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- [00:00]
Matt Miller
Ditch the complexity. Intuit Enterprise Suite delivers AI native ERP power that is intuitive and intelligent. Scale faster with advanced control. Getting started in days, not months. Learn more@intuit.com Enterprise and get the power you need. You need to make a huge presentation in an hour. Luckily, Adobe Acrobat Studio uses AI to take all your documents and generate a presentation with a single click, building slides faster than ever before. So if you need a last minute pitch deck, do that with Acrobat. Need to level up your presentation design? Do that with acrobat. You have 30 plus documents that need to be simplified into a proposal.
- [00:41]
Janet Lauren
Do that with Acrobat.
- [00:42]
Matt Miller
Learn more@adobe.com do that with Acrobat.
- [00:46]
Bloomberg Host
Support for the show comes from public on public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice.
- [01:52]
Sponsor/Ad Voice
Disclosures available at public.comDisclosures.
- [01:57]
Matt Miller
Bloomberg Audio Studios Podcasts Radio News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Earnings Palooza in full swing here. General Motors the latest report as well. It expect profit to grow as much as $2 billion this year and like RTX, plans to return more of that to shareholders with a higher dividend as well as buybacks. Earlier, GM's CEO Mary Barra joined Bloomberg's Matt Miller to discuss their earnings and their push on EVs. Remember those? For more on the company's earnings and what she had to say, let's bring in our Steve Mann. He covers autos for Us here at Bloomberg Intelligence. He's the Bloomberg Intelligence Global autos and industrials analyst. Steve, when Mary was talking about their portfolio of internal combustion eng, their portfolio of EV vehicles, what does that portfolio actually look like? I mean, is it 70, 30 ice engines to EVs? 8020.
- [03:04]
Steve Mann
Oh, it's actually ICE engines, much greater. I know they have a full portfolio of EVs, but you're talking about like 85, 90% ICE versus 10, 15% EVs. So you know, they do have a big portfolio, but it was just at the beginning of rolling them out. You know, they do have still, they do still have one more major rollout coming out, which is the Chevy Bolt, a smaller vehicle, which the industry and GM thinks that that's where the market is going, a cheaper, more convenient EV.
- [03:36]
Bloomberg Host
GM stock up 9% today to a 52 week and an all time high. So the street likes what they're hearing. Steve, it's almost to the point where the street rewards these companies if they not just not fully back away, but at least slow down the evolution to EVs and just focus on what's making money today. Is that kind of what where the industry is today?
- [04:00]
Steve Mann
Yeah, exactly. Like Trump actually did the auto industry a major favor by relaxing the miles per gallon mandate. So basically every vehicle in the Big Three's portfolio are currently meeting those mandates. And what it means is less penalties. Right. And no need to buy EV credits going forward. Huge savings. And what that means is it could translate into a slower increase in car prices for consumers, especially for big trucks. Makes the big trucks a lot more attractive to sell for the Big three. So they're going to sell as many as possible given this opportunity. I know we talked about hybrid for gm. That's a, it's going to be a huge sinkhole for them if they invest in that technology today. So let's, let's not do that. Maintain whatever they can do with EVs and really push the ICE vehicles.
- [05:01]
Matt Miller
Maintain what they can with EVs so that, you know, small 10 to 15% of their overall portfolio. Forget about hybrids and just focus on the mammoth gas guzzling vehicles that Matt Miller likes driving. I know he talked about how he drove electric versions of that, but let's face it, what happens then if gas prices do turn up higher unexpectedly? And I know that the administration is doing all it can to prevent that from happening, but I'm looking at triple A gas prices and they bottomed at around 279 and have now made their way back up towards 290.
- [05:33]
Steve Mann
Yeah, I mean historically when gas prices go up, it does impact sales and you know, it may, it may push some buyers into EVs depending how where the expansion of the EV charging network is at. But I think at the end of the day, if gas prices do go up, actually benefits the Japanese companies like Toyota and Honda where they have a full suite of hybrid vehicles that actually Consumer love.
- [06:00]
Bloomberg Host
Yeah, I just leased the Honda CR V Hybrid. My son who drives in California all the time where the gas is really expensive.
- [06:08]
Matt Miller
Yes, that's right. He probably wanted it. And how often does he have to fill up?
- [06:12]
Bloomberg Host
Not that often. I mean just not that often. It's great, it's a great technology. Steve, let's just, while we got you here, what's the call these days on Tesla as we talk about this EV business, but really for Tesla, we're talking about so, so much more.
- [06:27]
Steve Mann
Yeah. Looking at GM as a, as a backdrop, you know, GM's earnings for 2026 is probably a little bit light. There's probably some more upside on the shift mix for more ice. So what it means for Tesla, it's an uphill battle for them. I know the stock is trading at a astronomical valuation at the moment. Investors are very focused on their Robotaxi autonomous vehicle build out. People feel that they can actually out compete the likes of Uber and Lyft. So you know, sales will be weak in the fourth quarter for Tesla. But I believe the, you know, the investors are actually looking over past that into, you know, what is the, what is the catalyst or what is, what is Elon Musk going to talk about in their next earnings calls on the Robotaxi?
- [07:25]
Matt Miller
Yeah, it's always about the Elon, Elon Musk narrative, his vision going forward of what this company is going to be. I wonder, you know, Mary Barra talked about that charging infrastructure, the network and how we're not there in the United States. Tesla is offering the Supercharger and that's part of its business model to be able to make that charger available to other automakers. How big a contributor is that to its revenue, to its profitability when it's profitable?
- [07:53]
Steve Mann
Yeah, it's still, is still a small amount. It is what they do is they want to expand that business. So they are talking to gas stations like Wawa out in Pennsylvania are actually buying Superchargers, installing it next to the gas pumps and next to the stations. So they are trying to expand it in terms of charging, selling these supercharging business and the revenues from the charging, it's still really, really small. I would say around 10%, maybe less.
- [08:29]
Bloomberg Host
Hey, what do we know about how important are incentives here? I look at other countries around the world and they have got these huge EV percentages of China sales, China, the Nordic countries. How important are government incentives to get there?
- [08:45]
Steve Mann
It is very important. I think the Germans are actually putting back the incentives and it has lifted EV sales in Europe and Germany. But at the end of the day you really want to build a sustainable growth environment for these cars. And Mehrabar is right. We actually publish a very extensive report on EV charging comparing charging network in the US versus China night and day. Right? So it's about convenience, it's about cost for the US Consumer. It's great to have, it's great for consumer to have some subsidy, you know, help pay for, for the, for the cars that they're buying. But I think long term, you know, it really needs the consumer to really buy into the product.
- [09:38]
Bloomberg Host
Stay with us. More from Bloomberg Intelligence coming up after this Is your business outgrowing your current systems? Are you tired of the cost and crushing complexity of traditional ERPs? Meet Intuit Enterprise Suite, the AI native ERP that simplifies complexity and adapts with your business. It's enterprise grade power made intuitive, intelligent, adaptive and ready for what's next. Built for modern finance teams, Intuit Enterprise Suite helps you streamline complex financial management and gain real time visibility across all your entities. This AI native solution automates workflows and unifies your data, acting as a force multiplier for your team. You no longer have to migrate off Intuit as you grow, get the advanced accounting and multi entity control you expect, but in a solution that finance teams actually enjoy using best of all. It's quick to adopt, letting you get going in days, not months. Scale with confidence. Get the power of ERP without the complexity. Learn more@intuit.com Enterprise Today and Future Proof your business support for the show comes from public on public. You can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, llc. SEC Registered Advisor Generated Assets is an interest interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice.
- [11:46]
Sponsor/Ad Voice
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- [12:22]
Matt Miller
You'Re listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [12:37]
Bloomberg Host
Boy, a lot of news flow in the airline space, the aerospace area. So let's get right to it with somebody who knows this stuff. Philip, Deputy Team Leader for Global Aviation, Bloomberg News I think he's in my hometown, Dublin, Ireland, back when my peeps were fun, way back in the day. So good for him. Hey Sid, let's talk to us about the airlines. American Airlines. They said they're poised for a pretty strong year, yet JetBlue had a wider than expected loss here. What's going on with these two airlines here?
- [13:07]
Philip
So the airline industry is actually in a sort of bit of a flux at the moment. I mean, you've obviously had the impact of all these storms, you've had the impact of the government shutdown, and you've got the uncertainty about the year ahead. And so American Airlines is taking a more bullish view of the year ahead. They're sort of following their peers United and Delta in targeting the most premium end of the spectrum. And they're sort of hoping that by aiming their product at the premium end of the market, they can sort of offset the sort of downturn that's happened at the bottom end of the market. JetBlue also talking about how at the moment things look a bit shaky, but they're talking about how they see a road to profitability and a free cash flow by the end of 2027. So slightly more long term view of when the recovery might happen. And that sort of explains the dichotomy in the is the earnings forecast for both these companies.
- [14:03]
Matt Miller
And of course JetBlue is also doing what it can to premium, premiumize, if that's a verb. It's experience for customers too, with the opening of that new lounge in jfk. So that is the story with airlines and it's been fairly consistent too with what we heard from Delta and United. Where does that leave the smaller carriers that need to either team up or, or fade into oblivion? I'm thinking Spirit, I'm thinking Frontier. Is there still a market for these discount carriers?
- [14:33]
Philip
So the market at the moment is very tough for the discount carriers. So essentially what's happening is that the top end of the market is going to Delta and United for their premium products like first class and business class. And on the other end of the market you have sort of everyone else competing to get the lowest cost tickets into the hands of the passengers. And that's sort of eroding margins, especially as costs for both pilots and cabin crew are hurting the ultra low cost carriers and the low cost carriers. And sort of, that's sort of been explained by this K shaped recovery that airline executives are talking about. And so JetBlue and the others are sort of trying to get the premium end of it. I mean, we've seen even Spirit Airlines talking about how they're adding a so called business class product. They've added Wi fi, they've added all sorts of things to keep people coming back to them. And so they're hoping that by slightly differentiating themselves from just very commoditized ultra low cost carriers, they can be able to get in those customers.
- [15:27]
Bloomberg Host
Well then it kind of goes back to the point. Is there a need for a real true low cost carrier out there? Some of these supposed ones are going kind of mid market, higher market. Is there a market demand for that or is everybody just willing to pay up for travel?
- [15:43]
Philip
At the moment it looks the people who are willing to pay up for travel are the people willing to pay up for travel. And so at the bottom end of the market, I mean, everyone talks about how there will be a recovery of the ultra low cost carriers and that once people are more certain about the economy and once people at the bottom end of that key start to see some stability in the economy, people will travel. Because I mean, remember during the pandemic there was, after the, as, as we exited the pandemic, there was this boom in travel for across the board. And that sort of has further split up. And so we will see that demand coming back. We just don't know when and what sort of shape that will be.
- [16:20]
Matt Miller
So Sid, you also cover Boeing and it came out with its results. And in terms of the numbers for the fourth quarter, free cash flow topping estimates, it generated cash for a second straight quarter. That sounds like it's good news. How far along this recovery, this long awaited recovery is Boeing actually.
- [16:38]
Philip
So Boeing is on the road to recovery. They're still not there yet, but they are, they are recovering. I mean their fourth quarter results and their full year results were boosted by the sale of that Jefferson Digital Aviation subsidiary. And that sort of gave them a $9.6 billion boost. And at the same time, Boeing is sort of ramping up production, they are ramping up sales. I mean they've seen a surge in sales. I mean in the last, ever since the Trump administration came in, we've seen a surge in Boeing sales. And so Kelly Orthberg, the new CEO, is sort of pushing Boeing to improve production, ramp up production at a steady pace. I mean they've gone to about 40 to 737 max jets a month. And they are sort of further boosting those production numbers and that will get them on at the sort of where they want to be in. Kelly Odburg Talked about how 10 billion in free cash flow is his target and the company's on its way there.
- [17:33]
Bloomberg Host
Sid, I'm glad you mentioned deliveries because I guess I learned long ago about this aircraft manufacturing business, it's not the sales you announce, it's the orders that you actually deliver. You mentioned kind of on the 737, which is the key aircraft for Boeing, that around 42amonth here. Where does a company want to get to and by what time frame?
- [17:55]
Philip
So Boeing still way below it used to be above 50 pre pandemic when they sort of shut down production of the Max because of the grounding that happened after those two fatal crashes. And so they need to get to beyond that. I remember Airbus has talked about 75amonth by 2027 on their arrival, a 320 model. And so Boeing would have to sort of ramp up production to some, some of those levels to target that backlog. I mean they've got a massive, they've got a record breaking $682 billion backlog of customer orders. And so that's actually when airlines get. So the airframe is like Boeing and Airbus only get paid when they actually deliver those. So when they book those orders, they don't really get the money from the airlines. The airlines pay them when they get those planes. And so for Boeing to actually start generating that free cash, they need to actually get those planes out the door.
- [18:49]
Sponsor/Ad Voice
Yeah.
- [18:49]
Philip
And that they need to do by ramping up production.
- [18:51]
Matt Miller
Said very quickly. You mentioned that backlog record $682 billion. How much of that is customers trying to curry favor with the Trump administration by buying U.S. aircraft or at least announcing plans to do so?
- [19:04]
Philip
Some of it. Some of it may be some the customers trying to carry favor the administration. I mean we saw that massive Qatar order at the same time we there is only the only two planemakers in town and Airbus is sold out until the end of the decade and sort of into the next decade. And so the only way for an airline to actually get planes is to either buy planes from either Boeing or Airbus and Boeing is similarly sold out. And so airlines are placing their bets with either manufacturer and hoping that they will get those planes whenever they actually get those planes in terms of the delivery forecast.
- [19:38]
Bloomberg Host
Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public on public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice.
- [20:49]
Sponsor/Ad Voice
Complete disclosures available@public.com disclosures these days it seems like AI agents are just about everywhere you turn every field and every function. But without identity you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI Finding the right promotional products can feel overwhelming. But with 4imprint, it can be easy. They call it 4imprint certainty, which means the process is stress free, straightforward and backed by real peace of mind. Not sure what promo products to order? No problem. You can get free samples, product guidance, even free help with your logo so everything can meet your expectations. Need options? They've got thousands, including branded apparel, drinkware, outdoor and all the tradeshow essentials. And when your order arrives, it's backed by their 360 degree guarantee. That's 4imprint's promise. Your order will be packed with care, show up looking great and right on time. In a rush. 4imprint has quick turnaround options too to help you hit your deadline. Whether you're prepping for an event or just refreshing your promo lineup, 4imprint helps you get it done. Head to forimprint.com to explore. That's 4imprint.com 4imprint for certain.
- [22:22]
Matt Miller
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [22:36]
Bloomberg Host
Still on the earnings front, UPS Big Brown sees better than expected sales amid a network overhaul. Thomas Black joins us. Bloomberg opinion columnist Thomas, what'd you see? What'd you learn from the UPS earnings year?
- [22:52]
Thomas Black
UPS continues to shrink to become more profitable. That's the big takeaway there. They're reducing their Amazon business and they're trying to retrench with more profitable packages. And that's probably a move away from some of the e Commerce deliveries where the competition is fierce and there's lots of little companies that are out there competing.
- [23:15]
Matt Miller
So how far along this journey of shrinking to become more profitable? Are they are we in the third inning? Are we in the seventh inning?
- [23:24]
Thomas Black
This will be the last year of this, so I would say we're in the sixth inning heading toward the ninth. So after this year, Carol to the CEO at UPS said we're going to be a a leaner company and ready to grow. So we it's going to be a little bit painful this year. She walked analysts through it. The first half is going to be more painful as they glide down from Amazon and they take some write downs and so forth. As you know, they retired their fleet of MD11s, which is this old plane that was sadly had A crash. So they're going through all this in the first half and then the second half things should start to turn around. They're also, they're not only shrinking their Amazon business or shrinking their footprint, their facilities and the older ones are being retired and they're replacing those with new automated facilities and that's going to allow them to lay off more union workers. So that big union contract where the Teamsters push through a big labor increase is turning around to bite them a little bit because UPS is dealing with that by shrinking its workforce.
- [24:32]
Bloomberg Host
How does this UPS strategy differ from that of FedEx?
- [24:40]
Thomas Black
They're similar in the sense that they're both cutting costs aggressively. FedEx is a little bit different because it doesn't have the labor costs from the union workforce. So. So it's a little bit more flexible. And FedEx is undergoing a major overhaul that's probably in its last innings as well. And the last part of that is the most difficult part where they're going to combine their two separate networks, the ground network and express network. They're in the middle of that, but so they're going to be coming out.
- [25:12]
Bloomberg Host
Of that as well.
- [25:12]
Thomas Black
So we're going to have two parcel companies that are restructured and ready to grow at the end of this year.
- [25:17]
Matt Miller
Every time there is some kind of headline regarding UPS laying off workers or cutting positions, it's in. It's these massive numbers right this time around. It's up to 30,000 positions this year. And as you mentioned, Thomas, this is all due to trimming down and small downsizing the scope of the company. At what point are we looking at job cuts tied to AI or have we not got even gotten there yet?
- [25:42]
Thomas Black
Well, I would, instead of saying, I would say automation and that those are these new facilities that handle packages automatically. You even have the, the induction of packages where you have robots putting the packages on the conveyor belts and taking them off. So those are the steps toward more automation. This is that physical AI that people talk about. Right. And interesting stat that Carol Tomei gave on the call is that those Automated buildings are 28% more efficient than the older buildings. So they, the more automation is where they're leaning into. So it's part of it. Shrinking some of the low profit volume plus more automation to replace the human workers.
- [26:27]
Bloomberg Host
Basically E commerce continues to grow, I guess double digits. Who's handling all these packages of UPS is maybe backing away a little bit.
- [26:36]
Thomas Black
Well, Amazon has its own delivery network. It tends to want to deliver into those big urban areas where it just takes things from a warehouse to a residential home. So they, they do that very well. Where they want help is on the rural areas. That's where they turn to folks like UPS and the Postal Service. So obviously Amazon is a big player there. We also have lots of smaller companies. These are gig type companies that have apps and workers show up and they have an app on their phone and it gives them a delivery route and they throw packages in their car or their truck and they go deliver. So there's a lot of those companies that tend to operate in urban areas. So there's actually a lot of capacity out there for retailers or people who are really smart on their inventory management to tap into.
- [27:29]
Bloomberg Host
Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice.
- [28:40]
Sponsor/Ad Voice
Complete disclosures available@public.com disclosures these days it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, Secure any agent. Okta secures AI Finding the right promotional products can feel overwhelming. But with 4imprint, it can be easy. They call it 4imprint certainty, which means the process is stress free, straightforward and backed by real peace of mind. Not sure what promo products to order? No problem you can get free samples, product guidance, even free help with your logo so everything can meet your expectations. Need options? They've got thousands, including branded apparel, drinkware, outdoor and all the tradeshow essentials. And when your order arrives, it's backed by their 360 degree guarantee. That's 4imprint's promise. Your order will be packed with care, show up looking great and right on time in a rush. 4imprint has quick turnaround options too to help you hit your deadline. Whether you're prepping for an event or just refreshing your promo lineup, 4imprint helps you get it done. Head to forimprint.com to explore. That's 4imprint.com forimprint for certain.
- [30:13]
Matt Miller
You'Re listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app. Listen on demand, wherever you get your podcasts or watch us live on YouTube. Whenever we talk about Universal and their investments, their endowments, the one name always comes up, and that is Yale. Yale created this endowment model that was predicated on lots of private assets, long term investments that paid off handsomely years down the road. Except there are now question marks over whether this Yale endowment model is still relevant, whether it's debt or not. Janet Lauren is Bloomberg News's higher education finance reporter and today's big take really focuses on that idea. Janet, there's question marks about the Yale endowment model because the better performing endowments of late are those that invest in just plain old stocks and bonds.
- [31:07]
Janet Lauren
Yes. And you know, occasionally from time to time we've seen that in certain years where simple just outperformed private Equity and other NVC. And in 2021, remember the outstanding returns that these schools had. But now, higher interest rates, fewer exits, you've got a huge amount of money locked up in private equity, in some cases 40%. And you know, look, these schools would like a little cash. They're looking, you know, perhaps they want to change managers. They need the cash to do other things as well and refresh their portfolios. But when you have, you know, in the 40% locked up, you know, time to think about other things. And that's perhaps why you saw Yale doing its first ever sale last year, which was a big deal.
- [31:52]
Bloomberg Host
So again, this sale, Yale unloaded about $2.5 billion in LBO funds at a discount. That is brutal. Well, is that unprecedented or other folks?
- [32:03]
Janet Lauren
Well, Yale has done it for the first time. You know, others have been doing this before. Harvard has unloaded a lot in previous years, but it's sort of a new normal in some ways. Looking at secondaries, the secondary market is very popular right now. And in the hunt for potential cash and liquidity, you look at the UC endowment where we talked about this 80, 20, they call it the Blue and Gold Fund, Very proud of it. And in the height of the pandemic, when they wanted some liquidity, they gave almost $2 billion in cash to the campuses for liquidity. Compare that to 2008, when schools were forced to sell on the secondaries or borrow. That's kind of a stark example right there. When you need money.
- [32:52]
Matt Miller
When you need money. And I think that's a key phrase here, especially in 2026, because this white House has been targeting higher ed. And even though Yale has not been targeted to the extent that Harvard has, for instance, or Columbia, these schools need money in a way that they didn't before, if for nothing else to pay taxes on their endowment.
- [33:11]
Janet Lauren
Yes. And that's a huge game changer. You know, a year ago, we may not be having this conversation. Yale and Harvard each had pegged their bill for the endowment tax, which is now 8% of net investment returns, to be about $300 million a year.
- [33:27]
Bloomberg Host
Wow. And is that, is that enforced? Is that happening right now?
- [33:31]
Janet Lauren
Absolutely. That happened July 1st, when the, when the big beautiful act.
- [33:35]
Bloomberg Host
How about the, the actual, I guess, halting payments to some of these universities that President Trump and the administration have talked about for some of their funding? Has that happened?
- [33:47]
Janet Lauren
So many schools have had settlements. Harvard famously has not. Yet there was a lawsuit in last September. The district court ruled in favor of Harvard. Late December, the government appealed. So that still in flux. But there's a huge concern of Harvard and all universities. Are we still going to get this federal research funding going forward? And Harvard may have temporarily solved their problem. Still very unclear. But what is the money going forward? Are universities, these large research universities, still going to be able to count on hundreds of millions of dollars? You know, Northwestern, which settled around Thanksgiving, had been self funding their research to the tune of something like 30 or $40 million a month. So we're talking, you know, lots and lots of money.
- [34:40]
Matt Miller
Yeah, they need the money in a way that they didn't before. And going back to the Yale endowment strategy and how well it worked, at least initially, when David Swensen launched it back, I think in the 80s and 90s, those were the heydays of the Yale endowment model. Maybe it made sense when private equity, private investing was not a big thing yet, was not yet mainstream. Or maybe it makes More sense in a low rate environment. But times have changed and that's a big part of it, right?
- [35:04]
Janet Lauren
Absolutely. First mover advantage. You know, there weren't as many institutional investors doing what he was doing. He was, he saw inefficiencies in the market and he said, look, this is what we can do. We have the ability to lock up money for a while. We're very long term investors. We invest for centuries. We can do this. And they, and it was extremely successful. And others tried to copy. Certainly more money piled into private equity, sovereign wealth funds, pension funds, foundations. And when you have a lot of money chasing returns, it just, it just isn't as successful, especially at this higher interest rate, when there are fewer exits.
- [35:46]
Bloomberg Host
What is the Yale model in terms of asset allocation and is it dead now?
- [35:50]
Janet Lauren
Well, you know, we had the head of a very large pension fund say it's not dead, it's perhaps on life support, but it's, you know, it, it's looking at inefficiencies in the market. Now, typically, Yale has not been a big investor in US equities, you know, tiny share of. Now we don't know the details because unfortunately they stopped publishing their asset allocation when David Swensen died. You know, a huge loss for me personally because it gave you some great insight, but they typically had a very, very tiny investment in US equities. Now look at the University of California, 80% in global equities. But you know, who is, who, who are they trying to emulate? You know, some investor in Omaha who's been pretty successful.
- [36:40]
Matt Miller
Yeah.
- [36:40]
Janet Lauren
You know, betting on America.
- [36:41]
Matt Miller
Yeah. But just buying cheap index funds. I guess what's not immediately obvious to people is that an endowment is more of a fund of funds rather than just a fund like the UC fund, the Blue and Gold fund you were talking about. That's almost like a very basic personal account where you're just putting money into index funds and not dealing with it for a long time.
- [36:59]
Janet Lauren
Exactly.
- [36:59]
Matt Miller
But Yale is like they're picking fund managers. Like it's very, very complex.
- [37:03]
Janet Lauren
Well, it's actively managed. And Yale is very famous for, you know, having managers for 10 or more years. I did a story maybe 10 years ago that talked about the, the length of managers and it's often 10 years. And, you know, Yale very smartly came up with a new program. They call it the Prospect Fellowship. And they're looking for new talent. And we had a comment from a former Princeton manager who talked about, you know, they look for talent and they grow with them. So maybe a small allocation to a manager today. Think Hill House at Yale turns when they're successful into, you know, billion dollar investments. And especially when they've done well. You know, you can grow with a successful manager and then all of a sudden your, your allocations are much larger as you're growing with them and that's what they're seeking. So that's sort of like a refresh for them.
- [37:54]
Matt Miller
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