Latest / Bloomberg Intelligence / Quant Fund Just Went to 100% Cash: Cumberland's Kotok

Transcript

Quant Fund Just Went to 100% Cash: Cumberland's Kotok · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Waits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. We are joined by the one
• 0:23
  Speaker 1: and only David Kotalk, Chairman and Chief Investment Officer of
• 0:26
  Speaker 1: Cumberland Advisors. H really interesting right now to see bonds
• 0:32
  Speaker 1: continuing to rally even as we get better than expected
• 0:37
  Speaker 1: data out of China, and there seems to be a
• 0:39
  Speaker 1: growing amount of optimism that perhaps Europe is bottoming. And
• 0:43
  Speaker 1: I have to wander has the rally gone too far
• 0:46
  Speaker 1: too fast? Where are you on that? I think the
• 0:49
  Speaker 1: treasury rally in the United States that has flattened the
• 0:53
  Speaker 1: yield curve, inverted it. Some people would say you just
• 0:58
  Speaker 1: had a previous segment and talking about that, I think
• 1:00
  Speaker 1: it's gone too far too fast. And this whole notion,
• 1:04
  Speaker 1: now that we have futures pricing of rate cuts, how
• 1:11
  Speaker 1: recently did we have futures pricing rate hikes? What makes
• 1:17
  Speaker 1: futures pricings gospel? I don't see it, So I think
• 1:23
  Speaker 1: we're in our shop. You know, what do you think
• 1:26
  Speaker 1: is one thing? What do you do in a portfolio?
• 1:28
  Speaker 1: Was another. We are shortening duration, we are favoring the
• 1:32
  Speaker 1: front end. We've expanded the shorter maturity side of the barbell.
• 1:37
  Speaker 1: We're taking profits in bonds because they've galloped by so
• 1:41
  Speaker 1: many points, and we're shifting a portfolio to defense. So
• 1:47
  Speaker 1: in the high old market, that's also how to rally?
• 1:49
  Speaker 1: Do you see any value there? In which market is
• 1:52
  Speaker 1: in high I'm worried about credit. When you spend ten
• 1:57
  Speaker 1: years at zero interest rates, you buffer sensitivity, you you
• 2:03
  Speaker 1: eliminate this notion that there's credit risk. So you see
• 2:08
  Speaker 1: this spreading out a credit risk in spreads and then
• 2:10
  Speaker 1: it tightens right back up and people chase yield. And
• 2:14
  Speaker 1: chasing yield in the long run is a bad thing
• 2:18
  Speaker 1: to do. So in our shop, we're favoring higher grade,
• 2:21
  Speaker 1: not how you here's the problem, and this is something
• 2:25
  Speaker 1: that I think a lot of people are struggling with.
• 2:27
  Speaker 1: There are a lot of signs that were in late
• 2:28
  Speaker 1: cycle on every level, whether it's equities, whether it's risk
• 2:31
  Speaker 1: assets and credit. And the problem is is that that
• 2:34
  Speaker 1: can continue for a long time, right, and this would
• 2:37
  Speaker 1: actually be one of the best parts of the whole rally,
• 2:41
  Speaker 1: especially if there is no sort of disruptive factor. So, uh,
• 2:45
  Speaker 1: your your you look you have consternation. No, I don't.
• 2:50
  Speaker 1: I agree with you. A late cycle sweet spot two growth,
• 2:55
  Speaker 1: no excesses. It appears low inflation, low interest rates. Uh.
• 3:02
  Speaker 1: The markets ignore the geopolitical risk, it's there. They ignore
• 3:07
  Speaker 1: the narrative and volatility of politics, it's there. They ignore
• 3:12
  Speaker 1: Brexit in the charade we call the UK trying to
• 3:17
  Speaker 1: do something. I mean, markets are ignoring us. Well, why
• 3:22
  Speaker 1: there's a salve. The salve is constant monetary policy with
• 3:26
  Speaker 1: excess liquidity. And now in the United States that's normalizing.
• 3:31
  Speaker 1: In Europe they're gonna try in a change of regime
• 3:35
  Speaker 1: after drugging, to try to normalize interest rates up to zero.
• 3:41
  Speaker 1: So here's the question. Do you have a permanent free
• 3:45
  Speaker 1: lunch of infinite liquidity and therefore everything is wonderful all
• 3:50
  Speaker 1: the time, or is there some transfer that's taking place
• 3:56
  Speaker 1: between those who are borrowing long term at low interest
• 4:02
  Speaker 1: rates with some plan or no plan to ever pay
• 4:06
  Speaker 1: it back, and those who are trapped in a paradigm.
• 4:09
  Speaker 1: An institution, for example, that is forced to buy a
• 4:14
  Speaker 1: German government bond with part of its capital by law.
• 4:18
  Speaker 1: Is there a trade off and when it happens, we
• 4:21
  Speaker 1: don't know. Does it get ugly when it does? Maybe?
• 4:26
  Speaker 1: So when you get a massive rally like this, you
• 4:29
  Speaker 1: put some of it in the bank. You earn your
• 4:32
  Speaker 1: two percent on your cash in America, and you say,
• 4:34
  Speaker 1: you know what risk is rising, and I don't know
• 4:37
  Speaker 1: when it's gonna bite. So how much cash are you have?
• 4:40
  Speaker 1: You increased the allocation too well. In the bond side,
• 4:44
  Speaker 1: we're moving to the short duration. In the stock side,
• 4:47
  Speaker 1: we run four different types of stock portfolios and they
• 4:51
  Speaker 1: are in various positions in cash between fift and the
• 4:57
  Speaker 1: high turnover technical quantitative strategy went to a percent cash
• 5:03
  Speaker 1: last night last night. Please please elaborate how much was
• 5:09
  Speaker 1: it in cash before you sold out of everything. It's
• 5:11
  Speaker 1: a binary strategy, so it's either fully invested or it's
• 5:14
  Speaker 1: in cash, and it had it's got phasing, its intricate
• 5:17
  Speaker 1: math and the final trunch went to cash yesterday. David
• 5:23
  Speaker 1: Kotok cash and one of his funds that last night.
• 5:27
  Speaker 1: How often does it happen? Well, this strategy can sit
• 5:31
  Speaker 1: in cash for months till it has the right kind
• 5:33
  Speaker 1: of entry. It's it's quantitative driven. It doesn't have human
• 5:37
  Speaker 1: beings making decisions using their emotions. So no matter what
• 5:41
  Speaker 1: I think, it's the math that will was the last
• 5:43
  Speaker 1: time that it was in all cash um last time
• 5:47
  Speaker 1: it was in all cash was last um fall. Sometime
• 5:53
  Speaker 1: we had an entry after the summer sell off and
• 5:57
  Speaker 1: we went into the v drop in ash. So we
• 6:00
  Speaker 1: had a Swan song down and back. Interesting. So so
• 6:06
  Speaker 1: it's clear you think the FED has gone too far. Well,
• 6:08
  Speaker 1: I think I think the FED was remarkable. The FED
• 6:12
  Speaker 1: says we're data driven. The FED says we'll look at
• 6:16
  Speaker 1: data and if it changes, will change. And the FED
• 6:19
  Speaker 1: has said, okay, we're gonna pause for a while. That's
• 6:23
  Speaker 1: what the dots are all about. David Kotak, thank you
• 6:27
  Speaker 1: so much. I think we heard this was really interesting,
• 6:30
  Speaker 1: so interesting. We've you just never hear that going to
• 6:33
  Speaker 1: catch And it's a it's a binary strategy, to be clear,
• 6:37
  Speaker 1: which is what David Kodak was saying. But the idea
• 6:39
  Speaker 1: that right now things look a little bit overdone, even
• 6:45
  Speaker 1: when it comes to someone who doesn't have emotions exactly.
• 6:48
  Speaker 1: David Kotok, thank you so much. Thank it's a chairman
• 6:50
  Speaker 1: of Chief Investment officer of Complerent Advisors. Always a welcome
• 6:53
  Speaker 1: guest here in a Bloomberg Interactive Broker studio. Well, financial
• 7:11
  Speaker 1: technology or fintech is one of the hottest areas, not
• 7:15
  Speaker 1: only in technology but in financial services, and it is
• 7:18
  Speaker 1: impacting companies large and small across the spectrum. To help
• 7:22
  Speaker 1: us kind of dig into this issue, this issue, we
• 7:24
  Speaker 1: welcome Karen Mills. Karen is a senior Fellow at Harvard
• 7:27
  Speaker 1: Business School and she's a former Small Business Administration Administrator
• 7:31
  Speaker 1: for President Obama. Uh, Karen, thank you, and welcome to Bloomberg.
• 7:36
  Speaker 1: I really want to get a sense of is in
• 7:38
  Speaker 1: your book. In the book is entitled Fintech Small Business
• 7:41
  Speaker 1: in the American Dream. Is that your contention that financial
• 7:44
  Speaker 1: technology is a net positive or net negative for small businesses.
• 7:48
  Speaker 1: It's a huge positive for small business. In fact, I
• 7:50
  Speaker 1: think we're at a huge inflection point. You know, we
• 7:53
  Speaker 1: all talk about AI and fintech um and I think
• 7:58
  Speaker 1: one of the places that we're going to see huge
• 8:00
  Speaker 1: change is not in driverless cars, but it is in
• 8:03
  Speaker 1: small business lending. We're going to see the ability of
• 8:06
  Speaker 1: small businesses to have credit at the push of a button.
• 8:10
  Speaker 1: And the players in this are not going to be
• 8:12
  Speaker 1: just your old community bank. It's going to be Apple
• 8:18
  Speaker 1: and Amazon and Square and new fin techs and then
• 8:23
  Speaker 1: traditional places like JP Morgan are investing, you know, billions
• 8:28
  Speaker 1: of dollars literally in providing new services. So this could
• 8:32
  Speaker 1: be the game changer that small businesses need to get
• 8:36
  Speaker 1: the products and services that meet their needs. So here's
• 8:39
  Speaker 1: my question. We've had peer to peer lending that has
• 8:42
  Speaker 1: been going strong and then not so much over the
• 8:45
  Speaker 1: number of past number of years, we've had an increase
• 8:47
  Speaker 1: in online marketplaces for loans to those small businesses crop up.
• 8:52
  Speaker 1: Why have we not yet seen, uh, this sort of
• 8:55
  Speaker 1: crossing of the tipping point with respect to how much
• 8:59
  Speaker 1: this can help small businesses? And the book I talked
• 9:01
  Speaker 1: about the fintech innovation curve and you just described like
• 9:04
  Speaker 1: the first phase. In the initial part, we called it
• 9:07
  Speaker 1: the wild West. You know, we thought everything was going
• 9:09
  Speaker 1: to take off, and then take off was aborted because
• 9:14
  Speaker 1: the peer to peer lenders it turned out they weren't
• 9:17
  Speaker 1: actually solving that bigger problem. They were making a better
• 9:21
  Speaker 1: customer experience, but they were giving people the same product,
• 9:24
  Speaker 1: maybe at a higher price. So enter big tech and
• 9:28
  Speaker 1: then you've got Amazon and PayPal and Square starting to lend,
• 9:32
  Speaker 1: and then people rethought the whole experience. What happened is
• 9:37
  Speaker 1: that data technology changed so that you could suck up
• 9:41
  Speaker 1: big pools of data through a p I S and
• 9:43
  Speaker 1: now the process is going to be radically different. If
• 9:48
  Speaker 1: you want to understand what's inside a small business, it's
• 9:51
  Speaker 1: very opaque. You know, how do you know this business
• 9:54
  Speaker 1: is really making money? How do you figure it out?
• 9:57
  Speaker 1: You have some poor banker who spends three months sort
• 9:59
  Speaker 1: of figure ing it out and then they say, uh no.
• 10:02
  Speaker 1: So what if all of this went into an algorithm
• 10:06
  Speaker 1: and the lender could say right away yes or no,
• 10:10
  Speaker 1: and the small business could also at the same time
• 10:13
  Speaker 1: know what's going on in their business. So I think
• 10:16
  Speaker 1: take off. We're just at this inflection point and you're
• 10:19
  Speaker 1: going to see that takeoff you were looking for. Well,
• 10:21
  Speaker 1: how about if I think about this, the small community
• 10:24
  Speaker 1: banks have been to the backbone of lending too small
• 10:26
  Speaker 1: businesses across America. Are you getting a sense that some
• 10:29
  Speaker 1: of these smaller regional banks have the wherewithal to make
• 10:33
  Speaker 1: the investment, to get up the technology, to curve to
• 10:36
  Speaker 1: compete against what will be really tech driven lending to
• 10:40
  Speaker 1: small businesses. I'm a big fan of small banks and
• 10:43
  Speaker 1: community banks, and from my time at s b A
• 10:46
  Speaker 1: I saw how important they were to the economy. I
• 10:49
  Speaker 1: would not count them out. What I think is going
• 10:52
  Speaker 1: to happen, and one of my predictions is that if
• 10:55
  Speaker 1: we get the regulation right, data will be open. So
• 10:59
  Speaker 1: if you give yourself permission, your permissions, then anybody can
• 11:03
  Speaker 1: suck up that data. So the winners will be people
• 11:06
  Speaker 1: who can create these platforms, and banks large and small
• 11:10
  Speaker 1: they can acquire or use those platforms, and you can
• 11:14
  Speaker 1: use your banker for more real advice and counsel rather
• 11:17
  Speaker 1: than that sort of grinded out process of the loan.
• 11:21
  Speaker 1: So I think you should not count out the community banks.
• 11:24
  Speaker 1: They should stick around and wait for the fin techs
• 11:27
  Speaker 1: to give them the products they need and just partner
• 11:29
  Speaker 1: partner with them in the meantime. Though you did mention
• 11:33
  Speaker 1: the behemoths the Amazons of the world, it's really just
• 11:36
  Speaker 1: Amazon and Apple, I guess, I guess Google, but I
• 11:40
  Speaker 1: haven't really heard them getting in on this, but Amazon
• 11:42
  Speaker 1: really stands out to me, especially because so many of
• 11:45
  Speaker 1: these small businesses may use the platform to actually sell
• 11:48
  Speaker 1: their goods. And I'm just wondering, when you talk about
• 11:52
  Speaker 1: sharing this data and allowing uh, you know, potential lenders
• 11:57
  Speaker 1: to see into the inner workings of these small business
• 12:00
  Speaker 1: is to give more confidence to giving them loans. I
• 12:02
  Speaker 1: assume that's what you're talking about with the data. Um,
• 12:04
  Speaker 1: Amazon has a tremendous leg up because they can see
• 12:07
  Speaker 1: the flows themselves as they lend to their businesses. I mean,
• 12:11
  Speaker 1: they could really consolidate this business. No. If Amazon wanted
• 12:15
  Speaker 1: to play like in many businesses, they could make a
• 12:18
  Speaker 1: huge mark. And they're already doing three billion or so.
• 12:21
  Speaker 1: And one of the interesting things with Amazon is are
• 12:24
  Speaker 1: they going to make the choice to use their balance
• 12:26
  Speaker 1: sheet to really enter this market? So far they haven't.
• 12:31
  Speaker 1: And Apple when they came in the market, they partner
• 12:33
  Speaker 1: with Goldman Sachs. So I think that data is key
• 12:37
  Speaker 1: to the decision making. But if we get more open
• 12:40
  Speaker 1: access to data, if you could own the stream of
• 12:43
  Speaker 1: information in your bank account and your Amazon flow, and
• 12:47
  Speaker 1: you could make it funnel up into a fintech. Then
• 12:50
  Speaker 1: that takes away some of their monopoly power. Why haven't
• 12:53
  Speaker 1: they used their balance sheet? You know, maybe they have
• 12:56
  Speaker 1: too many opportunities. They've got so many things that they're doing.
• 12:59
  Speaker 1: I actually they have asked them this question, and I
• 13:02
  Speaker 1: know that they are thinking about it, they're working on it.
• 13:04
  Speaker 1: But one reason is that small business never seems to
• 13:08
  Speaker 1: be the priority. First of all, people look at the
• 13:11
  Speaker 1: consumer market, and then small business is like the poor
• 13:14
  Speaker 1: cousin that gets the dribs and drabs. One of the
• 13:17
  Speaker 1: things I think will happen is that somebody will figure
• 13:20
  Speaker 1: out how to make a small business focus bank that
• 13:23
  Speaker 1: has different products, different services, and just maybe even a
• 13:28
  Speaker 1: vertical bank just for restaurants or just for dry cleaners,
• 13:32
  Speaker 1: and that way they have the expertise and I think
• 13:35
  Speaker 1: they will clean up. I think that's a way to
• 13:37
  Speaker 1: win and invest as more technology comes into banking. Is
• 13:41
  Speaker 1: the regulatory framework that we have in this country right
• 13:43
  Speaker 1: now set up to really regulate it properly in your opinion? Well,
• 13:46
  Speaker 1: the short answer to that is no, and this longer
• 13:49
  Speaker 1: answer is absolutely no. The regulatory system in this country
• 13:53
  Speaker 1: is what I call spaghetti soup. There are seven regulators
• 13:57
  Speaker 1: who oversee small business lending, and in the midst of
• 14:02
  Speaker 1: that there's overlapping, there's confusion. A lot of people say, well,
• 14:06
  Speaker 1: let's just get rid of all that regulation and then
• 14:09
  Speaker 1: everything will flow in community banks will come back. But
• 14:12
  Speaker 1: that's actually not the answer. It's not less regulation. It's
• 14:15
  Speaker 1: of course smart regulation. That means that the new regulations
• 14:21
  Speaker 1: need to think about what's in the black box. Who
• 14:24
  Speaker 1: owns the data? What if a small business gets a rejection,
• 14:28
  Speaker 1: can they see what went into the algorithm? How are
• 14:32
  Speaker 1: you going to figure out if there's a discrimination and
• 14:35
  Speaker 1: disparate impact. So I think the regulatory questions get thornier.
• 14:39
  Speaker 1: Karen Mills, We love having you on. Thank you for
• 14:41
  Speaker 1: being with us. Delighted to be here. Karen Karen Mills
• 14:45
  Speaker 1: a Senior Fellow at the Harvard Business School, former small
• 14:48
  Speaker 1: Business administrator for President Obama from two thousand nine through two,
• 14:53
  Speaker 1: and author, most importantly of a new book, Fintech, Small
• 14:57
  Speaker 1: Business and the American Dream dig into some of these questions. Well.
• 15:17
  Speaker 1: The news this morning is that black Rock is launching
• 15:19
  Speaker 1: a massive overhaul of its leadership to help navigate mounting
• 15:23
  Speaker 1: challenges across the asset management industry. From global expansion to
• 15:27
  Speaker 1: pressure on fees. To help us dig deeper into this story,
• 15:30
  Speaker 1: we welcome Annie Massa and he's a Bloomberg Finance reporter.
• 15:33
  Speaker 1: She joins us in our Bloomberg Interactive Brooker studio. Any
• 15:36
  Speaker 1: thanks so much for joining us. Why do you think
• 15:39
  Speaker 1: black Rock is doing this now? What is really changing
• 15:42
  Speaker 1: their business? I think that one of the key themes
• 15:45
  Speaker 1: that they're trying to address with this leadership change is
• 15:48
  Speaker 1: the desire to grow globally. So they're the world's largest
• 15:52
  Speaker 1: asset manager already, but a lot of their revenue is
• 15:55
  Speaker 1: focused in the America's region, and Larry think Um black
• 15:59
  Speaker 1: Ocksy has made a big point of how he wants
• 16:02
  Speaker 1: to keep branching out the business and expand, especially in
• 16:06
  Speaker 1: regions like China and um In this UH News this morning,
• 16:10
  Speaker 1: Latin America is a big focus as well. So the
• 16:13
  Speaker 1: question that I have is how much is this a
• 16:17
  Speaker 1: leadership issue with or issue but a bit of positive
• 16:21
  Speaker 1: sign that black Rock is being proactive and trying to
• 16:24
  Speaker 1: keep its position as the world's biggest asset management and
• 16:27
  Speaker 1: how much is this a response and a reflection of
• 16:29
  Speaker 1: the challenges in the broader asset management industry. With shrinking
• 16:33
  Speaker 1: fees across the board, with the shift to passive and
• 16:37
  Speaker 1: just the increased competition. Yeah, asset managers are under a
• 16:41
  Speaker 1: lot of pressure. As you mentioned, fee pressure is one
• 16:43
  Speaker 1: of the biggest challenges I think, and especially the large
• 16:47
  Speaker 1: asset managers have just been locked in this UM grinding
• 16:49
  Speaker 1: competition over fees. But I mean one solution to that
• 16:53
  Speaker 1: is to develop client relationships in new places and and
• 16:57
  Speaker 1: try to take on more clients UM globally. So I
• 17:01
  Speaker 1: think that that's part of why they're why they're doing
• 17:04
  Speaker 1: this now UM as a way to address UM that
• 17:07
  Speaker 1: so is the expectation Annie that as they tried to
• 17:10
  Speaker 1: develop new businesses maybe diversified geographically, that we may see
• 17:14
  Speaker 1: black Rock, they're already the largest globally, may even get
• 17:17
  Speaker 1: try to get bigger via M and A. Definitely UM.
• 17:20
  Speaker 1: They've been pursuing UM some deal making globally to to
• 17:25
  Speaker 1: try and advance those goals. And one other thing I'll
• 17:28
  Speaker 1: add on on the fee side is they're trying to
• 17:31
  Speaker 1: grow their alternatives business as well. And so while you
• 17:36
  Speaker 1: see this expansion globally, you're also seeing an expansion in
• 17:40
  Speaker 1: terms of the types of offerings that they have for clients,
• 17:43
  Speaker 1: and the alternatives has has been a big focus for them.
• 17:45
  Speaker 1: Let's dig into what alternatives is. Are you talking about
• 17:48
  Speaker 1: private equity and distressed dead hedge funds and things like that.
• 17:51
  Speaker 1: That's exactly right. So one example that we just reported
• 17:55
  Speaker 1: on this week is black Rock has this long term
• 17:58
  Speaker 1: private capital vehicle. It's kind of like a private equity
• 18:01
  Speaker 1: type vehicle that they announced last year. So they've secured
• 18:04
  Speaker 1: their first round of funding for this UM. They didn't
• 18:08
  Speaker 1: reach their goals yet. They want to raise as much
• 18:11
  Speaker 1: as ten to twelve billion UM for this vehicle. They've
• 18:14
  Speaker 1: got about UM two point seven five billion already. What
• 18:17
  Speaker 1: does it say that that it's taking longer than they
• 18:19
  Speaker 1: had expected to raise the money for this. It's a
• 18:22
  Speaker 1: challenging environment and it's not exactly the type of arena
• 18:26
  Speaker 1: that you can arrive in and um, you know, just
• 18:30
  Speaker 1: take over completely. It won't happen in the blink of
• 18:32
  Speaker 1: an eye. UM. So it's taking a bit longer than expected.
• 18:36
  Speaker 1: But it shows, I mean, especially with the reorgan today,
• 18:39
  Speaker 1: it shows that they've got a lot of focus on
• 18:41
  Speaker 1: this and and they're trying to like meaningfully grow UM
• 18:44
  Speaker 1: in outside of their gigantic index business. So any does
• 18:48
  Speaker 1: is also this management overhaul Today's is also addressed maybe
• 18:52
  Speaker 1: succession issue for Larry Fink. Are we kind of setting
• 18:55
  Speaker 1: up a two horse race here for to succeed Larry.
• 18:59
  Speaker 1: It's it's more than two horses. It's actually a whole stable. UM.
• 19:03
  Speaker 1: But today today, specifically, we've got UM a couple a
• 19:07
  Speaker 1: couple of the people that have been widely seen as
• 19:09
  Speaker 1: in the running. We're in play here, so especially Mark
• 19:12
  Speaker 1: McComb UM. They've created a new role for UM of
• 19:15
  Speaker 1: Chief Client Officer UM. But there are several people in
• 19:20
  Speaker 1: the running. And Larry think has actually said that he
• 19:23
  Speaker 1: likes to UM look at management this way instead of
• 19:27
  Speaker 1: just having one air apparent, have a whole bunch of
• 19:30
  Speaker 1: people in UM, these higher up roles, shuffle them around
• 19:34
  Speaker 1: and UM, you know, leadership is kind of about the
• 19:36
  Speaker 1: dynamics UM interpersonally that happened there. Does this reorganization include
• 19:42
  Speaker 1: further layoffs in addition to the five hundred announced cuts
• 19:45
  Speaker 1: that they've already made this year? The cuts that were
• 19:47
  Speaker 1: announced earlier this year, UM are all that we know
• 19:50
  Speaker 1: of right now. UM, But yeah, it is important to
• 19:53
  Speaker 1: note that with the expansion and the reshuffling. Um there
• 19:58
  Speaker 1: there were all there were also those massive headcount cuts
• 20:01
  Speaker 1: that came early in January. So anyways, this overall black Rock,
• 20:05
  Speaker 1: are they how profitable are they right now? I'm trying
• 20:08
  Speaker 1: to get a sense of whether this is you know,
• 20:09
  Speaker 1: coming from a position of strength or they're just like,
• 20:11
  Speaker 1: oh boy, our business is really in trouble. Well, I
• 20:14
  Speaker 1: mean they are the world's artist asset manager. They have
• 20:17
  Speaker 1: the biggest ETF business in the world. So I wouldn't
• 20:20
  Speaker 1: say it would be I think a stretch to say
• 20:23
  Speaker 1: that they're um under tons of pressure there, but I
• 20:27
  Speaker 1: mean asset management changes all the time. This is a
• 20:30
  Speaker 1: business that for thirty years has been you know, growing
• 20:33
  Speaker 1: through acquisition and now I think, um, you know, the
• 20:36
  Speaker 1: global focus is really important to them, um as they
• 20:40
  Speaker 1: try to kind of chart the next um, you know, expansion.
• 20:44
  Speaker 1: Annie Massa, thank you so much for joining us. Annie
• 20:46
  Speaker 1: Massa covers black Rock and asset management for us here
• 20:50
  Speaker 1: at Bloomberg joining us and our Bloomberg Interactive Brokers Studios. Paul,
• 21:10
  Speaker 1: we talk a lot about five G and how it
• 21:13
  Speaker 1: can transform the entire communications and frankly uh technological landscape.
• 21:18
  Speaker 1: Four nations. Certainly the U, S and China have been
• 21:22
  Speaker 1: sort of facing off in this battle for five G supremacy.
• 21:27
  Speaker 1: Joining US now is Meredith Meredith at Well Baker c
• 21:31
  Speaker 1: t I, a president and CEO former Commissioner of the
• 21:34
  Speaker 1: f CC. She was appointed by President Barack Obama in
• 21:37
  Speaker 1: two thousand nine, serving on the f c C until
• 21:40
  Speaker 1: two thousand and eleven. Meredith, thank you so much for
• 21:43
  Speaker 1: being with us. So you're saying that you think the
• 21:47
  Speaker 1: US has actually started to take the lead with the
• 21:50
  Speaker 1: race for five G technology, please explain well, first of all,
• 21:55
  Speaker 1: Lisa and Paul, thanks so much for having me. I'm
• 21:56
  Speaker 1: pleased to be with you. Guys, Um and um, what
• 21:59
  Speaker 1: are our stages is? We're just releasing a paper today
• 22:02
  Speaker 1: from Analysis Recun that says that, you know, a year ago,
• 22:05
  Speaker 1: China and South Korea led the five G race, but
• 22:08
  Speaker 1: the US was close behind, and really because of the
• 22:11
  Speaker 1: quick actions of our administration and the FCC and Congress
• 22:15
  Speaker 1: were tied in we're tied with China. Overall. US is
• 22:19
  Speaker 1: first in private investment, and we're first and high and
• 22:22
  Speaker 1: low band availability, but overall we're tied with China. So again,
• 22:27
  Speaker 1: what are really the metrics that you define to say
• 22:29
  Speaker 1: who's winning or losing, because it's my understanding that not
• 22:34
  Speaker 1: only were we be behind China, but we were well
• 22:36
  Speaker 1: behind China. Well, the US leads commercial deployments, and we'll
• 22:40
  Speaker 1: have twice the number of other nations by the end
• 22:43
  Speaker 1: of twenty and remember that China won't have a single
• 22:47
  Speaker 1: deployment by the end of the year. We're looking at
• 22:49
  Speaker 1: having over ninety deployments. All right. So the reason why
• 22:53
  Speaker 1: one reason why we're raising that is because we spoke
• 22:56
  Speaker 1: with a couple of weeks ago, we spoke with Susan Crawford,
• 22:58
  Speaker 1: who's a Harvard law professor and a former special assistant
• 23:02
  Speaker 1: during the Obama invest administration as well. Uh, and she
• 23:05
  Speaker 1: just wrote a book saying the coming Tech Revolution and
• 23:08
  Speaker 1: why America might miss it, about how the US is
• 23:10
  Speaker 1: profoundly behind in five G I'm just wondering, you know, how,
• 23:15
  Speaker 1: how could you give us some confidence as you know
• 23:19
  Speaker 1: that that that what you're saying is is more accurate. Um, well,
• 23:23
  Speaker 1: I mean the metrics of the paper, certainly the investment
• 23:26
  Speaker 1: of our companies is um you know, uh, three hundred
• 23:31
  Speaker 1: it's gonna add you know, the jobs and the numbers
• 23:33
  Speaker 1: that it is going to add to the economy. It's
• 23:36
  Speaker 1: three billion dollars. You talked about the the UM what
• 23:40
  Speaker 1: is going to bring to you know, all all of
• 23:44
  Speaker 1: the United States and our numbers or three and a
• 23:47
  Speaker 1: hundred one point eight million new jobs. UM. We look
• 23:51
  Speaker 1: at what the companies are investing. And if you look
• 23:53
  Speaker 1: at A T and T and Verizon the top investing
• 23:56
  Speaker 1: companies in the country, UM, and so what they are
• 23:59
  Speaker 1: willing to invest, what they have invested. After the administration
• 24:03
  Speaker 1: had tax reform, and after the FCC lowered the barriers
• 24:06
  Speaker 1: for entry for citing these new small cells, companies are
• 24:11
  Speaker 1: quadrupling the number of small cells that they're installing. So
• 24:14
  Speaker 1: I think not only are we looking at as a
• 24:16
  Speaker 1: global race, we have a race going on here in
• 24:18
  Speaker 1: the United States as to which company is going to
• 24:20
  Speaker 1: be first for five G deployments. And um, they're they're
• 24:24
  Speaker 1: engaged in a battle. I guess that there's a question
• 24:26
  Speaker 1: can the US gained supremacy with five G without the
• 24:30
  Speaker 1: government actually financing some of this? Does it have to
• 24:33
  Speaker 1: be all driven by corporate spending? Well, the free market
• 24:37
  Speaker 1: is policies of what have made the disference in our
• 24:40
  Speaker 1: winning four G and I but from every indication that
• 24:43
  Speaker 1: we see it's going to make the UM difference in
• 24:46
  Speaker 1: five G. So UM, we don't we feel like five G.
• 24:52
  Speaker 1: We are on a great path for five G right
• 24:54
  Speaker 1: now and we don't need anything except for some more
• 24:58
  Speaker 1: midband spectrum, which is the last ask key to the
• 25:00
  Speaker 1: piece of the five G puzzle for the carriers. Speaking
• 25:03
  Speaker 1: with Meredith at well Baker c t I, a president
• 25:06
  Speaker 1: and CEO on five gene and deployment of five G
• 25:09
  Speaker 1: in the US. So Meredith, maybe just you know, really
• 25:12
  Speaker 1: a basic point here maybe for our listeners is just
• 25:14
  Speaker 1: explain why five G is important. Yeah, I think that's
• 25:19
  Speaker 1: that's great. To take it up a step. UM, five
• 25:21
  Speaker 1: G is the next generation of wireless services. It's going
• 25:24
  Speaker 1: to be a hundred times faster, it's going to support
• 25:27
  Speaker 1: a hundred times more devices, and it's importantly gonna unlock
• 25:32
  Speaker 1: real time applications, meaning that there's no lag time. So
• 25:35
  Speaker 1: when we talk about you know, uh, telemedicine, when we
• 25:39
  Speaker 1: talk about autonomous cars, this is really what can transform that. UM.
• 25:44
  Speaker 1: It's gonna really every industry is going to be transformed,
• 25:47
  Speaker 1: from healthcare to education UM, and and really it's going
• 25:51
  Speaker 1: to foster new industries of the future, from augmented reality
• 25:54
  Speaker 1: to artificial intelligence. When we rolled out the four G technology,
• 25:58
  Speaker 1: we didn't know what we were rolling out. We didn't
• 26:01
  Speaker 1: know that we were going to create a sharing economy
• 26:04
  Speaker 1: and companies like Uber. So while we can see and
• 26:07
  Speaker 1: we're starting to see the real time case scenarios um
• 26:11
  Speaker 1: in certain certain um inventions that we're seeing different entrepreneurs
• 26:16
  Speaker 1: in the five G world, we still don't exactly know
• 26:19
  Speaker 1: what what it will spark and what it will mean
• 26:22
  Speaker 1: to the entire economy. But we do know. We do
• 26:25
  Speaker 1: know it's the platform for tomorrow's economy, and that's that's
• 26:28
  Speaker 1: why every nation wants to lead in five G. One
• 26:31
  Speaker 1: question is, you know, if it is setting out the
• 26:33
  Speaker 1: platform for the new economy, why shouldn't there be sort
• 26:37
  Speaker 1: of some sort of oversight, like the utility kind of
• 26:41
  Speaker 1: structure for this, given that it is something that will
• 26:45
  Speaker 1: be and is already so uh fundamental. Well, that's a
• 26:51
  Speaker 1: good question, and from a farmer regulator's point of view,
• 26:53
  Speaker 1: is certainly something that I have have looked at. But
• 26:56
  Speaker 1: it is the free market policies and it is the
• 26:58
  Speaker 1: innovation of this economy me that moves so quickly that
• 27:01
  Speaker 1: it's very hard for some of oversight like utilities. Um.
• 27:06
  Speaker 1: You know, we people get new phones every two years,
• 27:09
  Speaker 1: the network changes every three months. Um so I think. Um,
• 27:13
  Speaker 1: we in the United States have come to a regulatory
• 27:16
  Speaker 1: perspective that when something goes wrong, we will fix it,
• 27:20
  Speaker 1: but we don't build a house of regulation around something
• 27:23
  Speaker 1: just in case it happens. Understood, Meredith at well Baker,
• 27:27
  Speaker 1: Thank you so much. Meredith as a c t I
• 27:29
  Speaker 1: A president and CEO, a former commissioner at the FCC,
• 27:32
  Speaker 1: I think with some interesting data coming out of the
• 27:36
  Speaker 1: c t I A suggesting that the US is deployment
• 27:38
  Speaker 1: of five g H is not behind those of some
• 27:43
  Speaker 1: of the Asian countries like China and create but in
• 27:45
  Speaker 1: fact maybe closer to you, maybe more on part Thanks
• 27:48
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 27:51
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
• 27:53
  Speaker 1: whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter
• 27:57
  Speaker 1: at pt Sweeney. Lisa bram Woyds I'm on Twitter at
• 28:00
  Speaker 1: Lisa Abramo. It's one before the podcast. You can always
• 28:02
  Speaker 1: catch us worldwide on Bloomberg Radiom