Blue Owl Money Machine Sputters in Face of Private Credit Cracks

Summary

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Bloomberg Businessweek: "Blue Owl Money Machine Sputters in Face of Private Credit Cracks"

Date: November 20, 2025
Hosts: Carol Massar, Tim Stenovec
Guests: Sri Nadav Rajan (Bloomberg News Chief Wall Street Correspondent), Davide Shilley (Chief Correspondent for Private Capital), Abby Roach (Empiric LT Equity, retail analyst), Lane Bass (Deep Instinct CEO), Brent Schutte (Northwestern Mutual CIO)

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Episode Overview

This episode probes cracks surfacing in the private credit market, with a spotlight on Blue Owl Capital following its failed fund merger and declining share price. Carol and Tim invite Bloomberg reporters and industry analysts to delve deep into what Blue Owl’s troubles imply for private credit as a whole, retail investors’ growing role, and broader market risk. The episode then pivots to other economic barometers: Walmart and Home Depot results, AI and cybersecurity investment sentiment, and advice for investors navigating a shifting financial landscape.

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Key Discussion Points & Insights

1. Blue Owl Capital and the Private Credit Crunch

(01:46–13:25)

Blue Owl’s Recent Turmoil

• Blue Owl's share price hit its lowest mark since 2023. Co-founder Craig Packer blames "negative articles" for stoking investor panic.
• Abandoned Fund Merger: Blue Owl called off merging two private credit funds (one public, one private) after investor scrutiny and concerns over potential losses (01:46).
• Investor Skepticism: Growing redemptions fueled fears that fund value marks might be unreliable.

Is Blue Owl a 'Canary in the Coal Mine'?

• Sri Nadav Rajan: “It’s now up to the Blue Owl management to prove that their marks are not illusory. ... Their publicly traded BDCs don’t quite believe the book value, and that’s why it’s trading at a big discount.” (02:59)
• He highlights that defaults are normal in a diversified credit portfolio, and that, so far, industry-wide metrics remain stable.
• Rajan recalls Jamie Dimon's warning: “There’s never just one cockroach. There will be other troubles that crop up.” (c. 04:20) — advice industry veterans took personally.

Private Credit's Liquidity Dilemma

• Davide Shilley: “How do you sell this asset class to retail investors and what is the right format to do that? ... [N]ew liquidity products are emerging, but sometimes the in-between doesn’t work as intended.” (06:06)
• Quarterly redemption limits introduce risk: if too many demand exits at once, funds may ‘gate’ redemptions, which can create panic.
• The failed merger would've forced investors to exit at a discount, fuelling outrage.

Systemic Industry Questions

• Not limited to Blue Owl: “It is an issue that everyone in the industry has to kind of deal with.” (09:24, Shilley)
• Heated competition may have led to declined lending standards during the boom years. As conditions tighten, the risk of trouble increases: “Did some people cut some corners? ... When the cycle turns, could it be problematic?” (10:53, Rajan)

Mark-to-Market Challenges

• Discussion on retail investors struggling to understand illiquidity and opaque valuation processes. (11:43)
• Markdowns and recent headlines at BlackRock suggest other giants face similar issues.

Optimism vs. Pessimism

• Rajan closes: “Skeptics often sound smart, but optimists make a lot of money.” – quoting David Solomon (13:11)

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2. Retail Sector Health: Walmart & Home Depot

(15:46–23:24)

Walmart Shines Amid Consumer Bifurcation

• Abby Roach: “Walmart saw continued share gains from upper income consumers ... middle income steady, slight weakness in lower income.” (16:44)
• Walmart’s size allows it to negotiate hard with suppliers and pivot to services (e-commerce, advertising) as growth drivers (18:02).
• Shift to NASDAQ seen as messaging for “growth company” positioning (19:38).

Home Depot vs. Lowe's

• Home Depot faces headwinds: acquisition digestion, lack of hurricane-related repair spending, and tough macro/housing environment.
• Roach: “Investors are really never that enthusiastic to hear conversations around ... comping the comp when there’s a hurricane and when there’s not.” (21:40)
• In contrast, Lowe's fared better in recent results.

Consumer Takeaway

• Durable bifurcation: “Upper income consumers continue to hold in there quite well ... lower income consumers are still challenged, but they haven’t dropped off a cliff.” (22:54, Roach)

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3. AI, Semiconductors, and Cybersecurity

(24:04–35:18)

AI Bubble or Real Opportunity?

• Lane Bass (Deep Instinct): “I don’t think we’re in a bubble ... The acceleration ... might make it look like a bubble, but ... we’re still at the front end of something.” (25:11)
• Forced capex by big tech players leads to explosive sector investment.

Applications Driving Growth

• Edge AI and cyber: “It is like that movement from the mainframe ... to the edge where a lot of the applications ... will be provided.” (26:07)
• Cybersecurity threat sophistication is accelerating, especially with deep learning and AI-powered attacks; Deep Instinct focuses on prediction and prevention, not just detection.

Evolving Cyber Risk Landscape

• “The biggest risk to most companies and governments is insider threat, it’s phishing attacks, it’s deepfakes ... That’s really what they focus on, is the weakest link.” (29:03, Bass)
• Multifactor authentication and constant vigilance are essential; “The consumer will continue to be under attack ... My best advice ... if it doesn’t look like anything you know or anybody you’ve heard from, don’t click on it.” (30:37, Bass)

Data Hygiene Is Critical

• “At the core ... being able to scan every byte of data, whether it’s on premise or in the cloud ... If you cannot protect your data, then you’re going to be at risk.” (32:02, Bass)

Valuation Reflections

• Bass is not worried about short-term AI market jitters, believes the “shift towards the edge ... going to be where we’re going to see additional future growth.” (34:44)

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4. Diversification vs. Hype: Investment Strategy in Uncertain Times

(37:58–45:12)

Emerging Cracks and Diversification Mandate

• Brent Schutte (Northwestern Mutual): Warns of cracks emerging in crypto, private credit, and non-profitable tech: “I just think in the future the answer is going to be a broadening out across the spectrum of asset classes ... even international stocks ... Do we have a hiccup before then?” (38:30)

Market Leadership Cycles

• Refers to historic periods post-Fed tightening: “Leadership has always changed ... at the end of economic cycles ... typically ... the economy broadens back out ... and things that have been harmed become better again.” (39:59)

Behavioral Finance

• Many investors concentrate in high-fliers, ignoring risk until a sharp drawdown hits: “If you didn’t concentrate ... in the late 1990s ... you didn’t have the large drawdown that those who did, did. ... The timeless answer is diversification.” (42:55)

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Notable Quotes and Moments (with Timestamps)

• Sri Nadav Rajan: “It’s now up to the Blue Owl management to prove that their marks are not illusory.” (02:59)
• Sri Nadav Rajan (on Jamie Dimon's critique): “There’s never just one cockroach. There will be other troubles that crop up.” (04:20)
• Davide Shilley (on liquidity pressure): “What Blue Owl really put on the map is an issue ... how do you sell this asset class to retail investors ... that liquidity ... doesn’t work as intended sometimes.” (06:06)
• Davide Shilley (industry-wide issue): “It is an issue that everyone in the industry has to kind of deal with.” (09:24)
• Sri Nadav Rajan (on BlackRock turmoil): “There was a deal where the mark on that investment went from 100 cents on the dollar to zero in 34 days.” (11:41)
• Lane Bass: “Applications and the growth opportunities ... make me feel we’re still at the front end ... certainly not a bubble.” (25:11)
• Lane Bass: “You need to fight AI with better AI.” (27:17)
• Brent Schutte: “They continue until they don’t. At least historically that’s been the case.” (39:59)
• Brent Schutte: “If you didn’t concentrate ... in the late 1990s ... you didn’t have the large drawdown that those who did, did. ... The timeless answer is diversification.” (42:55)
• Sri Nadav Rajan (optimism vs. skepticism): “Skeptics often sound smart, but optimists make a lot of money.” (13:11)

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Key Timestamps

• 01:46–13:25 — Blue Owl & Private Credit Discussion
• 15:46–23:24 — Retail Market: Walmart, Home Depot, Consumer Insights
• 24:04–35:18 — AI Industry, Cybersecurity, Bubble Debate
• 37:58–45:12 — Macroeconomic Risks, Diversification Advice

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Tone and Takeaways

The episode’s tone is probing yet pragmatic, with healthy skepticism about market exuberance, balanced by reminders that not all critical coverage signals imminent crisis. “Cracks” in private credit, AI hype, and retail investor behaviors are dissected with an eye toward both structural vulnerabilities and the cyclical nature of risk. The speakers maintain clarity, favoring insights and caution over fear-mongering.

• For investors: Diversify. Watch for signals of broader credit and liquidity stress but don’t panic.
• For retail and tech observers: The U.S. consumer—especially at the lower end—remains under pressure, while tech investment is likely to remain strong even if valuations reset.
• Private credit: Keep an eye on redemption pressures and opacity in this 'poster child' sector.

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Transcript

[Carol Massar]

Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. Follow the podcast, which is sponsored by Coinbase. Wherever you get your audio programs in.

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[Bloomberg Businessweek Announcer]

Bloomberg Audio Studios Podcasts Radio News this is Bloomberg businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight. Insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.

[Carol Massar]

So once again this week, a story around Blue Owl Capital is among the most read on the Bloomberg terminal has been all day. This is as the company's shares had fallen to the lowest level since 2023, with co founder Craig Packer blaming, quote, unquote negative articles about private credit for the decline. Now the latest stress point I got to say we talked about yesterday, if you might recall, Blue Owl Capital scrapped a planned merger of two of its private credit funds after scrutiny rose over potential losses for some investors. So the story still a live one and we wanted to dig a little bit deeper.

[Tim Stenovec]

To do that. We're joined by Bloomberg News chief Wall street correspondent Sri Nadav Rajan. He's here in the studio along with Davide Shilley. So Bloomberg News chief correspondent for Private capital both join us here in the Bloomberg businessweek studio.

[Carol Massar]

All right, welcome. Welco Sree, I do want to start with you. You reminded us yesterday, Blue Owl this is a firm that has been held up as kind of a poster child when it comes to the world of private credit. Is it, again, I want to ask you, the merger coming undone or something more like, is it just a company specific thing that's a problem or might it be the canary or owl in the coal mine? Is it something more in terms of what's going on in the private credit world?

[Sri Nadav Rajan]

Look, blue owls are supposed to be fictional characters in the real world. And it's now up to the Blue Owl management to prove that their marks are not illusory. In a credit market where you're dealing with private loans, the investors, your investors, are reliant on what you believe those loans are worth. Unfortunately for Blue Owl, many of their investors and their publicly traded BDCs don't quite believe the book value, and that's why it's trading at a big discount to book value. If you want to blame negative articles, that does sound a touch defensive and it's not going to really help the cause. And there are a lot of Wall street veterans who are pointing in this direction and talking about trouble. But I would like to take a step back and say, you know, when you ask about whether this is a canary in the coal mine, we haven't seen some crazy implosion. When you are investing in 100 companies, there will be some defaults along the way. The question is, can you keep it below what your peers are experiencing and is it below your historical averages so that tells you where you are in the credit cycle? And on those metrics, Blue Owl and the rest of their peers are doing, seemingly doing just fine. But the mind goes back to the kerfuffle last month when Jamie Dimon got on the earnings call and gave what sounded like sage advice about the credit cycle and said, you know, when there is a problem somewhere, you can expect a few other problems to crock up a few other cockroaches? For some reason, a lot of players in the private credit market took it as a direct insult hurled in their direction and got worked up about it. Prominent in that was Mark Lipscholz of Blue Isle, who really took a real swing at Jamie Dimon. A month later, you kind of feel like saying, if you come at the King, better not miss well before I.

[Carol Massar]

Want to bring in Davide. But Jamie Dimon, how many times have we had conversations with you? We all wait to see what he has to say about any situation. He doesn't. Or does he just drop something to stir the pot? Does he do that?

[Sri Nadav Rajan]

Let me tackle this Carefully. I think the fact that Jamie Dimon has been the CEO of JP Morgan, the largest bank in the United states with a $4.6 trillion balance sheet for 20 years now. Right. It makes you think that he's coming from a vantage point that is unparalleled, to be honest. And he's got the experience and the position and the pedigree to speak his mind. And thankfully he does in this case. And if you look back over the years, some of the things that Jimmy has said, whether it's about work from home or myriad number of topics, can veer towards the extreme. But what he said here seemed fairly innocuous. All he said was there's never just one cockroach. There will be other troubles that crop up. He didn't necessarily say the others will be in deep distress. Why did the private credit industry take it so personally?

[Davide Shilley]

Yeah.

[Tim Stenovec]

So David Shirley, come on in here because you cover private capital for, for Bloomberg News. The focus that, that we've had this week has certainly been on, on Blue Owl. Not just investor reaction, but, but also the press that we've seen around the company. Is this something you're seeing in your world outside of Blue Owl right now too?

[Davide Shilley]

Yeah. And I would say one thing to Jamie Dimon's comments, like he wasn't wrong because we have seen more of these situations and across, across the industry, by the way, we've seen them on the bank side too. So I think there is a broader issue kind of in credit markets where people are questioning like some of the underwriting standards and red flags that may have been ignored in the past. And that cuts both ways. I think what Blue Owl really put on the map is an issue that all of these firms are kind of wrestling with, which is how do you sell this asset class to retail investors and what is the right format to do that? You can, historically they've done permanent vehicles like very long dated stuff that it's great for institutions. You lock up your money for seven years and it works well for them. But if you're making a push into individual investors, you have to provide some kind of liquidity. And what is emerging with this failed merger of Blue Owl is that that liquidity is an in between daily liquidity and seven year liquidity and it doesn't kind of work as intended sometimes.

[Tim Stenovec]

Well, how big of an issue is that for private credit overall if they don't have the market that includes retail investors?

[Davide Shilley]

I mean, I would say it's a big issue because a lot of funds are being set up In a similar way, where they provide quarterly redemptions subject to a cap. And you can either come out at nav, which is basically the value of the assets in the fund.

[Judy]

Right.

[Davide Shilley]

That the manager assigns to them, or if it's in a public structure, you come out at the price that the market assigns to it. And the market right now is believing that most BDCs are 20, 30% below their asset value.

[Sri Nadav Rajan]

But here's the thing. There was nothing crazy or revolutionary or wacky about Owl Rock or Blue Owl wanting to merge a private fund with a publicly listed bdc. It has been done in the past. The problem, and the challenge was it was being considered, or at least it was presented to the market at a time when the amount of redemptions in that private fund were climbing. And if it climbs above a certain mark, Blue Hour might very well get redemptions. And you never want to be in a position where you tell your investors you're not allowed to get your money back. They had been honoring all their redemption requests so far. But if you ever had to get to the position of gating redemptions or basically saying, right now, we will not allow you to pull all the money that you want to pull, that spurs panic that results in more people wanting to run away from your vehicle. So instead, when they talk about wanting to merge it with this public vehicle, which is trading at a 20% discount to book value, which means once you're in there and then you want to get out, you have a 20% loss on day one, it starts to feel a bit icky. And that's what's really resulted in this market reaction that makes Blue Owl at least pushes Blue Owl into this defensive corner.

[Carol Massar]

But all this makes me feel like, okay, if Blue Owl is supposed to be the poster child, like, if we're talking icky or redemptions or gating those redemptions, that, to me, if you're talking about the poster child for private credit, then it makes me wait. Like, okay, if they're supposed to be up here and they're maybe potentially having issues, what else is out there? Because not everybody's in the same situation and that weaker situations.

[Davide Shilley]

And that goes back to the broader concern about the industry. It's not just Blue. I think Blue Owl is in the spotlight because they tried to do this. Yeah, some people, many people probably now would argue was terrible timing, but it is an issue that everyone in the industry has to kind of deal with.

[Carol Massar]

I guess the crazy thing is, and we've had so many gas, I feel like you go to Milk in the last couple of years, first of all, everybody, all they want to talk about is private credit. And then it feels like the last year or two, it's more like how do we get out of these deals? And like anybody who's got investments are thinking about their investors who after three to five years want to see some kind of returns and they've struggled to, to get out of these investments. And I feel like they're just trying to figure out all these ways and I just wonder at some point do we have some kind of problems as a result or. No, it's just again the timeline of how this has to come work out.

[Sri Nadav Rajan]

But it's, it's, it's also the nature of credit markets, right? It's not, it's not, it's not. Equity investors, credit credit investors generally tend to be a little more cautious because your upside is kind of capped. You get principal back and interest on that, nothing else. Whereas if you're a stock investor, your stock could go today from $10 to $300 and then back to $150. You still would of money, right? Your hundred cents on the dollar will be 100 cents on the dollar when it comes back or it goes down to 50, 30 or God forbid, zero. And that's why whenever there is a concern of is the cycle turning, is there a credit crunch coming? And when you have a space like the private credit space where funds that have been flush with cash, you see the enormous growth in that space in the last few years.

[Abby Roach]

Crazy.

[Sri Nadav Rajan]

When they're all competing with each other to actually win deals to put money to work, your automatic question is, did some people cut some corners? And so therefore when the cycle turns, could it be problematic? You talk about the potential issues with blue. We don't even see a ton of blue. All deals where there have been very obvious issues. But David is too polite to point this out. But look at some of the coverage out of BlackRock and their credit investments. You've already had a trio of investment. They had just last night we reported about how one of their private credit CLO had to waive management fees because they failed one of the critical tests on the clo. There's alleged fraud related to big telecom receivables. And then there was another deal that Davide wrote about just last week where the mark on that investment at One of the BlackRock funds went from 100 cents on the dollar to 0, 100.

[Davide Shilley]

To 0, 34 days.

[Tim Stenovec]

So as we're having this conversation, one thing I keep thinking of is this comes at a time when over the last few years we have had a lot of people in the private credit space and in the private investment space, Davide, say these are the assets that we think Americans should actually have in their retirement. And I'm wondering if this exposes maybe a potential flaw to that strategy, this idea of marking it to market and having the traditional retail investor understand that this type of thing can be locked up for a long period for a.

[Carol Massar]

New line of demand.

[Davide Shilley]

So that is. Right. Like the new line of demand has been retail and insurance because the institutional market kind of tapped out.

[Tim Stenovec]

Yeah.

[Davide Shilley]

The second point I'd make is that it was very easy to sell private credit as a great opportunity when rates were rising and capital was available and you had all of these dynamics where you could go to your investors and say, hey, you're, you're investing in, you know, senior loans that are on top of the capital structure and getting, you know, low double digit returns with leverage. And that's great. Right now, you know, we have rates coming down and there is a question about, you know, at least investors not being prepared for some disappointment when it comes to returns, but potentially credit issues when it comes to individual companies that just can't exist in that shape. And that's when you get the markdowns that we've been writing about.

[Carol Massar]

Okay.

[Tim Stenovec]

So to be continued.

[Carol Massar]

Yeah. Okay.

[Sri Nadav Rajan]

Can I just leave you with one thought?

[Carol Massar]

15 seconds.

[Sri Nadav Rajan]

I'll wrap it up in 15 seconds because there's been too much doomerism here. When David Solomon yesterday was asked about the concerns in the market, he said something. He quoted a friend and said, skeptics often sound smart, but optimists make a lot of money.

[Carol Massar]

Nice. Final thought. SRI and David Davide, thank you so much. We really appreciate it.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

[Carol Massar]

Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. The program investigates how traditional finance firms are integrating crypto into their operations now that Washington has begun to pass much needed regulations. Follow the podcast, which is sponsored by Coinbase. Wherever you get your audio programs, in.

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[Jenny Garth]

Hey everyone.

[Davide Shilley]

Ed Helms here and hi, I'm Kal.

[Judy]

Penn and we're the hosts of Irsay The Audible and iHeart Audiobook Club.

[Jenny Garth]

This week on the podcast, I am sitting down with Jenny Garth, host of the iHeart podcast. I choose me to discuss the new Audible adaptation of the timeless Jane Austen classic Pride and Prejudice. This is not a trick question. There's no wrong answer. What role would I play?

[Carol Massar]

You know what? I can see you as Mr. Darcy. You got a little Colin Firth.

[Jenny Garth]

Okay, that's really sweet. I appreciate that. But are you sure I'm not the dad? I'm not Mr. Bennett here. Listen to Earsay the Audible and iHeart Audiobook Club on the iHeartradio app or wherever you get your podcasts.

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[Tim Stenovec]

Taking a look at Walmart shares, we do see the majority of stocks lower today. Walmart is higher, number one gainer in.

[Carol Massar]

The S&P 500 right now.

[Tim Stenovec]

Add that to your list for maybe it's done. Okay? It's done. All right.

[Carol Massar]

Yeah.

[Tim Stenovec]

Shares up about 6.7%. There was as much as 7% earlier in the session. This after the company raised its full year sales and profit outlook. Assign the company's winning over price sensitive shoppers while absorbing rising costs. Let's bring in Abby Roach. She's senior portfolio analyst who covers consumer stocks for the Empiric LT Equity team at Allspring Global Investment Investments. That team has about $14 billion that it manages across three large cap portfolios. She joins us from McLean, Virginia. Abby, try to make sense of what we've heard from these, these companies in this most recent quarter. Rival big box chains have warned that consumers remain cautious. Home Depot, it's another company that you cover. What do these results from Walmart alleviate about consumers or do they alleviate concerns about consumers?

[Abby Roach]

Well, thank you very much for having me on today. I think Walmart was definitely a strong print and I think Walmart has continued to operate quite well in this environment. I think in terms of the health of the consumer, you know, they called out that they've seen continued to see share gains from upper income consumers. I think in terms of the middle income consumers that has been steady and they called out slight, slight weakness in terms of the lower income consumer. But I think we're continuing to hear similar messaging of what we've heard frankly for the last year of this bifurcation of the consumer with that upper income consumer holding up quite well and the middle income to a lesser extent as well. But the lower income consumer continues to be challenged. But Walmart in this environment, offering both value and convenience, continues to drive customers of all income cohorts and certainly saw that in a very strong print from them both as it relates to the environment. But they're also executing quite well here.

[Carol Massar]

Abby, how much being so massive the world's biggest retailer means that in a higher tariff environment, you know, this is the company that can squeeze suppliers and companies that sell into the Walmart chain because it's so massive and so it just puts them in a better position than so many other players.

[Abby Roach]

It certainly does. I mean they're the world's largest retailer so they are the best positioned to be able to negotiate for themselves. I think though too, you know, one of the other key parts of this story is around the different alternative revenue streams. And Walmart has a benefit here of they're growing their E commerce business. This was the seventh consecutive quarter of 20%/Global E commerce growth in addition to when you look at membership, advertising, other areas of the business. So they're also able to find offsets where they need to absorb some prices in different areas of the PNL in a way that they're much better positioned certainly relative to any of their peers.

[Tim Stenovec]

Carol, are you done with Home or with Wal Mart? Because I want to go to Home Depot.

[Carol Massar]

I want to ask 1 want to.

[Tim Stenovec]

Go to Home Depot.

[Carol Massar]

I know, I know, I know, I know, I know. But let me just ask you, Abby, what does it mean? I mean they're transferring their stock exchange. Listening to the NASDAQ from New York Stock Exchange. Like does it really for the exchange it means something, but I don't know. What do you, what do you tell an investor about this? Is there anything to tell?

[Abby Roach]

You know, it was certainly an interesting and interesting part of the announcement this morning and I think, you know, we have seen, we like Walmart here because it's, you know, both defensive. We think they're really well positioned short term but I think also the announcement, they're positioning themselves for growth longer term with really the focus around the alternative revenue streams, E commerce just they're really positioning themselves and setting themselves up in addition to investing for growth in the future. So I think the announcement wasn't all that surprising given There, that has really been the tone that we have heard from this management team over the last several years.

[Carol Massar]

Wait, so being on the NASDAQ means you're a growth company? Is that kind of what it is? I mean, I know that's kind of the history, but is that the idea?

[Abby Roach]

Yeah. And I think, you know, I think, you know, that's certainly how they're positioning themselves with investors. I think in addition to being defensive, but I think longer term they are positioning themselves, you know, from a growth standpoint with these different areas of, of higher growth for them relative to selling, you know, more consumer staples feels.

[Tim Stenovec]

It feels so old school to me. Well, because the New York Stock Exchange has tried to counter the narrative.

[Carol Massar]

Yeah.

[Tim Stenovec]

You know, the NASDAQ is the home for tech. Yeah. So, but anyway, it's interesting. Look, these, you know, they was on surveillance this morning, Tom and Paul, talking about how they, the, the nice in the nasdaq. You know, they play off each other and they try to, you know, it's expensive to list.

[Carol Massar]

Right.

[Tim Stenovec]

So then, you know, if you can actually save money by going to another exchange. Yeah. Why do that?

[Carol Massar]

Why wouldn't you do it?

[Tim Stenovec]

Yeah. Okay, so Home Depot. Because you also cover Home Depot. Abby, it seems like the Home Depot story is more idiosyncratic and it's like Home Depot Depot specific. Is it fair to say after hearing from Lowe's earlier this week?

[Abby Roach]

It is, I think, you know, with Home Depot, I think certainly they're positioning themselves. They're really focused on that pro customer and especially the complex pro. I think it continues to be a challenge, challenging environment, both for the consumer, but also from a housing standpoint of the interest rate. Piece of that is really a key for this story. And I think we're long term investors, so we're focused out the next five years from now. And I think when we look at how Home Depot is trying to position themselves with that pro customer, when we look at the environment longer term, we think there's a lot of ways that they're trying to set themselves up for future growth over the next several years, despite a bit of a challenged environment here as a result of just housing in the macro.

[Tim Stenovec]

Why was Home Depot so concerned in Lowe's? Not so much what are the differences between their business. I know there's the pro thing and, you know, what's the exposure that Home Depot has that caused it to say, okay, we have to think up differently about what next year is going to look like. And we didn't see that from Lowe's.

[Abby Roach]

I think with Home Depot, you know, there was more explanation both around some of the recent acquisitions that they've done. In addition to conversation around the weather, sort of the lack of a hurricane in 2020 versus this year, I think investors are really never that enthusiastic to hear conversations around. You know, there certainly is a challenge comping the comp when there's a hurricane and when there's not. But I think that coupled with commentary around different moving parts of the SRS and GMS businesses I think just left investors feeling a little bit sour, particularly in light of the current environment.

[Carol Massar]

I'm sorry, SRS is wholesale distribution of residential commercial building. Just remind us what that is.

[Abby Roach]

SRS versus yes, SRS distribution acquisition that they did last year as it relates to the roofing side of the business. And without a hurricane this year, you know, they didn't get as much benefit from that.

[Carol Massar]

No, it's just like real life stuff.

[Judy]

Right.

[Carol Massar]

And what you need or don't need. I should point out Home Depot traded down 6% on Tuesday when it came out with its results. And Lowe's, which reported and investors reacted yesterday, was actually up about 4%. In a nutshell, how would you describe the consumer in the retail environment? Just got about 30 seconds.

[Abby Roach]

You know, I would say it's much of the same. I wish there was a different story that I could tell you that the consumer doesn't continue to be bifurcated. But that's really the message that we've heard from consumer from different companies is that upper income consumers continue to hold in there quite well. But I think the lower income consumers are still okay. I think they're still challenged, but they haven't dropped off a cliff. So I think consumer companies are still, you know, operating, still meeting the needs of the different consumers while being very cautious around the sensitive needs of the lower income consumer who's more pressured in this environment.

[Carol Massar]

All right, so appreciate it. Hey Abby, thank you so much. Abby Roach, senior portfolio analyst. She covers consumer stocks for the Empiric LT Equity team at all Spring Global Investments.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily coming up after this.

[Judy]

This is the Bloomberg Businessweek Daily podcast.

[Jenny Garth]

Listen live each weekday starting at 2pm.

[Judy]

Eastern on Apple CarPlay and Android Auto.

[Tim Stenovec]

With the Bloomberg Business this app.

[Jenny Garth]

You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.

[Tim Stenovec]

Lots of news in the chip world this week. I'm going to read.

[Carol Massar]

So there's so much stuff.

[Tim Stenovec]

Okay, but I got to go quickly.

[Carol Massar]

Go, go. We have a Great guest.

[Tim Stenovec]

The US has approved the sales of tens of thousands of advanced AI semiconductors to the UAE's G42 group and regional rival Humane. That's of Saudi Arabia. It's a major boost for both Gulf nation's efforts to become formidable players in the tech. And then there's Nvidia and what's going on within video today. Following a rally of more than 5%, Nvidia, now down 2.3%, the chip maker did reassure investors on AI demand. Questions lingered though about the stretched stock prices and hefty investments.

[Carol Massar]

And that's where we want to start with Lane Bass. He is the CEO of the data security company Deep Instinct, Chairman of Blaze, which is an AI semiconductor company that works on low power, high efficiency processors for edge computing. He is also former CEO Palo Alto Networks and the former CEO of zscaler. He joins us Tim from Miami Beach.

[Tim Stenovec]

Elaine, good to have you on the program. You've been doing this for more than 30 years. You've built and led tech companies in the US and around the world. Yes or no, are we in a bubble?

[Jenny Garth]

No, I don't think we're in a bubble. I actually liken this to what we saw you mentioned. I've been at this 30 years. I've seen us from the days of the deck mainframes and IBM mainframes moving to servers, ultimately to PCs and then ultimately to handsets that have all the power. I think what we're seeing is an AI push that's condensing what we saw over perhaps two decades into a two to three to five year time frame. The acceleration of this adoption is what might make it look like a bubble. But the applications and the growth opportunities in various markets make me feel that we're still at the front end of something that might take pauses on occasion, but certainly not a bubble.

[Tim Stenovec]

Well, let's start with the applications of this technology. I mean, what do you see that justifies not just these lofty valuations but all the capex that these companies are spending to try to achieve?

[Jenny Garth]

Yeah, well, in the first place, every one of the companies that have to invest here, they have to invest to have a piece of the action. So there's almost going to be a forced action by them to invest in the GPUs, invest in the LLM models. But if you take a look at where the market will grow over time, and that's why I'm involved, as you'd mentioned earlier, in a company called Blaze Semiconductor on the edge again, it is like that movement from the mainframe, the central, large data center off to the edge where a lot of the applications and solutions are going to be provided. So I see a very large opportunity of growth in semi. There's a number of companies that we've seen Cerberus, we've seen Grok and of course Blaze in the market, and there's many, many more. But I also see similarly a high growth in the cybersecurity area where agentic AI attacks, black dark AI attacks are going to create a growth need for cybersecurity companies as well.

[Carol Massar]

And that's kind of where you come in. Tell us a little bit about Deep Instinct and the work that you guys are doing.

[Jenny Garth]

Sure. Well, Deep Instinct is based on an advanced AI capability called deep learning. And we've heard a lot about machine learning. But AI in the form of a deep learning framework really allows you to get into a predictive preventative mode. And it uses large GPU processing to be able to take massive amounts of data from all over the web and the dark web and be able to actually predict a ransomware attack or a breach before it happens. And so the market has been heavily, and we know very well known names such as CrowdStrike, Palo Alto Networks, Zscaler. There's still a lot in the detection and remediation mode where, which is very important, you need layers of defense. You need to know what to do when something happens. But to really get a step up on some of the AI attacks you, you need a more sophisticated AI. You need to fight AI with better AI.

[Tim Stenovec]

How do you do that though, in a world where the incentives are so aligned for bad actors to come after you? I mean, I don't know. How many. Carol, how many texts do you get a day that are like trying to dupe you into stuff?

[Carol Massar]

A lot.

[Tim Stenovec]

Yeah. And I mean, I mean even we're, we're to the point where, you know, with the voice generation, kids, you know, really fool those companies that are, that are used as voice authenticators like you. There, there are warnings about, you know, if you get a call from somebody in your family, it might not actually be your family. Like we're not headed in a great direction. I feel like you've called off a.

[Jenny Garth]

Great list of things and really in.

[Tim Stenovec]

This is what keeps me up at night. Don't worry, we can, you can charge me later.

[Jenny Garth]

I get them too. It's. But you know, really knowing that the biggest risk to most companies and governments is insider threat, it's phishing attacks, it's deep fakes that can really fool an individual user and that's really what they focus on, is the weakest link. So what you have to be able to do, and it's what we do at Deep Instinct, we actually track and scan at massive rates all of the bits and bytes and threads that come through. And at the end of the day, if you do get a scam or if you do get something that's in the form of a file that you open, whether it's on a text or in an email, there's a file there, many times it's fileless. But there's a scan that takes place that will be able to stop what we call zero day threats. It's the first time never seen threat. That's what we specialize at, a Deep Instinct.

[Carol Massar]

So like who do you see as your main customers or who are your main customers?

[Jenny Garth]

Yeah, large globals, if you take a look at the largest number of our customers, they're global banks, there's global manufacturing, global health care companies and you know, service providers such as the people who carry your, your phone conversations, your text messages, all of these are really where we focus our attention and our sales efforts.

[Tim Stenovec]

Do you think we can ever get to a point where we don't have to be vigilant as normal human beings or we just always have to be on the lookout and looking over our shoulder that somebody's going to get our data, somebody's going to get access to our accounts?

[Jenny Garth]

Yeah, this is going to be a game that continues cat and mouse for the longest time. And it's why quite frankly, the cyber security sector continues to be a strong sector. They're going to be some consolidation in that sector. As we've seen in recent months back to this year, 2025 has been a significant year for consolidation. I see 2026 being the same, but everybody, the largest platform players, including Palo Alto Zscaler, are accumulating the capabilities to be able to do everything from access identity management to make their SOC or their security operations centers more efficient. The consumer will continue to be under attack and really my best advice to consumers is if it doesn't look like anything you know or anybody you've heard from, don't click on it. When it comes to businesses, put the best layers of defense in place, including AI capabilities that are going to be able to battle more sophisticated attacks.

[Carol Massar]

So you're basically saying you are for someone, anybody who's creating data before it starts to go anywhere in the AI world or use if you will, of, you know, through a, the AI lens That's where you guys enter. It's like cleaning out the data, making sure it's pure, it's clean, you hit.

[Jenny Garth]

It right on the head. That's really only what bad actors are going after. Data. It might be your individual data, but more regularly it's compromising corporate data, government data. That's where they have the most leverage and can hold for ransom. They can disrupt operational capabilities. And at the core of this, being able to scan every byte of data, whether it's on premise or in the cloud. These days most companies are adopting multi cloud strategies. Aws, Azure, Google, gcp. Your data is everywhere and if you cannot protect your data, then you're going to be at risk. And in many cases, a lot of corporations have data that's already corrupted and they don't know it. So what we really promote is not only being able to scan in line the data in the files, leveraging Deep Instinct or other AI technologies, but also being able to scan all of the data you've had resident in large data centers that you've been storing data for years. In some cases, in many cases, data that has been disturbed has been corrupted for more than 86 days before somebody who determines that there is actually something bad there, that's just an impossible number of days and too long of a time.

[Tim Stenovec]

Do we need Lane, do we need a new way to authenticate ourselves if, if the data that, that we traditionally use, like Social Security numbers or you know, parents, maiden names, those things are out there, what's the right way to prove to an entity that we are who we say we are?

[Jenny Garth]

Well, I think the efforts in multi factor authentication have been very good.

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[Jenny Garth]

You know, while it might seem aggravating, sometimes every time you want to log on to a bank account or into some piece of our website that you're looking to access, that you have to get a code text to you or sent your email. These two multi factor authentication methods are really helpful and at the end of the day they do help identify that you are who you are. Identity access management is another key growth area in the cybersecurity space as well. And AI tools are being applied there as well to help.

[Carol Massar]

Just one last. I'm going to go back to where we started because it's just top of mind the narrative about the questions behind the AI trade, the AI spend, the circular financing the valuations. You're not worried? Just got about 30, 40 seconds here.

[Jenny Garth]

No, not really. I think we'll see. Pauses. I don't see trade off on Nvidia. Today. Believe me, I've been involved in many great earnings calls where after the earnings call is done the stock drops and you scratch your head. I don't think that's an indication as to any chink in the Nvidia armor here. I think we'll see some pauses in resuming. But as I do say, I think the shift towards the edge yeah, and companies plays are going to be where we're going to see additional future growth and that will come alongside with growth from Nvidia. Nvidia as well.

[Carol Massar]

Well, so glad we could go there with you. Certainly another window into this AI build out. Lane Bass He's CEO of the data security company Deep Instinct, Chairman of Blaze, former CEO Palo Alto Networks, former CEO.

[Tim Stenovec]

Of Zscaler Stay with us. More from Bloomberg businessweek Daily coming up after this.

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[Judy]

Hey, audiobook lovers. This week on the podcast I'm sitting down with musician, producer and walking encyclopedia Questlove. We're talking about Mark Ronson's memoir, Night how to Be a DJ in 90s New York City. All right, like we talked about before, Mark Ronson found sanctuary in the DJ booth. What's a tool or piece of equipment in the studio or on stage that gives you the most control?

[Jenny Garth]

So I have two microphones on stage. We have the microphone that you hear as the audience. Then we have a second microphone in.

[Tim Stenovec]

Which we communicate with each other.

[Jenny Garth]

I feel like that second microphone kind of saved all of our friendships. No band likes each other after 20 years or 25 years. The Beatles broke up in seven and.

[Davide Shilley]

A half years and we're going on 35.

[Judy]

Listen to earsay the Audible and iHeart Audiobook Club on the iHeartradio app or wherever you get your podcasts.

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You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tim Stenovec]

Okay, let's bring in Brent Schutte, CIO at Northwestern Mutual Management. They've got more than $300 billion in assets under management. Brent, good to have you on the program. A lot has changed since you were last on with us. In the middle of September we had an entire government shutdown, the longest ever in history. We had the government reopen. So we've gotten some late data. We've also had some cracks start to form around what many consider being the trade and questions about capex. How are you looking at all this?

[Judy]

There certainly are quite a few cracks and I know the commentary about Nvidia's earnings. I think the reality is there's still questions about the sustainability of AI and what it becomes in the future. There are economic questions. So think about the unemployment report, the jobs report, where is the labor market at coupled with inflation and what does the Fed do about that? And then I just think there's lots of market questions. So you've seen a large run up in nonprofitable tech companies. You've seen cryptocurrencies start to fall quite a bit. You've seen private credit cracks start to emerge. And that's where I think there's lots of questions that are still unanswered. I think investors are finally starting to pay attention to those. That's where I would just counsel people to please stay diversified. I know the temptation has been to concentrate in these names, in these tech names that have been the high flyers that have carried the markets for much of the past few years. I just think in the future the answer is going to be a broadening out across the spectrum of asset classes. Large cap overall small caps and mid caps, which actually trade at pretty cheap levels relative to their large cap counterparts and yes, even international stocks. I guess the question is do we have a hiccup before then?

[Carol Massar]

Well, I want to talk a little bit more about diversification before I do. So if I look at the Bloomberg Mag 7 index, it is still up nearly 17% year to date. If I look at the S&P 500 it's only up about 11%. We can go on. I think there are, you know, this, Brett, you know, people will counter and say, well, wait a minute, though, I get it. You know, this is where everybody runs into. But they tend to continue, in many cases to outperform.

[Judy]

They continue until they don't. At least historically, that's been the case. And leadership has always changed. And towards the end of economic cycles, or think about it, after the Fed tightens rates, you harm the economy because they're trying to slow the economy to slow inflation. But that doesn't harm it all at once. It harms manufacturing, it harms housing, it harms smaller cap companies. Until, at least historically, you get enough critical parts of the economy that have been harmed to where you actually have a recession, then we broaden back out. That has happened in every single cycle. It's not odd for the market to become concentrated then typically, on the opposite side when it ends up happening is that the economy broadens back out and those things that have been harmed become better again or healthy again as rates are usually lowered. And that's where, no matter what happens in the next few months, I do think you have to have a market that broadens. You have to have an economy that broadens. You can't have the housing market continue to not operate. And that's where I think there's opportunities pushing forward. And it's kind of the same formula that occurred post 1999, where you did see the Internet, which is where everybody concentrated back then. It benefited more than just the companies that were putting it in place. It benefited the economy and the broader side of the economy and companies. And that's where I think you'll see I have the same impact pushing forward.

[Tim Stenovec]

Brent? Judy, you were going through a litany earlier of, of sort of cracks that are starting to appear. You mentioned private credit. Carol and I are certainly trying to get to the bottom of everything happening in private credit right now. It's. I think we're going to continue to focus on totally. Yeah. I mean, it's, it's really piqued our interest. The crypto part that you mentioned, with bitcoin sliding right now, Bitcoin down another $4,000 today, 86,400, lowest going back to April of this year. Does that send. What is the signal that that sends? Like, why are you even mentioning it?

[Judy]

Liquidity and speculation. And so that's where I think, you know, whether or not and what it is or what it is not, we can debate that all we want, but it certainly, to me still is a speculative part of the market. There are other cryptos besides Bitcoin, some that have no purpose and no stated purpose and they have a lot of money in them. To me, that's been a sign of speculation and a lot of liquidity that that's still floating around in the economy, in the markets. And that's where I'm wondering what is happening underneath the surface with liquidity? Are people being forced to liquidate? Where is their leverage in the economy? This is where I think there's quite a bit of leverage. And that's where I think you look at this part of the market and you wonder what it is signaling. And that's where I think it's just nice to pay attention to the risks that are potentially out there. And this certainly is one of those.

[Carol Massar]

Yeah, I keep thinking about that, Brent too. Like I just, you know, for those of us who've been around through some markets, cycles and crises, I think of the great financial crisis where everybody was like, go, go, go, go, until it all came undone. And then when it came undone, it was pretty harsh. I don't want to be an alarmist. I just want to be smart here. And I think, you know, as you continue to look at this market, I mean, are you anticipating a certain amount of correction? And is it because of concerns of private credit? Is it because of AI? Is it both something else? Help me out here.

[Judy]

I think it's all the above. I think there are lots of things that are concerning out there. This doesn't mean that you run out and you sell all your stocks or do anything drastic. It just means that you pay attention to what your risk level should be based upon a financial plan and that longer term asset allocation that you have chosen. In that plan, which in that plan there is the reality that stocks go up and stocks go down and that we actually have pullbacks in the economy. And that's where I just fear that people are doing what they shouldn't be doing, which is concentrating. If you didn't concentrate in the market in the late 1990s, in the NASDAQ, in the tech sector, you didn't have the large drawdown of the people who did, did. And that's where I counsel people to think about that and think about what has worked as a timeless investment philosophy, which is diversification. And that's where if you diversified post1999, which I get a lot of questions about, what are you doing to keep me from having the. If it's a bubble, what are you doing to keep me from falling prey to that which the answer is just diversification. That was the answer then. It's the answer today. I know it's not popular, it's not cool, it's not as sexy as watching the rips and stocks, but it is the best answer that anyone in my position has come up with in 40, 50, 60, 70 years of doing this. And that's why I would encourage people to avoid the urge to concentrate, which I know is out there. I also know the urge of greed and making sure you know, if your account should be 60% equities and it's moved to 70% equities, you might not be apt to rebalance, which you should rebalance back to 60% equities. And that's where I just encourage people to do the time tested tested investment strategies that have worked. There are certainly tilts you can make things that you can do, but that time tested strategy is how people have at least historically gotten from point A to point B. And I think that's will be the same way in the future.

[Tim Stenovec]

It sounds like a lot of what Brett's speaking about is comes down to behavioral finance and it's like controlling our emotions, which is such a big part of, you know, what we hear from advisors increasingly now, which is like, hey, you have your goals.

[Carol Massar]

Yeah.

[Tim Stenovec]

Make sure you stick to them no matter how enticing something is.

[Carol Massar]

Listen, take the emotion out, right? It's what prevents you from chasing trades or getting out completely when things start to come undone. Brent, Perfect chat on this Thursday. We really appreciate it. Brent. Judy. Judy, excuse me. CIO Chief Investment Officer over at Northwestern Mutual Management.

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Terms apply.