00:00So, Alifia, you heard what Jamie Dimon was saying about this idea that interest rates could go higher, could be
00:07much higher.
00:07Do you agree with that assessment?
00:10Yes, and I think that's definitely one of the risks that we are underwriting to in the market.
00:14You know, obviously, with such a positive market this year, the risks just keep multiplying in terms of what investors
00:21have to think about
00:22and interest rates, consumer sentiment.
00:25You know, what is driving inflation?
00:26If we don't have some resolution in terms of energy prices, we think all of that will continue to be
00:32an increased risk to portfolios.
00:33And it will mean more bond volatility, which I think investors have not gotten used to, right?
00:39They were used to definitely a more calmer market in the bond markets, at least, and I don't think we'll
00:43see that.
00:44Yeah, no, absolutely.
00:46The bond sell-off that began, that's been in progress, but really kicked into high gear at the end of
00:52last week
00:52and, you know, continued into this week has got people scratching their heads.
00:55And I think one of the things that is difficult to answer at this moment is, are the reasons mainly
01:01cyclical
01:02or should they be viewed as something more systemic and therefore more concerning?
01:06How are you thinking about that?
01:07I mean, I think we do think that there is a potential that these are more systemic factors that we
01:12have to, you know, really start to think about.
01:14Is there a scenario where we don't go back into a lower interest rate environment and where we really need
01:20to underwrite our investment
01:21and our investment thesis in the markets and what we expect from the markets to a much higher, you know,
01:26perpetual interest rate environment?
01:28There's a lot of factors that can contribute to that, and we don't necessarily see us going back to a
01:33lower interest rate environment,
01:34no matter how much investors might want that.
01:36So with that in mind, how do you look at equities?
01:39Which parts of the market do you want to be most exposed to?
01:42Which parts do you want to be steering clear of?
01:45Yeah, we've been very focused on having a diversification in our equity portfolio,
01:49but we also think about our total portfolio.
01:52So while we have investments in public markets, which are obviously most impacted today in terms of short-term moves,
01:57we're also thinking about our private markets, you know, allocation and how that is going to influence what we do
02:03in our public markets part of our portfolio as well.
02:06Your earlier guests have talked about Anthropics, SpaceX, OpenAI.
02:10I mean, that's $4 trillion of public market cap that's going to come into the markets.
02:14And so how do you position your equity portfolio?
02:16Everyone talks about the overconcentration in the public equity markets, but there's concentration in the private markets too.
02:22And when you put all of that together, I think you're going to have to think about how to really
02:26diversify your equity portfolio
02:28without necessarily being susceptible to businesses and small businesses that may be negatively impacted by higher interest rates.
02:37Once we get those big IPOs out of the way, those three or four that are really, really large, SpaceX,
02:42OpenAI, Anthropic,
02:44is that going to clear the way for smaller companies to come out and go public as well?
02:49Or is the pattern here that you wait until the last minute to go public because there's so much funding
02:54available privately?
02:56What we have seen is that companies want to stay private as long as possible.
03:00And so you saw that to a certain extent with these three companies as well, right?
03:04And I think that trend will just continue.
03:06There is so much institutional investor capital.
03:08And then when you put on top of that wealth management that is pushing investments into the private markets,
03:13that there is enough capital for these private companies to stay private for longer
03:18and to grow without the pressure of what will occur in the public market space.
03:23Were you encouraged or discouraged after taking a look at SpaceX's IPO filing,
03:28given that it did report a loss for the period that ended, mainly because it absorbed XAI?
03:35The AI part of the business just requires so much spending.
03:39I think, you know, and it's not just SpaceX.
03:41I would put Anthropic and OpenAI in the same categories.
03:43It's what is the economics of AI?
03:46Does it actually work in the long run?
03:48You know, sometimes you have to think about historical precedent for some of these different things that we're seeing.
03:53And, you know, many have likened this era and this AI revolution we're seeing
03:57to what happened at the late 1800s in terms of the railroads and the boom and bust cycle.
04:01So are we going to have winners and losers?
04:03I think with SpaceX, it's going to be very interesting also to see what are the linkages across different types
04:09of investments.
04:10Some private credit funds, for example, are going to end up holding shares of SpaceX.
04:15Other parts of the market are actually going to really be exposed to SpaceX as well.
04:20So, again, that overconcentration in the market, whether it's public or private,
04:23I think is something that investors are ignoring across their total portfolio.
04:27And what happens if they ignore it?
04:29What's the how do you see that shaking out?
04:33I mean, the risks are just going to continue to multiply.
04:36And time and time again over the years, we have seen why diversification in a portfolio helps you.
04:41And I think that it is extremely hard to see how you can have a diversified portfolio
04:46when, you know, one of the latest stats was that almost 93 percent of U.S. GDP over the last
04:52four quarters was driven by tech and AI.
04:54If that is the case, then everything in your portfolio needs to really be thought about in terms of what
04:59are the second, third degree orders of impact related to AI and tech.
05:03And a lot of that is going to be a signal of what happens to the share prices of SpaceX,
05:08of OpenAI, Anthropic when they actually come to market.
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