Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. China hits back at
Speaker 1: us with sanctions on Lockheed and Raitheon. What's up with that?
Speaker 1: It's checking with George Ferguson does at Aerospace stuff Airlines.
Speaker 1: He's actually, if my eyes don't see me, actually in
Speaker 1: the Bloomberg Interactive Broger George Ferguson in the office before
Speaker 1: now He's fully embracing this work from the game in here,
Speaker 1: and I was like, who is this? Who is this guy?
Speaker 1: George Ferguson, Thanks for joining us. But I worked from
Speaker 1: the Bucolic farms of Princeton to the office. But I
Speaker 1: go to the Princeton off Yeah, it's like that's like
Speaker 1: Bloomberg life. Yea. Um, George talked to us about this.
Speaker 1: China hitting back sanctions on some of these big Garro
Speaker 1: space companies Lockheed, Raitheon, give us a sense as to
Speaker 1: how important this is or is not much to do
Speaker 1: about nothing. So if the Chinese could buy something from
Speaker 1: Raytheon Missile and Defense, not Broader Raytheon, they would, and
Speaker 1: if they could buy something from Lockheed they would. They'll
Speaker 1: never be able to buy anything for the defense sides
Speaker 1: of those businesses. It was interesting too again they went
Speaker 1: that's been the case for a long time, right, yes, okay,
Speaker 1: I mean they always sanctioned these companies, And it was
Speaker 1: interesting too that they made it Raytheon Missile and Defense,
Speaker 1: right because Raytheon makes the geared turbofan which powers about
Speaker 1: half of the airbus A three narrow bodies in the world.
Speaker 1: China is a GE country. There's a lot of GE
Speaker 1: powered aircraft, but there is some Pratt powered A three
Speaker 1: twenties in the country. So if China sanctioned Broader Raytheon,
Speaker 1: they probably wouldn't be able to get spare parts for
Speaker 1: those airplanes. They wouldn't be able to compete the engine
Speaker 1: contract against Ge. So they're a bit, you know, stuck
Speaker 1: in the middle of that whole thing. And that's why
Speaker 1: they went down for for the big aerospace companies that
Speaker 1: you cover, what percentage of their business is China general.
Speaker 1: I mean, for for well, Boeing right now is out right,
Speaker 1: because the Chinese haven't started to take their deliveries. It
Speaker 1: used to be of their business, right, and so so
Speaker 1: we would sell commercial We the US aerospace companies would
Speaker 1: sell commercial stuff to them. Military yes, okay, I mean
Speaker 1: really no military stuff at all going in there from
Speaker 1: the US. Very very commercial and very important, isn't the
Speaker 1: Michael Creighton book which was from like the eighties, right,
Speaker 1: that's even that is about like wing construction and how
Speaker 1: they didn't want to let the Chinese know how they
Speaker 1: built the wings. What was that airframe? You know? So
Speaker 1: I don't know that I've read that book, but I
Speaker 1: can tell you, you you know, the the update on that
Speaker 1: is one the Chinese and making their own airplane, the
Speaker 1: Comacs C nine one nine, right, So they know how
Speaker 1: to make wings and they know how to make fuselages.
Speaker 1: We've been doing that there for a while. But if
Speaker 1: you look at their airliner, it's supplied almost entirely by
Speaker 1: Western manufacturers, right, So the engines are coming from West
Speaker 1: and manufactures the avionics Western I'm talking European US. I
Speaker 1: think some of those manufacturers very careful about what level
Speaker 1: of technology they build in the country and they put
Speaker 1: on the airplane, but they have down you know that
Speaker 1: that kind of aerostructure stuff. Aero structures is sort of
Speaker 1: the low hanging fruit in the business. The big stuff
Speaker 1: is engines, avionics. So is there is there any pressure
Speaker 1: on these Western aerospace companies too, maybe cut off all
Speaker 1: business with China, including the commercial stuff. Just it just
Speaker 1: feels like things are getting worse by the day. And
Speaker 1: I'm wondering if that's big business. But it's big exports
Speaker 1: for the U. S economy. It is big exports, very
Speaker 1: important to the US economy. I haven't heard anybody talk
Speaker 1: about cutting off. There's a lot of concern about technology.
Speaker 1: I do think too. If you're an engine maker, you
Speaker 1: have to remember these engine makers have been making a
Speaker 1: lot of them have making engines since World War Two.
Speaker 1: There's a lot of intellectual property inside those engines that
Speaker 1: are it's really hard to replicate, and I think they're
Speaker 1: trying to be very very careful about making sure that
Speaker 1: doesn't leak, you know, in sort of an industrial spl
Speaker 1: Look what just happened with the SML right um that
Speaker 1: they make the equipment that makes chips, and we're worried
Speaker 1: that one employee has taken information and given it to
Speaker 1: the Chinese. I imagine they could have a trouble, have
Speaker 1: trouble even hiring employees from Raytheon or from Rolls Royce,
Speaker 1: you know. But I can't I can't understand why they
Speaker 1: wouldn't you know that they're already doing so well and
Speaker 1: making cars, and that effort has only been underway for
Speaker 1: a couple of decades. Why don't they start making some
Speaker 1: of the stuff themselves and hire as many people as
Speaker 1: they can from Boeing and Lockeed Martin Well again, because
Speaker 1: I think sort of the big technology is the engine technology.
Speaker 1: There's a real you know, there's a real art inside that.
Speaker 1: So Pratt and Whitney, Rolls Royce ge right, So that
Speaker 1: that's the real sort of art in this business. Um
Speaker 1: and uh, that's not made in China, right, And so
Speaker 1: I think they just have a harder time fund, you know,
Speaker 1: pulling people out of those companies. He's into China, um,
Speaker 1: you know. And I think it's I don't think any
Speaker 1: one person at Raytheon and g understands all the magic
Speaker 1: behind the engine. So that's another way you kind of
Speaker 1: firewall the intellectual property. But that's it is concerning. Again,
Speaker 1: They've been doing it since World War Two, I think,
Speaker 1: improving these processes and how they make these engines, engines
Speaker 1: getting hotter. You know, some of these engines run at
Speaker 1: temperatures that would that would melt some of the products inside,
Speaker 1: you know, the components inside the engine. Special codings helped them,
Speaker 1: you know, help them last longer and not melt, like
Speaker 1: a lot of science inside there. And I think those
Speaker 1: companies are very very protective about that. I was talking
Speaker 1: to for a today, Um, the CEO of air Bus,
Speaker 1: and one of the questions that I didn't have time
Speaker 1: to ask him is what are you doing about materials
Speaker 1: that you've had trouble getting from Russia? For example, titanium.
Speaker 1: It's my favorite metal by those Okay, I love it, Um,
Speaker 1: And I guess you have to get the stuff. Also.
Speaker 1: The Chinese have a lot of the rare earths, but
Speaker 1: maybe they have trouble getting a lot of the other
Speaker 1: stuff that goes into these engines. No, I don't. I
Speaker 1: don't know that they have any difficulty. Again, I think,
Speaker 1: you know, Russia is a is a good source for
Speaker 1: a bunch of these medals, and I think the China,
Speaker 1: Chinese won't have any you know, good relationship out of Russia.
Speaker 1: Airbus was even getting some of the stuff out of
Speaker 1: Russia until recently they've they've they've trailed that back. And
Speaker 1: you know, you have to remember too, some of these
Speaker 1: medals have been stockpiled because aircraft builds weren't as high
Speaker 1: as they you know, coming out of the pandemic, weren't
Speaker 1: as high as expected. So some of the West has
Speaker 1: been burning through some of these stockpiles, and these medals
Speaker 1: may become more of a problem here in the next
Speaker 1: next few years. We can't talk out of space without
Speaker 1: talking about our good friends I'm going to still refer
Speaker 1: to them from Seattle and that is Bowing. Forget the
Speaker 1: Chicago and now Washington. That gigantic order. You were talking
Speaker 1: about this gigantic orders touch us about Bowing. What's happening
Speaker 1: there again? We saw this big order from Air Indian
Speaker 1: mounts referencing. I mean, I think the you know, the
Speaker 1: bowing continues to uh sort of right the ship, I
Speaker 1: would say, right, they're driving for hyperduct ger rates, which
Speaker 1: is really what they need to boost profitability. I think
Speaker 1: the Air India order another in a string of good
Speaker 1: orders they've had recently. I'd say some of the higher
Speaker 1: qualities were probably you know the Southwest, the United some
Speaker 1: of those core customers, even you know the Ryanairs, Um
Speaker 1: Air India, you know. Bowings challenge in India is they
Speaker 1: don't have a good dog in the fight, right in
Speaker 1: every economy, you want to have a really good airline
Speaker 1: that's taken market share. So as they take market share,
Speaker 1: you could be pumping airplanes into them. And air Bus
Speaker 1: has it with with Indigo Indigoes, you know, very fast growing,
Speaker 1: low cost airline in India. That's why Air India was
Speaker 1: a bit of a prize. We thought that that order
Speaker 1: was going to go entirely to Boeing. It got divided.
Speaker 1: It felt to me a little bit like the American
Speaker 1: Airlines order back, you know, back in the day when
Speaker 1: the Neo was launched and the Max was launched, when
Speaker 1: American Airlines made went into the room to negotiate and
Speaker 1: they said, we got two great offers, we'll take them
Speaker 1: both right, and that sets up a fight down the
Speaker 1: road again to be that you know provider to Air
Speaker 1: India again. Boeing really needs it, but Air India is
Speaker 1: probably gonna squeeze you on price. So the challenge is
Speaker 1: how bad do you want to be in India? How
Speaker 1: much do you want to discount to be in India?
Speaker 1: But I think Boeing really wants to be in India,
Speaker 1: so it was a nice order from that standpoint. It
Speaker 1: would have been better for them if it wasn't. What
Speaker 1: an economy to tap I mean one point four billion
Speaker 1: people and growing plus young people that are gonna keep
Speaker 1: flying for the rest of their lives, and it's not
Speaker 1: and it's not China and coming out of the pandemic.
Speaker 1: I think we watched China shut down and that was
Speaker 1: so painful, and yet Boeing still out of there. So
Speaker 1: China being a much more open economy society, I think
Speaker 1: a better place to be a longer run. All right,
Speaker 1: George first, and he covers the airspace, he covers the airlines,
Speaker 1: anything that flies basically is in George's remit good guy.
Speaker 1: He is a US Army veterans, so we thank him
Speaker 1: for his service as always. How Bacco soon joins us here.
Speaker 1: He's a co portfolio manager for Hennessey Funds E S G,
Speaker 1: Large Cap e t F Kyle. I mean we've seen
Speaker 1: some weak us in the market today, but you know,
Speaker 1: rallying a little bit this year to date versus the
Speaker 1: disaster disaster that was. What are you telling your clients,
Speaker 1: what are you telling your fund managers? What are you
Speaker 1: telling your analysts about how they should think about positioning
Speaker 1: themselves in UM, I'd say is going to be an
Speaker 1: interesting year after what we had was a major correction
Speaker 1: and evaluates in the twenty two where names that I
Speaker 1: think had some very ambitious growth prospects go out of
Speaker 1: the reality checked by the prospect of delivering that growth
Speaker 1: in a higher interest rate environment caused which caused something
Speaker 1: significant declines. I think this year we've seen a lot
Speaker 1: of those same names recover a bit of the losses. UM.
Speaker 1: In terms of like January, I'd say we think it's
Speaker 1: been a bit of a kind of a garbage rally
Speaker 1: where the stuff like I Beeping up the most has
Speaker 1: rallied significantly. UM. We're looking at Orange quite closely. By
Speaker 1: the way, Kyle, was you think that was people who
Speaker 1: sold stocks at a loss last year for tax purposes,
Speaker 1: we're just getting back in them. Or UM, was it
Speaker 1: that people who shorted them down into two or covering
Speaker 1: those shorts or you know what, what why why was
Speaker 1: this garbage rally occurring? I think there's a couple of
Speaker 1: different forces. When we have the what I call retirement,
Speaker 1: which is a very powerful force for investors who are
Speaker 1: effectively forced to buy, and a lot of them have
Speaker 1: been just seeing that influence. We've also seen some repositioning
Speaker 1: where some investors have said, look, these valuations look quite
Speaker 1: attractive now and I'm gonna I'm gonna actually move some
Speaker 1: cash into names like UM that Tesla and other names
Speaker 1: that have been i'd say that have taken a significant
Speaker 1: beat down where their core businesses are Actually, we're actually
Speaker 1: relatively strong when wh when you look at the evaluation
Speaker 1: declines that have occurred UM in terms of tax loss harvesting,
Speaker 1: I do think that's a relatively powerful force, although I
Speaker 1: don't I highly doubt that most of those trades would
Speaker 1: have come in exactly on that timing yet, So I
Speaker 1: think there are a variety of different courses going on.
Speaker 1: The other big one I think that's we're going to
Speaker 1: see it's becoming more and more of a trend is
Speaker 1: UM as earnings and macro data comes out, as which
Speaker 1: names will have will be more attractive. So our name
Speaker 1: has dropped fifty six from last year. UM effectively has
Speaker 1: seen evaluation. Couldn't happen if those names are still are
Speaker 1: still growing up, although at a much slower rate, it
Speaker 1: might be quite attractive to investors. So talk to us
Speaker 1: about health care. I know that's a space you guys, like,
Speaker 1: what's your thesis on healthcare here? As we you know,
Speaker 1: come out of this pandemic, maybe get into more normalized.
Speaker 1: I guess kind of a health scenario, I mean health
Speaker 1: care are I always joke that it's a fake UM
Speaker 1: sector name in that there's a lot of diversification in there.
Speaker 1: As you have in germs names, you have m biotech
Speaker 1: research names, you have more established blake ship like farmer names,
Speaker 1: you have retail like names. So we actually quite like
Speaker 1: health care and that our quantum models find a lot
Speaker 1: of diversification in there. UM we always tend to be
Speaker 1: overweight because of that. UM we actually like some of
Speaker 1: the names as as names normalized in terms of being
Speaker 1: the growth of insurance plans we are, we see, we
Speaker 1: see and forecast some growth on the on the use
Speaker 1: of labs that the effectively the country's getting older and
Speaker 1: health care ugalization is going up if you think about it,
Speaker 1: with everyone's having to kind of I'm not gonna use
Speaker 1: the word high, but have been at home to the
Speaker 1: last Year's not everyone, obviously, there's a lot of people
Speaker 1: who've been out and about, but there's a large segment
Speaker 1: of the population that has not been using healthcare resources
Speaker 1: as they normally would in a non pandemic environment, and
Speaker 1: we do expect that utilization to go back up. That's
Speaker 1: a great that's a great point. You know, a lot
Speaker 1: of people probably during the pandemics, I don't need to
Speaker 1: go to the dermatologist. I don't need to go check
Speaker 1: out my tennis elbow, you know, those little or things,
Speaker 1: right or what we perceive as little or at least
Speaker 1: the beginning. Um, now that everything's open and clear, you
Speaker 1: make as many appointments as you can. Well, it's not
Speaker 1: only that, it's also it's a bit easier to go
Speaker 1: to get right now. I mean, at the height of
Speaker 1: the pandemic, your doctor might be remote only it might
Speaker 1: require um significant masking sensation protocols of fact the nations.
Speaker 1: Now things are kind of normalizing, you don't need all
Speaker 1: of that. Yeah, you still got to wear the mask.
Speaker 1: Unfortunately I go to HSS for my for my physical
Speaker 1: therapy tennis elbow, squash elbow, I got to wear a mask.
Speaker 1: I think that might be something for a very long
Speaker 1: time in those kinds of environments. So, Kyle, you talk
Speaker 1: about the quant background, what's the quant model you guys
Speaker 1: used today and how is it performed? I'd say are
Speaker 1: Our plant process has evolved a lot over the last
Speaker 1: nine years. So we started off in kind of intersecting
Speaker 1: machine learning for investment views and what I call rules
Speaker 1: basest screens for values alignment, and the name that has
Speaker 1: both an expectation about performance from the machine learning and
Speaker 1: a values alignment signal from our e STG process. You
Speaker 1: can think of as a potential long um, we've been
Speaker 1: blending a variety of different types of what i'd call
Speaker 1: them quantamental factors, So things like having our own in
Speaker 1: house sales growth forecast, our own relative valuation model, our
Speaker 1: own um time series framework, and we we we we
Speaker 1: combine all that with very tracditional metrics too, and we
Speaker 1: kind of let the machine figure kind of wait and
Speaker 1: deal with all of this, and it's our job to
Speaker 1: feed better things in there um in terms of performance
Speaker 1: we've had as a firm, we've had quite strong performance.
Speaker 1: Although nine years UM we recently launched an ETS in
Speaker 1: March one. We had quite significant out performance last year.
Speaker 1: What was the t F S t n C S
Speaker 1: t nc UM. Yeah, the Hennessey Stants UM s G
Speaker 1: t f UM. I'd say last year was quite interesting
Speaker 1: in that our quant model, which was saying, i'll say
Speaker 1: Q one, for example, what it was saying to buy
Speaker 1: energy names which are U s G process promptly rejected.
Speaker 1: So if I look at Q one, which was a
Speaker 1: bad quarter for us on a relative to benchmark basis
Speaker 1: of last year, a lot of the under performance was
Speaker 1: simply because we couldn't get access to those energy names,
Speaker 1: which went up in one case over nine probably because
Speaker 1: the SC signal said no, I was just gonna ask
Speaker 1: E s G is E s G something you slap
Speaker 1: on an E t F are a fund the way
Speaker 1: UM companies used to do with blockchain and their names
Speaker 1: so that people would think it was cool or UM.
Speaker 1: I guess your models limit you do they help you
Speaker 1: in anyway? As E s G been a tail wind
Speaker 1: because you were up I mean at least the last
Speaker 1: twelve months, stances up like seven percent, right, so you've
Speaker 1: done well. Yep, we we we have done well. But
Speaker 1: I would say I don't think I B. S G
Speaker 1: is having to help or heard us. I actually think
Speaker 1: it gives us simply a list of names that are
Speaker 1: more values aligned with the data of our clientele in process,
Speaker 1: and we actually think it's a firm. There's no alpha
Speaker 1: in E. S G. But because there's no alpha, it's
Speaker 1: effectively a free lunch. I can generate out performance from
Speaker 1: the use of quant models, I can build a more
Speaker 1: risk efficient portfolio to the use of optimization, and if
Speaker 1: I can actually have a process. In our case, we
Speaker 1: actually have a systematic process that tries to pick the
Speaker 1: best names from each industry group as a function of
Speaker 1: sector specific indicators things like clean avenue, diversity, re resource efficiency, UH,
Speaker 1: how they treat their workers. And also we also look
Speaker 1: at a lot of third party data in terms of
Speaker 1: bad lists where terms have been flagged for illegal behavior,
Speaker 1: non compliance fines, and we find the intersection of those
Speaker 1: of those two processes tends to yield a more what
Speaker 1: I call values aligned portfolio. So I'd say it's not
Speaker 1: something you slap on if you're gonna do it you
Speaker 1: need to have a very explainable process and a way
Speaker 1: to show that why a company isn't our out, which
Speaker 1: I think is very important, versus saying, um, we actually
Speaker 1: critique as a firm the I'm gonna have some vendor
Speaker 1: r E s G score and just to fire this
Speaker 1: through my tracking error optimizer to have the highest on
Speaker 1: the sc score, but give me back the SNP. I
Speaker 1: don't really think that's a good approach from product standpoint,
Speaker 1: as you're just trying to effectively sell the SNP with
Speaker 1: more fees. Just real quickly, thirty seconds. Give us your
Speaker 1: opinion on has E S G enthusiasm peaked? I don't
Speaker 1: think so. I actually think um, I actually think it's
Speaker 1: continuing to peaks. I always joke about this and when
Speaker 1: I say that anti E S T product is E
Speaker 1: S G product in the sense that it's some values aligned.
Speaker 1: The values might be opposite to some scientele, but but
Speaker 1: it's still the exact same thing. They're saying, these are
Speaker 1: values just the opposite of those ones. Then we're going
Speaker 1: to invest accordingly. So I'd actually argue that it's some
Speaker 1: continuing the peak. All right, good stuff. Kyle Backinson, co
Speaker 1: portfolio manager, Hennessey Funds e s G Large Cap e
Speaker 1: t F S t n C S t n C
Speaker 1: is the ticker for that E t F. I saw
Speaker 1: a story overnight by Katie Greifeld and Bildana Hirach about
Speaker 1: surging bond yields that are putting up real competition to
Speaker 1: the SMP five. In fact, they talked about a six
Speaker 1: month yield that is just a hair below five per cent,
Speaker 1: and that's risk free UM. That compares to an SMPS
Speaker 1: yield that clocks in about five point zero eight percent,
Speaker 1: so pretty much the same thing. Let's go to Kara
Speaker 1: Murphy right now. She's ce IO at Castra Holdings UM,
Speaker 1: and she can tell us a thing or two about
Speaker 1: this because she does it for a living. Kara, you
Speaker 1: know when when your clients comes to you and says,
Speaker 1: you know, I'd rather have risk free five return than
Speaker 1: worry about stocks, what do you say, I think cash
Speaker 1: is really compelling here. And this is like the first
Speaker 1: time in over a decade that that has been the case.
Speaker 1: But let's not forget for most of the history of
Speaker 1: the market that is kind of the norm where you
Speaker 1: were able to earn a decent risk free rate and
Speaker 1: whiskey athletes like stocks had to compete with that. So
Speaker 1: so I don't think that this is necessarily a bad thing.
Speaker 1: It's just getting to a more normal environment. And in
Speaker 1: that sense, then stocks have to make their case that
Speaker 1: much stronger than a straight up, you know, five percent
Speaker 1: yield on an almost cash flight position. So care I'd
Speaker 1: love to get a sense kind of where which camp
Speaker 1: you're in here with this UM inflation and the Federal
Speaker 1: Reserve discussion and the ability to engineer a soft landing
Speaker 1: and all of that, because that's clearly what's still driving
Speaker 1: the market. How do you see Yeah, and and I
Speaker 1: think you know, today's data shows that that it's becoming
Speaker 1: even more difficult to be able to thread this needle right.
Speaker 1: So the FET has been working for over a year
Speaker 1: to have this just right landing. And we've kind of
Speaker 1: described the economy as as a big plane that the
Speaker 1: FET is trying to land in turbulence without disturbing the passengers.
Speaker 1: It's a very high level difficulty, and I think today
Speaker 1: is showing us that um the challenges of monetary policy
Speaker 1: having an impact out a lag. So there are certain
Speaker 1: parts of the economy, like let's take housing for instance,
Speaker 1: that reacted very quickly to hire interest rates. You saw
Speaker 1: starts really slow down, traffic really slow down. Prices have
Speaker 1: taken longer to really modern, right, but then things like
Speaker 1: labor and services prices are taking a lot longer to
Speaker 1: respond to this tighter monetary environment. We still think that
Speaker 1: it will happen, it's just taking longer. The good news
Speaker 1: is that we're no longer having this almost existential discussion
Speaker 1: that we were, you know, towards the middle part of
Speaker 1: last year, about whether they said could even get its
Speaker 1: arms around inflation. There were a lot of people who
Speaker 1: are questioning if the FEDS, like typical medicine of higher
Speaker 1: interest rates is going to work. The good news is
Speaker 1: that it is working. It just might take some more
Speaker 1: medicine for it to actually have the desired impact. You Know.
Speaker 1: One of the things that I've started to worry about
Speaker 1: recently is you get a lot allowed voices people who
Speaker 1: are you know, cynics like me, who say, man, the
Speaker 1: Fed is raised rates four our seventy five basis points,
Speaker 1: and all they have to show for it is like
Speaker 1: a drop in stocks. You know, we have three point
Speaker 1: four percent unemployment and financial conditions are looser than they
Speaker 1: were a year go. So on the other hand, care
Speaker 1: you point out we have to be careful about these
Speaker 1: long and variable lags. If you're putting some pressure on
Speaker 1: the yoke and you're I don't know, uh boeing seven
Speaker 1: and you're not turning hard enough, then you just really
Speaker 1: wrench it to one side. All of a sudden, you're
Speaker 1: in a violent spin that you can't control what happens
Speaker 1: if you know, the FED keeps raising rates, raises rates
Speaker 1: too much, and then next year we're not just in
Speaker 1: a recession but a deep, deep procession and a housing
Speaker 1: crash of like thirty or Is that a concern for you, Yeah,
Speaker 1: for sure, And it's a concern for the Fed as well,
Speaker 1: which is why they've started to moderate interest rate um increases.
Speaker 1: I also think that's why the Fed is probably going
Speaker 1: to start to lean harder on this idea of higher
Speaker 1: for longer. That's an easier discussion to have to try
Speaker 1: and convince the market that they're not going to be
Speaker 1: cutting rates anytime soon. And it's a little bit softer
Speaker 1: of an adjustment to the landing rather than saying, hey,
Speaker 1: we need to go for another fifty or seventy five
Speaker 1: basis point rate hike in the near term. Alright, So kar,
Speaker 1: given that backdrop, here where do we go. I mean,
Speaker 1: you know, the portfolio got decimated in two people a
Speaker 1: little shell shocked. We are seeing a little bit of
Speaker 1: a bounce here in stocks this year, But what are
Speaker 1: you telling your clients? Yeah, and and as you said,
Speaker 1: you know, you have these tighter financial conditions, but stocks
Speaker 1: are rallied. And it's not just the broad market. It's
Speaker 1: particularly the nonprofitable kind of like low quality names that
Speaker 1: have really been catching a bit more recently. And so
Speaker 1: that's always a bit of a cautionary tale as we
Speaker 1: think that economic conditions are still weakening. So typically in
Speaker 1: that type of an environment, where you would go is
Speaker 1: to more defensive areas like consumer staples, utilities, healthcare, those
Speaker 1: bills that people have to pay even when their wages
Speaker 1: are being squeezed. The challenge there is that those valuations
Speaker 1: already look relatively rich compared to history. So all right,
Speaker 1: that tells us that the market has already made that move.
Speaker 1: So then we start looking around more broadly, and we're
Speaker 1: seeing interesting opportunities outside the US. UM you know, SMP
Speaker 1: has you know trounced any other non US UM stock
Speaker 1: Index for a very long time, and maybe that's starting
Speaker 1: to turn and we're seeing very chea valuations, attractive dividend yields, okay,
Speaker 1: earnings environments. UM, So we think it's time to start
Speaker 1: looking outside the US where specifically do you like Europe?
Speaker 1: Do you like emerging markets? So there there. You know,
Speaker 1: in emerging markets you always have to be very careful UM,
Speaker 1: and generally we keep it a smallish part of a
Speaker 1: total portfolio, but yes, we think that there are certain
Speaker 1: opportunities there. I think Europe is an easier call. Um.
Speaker 1: We have valuations that are not just cheaper than the US,
Speaker 1: but cheaper to their own historic averages dividend yields. They're
Speaker 1: running it like one and a half times what you
Speaker 1: would find in the US. And again we're expecting weaker
Speaker 1: economic environment there as well, but we think that that's
Speaker 1: already largely priced in. Have been earnings risk in this
Speaker 1: marketplace where just pretty much through this most recent earnings period,
Speaker 1: how much more downside, if any, do you see out
Speaker 1: there for earnings. So we've been talking since the middle
Speaker 1: of last year that earnings expectations for two thousand twenty
Speaker 1: three were too rich. So back then analysts were estimating
Speaker 1: that earnings would grow by ten percent this year. That
Speaker 1: seemed way too optimistic. By the end of the year,
Speaker 1: those estimates had come down to five percent grows, and
Speaker 1: now we're looking at three percent growth. So if we're right,
Speaker 1: we're continuing to see these lagged impact of monetary policy
Speaker 1: that will kick in later in the year. We think
Speaker 1: that that three percent growth is probably still optimistic, especially
Speaker 1: given that corporate profit margins are coming off of historic highs,
Speaker 1: so companies don't have a ton of room to cut expenses.
Speaker 1: That said, we're in a much more realistic position than
Speaker 1: we were just six months ago, but we do think
Speaker 1: that there's some additional downside. I wonder, um, Carol, when
Speaker 1: you're appointing investors towards UM areas like Europe, for example,
Speaker 1: even if it's a small part part of their portfolio,
Speaker 1: what's the best vehicle? I mean, do you go there
Speaker 1: and buy stocks in those markets? Specifically? Do you like
Speaker 1: E T f s or funds? What makes the most sense? Yeah,
Speaker 1: but for most of our clients, ets are a great vehicle.
Speaker 1: They're very liquid, they're very transparent, they're chiefs to get
Speaker 1: in and out of. You can get access to a
Speaker 1: very broad, diversified basket of stocks without having to worry
Speaker 1: about all the transaction costs associated with buying individual securities.
Speaker 1: So for most of our clients, that's perfectly appropriate. Cool alright,
Speaker 1: great stuff, Kara Murphy. We really appreciate you checking in
Speaker 1: with us. You bet, Kara Murphy. She's a chief investment
Speaker 1: officer Orchestra Investment Management. Here a little bit of caution
Speaker 1: I noted in some of her out look and why
Speaker 1: not one of the top red stories. Not surprisingly, they
Speaker 1: were the last of teen thirty minutes on the Bloomberg
Speaker 1: terminals about Bank of America. They're planning some job cuts
Speaker 1: in their investment banks, uh, as Wall Street continues to
Speaker 1: re entrench. So we want to get a sense of
Speaker 1: kind of what's going on that's only at BA, but
Speaker 1: just across the street as they think about headcount going
Speaker 1: into another perhaps difficult year on Wall Street. So for
Speaker 1: that we bring in Snali bassik Uh. She covers all
Speaker 1: things Wall Street for Bloomberg News. Snally, what do you
Speaker 1: make of this? We've seen some job cuts, uh, you know,
Speaker 1: from some of the other players. Now it seems like
Speaker 1: Bank of America is jumping in yeah, listen, the number
Speaker 1: of cuts being discussed, according to this great scoop today
Speaker 1: by Katherine Dougherty and our team, Listen, it's less than
Speaker 1: two under bankers globally, so that is the good news.
Speaker 1: It is a fairly small amountain for now, for now,
Speaker 1: and that's the important part because we have been like
Speaker 1: laser eyes watching Bank of America. They have a huge workforce.
Speaker 1: Arises a crypto thing. Yeah, crypto absolutely, Uh well crypto,
Speaker 1: but I know what you mean. Look, if I was
Speaker 1: telling our producer Eric Mallow, because he said, maybe it's
Speaker 1: not a huge number of people, I thought, it's not
Speaker 1: about really the speed. It's about the direction of travel here,
Speaker 1: and they're just one more bank, you know. Put aside
Speaker 1: what we heard from Fidelity this morning, and we'll get
Speaker 1: to that. Um, it seems like Wall Street banks are
Speaker 1: really starting to retrench and they're starting to fire people.
Speaker 1: And listen, there's a calculus all these banks have to make.
Speaker 1: When I spoke to somebody at Goldman, the sense was, okay, fine,
Speaker 1: we cut people, but our comp was still up in
Speaker 1: broad strokes. But a lot of banks didn't make those cuts,
Speaker 1: and you might have seen comp compensation that is fall
Speaker 1: at a more drastic pace at Bank of America. The
Speaker 1: longer this goes on, the longer it's harder to keep
Speaker 1: people around. There's a sense that dealmaking could start to
Speaker 1: pick up in the second half of the year, but
Speaker 1: as you say, Paul, if rates stay higher for longer
Speaker 1: than does that stifle a lot of the things that
Speaker 1: these bankers are and their fees off of Jeffreys is
Speaker 1: another injury sting example of this because their communication couldn't
Speaker 1: have been clearer. They don't want to let go of
Speaker 1: all the people that they just added. It's bad for morale.
Speaker 1: It sends the wrong signal to clients in terms of
Speaker 1: where their ambitions are, which is why you're seeing right
Speaker 1: now that's small number of Bank of America. But to
Speaker 1: your point, this is just you know, six weeks ago,
Speaker 1: Brian moynihan was saying something different, right exactly. Here's what's
Speaker 1: great about Bloomberg Bloomberg Radio TV because we get the
Speaker 1: draw upon Matt some the biggest and best news organization
Speaker 1: on the plan at Bloomberg News. And then we've got
Speaker 1: what I think is the biggest and the best research
Speaker 1: department on Wall Street, not as Bloomberg Intelligence. So we
Speaker 1: get Shanali Basset from Bloomberg News and Bloomberg News of
Speaker 1: course with this story here today. And then of course
Speaker 1: we have Allison Williams, who has been covering the investment
Speaker 1: banks for decades, and Allison joins us live in our
Speaker 1: Bloomberg Interactive Broker studios. Now we can kind of round
Speaker 1: table table it with Shale and Allison. So Allison, I mean,
Speaker 1: it just seems like you and I've been on the
Speaker 1: street for a long time. We've seen this come and go.
Speaker 1: Is this a surprise or is this just what Wall
Speaker 1: Street does when businesses stuff. I think it is Wall
Speaker 1: Street what Wall Street does when business is tough. And
Speaker 1: I think the timing really relates to a very slow
Speaker 1: start to the year, especially in equity issue and so
Speaker 1: on the death side of things. Things are looking up
Speaker 1: a little bit um, you know, and we're looking versus
Speaker 1: last quarter, so typically the fourth quarter is seasonally slow.
Speaker 1: There's not a lot going on um when we look,
Speaker 1: so we would expect a big pick up in the
Speaker 1: first quarter. We're just still not getting it in equities.
Speaker 1: And obviously when we compare to the year ago quarter,
Speaker 1: um things are things are much worse. JP Morgan came
Speaker 1: out and said they expected drop and I think across
Speaker 1: all these banks UM and Gennale alluded to this before
Speaker 1: when she was talking about Jeffreys. There's such a scramble
Speaker 1: to add bodies, um, and so to your point, that's
Speaker 1: what happens in the cycle, right. So, but there was
Speaker 1: such a scramble, and their pipelines have remained really strong,
Speaker 1: and so there's this this term bank a hoarding right
Speaker 1: boom bust. Right. You think that after so many years
Speaker 1: that this would not be the case anymore, But right
Speaker 1: here we are. And I think what was a little
Speaker 1: bit different this time is because the pandemic and things
Speaker 1: have been very extreme. UH as they said, you know what,
Speaker 1: we're gonna hold that out. The pipelines are still strong.
Speaker 1: Maybe we'll get that lift, and we're not seeing it
Speaker 1: on the equity side, so you might just see like
Speaker 1: a little bit of throwing in the tow at Bank
Speaker 1: America on the dead side of things. UM. JP Morgan's
Speaker 1: UH fixed income trading boss, Troy Warbox said Um. He's
Speaker 1: the global head of markets at JP Morgan. He said,
Speaker 1: fixed income is in wh I thought of Paul when
Speaker 1: I read that, because he's excited but I wonder if
Speaker 1: this doesn't signal a new phase, a bigger, more worrying phase.
Speaker 1: Is it just Allison's slow start too, and we're gonna
Speaker 1: let down like go two hundred people? Or is this
Speaker 1: like Goldman Sachs is letting people go? Um, you know,
Speaker 1: Bank America goes letting people go city Jeffreies Citadel, like
Speaker 1: is everybody else gonna follow? I think that looks like
Speaker 1: the case. But again I think the latter because yeah, yeah,
Speaker 1: And so to Sale's point, there's two sides of the business,
Speaker 1: right so um, to the extent that markets are higher,
Speaker 1: and I think that's been the surprise this quarter. Right,
Speaker 1: so markets are higher. We had a strong equity start
Speaker 1: of the year. Um, you know, Paul, as we know
Speaker 1: that generally means a lot of activity, a lot of
Speaker 1: hustle going on, and the fact that that hasn't come
Speaker 1: with the better markets, I think is the disappointment. Whereas
Speaker 1: on the asset management side of things, higher assets mean
Speaker 1: higher fees. Um, so you don't fidelity the story this
Speaker 1: morning out of Boston Fidelities adding four thousand people. So
Speaker 1: I guess, look the two under investment bankers leaving Bank
Speaker 1: America They're not gonna go from Charleston up to Boston. Right,
Speaker 1: There's a different skill set. It is a different sales set,
Speaker 1: and I would just you know, circle back to what
Speaker 1: you said about fixed income. I think that is. I
Speaker 1: think what we're going to see this quarter, UM, from
Speaker 1: a mix standpoint is credit trading, which was, you know,
Speaker 1: sort of the the underperformer last year. It was all
Speaker 1: about rates and macro credit trading doing a little bit better.
Speaker 1: Part of that is the fees that we talked about,
Speaker 1: So the debt bankers are a little bit happier with
Speaker 1: their outlook than than on the accorties. I'm just wondering
Speaker 1: about the individuals affected by this, um, you know, who
Speaker 1: are they and where do they go? I'm assuming you
Speaker 1: let go like the older white guys first, and then
Speaker 1: where do you where do you send them? Did they
Speaker 1: move to a smaller bank? Um? Do they move to
Speaker 1: what's Paul? What's the so you know, there's a few things.
Speaker 1: I know, Paul's pointy at himself. Stop doing that, you know. Um,
Speaker 1: a lot of people had started to anticipate this and
Speaker 1: moved before and what they've ended up doing was there
Speaker 1: are still private debt firms that are hiring. They're raising money.
Speaker 1: You know, you think about a place like Aries and
Speaker 1: they're raising money at seven of their ten largest funds.
Speaker 1: Because so much activities outside of the banking system into
Speaker 1: the private debt world. So that's a place people are going.
Speaker 1: If you're a trader. Some of the big multi street
Speaker 1: hedge funds are growing very quickly. There's a question about
Speaker 1: how sustainable that growth is, but that's another boom bust.
Speaker 1: You know, if you want to sit there and have
Speaker 1: a job for the next ten years, not typically the
Speaker 1: place you got, but they are hiring, uh, and so
Speaker 1: there are places to go, and there are some of
Speaker 1: the smaller firms. The boutiques are trying to they say
Speaker 1: they're trying to pick up that's all. That's exactly what
Speaker 1: I was going to point to. If you look at
Speaker 1: the boutiques, they are still very much in hiring mode.
Speaker 1: And that's something that's something that's something that we didn't
Speaker 1: have the coming boutique, right, That's something that we didn't
Speaker 1: have a decade ago. We have all these smaller boutiques
Speaker 1: that are public now UM have money. They're going after
Speaker 1: UM some of the senior talent. So that you know,
Speaker 1: at the smaller firms like the molest of the world,
Speaker 1: and do you have the we do you have the
Speaker 1: credit suites first Boston? You know, as that evolves, right,
Speaker 1: So that's that's going to evolve over the next couple
Speaker 1: of years. What's fun too, is those places are actually
Speaker 1: promoting young people faster as well. And so even for
Speaker 1: you know, the thirtysomething banker, they're trying to make it
Speaker 1: really attractive to come over there because you just get
Speaker 1: in front of clients quicker. Lastly, i'd say restructuring. I
Speaker 1: mean the restructuring guys are having the time of their
Speaker 1: life because there has been no restructuring activity in so long.
Speaker 1: And so whether it's like you know, quote unquote liability
Speaker 1: management and just kind of you know that's hot right now?
Speaker 1: Oh my god, it's the most boring thing alive. But
Speaker 1: yes it's hot. So I love it. I love it.
Speaker 1: You build up so much debt during ZIRP and then
Speaker 1: you hire a banker to fix your balance, and then
Speaker 1: you've got to sell stuff off to get rid of it.
Speaker 1: Sounds like my household help restructure exactly. Money on both sides, yep.
Speaker 1: I remember, alright, great stuff, we can put this together again.
Speaker 1: The News Bank of America laying off a small number
Speaker 1: of people. But it just kind of goes to the
Speaker 1: trend we're singing on Wall Street. It's an important story.
Speaker 1: It's a highly read story on the Bloomberg Criminal So
Speaker 1: we got two of our smarter folks in the building
Speaker 1: to come in here and chat with us. That's Shinnelli
Speaker 1: Bassik from Bloomberg News and Alison Williams and Bloomberg Intelligence.
Speaker 1: Put it all together and get a nice little round table.
Speaker 1: Thank you, Eric Mulla for putting that together. All right,
Speaker 1: let's go to the hotel business high reported. Uh some
Speaker 1: pretty darn good numbers. Uh. Just recently stocks off about
Speaker 1: one point eight percent, but boy, the stock is up
Speaker 1: twenty seven percent year to date this year. Hotel stocks
Speaker 1: are just ripping. Uh, they're all up about year to date.
Speaker 1: So people are getting out there, they're traveling. Let's see
Speaker 1: what's going on with there. Mark Hoplamaze, and he's the
Speaker 1: CEO and president of Hyatt, joins us here by phone. Mark,
Speaker 1: thanks so much for taking the time, give us the
Speaker 1: the highlights the takeaways from your recent quarterly report. Thanks
Speaker 1: for having me. Um. Yeah, we we finished a transformative
Speaker 1: year with another record quarter driven really across the business.
Speaker 1: UH Leisure has been the the UH the strongest segment
Speaker 1: by far. We see no signs of slowdown in that
Speaker 1: in that segment. UM Group business that is meetings and
Speaker 1: conventions and so forth. Has we fully worked coverage levels
Speaker 1: in the fourth quarter, and we are seeing great demand
Speaker 1: heading into this year. Our bookings in January or paced
Speaker 1: into the rest of the year rather for twenty three
Speaker 1: is ahead of where it was last year. UM. And
Speaker 1: even business transient is showing signs of real improvement. UM.
Speaker 1: You know, we were down eighteen to nineteen levels in
Speaker 1: the fourth quarter. We ended January started off much further
Speaker 1: down because everyone's still on holiday, but ended seventeen percent down.
Speaker 1: But the first two weeks of February we're down twelve UM.
Speaker 1: So it's really improved a lot UM, and we see
Speaker 1: great strength across the board. So Mark, talk to us
Speaker 1: about that business travel segment. UM. You know, just somematcdonald
Speaker 1: evidence here at Bloomberg. I mean, it's it feels like
Speaker 1: it's picking up. Where asked to go to various conferences
Speaker 1: and things like that. It feels like it's picking up.
Speaker 1: But how do you guys think about that long term,
Speaker 1: but it just feels like it might not every return
Speaker 1: to the level pre pandemic level. How do you guys
Speaker 1: think about it? Well, the first thing I would say
Speaker 1: is that the the dividing lines between business transient group
Speaker 1: and leisure have all blurred. So we see more leisure
Speaker 1: trips where people are going on Thursday nights staying in
Speaker 1: hotels for a long weekend. So Thursday and Sunday night
Speaker 1: occupancies have recovered faster than weekday occupancies. UM. That's notable
Speaker 1: because we're seeing that that crossover trip between hanging out
Speaker 1: and working remotely for a long weekend. UM. So there's
Speaker 1: some measure of of I think challenge, and it's fuzzy
Speaker 1: line now between leisure transient and business transient. And secondly,
Speaker 1: quite a few corporations UM have have turned to travel
Speaker 1: with the c suite or with groups of people UM,
Speaker 1: and we track any group of ten or more as
Speaker 1: a group as opposed to business transient. And so there's
Speaker 1: some substitution going on where you used to have a
Speaker 1: bunch of individual trips and now they're aggregating that up
Speaker 1: and traveling in teams. And that part of that has
Speaker 1: to do with maximizing the impact of client meetings, um,
Speaker 1: but partly by virtue of the fact that not every
Speaker 1: one of their clients is in the office on a
Speaker 1: full time basis, so when they can capture the important
Speaker 1: people they need to see, they want to bring the
Speaker 1: full measure of their firms to bear. This is really
Speaker 1: pronounced in the financial services industry, so I would say
Speaker 1: that the dividing lines are are blurring. The one thing
Speaker 1: I would say is commercial travel in general, whether it's
Speaker 1: group or business transient as a category, will be growing
Speaker 1: and will exceed pre pandemic levels because their secular economy. Hey,
Speaker 1: Mark talked to us about the labor issue. I've just
Speaker 1: done some travel recently, and you know, it doesn't feel
Speaker 1: like hotels are ever going to return to Hey, We'll
Speaker 1: come to your housekeeping every day, um I, And I
Speaker 1: know that's partly a function of labor availability, but I
Speaker 1: kind of feel like, you know, you guys are in
Speaker 1: the hotel industry realizing that as guests will take that
Speaker 1: lower level of service. Uh, and that's cost savings to
Speaker 1: you guys. How do you think about labor and how
Speaker 1: you deploy labor? Yeah, First of all, the labor market
Speaker 1: conditions have improved a lot. UM. A year ago, we
Speaker 1: were running sort of fiftent vacancy rates and now we're
Speaker 1: down to eight, which is sort of I would say,
Speaker 1: in the range of that I would consider to be typical. UM.
Speaker 1: So we've we've we've seen a great improvement in being
Speaker 1: able to hire people. UM. But it's true that UM,
Speaker 1: there there has been a change in policy. You can
Speaker 1: still get daily housekeeping, but it's with requests in many
Speaker 1: lower end brands and select service brands for our luxury hotels, UH,
Speaker 1: in our lifestyle hotels that we we are maintaining daily housekeeping.
Speaker 1: I personally, when I travel, all I really need is
Speaker 1: a is a refresh on towels. UM. I actually sounds
Speaker 1: a little a little strange. But during the during the pandemic,
Speaker 1: I made it a practice to make make you know
Speaker 1: our bed in the morning. UM. And I still do that.
Speaker 1: And when I'm at hotels, I seem to be reverting
Speaker 1: to my autonomic response and I make the bed. So
Speaker 1: sometimes the housekeepers come in and they remake it because
Speaker 1: apparently I didn't do the job according to their standards.
Speaker 1: But apart from that, I actually prefer a re USh
Speaker 1: to a full clean and so I think some people
Speaker 1: are just choosing to opt out, But I think it's
Speaker 1: gonna we will discover a different type of equilibrium going forward.
Speaker 1: And I do think that the incidents of full housekeeping
Speaker 1: every day is is going to be lower. Are you
Speaker 1: able to get the UM employees that you need or
Speaker 1: is it a regional problem where you are in you know,
Speaker 1: some countries and you're not in others. Yeah, I think
Speaker 1: the answer is it's it's a challenge in many markets.
Speaker 1: The number one issue in the United States at least
Speaker 1: is that the temporary visas that are have been issued
Speaker 1: for summer workers for for temporary workers UM for decades.
Speaker 1: This is not a new program. This has been around forever.
Speaker 1: UM has been dramatically limited in numbers. UM. We through
Speaker 1: through our Industry Association, appealed for a significant increase in
Speaker 1: the number of visas for temporary work visas for the
Speaker 1: last summer and we got a small fraction, like one
Speaker 1: fifth of the of the employees that we would have needed.
Speaker 1: Because leisure, a lot of these positions are resorts. So
Speaker 1: I would say, first and foremost, our industry Association is
Speaker 1: focused on constructive way to increase those temporary visas, but
Speaker 1: ultimately a better uh well, a an immigration policy period
Speaker 1: UM would really significantly improve this. Why why has the
Speaker 1: Biden administration seemingly dropped the ball on that. I don't
Speaker 1: know the specifics of what they're doing, but I do
Speaker 1: know that, you know, the Trump administration severely limited foreign
Speaker 1: access to this country and that affected you know, workers,
Speaker 1: you know, legal immigration as well as illegal immigration. A
Speaker 1: lot of people thought it would get back to normal
Speaker 1: when President Biden came into office, and we're still looking
Speaker 1: at a backup of almost two million people waiting for
Speaker 1: legal visas. Why don't you and the other uh, you know,
Speaker 1: top on CEOs in the country just go to Washington
Speaker 1: and say, dude, you gotta do something on this. Yeah, well,
Speaker 1: I I share your sense of urgency. I think it
Speaker 1: is one of the key issues that we face as
Speaker 1: a as an economy, US economy looking forward. Uh, this
Speaker 1: is really a high priority for the American Hotel and
Speaker 1: Lodging Association UM, and we as a group of UM
Speaker 1: CEOs across the industry are heavily engaged in this. So
Speaker 1: we are making the case. UM. There are various reasons
Speaker 1: why the needlessent moved on this UM, and I'm not able.
Speaker 1: I'm not a political commentator, so I'm not going to try.
Speaker 1: What I can tell you is that the pressure on
Speaker 1: focusing people on what the actual net impact on the
Speaker 1: economy is UH is that case is being made and
Speaker 1: it's persistent, like we are going back to the to
Speaker 1: Capitol Hill over and over and over again to make
Speaker 1: these make these same points. I strongly agree with your
Speaker 1: sense of urgency, though. Mark talked to us about the
Speaker 1: growth outlook for Hiatt. What are the drivers that you're
Speaker 1: going to be pulling to drive revenue and earnings? Ford?
Speaker 1: Is it focusing on revenue prevailable room that rev part metric.
Speaker 1: Is it adding rooms through new hotels as acquisitions? What's
Speaker 1: your growth story? Yeah, it's it's all of the above.
Speaker 1: But but first and foremost, we for the last six
Speaker 1: years in a row, we've had the highest net rooms
Speaker 1: growth in the industry among major companies, and UM, we're
Speaker 1: very proud of that. But it's really partly a result
Speaker 1: of the fact that we are a small We have
Speaker 1: a smaller footprint than some of our bigger competitors, so
Speaker 1: we are not running into ourselves in any markets. We
Speaker 1: are underpenetrated in most markets in which we operate the
Speaker 1: vast majority of them actually, so we've been able to
Speaker 1: grow at a faster pace and we expect that to
Speaker 1: continue UM really into the future. We've done part of
Speaker 1: that through organic growth and part of it through acquisition.
Speaker 1: UM the acquisitions that we've made have had a couple
Speaker 1: of attributes associated with them. First, fits into our portfolio
Speaker 1: and our customer base. Second, UH creates more of a
Speaker 1: network effect, so that UM the kind of customers that
Speaker 1: we're serving in the locations of those brands help helped
Speaker 1: to strengthen the entirety of the higher network for our
Speaker 1: loyalty members. And Third, in each case, they were brand
Speaker 1: platforms that had future significant future growth potential. Our most
Speaker 1: recent acquisition that we just closed on is Dream Hotel Group.
Speaker 1: We start off with twelve open hotels, but they have
Speaker 1: twenty four signed contracts for new UM management agreements for
Speaker 1: hotels opening in the future. That's just an example of
Speaker 1: what we've been doing, which is finding brands that have
Speaker 1: very strong growth prospects and bringing that growth into UM
Speaker 1: into the company. Alright, good stuff, Mark hop amaze, and
Speaker 1: thank you so much for joining us. A Mark is
Speaker 1: the CEO and president of high at the just reported
Speaker 1: some numbers, some better than expected numbers, their financial results
Speaker 1: and stock up about year to date. Thanks for listening
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller, three
Speaker 1: pen on Fall Sweeney I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio