Um, it's good here. We go here, we go. Okay, which I know you want to talk about? Thank you for joining us. Great to be here today.

We're going to talk about education and and why? success in a moment? But but first Big Markets day for us. Big IPO day. The folks were just talking about Arm. Do you? do you look at Arm which is the biggest debut in a couple of years as a sentiment barometer, How do you look at IPOs and what they signal about where we are in the market? I Mean so clearly the armed transaction is a sentiment barometer.

The very fact the deal is coming to market today tells you there's a perception that our Capital markets are reopening for IPOs and I I. Really hope this is a deal that goes off very well today. we need to see all of the VC back companies of the last decade have that opportunity to go to our public markets to raise Capital so that the founders have an opportunity to continue to grow their businesses and grow our economy. It's been a surprise good year for the markets and the economy, which I think is reflected in the fact that they're they're going public.

question Ken is what comes next. So actually I would agree with you. It's been a been a really good year for the market, particularly with the backdrop of higher real interest rates. So if you look at both the yield on the 10-year bond and more importantly, the real yield.

For example, in the five-year tips bonds, we've seen a again an increase in real rates and nominal rates. and yet the stock market's been resilient. So that's A. That's a really interesting year to see the resiliency of our stock market against this backdrop that would usually be very challenging for equities.

I Think it can continue? I'm a bit anxious that this rally can continue. You know, obviously one of the big drivers the rally has been the the Just Frenzy over Generative AI which is powered many of the big tech stocks. I Like to believe that this this rally has legs I'm a bit anxious. We're We're sort of in the seventh or eighth inning of this rally.

Well, part of it has been the the Soft Landing story. Are you a buyer of that? The fact that we just haven't gone into recession despite 525 basis points of tightening. so it takes about a year to two years for an interest rate hike to work its way through the economy. It's not instantaneous.

We're now at the point where we're going to see the impact of these hikes really start to play out. We're seeing the job market starting to weaken. There's been there's been a number of news stories in recent weeks about how companies are willing to pull back what they're paying for for starting roles. We're seeing, uh, signs that consumers have had enough in terms of price increases that they're starting to walk away from products.

They're trying to push through price increases. So there's signs here that we're we're heading very quickly into hopefully the Soft Landing Potentially a more difficult scenario moving into mid to late last year in terms of an actual recession sounds like you're That's what you're expecting: a recession I Look, my personal view is that the United States economy is enjoying a tremendous amount of unanticipated stimulus from Washington Still, the Federal deficit this year is going to Total almost six percent of GDP It is completely unsustainable, but it has been yet another shot of a journal into the economy that our our fiscal large s continues to push the economy forward, but leaving it ever ever bigger bill for future Generations Do you? It also complicates the Fed's job a little bit. We're still getting these numbers. Inflation has come down a lot, but looks to be sticky.

Uh, well. I mean he's in a no-win situation. He Paul is right because monetary tightening can only do so much to offset fiscal stimulus. and in some sense he's It's like he's showing up in a fight with both of his hands tied behind his back because DC is just on a different agenda than he is.

He's trying to prudently slow the economy, bring inflation back down, and really engineer the hopeful soft. Landing And at the same time, whether it's the Inflation Reduction Act or other programs that have increased spending, we keep stimulating the economy out of DC But do you think those those pieces of legislation are a mistake? Inflation Reduction Act Chips Act aren't those helpful for our future? So there are there are absolute elements of this legislation that are important. So for example, if we can successfully bring chip manufacturing back to the United States that helps us maintain National Security both from a matter of National Defense and economically against shifting geopolitical Tides. So that's a really important piece of legislation.

but if you look at the amount of spending that goes towards that part of the overall legislative agenda, it's like a drop in the bucket. There's been a tremendous amount of spending and a whole slew of different things that don't have the same element of both being in an interest of National Security economically and defense. So you're worried about all the the fiscal spending. Do you think that that the market is starting to worry about that? Absolutely.

And let's just take a step back. At the start of the year, people thought that the deficit was going to be roughly three percent of GDP. And of note, All right, it's double that. it's six.

It's almost six where we have full employment, full employment. In this country, things don't get much better and we still can't keep our fiscal house in order. And now that the CBOE has put out their projections, that for the next several years we're going to run deficits of roughly five percent. The fixed income markets are getting nervous.

It's an unsustainable path. You think there's going to be an issue with demand for all the the issuance? Well, one of the questions is is has he actually not blinked? Are you guys keeping track of this I See your comments Really attributable to the FED tightening or physical? Is it fiscal? Is it the markets fearful about the magnitude of supply? And to be clear, this, the possibility of credit risk? You know we have the US government downgraded by Fitch a few months ago. If it, if it wakes up our politicians in Washington Absolutely the right call. Not sure it's doing that well.

It starts somewhere right. At some point we're talking about it today, right? In fact, you're curious about this. This is the start of how we actually make policy happen in America Is we start to talk about the issues and this issue is now coming back front and center. We haven't talked about deficits in America in a very long time, but now at Jetty to GDP about 120 percent near historic highs with deficit spending that we haven't seen before in in recent history outside the pandemic, this topic is becoming front and center again in the minds of Wall Street.

So do you think we're looking at sort of persistently higher level of yields because of those, So there's no doubt that this will cause us to have higher real yields, all else being equal for years to come. There's no doubt about it. What does that mean? That means fewer construction project. That means less investment in companies.

That means that consumers will be more hesitant to buy goods and services. Higher real yields crowd out needed investment that we have in our economy. What does it mean for the overall investing landscape for the equity market? So for the equity Market it's a headwind. And and that's why we we spoke about earlier.

Why you're anxious, right? Are we in the seventh or eighth inning? Because we now have this headwind of higher real yields starting to come through the economy, even if the Federal Reserve is raising rates and even starts to cut into next year. So I think that that you know there's a small chance of one more increase. Later this year, they're going to look at data like today. They're going to think about this very long and hard.

Do we have to raise one more time? But let's say we're pretty close to the end of this rate cycle. How fast they can cut rates comes down to how fast inflation breaks. Now the good news is is base effects mean that inflation probably comes down over the months ahead. The negative to the story.

Again, we're seeing higher prices at the gasoline pump and unfortunately gasoline is one of those things that you buy every week for most American families. And when you see higher gasoline prices, inflation becomes better anchored in your mind. And that's a problem for the economy. so you don't see it coming down to Fed's Target No, No.

I I will be at two if we're in a deep. if we're in a real recession, which it sounds like you don't expect in the next years. I'm hoping not. But if we get to two, that's actually a very bad state of the world right now.

So you think the FED will have to stay at these levels or even higher into next year? Look, here's here's the conundrum. The Feds publicly said we're aiming for two. It's probably not worth the cost of getting to two. The FED should stay on its talking points.

It's the Central Bank It wants to inspire confidence that they are protecting the value of our currency and the purchasing power of the American Consumer. But at the same time, you don't want to take the economy off a cliff. For the difference between an interest rate or inflation rate of two and three quarter percent and two, it's not worth the cost. so they're going to have to walk that fine line.

I Think we'll see them talk about a long-term Target of two more and more as we head into the mid twos. In other words, they're going to make it clear they're going to get to two, but they're not going to do it immediately and they're going to make that trade-off full employment versus hitting their target. They don't want to burn it down, so do you have confidence in Powell I Think Paul's done a pretty damn good job. He's had a horrible hand to play right.

We've had the pandemic supply chain shocks, massive fiscal stimulus, and he's supposed to try to achieve price stability. That's a no-win scenario. It's it's a no. There was no course of action where he was going to walk out of this looking like they had just absolutely nailed.

their job wasn't going to happen, so history should judge him through the lens of the predicament that he was put in. And I think they're doing. They're doing a reasonable job in trying to get us to where they need to get to. if I could.

If I could say one thing to Paul it's stay on Message: We're going to break the back of inflation. Don't talk about how we might ease. Don't talk about how we're data dependent. just stay focused on message.

We're going to bring inflation down. There is a lot of talk of data dependence. but but can you mentioned AI as as something that has captivated investors so far this year? I'm wondering how you're thinking about how transformative it's going to be. So I believe that generative AI which is what people think about today when they say AI is going to have a very uneven impact across the economy in certain areas.

for example, call centers generative AI is going to be transformative. You'll you'll dial a phone number, You'll get a human sounding voice on the other side that can respond to your questions and handle your matters. All done from a data center. No people, no people.

We're going to see a lot of relatively road to repetitive activity fully automated by what generative AI will bring to the table. We're going to see real changes in productivity in certain sectors of the economy. In fact, right now, the strike in Hollywood really revolves around the impact that Generative AI has People that you need to produce a movie. You see it in the same way for software Engineers We already use generative AI in coding at Citadel and it's probably improved the productivity of our software Engineers by five to ten percent.

Now, what's that mean? That means that we need five to ten percent fewer software. Engineers Now fortunately, we're growing fast enough that we'll take that productivity gain and not have to change headcount. but other firms will reduce the size of the software engineering team. So we're seeing these impacts start to Ripple through the economy.

Big picture though. for most of the economy, this is another productivity tool that simply makes us better at our job. much like Microsoft Word Microsoft Excel did 20 some years ago. there's no doubt we're more efficient because of email.

In fact, it's just part of life and Generative AI is going to have the same part of life aspect for most of us and how we do our work day in and day out. Is it a big investment theme for you? order itself theme for us, but more importantly for us, we're thinking how to use this toolkit to make our firm more productive and more successful. There's very few public opportunities to invest in Generative AI In fact, this is one of the challenges that we have today in our public Capital markets. Is there are fewer companies that are publicly traded today than 20 years ago? Oh, that's interesting.

1200 unicorns according to CNBC Those are companies that would usually then public companies. They're not Today Some of this has been the backdrop. It's been a harder environment to go public, but some of this is the backdrop that we've made it less attractive to be public. What do you mean? Well, the SEC has over the last 20 some years.

Here we go talking about regulations, number of burdens, and costs on public companies. It's making our public markets less attractive as a home in which companies live and where their Shares are owned. And I think this is a tragic mistake that we're making on behalf of American investors because for the average family, they don't have a chance to invest in the startups or the mid-size companies that become the apples of today. I Mean people forget Apple and public get a very modest valuation.

People have had their entire retirements defined by being an early investor in Apple or Amazon or Microsoft by making our public markets less attractive for issuance. We're taking those stories away from the American investor. I I Know you you have strong views, especially on Chair Gensler's regulatory agenda. Here we go.

We actually was in front of Senate Banking yesterday to talk about it. 22 Pro 22 rule changes that he's passed and more than double that in terms of proposal changes. What's your take? Too busy, Too many rules, too busy, too many rules, too much change, too much haste. So Chairman Genser may be coming from a good place.

on many of these roles, do the homework about what are the real problems and how do you effectively solve those problems. You can end up creating an onslaught of legislation that actually destroys value for the American public. For American corporations and American investors. and I think Unfortunately, I think we were well over that.

Tipping Point The SEC needs to slow down. Yeah, because haste Ken Griffin is literally the symbol of fighting for the little guy, right We want to address in our Capital markets and taking a huge step back. The United States has both the most vibrant Capital Market in the world. Think very carefully before you change the rules in the great success story of the world.

Which ones are you talking? Climate Disclosure? Climate Disclosure For a public company? How are they ever supposed to compile this information? Now if you compile the information, it turns out you don't have it right. Which will often be the case with a new rule. How many billions of dollars are they going to spend defending themselves from Plaintiff's lawyers who are going to have a field day on the back of this issue? I mean Chairman Gensler I Appreciate you have an interesting climate, but advocate for a carbon tax. Advocate for something that's easy.

Simple, straightforward, and effective to implement. Don't go burden public companies with a with a task that's beyond their reach beyond their core competency and we'll just create a field day for Plaintiff's lawyers. I I Don't have you talked to him about this. I Haven't talked about climate change on that issue, but we've been very actively involved in the regulatory process.

We comment on on virtually all the rules that impact our Capital markets. We because a room of lawyers arguing for what's better for his business. We have a very unique vantage point of appreciating how liquidity is created and liquidity is so important. because one of the drivers of our public companies sorry of our of our Capital markets is capital formation, right? That's how we create these incredible stories like Nvidia They can raise cap in our public markets and they create exits for for Venture capital-backed firms which encourages more VC in America So we have a really powerful vantage point to comment on these rules and they do allow public comment.

I Mean he would say they take that all into account? Well, that's what they say and unfortunately we haven't seen that even Ken Griffin is admitting doesn't listen to anyone am I So I have huge admiration for what they've done to. Nvidia I mean what an unbelievable story. The stock is is pretty frothy right now. We'll see if they're able to maintain their dominance within this sector of the market, but boy have they executed that's an A-Plus management team.

Eva First of all, thank you for having us here today! I Know Ken is a big believer and a big fan of your work and what you've built here. So for those that aren't familiar with with Success Academy tell us about what it is. Sure, we opened five weeks ago with 21 500 students kindergarten through 12th grade. That's really big 21 000.

Sir Black and Brown 16 are special needs. About 82 percent live below the poverty order filled, and yet we are educating them up to a very, very high standard. In fact, our kids outperform kids in the affluent suburbs. On the state tests.

On AP exams, we have a six-year record of a hundred percent of our graduates going to four-year colleges. I Mean the track record is amazing Ken How did you get get involved with success? So I've been involved with Robin Hood in New York for years and Robin Hood's been a big fan of charter schools in New York City and of Success in particular. And then Dan Loeb who runs third Point is is certainly part of the Eva fan club and he he made a real point to making sure that I came to learn more about just literally the miracle that happens here at Success Academies. What? What are the takeaway s more broadly Eva about what you're doing here and how to scale that and and broaden that.

How did he interject Robin You've seen some of these these new statistics. it's not good and especially post covet 8th grade reading is at a two decade low I Think math is at a three decade low. What do we take from this? well? I Think we have to take a step back and fundamentally rethink the service of Education. We are not getting the basics right in.

America Even though we spend more money on education than any country around the globe takes something like reading for 20 years, we canceled Phonics. Any educator worth their salt knows that an evidence-based program is essential. We're not teaching kids to count in kindergarten anymore. That's a very, very basic.

Is that true? Uh, the problem in kindergarten don't count anymore. It will. It's not one educate children. We actually do know how to educate children.

We're just not giving them what they are entitled to and deserve. And I think it has major implications for America's Global competitiveness. It is a tremendous drag on our system when we have poorly educated kids and we don't really want a society I Hope not. Where we have educational haves and have-nots you said it's political will and I know that you do spend some time you know fighting the teachers union for instance and some of these bigger cities with changing policies.

Is that what the biggest obstacle is? do you think to to expanding what you're doing well? I Think the unions are one important obstacle. They influence all educational policy and there isn't really another side. Imagine if the kids had a union, things might be a little different, but kids and families don't really have the level of political influence that the unions have. but I think it would be unfair to sort of say.

That is the whole problem. We have public policies in this country that make no sense. We have something called categorical funding I Think one of the most important jobs I do as CEO is resource allocation. You can't do that if you're a principal or a superintendent.

The state determines all the categories of funding and you have no ability to meet the needs of your children in front of you. So enter Ken Griffin you you fun at Harvard Miami-Dade Success Academy Clearly, education is one of your key priorities. Why? Well, let's take a huge step back. You and I will spend our days talking about arm and Microsoft and Nvidia that's not the future of America.

The future of America is our children. It's our kids. And if we can't educate the next generation of American students to be successful, our country is over. We talked earlier about the size of the federal deficit.

If we can't profoundly change productivity in America, We can't make the promises that we've made to the Baby Boomers our retirees and those who really do have a hardship in life. We need to radically improve education. K-12 in high school and we spoke about political will. Let's be clear: we need the voter to make this an issue.

It's not, it's not. and they're going to pay the dollars when you have 53 schools in the state of Illinois and not one student can test at grade level. You don't have a future in a global economy as a nation. is that why you left? Chicago It's part of the reason I Love Chicago We've lost the focus on the basic Services of government.

Government should educate our children. Government should keep our streets safe. Governments should help to create an environment in which businesses can flourish and in which a Civic Community can come together to make for better cities, better towns, and better environments. We lost.

We lost that in Illinois we lost the big picture. But I'm I'm so pleased to support what Eva does here at Success Academies because she shows us a different way. She takes kids who come from the sob story that unions use in trying to justify their poor results in public schools. and she proves them wrong.

Not just a little wrong, enormously wrong. And the kids here, they're remarkable and and we don't always start out excellent. We use data to figure out how to improve every day, how to improve the teaching and learning. We think a lot about educational productivity, what is the fastest way to get a kid to read, and those are the kinds of practices that are really missing.

In fact, the education establishment is kind of anti-data anti-productivity anti-efficiency and those are some of the things that allow us to be. AI Is AI going to be harmful or hurtful for education? I Think in the long run it will be helpful reasons can you mention thank you for the back office! I Don't know exactly how helpful it will be on learning per se, but there are so many things in education that humans are doing that are unnecessary. and I'm really excited about making our Market trying to operation even more efficient so that we can put more resources in chess and debate and art and music. Well, it's a great test case, but I do think though it's I cannot emphasize enough how you hold the children here to extraordinarily high standards and they rise to the occasion.

When you believe in these kids and you believe in their potential, they step up and I'll share a little story that Dan's going to be upset about: Dan Loeb and I were here a few months ago. We were in the AP classes and Dan and I are both big art collectors and they put up a painting famously. Yes, and who painted this and what sort of the story behind this moment in art history and Dan and I are looking at each other going no idea I don't know and then the second painting and then the third painting like I know that era I can't tell you who painted it. but I mean to see these kids with that domain expertise is humbling.

Is it necessary for kids to know about art history? and they're going through all the mathematics of of macroeconomics that I haven't studied since college and it's like they're serious here. Education here in the heart of New York City sounds like their future 19 000 a month interns at Citadel. They certainly might be all right. Eva Thank you so much again for having us here and and talking us through that even Moskowitz of Success Academy Ken Griffin We're gonna have a lot more with Ken.

We've got an 8 P.M special on CNBC on Monday evening and we're going to hear much more from Ken PM the political landscape. Whether he's still backing Ron DeSantis I know a lot of people want to know that. Uh, Ken We'll talk a little bit more about the growth of the firm as well. Citadel which is booming in Miami and also here in New York City But for now, send it back to you David.