November 20, 2025 • 40 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Blue Owl Capital Inc.’s Craig Packer has been something of a mainstay on the New York Stock Exchange in recent years, ringing the opening bell multiple times to toast the private credit giant’s public funds.On Wednesday, minutes after the market opened, his mood was anything but celebratory.
Blue Owl had just announced it was scrapping a planned merger of two of its private credit funds, backtracking on a plan revealed Nov. 5 after scrutiny arose over the potential losses some investors would have to swallow as part of the deal. The parent company’s shares had fallen this week to the lowest level since 2023.
Packer bemoaned “negative articles” about private credit that caused its stock to sink. When it comes to Blue Owl’s business development companies, the firm’s co-founder said on CNBC, “there’s no emergency here.”
The abrupt reversal is a rare egg-on-face moment for Blue Owl, which for years has been held up as the poster child of the boom times in the $1.7 trillion private credit market. Created as a merger between Owl Rock Capital and Dyal Capital Partners in 2021, it has pitched itself as a one-stop financing shop that can compete with banks and the biggest alternative asset managers.
Today's show features:
- Bloomberg News Chief Correspondent for Private Capital Davide Scigliuzzo and Chief Wall Street Correspondent Sridhar Natarajan on the fallout from Blue Owl’s scrapped private-credit fund merger, and whether it portends further credit market pain
- Abby Roach, Senior Portfolio Analyst for the Empiric LT Equity Team with Allspring Global Investments, on quarterly earnings from Walmart and the outlook for the US consumer
- Lane Bess, CEO of Deep Instinct, Chairman of Blaize, and former CEO of Palo Alto Networks, on Nvidia’s impact on the broader market for semiconductors
- Brent Schutte, CIO at Northwestern Mutual Management, on the lack of timely government data contributing to uncertainty about the state of the US. economy
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy, plus global business, finance and tech
(00:23):
news as it happens The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio Show.
Speaker 2 (00:31):
So, once again this week, a story around Blue Owl
Capital is among the most read on the Bloomberg terminal
has been all day. This is as the company shares
had fallen to the lowest level since twenty twenty three,
with co founder Craig Packer blaming quote negative articles about
private credit for the decline. Now the latest stress point
I gotta say we've talked about yesterday, If you might recall,
(00:54):
Blue Owl Capital scrapped a plan merger of two of
its private credit funds after scrutiny rose over potential losses
for some investors.
Speaker 3 (01:01):
So the story's still a live one, and we wanted
to dig a little bit deeper.
Speaker 4 (01:04):
To do that.
Speaker 5 (01:05):
We're joined by Bloomberg News Chief Wall three correspondent shreetnut
A Rajen. He's here in the studio along with Dobby
Day Shiliuzzo, Bloomberg News chief correspondent for Private Capital, both
join us here in the Bloomberg BusinessWeek Studio.
Speaker 2 (01:17):
All right, welcome, Welcome, Shria. I do want to start
with you. You reminded us yesterday Blue Owl. This is
a firm that has been held up as kind of
a poster child when it comes to the world of
private credit. Is it again, I want to ask you
the merger coming undone or something more like? Is it
just a company specific thing that's a problem, or might
(01:38):
it be the canary or owl in the coal mine?
Speaker 3 (01:40):
Like is it something more? In terms of what's going
on in the private credit world.
Speaker 6 (01:45):
Blue Owls are supposed to be fictional characters in the
real world, and it's now up to the Blue Owl
management to prove that their marks are not illusory. In
a credit market where you're where you're dealing with private clans,
the investors, your investors are reliant on what you believe
those loans are worth. Unfortunately for Blue Aul, many of
their investors in their publicly traded BDCs don't quite believe
(02:09):
the book value, and that's why it's trading at a
big discount.
Speaker 7 (02:13):
To book value.
Speaker 6 (02:14):
If you want to blame negative articles, that does sound
a touch defensive and it's not going to really help
the cost. And there are a lot of Wall Street
veterans who are pointing in this direction and talking about trouble.
But I would like to take a step back and say,
you know, when you ask about whether this is a
canary in the coal mine, we haven't seen some crazy implosion.
When you're investing in one hundred companies, there will be
(02:35):
some defaults along the way. The question is can you
keep it below what your peers are experiencing, and is
it below your historical averages? So that tells you where
you are in the credit cycle. And on those metrics,
blue Out and the rest of their peers are seemingly
doing just fine. But the mind goes back to the
kerfuffle last month when Jamie Diamond got on the earnings
(02:56):
call and gave what sounded like sage advice about the
cycle and said, you know, when there is a problem somewhere,
you can expect a few other problems to crack up
a few other cockroaches. For some reason, a lot of
players in the private credit market took it as a
direct insult hurled in their direction and got worked up
about it. Prominent in that was Mark Lipshots of Blue Out,
(03:19):
who really took a real swing at Jamie Diamond. A
month later. You kind of feel like saying, if you
come at the King, better not miss.
Speaker 3 (03:27):
Well before I want to bring into a day.
Speaker 2 (03:29):
But Jamie Diamond, how many times have we had conversations
with you? We all wait to see what he has
to say about any situation he doesn't or does he
just drop something to stir the pot?
Speaker 3 (03:39):
Does he do that?
Speaker 6 (03:43):
Let me tackle this carefully. I think the fact that
Jamie Diamond has been the CEO of JP Morgan, the
largest bank in the United States with a four point
six trillion dollar balance sheet for twenty years now, right like,
it makes you think that everything he's coming from a
vantage point that is unparallel, to be honest, and he's
got the experience and the position and the pedigree to
(04:05):
speak his mind, and thankfully he does in this case.
And if you look back over the years, some of
the things that Jimmy has said, whether it's about work
from home or a myriad number of topics, Yeah, again,
veer towards the extreme. But what he said here seemed
fairly innocuous. All he said was there's never just one cockroach.
There will be other troubles that he can't necessarily say.
(04:27):
The others will be deep distressed. Why did the private
credit industry take it so personally?
Speaker 5 (04:34):
Yeah, so, David dashelieds have no money here because you
cover a private capital for Bloomberg News. The focus that
we've had this week has certainly been on Blue Owl,
not just investor reaction, but also the press that we've
seen around the company. Is this something you're seeing in
your world outside of Blue Owl right now too?
Speaker 8 (04:52):
Yeah, And I would say one thing to Jamie Diamond's comments,
like he wasn't wrong, because we have seen more of
these situations and across across the industry, by the way,
we've seen them on the bank's side too. So I
think there is a broader issue kind of in credit
markets where people are questioning, like some of the underwriting
standards and red flags that may have been ignored in
(05:12):
the past, and that cuts both ways.
Speaker 4 (05:16):
I think what Blue Owl really.
Speaker 8 (05:17):
Put on the map is an issue that all of
these firms are kind of wrestling with, which is how
do you sell this asset class to retail investors and
what is the right format to do that you can
Historically they've done permanent vehicles, like very long dated stuff
that it's great for institutions. You lock up your money
for seven years and it works well for them, But
(05:39):
if you're making a push into individual investors, you have
to provide some kind of liquidity. And what is emerging
with this failed merger of Blue Owl is that that
liquidity is in between between daily liquidity and seven year
liquidity and it doesn't kind of work as intended sometimes well.
Speaker 5 (05:58):
I big of the issue is that for private credit overall,
if they don't have the market that includes retail investors.
Speaker 8 (06:05):
I mean I would say issue because a lot of
funds are being set up in a similar way where
they provide quarterly redemptions subject to a cap and you
can either come out at nav which is basically the
value of the assets in the fund that the manager
assigns to them, or if it's in a public structure,
you come out at the price that the market assigns
(06:26):
to it. And the market right now is believing that
most BDCs are twenty to thirty percent below their asset value.
Speaker 6 (06:32):
But here's the thing. There was nothing crazy or revolutionary
wacky about aurock of blue Out wanting to merge a
private fund with a publicly listed BDC. It has been
done in the past. The problem in the challenge was
it was being considered, or at least it was presented
to the market at a time when the amount of
redemptions in that private fund were climbing, and if it
(06:54):
climbs above a certain mug, blue Out might very well
gate redemptions. And you never want to be in a
position you tell your investors you're not allowed to get
your money back. They had been honoring all their redemption
requests so far. But if you ever had to get
to the position of gating redemptions or basically saying right now,
we will not allow you to pull all the money
that you want to pull, that spurs panic. That results
(07:17):
in more people wanting to run away from your vehicle.
So instead, when they talk about wanting to merge it
with this public vehicle, which is training at a twenty
percent discount book value, which means once you're in there
and then you want to get out, you have a
twenty percent loss on day one, it starts to feel
a bit icky, and that's what's really resulted in this
(07:38):
market reaction that makes Blue Out at least pushes Blue
Out into this defensive corner.
Speaker 2 (07:43):
But all this makes me feel like, Okay, if Blue
Oul is supposed to be the poster child, like if
we're talking icky or redemptions or gating those redemptions, that
to me, if you're talking about the poster child for
private credit, then it makes me wait, like, Okay, if
they're supposed to be up here and there are may
be potentially having issues, what else is out there? Because
(08:06):
not everybody's in the same situation, and that in other words,
there in weaker situations.
Speaker 8 (08:10):
And that goes back to the broader concern about the industry.
It's not just Blue Out. I think Blue Al is
in the spotlight because they tried to do this. Yeah,
some people, many people probably now would argue was terrible timing,
but it is an issue that everyone in the industry
has to kind of deal with.
Speaker 2 (08:26):
I guess the crazy thing is and we've had so
many guests I feel like you go to milk in
the last couple of years. First of all, everybody all
they want to talk about is private credit, and then
it feels like the last year or two. It's more like,
how do we get out of these deals? And like
anybody who's got investments are thinking about their investors, who
after three to five years want to see some kind
of returns, and they've struggled to get out of these investments.
And I feel like they're just trying to figure out
(08:47):
all these ways, and I just wonder, at some point.
Speaker 3 (08:50):
Do we have some kind of problems as a result
or no. It's just again the timeline of how this
has to come.
Speaker 6 (08:56):
But it's also in the nature of credit markets, right,
it's not it's not equity investors. Credit investors generally tend
to be a little more cautious because your upside is
kind of capped. You get principle back and interest on
that nothing else. Whereas if you're a stock investor, your
stock could go today from ten dollars to three hundred
dollars and then back to one fifty dollars, you still
would have made a lot of money. Your hundred cents
(09:17):
on the dollar will be one hundred cents on the
dollar when it comes back, or it goes down to
fifty to thirty or god forbid zero. And that's why
whenever there is a concern of is the cycle turning?
Is there a credit crunch coming? And when you have
a space like the private credit space where funds that
have been flush with cash. You see the enormous growth
in that space in the last few years, when they're
(09:39):
all competing with each other to actually win deals to
put money to work, your automatic question is it DIDs
Some people cut some corners and so therefore when the
cycle turns could be problematic. You talk about the potential
issues with blue out, We don't even see a ton
of blue oil deals where there have been very obvious issues.
But and wd is too polite to point this out,
but look at some of the cover out of Black
(10:01):
Crock and their credit investments. You've only had a trio
of investment they had. Just last night we reported about
how one of their private credit COLO had to waive
management fees because they failed one of the critical tests
on the COLO. There is an alleged fraorders related to
big Telecom receivables. And then there was another deal that
Dawdy wrote about just last week where the mark on
(10:22):
that investment and one of the Black Rock funds went
from one hundred cents on the dollar to zero undred
thirty four days so well.
Speaker 5 (10:30):
And as we're having this conversation, one thing I keep
thinking of is this comes at a time when over
the last few years, we have had a lot of
people in the private credit space and in the private
investment say space, dab DASA, these are the assets that
we think Americans should actually have in their retirements, and
I'm wondering if this exposes maybe a potential flaw to
(10:50):
that strategy, this idea of marking it to market and
having the traditional retail investor understand that this type of
thing can be locked up.
Speaker 3 (10:58):
For a new line of demand that is right.
Speaker 8 (11:04):
Like the new line of demand has been retail and
insurance because the institutional market kind of tapped out. The
second point I make is that it's very easy to
sell private credit as a great opportunity when rates were
rising and capital was available, and you had all of
these dynamics where you could go to your investors and say, hey,
you're you're investing in you know, senior loans that are
(11:26):
at top of capital structure and getting you know, low
double digit returns with leverage, and that's great. Right now,
you know, with rates coming down and there is a
question about you know, at least investors not being prepared
for some disappointment when it comes to returns, but potentially
credit issues when it comes to individual companies that just
can't exist in that shape, and that's when you get
(11:48):
the markdowns that we've been writing about.
Speaker 2 (11:50):
Okay to be continued, Yeah, okay, can I just leave
you with one thought in fifteen seconds.
Speaker 6 (11:56):
I'll wrap it up in fifteen seconds because there's been
too much dumerism here. David Solomon yesterday was asked about
the concerns in the market. He said something he quoted
a friend and said, skeptics often sound smart, but optimists
make a lot of money.
Speaker 2 (12:11):
Nice final thought, Sherian David David Day, Thank you so much.
Speaker 3 (12:15):
We really appreciate it.
Speaker 5 (12:17):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (12:25):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (12:39):
Taking a look at Walmart shares, we you see the
majority of stocks lower today, Walmart is higher.
Speaker 3 (12:44):
Yes, Carol number one gainer in the s and P
five hundred.
Speaker 5 (12:47):
Right now, add that to your list for maybe it's done. Okay,
it's done, all right? Yeah, cheers up about six point
seven percent. There was as much as seven percent earlier
in the session. This after the company raised it's full
your sales and profit outlook, a sign the company's winning
over priced sensitive shoppers while absorbing rising costs. Let's bring
an Abby Roache. She's senior portfolio analyst who covers consumer
stocks for the Empiric lt Equity team at all Spring
(13:09):
Global Investments. That team has about fourteen billion dollars that
it manages across three large cap portfolios. She joins us
from McLean Virginia. Abby trying to make sense of what
we've heard from these companies in this most recent quarter.
Rival big box chains have worn that consumers remain cautious.
Home depot it's another company that you cover. What do
(13:30):
these results from Walmart alleviate about consumers or do they
alleviate concerns about consumers?
Speaker 9 (13:37):
Yeah, well, thank you very much for having me on today.
I think Walmart was definitely a strong print, and I
think Walmart has continued to operate quite well well in
this environment.
Speaker 4 (13:46):
I think in.
Speaker 9 (13:46):
Terms of the health of the consumer. You know, they
called out that they've seen continued to see shar gains
from upper income consumers. I think in terms of the
middle income consumers that has been steady, and they called
out slight, slight weakness of the lower income consumer. But
I think we're continuing to hear similar messaging of what
we've heard frankly for the last year of this bifurcation
(14:07):
of the consumer, with that upper income consumer holding up
quite well and the middle income to a lesser extent
as well, but the lower income consumer continues to be challenged.
But Walmart, in this environment, offering both value and convenience,
continues to drive customers of all income cohorts and certainly
saw that in a very strong print from them both
(14:29):
as it relates to the environment. But they're also executing
quite well here Abby.
Speaker 2 (14:32):
How much of being so massive the world's biggest retailer
means that in a higher tariff environment, You know, this
is the company that can squeeze suppliers and companies that
sell into the Walmart chank because it's so massive, and
so it just puts them in a better position than
(14:53):
so many other players.
Speaker 9 (14:55):
It certainly does I mean, they're the world's largest retailer,
so they are the best position and to be able
to negotiate for themselves.
Speaker 6 (15:03):
I think though too.
Speaker 9 (15:03):
You know, one of the other key parts of this
story is around the different alternative revenue streams, and Walmart
has a benefit here of their growing their e commerce business.
This was the seventh consecutive quarter of twenty percent plus
global e commerce growth in addition to when you look
at membership, advertising, other areas of the business, so they're
(15:24):
also able to find offsets where they need to absorb
some price in different areas of the P and L
in a way that they're much better positioned, certainly relative
to any of their peers.
Speaker 5 (15:35):
Carol, are you done with home or with uh? Walmart?
Is I want to go to home depost? I want
to ask what I want to go to home depots?
Speaker 3 (15:41):
I know, I know, I know, I know, I know,
But let me just ask you. I mean, what does
it mean?
Speaker 7 (15:45):
I mean they're.
Speaker 2 (15:45):
Transferring their stock exchange listening to the Nasdaq stock exchange,
Like does it really for the exchange? It means something,
but I don't know. What do you tell an investor
about this? Is there anything to tell.
Speaker 10 (16:00):
It?
Speaker 9 (16:00):
Was certainly an interesting and interesting part of the announcement
this morning. And I think, you know, we have seen
we like Walmart here because it's you know, both defensive.
We think they're really well positioned short term, but I
think also the announcement they're positioning themselves for growth longer
term with really the focus around the alternative revenue streams
e commerce. Just they're really positioning themselves and setting themselves
(16:22):
up in addition to investing for growth in the future.
So I think the announcement wasn't all that surprising given
there that has really been the tone that we have
heard from this management team over the last several years.
Speaker 3 (16:32):
Wait, so being on the NAZAC means you're a growth company?
Is that kind of what it is?
Speaker 2 (16:35):
I mean, I know that's kind of the history, but
is that the idea?
Speaker 9 (16:39):
Yeah, And I think, you know, I think you know,
that's certainly how they're positioning themselves with investors, I think,
in addition to being defensive, but I think longer term,
they are positioning themselves, you know, from a growth standpoint
with these different areas of higher growth for them relative
to selling you know, more consumer stables.
Speaker 5 (16:57):
Feels so old school today, well, because the New York
Stock Exchange has tried to counter the narrative. You know,
the NASDAQ is the home for tech ye. So but anyway,
it's interesting, you know they I think it was on
surveillance this morning, Tom and Paul talking about how they
the Nice and the Nasdaq. You know, they play off
each other and they try to you know, it's expensive
(17:17):
to list, so then you know, if you can actually
save money by going to another exchange, Yeah, do that.
Speaker 3 (17:22):
Why wouldn't you do it?
Speaker 7 (17:23):
Yeah?
Speaker 5 (17:24):
Okay, So Home Depot because you also cover Home Depot, Abby,
it seems like the home Depot story is more idiosyncratic
and it's like home deep Deepot specific. Is it fair
to say after hearing from Low's earlier this week.
Speaker 6 (17:38):
It is?
Speaker 9 (17:39):
I think, you know, with Home Depot, I think certainly
they're positioning themselves. They're really focused on that pro customer
and especially the complex pro I think it continues to
be a challenging environment both for the consumer but also
from a housing standpoint of the interest rate piece of
that is really a key for this story. And I
think we're long term investors, so we're focused out the
next five years from now, and I think when we
(18:01):
look at how Home Depot is trying to position themselves
with that pro customer. When we look at the environment
longer term, we think there's a lot of ways that
they're trying to set themselves up for future growth over
the next several years despite a bit of a challenged
environment here as a result of just housing in the macro.
Speaker 5 (18:18):
Why was Home Depot so concerned and Lows not so much?
What are the differences between their business and I know
there's the pro thing and you know, what's the exposure
that Home Depot has that caused it to say, Okay,
we have to think of differently about what next year
is going to look like. And we didn't see that
from Lows.
Speaker 9 (18:33):
I think with Home Depot, you know, there was more
explanation both around some of the recent acquisitions that they've done,
in addition to conversation around the weather, sort of the
lack of a hurricane in twenty twenty four versus this year.
I think investors are really never that enthusiastic to hear
conversations around you know, there certainly is a challenge comping
the comp when there's a hurricane and when there's not.
(18:55):
But I think that coupled with commentary around different moving
parts of the SRS and GMS businesses, I think just
left investors feeling a little bit sour, particularly in light
of the current environment.
Speaker 2 (19:09):
I'm sorry SRS is whosts sale distribution of residential commercial
building just remind us of what that is srsus.
Speaker 9 (19:16):
Yes, the SRS distribution acquisition that they did last year
as it related to, you know, the roofing side of
the business, and without a hurricane this year, you know,
they didn't get as much benefit from that standard.
Speaker 2 (19:28):
It's just like real life stuff, right and what you
need or don't need. I should point out home Depot
traded down six percent on Tuesday when it came out
with its results and lows, which reported and investors reacted
yesterday was actually up about four percent. In a nutshell,
how would you describe the consumer and the retail environment?
Just got about thirty seconds.
Speaker 9 (19:48):
You know, I would say it's much of the same.
I wish there was a different story that I could
tell you that the consumer doesn't continue to be bifurcated.
But that's really the message that we've heard from consumer
from different companies, is that upper income consumers continue to
hold in there quite well. But I think the lower
income consumers are still okay. I think they're still challenged,
but they haven't dropped off a cliff. So I think
(20:08):
consumer companies are still operating, still meeting the needs of
the different consumers, while being very cautious around the sensitive
needs of the lower income consumer, who's more pressured in
this environment.
Speaker 2 (20:18):
All right, so appreciate it, hey, Abby, Thank you so much.
Aby Roach, Senior portfolio analyst. She covers consumer stocks for
the Empiric l T Equity team at all Spring Global Investments.
Speaker 5 (20:30):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 10 (20:39):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 5 (20:58):
Lots of news in the chip world this week. I'm
going to read, Okay, so much stuff, Okay, but I
got to go quickly, Okay, go go.
Speaker 3 (21:05):
A great guest, The.
Speaker 5 (21:07):
US has approved the sales of tens of thousands of
advanced AI semiconductors to the UAE's G forty two group
and regional rival Humane that's of Saudi Arabia. It's a
major boost for both Gulf nations efforts to become formidable
players in the tech And then there's Invidia and what's
going on within Vidia today following a rally of more
than five percent and video now down two point three percent,
(21:30):
The JIT maker did reassure investors on AI demand. Questions
lingered though about the stretch stock prices and hefty investments.
Speaker 2 (21:36):
And that's where we want to start with Lane Bess.
He is the CEO of the data security company Deep Instinct,
chairman of Blaze, which is an AI semiconductor company that
works on low power, high efficiency processors for edge computing.
He is also former CEO Palo Alto Networks and the
former COO of z Scaler.
Speaker 3 (21:53):
He joins us to him from Miami Beach.
Speaker 5 (21:55):
Lane, good to have you on the program. You've been
doing this for more than thirty years. You've built and
led tech companies in the US and around the world.
Speaker 4 (22:01):
Yes or no?
Speaker 5 (22:02):
Are we in a bubble?
Speaker 7 (22:04):
No? I don't think we're in a bubble. I actually
liken this to what we saw, and you mentioned I've
been at this thirty years. I've seen us from the
days of the deck mainframes and IBM mainframes moving to servers,
ultimately to PCs, and then ultimately to handsets that have
all the power. I think what we're seeing is an
AI push that's condensing what we saw over perhaps two
(22:29):
decades into a two to three to five year timeframe.
The acceleration of this adoption is what might make it
look like a bubble, But the applications and the growth
opportunities in various markets make me feel that we're still
at the front end of something that might take pauses
on occasion, but certainly not above.
Speaker 5 (22:49):
Well, let's start with the applications of this technology. I mean,
what do you see that justifies not just these lofty valuations,
but all the copecks that these companies are spending to
try to achieve.
Speaker 7 (23:01):
Well, in the first place, every one of the companies
that have to invest here, they have to invest to
have a piece of the action. So there's almost going
to be a forced action by them to invest in
the GPUs, invest in the LM models. But if you
take a look at where the market will grow over
time and that's why I'm involved, as you'd mentioned earlier,
(23:21):
in a company called Blaze Semiconductor on the edge. Again,
it is like that movement from the mainframe, the central
a large data center off to the edge where a
lot of the applications and solutions are going to be provided.
So I see a very large opportunity of growth in semi.
There's a number of companies that we've seen Cerebrace, we've
(23:44):
seen Rock and of course Blaze in the market, and
there's many, many more. But I also see similarly a
high growth in the cyber security area, where agantic AI attacks,
black dark AI attacks are going to create a growth
need for cybersecurity companies as well, And.
Speaker 3 (24:05):
That's kind of where you come in.
Speaker 2 (24:06):
Tell us a little bit about Deep Instinct and the
work that you guys are doing.
Speaker 7 (24:11):
Sure well, Deep Instinct is based on an advanced AI
capability called deep learning. And we've heard a lot about
machine learning, but AI in the form of a deep
learning framework really allows you to get into a predictive,
preventative mode and it uses large GPU process and to
(24:31):
be able to take massive amounts of data from all
over the web and the dark web and be able
to actually predict a ransomware attack or a breach before
it happens. And so the market has been heavily and
we know very well known names such as CrowdStrike in
the past few Palo Alto Networks zscaler. There's still a
(24:52):
lot in the detection and remediation mode where which is
very important. You need layers of defense. You need to
know what to do when something happens. But to really
get a step up on some of the AI attacks,
you you need a more sophisticated A You need to
fight AI with better AI. How do you do that?
Speaker 5 (25:12):
Though, in a world where the incentives are so aligned
for bad actors to come after you. I mean, I
don't know how many Carol, how many texts do you
get a day that are like trying to dupe you
into a lot? Yeah, and I mean I mean even
we're to the point where, you know, with the Voice
generation kid, you know, really fool those companies that are
(25:37):
that are used as voice authenticators, Like you know, there
are warnings about you know, if you get a call
from somebody in your family, it might not actually be
your family. Like we're not headed in a great direction.
Speaker 7 (25:48):
I feel like you've called off a great list of
things and really in just.
Speaker 5 (25:53):
What keeps me up at night. Don't worry, we can.
You can charge me later.
Speaker 7 (25:57):
I get them too. It's but you know, really knowing
that the biggest risk to most companies and governments is
inside your threat. It's phishing attacks, it's deep fakes that
can really fool an individual user, and that's really what
they focus on as the weakest link. So what you
have to be able to do, and that's what we
do at Deep instant. We actually track and scan at
(26:21):
massive rates all of the bits and bites and threads
that come through. And at the end of the day,
if you do get a scam, or if you do
get something that's in the form of a file that
you open, whether it's on a text or in an email,
there's a file there. Many times it's fileless, but there's
a scan that takes place that we'll be able to
stop what we call zero day threats. It's the first time,
(26:44):
never seen threat. That's what we specialize at at Deep Instinct.
Speaker 2 (26:49):
So like, who do you see as your main customers
or who are your main customers.
Speaker 7 (26:54):
Up large globals. If you take a look at the
largest number of our customers, their global banks, thanks, there's
global manufacturing, global healthcare companies, and service providers such as
the people who carry your phone conversations, your text messages.
All of these are really where we focused our attention
(27:16):
and our sales efforts.
Speaker 5 (27:18):
Do you think we can ever get to a point
where we don't have to be vigilant as normal human
beings or we just always have to be on the
lookout and looking over shoulder that somebody's going to get
our data, somebody is going to get access to our accounts.
Speaker 7 (27:31):
This is going to be a game that continues cat
and masks for the longest time, and it's why, quite frankly,
the cybersecurity sector continues to be a strong sector. There
are going to be some consolidation in that sector, as
we've seen in recent months back to this year. Twenty
twenty five has been a significant year for consolidation. I
(27:53):
see twenty twenty six being the same. But everybody, the
largest platform players, including palle alto z scal Aer, are
accumulating the capabilities to be able to do everything from
access identity management to make their soft or their security
operations centers more efficient. The consumer will continue to continue
(28:13):
to be under attack, and really my best advice to
consumers is if it doesn't look like anything you know
or anybody you've heard from, don't click on it. When
it comes to businesses, put the best layers of defense
in place, including AI capabilities that are going to be
able to battle more sophisticated attacks.
Speaker 2 (28:33):
So you're basically saying you are for someone anybody who's
creating data before it starts to go anywhere in the
AI world, or use if you will, through the AI lens.
Speaker 3 (28:48):
That's where you guys enter. It's cleaning out the data,
making sure it's pure, it's clean.
Speaker 7 (28:55):
You hit it right on the head. That's really only
what bad actors are going after data. It might be
your individual data, but more regularly it's compromising corporate data,
government data. That's where they have the most leverage and
can hold for ransom. They can disrupt operational capabilities, and
(29:18):
if the core of this is being able to scan
every byte of data, whether it's on premise or in
the cloud. These days, most companies are adopting multi cloud
strategies AWS, Azure, Google GCP. Your data is everywhere, and
if you cannot protect your data, then you're going to
(29:39):
be at risk, and in many cases, a lot of
corporations have data that's already corrupted and they don't know it.
So what we really promote is not only being able
to scan in line the data and the files, leveraging
deep instinct or other AI technologies, but also being able
to scan all of the data you've had resident in
(30:00):
large data centers that you've been storing data for years
in some cases. In many cases, data that has been
disturbed has been decorrupted for more than eighty six days
before somebody who determines that there is actually something bad there.
That's just an impossible number of days and too long
(30:22):
of a time.
Speaker 5 (30:24):
Do we need lane? Do we need a new way
to authenticate ourselves? If the data that we traditionally use,
like social security numbers or you know, parents made in names,
those things are out there, what's the right way to
prove to an entity that we are who we say
we are.
Speaker 7 (30:42):
Well, I think the efforts in multi factor authentication had
been very good, While it might seem aggravating sometimes every
time you get I don't want to log onto a
bank account or into some pieces of our data website
that you're looking to access, that you have to get
a code text to you or sent your email. These
two multi factor authentication methods are really helpful and at
(31:08):
the end of the day, they do help identify that
you are who you are. Identity access management is another
key growth area in the cybersecurity space as well, and
AI tools are being applied there as well to help.
Speaker 2 (31:22):
Just one last I'm going to go back to where
we started because it's just top of mind the narrative
about the questions behind the AI trade, the AI spend,
the circular financing, the valuations.
Speaker 3 (31:34):
You're not worried. Just got about thirty forty seconds here.
Speaker 7 (31:38):
No, not really. I think we'll see pauses. I don't
see trade off in video today. Believe me. I've been
involved in many great earnings calls where after the ARNS
call is done, the stock props and you scratch your head.
I don't think that's an indication as to any chink
in the Nvidia armor here. I think we'll see some
(31:59):
pauses that resuming. But as I do say, I think
the shift towards the edge yeah and company lays are
going to be where we're going to see additional future growth,
and that will come alongside with growth from Nvidia as well.
Speaker 3 (32:11):
Well, So glad we could go there with you.
Speaker 2 (32:13):
Certainly another window into this AI build out Lane Best.
He's CEO of the data security company Deep Instinct, chairman
of Blaze, former CEO palow Outo Networks, former CEO of
z Scaler.
Speaker 5 (32:26):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (32:33):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (32:48):
Okay, let's bring in brand Shooty. He's CIO at Northwestern
Mutual Management. They've got more than three hundred billion dollars
in assets under management.
Speaker 7 (32:56):
Bred.
Speaker 5 (32:56):
Good to have you on the program. A lot of changes.
You were last on with us in the middle of September.
We had an entire government shutdown, the longest ever in history.
We had the government reopen, so we've gotten some late data.
We've also had some cracks start to form around what
many consider being the AI trade and questions about Capex.
(33:17):
How are you looking at all this?
Speaker 11 (33:19):
There certainly are quite a few cracks, and I know
the commentary about Nvidia's earnings. I think the reality is
there's still questions about the sustainability of AI and what
it becomes in the future. There are economic questions, so
think about the unemployment report, the jobs report, where is
labor market at coupled with inflation and what does the
FED do about that? And then I just think there's
lots of market questions. So you've seen a large run
(33:40):
up and non profitable tech companies. You've seen cryptocurrencies start
to fall quite a bit, You've seen private credit cracks
start to emerge, and that's where I think there's lots
of questions that are still unanswered. I think investors are
finally starting to pay attention to those. Yeah, that's where
I would just counsel people to please stay diversified. I
know the temptation has been to concentrate in these A names,
(34:00):
in these tech names that have been the high flyers
that have carried the markets for much of the past
few years. I just think in the future the answer
is going to be a broadening out across the spectrum
of asset classes large cap overall, small caps and midcaps,
which actually trade at pretty cheap levels relative to their
large cap counterparts and yes, even international stocks. I guess
(34:21):
the question is do we have a hiccup before then?
Speaker 3 (34:23):
Well, I want to talk a.
Speaker 2 (34:24):
Little bit more about diversification before I do so. If
I look at the Bloomberg mag seven Index, it is
still up nearly seventeen percent year to date. If I
look at the S and P five hundred, it's only
up about eleven percent.
Speaker 3 (34:35):
You know, we can go on.
Speaker 2 (34:36):
But so like I think, there, you know this, Brent.
You know people will counter and say, well wait a minute, though,
I get it. You know, this is where everybody runs
into but they tend to continue in many cases to outperform.
Speaker 11 (34:49):
They continue until they don't. At least historically that's been
the case, and leadership has always changed and towards the
end of economic cycles, or think about it, after the
Fed titans rates. You harm the economy because they're trying
to slow the economy to slow inflation, but that doesn't
harm it all at once. It harms manufacturing, it harms housing,
it harms smaller cap companies, until at least historically, you
get enough critical parts of the economy that have been
(35:10):
harmed to where you actually have a recession, and then
we broaden back out. That has happened in every single cycle.
It's not odd for the market to become concentrated. Then
typically on the opposite side when ends up happening is
that the economy broadens back out and those things that
have been harmed become better again or healthy again, as
rats are usually lowered. And that's where no matter what
happens in the next few months, I do think you
(35:31):
have to have a market that broadens. You have to
have an economy that broadens. You can't have the housing
market continue to not operate. And that's where I think
there's opportunities pushing forward. And it's kind of the same
form that occurred post nineteen ninety nine where you did
see the Internet, which is where everybody concentrated back then,
it benefited more than just the companies that were putting
it in place. It benefited the economy and the broader
(35:53):
set of the economy and companies. And that's where I
think you'll see AI have the same impact pushing forward.
Speaker 5 (35:58):
Brin Shiddi, you were going through a litany earlier of
sort of cracks that are starting to appear. You mentioned
private credit, Carol, and I are certainly trying to get to
the bottom of everything happening in private credit right now.
It's a thing We're going to continue to focus on
it totally. Yeah, I mean it's really piqued our interest.
The crypto part that you mentioned with bitcoin sliding right now,
(36:19):
Bitcoin down another four thousand dollars today eighty six four
hundred low is going back to April of this year.
Does that send what is the signal that that sends? Like,
why are you even mentioning it?
Speaker 11 (36:32):
Liquidity and speculation? And so that's where I think you
know whether or not and what it is or what
it is not. We can debate that all we want,
but it certainly to me still as a speculative part
of the market. There are other cryptos besides Bitcoin, some
that have no purpose and no stated purpose, and they
have a lot of money in them. To me, that's
been a sign of speculation and a lot of liquidity
that's still floating around in the economy, in the markets,
(36:55):
And that's where I'm wondering, what is happening underneath the
surface with liquidity. Are people being forced to liquidate? Where
is their leverage in the economy? This is where I
think there's quite a bit of leverage, and that's where
I think you look at this part of the market.
Speaker 4 (37:07):
And you wonder what it is signaling.
Speaker 11 (37:09):
And that's where I think it's just nice to pay
attention to the risks that are potentially out there, and
this certainly is one of those.
Speaker 10 (37:15):
Yeah.
Speaker 2 (37:15):
I keep thinking about that, Brent too, Like I just
you know, for those of us who've been around through
some market cycles and crises, I think at the Great
Financial Crisis where everybody was like, go, go, go go
until it all came undone, and then when it came undone,
it was pretty harsh. I don't want to be an alarmist.
I just want to be smart here. And I think
you know, as you continue to look at this market,
I mean, are you anticipating a certain amount of correction?
(37:38):
And is it because of concerns of private credit? Is
it because of AI? Is it both something else? Help
me out here.
Speaker 11 (37:45):
I think it's all the above. I think there are
lots of things that are concerning out there. This doesn't
mean that you run out and you sell all your
stocks or do anything drastic. It just means that you
pay attention to what your risk level should be based
upon a financial plan, and that longer term asset allocation
that you have chosen in that plan, which in that plan,
there is the reality that stocks go up and the
stocks go down, that we actually have pullbacks in the economy.
(38:05):
And that's where I just fear that people are doing
what they shouldn't be doing, which is concentrating. If you
didn't concentrate in the market in the late nineteen nineties
in the Nasdaq, in the tech sector, you didn't have
the large draw down that the people who did did.
And that's where i'd counsel people to think about that
and think about what has worked as a timeless investment philosophy,
(38:28):
which is diversification. And that's where if you diversified post
ninety nine nine, which I get a lot of questions about,
what are you doing to keep me from having the
if it's a bubble, what are you doing to keep
me from falling prey to that? Which the answer is
just diversification.
Speaker 4 (38:42):
That was the answer. Then it's the answer today.
Speaker 11 (38:44):
I know it's not popular, it's not cool, it's not
as sexy as watching the riffs and stocks, but it
is the best answer that anyone in my position has
come up with in forty fifty sixty seventy years of
doing this, and that's where I would encourage people to
avoid the urge to concentrate, which I know is out there.
We also know the urge of greed in making. You know,
if your account should be sixty percent equities and it's
moved to seventy percent equities, you might not be apt
(39:07):
to rebalance, which you should rebounce back to sixty percent equities.
And that's where I just encourage people to do the
time tested investment strategies that have worked.
Speaker 4 (39:15):
There are certainly tilts, you.
Speaker 11 (39:16):
Can make things that you can do, but that time
test is strategy, is how people have at least historically
gotten from point A to point B, and I think
that's will be the same way in the future.
Speaker 5 (39:24):
It sounds like a lot of what Brett's speaking about
comes down to behavioral finance, and it's like controlling our emotions,
which is such a big part of you know what
we hear from advisors increasingly now, which is like, hey,
you have your goals, Yeah, make sure you stick to
them no matter how enticing something is.
Speaker 3 (39:44):
Well, then take the emotion out right.
Speaker 2 (39:45):
It's what prevents you from chasing trades or getting out
completely when things start to come undone. Brent Perfect chat
on this Thursday. We really appreciate it. Brent shoe Dy
Shooty excuse me, see IO, Chief Investment Officer over at
Northwestern Mutual Manumentary.
Speaker 1 (40:02):
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(40:23):
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shaping today's complex economy, plus global business, finance and tech
(00:23):
news as it happens The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio Show.
Speaker 2 (00:31):
So, once again this week, a story around Blue Owl
Capital is among the most read on the Bloomberg terminal
has been all day. This is as the company shares
had fallen to the lowest level since twenty twenty three,
with co founder Craig Packer blaming quote negative articles about
private credit for the decline. Now the latest stress point
I gotta say we've talked about yesterday, If you might recall,
(00:54):
Blue Owl Capital scrapped a plan merger of two of
its private credit funds after scrutiny rose over potential losses
for some investors.
Speaker 3 (01:01):
So the story's still a live one, and we wanted
to dig a little bit deeper.
Speaker 4 (01:04):
To do that.
Speaker 5 (01:05):
We're joined by Bloomberg News Chief Wall three correspondent shreetnut
A Rajen. He's here in the studio along with Dobby
Day Shiliuzzo, Bloomberg News chief correspondent for Private Capital, both
join us here in the Bloomberg BusinessWeek Studio.
Speaker 2 (01:17):
All right, welcome, Welcome, Shria. I do want to start
with you. You reminded us yesterday Blue Owl. This is
a firm that has been held up as kind of
a poster child when it comes to the world of
private credit. Is it again, I want to ask you
the merger coming undone or something more like? Is it
just a company specific thing that's a problem, or might
(01:38):
it be the canary or owl in the coal mine?
Speaker 3 (01:40):
Like is it something more? In terms of what's going
on in the private credit world.
Speaker 6 (01:45):
Blue Owls are supposed to be fictional characters in the
real world, and it's now up to the Blue Owl
management to prove that their marks are not illusory. In
a credit market where you're where you're dealing with private clans,
the investors, your investors are reliant on what you believe
those loans are worth. Unfortunately for Blue Aul, many of
their investors in their publicly traded BDCs don't quite believe
(02:09):
the book value, and that's why it's trading at a
big discount.
Speaker 7 (02:13):
To book value.
Speaker 6 (02:14):
If you want to blame negative articles, that does sound
a touch defensive and it's not going to really help
the cost. And there are a lot of Wall Street
veterans who are pointing in this direction and talking about trouble.
But I would like to take a step back and say,
you know, when you ask about whether this is a
canary in the coal mine, we haven't seen some crazy implosion.
When you're investing in one hundred companies, there will be
(02:35):
some defaults along the way. The question is can you
keep it below what your peers are experiencing, and is
it below your historical averages? So that tells you where
you are in the credit cycle. And on those metrics,
blue Out and the rest of their peers are seemingly
doing just fine. But the mind goes back to the
kerfuffle last month when Jamie Diamond got on the earnings
(02:56):
call and gave what sounded like sage advice about the
cycle and said, you know, when there is a problem somewhere,
you can expect a few other problems to crack up
a few other cockroaches. For some reason, a lot of
players in the private credit market took it as a
direct insult hurled in their direction and got worked up
about it. Prominent in that was Mark Lipshots of Blue Out,
(03:19):
who really took a real swing at Jamie Diamond. A
month later. You kind of feel like saying, if you
come at the King, better not miss.
Speaker 3 (03:27):
Well before I want to bring into a day.
Speaker 2 (03:29):
But Jamie Diamond, how many times have we had conversations
with you? We all wait to see what he has
to say about any situation he doesn't or does he
just drop something to stir the pot?
Speaker 3 (03:39):
Does he do that?
Speaker 6 (03:43):
Let me tackle this carefully. I think the fact that
Jamie Diamond has been the CEO of JP Morgan, the
largest bank in the United States with a four point
six trillion dollar balance sheet for twenty years now, right like,
it makes you think that everything he's coming from a
vantage point that is unparallel, to be honest, and he's
got the experience and the position and the pedigree to
(04:05):
speak his mind, and thankfully he does in this case.
And if you look back over the years, some of
the things that Jimmy has said, whether it's about work
from home or a myriad number of topics, Yeah, again,
veer towards the extreme. But what he said here seemed
fairly innocuous. All he said was there's never just one cockroach.
There will be other troubles that he can't necessarily say.
(04:27):
The others will be deep distressed. Why did the private
credit industry take it so personally?
Speaker 5 (04:34):
Yeah, so, David dashelieds have no money here because you
cover a private capital for Bloomberg News. The focus that
we've had this week has certainly been on Blue Owl,
not just investor reaction, but also the press that we've
seen around the company. Is this something you're seeing in
your world outside of Blue Owl right now too?
Speaker 8 (04:52):
Yeah, And I would say one thing to Jamie Diamond's comments,
like he wasn't wrong, because we have seen more of
these situations and across across the industry, by the way,
we've seen them on the bank's side too. So I
think there is a broader issue kind of in credit
markets where people are questioning, like some of the underwriting
standards and red flags that may have been ignored in
(05:12):
the past, and that cuts both ways.
Speaker 4 (05:16):
I think what Blue Owl really.
Speaker 8 (05:17):
Put on the map is an issue that all of
these firms are kind of wrestling with, which is how
do you sell this asset class to retail investors and
what is the right format to do that you can
Historically they've done permanent vehicles, like very long dated stuff
that it's great for institutions. You lock up your money
for seven years and it works well for them, But
(05:39):
if you're making a push into individual investors, you have
to provide some kind of liquidity. And what is emerging
with this failed merger of Blue Owl is that that
liquidity is in between between daily liquidity and seven year
liquidity and it doesn't kind of work as intended sometimes well.
Speaker 5 (05:58):
I big of the issue is that for private credit overall,
if they don't have the market that includes retail investors.
Speaker 8 (06:05):
I mean I would say issue because a lot of
funds are being set up in a similar way where
they provide quarterly redemptions subject to a cap and you
can either come out at nav which is basically the
value of the assets in the fund that the manager
assigns to them, or if it's in a public structure,
you come out at the price that the market assigns
(06:26):
to it. And the market right now is believing that
most BDCs are twenty to thirty percent below their asset value.
Speaker 6 (06:32):
But here's the thing. There was nothing crazy or revolutionary
wacky about aurock of blue Out wanting to merge a
private fund with a publicly listed BDC. It has been
done in the past. The problem in the challenge was
it was being considered, or at least it was presented
to the market at a time when the amount of
redemptions in that private fund were climbing, and if it
(06:54):
climbs above a certain mug, blue Out might very well
gate redemptions. And you never want to be in a
position you tell your investors you're not allowed to get
your money back. They had been honoring all their redemption
requests so far. But if you ever had to get
to the position of gating redemptions or basically saying right now,
we will not allow you to pull all the money
that you want to pull, that spurs panic. That results
(07:17):
in more people wanting to run away from your vehicle.
So instead, when they talk about wanting to merge it
with this public vehicle, which is training at a twenty
percent discount book value, which means once you're in there
and then you want to get out, you have a
twenty percent loss on day one, it starts to feel
a bit icky, and that's what's really resulted in this
(07:38):
market reaction that makes Blue Out at least pushes Blue
Out into this defensive corner.
Speaker 2 (07:43):
But all this makes me feel like, Okay, if Blue
Oul is supposed to be the poster child, like if
we're talking icky or redemptions or gating those redemptions, that
to me, if you're talking about the poster child for
private credit, then it makes me wait, like, Okay, if
they're supposed to be up here and there are may
be potentially having issues, what else is out there? Because
(08:06):
not everybody's in the same situation, and that in other words,
there in weaker situations.
Speaker 8 (08:10):
And that goes back to the broader concern about the industry.
It's not just Blue Out. I think Blue Al is
in the spotlight because they tried to do this. Yeah,
some people, many people probably now would argue was terrible timing,
but it is an issue that everyone in the industry
has to kind of deal with.
Speaker 2 (08:26):
I guess the crazy thing is and we've had so
many guests I feel like you go to milk in
the last couple of years. First of all, everybody all
they want to talk about is private credit, and then
it feels like the last year or two. It's more like,
how do we get out of these deals? And like
anybody who's got investments are thinking about their investors, who
after three to five years want to see some kind
of returns, and they've struggled to get out of these investments.
And I feel like they're just trying to figure out
(08:47):
all these ways, and I just wonder, at some point.
Speaker 3 (08:50):
Do we have some kind of problems as a result
or no. It's just again the timeline of how this
has to come.
Speaker 6 (08:56):
But it's also in the nature of credit markets, right,
it's not it's not equity investors. Credit investors generally tend
to be a little more cautious because your upside is
kind of capped. You get principle back and interest on
that nothing else. Whereas if you're a stock investor, your
stock could go today from ten dollars to three hundred
dollars and then back to one fifty dollars, you still
would have made a lot of money. Your hundred cents
(09:17):
on the dollar will be one hundred cents on the
dollar when it comes back, or it goes down to
fifty to thirty or god forbid zero. And that's why
whenever there is a concern of is the cycle turning?
Is there a credit crunch coming? And when you have
a space like the private credit space where funds that
have been flush with cash. You see the enormous growth
in that space in the last few years, when they're
(09:39):
all competing with each other to actually win deals to
put money to work, your automatic question is it DIDs
Some people cut some corners and so therefore when the
cycle turns could be problematic. You talk about the potential
issues with blue out, We don't even see a ton
of blue oil deals where there have been very obvious issues.
But and wd is too polite to point this out,
but look at some of the cover out of Black
(10:01):
Crock and their credit investments. You've only had a trio
of investment they had. Just last night we reported about
how one of their private credit COLO had to waive
management fees because they failed one of the critical tests
on the COLO. There is an alleged fraorders related to
big Telecom receivables. And then there was another deal that
Dawdy wrote about just last week where the mark on
(10:22):
that investment and one of the Black Rock funds went
from one hundred cents on the dollar to zero undred
thirty four days so well.
Speaker 5 (10:30):
And as we're having this conversation, one thing I keep
thinking of is this comes at a time when over
the last few years, we have had a lot of
people in the private credit space and in the private
investment say space, dab DASA, these are the assets that
we think Americans should actually have in their retirements, and
I'm wondering if this exposes maybe a potential flaw to
(10:50):
that strategy, this idea of marking it to market and
having the traditional retail investor understand that this type of
thing can be locked up.
Speaker 3 (10:58):
For a new line of demand that is right.
Speaker 8 (11:04):
Like the new line of demand has been retail and
insurance because the institutional market kind of tapped out. The
second point I make is that it's very easy to
sell private credit as a great opportunity when rates were
rising and capital was available, and you had all of
these dynamics where you could go to your investors and say, hey,
you're you're investing in you know, senior loans that are
(11:26):
at top of capital structure and getting you know, low
double digit returns with leverage, and that's great. Right now,
you know, with rates coming down and there is a
question about you know, at least investors not being prepared
for some disappointment when it comes to returns, but potentially
credit issues when it comes to individual companies that just
can't exist in that shape, and that's when you get
(11:48):
the markdowns that we've been writing about.
Speaker 2 (11:50):
Okay to be continued, Yeah, okay, can I just leave
you with one thought in fifteen seconds.
Speaker 6 (11:56):
I'll wrap it up in fifteen seconds because there's been
too much dumerism here. David Solomon yesterday was asked about
the concerns in the market. He said something he quoted
a friend and said, skeptics often sound smart, but optimists
make a lot of money.
Speaker 2 (12:11):
Nice final thought, Sherian David David Day, Thank you so much.
Speaker 3 (12:15):
We really appreciate it.
Speaker 5 (12:17):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (12:25):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (12:39):
Taking a look at Walmart shares, we you see the
majority of stocks lower today, Walmart is higher.
Speaker 3 (12:44):
Yes, Carol number one gainer in the s and P
five hundred.
Speaker 5 (12:47):
Right now, add that to your list for maybe it's done. Okay,
it's done, all right? Yeah, cheers up about six point
seven percent. There was as much as seven percent earlier
in the session. This after the company raised it's full
your sales and profit outlook, a sign the company's winning
over priced sensitive shoppers while absorbing rising costs. Let's bring
an Abby Roache. She's senior portfolio analyst who covers consumer
stocks for the Empiric lt Equity team at all Spring
(13:09):
Global Investments. That team has about fourteen billion dollars that
it manages across three large cap portfolios. She joins us
from McLean Virginia. Abby trying to make sense of what
we've heard from these companies in this most recent quarter.
Rival big box chains have worn that consumers remain cautious.
Home depot it's another company that you cover. What do
(13:30):
these results from Walmart alleviate about consumers or do they
alleviate concerns about consumers?
Speaker 9 (13:37):
Yeah, well, thank you very much for having me on today.
I think Walmart was definitely a strong print, and I
think Walmart has continued to operate quite well well in
this environment.
Speaker 4 (13:46):
I think in.
Speaker 9 (13:46):
Terms of the health of the consumer. You know, they
called out that they've seen continued to see shar gains
from upper income consumers. I think in terms of the
middle income consumers that has been steady, and they called
out slight, slight weakness of the lower income consumer. But
I think we're continuing to hear similar messaging of what
we've heard frankly for the last year of this bifurcation
(14:07):
of the consumer, with that upper income consumer holding up
quite well and the middle income to a lesser extent
as well, but the lower income consumer continues to be challenged.
But Walmart, in this environment, offering both value and convenience,
continues to drive customers of all income cohorts and certainly
saw that in a very strong print from them both
(14:29):
as it relates to the environment. But they're also executing
quite well here Abby.
Speaker 2 (14:32):
How much of being so massive the world's biggest retailer
means that in a higher tariff environment, You know, this
is the company that can squeeze suppliers and companies that
sell into the Walmart chank because it's so massive, and
so it just puts them in a better position than
(14:53):
so many other players.
Speaker 9 (14:55):
It certainly does I mean, they're the world's largest retailer,
so they are the best position and to be able
to negotiate for themselves.
Speaker 6 (15:03):
I think though too.
Speaker 9 (15:03):
You know, one of the other key parts of this
story is around the different alternative revenue streams, and Walmart
has a benefit here of their growing their e commerce business.
This was the seventh consecutive quarter of twenty percent plus
global e commerce growth in addition to when you look
at membership, advertising, other areas of the business, so they're
(15:24):
also able to find offsets where they need to absorb
some price in different areas of the P and L
in a way that they're much better positioned, certainly relative
to any of their peers.
Speaker 5 (15:35):
Carol, are you done with home or with uh? Walmart?
Is I want to go to home depost? I want
to ask what I want to go to home depots?
Speaker 3 (15:41):
I know, I know, I know, I know, I know,
But let me just ask you. I mean, what does
it mean?
Speaker 7 (15:45):
I mean they're.
Speaker 2 (15:45):
Transferring their stock exchange listening to the Nasdaq stock exchange,
Like does it really for the exchange? It means something,
but I don't know. What do you tell an investor
about this? Is there anything to tell.
Speaker 10 (16:00):
It?
Speaker 9 (16:00):
Was certainly an interesting and interesting part of the announcement
this morning. And I think, you know, we have seen
we like Walmart here because it's you know, both defensive.
We think they're really well positioned short term, but I
think also the announcement they're positioning themselves for growth longer
term with really the focus around the alternative revenue streams
e commerce. Just they're really positioning themselves and setting themselves
(16:22):
up in addition to investing for growth in the future.
So I think the announcement wasn't all that surprising given
there that has really been the tone that we have
heard from this management team over the last several years.
Speaker 3 (16:32):
Wait, so being on the NAZAC means you're a growth company?
Is that kind of what it is?
Speaker 2 (16:35):
I mean, I know that's kind of the history, but
is that the idea?
Speaker 9 (16:39):
Yeah, And I think, you know, I think you know,
that's certainly how they're positioning themselves with investors, I think,
in addition to being defensive, but I think longer term,
they are positioning themselves, you know, from a growth standpoint
with these different areas of higher growth for them relative
to selling you know, more consumer stables.
Speaker 5 (16:57):
Feels so old school today, well, because the New York
Stock Exchange has tried to counter the narrative. You know,
the NASDAQ is the home for tech ye. So but anyway,
it's interesting, you know they I think it was on
surveillance this morning, Tom and Paul talking about how they
the Nice and the Nasdaq. You know, they play off
each other and they try to you know, it's expensive
(17:17):
to list, so then you know, if you can actually
save money by going to another exchange, Yeah, do that.
Speaker 3 (17:22):
Why wouldn't you do it?
Speaker 7 (17:23):
Yeah?
Speaker 5 (17:24):
Okay, So Home Depot because you also cover Home Depot, Abby,
it seems like the home Depot story is more idiosyncratic
and it's like home deep Deepot specific. Is it fair
to say after hearing from Low's earlier this week.
Speaker 6 (17:38):
It is?
Speaker 9 (17:39):
I think, you know, with Home Depot, I think certainly
they're positioning themselves. They're really focused on that pro customer
and especially the complex pro I think it continues to
be a challenging environment both for the consumer but also
from a housing standpoint of the interest rate piece of
that is really a key for this story. And I
think we're long term investors, so we're focused out the
next five years from now, and I think when we
(18:01):
look at how Home Depot is trying to position themselves
with that pro customer. When we look at the environment
longer term, we think there's a lot of ways that
they're trying to set themselves up for future growth over
the next several years despite a bit of a challenged
environment here as a result of just housing in the macro.
Speaker 5 (18:18):
Why was Home Depot so concerned and Lows not so much?
What are the differences between their business and I know
there's the pro thing and you know, what's the exposure
that Home Depot has that caused it to say, Okay,
we have to think of differently about what next year
is going to look like. And we didn't see that
from Lows.
Speaker 9 (18:33):
I think with Home Depot, you know, there was more
explanation both around some of the recent acquisitions that they've done,
in addition to conversation around the weather, sort of the
lack of a hurricane in twenty twenty four versus this year.
I think investors are really never that enthusiastic to hear
conversations around you know, there certainly is a challenge comping
the comp when there's a hurricane and when there's not.
(18:55):
But I think that coupled with commentary around different moving
parts of the SRS and GMS businesses, I think just
left investors feeling a little bit sour, particularly in light
of the current environment.
Speaker 2 (19:09):
I'm sorry SRS is whosts sale distribution of residential commercial
building just remind us of what that is srsus.
Speaker 9 (19:16):
Yes, the SRS distribution acquisition that they did last year
as it related to, you know, the roofing side of
the business, and without a hurricane this year, you know,
they didn't get as much benefit from that standard.
Speaker 2 (19:28):
It's just like real life stuff, right and what you
need or don't need. I should point out home Depot
traded down six percent on Tuesday when it came out
with its results and lows, which reported and investors reacted
yesterday was actually up about four percent. In a nutshell,
how would you describe the consumer and the retail environment?
Just got about thirty seconds.
Speaker 9 (19:48):
You know, I would say it's much of the same.
I wish there was a different story that I could
tell you that the consumer doesn't continue to be bifurcated.
But that's really the message that we've heard from consumer
from different companies, is that upper income consumers continue to
hold in there quite well. But I think the lower
income consumers are still okay. I think they're still challenged,
but they haven't dropped off a cliff. So I think
(20:08):
consumer companies are still operating, still meeting the needs of
the different consumers, while being very cautious around the sensitive
needs of the lower income consumer, who's more pressured in
this environment.
Speaker 2 (20:18):
All right, so appreciate it, hey, Abby, Thank you so much.
Aby Roach, Senior portfolio analyst. She covers consumer stocks for
the Empiric l T Equity team at all Spring Global Investments.
Speaker 5 (20:30):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 10 (20:39):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 5 (20:58):
Lots of news in the chip world this week. I'm
going to read, Okay, so much stuff, Okay, but I
got to go quickly, Okay, go go.
Speaker 3 (21:05):
A great guest, The.
Speaker 5 (21:07):
US has approved the sales of tens of thousands of
advanced AI semiconductors to the UAE's G forty two group
and regional rival Humane that's of Saudi Arabia. It's a
major boost for both Gulf nations efforts to become formidable
players in the tech And then there's Invidia and what's
going on within Vidia today following a rally of more
than five percent and video now down two point three percent,
(21:30):
The JIT maker did reassure investors on AI demand. Questions
lingered though about the stretch stock prices and hefty investments.
Speaker 2 (21:36):
And that's where we want to start with Lane Bess.
He is the CEO of the data security company Deep Instinct,
chairman of Blaze, which is an AI semiconductor company that
works on low power, high efficiency processors for edge computing.
He is also former CEO Palo Alto Networks and the
former COO of z Scaler.
Speaker 3 (21:53):
He joins us to him from Miami Beach.
Speaker 5 (21:55):
Lane, good to have you on the program. You've been
doing this for more than thirty years. You've built and
led tech companies in the US and around the world.
Speaker 4 (22:01):
Yes or no?
Speaker 5 (22:02):
Are we in a bubble?
Speaker 7 (22:04):
No? I don't think we're in a bubble. I actually
liken this to what we saw, and you mentioned I've
been at this thirty years. I've seen us from the
days of the deck mainframes and IBM mainframes moving to servers,
ultimately to PCs, and then ultimately to handsets that have
all the power. I think what we're seeing is an
AI push that's condensing what we saw over perhaps two
(22:29):
decades into a two to three to five year timeframe.
The acceleration of this adoption is what might make it
look like a bubble, But the applications and the growth
opportunities in various markets make me feel that we're still
at the front end of something that might take pauses
on occasion, but certainly not above.
Speaker 5 (22:49):
Well, let's start with the applications of this technology. I mean,
what do you see that justifies not just these lofty valuations,
but all the copecks that these companies are spending to
try to achieve.
Speaker 7 (23:01):
Well, in the first place, every one of the companies
that have to invest here, they have to invest to
have a piece of the action. So there's almost going
to be a forced action by them to invest in
the GPUs, invest in the LM models. But if you
take a look at where the market will grow over
time and that's why I'm involved, as you'd mentioned earlier,
(23:21):
in a company called Blaze Semiconductor on the edge. Again,
it is like that movement from the mainframe, the central
a large data center off to the edge where a
lot of the applications and solutions are going to be provided.
So I see a very large opportunity of growth in semi.
There's a number of companies that we've seen Cerebrace, we've
(23:44):
seen Rock and of course Blaze in the market, and
there's many, many more. But I also see similarly a
high growth in the cyber security area, where agantic AI attacks,
black dark AI attacks are going to create a growth
need for cybersecurity companies as well, And.
Speaker 3 (24:05):
That's kind of where you come in.
Speaker 2 (24:06):
Tell us a little bit about Deep Instinct and the
work that you guys are doing.
Speaker 7 (24:11):
Sure well, Deep Instinct is based on an advanced AI
capability called deep learning. And we've heard a lot about
machine learning, but AI in the form of a deep
learning framework really allows you to get into a predictive,
preventative mode and it uses large GPU process and to
(24:31):
be able to take massive amounts of data from all
over the web and the dark web and be able
to actually predict a ransomware attack or a breach before
it happens. And so the market has been heavily and
we know very well known names such as CrowdStrike in
the past few Palo Alto Networks zscaler. There's still a
(24:52):
lot in the detection and remediation mode where which is
very important. You need layers of defense. You need to
know what to do when something happens. But to really
get a step up on some of the AI attacks,
you you need a more sophisticated A You need to
fight AI with better AI. How do you do that?
Speaker 5 (25:12):
Though, in a world where the incentives are so aligned
for bad actors to come after you. I mean, I
don't know how many Carol, how many texts do you
get a day that are like trying to dupe you
into a lot? Yeah, and I mean I mean even
we're to the point where, you know, with the Voice
generation kid, you know, really fool those companies that are
(25:37):
that are used as voice authenticators, Like you know, there
are warnings about you know, if you get a call
from somebody in your family, it might not actually be
your family. Like we're not headed in a great direction.
Speaker 7 (25:48):
I feel like you've called off a great list of
things and really in just.
Speaker 5 (25:53):
What keeps me up at night. Don't worry, we can.
You can charge me later.
Speaker 7 (25:57):
I get them too. It's but you know, really knowing
that the biggest risk to most companies and governments is
inside your threat. It's phishing attacks, it's deep fakes that
can really fool an individual user, and that's really what
they focus on as the weakest link. So what you
have to be able to do, and that's what we
do at Deep instant. We actually track and scan at
(26:21):
massive rates all of the bits and bites and threads
that come through. And at the end of the day,
if you do get a scam, or if you do
get something that's in the form of a file that
you open, whether it's on a text or in an email,
there's a file there. Many times it's fileless, but there's
a scan that takes place that we'll be able to
stop what we call zero day threats. It's the first time,
(26:44):
never seen threat. That's what we specialize at at Deep Instinct.
Speaker 2 (26:49):
So like, who do you see as your main customers
or who are your main customers.
Speaker 7 (26:54):
Up large globals. If you take a look at the
largest number of our customers, their global banks, thanks, there's
global manufacturing, global healthcare companies, and service providers such as
the people who carry your phone conversations, your text messages.
All of these are really where we focused our attention
(27:16):
and our sales efforts.
Speaker 5 (27:18):
Do you think we can ever get to a point
where we don't have to be vigilant as normal human
beings or we just always have to be on the
lookout and looking over shoulder that somebody's going to get
our data, somebody is going to get access to our accounts.
Speaker 7 (27:31):
This is going to be a game that continues cat
and masks for the longest time, and it's why, quite frankly,
the cybersecurity sector continues to be a strong sector. There
are going to be some consolidation in that sector, as
we've seen in recent months back to this year. Twenty
twenty five has been a significant year for consolidation. I
(27:53):
see twenty twenty six being the same. But everybody, the
largest platform players, including palle alto z scal Aer, are
accumulating the capabilities to be able to do everything from
access identity management to make their soft or their security
operations centers more efficient. The consumer will continue to continue
(28:13):
to be under attack, and really my best advice to
consumers is if it doesn't look like anything you know
or anybody you've heard from, don't click on it. When
it comes to businesses, put the best layers of defense
in place, including AI capabilities that are going to be
able to battle more sophisticated attacks.
Speaker 2 (28:33):
So you're basically saying you are for someone anybody who's
creating data before it starts to go anywhere in the
AI world, or use if you will, through the AI lens.
Speaker 3 (28:48):
That's where you guys enter. It's cleaning out the data,
making sure it's pure, it's clean.
Speaker 7 (28:55):
You hit it right on the head. That's really only
what bad actors are going after data. It might be
your individual data, but more regularly it's compromising corporate data,
government data. That's where they have the most leverage and
can hold for ransom. They can disrupt operational capabilities, and
(29:18):
if the core of this is being able to scan
every byte of data, whether it's on premise or in
the cloud. These days, most companies are adopting multi cloud
strategies AWS, Azure, Google GCP. Your data is everywhere, and
if you cannot protect your data, then you're going to
(29:39):
be at risk, and in many cases, a lot of
corporations have data that's already corrupted and they don't know it.
So what we really promote is not only being able
to scan in line the data and the files, leveraging
deep instinct or other AI technologies, but also being able
to scan all of the data you've had resident in
(30:00):
large data centers that you've been storing data for years
in some cases. In many cases, data that has been
disturbed has been decorrupted for more than eighty six days
before somebody who determines that there is actually something bad there.
That's just an impossible number of days and too long
(30:22):
of a time.
Speaker 5 (30:24):
Do we need lane? Do we need a new way
to authenticate ourselves? If the data that we traditionally use,
like social security numbers or you know, parents made in names,
those things are out there, what's the right way to
prove to an entity that we are who we say
we are.
Speaker 7 (30:42):
Well, I think the efforts in multi factor authentication had
been very good, While it might seem aggravating sometimes every
time you get I don't want to log onto a
bank account or into some pieces of our data website
that you're looking to access, that you have to get
a code text to you or sent your email. These
two multi factor authentication methods are really helpful and at
(31:08):
the end of the day, they do help identify that
you are who you are. Identity access management is another
key growth area in the cybersecurity space as well, and
AI tools are being applied there as well to help.
Speaker 2 (31:22):
Just one last I'm going to go back to where
we started because it's just top of mind the narrative
about the questions behind the AI trade, the AI spend,
the circular financing, the valuations.
Speaker 3 (31:34):
You're not worried. Just got about thirty forty seconds here.
Speaker 7 (31:38):
No, not really. I think we'll see pauses. I don't
see trade off in video today. Believe me. I've been
involved in many great earnings calls where after the ARNS
call is done, the stock props and you scratch your head.
I don't think that's an indication as to any chink
in the Nvidia armor here. I think we'll see some
(31:59):
pauses that resuming. But as I do say, I think
the shift towards the edge yeah and company lays are
going to be where we're going to see additional future growth,
and that will come alongside with growth from Nvidia as well.
Speaker 3 (32:11):
Well, So glad we could go there with you.
Speaker 2 (32:13):
Certainly another window into this AI build out Lane Best.
He's CEO of the data security company Deep Instinct, chairman
of Blaze, former CEO palow Outo Networks, former CEO of
z Scaler.
Speaker 5 (32:26):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (32:33):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (32:48):
Okay, let's bring in brand Shooty. He's CIO at Northwestern
Mutual Management. They've got more than three hundred billion dollars
in assets under management.
Speaker 7 (32:56):
Bred.
Speaker 5 (32:56):
Good to have you on the program. A lot of changes.
You were last on with us in the middle of September.
We had an entire government shutdown, the longest ever in history.
We had the government reopen, so we've gotten some late data.
We've also had some cracks start to form around what
many consider being the AI trade and questions about Capex.
(33:17):
How are you looking at all this?
Speaker 11 (33:19):
There certainly are quite a few cracks, and I know
the commentary about Nvidia's earnings. I think the reality is
there's still questions about the sustainability of AI and what
it becomes in the future. There are economic questions, so
think about the unemployment report, the jobs report, where is
labor market at coupled with inflation and what does the
FED do about that? And then I just think there's
lots of market questions. So you've seen a large run
(33:40):
up and non profitable tech companies. You've seen cryptocurrencies start
to fall quite a bit, You've seen private credit cracks
start to emerge, and that's where I think there's lots
of questions that are still unanswered. I think investors are
finally starting to pay attention to those. Yeah, that's where
I would just counsel people to please stay diversified. I
know the temptation has been to concentrate in these A names,
(34:00):
in these tech names that have been the high flyers
that have carried the markets for much of the past
few years. I just think in the future the answer
is going to be a broadening out across the spectrum
of asset classes large cap overall, small caps and midcaps,
which actually trade at pretty cheap levels relative to their
large cap counterparts and yes, even international stocks. I guess
(34:21):
the question is do we have a hiccup before then?
Speaker 3 (34:23):
Well, I want to talk a.
Speaker 2 (34:24):
Little bit more about diversification before I do so. If
I look at the Bloomberg mag seven Index, it is
still up nearly seventeen percent year to date. If I
look at the S and P five hundred, it's only
up about eleven percent.
Speaker 3 (34:35):
You know, we can go on.
Speaker 2 (34:36):
But so like I think, there, you know this, Brent.
You know people will counter and say, well wait a minute, though,
I get it. You know, this is where everybody runs
into but they tend to continue in many cases to outperform.
Speaker 11 (34:49):
They continue until they don't. At least historically that's been
the case, and leadership has always changed and towards the
end of economic cycles, or think about it, after the
Fed titans rates. You harm the economy because they're trying
to slow the economy to slow inflation, but that doesn't
harm it all at once. It harms manufacturing, it harms housing,
it harms smaller cap companies, until at least historically, you
get enough critical parts of the economy that have been
(35:10):
harmed to where you actually have a recession, and then
we broaden back out. That has happened in every single cycle.
It's not odd for the market to become concentrated. Then
typically on the opposite side when ends up happening is
that the economy broadens back out and those things that
have been harmed become better again or healthy again, as
rats are usually lowered. And that's where no matter what
happens in the next few months, I do think you
(35:31):
have to have a market that broadens. You have to
have an economy that broadens. You can't have the housing
market continue to not operate. And that's where I think
there's opportunities pushing forward. And it's kind of the same
form that occurred post nineteen ninety nine where you did
see the Internet, which is where everybody concentrated back then,
it benefited more than just the companies that were putting
it in place. It benefited the economy and the broader
(35:53):
set of the economy and companies. And that's where I
think you'll see AI have the same impact pushing forward.
Speaker 5 (35:58):
Brin Shiddi, you were going through a litany earlier of
sort of cracks that are starting to appear. You mentioned
private credit, Carol, and I are certainly trying to get to
the bottom of everything happening in private credit right now.
It's a thing We're going to continue to focus on
it totally. Yeah, I mean it's really piqued our interest.
The crypto part that you mentioned with bitcoin sliding right now,
(36:19):
Bitcoin down another four thousand dollars today eighty six four
hundred low is going back to April of this year.
Does that send what is the signal that that sends? Like,
why are you even mentioning it?
Speaker 11 (36:32):
Liquidity and speculation? And so that's where I think you
know whether or not and what it is or what
it is not. We can debate that all we want,
but it certainly to me still as a speculative part
of the market. There are other cryptos besides Bitcoin, some
that have no purpose and no stated purpose, and they
have a lot of money in them. To me, that's
been a sign of speculation and a lot of liquidity
that's still floating around in the economy, in the markets,
(36:55):
And that's where I'm wondering, what is happening underneath the
surface with liquidity. Are people being forced to liquidate? Where
is their leverage in the economy? This is where I
think there's quite a bit of leverage, and that's where
I think you look at this part of the market.
Speaker 4 (37:07):
And you wonder what it is signaling.
Speaker 11 (37:09):
And that's where I think it's just nice to pay
attention to the risks that are potentially out there, and
this certainly is one of those.
Speaker 10 (37:15):
Yeah.
Speaker 2 (37:15):
I keep thinking about that, Brent too, Like I just
you know, for those of us who've been around through
some market cycles and crises, I think at the Great
Financial Crisis where everybody was like, go, go, go go
until it all came undone, and then when it came undone,
it was pretty harsh. I don't want to be an alarmist.
I just want to be smart here. And I think
you know, as you continue to look at this market,
I mean, are you anticipating a certain amount of correction?
(37:38):
And is it because of concerns of private credit? Is
it because of AI? Is it both something else? Help
me out here.
Speaker 11 (37:45):
I think it's all the above. I think there are
lots of things that are concerning out there. This doesn't
mean that you run out and you sell all your
stocks or do anything drastic. It just means that you
pay attention to what your risk level should be based
upon a financial plan, and that longer term asset allocation
that you have chosen in that plan, which in that plan,
there is the reality that stocks go up and the
stocks go down, that we actually have pullbacks in the economy.
(38:05):
And that's where I just fear that people are doing
what they shouldn't be doing, which is concentrating. If you
didn't concentrate in the market in the late nineteen nineties
in the Nasdaq, in the tech sector, you didn't have
the large draw down that the people who did did.
And that's where i'd counsel people to think about that
and think about what has worked as a timeless investment philosophy,
(38:28):
which is diversification. And that's where if you diversified post
ninety nine nine, which I get a lot of questions about,
what are you doing to keep me from having the
if it's a bubble, what are you doing to keep
me from falling prey to that? Which the answer is
just diversification.
Speaker 4 (38:42):
That was the answer. Then it's the answer today.
Speaker 11 (38:44):
I know it's not popular, it's not cool, it's not
as sexy as watching the riffs and stocks, but it
is the best answer that anyone in my position has
come up with in forty fifty sixty seventy years of
doing this, and that's where I would encourage people to
avoid the urge to concentrate, which I know is out there.
We also know the urge of greed in making. You know,
if your account should be sixty percent equities and it's
moved to seventy percent equities, you might not be apt
(39:07):
to rebalance, which you should rebounce back to sixty percent equities.
And that's where I just encourage people to do the
time tested investment strategies that have worked.
Speaker 4 (39:15):
There are certainly tilts, you.
Speaker 11 (39:16):
Can make things that you can do, but that time
test is strategy, is how people have at least historically
gotten from point A to point B, and I think
that's will be the same way in the future.
Speaker 5 (39:24):
It sounds like a lot of what Brett's speaking about
comes down to behavioral finance, and it's like controlling our emotions,
which is such a big part of you know what
we hear from advisors increasingly now, which is like, hey,
you have your goals, Yeah, make sure you stick to
them no matter how enticing something is.
Speaker 3 (39:44):
Well, then take the emotion out right.
Speaker 2 (39:45):
It's what prevents you from chasing trades or getting out
completely when things start to come undone. Brent Perfect chat
on this Thursday. We really appreciate it. Brent shoe Dy
Shooty excuse me, see IO, Chief Investment Officer over at
Northwestern Mutual Manumentary.
Speaker 1 (40:02):
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(40:23):
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