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Nick Kolis joins us right now, thrilled that it could be with us. First of all, let me tell you about the jobs report coming up on Friday. It's at eight thirty, and that means here at a thirty on our economic indicators. They're brought to you by Commonwealth Join. Over two thousand independent financial advisors are taking control of their growth with advisor centric support, future ready technologies. Grow on your own terms with a partner dedicated to your success.
Go to Commonwealth dot com to learn how we got to cover up something first. I mean people go to way to school and you know, they, you know, like they they're like it's good when there's other schools around. So if you go to Haverford like you did, and you're studying absolutely bizarre majors like Nick Coolis, did you end up You're walking the two miles Turnbridge Road to College Avenue to Haverford Road. You're going north, deep north to Brynmar to studies. Did you do most of you
studying at Brynmar? Yes, that was where I majored Seven Sisters School.
They had the best archaeology undergrad program in the country when I was applying the schools, and so I studied with the very best people in the field for four years.
It was awesome women there, it is there.
Yes, Haverford had gone co ed three years before I got there. I saw the last all male class graduates, and then Brynmar was was single sex obviously, and so it was an interesting dynamic.
I'll see what you did there, Okay, I mean it's a it's a plethora of people. You're Jody Lurie. You know Britmar Grey shows off sometimes without the horse.
Yep. But this is a Philadelphia thing.
Do you have any perspective on the Pennsylvania vote coming up? The axis of Philadelphia out to Pittsburgh havn't been a mainline academic.
Mainline is sort of like Manhattan. It is its own little isolated world.
So no, do you think it's definitive within the election. I don't hear a lot of people talking about it.
No, no, it's okay. Let's go to your research on Nick Coolas.
Of course, we protect the copyright of all I guess get it from Nick Colis at Data Trek Research. You have a stunning industry sector chart that in red shows you the max overweight of technology. What does Nick Colis do with the reality of a persistent tech overweight.
Yes, it is dramatic, and it's obviously we're talking about the SP five hundred versus anything else, any other index anywhere in the world, MSCI Europe, Japan, Emerging Markets, everything. Tech is a heavyweight in the US more than anyplace else. And the bottom line is you have to live with it. And there's a reason why these companies have gotten so big. They are disruptive innovators at scale, and they own most of the Internet, and it's really hard to back away
from that. Here in the US we talk about it a lot as a negative. When I visit clients in Europe, everybody resolutely thinks it's a positive, and they think, thank God for US equities, because if there weren't for the s people five hundred, I'd be stuck owning MSCI Europe earning five to eight percent instead of owning the US, which is compounding at thirteen. So we think of it as a problem here, nobody else sins it's a problem.
And it's funny because my personal opinion is one of the reasons we have such a robust tech business is because of the government. The government has historically taken a light touch to regulating technology, which I in my opinion, has allowed silicon value to become Silicon Valley, whereas in Europe, I've got SAP, I've got ASML, and I think that's
kind of it. Okay, So we'll see how that plays out going for You've got something in your note which Tom reference offshore gambling odds on the presidential elections.
Are they important?
Are they impacting the market?
It's funny.
I've followed prediction markets for years back to predict it, some of the Iowa original Iowa analysis, and I've never seen as much interest in this as right now in this election. The prediction markets, the bank markets are really blown up, and I wonder how isolated or insulated they are from influence from people who know that they are now affecting capital markets.
Well, there's people putting gazillions of dollar trades into one of the predicted markets, Nick Coleas, is it you?
Sadly it is not me. Polymarket is the big market for that. And I think there's been reports of a whale buying between thirty and forty million dollars or Trump trades. And evidently he's a sophisticated French investor, French trader. And I've wondered, and I've written this, I wonder how much perhaps people are influencing the Trump contract because they know it spills over and to pay so and bank stock and the Yell curve and the Lolong end of the
Yuell curve. I wonder how accurate prediction markets will be now that they're hooked up to the rest of the financial system.
Interesting.
So, I mean, as an investor, how do you think about this US election? It feels kind of binary a little bit. There's I mean, depending on who wins the election, there's different policies there. And is that factoring into your investment outlook, the.
Way we described as the clients was there's a very clear set of Trump trades because we saw what happened in the market after he won in twenty sixteen. Yell curve backed up, financials ripped energy ripped. It's a very clear trade, and it's kind of happening right now. There's not as clear a Harris or Biden trade because when Biden was elected in twenty twenty, we're in the middle of the pandemic. The vaccines were rolling out in between
election day and the rest of the year. There's no clear Harris trade, right but there is a clear Trump trade, which I think has forced people to say, Okay, at least we know what to do if he wins. And that's why they've been working at Trump trade because there's some clarity there versus no clarity of Harris.
What are you doing?
What is the Nick Cholis action to invest new money in the stock market? Looking out six months, looking out a year.
Two years.
Yeah, the way we're looking at it is, let's sort of get past the election. So we're talking about, like I said, a one to two year timeframe, and there the playbook is pretty straightforward.
For US.
It's long US equities, it's small caps for a trade, it's financials, it's industrials. But really be very careful with Europe, Japan, and em because aside from China, there's not a lot good going on there.
Nick you.
You and I have talked about this before. They're the brats out in Silicon Valley. Everything's great. They got ping pong.
You know what are the football They.
Got foosball machines in the lobby. Data Truk doesn't have that, folks. And all of a sudden they've grown up. Thank you, mister Zuckerberg. And we saw yesterday with Google margins coming in count excuse me, folks, and gasp went off. The plague headcount coming in as well. There's a new sobriety in tech. Can you invest in that new sobriety?
I think it is certainly helpful and improved return on capital, It improves margins, It shows that there's some grown ups in the room with some discipline, and that's great. But ultimately you're buying tech for jen Ai and for the next level of autonomous driving and a whole bunch of other things. The only thing the market consistently gets wrong in any sector is in technology because it's so hard
to predict the future of technology. So if you look at ten year returns, tech has it over everything by a wide margin because the market doesn't know what's coming next, and every other sector it's a lot harder.
I've got a FED that's cutting rates. They cut initially by fifty basis points. Yet my two year treasury in four point one four percent. What happened there? I mean, I'm an equity guy, so I have no idea what's going on?
Yeah, the issue is economic growth picked up and it still remains strong. We see what with the ADP numbers. We see it with the GDP numbers, even though they're a little bit light versus expectations are still very robust.
Let's review that three percent two point nine percent was a survey. It comes in two point eight percent, and I'm looking at Paul. It's like a big red light going on personal consumption three point seven percent most in the old days, that's a boom and Coonamy Right, Nick.
Yes, I mean this is one of those what else do you need to know? Kind of reports. You look at this and say, fine, I know everything I need to know for the next ninety days.
So what are you doing. I guess in the near for the next week, or you're telling clients just de risk to the extent you can de risk until we figure out what's going to happen in a week.
We try very hard not to play the game that way because some of our clients are traders. My background is some degree in trading, so we are telling them, okay, this is why yields it backed up, and the financials have worked, that energy has worked. So if you're along those trades lightened up because who knows. But aside from that, we try very hard to say, look, ultimately, like the Larry Summers quote is right, Europe's and museum Japan's are nursing home, China is a prison, and the US he
didn't say this, but this is my addendum. The US is a business. Larry Summers, Europe, muse, Japan's a nursing home, China's a prison. And my addendum to it is America is a business. And the reason that American markets work better than others is simply because they overwhelm the political side.
Twenty seconds near Eastern archaeology, can there be a new Syria?
Ooh?
I think what archaeologies haven't win anything else is that empires rise and fall, but they're very unpredictable, and you can have empires that go two thousand years, like Egypt. So it's fascile to say, Okay, the Rooman empire only lasts a couple hundred years. There are examples of things lasting a really long time.
Nick Cools, including Bloomberg Surveillance. Nick Cools, thank you so much.
Data tech research just really really important.
We'll feature him in single Best Idea our podcasts out today.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am. Easter Listen on Apple car Play and Androt Auto with a Bloomberg business app, or what's just live on YouTube.
I'm looking at Google pre pandemic thirty one billion in free cash flow. We got a model here many if Singh's got a model of seventy six billion, it's like a double plus yea coming out of the pandemic. Are they hiding how successful they are? Is the bottom line? We're gonna see it with Microsoft today, Apple tomorrow. They really don't want Washington to know how big and how fast they're growing, do they?
Yeah?
And they know how to turn on the dials when it comes to top line or free cash flow. And that's what they showed last night is the.
Merging build out versus employee headcout was an active.
Gay, Yeah, I mean all the new In fact, twenty five percent of new code is written by AI. For a company of Google scale to say, twenty five percent of new code is written by AI. That just goes to show how far ahead they are when it comes to deploying these technologies, and then what it means for the head count going forward. I mean, these companies will not grow headcount at least in the next two three.
So you know, we hear anecdotally. Paul and I read on the weekend. Paul's at the beach, He's got a vest bice're having the morning coffee and we're reading the tech and software engineers or having trouble getting jobs.
Can you say it's because of AI?
They will certainly be more efficient and there won't be as many jobs at the same time. I think what he called that was everyone is more productive when it comes to writing code as a result of this, And yes, that translates into some jobs changing because of you know, the dynamic that code can be completed by AI system.
I think code can do like newscasts John Tucker's jobs AI.
We tried that in the.
Old building or some version of it, and it was just as a disaster.
Man, we talked about Alphabet. It's still the search business. And I think I'm looking at the stock it's only up twenty percent year to date because I think some investors are concerned about the core search business and the threat from AI. What did you hear last night from the company about that issue?
I mean for business. So for two hundred billion dollar run rate growing double digits, that just goes to show that that threat was just a narrative. It's really not translating into any AD dollars going away. And what they call that was the lengthening of engagement when it comes to search. Typically, with the traditional search, you would see the blue links, they'll show you an AD, you will go to the publisher website. Now people are engaging in
a more complex way. That's what they said, that the time spent in searching, the complexity of queries is getting bigger, and that is what's helping their AD loads when it comes to you know, the overall at revenue.
Man, if we don't care, the only reason you're here is Paul in my in John Tucker's entire future is based on this bet on YouTube. We said good morning, and we value everyone. Yeah, subscribing to Bloomberg podcasts on YouTube. Michael Nathans suggests YouTube swings to profit this year. Was there evidence there that John Tucker's making profit YouTube?
Yes. In fact, along with the cloud acceleration from twenty nine to thirty five percent, this quarter, YouTube subscriptions grew twenty eight percent. Just think about it. It's a fifteen billion dollar plus run rate business. Just a subscriptions piece. I'm taking out the YouTube ads, which is another forty billion dollars. Subscriptions piece grew twenty eight percent. Now compare that to Netflix. I mean, it's growing midteens, fifteen percent higher run rate, but still that just goes to show
how much traction they have with YouTube. So clearly that's working.
All right.
I was using Google Search last night. I'm trying to figure out something. What is AI overviews that's coming in? I don't know what that is? What is that?
So basically what they've changed is the search page will have a summary of you know, whatever query you have. The prompt can be any length, and they show you an overview of all the blue line that they are showing you underneath that. So they have basically combined generative AI along with their traditional search and then that JENNYI overview is the generative AI.
No way, John Tucker's using generative AI. I can just tell you that right now, what do you think?
Maybe I am and I don't know exactly I would concur with that.
Yeah, Microsoft today, what is I mean, it's off your.
Remit right, you're not following Microsoft.
I mean, if you're looking at cloud, you have to look at Microsoft.
So what are you looking at here? At four fifteen?
The Azure growth and the bogie is higher than what consensus numbers are, which is thirty one percent growth for eighty billion dollars rundread business. I think the bogie is thirty four percent because alphabet Google's cloud business grew thirty five percent last night. So anything less than that would be perceived as somewhat of a share shift.
So translate this back he's talking to.
They need to get thirty five percent growth in what part.
Of my Azure cloud business?
Azure Azure Okay, yes, and that's a much so think of Google Cloud as a forty five billion dollar rundred business. Azure Cloud is an eighty billion dollar rundred business, and Amazon Awls is one hundred and five billion dollar runder.
The regulators have no idea what's going on. There's no way to put this genius.
That's the big risk when it comes to alphabet So sounder pitch I last night did call out that risk off you know, the DOJA cases and what it could mean for the company, and that is the big risk.
One hundred billion to eighty billion, I think you said forty billion, Yeah, added up, and all this stuff we're talking about runs on electricity, I believe. I mean, we're directly LinkedIn near at our world headquarters folks to Staten Island. When mister Bloomberg turns on the lights in the morning, Staten Island dims, I get it. Where's all the electrical generation for the one hundred and eighty two hundred and twenty billion dollars of business talking.
About I mean the in fact, Google did mention last night they are investing in nuclear reactors or some of their.
User referbed like three Mile Island.
I mean, these are and they're doing it in partnership. So it's not all Google, but clearly that's part of the capex, the thirteen billion dollars in capex they invent. Some of it is going towards building new data centers and adding new and.
They need water to cool, so they're going to go between John Tucker's house and the restaurant right at the ferry. I mean, is that where the is that where the plant's going?
Yeah, right in my backyard.
The S and P five hundred utilities index this year, that's up.
Yeah, utility, it's amazing. Plus the dividend, and I feel we haven't covered it. Can Eric, can you make a note?
We got to get a bunch of utility animals in here to talk about man deeps world.
This is exciting. Did you expect this five years ago?
Mandeep, We're talking about one gigawatt data center. I mean just think about it. Right now, we're at twenty megawatts, one gigawak data center. Yes, I did not expect this coming back quickly.
So a gigawat, yeah, okay, that's a lot.
One point two one gigawatts can power more than ten million light bulbs and they're all burntout in jud Tucker's basement.
It can probably power the entire New York City if you think about it, you know.
A gigaway.
Yeah, it's like physics with Mandy coming out of Silicon down Gerarm.
Okay, you get wet to give you an email coming in here. They're worried about it getting back. You're gonna be ready for Wimbledon. You're going to be ready for Wimbledon. We'll talk. We gets a free time your way.
I want to talk to you about I had the honor of seeing vj Armatrov with Borg. It is peak at Forest Hills, and I really want to get time to talk to you about that man deep sing there in the middle earning season this.
Here's the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple car Playrod Auto with a Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
When I was in.
Rome recently, this was really front in center, the international view of a America's fractured politics, whatever your belief. Lindsay Newman working with Ian Bremer over at G zero, over at Eurasia Group. We're thrilled she could.
Join us right now, doctor Newman.
The view from sixty thousand feet, What does the first G seven meeting look like, daresay russia'sttens G eight. What does the first G seven meeting look like for President Trump or President Harris?
Well, as you know, John, we're just a few days af from his election, and it has been a turbulent, tumultuous one. We've had Donald Trump, former President Trump suggesting that should he win this election on Tuesday, which remains a dead heat in anyone's game, that he would immediately begin the process of bringing the parties together in the Ukraine Russia conflict and seeing if he could bring a resolution to it. He says, the US is on the
brink of World War three. Those are the stakes as he sees them, So we would have to expect a lively G seven G eight.
As you say, should it.
Be Trump Harris, you know, as you know, the big threadline and I feel it too, is that it's a bit of an unknown. She has tried to associate herself with Biden administration's successes, perceive successes. She has tried to distance herself from those areas where it may have fallen short. Of course, Trump is always talking about Afghanistan, and Afghanistan
is a key sticking point on US foreign policy. But there's a lot of unknown there on what a Harris presidency would mean on foreign policy, and we have to expect it would look a lot like what we've seen before from the Democrats. So those allies in the G seven would be the important partners for the US.
Doctor Newman, are we going to know at nine or ten o'clock at night on November fifth who our president is? If not, how long do we have to wait?
It's a great question.
I mean nine o'clock at night for me sitting here in London, absolutely, not night o'clock at night for you sitting over there. I think the answer is still no. You know, this race is a toss up at the national level. Trump has now erased Harris's lead that she's held essentially since building her case in the race in when she entered in July. We know that each one of these swing states is also a toss up and
have traded back and forth. So if anyone tells you they know where this race stands today, you know, either back away and close the door or run towards them perhaps. But what I would just say, there are a couple of signals we can be watching. There's the momentum, which I've already talked about. There's this anti incommency sentiment that has circled the world. Right, we've all been saying, oh, this is the year of elections. A half of the
world's population, we'll be voting. Harris may very well get caught up in that, because voters may want change, they feeling their pocketbooks are lighter. And then the early voting signals that we're already seeing are interesting. Fifty three million have already voted. There is some indication that perhaps Democrats are ahead on that have had more votes casts, and interestingly enough, women may have voted more so already than Democrats feel that that gender gap is going to.
Be critical for them. But I think the short answer out of my lung is no, we're not going to know at nine o'clock at night.
For Trump's supporters and frankly Harris supporters as well, there seems to be a primal scream to find a Harris foreign policy that is distinctive and differenced or nuanced from a Biden foreign policy.
Is it out there?
Does it exist, this distinction of a new change in foreign policy.
I think you're absolutely right that there is a desire for change in foreign policy. I think it is not out there yet. But one point that I always come back to is personnel. We are not going to have the same personnel around Harris.
Should she win the presidency.
She will read hire for Lincoln.
Foreign policy is not going to I think it's very unlikely that shor we hire Blncoln. I think Burns is a likely familiar face that we'll see again.
But it's not going to be Jake Sullivan. It's not going to be Anthony Blincoln.
It will be a new cast of characters, some who have had ties to the say the Obama administration. But the personnel is personal, and I think it will shape form policy.
So how about down ballot voting? What do we know about that these days? Because I mean, we need to be able to call Congress at some point next week. How is that looking?
Yeah, I mean, look, it's also been very close.
I think the expectation there is that we're going to see some split in the in the you know, in the two houses, and that is going to affect whoever holds you know, whoever holds the White House. And we know that, you know, last night Harris was talking at that very stunning event at the Ellipse, you know, brought seventy five thousand people out, got under Donald Trump's fingernails with all those people. But she was talking about national security and the way forward. But you know she's talking
about immigration reform. How is she going to get immigration reform? You know, no president has been able to get say, massive immigration reform through the Houses because of these divisions that we see both within the Houses and across the houses.
Does foreign policy matter inside the voting booth, sitting at your kitchen table writing in the ballot?
Is there any.
Evidence of foreign policy matters? Or it does all domestic at the end of the day.
We've all seen, I mean, there's been a million articles that we've seen about how foreign policy never matters. How it does matter this time around. I promise you it matters this time around.
You know, Donald.
Trump this weekend, speaking at Madison Square Garden said he opened with this question, are you better off today than you were four years ago?
That is what matters to voters the selection.
You know the fact that he thinks that they might be on the brink of World War two, that's of interest. But we know the top issues here, the top issues for voters are the economy, inflation, immigration. If you call immigration form policy, then maybe you've got a slight asterisk there. But what matters to people is how they're feeling in their pocketbooks, in their teching accounts, when they look around their friends and family.
Are we now at a new normal, lindsay is to the electorate? Is it split fifty to fifty just now? Going forward? I mean, it doesn't seem It seems like the lines are so drawn and so set that I'm not sure how that changes in you know, cycles going forward.
Yeah, it's a great point, Paul.
I mean, I've been writing a lot about what I was calling radicalization, which is just this idea that American voters are moving towards the polls and not towards the center. We know that Democrats and Republicans don't share facts. We know that they don't have a lot of love loss between them. We are at a hyperpolarized moment. I think it's a generational hyperpolarized moment. Generations get me long, And it's distinctly possible that this is just where we are
for the next couple of cycles. Because we're not seeing you know, we're not seeing a retrenchment back towards the center. We're not seeing a big poll in either parties towards the middle. That's just not the trend line.
I was talking to the Roman is one of my great editorials advisors. Roman and I were going back and forth on the David Brooks essay that was out a week and a half ago, ten days ago, on just what you're talking about, doctor Newman, which is a polarization, and yet, like Reagan and Ford, Ron Reagan to get elected move to the middle in the next six days.
I mean, the President Trump's got.
A method, let's be honest. Vice President Harris is or any tendency to move to the middle.
I think what Vice President Harris's campaign has tried to do is to leave it open to interpretation that she wants you to see yourself in her candidacy. That's why we don't see her drilling down on policy, you know, despite the efforts to probe, despite the interest in understanding. As you asked me earlier, you know what really is the what is that they're there on foreign policy? And I think it's because we are going She's going to craft it as she goes Once if she if she
wins this election. I don't expect us to see more of the filled in though on policy, either domestic or foreign policy in the days ahead.
From her son, don't be a stranger.
Bring the Bremmer guy along with the next time. Lindsay Newman with your raising group A gzero media from London this morning. Really informative there, whatever your politics.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
This is what surveillance is about, folks. We've codified this decades ago. I can't say enough about We move when the story moves.
Joining us.
In fourteen minutes, Woo Jin Hoe will join us. He is expert on super micro computer with Bloomberg Intelligence. Are thrilled he's freed up as schedule to speak to us. Paul, why don't you bring a guest in here? On the shadows of private credit.
I tell you this is again. I've kind of been in this investment game for thirty five years. One of the most amazing developments to me, has been in addition to ETFs, this private credit business all grew up with private equity, but private credit has become just an extraordinary alternative investment opportunity for a lot of investors, particularly after the Great Financial Crisis when some of the banks were
pulling back on their lending. And kind of what I know about this business I learned from our next guest, Randy Schumer, vice Chairman, Investor Solutions Group, Churchill Asset Management, most notably from the JP Morgan Chase corporate banking business and loan syndication business.
That's a long time ago, Paul.
That's where you learn credit, and that's where I learned my credit chops there at Chase Manhattan Bank, Randy. We got interest rates coming down, although they old curve is steepening, but interest rates generally coming down the Feds lowering rates. What does that mean for the private credit business?
By the way, a shout out to James Crombie and your Credit Edge podcast. I'll be if you want sixty minutes of Me and private Credit to tune in tomorrow for that. So, yeah, rates are probably coming down spreads across this credit spectrum. As you guys have reported are tightening. The Bloomberg High Yield spread index is below three percent. I mean, that's a little bit nutty when you look at what you know, the potential risks over the next
six months are. But really, capital markets are wide open, and in the midst of all this, private credit is actually according to JP Morrigan report that they put out a couple of days ago, credit spreads in private credit have actually increased by twenty five basis points. Now, let's think about that in the context of everything going on.
Part of what's going on is that the broadly syndicated market, which we know has been more active this year than ever, has been able to affect the large cap market, the large mintal market deals. But in the traditional middle market, in the in the direct lending market that we churchills in spreads have actually gone up a little bit. Why is that deal flow is starting to come back? I
always like bringing stats into you guys. Every month, Global m and A up quarter over quarter by nine percent according to S and P year over year twenty three percent. So as deal flow increases, people can be more picky, so they like us say, he you know, I'd rather take something a little more spread, A little more protections for our investors, So spreads are actually coming up. The other thing that's going on is the ill liquidity premium
between liquid markets. The Brothers indicate loan market private credit is actually widened to a five month high, so very attractive for investors right now, right where.
I want to go to. I want to explain, Randy, you're the best to do this. Everybody's concerned, even people supporting private equity private credit. We intuitively get in private equity, you buy something, it's locked up for seven years whatever, you got to wait to get out. Then when you get out, you can't get out. It's intuitive inequity, it's not in your world. Now you just discovered that what is the lock up in private credit that needs to be analyzed, studied, calmed, or concerned about.
Yeah, so you're pointing to the issue of liquidity, right, and illiquidity which has tended to be viewed as a negative in markets that are very correlated, and we saw that in spades, you know twenty two and a little
bit in twenty three. Tends to be a negative for investors because they don't they want something that's an alternative to the correlated assets of public equities and fixed income, and so they seek alternatives, including private capital, to get a little bit more calm during periods of stress and turmoil. So what's happening for private credit investors is that the valuations associated with our loans tend to be a lot
more stable during periods of volatility. And so what they're trading for in terms of lack of being able to trade on demand is the ability that during a crisis they don't see the kinds of moves and prices. Oh yeah, all of our loans are valued by third party agencies, you know, and and so it's not just us value, but they're they're valued by by others as well as the fundamentals of these companies. It's not they're not traded the way that you know, the broadly syndicated loans are.
But the fundamental difference I think now is that with the m and a market opening up, these loans are going to start to trade more often in the sense that deals are going to start to get done and refinanced private equity, which has been stalled to your point because capital has been locked in with these deals where LPs are stuck because they haven't seen realizations. Now those realizations are going to start to come and I think we're going to see more of that next year.
You guys get a gajillion pitch books coming through your door every year. How do you screen them?
What?
What do you like these days?
Well, we get about a thousand deals a year coming from our private equity friends. Where As I've told you before, we're an investor in their funds. So these are kind of pre screen transactions. We could probably do all of them and be fine, but some of them fit better into our credit book, right So some are more equity like high growth, and in the credit world, as you know, you're getting paid principal and interest, so you just want to be you know, it's not being first or second,
it's finishing the race. What we're looking for is kind of what we've been looking for, which is defensive industries, sectors such as you mentioned, accounting firms, accounting firms, regional firms. In this business we're going around right now very steady atty. Doesn't matter what the tax rates or taraffs are, you still need five fall and life al So I think that business services are really good right right now in terms of what we're seeing.
With Churchill asset management or industry. We're with us right now.
I'm looking to Google up ten dollars to a one seventy nine and off the trading range, going back to Midsummer, I'm going to call it that was where Sweeney took three.
Fridays in a row off back then.
There are three point eight standard deviations. I think we can say surge is appropriate.
Yes, surge is appropriate. Rannie, talk to us about the private equity world. What are you seeing from your private equity clients in terms of deal flow. When we hear Jamie Diamond and Brian moynihanda the big you know Wall Street banks thing, you know, activities picking up, they feel more bullish about activity.
Are you seeing that?
Yeah?
So our platform, so we do private credit. We have a junior capital co invest and fund to fund business.
We also have a secondary's business which is actually one of our fastest growing And going to the point that Tom mentioned about liquidity when these investors and some of the gps are stuck, the secondary's market has been one of the fastest growing in the private equity space because realizations are slow and so if you're an investor in a fund or if you're a GP with a sponsor, you're kind of looking for ways out, and you can create liquidity through the investments that you have and the
portfolios that you created, because the enterprise value that's there is being tapped by firms like Churchill to be able to help them access liquidity when otherwise they couldn't. So the sophistication and technology in private equity now has changed so much since the old days when you basically had a portfolio company. If it's stuck and you can't sell it, that's it. But today you can actually transfer value into,
for example, another fund that you control. So these co invest vehicles are read.
Give us a comparison yield. I think it's something I'm ignorant about. What's a blended yield of a private credit Churchill transaction versus high yield versus four point x percent ten years?
Yeah, so I mentioned I mentioned the illiquidity premium. So you're about two hundred basis points differential in private credit relative to liquid loans number one, So you're probably another fifty one hundred basis points above the high yield bond market. Okay, because think about where your high Bloomberg spreads are, right now and then if you look at private equity, depending on you know, and we're sort of a top tier investor focusing on top tier firms, you're looking at twenty
plus percent returns for the best private equity sponsor. So you have the ability as an investor to choose with our platform, you know, stream of income that's safe because you're top of the capital structure, secured by all the assets senior credit. But then you can migrate up the risk spectrum to get more yield. And what investors are looking now for is how do you adapt in the current climate. How do you adapt when things are uncertain?
How do you adapt when markets can be volatile? And there's a safe harbor that's been created and that's why you're seeing the growth that you're doing real quick.
One of things regulations I see the FTC and the DJ blocking a lot of the big deals. Are you seeing that as a headwind?
Well, again, you know, private credit tends to be a little bit of a different environment because these companies are privately held, they're not raided, they're not traded, and private acty sponsors have been looking at industries that they like for like a decade that are smaller these and medium sized companies. These are companies are small. Yeah, exactly, that makes sense.
You're doing the James Cromby.
Yeah Podcast tomorrow. Check it out.
Check it out, folks. This is Cromby is like the real deal. Credit Edge.
I'm taking notes from from Credit Edge. I'm taking notes from from James Crimby.
That's really special for Global Wall Street.
Randa Schummer, Churchill, Will James Crabby look for that of course at Bloomberg Podcast.
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