environment. So it's just become more and more diverse.
And I think is we're able to educate and offer access to investors that didn't have access to certain products before. There's just a lot of uptakes from a new set of clients that are interested in what we can deliver it areas.
How much is that going to be turbocharged by some of what's coming out of Washington, DC to open up some of the private as a management field for one KA.
Accounts coming to I think our view is that it's probably a ways off for that to really provide a lot of lyft. But we are incredibly supportive obviously of bringing our products into channels where there's interest. And I do think that those groups of investors today who have not had access to alternatives deserve access to alternatives.
So right now, one thing that is another theme for the year has been American exceptionalism and this question of is it still the best place to invest? And I wonder, as the co president of Areas, whether you see the greatest opportunity in the United States or whether you increasingly are expanding overseas that you see better investment.
Opportunity well, And so I think holistically we've been looking to expand geographically for a host of different reasons, just to give our investors more access points in terms of geographic diversification and a class diversification. But to actually answer your question, I do think despite some of the instability that people may feel here, that most of the investors that we see around the world are most excited still about investing in America.
It's one thing that we've seen sort of this idea that everything was going to fall apart in the first half, and suddenly we're talking about a reacceleration, and suddenly the M and A that everyone had been expecting is coming back online. We're actually seeing those deals come to place. How active has it gotten for you? I mean, how much you see this in your book?
So I mean, look, the first three to four months of the year, we're pretty rocky, particularly up through April, and that really slowed transaction volume everywhere. But I'd say in most of the asset classes that we're in, everything is rallied back to where it was pre Liberation Day and even through that. So credit spreads are incredibly tight, whether you look at high grade corporates or high yield or loans. The equity markets are obviously up through highs.
The thing that we're most excited about is actually kind of a shift for folks that see maybe some of those markets as expensive into some of our real assets businesses. So the recovery in real estate, which we think is real is offering a lot of opportunity for us to kind of play into the sectors that we like. We refer to kind of as the new economy real estate.
So that's industrial, that's logistics, it's self storage, it's multifamily, and we're seeing, we talked about it for a moment earlier, a lot of investment in the infrastructure space, whether it's additional or toward digital.
How much is that predicated on the idea of FED rate cuts or how much is that completely independent in a sort of secular bed on some sort of shift in the economy.
I don't think it's particularly you know, reliant on rate cuts. I think rate cuts help equity more than it helps credit lending businesses.
So our own.
View is the yield curve is probably over predicting cuts. I frankly think the economy here is pretty good, and policy, while it's a bit restrictive, doesn't seem to be slowing too much down here in the States. So transaction activities picking up, and valuations, as I mentioned, have recovered in almost every asset class. So I do think we'll see a slow decrease here in rates to try to provide some relief and keep the economic growth that's slowed growing.
But my own view is I don't think rates ring it down as quickly as maybe you're reading about in the newspaper.
So I have a feeling I know how you're going to answer, But what concerns you more some sort of downturn of the next six months or some sort of reacceleration in inflation.
The ladder the ladder, I mean, I think we see the economy as good, although the growth has slowed, and that's partially a result of rate increases by design to
obviously try to deal with inflation. But I think that the real scary moment is that if you see a reignite of inflation and the FIT has to really dramatically rethink their policy, which I think has been one two leave rates where they are, slash, reduce them a bit, which is obviously going to accommodate more growth and more rise and valuation.
Stay with us multile impex. Savannah's coming up off to this.
I I'm here with Governor Ned Lamont of the Great State of Connecticut in this October is that what Anne Marie called it in Connecticut in the Delmar Harbor and Governor, thank you so much for being with us. I want to start with something that's an increasingly hot topic. We're here at a leader of businesses, with the leaders of businesses who oversee huge portfolios of money.
How is governor, do you keep.
Attracting this type of business to a state while providing some of the social services and other expenses that cause taxes to go up.
Well, the folks here at the Greenwich Economic Forum are really important to the state, and the fintech sector, the financial services sector a big piece of our economy. We're part of the New York City financial ecosystem. I think what they like here is a little bit of certainty, instability. They sort of know where the state's going to go. Are taxes a little bit less and it's not a bad lifestyle.
Are you concerned about what would happen if, say there is a changeover in the leadership in New York City, Let's say mayoral candidate Zoron Mumdanie does win and implement some of the policies that he puts out there. Are you concerned about the ramifications for a place like Greenwich truly relies on the ecosystem of the t state region a little bit.
New York City is the financial capital of the world, and we're a big piece of it here as evidence of the economic form, and I want to make sure that the next mayor understands how important New York City is to that system and that's important to Connecticut.
How confront are you about who the leader is in the Democratic Party right now? Do you have a sense of where the leadership really is coming from?
Governors? Okay, I'm a little loaded for bear on that. I like governors. Governors have to get stuff done. Voters have to balance a budget, they have to do it on time. Governors can't shut down a government. Governors are sort of the opposite of what you see going on to Washington. I think on both sides ale, but in our case, the Democrats sees real leadership coming from the governors.
But don't ask me to ask names.
Well, but I'm wondering, though, how does a governor take that leadership when things are shut down in Washington, DC, And it seems like there's a real fissure right now in the party and tactics in approach in platform.
I can tell you the governor's incredibly frustrated. Democrats are louder about it than Republicans. You know, we balance our budget, we do it based upon some assumptions in terms of what our relationship is with the federal government. If they pull the rug out from under you every week, seems to be happening right now, it makes it very difficult for that certainty of stability that the people in this room.
Like, how much have you seen actual ramifications from the government shutdown in the form of funding that isn't coming through.
It's not my first rodeo with these Trump shutdowns. So we went through all of our commissioners. We saw what's it most at risk? Where do you have reserves with which is women, infant and children probably only had a week it's worth of reserve there. So we've figured out how we backstop that snap, which is you know, food benefits.
That's the end of this month.
So we're watching very carefully where the risk is and i can't make up all the shortfall, but I'm trying my best to help out the most vulnerable.
Well, how long do you have reserves to cover things? In other words, does funding run out? Should this shutdown continue for a long period of time.
End of this month, you know, snap Benefits is probably seventy five million dollars a month. I cannot make up that shortfall. So if the federal government walks away, that's tough. If we had assurance the federal government is going to backstop, if we had to help it out for a couple of months and we'll get paid back, that's something else.
We have none of that assurance.
I guess I want to go back to the idea of leadership right now because we are beginning the midterm election cycle, and I wonder, as a Democrat in your second term as governor, how much do you feel allegiance to the Democratic Party versus something else, a MorphOS that's coming that doesn't necessarily have a label.
Well, as governor, you feel strong allegiance to your state.
I'm a homer for Connecticut.
I'm Team Connecticut, and you know, Republican or Democrat, I try and get stuff done. Personally speaking, is I look at a lot of the Civil War down of Washington, DC, and I look at LA and I look at Chicago. You know, I do think it's important that the Democratic governors stand and stand and speak with one voice, that you know what we need from the federal government in terms of a reliable partner.
How much are you concerned about some of the images that we're seeing with the National Guard going into places like Chicago and San Francisco and Portland and really raising a question about whether it's going to be the States versus the federal government.
Right Dally will be speaking again. Remember a year or two ago you was talking about civil war. Will you go, oh, Ray, come on, it's a little bit unnerving if you see those images right now. I talked to General Yvon, the head of the Connecticut Guard. We're very careful, I said, any inquiries from the federal government, I don't know. We just sent our guard to Djibouti, not to Chicago. I feel pretty good about.
That going forward.
What is your plan to try to keep businesses here and attract them to the Northeast given the exodus that has gone to Florida to other places have lower taxes.
We are speeding up our rail system from say Greenwich to you know, Grand Central. That'll be ten to fifteen minutes faster. Working really hard to make sure, you know, you can get the workforce you need. And again, we haven't raised taxes in seven years, we've balanced the budget. I think that type of stability is pretty helpful.
Do you think that taxes need to come down?
Do you think that that's an instrumental part of trying to keep attracting businesses and compete with other states.
Well, I'm a governor, so I can't over promise. Everybody running against me is always say they're going to eliminate the income tax in the state of Connecticut. I think what's more important to the folks I talk to is what's this state going to look like one year and five years from now? Do I want to be here? Because I'm making a five year bet. We haven't raised taxes at all. I've cut them for middle class folks. I think that's a good balance going forward.
What is your number one hope for the state?
What is your number one sort of policy platform that you're hoping to get forward over the next one to five years.
I need housing.
You know, for the first time in a long time, a lot of young people are moving out here. Like the lifestyle. We're pretty good as a suburban lifestyle. Rebuilding our cities. You know, these are our cities. We're fifty percent bigger fifty years ago. Now they're growing again where young people want to be. As I talk to the businesses and say, is this a place where young people, young employees want to be, I'm trying to say, yes.
How much are you participating in the reindustrialization of the United States? And that's been a big platform that we've seen overall. Is that something that you're trying to attract to the state as well.
Yeah, I'd like to think of us as a silicon valley of manufacturing. We do a lot of complicated stuff like submarines and jet engines and choppers, and they are growing fast. That's the sort of the heart of our economy in the northern part of the state. But you know that's changing too. It's getting increasingly energy intensive. So I'm going to bring down the price of electricity as best I can and make sure they have the workforce. It's all sort of an AI computerized workforce.
Now, stay with us multiple impex. Savanna's coming up off to this. Let's talk about the government shut down. I'm pleased to say that joining us now is the Senator from Louisiana, the Republican Chafre of the Senate Health, Education, Labor and Pensions Committee, Senator Bill Cassidy joins us now for more. Senator, welcome to the program, Sir, welcome back. I should say there is a take on Wall Street that we've seen this movie before, that we get to
the inevitable pressure points and the government reopens. You've done this for a long time, You've had this seat for ten years, Senator. Does it feel different this time?
It feels a.
Little bit different because there's a complete breakdown of trust. Chuck Schumer, obviously you get ended tomorrow if he wants to end it, but he doesn't trust the president that said Chuck Schumer could end this tomorrow. I'm hoping that he does, and I'm hoping it doesn't take a lot of pain from the American people in order to get him to do so.
Is there a breakthrough the fact that in Good Morning, Senator, that it does seem like both sides, at least at this point want to talk about talking as political put it, that the President is coming out and saying maybe there could be a compromise comes to healthcare.
Yeah, absolutely.
You know, it's better to jawge all than the world wars. Winston Churchill once said, so let's go ahead and start talking that said, Republicans have suggested a seven week extension of the current budget to to allow dialogue to continue, and that's commonly done. As Chuck Schumer points out, it happened thirteen times under Joe Biden, and so that seven weeks kept the government open, allowed us to continue to negotiate. So I think there's something else that Schumer's thinking about.
Not quite sure what it is, but I'd rather be talking than kind of sitting in our own corners.
What is going to happen though at the end of the year when we get this premium.
Hike, Well, first, we don't know what premium mic is going to occur, let's just say that. But secondly, we've got to address the fact that the Affordable Care Act has become the Unaffordable Care Act, in which it takes huge subsidies in order to continue to make those policies affordable to Americans.
That's wrong. We've got to.
Roll that back to a point where it's still affordable to Americans, but it doesn't require these huge subsidies. This is not sustainable. But by the way, it's not just me saying this. The Washington Post had an editorial about how the Affordable Care Act is no longer affordable. So I think now might be the time. What can we do to help the American public lower health care costs in a way which is not just for the exchanges but for those in the kind of private markets as well.
Could you get a compromise like that before the end of the year.
I sure hope so, But first you got to reopen the government.
We're actually asking for you.
How can we do this? How can we do that?
The government's shut down, so we can't get some of the information. The seven week extension of the current budget allows that to happen, and so I'd ask Schumer to reopen the government in the meantime. I'm certainly committed to how we get lower healthcare costs for all Americans. That's what I've been doing my whole life, and so let's get on it.
Senator.
When it comes to moderate Democrats, do you see any willingness some of them to join the three that we have seen sign up and vote for a clear stopgap funding measure, And that's.
Spoken to any of them personally, you'd like to think so one more time, We've just asked for a seven week extension of the current budget, which was done thirteen times under Joe Biden, and so so I would hope they would because this is inflicting pain on the American people. But we could be talking with each other without a shutdown.
I think this is a political response by Schumer to pressure from his left wing, but it should be pressure from the American people keeping the government open while we continue to work the lower healthcare cost.
A Senator of the White House is still operational, and if they're making moves, I wanted to squeeze this in because I know you're a busy man. This morning, Trilogy Metals in early training this morning is hired by more than two hundred percent. The announcement that the US will be taking a ten percent stake in the Canadian Minerals
Explorer leading to a big rally on the stock. Senator, can you give me your opinion, your perspective on what you think of the party moving towards something that smells a little bit like central planning.
Yeah, I'm a little bit personally concerned about state owned enterprises because it's a slippery slope. At first, you're a passive partner. It's one thing to have a position in the stock market or it's another thing to have a time.
Exit after TARP.
There are some positions that the federal government had that was a time exit. That's okay, But having a long term interest, I think there'll be a future Democratic president who will be tempted to go a little bit further. We should definitely get a return on our investment if we end up bailing somebody out. Absolutely, But on the other hand, I'm a little bit nervous about taking positions that go beyond a time exit.
Well, what do you make of the fact that the Republican Party, not the Democratic Party, is the party doing this and supporting state capitalism.
Yeah, so I think the president. I can't speak for the president, and the Republican Party is a diverse organization. I'll say that as well. I'm just speaking for Bilcassidy, and I am a conservative, and I am a little bit nervous when government ends up owning the means of production. When that happens, sometimes the government ends up dictating to the means of production what to do, for example, keep employment up for political reasons. I'm nervous about that. Maybe
the President's got a great plan. It's one thing to be a passive partner to own stock, we have a time dexit, etc. Another to be active. Now, I will say the president's specifically saying will not take a position on the board. That's my understanding. That's a good thing, that's a really good thing. But still I'll put all those caveats out there.
As a senator, does it concern you that the executive branch is going one way and not consulting you and your colleagues.
Ultimately, we have to recognize that executive orders have been put there, and the presidents can do kind of what they want with an executive order. But obviously the problem with that is that when a new president comes in, she or he so far just he can immediately reverse all those So you want legislation that will actually put in place for certainty for business and for labor, that plan for the economy that goes forward. So everybody understands
executive orders are powerful, but they're temporary. I would suggest that we're going to have long term certainty. We need Congress to William.
Senator before you go, can Tiger's football get back on track?
Okay?
Who can Tiger's football get back on track?
Oh?
My gosh, I certainly hope, So I certainly hope. So we have a good game that's coming up with South Carolina, so I'm always hopeful for the Tigers.
Go Tigers.
This is the Bloomberg Savandons podcast, bringing you the best in markets, economics, anchient politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.