NewEdge Wealth CIO Cameron Dawson Talks Market Choppiness

SPEAKER_1 (0:02)

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Tom Keene (0:07)

Cam Dawson with us. We got started for NewEdge Wealth this morning. So you and I did Purchase Accounting, you know, the different ways, and they changed the laws a couple of times, et cetera. Define for our audience the efficacies of synergies when you meet.

Cam Dawson (0:23)

Yeah, well, certainly if you have a lot of overlap between businesses, the opportunity to cut costs, which is reading usually as headcount reductions, or it can be system overlaps where you don't have to have two accounting systems, for example. And so a really big question is, can you make good on those synergies? And the big question in all of this is that, do you cut muscle or are you just cutting proverbial fat?

Tom Keene (0:46)

And on a segmented basis, you cut synergies in administrative offices, all the other obvious stuff. I have never, in the studies I've done, Cam Dawson, can you make synergies in creative?

Cam Dawson (1:03)

Yeah, well, I think that the industry has been trying to do it for quite some time.

Tom Keene (1:06)

It's been like a lifelong experience.

Cam Dawson (1:08)

I saw a headline that some 200,000 jobs have been cut globally in the media industry over the course of the last few years. And so it just suggests that you continue, you continue to kind of cut into that muscle of creativity. I think a really big question is, will consumers embrace AI-generated content? It seems like the younger generation sees it as slop. I see as soon as you sense that something is AI generation, it feels like slop. So the big question is, are you cutting humans just at the moment where people are actually demanding more human content?

Tom Keene (1:40)

We interrupt the program. Alexis wants to jump in here, but this is just too, too important. I didn't realize this. You look at the synergy basket of Skydance. Paramount Global owns Teenage Mutant Ninja Turtles through its subsidiary Nickelodeon.

That's a kind of micro thing, Cam Dawson, with the societal impact of Teenage Mutant. How do you do synergies to get rid of one of the Ninja Turtles?

Cam Dawson (2:10)

You have to keep them all. They're all incredibly critical. Even the one that people spend the least time talking about, which is Donatello. He's the glue that binds the Ninja Turtles together.

Tom Keene (2:19)

You're going to put Donatello out in the street?

Cam Dawson (2:22)

You absolutely cannot. It's unconscionable.

Tom Keene (2:25)

I love it. All right, let's talk credit, because there's no way to segue. I'm just going to go right in.

Cam Dawson (2:29)

The credit market, what is it telling you right now versus the strength and equities? Well, there is a segue with the credit market because this is a debt finance deal. And certainly, as we see continued demand for credit, we're seeing credit spread start to widen out, certainly within CCCs, which is actually where a lot of the media and communications companies sit. But now that CCC credit widening, which has been extraordinary, it's nearly at 1,000 basis points as that spread, which has widened out significantly year to date, it's now spreading into things like high yield. Now, high yield is still about 346 basis points. That's nothing that's wide, that nothing is suggest really acute stress, but it does tell you that the cost of capital is getting higher. Now, I think the big question when it translates to equity markets is, yes, cost of capital is higher, but is it too high to suggest that companies will start pulling back on that borrowing, pouring back on their spending. I don't think we're at the too high portion yet, but the weaker borrowers, the more leverage borrowers, the weaker equities are certainly starting to feel the pain.

Tom Keene (3:35)

What could get us there to that too high level?

Cam Dawson (3:37)

I think that it would be a continued movement wider in spreads. You look at the upward pressure and overall high yield bonds, the all-in index, it really is coming because you're seeing the base yields move higher. Credit spreads have only widened by about 46 basis points. So if you continue to see markets push back on credit pricing and you see those spreads widen, we've heard from different players that private credit spreads are widening, CLO spreads are widening. So it looks like we are on the precipice of some kind of credit distress. Does it have to be as acute as what we've seen over the course of the last couple years? Maybe not, but that will be the big watch item as we turn the corner into 27, as if all in credit costs start to become so high that they crimp spending. So distress, but not crisis.