Bloomberg Markets Full Show (11/10/2021)

Bloomberg Markets Full Show (11/10/2021)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. Wednesday the 10th 3:00 p.m. in London 10:00 a.m. in New York 30 minutes into the trading day in the United States from London I'm Guy Johnson Alix Steel of course over in New York. Welcome everybody to Bloomberg Markets. Alex we've got hot inflation and hot trucks to deal with today. Yeah I'm really looking forward to the revealing IPO. I mean this is the biggest IPO of the year and we're going to be talking to the CEO guy. That's gonna be super interesting. I think the question is going to become kind of how we can grow the company how the company can grow and what that natural cap is going to be in terms of producing these amazingly looking very cool trucks by the way. Yeah we're going to take it to LJ

Scavenge pretty shortly that's gonna be an interesting conversation. They do look cool. The question is will they be able to produce enough of them. That's always been the challenge for Tesla but this is a company that has huge backing. You really have to look at the Amazon backing of Revere and to appreciate that there are certain inbuilt advantages for this company going forward in that order that effectively they have with Amazon going forward is going to be a huge part of that market to your side. We're looking at a flatter curve on the back of that inflation story. Yeah I mean some real real chunky move is if I can steal a word from your vocabulary here and we can all party like it's 1992. It's a good time to party. I had some pretty good hairstyling back then. So the hot inflation is having the expected effect on the market.

It was harder than expected. The S&P is a little bit weaker here trading a teeny tiny bit heavy. But the utilities health care real estate for example they're leading the upside. No surprise because a look at what's happening here to the bond market a deep sell off in the front of the curve as the market rewrites in terms of rate hikes for the Fed adding a little bit more rate hikes and the back end around 20 24 yields up by about 7 basis points. And obviously they're having a serious flatness. You have a bear flattened around the curve. You're at ninety eight basis points at one point on the 2s and the 10 no surprise dollar index getting a boost of three tenths of one percent. If you hike if it's more hawkish that is

supposedly better for the US dollar and gold finally getting a bit of that inflation hedge. It's been a wishy washy unreliable boyfriend when it comes to being inflation has but now it's up a solid twenty eight dollars as it feels like maybe it were higher than we thought. And maybe it's a little stickier than we thought as well. Guy Yeah. Silver Also on the move this morning to the precious metals complex steady reacting to this data. So let's talk about the data. U.S. inflation absolutely surging last month with prices rising more than expected the fastest pace in more than 30 years. Back to IBEX hairstyle.

In 1990 I just left school. I was traveling from one end of Africa to the other. Bloomberg's international economics and policy correspondent Mike McKee has traveled far and wide as well. He is out in San Francisco to walk us through this data. Mike the number is horse. How will the Fed react. Well they're on a tough position guy because at this point the

Fed is insisting that this is all going to go away but they can't tell you when. And then every month they get a higher and higher number to deal with. We'll be talking with the San Francisco Fed president Mary Daly about that coming up on this show. But you're right. 1990 was the last time we saw CPI inflation this hot. We wonder what Alex's hairstyle looked like then. Nineteen ninety one the last time core was this high. The headline pushed up by the usual suspects. Gasoline and food.

Gasoline up six point one percent. Food up one percent. Now this is food at restaurants and you can see they are going up up up. And that's the thing that people notice. Now the Fed's going to look at the core rate but the core rates getting pushed up as well. One of the problems they have is that housing is starting to contribute to inflation. It takes a while because of the way

it's calculated for housing to work its way into the CPI but it is now up three point one percent and rising on the year. And that's not something that's going to go away quickly after we've seen all these reports from homebuilders that they're selling houses as fast as they can. So you're looking at what the Fed has left and they have inflation well over target by a CPI measure not as much by the PCC that they follow but the P.C. is probably going to rise too like this. What do they do about it.

It's a supply problem. Is it a demand problem too. Can they slow the economy by raising rates. What kind of pressure is Wall Street going to put on. Those are all questions that really need an answer. We'll ask Mary Daly about that. I'm not sure that the president of the San Francisco Fed will have a view on Alex's hair in 1990. But we'll get the other questions answered. Oh my

God. Three L's here. It was really cool. I showed you later. All right Mike Mickey thanks a lot. We'll be talking to Mary Daly at the top of the next hour. An exclusive conversation with the San Francisco Fed president. Meanwhile Senator Joe Manchin of West Virginia is tweeting about the risks of inflation. A recent tweet he says by all accounts

the threat posed by record inflation to the American people is not transitory. And it's getting instead worse up in the grocery store to the gas pump. Americans no inflation tax is real and D.C. can no longer ignore the economic pain Americans feel every day. Let's get more insight now in the NASDAQ is chief financial economist. And Andy you're an economist. You're going to tell me ignore things like food ignore things like energy. But in the

real economy those things make a difference and put the Fed in a real bind. What's your take. I'm not going to tell you to ignore it because I do think while you know you could certainly make a case that there's a transitory component to these price pressures. We don't know when that goes away. But even when you go back to the labor market we think that the labor market and what we're seeing in the wage dynamic unit labor cost dynamic explains up to a board a percentage point of this elevated inflation. So even if we assume that these bottlenecks are resolved whenever that might be presumably in the middle of next year I just don't think we're going back to 2 percent inflation. You know the best case scenario is that maybe we go back to two and a half 3 percent range. That's what that's what. Wages are telling us at the moment. What comes next. On the inflationary train NSA we've clearly had

the effect of the supply bottlenecks energy prices are going up. We're certainly seeing that around the world. But energy prices feed into food price inflation. They're a huge input into food price inflation. We are going to see a return of airfares as an expensive item and a rising item. What comes next in terms of keeping this inflationary narrative alive. Do you think.

So I think the next three to six months we're going to see continued pressure. You know it's just going to be it's just gonna be hot basically in the rental market. As you know you talked about more pressure there when you look at market rents indices. They've been rising at a pace that's consistent with not point fought increases in rents and only on a CPI but something more consistent with point seven maybe even point eight. So there's more upside there. Core goods inflation. I mean we're this is the beginning of the holiday shopping season right. Supply is absolutely constrained

and seasonal demand is going to go much higher by December. So presumably those shortages of products will become even more intense. And then you're absolutely right. I think the travel related sectors which are clearly bottoming could experience even more pressure as well. We just lifted the ban on European tourists a few days ago. And so. So that that should lead to a pickup in demand. So I think the next three to six months you have to expect more pressure. And I think there's a good chance that we actually see a five handle on core CPI as early as December.

Wow. Now that's going to be seriously hot headed into 2022. So the market currently is pricing another 13 basis points of rate hikes by mid 2023. Is the market too complacent in the. So this is where it gets tricky I think with the lift off because the Fed obviously has laid out a what they call a very stringent test that talks not just about inflation but the employment situation. And and I think we can all agree that we're not quite at maximum employment yet. It's a debate where maximum employment is at the moment. And I think that getting back to the pre pandemic employment to population ratio is just a too ambitious of a goal that the Fed will probably have to abandon at some point. I just don't think they're ready to throw in the towel anytime soon. I think there is another response that the Fed

that the Fed can go toward and that's just accelerating the taper. I think it's a much more logical response when we're not quite there on the labor market but clearly there on inflation we're gonna have another CPI report by the December FOMC meeting. It's probably going to be another hot one. And I think there is a growing probability that at that meeting the Fed accelerates the rate of tapering maybe even double that which would put them on track to finish by March as opposed to June. And you wonder whether therefore that then brings forward the first rate hike. And that's her. This is a hot subject. It is going to be debated widely. Thank you very much indeed for

giving us your thoughts. And Ann McCosker Jeffries chief financial economist. Coming up rebellion hitting the public markets today. The company is suddenly looking to make a dent in the evey space. Scavenge really CEO. Joining us next for an exclusive interview. This is Bloomberg. I'm not sure what the hottest number is today. It's under the inflation print. We just had or it's the numbers I'm seeing on revision. The indicator price has gone from 110 to 120 within the last couple of minutes. It is a let's call it a circa 12

billion dollar IPO. It's absolutely massive. The prices indicated that it could be super hot as it comes out of the gate. We think that's going to happen somewhere around 12 Eastern at Ludlow is with the CEO of Revision. Ed what a day. Yeah. What an incredible day what a incredible indication of the opening price. RJ scavenge revision. Founder and CEO. Congratulations. Let's just kick it off by asking what does today mean for revision and for revisions future.

Yeah it's an exciting day for us. This is this is the result of lots and lots and lots of effort from a variety different folks across the whole business. And for us we've spent years and years putting this together. Really what's so exciting is seeing such a diverse group of people with diverse backgrounds and interests really coming together to create these products. And you're standing here today looking out at the teams as we ring the bell was quite emotional seeing seeing somebody's passion faces. It is really powerful. So we're we're excited. And of course this is the first step of many with us to becoming a public company and not having the opportunity to really accelerate a lot of errors and focus in terms of scaling the impact that we can have with our products and with what we're building.

Right. To reiterate what's on the screen RJ really an indicator to open at one hundred and twenty dollars a share off the pricing at 78 dollars overnight. That's a big valuation. We'll do the math in due course. What is it about revisions technology and the company that justifies that valuation. I think as you look at our business there's really two arms. We have a consumer side of the business and really the tip of the spear. The first products we often think about is the products that

will open the brand umbrella are are ones you know are with us. And they're really going into a segment that that hasn't seen this level of innovation. This level of technology. And really allowing us to build a brand around this idea of both inspiring but very importantly also enabling people to go do the things they love. And so we've we vertically integrated the electronics

in the vehicle vertically degraded the software stack. We built up a propulsion platform that's incredibly scalable. And a lot of that vertical migration on that platform has allowed us to go really fast on building out the commercial side of our business with our first customer really also being a flagship much like the R.A. Yvonne Man s with Amazon and their initial order being one hundred thousand of these vans really allowing us to even further having for the impact in terms of how we electrify the full space. Well let's dig into Amazon. Bloomberg reported that revision is prioritizing the production of the Amazon van.

You're obviously on a deadline to deliver 10000 by the end of next year 100000 by the end of the decade. How are you going to manage that your own consumer products and the constraints of having to deliver for Amazon. Yeah I think this is a misunderstanding. Often when people look at the business we've designed the company at its core and really in part having these two different programs to create a forcing function for us to build and grow the ability to be able to develop multiple programs at the same time and launch multiple products at the same time. So

when you see the the Argentinian awareness and in the commercial man these are different teams that are developing them different launch teams they're even different production lines. So that the van of course isn't built on the same line as the truck and those that separate team and a folk that focus on discipline of building those separate organizations. Of course pulling from the same pool of resources allows us to go very fast on two programs at once. And really the core of that is is our desire

to build out really our portfolio of products. It's broad enough for us to achieve significant scale quickly and have as much impact as possible. That's that's really the reason I started the company. It's the reason we had some of our early pivots as we designed and iterate on our strategy was really in service to the question of how do we maximize impact.

How critical has Amazon been to the various valuations the company's been assigned along the way to credibility. The review has been able to build. Well Amazon's been just an outstanding partner. Of course they're a major shareholder. But aside from that I would say much more important than that is the collaborative relationship we have with them. And in the vehicles that we're developing on the commercial side what you see on the surface is a really

friendly easy to get in and out of a very efficient very easy to load and unload a van that's optimized around last mile as a whole host of applications. But what you don't see is all the infrastructure that we're building around that what we call our fleet of West platform. But essentially the the ecosystem of services that we're able to wrap around the vehicle to make it very efficient to run and to be able to work closely with Amazon and understanding what the needs are for us to build that system as. It's just been awesome. It's been it's been really exciting. And

you working to understand how do we how do we find operatives for efficiency but also how do we make the environment for the drivers and the operators really comfortable in something that they want to come into. So you've raised ten and a half billion dollars in the private markets I guess around 12 billion dollars in the public markets. What are you gonna spend that money on. But I think as you look at the scale of what has to happen as an industry today there's there's well over a billion vehicles in the planet. A tiny fraction of those are electric. And really over the next 10 to 15 years we have to electrify that entire fleet. We have to replace well in excess of a billion vehicles

gasoline combustion powered vehicles with electric vehicles. So the scale of this is just it's in some ways unimaginably large. And it's going to require multiple companies to be building multiple products know portfolios of products that capture addressable market in different form factors different segments. And for us we're very focused on that. So what we're in right now what we're looking at today is our launch products. But making sure we have the capital to continue scaling the business

building additional production capacity for future products. Continuing the development of those huge products along with the technologies is really key. And we are really striving to help drive and lead this massive transition that we're gonna have to see over the next 10 to 15 years. Bloomberg's reported you're in talks with the city of Fort Worth to invest five billion dollars

in a plant that you're looking at potential sites for a plant in Europe potentially the UK. What's the update on those please. Well we haven't been any announcements around second facilities second or third facilities. There's certainly a lot of speculation but it's these are really important decisions. And for us it really comes down to looking at the ability to recruit an outstanding team to come in and help drive and operate these these facilities. So looking at that the pool of talent that exist in each of these locations these potential locations as well as of course the access to the supply chain. So where our suppliers are and what the logistics looks like to bring brand components in.

On the supply chain you delayed the start of production on the old one T. More than once you know you talked about a shortage of semiconductors where all the pressure points. Is it in semiconductors. Rising commodity costs labor. Where are you seeing the choke points. I would say the biggest challenge that we have and I would say probably across many industries is really the health of the supply chain. And you know if you think about building a vehicle

like this like our R.A. there is around two thousand parts that come in from and item parts that come from suppliers. And this is one of those rare situations where a ninety nine point five percent is not good enough meaning of you know ninety nine point five percent of the supply chain is ramping at the same rate of our production. But point five percent doesn't. That of course constraints creates a constraint or a throttle for how fast we can ramp the rest of the sodium. And that's certainly the world that we're living in along with many others. Of of managing what is actually a small number of suppliers but working really close with them partnering with those those organizations to make sure that they can keep up with our ramp. And that is that is a major

focus for our team. And we're fortunate to have some great folks that are on the ground working with those suppliers making sure we can ride this ramp phase. Revision is subject to some litigation to specific items the company has not been able to comment on because they've cited the quiet period ahead of the listing. The first being a former

employee an executive who has accused the company of gender discrimination and quotes a toxic brew culture. Could you respond to that please. You know what we're not able to comment on anything in terms of active litigation but what I will say is the most important thing that we're building as a company the most important thing is is our culture is the organization. And it's something that I spend a tremendous amount of time on. And we really focus on

making sure the organization and the people with a recruit into the organization and our leaders across the organization are empathetic are open and have humility drive collaboration. And of course it's a diverse set of leaders. So as you look across the business we have diversity in various parts of business. That's really important really to drive diverse points of view and to make sure that as we think about making the thousands and thousands of decisions we have to make every week on the products and what we're building that those different points of view those different backgrounds are coming together to make really high quality decisions and integrate environment where that continues. And that's something that across the team we're incredibly focused on. Tesla has accused you of poaching employees and in the process taking trade secrets. Is that the case. So today we're about ninety five hundred employees and we've pull we've pulled our team together. We've come as I said from a very broad mix of backgrounds. We certainly have folks who've

come in from tests. So we have folks who've come in from other automakers. We have a very large number. Folks have come in from consumer electronics and the technology space. And you know as part of that it's it's really important to make sure that that that mix of talent comes from different places helps provide that diverse point of view. Of course when we bring people in

from previous roles we make it very very clear that they're not to bring in either previous previous work with them or any anything that they've developed in previous roles in any company. RJ we're running out of time here so much to discuss Tesla's mission statement is to advance the transition to sustainable energy. What is revisions mission statement. Are you seeing yourselves going into similar fields where you leverage your attack in energy storage batteries things like that. If we think about the transition we have to go through as a planet. It is as I said it's very large. And the way we look at this the lens we look at it through is this is something where

we really talk about keeping the world adventurous forever. And the keyword I'll focus on there forever. And it's such a powerful word because it it's sort of it's almost intimidating in that it causes you to think about not just ourselves or even our kids but our kids kids kids and Brian. And so as we look at it through that lens for us it's a question of how do we as rapidly as possible transition ourselves away from fossil fuel based economy. And that of course has a huge huge focus on the

transportation products but it also includes energy products. And this is something that we will certainly get into as we as we really tried to accelerate that. And as part of this we've got a pull customers in. We have to get customers excited about the products. And and really our focus on products that enable and inspire the kinds of things you want to take photographs of

you know doing those kinds of things. That's the brand we're building. And we hope that that gets people excited about making this transition. All right RJ Scavenge found a chief executive officer have revealed this so many more things we need to discuss but we'll save it for another time. Thank you for joining us. Congrats on the listing Alex. I'll throw it back to you. Thanks. I'd really appreciate that. Thank you so much for bringing the interview up for us as well.

And just to update everybody on where we're looking at in terms of pricing really and still indicate to open about one hundred twenty dollars IPO priced at seventy eight dollars a share guide this would be about 12 billion in terms of valuation and the sixth largest IPO on record. The biggest IPO of this year. I know that electric vehicles accelerate pretty quickly but the rate of change in terms of going from a standing start to where we are now absolutely eye watering. It was interesting to hear some of the commentary coming from COP. A lot of money is flowing into the space right now. A lot of people are trying to figure out exactly where we are going to see success. Will it be revision. Will it be elsewhere. At the moment the market is just like we got to go for this. There is no option. All in. Yep. And if you talk to those in the market too they say we're not

backing off from this and that even if somehow governments change their tune or subsidies become a little bit different. Car companies have already transitioned like they're already all in on this as well. You can follow a tick by tick here with T Live is a great blog going on. Check that out. We follow everything about that listing. We'll also bring you any headlines that cross again. Rubin indicated to open at 1 at 20 a share are coming in the markets. Catarina Simonetti and Morgan Stanley Private Wealth Management senior vice president will tell us why she sees an economic slowdown on the horizon that could actually be worse than expected. This is Bloomberg.

The number one economic issue is when interest rates go up as the day they inevitably will. Will asset prices come down and will it be more difficult to sustain all the values that people had over the last year and a half. That was David Rubenstein Carlyle co-founder and co CEO speaking to Bloomberg Sandy Berger at the Super Return Summit in Berlin. Rubin Sands also the host of David Rubenstein show Peer to Peer Conversations. That airs on Bloomberg Television. So what does everyone else think of that. Catriona Simonetti Morgan Stanley Private Wealth Management senior vice president private wealth advisor joins us now for that. So at some point interest rates rise. That's going to knock out all this value. The valuations that we've seen to

that point I should point out that revision is indicating that open one hundred twenty five. So talk about valuations. What do you think. I like that guy. Thank you for having me on the show. Of course you know this market has given us the surprise after surprise after surprise and valuations absolutely matter. And as

much as the retail investors and the markets tend to ignore the issues that we're seeing such as higher material costs supply chain interruptions higher labor costs you know all of that eventually is going to translate into the earnings revisions. Not to mention potential for higher taxes higher inflation. This is the reality. And with that said we see the consumer strongly supporting this market. And we think that this spending strong consumer spending is going to continue throughout the end of the holiday season. But the question is what comes after. And as much as the retail investor is so worried about taking money off

the table too soon in our opinion would be should be worried about is the excessive risk to their portfolios. And this is the perfect time to gravitate towards defensive plays to take profit into be in the sectors that are strategically positioned to boards this more volatile market that presents a lot of challenges. Alex is gonna chuckle and laugh at me now because I've been asking this question a lot but I hear it a lot. Being asked by other people are you suggesting that you should not be fully invested at this point. Guy absolutely. This is precisely what we're suggesting. But not to be fully invested. We are suggesting that we

shouldn't be invested in exactly the same sectors that are disproportionately up. And this is the perfect time to evaluate our investment portfolios. See what sectors performed well take some gains off the table in sectors like S&P 500 like Russell 2000 like certain parts of technology in PE the two sectors that are positioned to do well in the following years like healthcare for example where there is a lot of pent up demand due to all of it. We're going to see this for years like financials that are positively correlated to the higher interest rate environment. I mean this is going to be a reality that is about to start

raising rates. We really like consumer staples. We're a little apprehensive about consumer goods but we still like consumer services. So the point is there is still a way to make money in this market. People need to be fully invested which we should be doing it in a very smart strategic way. Guy I knew I knew you were gonna ask

that question next. I think the mind meld today is complete. So Catarina Finney had an interesting call out the other day saying that they're actually positioning for a decline in inflation. They see the peak coming in the next three to six months and they want a position for a decline in inflation. Is your thesis encapsulate that or does it wrap in higher is more sustained inflation. Alex it's an interesting time when it comes to inflation. Federal Reserve for example you know views it as perhaps transitory in nature. But in our opinion we should consider the fact that higher inflation is perhaps here to stay. Well it's higher inflation and higher taxes. You know what we see right

now is the increase in cost supported by higher demand. But we can't ignore the fact that it is also fueled by stimulus checks by the Fed that people had more money to spend because of the performance in the market and in cryptocurrency and going into the new year. Is this trend going to continue to come back to inflation. We actually think that inflation levels are going to be higher and perhaps they're here to stay. Do you think wages keep up with inflation. Your your comments on the consumer being

fairly healthy at the moment is certainly borne out by the data. But there is a gap currently between wages and inflation. There is a squeeze on the consumer. Does that get. But does that become a bigger problem next year and if so how does that work its way back into the market.

It certainly is a data to watch and the labor market is really challenging right now. We are on one side are seeing labor shortages and then pressures on wages. But what we are also concerned about is the decreased saving rates in this country. And we always say in almost every narrative that consumer is the driving force behind our economy which is weird as we're seeing this rate of savings declining. This is something that would present a challenge. Absolutely. I want to point out we're getting another renowned revision indicator opened at 120. So really despite our bouncing around this one twenty one twenty

five level remember that stock price at around seventy eight dollars a share. Catarina where does this leave your view on technology stocks like the big tech names where if you haven't owned them you've just gotten really beaten up and you can't seem to beat your benchmark. Really. What do you do. Alex we're not ready to give up on technology. We know what the most exciting part about the world of technology is research and innovation and how much investment is being made into this technological development. So we think that this is the time to be really selective about the technology place and technology absolutely should remain within the investment portfolios. But competitive positioning of two to select

technology companies or sectors that we have in our portfolios are more important than ever. We have to evaluate the portfolios. And again we're huge proponents of profit taking. This is the time where if you see the disproportional growth in certain sectors of technology in our portfolios this is the time to not abandon that sector but to strategically take profit and reallocate to the parts of technology that sector that are going to continue to grow. And there is tremendous amount of opportunity there. And we think money is absolute needs to be made in technology. Where does that leave the headline index. I heard what you said about the S&P I heard what you said about the rustlers. We get

this rotation. Does the index level come down. Guy there is a time for investing in indexes and then there is a time where the active management and very careful security selection takes place. And this is the time for equality. This is the right time for a deal risky and strategic positioning. So when we look at the positioning of the sectors within the portfolio we have to ask ourselves know is there a competitive advantage. Is there a price sensitivity. Right. You know that that these companies can take advantage of. Or is it something that that is

disproportionately positions them to not make a lot of profit next year. You know this is the time for this question. So we believe that this is not ideal time for index investing but instead rotate quality and individual security selection would work much better in this market. Bottom up not top down. CAC thank you very much indeed. Really appreciate your time and your analysis. Always thoughtful. CASSIDY disseminates evil good standing private

wealth management. Thank you very much indeed. Because some oil data Alex. Oh yeah. So the reason why. Well I always kept the oil data. But in particular the markets are really expecting much needed relief build for this week's reading. And we didn't get it. But it wasn't as much as we thought. Overall crude builds came

in about one million barrels. You did see though a draw and slight draw in Cushing. Gasoline inventories drew distillate inventories grew here. It doesn't really feel like we're out of the woods yet but oil trading a little bit heavy. The EIA really did help to put the kibosh on higher oil prices for the time being said that we're going to start to see a surplus in the first half of next year. That could be more of what's leading the market. But we did get that build one million barrels of oil from last week. All right. Coming up Ursula Burns I Instagram a founder and former Xerox

CEO will be joining us from the Super Return International Summit. Looking forward to that conversation. This is Bloomberg. This is Bloomberg Markets High Flyers could get through not looking at a live shot of the principal room. Coming up an exclusive interview with Mary Daly the San Francisco Federal Reserve president. That's at 11:00 a.m. in New York 4:00 p.m. in London. This is Bloomberg. Let's check in on the Bloomberg Businessweek these numbers could get to Bloomberg's plan that President Biden and China's Xi Jinping will hold a virtual summit next week. No specific date has been set.

Ties between the world's two largest economies have quietly improved in recent months. Still the U.S. and China sped sparred over Taiwan. And Washington is concerned about Beijing's expanding nuclear arsenal. And China is signaling it's unlikely to join a global pledge to cut methane emissions saying it's already doing enough. A senior Chinese negotiator at 26 climate

talks accused the US of asking nations to pledge to cut greenhouse gases without offering solutions on how to tackle the problem. President Xi Jinping also failed to attend the conference a move criticized by President Biden while capital has emerged as one of the fastest growing and most disruptive players in private markets. The New York based firm now both 70 billion dollars in assets co-founders Michael Reese and Mark Lippert. Schultz adapted a Silicon Valley type business model for financial services. Is Rich Erik Schatzker. Michael Bloomberg Vonnie Quinn. We said there is a chance to be that disruptor and then we purposely built a business model that looked a whole lot more like a tech company than financial services. We didn't start and say you know our base model is a bank. Now how do we become a

better bank. You can watch the entire interview with The Sun as it blew our capital tonight on Bloomberg TV starting at 9:00 30 New York time global news 24 hours a day on air and on Bloomberg Quicktake Brad Stone more than twenty seven hundred journalists and analysts and more than 120 countries. How much can get done. This is bad guy. Thank you very much indeed. Super Turn International Summits is back in Berlin back in person. It's the world's largest private equity and venture capital event. Joining us now from the summit Bloomberg's Dani Burger Danny. Over to you guy. Thank you so much. I am so pleased to say that we are joined now by Ursula Burns who is the founder of Integrity Holdings. Ursula thanks so much for joining us. Of

course. It's not just integrity. You were formerly the CEO of Xerox as well. You're on many input on many boards. You have been on many boards. But of course private equity is where you find yourself now. Let's talk a little bit about integrity part of the core of integrity. Along with technology investing of forces diversity inclusion social impact. What does it mean to have this at the core of a firm versus a lot of private equity which kind of tax it on afterwards. Yeah it's a great place to start. First of all I formed the firm with three part with two other partners. The three of us were kind of like let's say mid to late mid career. We had already done a whole bunch in our lives and we found

ourselves thinking about what we could do in the future and what we thought was to try to actually change a little bit of the way that business building is done today. The business building is done largely in P E MVC firms. It's generally done by people who were born and raised to be in PE MVC firms. A think about it when they grow up. When I go to college et cetera. We wanted to actually have a more diverse firm not just racial or gender diversity. We wanted experienced diversity as well. I'm an operator for example was not in investing. We want age diversity. We want to diversify the vendor pool that we use

everything. We want to start from scratch build a firm that had nothing before. Literally the offices that we go in who provides our copying machines everything is broadening the access to people who were not in before. Right. Diversity equity and inclusion is not an afterthought. It's not the kind. We're not taking something that's already running and trying to contort it to be diverse or equitable. We're trying to build it from the bottom up. And that's the that's the difference. I think it's great. And it's important that we're not a diversity firm. Right. We're investing firm. We're going to be as good or better than investing firms out there. Certainly just want to do it in a different way. It's a competitive environment out there right

now. You started earlier this year. How have you found it so far. How has the environment been on this project that you've embarked on. It's really interesting that you know because of the approach that we're taking our ability to get talent into the into the pool of people that we're looking at is amazing. So young talent. We're a small fund. Billion dollars is small compared to the world out there. And so we can work or we bring people in who can work on things with us from the beginning. So

they literally younger people mid career people and senior people actually all engage around deals all engage around staffing the organization all engage in building a fund. So we've found access to talent to be very very good. It's a problem that other people are dealing with and struggling with fortune. We're only hiring 10 to 15 people not hundreds and hundreds because that is a challenge. Talent is a challenge in the world right. Well I mean it's interesting you say that we're

not a diversity firm because unfortunately often in this world when you have a diverse firm sometimes that's the label that gets put on it. I mean unfortunately you look around at a conference like this and you see that it is mostly white and it is mostly male. Why is this industry having such an issue. What are they getting wrong that this diversity question is very far from being solved. It's interesting. I think that they're getting the same things wrong that public companies got wrong for many many years. I'd say that they're one cycle out of one cycle behind and they have to get on it. Because you said it. I'm standing in the or sitting in the hallway here. And I think I've seen I'm the only person of color that I've seen. And there

are very few women around. This can't. This is not sustainable. Obviously all studies you know the facts are already in the die has been cast. You're more innovative. You have better have better results. You're more future ready. If you are diverse you are views. You serve more people if you are diverse. So this ability to actually stay in the old white male club is not going to last very long. I think this is the next place that there'll be a turn in. Equity and venture capital firms. We did a study in this thing called the Board Diversity Action Alliance that I started with some I mean just started I started me and a couple of people thought about this. I said why are there not more. And we studied it and looked at number just the

performance. It's unbelievable in public companies. But the progress has been made in private firms and PE firms and V.C. firms. It's an embarrassment. It is an embarrassment. Literally you couldn't do. You couldn't design a less diverse set of firms. That's what we have. The good news is that the owners and the founders and the principals of these firms know it. And they starting to change. It's just taking a lot longer than it should take. Every journey starts with a single step. So we wish you well with that and progress as you say needs to be made. Can I talk a

little bit about something else that may not be sustainable as well. And that is the current valuation picture. We've just seen a superhot inflation number out of the United States. Rates are expected to go higher. What impact do you think higher rates are going to have on the private equity industry and the valuations that are currently being ascribed to assets. And I think that right now we are in a super heated mode. We've been there unfortunately for probably five to seven years and

it's just not cooling down at all. Every year that we think it's going something is going to impact that. We thought the pandemic would actually come out of the pandemic pandemic even harder than before. So in normal times I would say that inflation would have a negative or chilling effect. But I I'm not sure that that's going to be the case. We've been riding a wave. We meaning industry investing has been riding a wave for 15 years now that literally something has to stop and something has to to adjust the valuations because now they're at the point. Anything that's called tech enabled that trades on I love this trades on multiple of revenue a multiple of revenue. But good news is Instagram is not in that space but it's a very big challenge right now. I don't believe that inflation is going to be the cooler of that. I think something else has to happen structurally to slow down this wave

that we're on. Ursula. Hi it's Alex in New York. Yeah. All you to do is look at revision today maybe opening in about a hundred and twenty. I wanted you to put on your Xerox hat for a second. Yesterday we saw the bridge the breakup of G.E. spinning off into three parts. You ran a huge company and you made acquisitions as CEO of that company. Do you feel like the era of the big conglomerates in the US is over. And what does that do for competitiveness for U.S. business. Yeah I think that capital intensive conglomerates are waning now but we still don't lose sight of the fact that we have massive conglomerates in softwares software and services. So yeah it's just a different way to look at ad size or different type of size. So I think that technology CAC on. All right conglomerates on capital intensive business I think

are slowing down. What on tech businesses. I think not. Thank you so much. We really appreciate your time. Ursula Burns interim founder and Bloomberg's Dani Burger. Thank you for bringing the interview to us as well. This is Bloomberg. It's time for the Bloomberg Businessweek to look at some of the base business stories in the news right now which could get better. General Electric has launched an offer to buy back as much as twenty three billion dollars in debt. The company is on target to cut its borrowings by more than 75 billion in the three years through next month. Yesterday G.E. unveiled a plan to split the corporation into three separate companies.

About a quarter of financial services firms plan to cut jobs in New York City in the next five years according to the Partnership for New York City. That was the highest share of any industry survey. Just 28 percent of the city's one million office workers are back on an average work day. Employees expect that to rise by about 50 percent by the end of January. And that is huge business. Flash Guy IBEX. All right. Thanks so much. Oh jinx. So Guy I do think that that is quite interesting because I think the question that Mayor elect Eric Adams is going to is going to really confront with New York City is how do you get people back in the offices the people who still have jobs and what happens when those jobs are actually reduced. That has a profound effect among rents among shops among you know freedom margin whatever

you take it. And you know it's gonna be an enormous issue and you take a very long time to suss out. Yeah you got to get all the infrastructure right around that. You gotta make people feel safe. You've got to make people feel comfortable with the idea that they can make that journey from their homes to the office. And I think Eric Adams has certainly as you say got his work cut out for him. It's it's been a narrative here in London. We started to see people coming back.

But again we're nowhere close to being full. And you wonder kind of. We saw an initial spike and then we're starting to faded a little bit. It's going to be interesting as we go through the winter whether people want to stay tucked up at home or whether they actually do want to come into the office. But as we've discussed in the past Wall Street is is a concept rather than a

place. Now you could be anywhere. Florida Texas you name it. Yep. Yep. Are they going to be in San Francisco. Well we're going to be in San Francisco coming up. Mary Daly San Francisco Federal Reserve president joining us next exclusive interview. This is Lee.

2021-11-11 23:08

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