Arsenio Dominguez (2:55)

Listen, yesterday I asked for cautious when that announcement came, particularly because we need to verify the full openness of the Strait of Hormuz. When I immediately contacted the literal states in the region, including Iran, it was clear that the freedom of navigation is not fully restored because the traffic separation scheme that has been adopted by the IMO back in 1968 is still not open for navigation. There are concerns that there may be mines, which meant that the announcement from Iran about the opening of the Suite of Hormuz was something similar to what they announced earlier, when there will be some connections or some verifications from that side that actually doesn't follow the right of freedom of navigation. And this is the reason why I asked for cautions in that I was verifying the information, because for us, the full openness has to be in a safe manner.

Christina Raffini (3:52)

So you're talking about that TSS traffic pattern, the one that's been there, the ones that ships have been using, that was never really reopened.

Arsenio Dominguez (4:00)

That is correct. And at present there are concerns that there may be mines in this traffic separation scheme. This is one of those areas where several countries met yesterday, led by the United Kingdom and France, in order to provide that assistance to verify and clean the soto for moose from mines once the conflict comes to an end. We all want progress, but we also need to make sure that any transit in the suite of Hormuz is not going to be during any dangerous times and of course, put at risk the life of the seafarers.

David Gura (4:34)

A sticking point seems to be, Mr. Secretary General, the presence of this U.S. military blockade. The President, United States adamant that it stay in place. Iranian officials saying it needs to go. How is that affecting the flow of traffic? And have you gotten any indication that the US Is willing to move all of that military might here in the days and weeks ahead?

Arsenio Dominguez (4:54)

I haven't received any official confirmation from the United States in that respect. And of course, their announcement is related to traffic that goes into the Iranian ports. So this is slightly different to the way that we are approaching the the transit in the Strait of Hormuz. The way that we are working right now is to verify that the strait is fully open once the conflict comes to an end, that they are not hazards like mines, and that the traffic separation schemes will continue to operate just the way that it was doing it before the conflict started. And for that, we already have developed an evacuation plan in assistance with the industry and those organizations that look after the seafighters who are, as well as the flagsteps of the ships that are in the Persian Gulf.

Christina Raffini (5:38)

Mr. Secretary, you and I were messaging earlier while we were on the air. Actually, it's one of the reasons we wanted to have you back on. Do you have any updates on this incident? There may be one. There may have been two incidents where IRGC fast boats appear to have approached tankers, possibly fired on a British ship. Now, it sounds like the crews and the vessels are safe, but what can you tell us about that one or possibly two situations?

Arsenio Dominguez (6:00)

The information is quite fluid at present and we are working in verifying exactly what's happened because of the announcement this morning, again reverting the openness of the suto formus. So there is information of at least one vessel that was approached and was fired at, but there's no damage to the vessels and thankfully also not a single seafarer has been harmed. These have also been broadcasted to other vessels in the regions, so companies and ship owners continue to be cautious on this. That's the call that I made yesterday. We need to verify what is happening. Some vessels continue to turn off their automatic identification systems in order not to be targeted. And this is why it takes us a few more time in order to actually get the correct information.

David Gura (6:45)

For my last question, I'm going to actually steal it from Christina, who's been asking about this over the course of the morning. But I think you can give us the concrete information on all of this. You've spoken with us in the past about how many seafarers are on these vessels in the Strait? Some 20,000 in total. How many of them, if any, have been able to get off of those vessels during the course of this conflict? Or have they been effectively stuck on those ships over the course of these last seven or eight weeks?

Arsenio Dominguez (7:08)

A handful of seafarers have actually transit. If we looked into the movements and when some of them use the corridor that the Islamic Republic of Iran introduced, we saw that there were at least sort of eight or 10 vessels that at any given time transit yesterday. We're now verifying the few vessels that managed to sail through the Soto Formus when the information was sent out about the openness of it. We still have a large number of seafarers. Just because a handful of vessels have transit doesn't mean that we have come down from 20,000 to a more significant reduced number. So the focus remains on roughly that number. Next, early next week we will have more information on what is the data in relation to the seafarers trap there. But I can tell you one thing. If it's one seafarer strap in the Strait of Hormuz, that's one too many.

David Gura (8:01)

Mr. Secretary General, thank you very much for joining us on this Saturday morning. That's Arsenio Dominguez, the Secretary General of the International Maritime Organization.

Christina Raffini (8:07)

Thank you so much, sir. All right. Joining us now are former deputy Assistant Secretary for Iraq and Iran under President Trump, Andrew Peake, and former acting principal Deputy Assistant Secretary for the Bureau of Near east affairs under President Biden, Jen Gavito. This is our two favorite Dases, as we say over at the State Department. We're very happy to have you both back. David, you want to kick it off?

David Gura (8:26)

Yeah. Jen, let me start with you and just get a sense from you of how you're navigating the dueling messaging that we're getting from the Iranian officials and from U.S. officials, principally President Trump, about the situation in the Strait. Who are you looking to or listening to for clarity amidst all of this confusion?

Jen Gavito (8:41)

At this point, I'm looking for kind of top line indicators of what direction these talks are headed. I think that your previous guest mentioned caution and fluidity, and I think that's exactly right. Both parties are positioning in advance of what are expected to be a renewed round of talks. And I think it's always important to remember that nothing is agreed to until everything is agreed to. With regard to the Straits specifically, this has been a really important reminder that regardless of what President Trump says or what Iran does in the immediate term, the long term impact of this is that Iran can close the Strait of Hormuz anytime at once in the future. That is a very disruptive and disconcerting tool that it now has exercised over the course of the last month that won't necessarily be fully resolved regardless of how this conflict ends.

Christina Raffini (9:32)

Andrew, I want to pick up on that because I was going to ask you for all this weaponry and munitions and lives lost and as we were just talking about tankers stuck and economic hardship, the US Is really not any different in a different place than it was before they pulled out of the JCPOA the first time. I was going to ask you what was different the second time around, except for it seems to me that Iran might be more willing to give up its nuclear program to please the U.S. knowing that its real card it has to play now is closing the strait. What is your take on that?

Andrew Peek (10:04)

I think that's right. I also think importantly, the geopolitical situation for Iran is much worse today than it was back in 2018 when we got out of The Iran nuclear deal. I mean, remember the reasons we got out of the JCPOA was not just the perceived holes in the nuclear piece, but also the effect that it would have on Iran's support of proxies and its development of ballistic missiles. That is it would make it tougher to sanction Iran for a variety of reasons if we stayed in the deal. Now since then, you've had Bashar Assad fall, you've had Hezbollah take a tremendous beating from the Israelis in Lebanon, you've had Hamas take a tremendous beating. Also you've had Midnight Hammer. Iran is in a worse place today. And so I think it actually could make more sense focusing specifically on the nuclear issue. And I'm not surprised there's parts of the Iranian government that are willing to deal just on that piece.

David Gura (10:56)

Chuck DeVito, I heard a colleague here describe what's happened over these last seven or eight weeks as Iran exercising a new kind of nuclear option that is for many decades. They talked about and planned for closing off this strait to, to wreak the kind of economic havoc they have over the last seven or eight weeks. We saw yesterday in those posts from President Trump adamants that Iran never do this again or be prevented from doing this once again. To what degree has Iran learned here they have a very powerful tool at their disposal? One, I mean we can quibble with this, that has the power to be, if not as destructive as a nuclear weapon, certainly a very powerful weapon that can disrupt the world economy.

Jen Gavito (11:31)

I think that's 100% correct. I still think that all of the things that Andrew just mentioned will remain important parts of its external facing policy, its missile and drone program, which have not been addressed as far as I can tell in these current negotiations. The nuclear we've arguably they have now had motivation to move towards weaponization whereas they had not made that decision in the past. But in the immediate term what they can really exercise on a day to day basis and influence kind of geopolitical direction is in fact the closure of global commerce. So I expect that we will continue to see this kind of back and forth where if they don't like the direction things are headed and I suspect that that's what happened yesterday, they announced that the strait was open, tested the United States and the blockade remained in place. And so they're showing us that they can close it again. So I do think that we are likely to see this happen quite a bit in the future. And that is particularly bad news in particular for our Gulf allies who rely so heavily on the strait in order to induct virtually all of the commerce that they do, but particular with regard to the energy sector.

Christina Raffini (12:44)

Andrew, one of the things that's complicating, well, our lives here as journalists, but also the lives of people trying to make market predictions and the lives of people just frankly trying to live their lives is the mixed messaging we're hearing from Iran and from the White House. The president says Iran has agreed to all of these things. Then Iran says, we haven't agreed to any of these things. And yet that's the backdrop for these talks that, as far as we know, are expected to happen in Pakistan on Monday. Can you talk to us a little bit about the flight format of those talks, why there's no working group or expertise involvement in them? And if you think the Pakistanis are being kind of reliable narrators, are they telling the Trump administration what Iran is really saying? Are they telling the Trump administration what they think the Trump administration wants to hear?

Andrew Peek (13:25)

That's a very, very good question. Certainly the Pakistanis love the position they're in. They have their own geopolitical problems on their border with the Taliban. There was a conflict with the Taliban kicking off right about the time the US Conflict with Iran was kicking off. The more we focus on this channel through them, the more U.S. goodwill and latent support they're going to have in any coming fight with the Taliban and also vis a vis India. So, yes, the Pakistanis want this to continue very much. You know, in terms of signal versus the noise, at least on the Iranian side, I do think there's this. There's a couple of things going on. One is that genuinely the two, you know, different parts of the remaining Iranian regime probably have a tough time talking to each other. Everyone's concerned about communications. Everyone thinks they've been hacked. So it's not clear. It's not that easy to get everyone to clear things. Also, I think it's important to remember, even under the jcpoa, that the Revolutionary Guards never really bought into that. They were basically told to do that by the Supreme Leader. That's not something that they were wildly enthusiastic about. The Supreme Leader. Supreme Leader basically gave it to the Foreign Ministry that, hey, run and see if you can get a deal to alleviate the economy. Now, without a Supreme Leader or without one who's as old and sort of set as Khamenei, you know, it's going to be even more challenging to get consensus.

Christina Raffini (14:48)

Jen, we've only got about 30 seconds, but I did want to get your take on that at the form of these talks and the Pakistanis as mediators.

Jen Gavito (14:55)

Yeah, I think that they have done an admirable job of getting us this far and I do think that the fact the parties are continuing to talk is a very positive signal that there is formula to be found what that looks like in the end. Again, I would exercise caution at this point because in addition to the points that that Andrew rightly makes, I think also, you know this, this formula is complicated and so again, going back to nothing is agreed to until everything is agreed to. Everything will fall into place. And, and I do think that Lebanon remains an important part of this.

Christina Raffini (15:28)

I agree with that. And unfortunately we are going to have to leave it there. Jen Gavito, Andrew Peek, thank you both so much for lending your expertise to us this morning.

David Gura (15:36)

Stay with us for more on Bloomberg this weekend, right after this.

IBM Representative (15:43)

The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.

Narrator for Cigna Healthcare Podcast (16:12)

IBM for many men, mental health challenges aren't recognized until they've already taken a toll. Work pressure, financial stress, changing relationships, and traditional expectations around masculinity can quietly wear men down, often without clear warning signs. In season three of the Visibility Gap, Dr. Guy Winch and his guests explore how these pressures show up, how to spot them earlier, and how men can access meaningful support. Listen to the new season of the Visibility Gap, a podcast presented by Cigna Healthcare.

Public Investing Representative (16:43)

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Christina Raffini (18:05)

All right. A federal government agency is reportedly investigating possible insider trading involving big swings in oil markets ahead of a major policy announcement by President Trump.

David Gura (18:14)

Commodity Futures Trading Commission is examining at least two instances where trading volume surged right before those announcements. Announcements were made. Joining us now is Gary Gensler, the former chairman of the cftc. He also served as the chairman of the SEC and has a new podcast called Power and Consequences. It's you and the Nobel laureate Simon Johnson dealing with a lot of these issues. Prediction markets is we want to talk the most about. But let me ask you quickly about this story. You helmed the agency after the global financial crisis. There were a lot of raised eyebrows after word of this trade came out. What is your read on what's happening here? And maybe take us behind the scenes of what the CFTC might be doing

Gary Gensler (18:47)

as it looks into this one. The only way that the American public can have confidence in markets is they think that insiders can't get ahead of them with material information. I mean, that's just not fair. Right. But to. The only way we can have confidence in our government is that we don't think that somebody in government or their friends or family are trading ahead of us. Right. So those two things are really important. And we knew that 16 years ago after the financial crisis, we were putting reforms in place. And I was honored to have this thing called the cftc. And we were going to Congress. And I have to tell you a little story about Eddie Murphy.

Bill Cohen (19:30)

Okay.

David Gura (19:30)

The comedian.

Gary Gensler (19:31)

The comedian, yes.

David Gura (19:32)

An actor.

Gary Gensler (19:33)

An actor. And he had done this movie, Trading Places.

Christina Raffini (19:37)

This is a legendary movie in my household. I never understood the end of it until like a year ago. But, yes, this is an amazing.

Gary Gensler (19:42)

And it's an amazing movie where Eddie Murphy is trading these things called futures. It's a contract where it's.

Christina Raffini (19:50)

Right. The frozen concentrated orange juice.

Gary Gensler (19:52)

There you go. There you go. But do you remember, Christina, what he was trading it on? He was trading it on. And a report from the Department of Agriculture about the orange crop.

Christina Raffini (20:04)

He basically had inside information.

Gary Gensler (20:05)

Yes. Yeah. So I get to the Commodity Futures Trading Commission. I asked the staff, I said, well, that's illegal. Right? And they go, well, boss, no, it was a lot of mumble, mumble and wonderful people. So we went to Congress in the midst of all that, we said, we've got to get something. And I used to say it was the Eddie Murphy provision. It's got to be illegal. Well, guess what? We were successful. Al Franken, who was in that movie and was a senator, had a great yucks on a couch in his office. But it's, here's where it is today. It is illegal for a government actor, somebody who works in the government, to pass on information to somebody and to have that person knowingly or with reckless disregard of the knowledge trade on that information. Also, it's illegal for that government actor.

Emily Sweeney (20:54)

Yes.

Dani Burger (20:54)

Yeah.

Gary Gensler (20:55)

So it's, it's both the government actor or somebody passing on.

Christina Raffini (21:00)

But how do you. I'm sorry, go ahead.

Gary Gensler (21:01)

So it's illegal.

Christina Raffini (21:02)

Yeah, but how do you prosecute it? Because it can't be easy because it's not like these trades all have the person's name on them. They go through intermediaries, they go through trading desk. Talk to us about how the investigation works. You have to figure out who did it, when they did it, what information they have, and if it was public information or not.

Gary Gensler (21:16)

It's hard. It's hard. And I was honored to run federal law enforcement agencies twice. One in the commodity space, one in the security space. And so the staff is doing this, not the political appointees, but the staff is doing it with a lot of technology now using artificial intelligence as well, tracking and looking for patterns, just like you do at Bloomberg, looking for patterns. Is there a spike in trading three minutes before something happens like we saw late in March, I think it was March 23rd, like you've all reported. We saw again on April 7th, like various members of the House and Senate on both sides the of, of the aisle have written Senator Warren, but, but others, also Senator Whitehouse and others have written. And so I would think, yes, the government's going to investigate these things. But to your point, Christina, it's hard because it's about pattern recognition and then getting behind that and saying, well, who actually traded? And even if you identified David, I'm not saying you did this.

David Gura (22:24)

No.

Gary Gensler (22:24)

But if David, somebody in your production booth, your control room, in the one second delay that we have here, traded on whatever information, even in that one second, they might be trading on material, nonpublic information. I'm not saying they are.

David Gura (22:40)

No, of course not.

Gary Gensler (22:41)

Right.

David Gura (22:42)

We'll follow up after.

Christina Raffini (22:43)

If they don't show up for their shift, we'll know something's happened. But so far our team is all still here, so.

Gary Gensler (22:47)

Right, right. But then what happens if all those government actors show up for their shifts? They're in a situation room or maybe they're handling President Trump's tweet.

Christina Raffini (22:58)

Yeah.

Gary Gensler (22:59)

Or they call it X now.

David Gura (23:00)

Right, Same.

Christina Raffini (23:01)

Same.

Gary Gensler (23:01)

Or truth Social.

David Gura (23:02)

Yes.

Gary Gensler (23:03)

Right. So that's important. Look, I think also Congress is looking at whether to ban certain contracts. Prediction markets. Think about it.

David Gura (23:13)

Well, let me use that as a segue. We had Alyssa Slotkin on the show talking about a ban that she's suggesting be put in place for government officials. They shouldn't be able to make bets.

Christina Raffini (23:23)

Congressional staffers. Yeah.

David Gura (23:25)

And in that interview, it was kind of clear that there was some ambiguity surrounding who's regulating these spaces. So as we talk about prediction markets and you on a recent podcast episode point out people been betting on things for centuries, talking about betting on the Pope, who's that going to be back in the 15th century? Whatever. Is it well regulated? When we look at Kalshi, which is domiciled here in the United States, Polymarkets is not. It's overseas and subject to less regulation. Is there an adequate regulatory apparatus surrounding all of this?

Gary Gensler (23:50)

Right now, I don't. I think that collectively people probably agree. No, no. Right now, no one. You're right. Americans, humans have been betting on things since antiquity, but how it's regulated, and at least on sports betting, we've done that at the state level.

Christina Raffini (24:10)

Yeah.

Gary Gensler (24:10)

And I worked on that reform back in 2010. I don't remember a single member of Congress, a single senator or House member saying, oh, we're going to give you your little agency, Gensler, we're going to give you authority to regulate all this gaming.

Christina Raffini (24:27)

And this also isn't a really pro regulatory environment right now. That's just not where the winds of federal government seem to be.

Gary Gensler (24:34)

No, no, but I can't. I can tell you this. The majority leader at the time, Senator Harry Reid, would have never voted for something to basically preempt Nevada gaming.

David Gura (24:44)

The gentleman from Nevada. That's right.

Gary Gensler (24:46)

No, it's just, it's rather absurd to think that's what Congress meant to do. Now the courts, that will play out. That's about sports betting. But now you have these geopolitical events and we did work with Congress at the time to have a prohibition put in place on any contracts on assassination, war, terrorism, gaming and otherwise unlawful acts. And that was something that they gave to the cftc that we could prohibit. I thought we voted on that. I remember voting on that. It was a Rule 40.11, I think. And, and so I thought we voted on that.

David Gura (25:25)

Settled.

Gary Gensler (25:26)

Well, sometimes in life, things that you think are settled aren't settled.

David Gura (25:31)

Spoken as a true lawyer here.

Gary Gensler (25:33)

No, I'm not a lawyer. I'm a markets guy.

David Gura (25:36)

That's very true.

Gary Gensler (25:37)

But I would say this. I think the prediction markets, some things we might just say as a society, we're going to ban. And you talked about the Pope in 1591. Gregory XIV said no betting on papal conclaves. The table, that's just off the table. But guess what? In that reform effort in 2010, Congress said we can't bet on movie. That's right. That's right. On box office receipts. Howard Ludnick was running Cantor Fitzgerald at the time. He's now the Secretary of Commerce. He came in to us and said, we want to start a contract on movie futures. What do you think? Cftc. And we looked at it and we voted. It was a split vote, 3 to 2. We lost one Republican, one Democrat, actually. But we voted and we said, there's an economic purpose here. There's. You're hedging some risk. The movie industry, Hollywood reacted negatively and they had a vehicle, this reform thing going through. Senator Patrick Leahy from Vermont took that side. Got an amendment in that is illegal. You cannot bet on movie futures in this country, nor can you bet on onions. And that was Gerald ford in the 1950s.

Christina Raffini (26:58)

Okay, so we can't bet on movie futures or onions.

David Gura (27:00)

Great lesson in lobbying, but we can watching.

Christina Raffini (27:02)

But 100%. I covered D.C. for 17 years. But you can now bet on going to war. You can bet on all these real

Gary Gensler (27:09)

huge outcomes, but not on assassination, war or terrorism. I thought I voted on that 16 years ago.

Christina Raffini (27:17)

But I mean, talk to us about the larger picture of this because we're in an era of so much data and commoditization and refining everything down to the numbers. I do worry, and I'm not a very touchy feely person, but I do worry about what it does to us when you are marketizing things like acts of war and people dying in conflicts and these huge geopolitical events which could

David Gura (27:38)

have economic consequences, I should add.

Dani Burger (27:40)

Of course, of course.

Gary Gensler (27:41)

Absolutely, absolutely.

Bill Cohen (27:42)

And.

Gary Gensler (27:43)

And there's day trading and people who watch this show know that people can trade on options that are expiring the same day.

Emily Sweeney (27:50)

Yeah.

Gary Gensler (27:51)

And we, we try to allow the retail public and the big institutions to trade and meet in those markets or even to buy and sell and speculate on the price of oil if it's well regulated. And we guard against insider trading and the like. But then there's some things that you would say, really, do they have economic consequences? Do we, do we want to have that now, why we banned onions in the 1950s and why we banned movie futures in, in the 2010. But assassination, war, terrorism, death contracts, like even in 18th century England. And this was a real problem at Lloyd's of London, which was out of a coffee shop. King George ii in the 1740s had to deal with his noble lord say, hey, we're losing too many times to the pirates. Can we ban betting on ships going down? They use different words. Yes, Admiralty insurance. You have to have an insurable interest in the ship. So maybe you have to have an insurable interest to have, have terrorism.

David Gura (28:58)

And we have about a minute left here. Where do you see this? How do you see this developing here over the next year? Groundswell of public interest and leads to what?

Gary Gensler (29:09)

It's a challenge. I think that this administration will try to do their best to push out insider trading and that's because they have an interest in promoting this. Two, the courts will play out. I don't think it was Congress's intent to preempt state gaming laws, but this administration wants to take that on and have a little agency of 500 people be a national gaming regulator. I think I don't.

David Gura (29:36)

You don't.

Gary Gensler (29:36)

And then I think Congress, I hope Congress takes up some prohibitions on certain, like death and assassination contracts.

Christina Raffini (29:44)

All right, on that cheerful note, we're going to have to leave it there. Gary Gensler, thank you so much for coming in. Stay with us for more on Bloomberg this weekend, right after, after this.

IBM Representative (29:57)

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Narrator for Cigna Healthcare Podcast (30:27)

For many men, mental health challenges aren't recognized until they've already taken a toll. Work pressure, financial stress, changing relationships and traditional expectations around masculinity can quietly wear men down, often without clear warning signs. In season three of the Visibility Gap, Dr. Guy Winch and his guests explore how these pressures show up, how to spot them earlier, and how Men can access meaningful support. Listen to the new season of the Visibility Gap, a podcast presented by Cigna Healthcare.

Public Investing Representative (30:57)

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Christina Raffini (32:05)

Private credit has been in the spotlight as concerns that software portfolios are vulnerable to AI disruption begin to mount.

David Gura (32:11)

Major banks saying it's not a systemic crisis in the making, but Wall street closely monitoring private credit portfolios with the global financial crisis in the rearview mirror, of course. Joining us now, Bloomberg TV anchor Dani Burger once again and Puck founding partner Bill Cohen. Bill, let me start with you. Always good to gauge your level of worriedness, worriedness about something like this. Are you seeing these people, restrictions on withdrawals and likes and feeling like something is on the horizon here, something worth us noting?

Bill Cohen (32:38)

Well, David, maybe I'm like the boy who cried wolf a few times, but we are overdue, shall we say, for some sort of financial correction, Right. Usually, you know, as a Wall street historian, usually these things happen once every 20 years or so. So it's been 18 years, right. So we're probably due for something. So that feels like maybe something is imminent. But I don't think this private credit is going to be the catalyst. I think this is a big overreaction, frankly.

David Gura (33:10)

I can elaborate, please.

Gary Gensler (33:12)

I was going to produce.

Bill Cohen (33:14)

So I mean, let's, let's think about this. If we're really. Look, if you create a fund and you say people can only take out 5% of their money every quarter, and you're a retail investor and people start making noises about being worried about software credit or something like that, and your broker says, well, maybe you really should think about taking money out. Of course you're going to take money out and ask questions later. So everybody floods to that. And then it becomes headlines that, you know, more than 5% people are seeking redemptions and everybody's starting freaking out and it's contagious. But what are we talking about here? We're Talking about basically 97% of the securities in these funds, or private credit generally, is senior secured debt. Okay. Senior secured debt, top of the food chain. If we want to be worried, we should be worried about the equity down at the bottom of these companies or these leveraged buyouts or whatever these credits are. Nobody seems to be talking about they're concerned about the equity. No, once you if you're going to be worried, let's worry about the equity holders and then maybe down the road we can worry about the senior time secured.

Christina Raffini (34:20)

As a millennial, I'm more worried about another financial crisis. Thanks for that. But Danny, you were nodding when you saying equity. Talk to us about why that's a concern.

Dani Burger (34:28)

This is, I have to say I've heard this argument a lot, and I think it makes complete sense. Just given where the capital stack exists, where credit exists that's going to get paid out first, you have to worry about the equity. If a loan is going to zero. It's something that I say Blue Owl makes the argument of quite frequently and it's completely fair. Also, if you're in a credit cycle, what's happening to the equity market, what's happening to public equities if you're in the middle of a credit cycle? So it's not just private credit. And I think it is important to contextualize how big this universe is. It's just under $2 trillion. The BDC, these retail funds are even a smaller amount of it. And most of these funds date them at 5%. So only 5% of those even smaller funds are coming out. It's something that John Zito from Apollo has said if you can't meet these redemptions. I think he said something along the lines of like, you're a fool. Not exactly that, but basically saying they amount to a rounding arrow error for us, the amount of money that's being pulled out. Look, that doesn't mean that there aren't issues, especially for specific funds that have essentially built themselves around these being the profit drivers for them or the future drivers of growth. But it's not necessarily systemic.

David Gura (35:31)

Bill, giving us this hypothetical, the retail investor calling the broker and getting nervous. I think a lot of people seized on Jamie Dimon's kind of markets. Etymology. A few entomology. Excuse me. A few months back when he talked about cockroaches, I mean, it's something very vivid that a lot of people, people seized on. Again, you've been tracking bank earnings over the course of the week. What have bank executives said about what is effectively one of their rivals? I mean, they are taking business away from some of these major banks.

Dani Burger (35:54)

I don't know if you got this too, but it felt kind of like a pullback from Jamie Dimon. He wasn't as forceful when he, he talked. He didn't bring up cockroaches or anything like that. And in fact said that if we have some sort of crisis, I don't think that private credit is going to be the thing that causes it. And by the way, any ruptures in the business that, to your point, is good for these banks, I mean, they do have exposure. JP Morgan has about $50 billion which, which they laid out. But broadly, syndicate markets get a little bit more popular when you start to see pullbacks on private credit. You have started to see there was really intense competition. It still exists, but it feels like it's ebbed a bit.

Christina Raffini (36:27)

So go ahead.

Bill Cohen (36:28)

I mean, what are we really talking about here? We're talking about loans that banks have been making for generations, for millenniums. So Jamie Dimon is like one of the biggest lenders that there is. So he's in the private credit business. Yes, because after Dodd Frank, after the 2008 financial crisis, you know, Gary Gensler and his fellow regulators, you know, wanted to push that kind of business off the books of the central banks, the big banks on Wall street, they became in the moving business, not in the, the storage business. So what happened around all of that, around all that new regulation? Up comes, you know, the Apollos, the Blackstones, the kkrs, the Blue Owls, you know, all of them who are the sort of private credit leaders. And by the way, that business took off. They all used to be just private equity guys. Now all of a sudden they're private credit guys or their alternative asset management guys. They're all in the same business, they're all doing the same thing and they're all sort of filling the hole that was left by when GE Capital went out of that business in 2015. So they're all making loans to, you know, inventory finance or mobile home finance or things that basically nobody really wants to do, but they're senior secured at the top of the credit structure. And so what are we really worried about here? Yes, it's great headlines and it's fun to see People take, want more than 5% of their money out when, you know, they can only take 5%, they want 7 and a half percent. What do we do? Do we put more money in or what do we gate them? What do we do? So it's an event, but.

Christina Raffini (38:03)

All right, we've got about two minutes left. I'm going to start with you. Bill and I want to go. Danny, if we're not worried about private credit, what are we worried about?

Dani Burger (38:12)

What is the question?

Emily Sweeney (38:13)

You know, that.

Christina Raffini (38:14)

What is keeping you up at night?

Bill Cohen (38:16)

Well, I mean, again, I think human nature is such that, you know, people forget the last.

Christina Raffini (38:22)

Short memories.

Bill Cohen (38:22)

Short memories. So I'm, you know, I'm worried about, I'm worried about the excess valuation, the toppiness to the valuations. I mean, you know, the AI, I mean we all talk about, I mean I, is probably, but, but, but, you know, valuing these things at infinite multiples of earnings, I mean, it's, it's bound to come down. But shorting them is a very dangerous game too.

Dani Burger (38:45)

So, Danny, I'm, I'm worried kind of on the existential AI thing and what it means for our labor markets. I know that's completely like, feels non sequitur, but what we're talking about. But to be fair, it is part of the ruptures we've seen in private credit. We've seen kind of trickling in companies talking about layoffs because of AI. It could be a little bit of a theater, but are politicians prepared for this? We've seen backlash in communities about building data centers, which, by the way, private credit, that's been a huge business for them. I feel like we're moving towards something and we haven't fully thought out what that end game looks like from politicians, regulators, and even capital markets and valuations. I feel like we're kind of putting the plane together as we're flying and that worries me a bit.

Bill Cohen (39:29)

And no one rings a bell at the top of the market.

David Gura (39:31)

No.

Bill Cohen (39:31)

And, and no one. Very rarely can you anticipate the crisis that's going to occur until it occurs.

Lisa Mateo (39:39)

Stay with us for more on Bloomberg this weekend, right after this.

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Christina Raffini (42:08)

Welcome back to Bloomberg. This weekend it is time for BT dubs, or as David calls it, vtw,

David Gura (42:13)

insisting on the colloquial.

Christina Raffini (42:16)

Yeah, some of the stories you might have missed this week. Lisa, what you got for us?

Lisa Mateo (42:19)

Okay, so a few weekends ago we did this story for btw about a boss, Globe reporter, Sweeney. Yes. She was posting her stories to their Instagram, to their TikTok, things like that. They were interesting. She does like cold cases, things like that. But what people started taking notice is of her Boston accent and the tracksuit she was wearing. So we have some sound for you that went viral. Take a listen.

Emily Sweeney (42:40)

Several valuables were stolen, including a Porsche that was used to escape from the property. The car has since been recovered, but the suspect remains. At last, the caretaker who was tied up, managed to escape and go to A neighbor's house for help.

Lisa Mateo (42:54)

Love that. Okay, so the New York Times now, they did an article. Here's the headline. Why is everyone wicked obsessed with this Boston Globe reporter? We love this. What we did, we figured out, you

David Gura (43:05)

know, you're also wicked obsessed.

Lisa Mateo (43:06)

I'm wicked obsessed with her. So reached out and Emily Sweeney is now going to join us live from Boston Austin. Yes, Emily Sweeney, how are you this morning? Glad you can join us. I mean, what was your reaction when you found out your video went viral?

Emily Sweeney (43:23)

Yeah, you know, it was a total surprise. And I want to thank you because, you know, I listen to Bloomberg, like, all the time.

Gary Gensler (43:29)

Oh, my gosh.

Lisa Mateo (43:30)

Thank you.

Emily Sweeney (43:31)

I'm kind of fangirling here big time, because, you know, like, seriously, like, you guys are like, superstars, so I really appreciate it.

David Gura (43:39)

I love this.

Emily Sweeney (43:41)

But, yeah, all the attention was totally unexpected, you know, because you've been doing

Christina Raffini (43:45)

these for a while, right? This, like, wasn't your first one?

Emily Sweeney (43:48)

Yeah, yeah, no, I do videos for the Globe, like, news reports, just like all the other reporters in the newsroom, you know, and, you know, my accent is a little bit harder than some of the others because I grew up in Boston, you know what I mean? So I was really shocked. But the thing is, is, like, you know what really shocked me more is, like, just how positive everybody's feedback has been, you know, so it's been kind of restored my faith in, like, in media just to hear so many people, like, interested in the news and writing to me, you know, so.

Christina Raffini (44:17)

But it was the comments. I mean, I saw it before we even started talking about in the newsroom, and then it just kind of grew in group. But the comments were really awesome. And one of them was like, I want Emily Sweeney to be the only one allowed me to read the news. To me, like, can Emily Sweeney narrate the Iliad like, Emily Sweeney voice in my head all the time? It was. It was a good one. It was great everywhere.

Lisa Mateo (44:38)

Yeah.

David Gura (44:39)

Yeah.

Emily Sweeney (44:39)

I mean, you know, for me to be the only one reading the news, I think that's slightly extreme. But. But, you know, it has been heartening to hear that people are still interested in the news because, you know, for a long time, I don't know, you know, working at a legacy media organization, you know, it's been hard, you guys know, and, you know, it's been great to see just, like, this sudden interest in journalism again. That's. It means a lot to me.

David Gura (45:03)

Tell us about how you got into journalism. So I detect the Dorchester accident. I'm go micro. And I think I've pinpointed that correctly. How did you get into journalism and what have you covered at the Globe? So you're doing this true crime reporting now you've written books as well. How did you get into that?

Emily Sweeney (45:19)

Yeah, yeah. So I've written three books, two of them about organized crime. I write a lot about unsolved murders. I feel like a lot of people aren't aware of how many unsolved homicides there are. And, you know, I think it's really important to draw awareness to the cases because sometimes it can help them get solved. So I do a lot of cold case reporting for the Globe, and now I've been doing a lot of video lately, you know, because we've just been getting, like, a lot of, like, great engagement from our audience, and it's growing and we're going to roll with that. And, you know, I'm going to make videos until they tell me no.

Lisa Mateo (45:53)

Well, speaking of rolling, you've been on rollerblades doing the news, too.

Emily Sweeney (45:57)

Yeah, like that.

Lisa Mateo (45:58)

I mean, talk to me about the Boston accent, because it's different from different regions where you are correct.

Emily Sweeney (46:06)

Yeah, yeah. I mean, if you drill down different neighborhoods have different accents. You know, I'm from Dorchester, which is like the biggest neighborhood in Boston. And you know how I talk? Like, I sound. Well, to me, I sound totally normal. You know what I mean? And my mother, my brother has like an even stronger accent. Incredible.

Christina Raffini (46:24)

Stronger than that.

Emily Sweeney (46:25)

Yeah. And so when I. Again, it was just a surprise to see, like, you know, everybody thought like in that news report that I was saying, I don't know, I'm like. I thought I was just talking regular.

Christina Raffini (46:34)

What accent? Look, I think as we talk about it, in a time when journalism is struggling to find its audience and find its feet, two things that stood out to me. One was you just came approached as really genuine and authentic. You came across as someone who was being yourself. You didn't change out of your tracksuit. You weren't putting on airs. You were like, here's my story. Here's what we got. Here's what we talk about. Talk to us about how you guys are reaching a new audience with social media, especially reaching working the legacy paper. Do you feel like you're making more of an impact and what that process is like?

Emily Sweeney (47:05)

Yeah, so, I mean, absolutely, because, you know, I definitely have gotten so many messages from, number one, younger people, you know, who I mean, I'm not sure would even, like, you know, watch the news or, you know, pick up a newspaper or you know what I mean?

Christina Raffini (47:18)

Yeah.

Emily Sweeney (47:20)

And also people from. It's kind of strange, like all over the world, like Australia, Ireland, Guam. I mean, people are writing, saying, I'm following the Boston news. Like, so, you know, I, I just think it's great to draw attention to the great journalism the Globe is doing. And it's great that people are just even interested in news again. I feel like, just in general and like asking for headlines, like, you know, you didn't do the headlines today. Where are they? Like, you know, it's, it's been really great to see, so.

Christina Raffini (47:49)

Well, we've enjoyed the heck out of it. We got Duncan here.

David Gura (47:52)

We're gonna eat it.

Christina Raffini (47:54)

We've got Dunkeys.

David Gura (47:55)

What's your order? We should have, should have asked advance,

Emily Sweeney (47:57)

I realize, you know, I mean, I usually go like extra large coffee, you know, just black ice. You know what I mean?

Christina Raffini (48:05)

You have a specific donut. You got a donut.

Emily Sweeney (48:08)

You know, I used, I ate so many jelly donuts from dunks that I have to put. I'm on hiatus. Yeah.

Christina Raffini (48:15)

I also don't think those are TV timely.

Gary Gensler (48:17)

We're too good.

Christina Raffini (48:18)

We're already trying not to spill coffee on ourselves.

David Gura (48:20)

But, Emily, thank you very much. Emily Sweeney, reporter for the Boston Globe, joining us Fangirl for Boston 92.9. Get that shout out in there and we'd love to have you back on anytime.

Christina Raffini (48:30)

Please come on set, go, Emily. And the Boston Globe because it's great news and great content. Thanks for joining us on today's Bloomberg this Weekend podcast. Don't forget to tune in live for the show every Saturday and Sunday morning starting at 7am Eastern.

David Gura (48:45)

We're on Bloomberg Television, radio and the Bloomberg Business app, bringing you unique takes and in depth interviews on news, politics, lifestyle and culture.