Latest / Bloomberg Intelligence / Lending, Markets, Metals, And A Growth Recession (Podcast)

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Lending, Markets, Metals, And A Growth Recession (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. All right, Matt, you
• 0:21
  Speaker 1: go you get your undergraduate degree in English from Trinity College,
• 0:25
  Speaker 1: which is just a phenomenal school. Oh my god. The
• 0:28
  Speaker 1: squash team is insane, insane and legendary squash team. Yeah,
• 0:32
  Speaker 1: in Hertford, Connecticut. And then you go get a master's
• 0:34
  Speaker 1: in English from the Universe Chicago, which I didn't even
• 0:36
  Speaker 1: know the University of Chicago offered a master's in English.
• 0:39
  Speaker 1: I just think numbers when I think of Univerity of Chicago.
• 0:41
  Speaker 1: So you get all that going, what do you do?
• 0:44
  Speaker 1: You go into the private credit business? How does that work?
• 0:47
  Speaker 1: I mean, well that's what I If you're gonna go
• 0:49
  Speaker 1: to Wall Street, I think you're gonna do English major
• 0:52
  Speaker 1: in the classics or history. I just don't see it.
• 0:55
  Speaker 1: But Randy Schwimmer did it. He's co head of senior
• 0:57
  Speaker 1: lending and Senior managing Director Churchill as management. Randy, You've
• 1:01
  Speaker 1: had a odd career path, but we'll take you as
• 1:04
  Speaker 1: an expert on this private credit business. I love the
• 1:08
  Speaker 1: private private credit business. I think I can get yield there.
• 1:12
  Speaker 1: Just give us an overview of kind of what the
• 1:14
  Speaker 1: private credit market is like today, because boy, it's been
• 1:17
  Speaker 1: ugly everywhere else in the capital markets it has been.
• 1:20
  Speaker 1: But you know, listening to you guys talk, I had
• 1:22
  Speaker 1: to do some push ups in my office just exactly
• 1:25
  Speaker 1: that's he's shaming us. All. Yeah, but I did on
• 1:28
  Speaker 1: my oak mail this more and so I'm good to go.
• 1:29
  Speaker 1: But you know, feeling energized actually about where we are.
• 1:32
  Speaker 1: Although you know, it's interesting. There's no much more fun
• 1:36
  Speaker 1: for capital markets and investor guy to be looking at
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  Speaker 1: an inflection in the market right because the things are
• 1:42
  Speaker 1: going along smoothly. It's like being a weather person meteorologist
• 1:46
  Speaker 1: in San Diego. Okay, it's Sunday today, Sunday to Marrow,
• 1:48
  Speaker 1: it's gonna be Sunday next week all week, you know.
• 1:50
  Speaker 1: Whereas you know New England, it's a little more changeable.
• 1:53
  Speaker 1: Sometimes he's raining sometimes and this is what's going on
• 1:56
  Speaker 1: kind of right now. Is there a lot of moving
• 1:58
  Speaker 1: parts where at the end of a war to your
• 2:00
  Speaker 1: cycle where interest rates fell fell fell, you know that's
• 2:03
  Speaker 1: over and we're in a new cycle, you know where
• 2:05
  Speaker 1: rates are lifting off. We're calling it the Great Unwind.
• 2:08
  Speaker 1: So the FEDS on winding its balance sheet, and the
• 2:11
  Speaker 1: concern now is inflation, right, and so the Fed has
• 2:15
  Speaker 1: to be frustrated because they're wondering, Okay, everybody, what about
• 2:19
  Speaker 1: this we're raising rates until inflation is dead message? Have
• 2:22
  Speaker 1: you not been getting? Turns out it was the we're
• 2:25
  Speaker 1: raising rates until inflation is dead message they weren't getting. Well,
• 2:28
  Speaker 1: it feels like they're getting it now, and the market
• 2:30
  Speaker 1: is very cautious. Private credit, i would say, is somewhere
• 2:33
  Speaker 1: between cautious, um and constructive depending on what's going on.
• 2:39
  Speaker 1: Our portfolio, interestingly, which is comprised of almost three hundred
• 2:44
  Speaker 1: private equity backed companies and all sorts of sectors, mostly defensive, healthcare,
• 2:50
  Speaker 1: business services, technology, that portfolio is actually doing pretty well.
• 2:54
  Speaker 1: Revenues are generally up, cash closer are also up. Now
• 2:58
  Speaker 1: there are obviously, see situations where companies are struggling with
• 3:01
  Speaker 1: supply chain issues. You mentioned labor costs before we started,
• 3:04
  Speaker 1: you know, labor costs and labor availability is certainly an issue.
• 3:09
  Speaker 1: But in the right sectors, and particularly with private equity
• 3:12
  Speaker 1: sponsors who have raised long term capital with decades of
• 3:15
  Speaker 1: experience around those sectors, and they have conviction with these
• 3:19
  Speaker 1: businesses based not only in their decades, you know, going
• 3:23
  Speaker 1: through cycles, but also in the recent experience going through COVID,
• 3:27
  Speaker 1: And so they're coming out of COVID and looking at
• 3:28
  Speaker 1: this new opportunity in the market and saying, you know,
• 3:31
  Speaker 1: we think we have found companies that will continue to
• 3:35
  Speaker 1: do well, less consumer facing, lower cap acts, and higher
• 3:40
  Speaker 1: cash free cash flow uh generation, and those businesses we
• 3:46
  Speaker 1: think we're going to do really well. We're partnering with
• 3:48
  Speaker 1: them up and down the capital structure, senior debt, junior capital,
• 3:52
  Speaker 1: equity co investing, and and have found that all of
• 3:56
  Speaker 1: a sudden over the last you know, year or two,
• 3:59
  Speaker 1: that opportunity is actually expanding for us, in part because
• 4:02
  Speaker 1: the AZTEC class, as you mentioned, is attractive for people.
• 4:05
  Speaker 1: It's an alternative asset class to the sort of headline
• 4:08
  Speaker 1: bending stuff that's going on and very very popular lately.
• 4:12
  Speaker 1: I mean, we hear so many people actually all year
• 4:15
  Speaker 1: we've been hearing people talk about it, But how bad
• 4:17
  Speaker 1: has it been. It's so opaque that I can't get
• 4:19
  Speaker 1: a good picture by typing I N go on my
• 4:21
  Speaker 1: Bloomberg terminal. I can see that treasuries UM are off,
• 4:26
  Speaker 1: you know, the Treasury's index is down ten percent year
• 4:28
  Speaker 1: to date. I can see that corporate debt is down
• 4:32
  Speaker 1: UH ten eleven percent year to date. The global agg
• 4:34
  Speaker 1: is off almost from its high. So it's been an
• 4:37
  Speaker 1: historically bad period for you know, fixed income of all kinds.
• 4:43
  Speaker 1: How has it been for uh, for private debt until
• 4:47
  Speaker 1: this until this inflection has actually been through this year.
• 4:51
  Speaker 1: And I would include include actually leverage loans in general,
• 4:53
  Speaker 1: because we have a large cap practice with the now
• 4:57
  Speaker 1: vene UM that does the broadly syndicated market liquid loans
• 5:00
  Speaker 1: and so forth. Both that asset class and private credit
• 5:04
  Speaker 1: have done very well this year relative to other assets,
• 5:08
  Speaker 1: in part because of interest rates going up, in part
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  Speaker 1: because of the collateral and the security and the covenants
• 5:16
  Speaker 1: that we have in the direct lending market that gives
• 5:18
  Speaker 1: us protection, and in part because we don't trade. You
• 5:22
  Speaker 1: mentioned you can't go on Blueberg and find flind these deals.
• 5:25
  Speaker 1: That's the beauty of the alternative market, and that's what's
• 5:28
  Speaker 1: happening with private credit since you can't trade it. The
• 5:31
  Speaker 1: goodness is if you're comfortable with the investments you've made.
• 5:34
  Speaker 1: These businesses are throwing off cash flow after cash flow,
• 5:39
  Speaker 1: strong valuations because again, we're buying this, we're financing the
• 5:43
  Speaker 1: data as a partner to the private equity firm who's
• 5:45
  Speaker 1: throwing in tons of private equity cash that they've raised
• 5:49
  Speaker 1: below us, So they've got to burn through a lot
• 5:52
  Speaker 1: to get to even to us. That's why our default
• 5:54
  Speaker 1: rate and laws rate has been so low, and that's
• 5:56
  Speaker 1: generally the case in in private credit. The other thing
• 5:59
  Speaker 1: that's going on right now is that investors, you know,
• 6:02
  Speaker 1: who were investing in platforms like Churchill are looking for
• 6:06
  Speaker 1: you know, relatively low risk, conservative but you know, yield
• 6:11
  Speaker 1: that is going to be enhanced when rates go up.
• 6:14
  Speaker 1: We're a floating right off the class. We've been waiting
• 6:17
  Speaker 1: for this news cycle for forty years. Okay. I started
• 6:21
  Speaker 1: my career coming out of Universe Chicago forty plus years
• 6:23
  Speaker 1: ago and at the time was in charge. Interest rates
• 6:27
  Speaker 1: were you know, double digital. I had a mortgage that
• 6:30
  Speaker 1: was like twelve percent. I thought I was lucky here
• 6:33
  Speaker 1: we are so far went from zero percent so for
• 6:36
  Speaker 1: like the I don't use so for I'm a lieboard guy. Okay,
• 6:39
  Speaker 1: so it went from zero to three percent? Right, all right, Randy,
• 6:42
  Speaker 1: we gotta kint it short there. I could talk private
• 6:44
  Speaker 1: credit all day, not at the time, so you can
• 6:46
  Speaker 1: get you do you get? Ran Randy back back for
• 6:48
  Speaker 1: like a half hour because I love this private credit
• 6:51
  Speaker 1: business co had of senior lending and senior managing director
• 6:54
  Speaker 1: Churchill Asset Management Private Credit. Check it out, all right,
• 7:00
  Speaker 1: Breton Ewing Joints us he's a chief market strategist for
• 7:02
  Speaker 1: First Franklin Financial Services. They're based in Tallahassee, and Brett
• 7:07
  Speaker 1: has his undergraduate degree from Florida State and he's on
• 7:09
  Speaker 1: the board of trustees at Tallahassee Quarterback Club Foundation. So Bred,
• 7:14
  Speaker 1: we gotta start up. We'll get to the market stuff later.
• 7:17
  Speaker 1: Give us the preview Florida State football. Well, we just
• 7:21
  Speaker 1: had our first home game, got a pulled out a
• 7:25
  Speaker 1: victory in a rainy night. But the big game really
• 7:28
  Speaker 1: that's starting our season in our minds is this weekend
• 7:31
  Speaker 1: against l s U. This So what's the feeling in
• 7:35
  Speaker 1: Tallahassee about Florida State football. I mean they were you
• 7:38
  Speaker 1: guys had such a great run for such a long
• 7:40
  Speaker 1: time under coach Balden. It's been a little bit follow
• 7:43
  Speaker 1: since then. What's the feeling of Tahassee these days? Well,
• 7:47
  Speaker 1: we are optimistic. Um, we do feel that we have
• 7:51
  Speaker 1: a good coaching and his leadership and what he's done
• 7:54
  Speaker 1: with recruiting given the tools he does have, access two
• 7:59
  Speaker 1: is pretty strong, and we are optimistic that we'll have
• 8:02
  Speaker 1: a pretty decent season this year, which should give us
• 8:05
  Speaker 1: momentum going into next fall. All right, good stuff. All right,
• 8:08
  Speaker 1: So you've got a Federal Reserve that turn I'm not
• 8:12
  Speaker 1: sure if they turned hawker Is on Friday last of
• 8:14
  Speaker 1: last week, but boy, they certainly communicated that and that's
• 8:18
  Speaker 1: had an impact on these markets. What did you guys
• 8:21
  Speaker 1: take away from our Federal Reserve on Friday? Well, I
• 8:25
  Speaker 1: think the timing of that meeting was, you know, reflect
• 8:29
  Speaker 1: important because I mean we were coming off of a
• 8:32
  Speaker 1: pretty big run up from the June Lows. In fact,
• 8:36
  Speaker 1: the week prior to that you had the NASDAC up
• 8:39
  Speaker 1: from the Lows, SMP up at almost and I think
• 8:44
  Speaker 1: I think he didn't turn a little bit more dubblished
• 8:47
  Speaker 1: in the market, was kind of hoping for looking forward,
• 8:52
  Speaker 1: and his rhetoric just was perfect timing for what we
• 8:57
  Speaker 1: feel is a pullback that has been badly needed in
• 9:00
  Speaker 1: this market. We think a new bull market has started
• 9:03
  Speaker 1: and the June lows will hold. Really I'd like that. See,
• 9:07
  Speaker 1: that's the question I've had a lot of people. Yes,
• 9:09
  Speaker 1: it is a call like will we retest those June lows,
• 9:13
  Speaker 1: and you're suggesting maybe not. I think the only way
• 9:17
  Speaker 1: that we retest those June lows over this fall would
• 9:21
  Speaker 1: be inflation actually starts picking up at a higher pace,
• 9:26
  Speaker 1: and we don't see that happening with our data that
• 9:29
  Speaker 1: we're looking at across the board. The FED has really
• 9:33
  Speaker 1: done one of the most hawkish beatdowns of this economy
• 9:37
  Speaker 1: that we've seen in forty years, and the real effects
• 9:41
  Speaker 1: of that are just now starting to flow through. And
• 9:44
  Speaker 1: we believe the economic data will still continue to cool,
• 9:49
  Speaker 1: and we believe that inflation numbers have peaked and that
• 9:53
  Speaker 1: we're going to start seeing some cooling in there as well.
• 9:56
  Speaker 1: You know, I want to ask you about the labor
• 9:57
  Speaker 1: market because we had um the app firing kind of
• 10:01
  Speaker 1: adding to the pile of silicon valley, Um, you know,
• 10:05
  Speaker 1: shopping that's going on as well as or At the
• 10:08
  Speaker 1: same time, we had a super high job openings and jolts.
• 10:11
  Speaker 1: And then I thought, why am I always asking these
• 10:13
  Speaker 1: macro questions? Why are we so darn macro? It just
• 10:16
  Speaker 1: drives me crazy. It's so annoying bread Does it annoy
• 10:19
  Speaker 1: you too? I mean, you have to do you have
• 10:21
  Speaker 1: to be this this macro in these markets? I really
• 10:25
  Speaker 1: think you do. I mean, what what's going on today?
• 10:28
  Speaker 1: I mean, look, a lot depends on what happens in
• 10:30
  Speaker 1: the job market as we move forward, right, I mean
• 10:32
  Speaker 1: that's one of the primary things that the Fed's looking at.
• 10:36
  Speaker 1: And the eight hundred pound gorilla in the room is
• 10:39
  Speaker 1: definitely the FED, and we have to pay attention to
• 10:41
  Speaker 1: what they're going to be doing. But look, the job
• 10:44
  Speaker 1: market is cooling Since April lows, the job four week
• 10:48
  Speaker 1: moving average on jobless claim is up fort and I
• 10:51
  Speaker 1: would say, you know, statistically, anytime it's moved up fifty
• 10:56
  Speaker 1: from those lows, it's it's indicated recession coming down the road.
• 11:01
  Speaker 1: And so I do think the job market is cooling off,
• 11:05
  Speaker 1: even though we have a big job's report coming up
• 11:07
  Speaker 1: this Friday, we're expecting somewhere around three three fifty UM
• 11:12
  Speaker 1: on jobs game, which is significantly reduced from the last number.
• 11:16
  Speaker 1: But yeah, moving forward, I think you're going to continue
• 11:19
  Speaker 1: to see some economic numbers to terryate. So what have
• 11:22
  Speaker 1: you guys been doing in the market here, Brett in
• 11:25
  Speaker 1: in the last you know, several weeks here again, we
• 11:28
  Speaker 1: had a brutal first half of the year, bounce off
• 11:31
  Speaker 1: the bottom. Now a little bit of uncertainty here. What
• 11:34
  Speaker 1: are you guys doing over the last several weeks. Well, strategically,
• 11:37
  Speaker 1: we have shifted to we are by dips and specifically
• 11:42
  Speaker 1: we like the small and mid cap arena. I think
• 11:44
  Speaker 1: the valuations on their four p's are probably the best
• 11:49
  Speaker 1: going back to the early two thousands, and we're paying
• 11:53
  Speaker 1: attention to that. We're taking advantage of individual stock picking,
• 11:57
  Speaker 1: I think is the way to play this. There's just
• 11:59
  Speaker 1: some companies that have been thrown out with the bathwater
• 12:03
  Speaker 1: and I think there's incredible opportunities and we're taking advantage
• 12:06
  Speaker 1: on any of these dips as we move forward. It's
• 12:09
  Speaker 1: awesome to get a straight talker, you know. Yeah, Well
• 12:11
  Speaker 1: you get good to Tallahassee. You get straight talkers. I
• 12:14
  Speaker 1: like it. Yeah, I like it. Don't mess around that.
• 12:16
  Speaker 1: And it's also rare to get a street talker that's
• 12:20
  Speaker 1: so bullish these days, right, even the big bulls seem
• 12:22
  Speaker 1: to have turned bearish. And the bear sounds so much
• 12:24
  Speaker 1: smarter with their doom and gloom if you step back
• 12:27
  Speaker 1: and look at the charts longer term. Absolutely yeah. Alright,
• 12:31
  Speaker 1: Florida State at l s U this Sunday, September four pm.
• 12:35
  Speaker 1: That is game, all right, Brett, you in chief market
• 12:39
  Speaker 1: strategist First Franklin Financial Services. We appreciate getting your thoughts.
• 12:46
  Speaker 1: Our next guest, this is interesting. A bus hater, CEO
• 12:50
  Speaker 1: and president of a peto based in Fredericksburg, Virginia. I
• 12:55
  Speaker 1: think all of us. What do you guys do at
• 12:58
  Speaker 1: a specto? This is really interesting? Tell us about your
• 13:01
  Speaker 1: company absolutely so. Basically, um, A Speedo provides innovative solutions
• 13:09
  Speaker 1: to the government, military, and the intel community protecting their interest,
• 13:14
  Speaker 1: human assets and infrastructure. And I have a feeling you're
• 13:18
  Speaker 1: going to get into one of our more interesting products
• 13:21
  Speaker 1: here in a little bit, but I'll wait for that. No,
• 13:23
  Speaker 1: it's bullet bulletproof close. I'm so down with this and
• 13:27
  Speaker 1: by the way, it's not just like vests. Right, do
• 13:30
  Speaker 1: you make actually bulletproof suits? Can I wear this on TV? Oh? Absolutely?
• 13:35
  Speaker 1: It's uh, no such thing as bulletproof, but yes, we
• 13:38
  Speaker 1: are America's first bullet resistant clothing company. Many many years
• 13:42
  Speaker 1: ago we created suits that look like regular suits that
• 13:45
  Speaker 1: you wear to work, but they'll stop a nine millimeter
• 13:51
  Speaker 1: fifty and all that. How how does that just tell us? How?
• 13:56
  Speaker 1: Um we work with the special arameds and integrated into clothing.
• 14:01
  Speaker 1: I've talked to you before, I've talked you. I've talked
• 14:05
  Speaker 1: to you about this before. My first thought goes to
• 14:07
  Speaker 1: motorcycle clothing because it's so difficult to find good, uh,
• 14:12
  Speaker 1: motorcycle clothing that's not big and bulky, and clearly suits
• 14:17
  Speaker 1: are not that. So why don't you branch out into
• 14:19
  Speaker 1: that business? We've actually done stuff like that on individual basis.
• 14:25
  Speaker 1: But I mean our focus is government, uh, in the
• 14:28
  Speaker 1: intel community, the military, So we're right now sticking to that.
• 14:33
  Speaker 1: But who knows, Yeah, that's my tip, you know, like military, well, police,
• 14:37
  Speaker 1: police ride a lot of times. But so so what
• 14:41
  Speaker 1: what else? What are the most interesting aspects of espetto
• 14:46
  Speaker 1: for you? Beyond the one that you have to talk
• 14:48
  Speaker 1: about every time someone finds happy. But well, we're also
• 14:53
  Speaker 1: the first ones to introduce female focused body armor to
• 14:56
  Speaker 1: the military. Women in the military have been wearing uh
• 14:59
  Speaker 1: men body armor for the longest time, and it affects
• 15:03
  Speaker 1: their mobility. Uh you know, it's not as safe. It
• 15:07
  Speaker 1: causes a lot of injuries. So we were the first
• 15:12
  Speaker 1: ones to work with the US Air Force and create
• 15:16
  Speaker 1: the female focused body armors. So we did that. We
• 15:19
  Speaker 1: also right now are working on something really cool. We're
• 15:22
  Speaker 1: calling it Scaliflex, which is going to be the you know,
• 15:26
  Speaker 1: the next level of female focused body armors. So doing
• 15:29
  Speaker 1: those things, but we have an entire division called a
• 15:34
  Speaker 1: Speado Labs were we're just developing cool technology and we
• 15:39
  Speaker 1: have in house engineers, tree d printers, all of that.
• 15:42
  Speaker 1: And then the other side of a Speadow Labs is
• 15:44
  Speaker 1: where we actually invest were incumbator accelrator model on that
• 15:48
  Speaker 1: where we invest in cool technologies and bring them to
• 15:53
  Speaker 1: the government. Because the biggest issue with startup communities that
• 15:57
  Speaker 1: they can't really present their products to the federal government.
• 16:01
  Speaker 1: There's I mean, you have to have contracts, you have
• 16:04
  Speaker 1: to have contact, past performances and everything well has all
• 16:07
  Speaker 1: of that, and so we would just invest in that.
• 16:11
  Speaker 1: See I see, so you're there in basically you're absolutely
• 16:15
  Speaker 1: there so to speak. Or nobody wants to have to
• 16:21
  Speaker 1: use these kind of products, right. Um, I'm sure you
• 16:24
  Speaker 1: also would prefer if there were no war, but there
• 16:28
  Speaker 1: is one right now. Vladimir Putin invaded Ukraine. Are you
• 16:31
  Speaker 1: shipping armor? Um? Two soldiers there? Are you helping out
• 16:34
  Speaker 1: in that? Uh, you know, on the good side of
• 16:36
  Speaker 1: that fight? Yeah? Absolutely, the good side of the fight. Um, yeah,
• 16:41
  Speaker 1: we are. We have a cargo plane full of products
• 16:45
  Speaker 1: that goes out. In the beginning, it was going out
• 16:48
  Speaker 1: pretty much every week, every other week, and now it's
• 16:51
  Speaker 1: more or less like a couple of times a month. Uh,
• 16:53
  Speaker 1: that we have. So we've done um, body armor carriers,
• 16:58
  Speaker 1: UM m r E, medical equipment, flashlights, and you know,
• 17:04
  Speaker 1: a whole bunch of stuff. Is this I've actually been
• 17:07
  Speaker 1: to Ukraine. I was right at the beginning of this war.
• 17:09
  Speaker 1: I was I was at the border of Poland in Ukraine.
• 17:12
  Speaker 1: But in eighteen I also supplied a whole lot of
• 17:16
  Speaker 1: armor to Ukraine and I was actually there delivering that. Interesting,
• 17:20
  Speaker 1: So I mean, is it for the Ukraine army as
• 17:23
  Speaker 1: for civilians, who knows for the military, it's the military
• 17:27
  Speaker 1: and border control. So what what how do you finance
• 17:32
  Speaker 1: all this stuff? I mean, um, are you looking at
• 17:36
  Speaker 1: raising money in public markets? Are you? Um? You know
• 17:40
  Speaker 1: taking out debt right now is a very interesting time
• 17:43
  Speaker 1: to I guess already have done that. You don't maybe
• 17:45
  Speaker 1: don't want to do it, um, as as as rates
• 17:48
  Speaker 1: go up and up, But what's the capital structure look like?
• 17:52
  Speaker 1: So espeto? UM. We we are cash positive. We were
• 17:58
  Speaker 1: not in lost. Uh, We're doing well. So a lot
• 18:01
  Speaker 1: of it is just you know, utilizing our own cash.
• 18:04
  Speaker 1: We worked great deals with some of her suppliers. We've
• 18:07
  Speaker 1: got great partners in the industry with great terms with that.
• 18:10
  Speaker 1: But we are looking at talking to some pees and vcs.
• 18:15
  Speaker 1: But the biggest thing that we're gearing up for is
• 18:18
  Speaker 1: at the end of three for early hopefully we will
• 18:23
  Speaker 1: be going public UM. Right now, we're just in the
• 18:26
  Speaker 1: prep mode forward. We're we have a firm we're working
• 18:29
  Speaker 1: with in New York, have taken hundreds of companies public um.
• 18:33
  Speaker 1: We've got a great board of advisors. UM. Heck, one
• 18:36
  Speaker 1: of the one of the guys on our board of
• 18:37
  Speaker 1: advisor is the guy who wrote the book, The I
• 18:39
  Speaker 1: P O Playbook. Uh, Steve cake Bread, he took sales
• 18:42
  Speaker 1: Force Pandora, yes public, he was their CFOs. So just
• 18:46
  Speaker 1: putting all the pieces in place right now and scale
• 18:49
  Speaker 1: to scale you want to really out? Yeah, absolutely. I
• 18:54
  Speaker 1: mean most of the companies that go public are are
• 18:57
  Speaker 1: in a loss right, but they have exponential growth. We're
• 19:00
  Speaker 1: a company that has been positive for years and we're
• 19:03
  Speaker 1: still have that exponential growth. Where did you guys come from?
• 19:06
  Speaker 1: I mean, where do you find people like you? I
• 19:08
  Speaker 1: mean doing a bullet resistant clothing I mean, I don't
• 19:13
  Speaker 1: even think I can even think of that. So you're
• 19:16
  Speaker 1: and you're a bit of a serial entrepreneur, aren't you?
• 19:18
  Speaker 1: After ships in ports? Hope, you're sending your ships in
• 19:22
  Speaker 1: ports That was a great business senior year of high school. Um,
• 19:30
  Speaker 1: that's all so, so basically you've been starting businesses since
• 19:33
  Speaker 1: you were a kid. Yeah. Especially I started freshman year
• 19:36
  Speaker 1: of college and senior year of colleges when we introduced
• 19:38
  Speaker 1: the America's first bullet resistant clothing line. Unbelievable. Why, I
• 19:44
  Speaker 1: mean party, Why wasn't just just drinking beer with the
• 19:48
  Speaker 1: rest of the college kids. I was, but I was
• 19:52
  Speaker 1: working at men'sware house full time, learning my business full time,
• 19:56
  Speaker 1: going to school full time. Um and uh it was.
• 20:00
  Speaker 1: It was tough. But University of Mary Washington, that's a hustle.
• 20:03
  Speaker 1: Where's the University Mary Washing? I know it's in Virginia.
• 20:05
  Speaker 1: We're in Virginia. You guys stayed right there. You're close
• 20:09
  Speaker 1: to d C. You're close to d C all those
• 20:11
  Speaker 1: government businesses. That's cool stuff. Alright, great figure build up
• 20:16
  Speaker 1: contacts on the Colorado to so Colorado's big. Colorados are
• 20:20
  Speaker 1: another tech side. So we have our offices in Colorado
• 20:23
  Speaker 1: and Charleston. Colorado is mostly you know, Space Force Missile
• 20:27
  Speaker 1: Defense System and APETO is in all of those nassas
• 20:30
  Speaker 1: for Missile Defense System. A boss Hayter when you make
• 20:35
  Speaker 1: your first billion remember remember us, Yes exactly, A boss
• 20:39
  Speaker 1: Hater CEO and president of ASPECTA. One of our more
• 20:42
  Speaker 1: interesting guest all right, want to bring in Anna Want
• 20:48
  Speaker 1: she's the chief US economist with Bloomberg Economics. I'm glad
• 20:51
  Speaker 1: we got her on today because I have some questions.
• 20:52
  Speaker 1: Will you go hit well? So all right, Anna, thanks
• 20:54
  Speaker 1: so much for joining us. We had this um piece
• 20:58
  Speaker 1: of news from snap You know, the owners of Snapchat,
• 21:01
  Speaker 1: they're firing twenty percent of their staff. And we've been
• 21:05
  Speaker 1: seeing stuff like this at a Silicon valley for a
• 21:08
  Speaker 1: month two months now, where they're either freezing, hiring or
• 21:12
  Speaker 1: reducing headcount by ten percent or twenty You know, from
• 21:17
  Speaker 1: social media to UH to UM, UH, crypto to software,
• 21:24
  Speaker 1: everybody seems to be slowing, stopping, or firing at the
• 21:28
  Speaker 1: same time. The JOLTS yesterday showed the biggest amount of
• 21:31
  Speaker 1: job openings, one of the highest on record, eleven point
• 21:34
  Speaker 1: eight million. What gives Yeah, I think definitely there has
• 21:39
  Speaker 1: been a tech recession UM, but techno technology technology sector
• 21:44
  Speaker 1: accounts for but just a small proportion of the labor
• 21:48
  Speaker 1: force UM. In JOLTS data yesterday, we saw that the
• 21:53
  Speaker 1: job openings UH increase has been concentrated in government and
• 21:58
  Speaker 1: UH low sort of the low income services sector. And
• 22:03
  Speaker 1: I think that seems to be consistent with what I'm
• 22:07
  Speaker 1: seeing outside in the real world too. That is, if
• 22:09
  Speaker 1: you just get out of the cities and go out
• 22:12
  Speaker 1: to you know, Brew America, there's still a lot of
• 22:15
  Speaker 1: a lot of UM for higher signs. People are still
• 22:18
  Speaker 1: small businesses, are still complaining about not being able to
• 22:22
  Speaker 1: to find workers. So I think two things could happen
• 22:27
  Speaker 1: at once in the in the economy, which is you
• 22:30
  Speaker 1: have these pockets of weaknesses, which is good to save
• 22:32
  Speaker 1: from the fetch perspective, but also that there's a strength
• 22:37
  Speaker 1: in the rest of the service economy. Matt, I don't
• 22:40
  Speaker 1: know how you and I made it to Bloomberg. I mean,
• 22:42
  Speaker 1: we are surrounded by really smart people. And it's got
• 22:45
  Speaker 1: her undergraduate degree economics and statistics, which is just the worst.
• 22:50
  Speaker 1: I was just luck lucky, but I thinks is the best.
• 22:53
  Speaker 1: I couldn't get away in it. It's just the worst.
• 22:55
  Speaker 1: And then she gets her PhD from the universe of Chicago.
• 22:57
  Speaker 1: I don't have no idea how we made it here.
• 23:00
  Speaker 1: But and I talked to us about a growth recession.
• 23:04
  Speaker 1: What is a growth recession? Or is that something you
• 23:06
  Speaker 1: just made up? Didn't we just see that? I don't know. Well,
• 23:10
  Speaker 1: I'm I'm on the same boat as you guys. Actually,
• 23:12
  Speaker 1: I have not seen this terminology at Berkeley or Chicago,
• 23:19
  Speaker 1: but apparently once I looked it up. What this means
• 23:23
  Speaker 1: is that it is positive growth that but it's not
• 23:27
  Speaker 1: positive enough to bring down unemployment rate. So unemployment rate
• 23:31
  Speaker 1: will still go up. UM. So I think it's just
• 23:34
  Speaker 1: a euphemism for soft landing UM. And you know, in
• 23:39
  Speaker 1: in the June's Summary of Economic projections, the median f
• 23:42
  Speaker 1: o MC members sees unemployment rate rising from you know,
• 23:47
  Speaker 1: three point six at that time to four point one
• 23:49
  Speaker 1: pc by the end of still very low, very low,
• 23:53
  Speaker 1: very low, but with positive GDP growth. So that is
• 23:57
  Speaker 1: the growth recession. I think that that would be consistent
• 23:59
  Speaker 1: with growth recession. That's just weird. Okay, what do we
• 24:04
  Speaker 1: call what just happened? We had contraction, no growth in
• 24:08
  Speaker 1: the first two quarters. And do you think we're going
• 24:10
  Speaker 1: to continue to see um, you know, back to back
• 24:13
  Speaker 1: quarters of contraction without calling it a recession. I mean,
• 24:17
  Speaker 1: it doesn't feel like a recession, does it unless you
• 24:20
  Speaker 1: are one in five people at snapchat. UM. I think
• 24:25
  Speaker 1: there's a big debate in the economic profession right now,
• 24:29
  Speaker 1: which is what is the real data and GDP. There
• 24:33
  Speaker 1: there are two measures of GDP. One is the from
• 24:36
  Speaker 1: the expenditure side, where you know C plus G plus
• 24:39
  Speaker 1: I plus net exports and that is showing two consecutive
• 24:43
  Speaker 1: quarters of negative growth. But the other measure, which is
• 24:47
  Speaker 1: based on summing the income and corporate profits. That's called
• 24:51
  Speaker 1: the gross domestic income that is showing positive growth in
• 24:56
  Speaker 1: the last two quarters. So usually the economists think that
• 24:59
  Speaker 1: the average of those two is the best gauge of
• 25:02
  Speaker 1: what's going on in the economy, and that will tell
• 25:05
  Speaker 1: you that, well, growth has stalled definitely in the first
• 25:09
  Speaker 1: half of this year, but it did not go negative.
• 25:12
  Speaker 1: And what's this what's this half look like? Are we
• 25:15
  Speaker 1: what's this quarter look like? What are we in right now?
• 25:18
  Speaker 1: I think the troth of consumer spending was around June
• 25:22
  Speaker 1: or early July, when gasoline prices was uh was very high.
• 25:27
  Speaker 1: And from high frequency data, I'm seeing that spending has
• 25:32
  Speaker 1: has been going back up again truck yesterday. And even
• 25:37
  Speaker 1: the housing market, Yeah, we are seeing these dramatic plunges
• 25:40
  Speaker 1: in home sales, but you know, if you look at
• 25:43
  Speaker 1: actual real time data, like I have the app red
• 25:47
  Speaker 1: fin on my phone, there has been just a lot
• 25:49
  Speaker 1: of pending and continguous Like the moment that houses comes on,
• 25:53
  Speaker 1: it's pending contingency. Good stuff an a long Next time
• 25:56
  Speaker 1: you're in New York, you are coming into our studio,
• 25:58
  Speaker 1: no questions ask all right, I think we're all gonna
• 26:03
  Speaker 1: learn a lot here. I know I am in this
• 26:05
  Speaker 1: next segment. Dr Luisa Marino joins us. She's president of
• 26:08
  Speaker 1: Defense Metals Corporation. That makes it sound so so serious,
• 26:13
  Speaker 1: I know, but that's why I want to go there.
• 26:14
  Speaker 1: So uh, Dr Marina, thank you so much for joining
• 26:17
  Speaker 1: us here. Tell us what Defense Metals Corporation is. What
• 26:20
  Speaker 1: do you guys do well? Defense Metals is a junior
• 26:24
  Speaker 1: mining company and we are in the process of developing
• 26:29
  Speaker 1: um mine, a rare earth mine, and rare earth is
• 26:33
  Speaker 1: is a critical material um for technologies and for the
• 26:38
  Speaker 1: defense sector. I thought rare earth was like a whole
• 26:41
  Speaker 1: group of minerals. It is. It is so rares. Uh.
• 26:46
  Speaker 1: They are the London Nights. They'll find at the bottom
• 26:48
  Speaker 1: of the the periodic table, and they're about seventeen elements.
• 26:54
  Speaker 1: And so the reason why they all grouped together is
• 26:57
  Speaker 1: that when you mind one effectively mining all of them,
• 27:00
  Speaker 1: because they tend to occur together. So where does one
• 27:05
  Speaker 1: mind for these? Are they in certain parts of the world?
• 27:08
  Speaker 1: And what are there like neodymium or prodium? Are you
• 27:12
  Speaker 1: you just pulled up the periodic table. I'm just looking
• 27:15
  Speaker 1: at the last seventeen I thought he had that memories
• 27:17
  Speaker 1: from hyd chemistry. Now, they are not very common. Most
• 27:22
  Speaker 1: people don't know about them. Like I said, they are seventeen.
• 27:26
  Speaker 1: Some of the most known would be, for instance, new
• 27:28
  Speaker 1: demium presidymium. They make the strongest known magnets um and
• 27:34
  Speaker 1: and they go into everything from speakers to too electric
• 27:39
  Speaker 1: mortars for electric vehicles and things like that, as well
• 27:42
  Speaker 1: as m right machines for for in medicine. So those
• 27:45
  Speaker 1: are very popular ones. But there's this prosium, there's lenten um,
• 27:49
  Speaker 1: there's therium. There's so many for so many different applications.
• 27:53
  Speaker 1: But they are so so so what's your focused that
• 27:56
  Speaker 1: I mean, it's this is something that is of uh
• 28:01
  Speaker 1: sort of national security importance because um otherwise, in order
• 28:06
  Speaker 1: to build the batteries we need or um, you know,
• 28:10
  Speaker 1: the medical equipment that we need, we have to rely
• 28:13
  Speaker 1: on China or other countries that we don't necessarily so
• 28:19
  Speaker 1: um so so so what are you what are the
• 28:21
  Speaker 1: one what are the use cases that you're focused on
• 28:24
  Speaker 1: with the stuff that you you're gonna mind, right, So,
• 28:27
  Speaker 1: like I said, when you mind one, you mind all
• 28:29
  Speaker 1: of them. So we tend to have the most important
• 28:31
  Speaker 1: ones for us. Definitely the new Demium, presidimium UM, some
• 28:35
  Speaker 1: other minds, mostly in China. They will have you know,
• 28:39
  Speaker 1: what we call the heavy arths, which are the least
• 28:42
  Speaker 1: uh common ones, the more the more difficult ones to find.
• 28:46
  Speaker 1: And those have even more scientific and and and and
• 28:50
  Speaker 1: you know, very specialized applications. UM. For instance, this podium
• 28:54
  Speaker 1: that's go into magnets as well, but those are for
• 28:57
  Speaker 1: magnets that need to be exposed to very high temperatures
• 29:01
  Speaker 1: for instance, UM. And so they are you right, um.
• 29:05
  Speaker 1: China is responsible for refining of all the earth in
• 29:11
  Speaker 1: the world, although the US does mine about fifteen um
• 29:18
  Speaker 1: of in our accounts for fifteen of the world mind production.
• 29:24
  Speaker 1: But he exports everything to China as well, but is processed,
• 29:28
  Speaker 1: so China controls effectively the supply chain for for for earth.
• 29:33
  Speaker 1: The world is dependent on China for that that if
• 29:36
  Speaker 1: they were that's not good. How do we diversify? Is
• 29:39
  Speaker 1: it possible toy away from that? Right? That's what Defense
• 29:44
  Speaker 1: Mental is trying to do. We're trying to to to
• 29:47
  Speaker 1: build this mind in in British Columbia and Canada and
• 29:50
  Speaker 1: and build a supply chain in North America. There are
• 29:54
  Speaker 1: a couple other projects some in Africa, UM, some in
• 29:58
  Speaker 1: South America, UM one or two in Europe. And you
• 30:03
  Speaker 1: know it's it takes time to develop that. So mining
• 30:06
  Speaker 1: is one part of it, and then there's different stages
• 30:10
  Speaker 1: of processing. You have to float to produce a munal concentrate,
• 30:13
  Speaker 1: which you do UNUS, but and then they haven't been
• 30:15
  Speaker 1: able to economically refine it and they are sending it
• 30:18
  Speaker 1: at a moment to to China. And so the rest
• 30:20
  Speaker 1: of the world has to find ways of economically refined
• 30:24
  Speaker 1: these these materials and the defense metals that that's what
• 30:27
  Speaker 1: we focus on doing. So where is the US government
• 30:31
  Speaker 1: in this and trying to diversify away from trying I
• 30:33
  Speaker 1: would think you would have a tremendous amount of government
• 30:36
  Speaker 1: support and incentives to try to diversify away from China.
• 30:40
  Speaker 1: How do you deal with the US government and maybe
• 30:43
  Speaker 1: some other governments. Why isn't the military just doing this
• 30:45
  Speaker 1: itself find the stuff, you know, kick people out of
• 30:48
  Speaker 1: their houses where it is, and then rip up the
• 30:51
  Speaker 1: ground and get it. It would be extremely expensive and
• 30:54
  Speaker 1: if every if everything else fails, UM, probably that's that's
• 30:59
  Speaker 1: that's the way to Oh. I mean, some of these
• 31:01
  Speaker 1: materials already very very expensive five hundred dollars per kilo,
• 31:05
  Speaker 1: thousand dollars per kilo UM. And so you know, if you,
• 31:10
  Speaker 1: if you, if we have an incident with China, for instance,
• 31:14
  Speaker 1: and these cars, the prices of these of these elements
• 31:17
  Speaker 1: will go through the roof, like they did back into
• 31:19
  Speaker 1: thousand and ten when there was a conflict between China
• 31:22
  Speaker 1: and Japan and they were, you know, effectively rumors that
• 31:25
  Speaker 1: China was going to halt exports too of rats to Japan,
• 31:30
  Speaker 1: which at that time was the second consumer, and prices
• 31:33
  Speaker 1: went up a thousand percent, two thousand percent. Linden in Syria,
• 31:36
  Speaker 1: which was two dollars went to two hundred and fifty
• 31:38
  Speaker 1: dollars per kilo. And that is used for instance for
• 31:40
  Speaker 1: oil refinery. By the way, where is this stuff? Where
• 31:43
  Speaker 1: is this stuff traded? Louis says it it's not a
• 31:45
  Speaker 1: lot of metals exchange right, Well, no, it's not really
• 31:49
  Speaker 1: traded um not yet. So you could see prices launch
• 31:53
  Speaker 1: Shanghai metals, UM and uh and and some other Asian
• 31:58
  Speaker 1: metals and in in you know, some some other websites,
• 32:02
  Speaker 1: but it's it's usually uh, you know, confidential contracts, different amounts,
• 32:09
  Speaker 1: some you know, it's it's not that large. It's not
• 32:11
  Speaker 1: like iron ore or copper. You know, there's only about
• 32:15
  Speaker 1: two eighty thousand tons produced around the world, and these
• 32:20
  Speaker 1: are really unique, very strong materials which with a small
• 32:25
  Speaker 1: amount of it you can get fantastic magnetic, electric, optical properties.
• 32:31
  Speaker 1: So you mentioned you're starting a mine in Canada. Give
• 32:34
  Speaker 1: us kind of the update there. Where are you What
• 32:36
  Speaker 1: are some of the challenges you're facing. How do you
• 32:38
  Speaker 1: find the stuff? Yea, how do you find How do
• 32:39
  Speaker 1: you know it was there? Yes, you know, it's started
• 32:44
  Speaker 1: a long time ago. I mean they had associated with
• 32:47
  Speaker 1: sometimes niobium and other elements, and the geological survey of
• 32:53
  Speaker 1: of of of Briach, Columbia was was looking at the time,
• 32:55
  Speaker 1: I believe for food for niobium, and they find out
• 32:59
  Speaker 1: that there was rares as well, and it was not
• 33:01
  Speaker 1: important for a long time until somebody find out, Okay,
• 33:04
  Speaker 1: now is the time for rats, and you start developing it.
• 33:06
  Speaker 1: So that happens a little bit. So you do find
• 33:09
  Speaker 1: um rats with sometimes associated with with uranium or or
• 33:15
  Speaker 1: autorium or other elements, and so historically we know more
• 33:20
  Speaker 1: or less where where they occur. The problem is not
• 33:22
  Speaker 1: so much to find them, but it's but it's to
• 33:24
  Speaker 1: develop them, is to ultimately find an economic way of
• 33:28
  Speaker 1: processing them. And so we have been very successful at
• 33:31
  Speaker 1: Defense Metals. So we have a unique deposit. We are
• 33:34
  Speaker 1: able to do one important thing, which is to produce
• 33:37
  Speaker 1: mintal concentrate first, which then makes the whole profits more.
• 33:41
  Speaker 1: All right, good stuff, A good stuff. Dr Louisa Marino,
• 33:43
  Speaker 1: President Defense Metals Corporation. You get a PhD and Material
• 33:47
  Speaker 1: science and mechanics from Imperial College, London. What do you
• 33:50
  Speaker 1: do when you become the president of Defense Medals Corporation.
• 33:58
  Speaker 1: Thanks for listening to the Bloomberg Mark Gets podcasts. You
• 34:01
  Speaker 1: can subscribe and listen to interviews of Apple Podcasts or
• 34:04
  Speaker 1: whatever podcast platform you prefer. I'm Matt Miller. I'm on
• 34:08
  Speaker 1: Twitter at Matt Miller three and on Fall Sweeney I'm
• 34:12
  Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
• 34:15
  Speaker 1: always catch us worldwide at Bloomberg Radio.