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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: daybaq At podcast, available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Monday, the twenty sixth of February

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Speaker 1: in London. I'm Caroline Hipka.

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Speaker 2: And I'm Stephen Carroll. Coming up today. Why the world's

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Speaker 2: most profitable hedge fund bet is facing a new era

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Speaker 2: of risk.

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Speaker 1: Bercher Hathaway's cash pile jumps to a record one hundred

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Speaker 1: and sixty eight billion dollars as Buffett bemoans a lack

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Speaker 1: of opportunities.

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Speaker 2: And from globalism to protectionism. What this week's WTO summit

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Speaker 2: tells us about the risks of a changing world order.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: The most successful hedge fund strategy of twenty twenty three

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Speaker 2: is facing a more complicated future. A new era of

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Speaker 2: risk is threatening the models that insurance insurance link to

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Speaker 2: securities dominated by catastrophe bonds rely on. Bloomberg's Tea Ada

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Speaker 2: Bio has the details.

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Speaker 3: So called cat bonds issued by insurers to shield from

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Speaker 3: losses too big to cover. They transfer the risk to

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Speaker 3: investors who lose it for pre defined catastrophe hits and

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Speaker 3: gain big if it doesn't. But calculating catastrophic risk is

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Speaker 3: getting more difficult because of a growing concentration of property

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Speaker 3: in areas prone to weather events like destructive thunderstorms. They're

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Speaker 3: now outpacing the number of once in a generation natural

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Speaker 3: disasters which cat bonds are designed for. Climate change is

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Speaker 3: amongst the factors behind the shift, fueling uncertainty in the

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Speaker 3: cat bond market, which investors are currently unprepared for. In London,

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Speaker 3: Tea Ated, Baio, Bimberg, Radio.

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Speaker 1: Berkshire, Hathaway's cash pile jumped to a record one hundred

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Speaker 1: and sixty seven point six billion dollars in the fourth

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Speaker 1: quarter as the conglomerates struggled to find deals at attractive valuations.

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Speaker 1: CEO Warren Buffett use his annual shareholder letter to decry

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Speaker 1: a lack of meaningful deals that he said would give

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Speaker 1: the firm a shot at eye popping performance. The company

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Speaker 1: also reported a jump in fourth quarter operating earnings of

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Speaker 1: eight point four eight billion dollars, helped by an increase

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Speaker 1: in insurance underwriting and investment income.

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Speaker 2: Ukraine's president vladimyr Zelenski says his country has lost thirty

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Speaker 2: one thousand soldiers since Russia's full scale invasion began two

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Speaker 2: years ago. He added that there is a lack of

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Speaker 2: precise data on civilian casualties, though the figure is in

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Speaker 2: the tens of thousands. Ukrainian president also stressed the need

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Speaker 2: for military support from American allies as a congressional decision

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Speaker 2: on sixty billion dollars worth of aid for the country looms.

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Speaker 2: US National Security Advisor Jake Sullivan agreed, urging the House

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Speaker 2: to approve measures.

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Speaker 4: Ukraine can go further in retaking territory that Russia has occupied,

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Speaker 4: ensuring Russia fails, and ensuring Ukraine prevails, but it can

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Speaker 4: only do so if it has the tools that it needs,

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Speaker 4: and that is why the United States needs to deliver

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Speaker 4: the aid package that passed on a massive bipartisan vote

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Speaker 4: in the Senate.

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Speaker 2: The House needs to step up and pass that bill.

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Speaker 2: Jake Sullivan was speaking as President. Zelenski also claimed that

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Speaker 2: some plans for Kiev's counter offensive last year were leaked

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Speaker 2: to Russia.

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Speaker 1: When it comes to the conflict in the Middle East,

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Speaker 1: Benjamin Letnia, who says that he will have a plan

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Speaker 1: of action for evacuating civilians in Rafa soon. The Israeli

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Speaker 1: Prime Minister revealed that those sheltering in the southern city

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Speaker 1: would be directed north where fighting has finished.

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Speaker 2: We agree on this, I mean, we don't have to

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Speaker 2: be plodded it.

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Speaker 5: We're on the same page with the US oners because

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Speaker 5: that's how we do it.

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Speaker 1: Benjamin Lettanier, who's speaking there. He also said that his

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Speaker 1: plans will include how to dismantle remaining Hamas battalions.

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Speaker 2: The UK government is trying to revamp the way it

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Speaker 2: handles business investment. A new panel made up of senior

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Speaker 2: ministers and government officials aims to coordinate between departments to

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Speaker 2: bring in large projects. It was one of the key

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Speaker 2: plan thanks of Richard Harrington's review of the UK's FDI slump.

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Speaker 2: He spoke to us when the review was published last November.

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Speaker 5: Up to now, we've been very reactive in government in

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Speaker 5: London or in the regions. If a company comes to

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Speaker 5: us and they're interested in investing here, it's slow and

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Speaker 5: it's cumbersome, and often they have to go through different departments,

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Speaker 5: but actually eventually a package is brought up with the

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Speaker 5: other countries are better organized. They have a concierge service,

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Speaker 5: they have an investment minister at very senior level.

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Speaker 2: At Harrington told Bloomberg he's pleased with progress so far,

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Speaker 2: but some question if a concierge service can compete with

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Speaker 2: the US and it's Inflation Reduction Act investment plan.

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Speaker 1: The Conservative Party is facing accusations of racism after a

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Speaker 1: high profile Conservative MP was suspended for suggesting that the

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Speaker 1: mayor of London was controlled by quote Islamists. Lee Anderson

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Speaker 1: was a deputy chairman in the party until he refused

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Speaker 1: to apologize for the remarks, but Deputy Prime Minister Oliver

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Speaker 1: Dowden has refused to call the comments racist.

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Speaker 6: I see from my own constituents where Jewish people are

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Speaker 6: fearful of walking the streets showing symbols of their own religion,

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Speaker 6: where we have hate on marches, where the actual conduct

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Speaker 6: of Parliament is apparently being influenced by threats of violence

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Speaker 6: and intimidation.

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Speaker 1: Unlike Dowden, the mayor of Lonton City Cahn't, said that

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Speaker 1: the claim was islamophobic, racist and stokes anti Muslim hatred.

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Speaker 1: Anderson's suspension comes as MPs are seeing increasing threats of violence,

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Speaker 1: with The Sunday Times reporting that three female MP's have

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Speaker 1: been assigned bodyguards.

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Speaker 2: In the United States, even a home state advantage couldn't

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Speaker 2: give Nicki Haley her first winner of the Republican presidential primaries.

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Speaker 2: Donald Trump won South Carolina bout twenty points over the weekend.

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Speaker 2: That's despite Haley being the former governor there. The news

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Speaker 2: has spurred one of her biggest donors to withdraw their

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Speaker 2: campaign fund with more Hairs bloombergs at Baxter.

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Speaker 7: This of course comes after her disappointing loss in South Carolina,

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Speaker 7: and now the Charles cokebacked Americans for Prosperity Action will

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Speaker 7: cut funding. It has spent millions of dollars since the

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Speaker 7: fall on advertising and voter outreach efforts, but it says now,

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Speaker 7: given the challenges in the primary stage ahead, well, it

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Speaker 7: says it doesn't think it can make a substantial difference.

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Speaker 7: The pack says it will continue to endorse her, but

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Speaker 7: we'll focus on funding where it can make a difference

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Speaker 7: at Baxter Bloomberg Radio.

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Speaker 2: Now, at a moment, we'll dig into the day's results

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Speaker 2: from Berkshire Hathaway and look at some of the big

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Speaker 2: issues at stake at the wto Summus in Abu Dhabi.

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Speaker 2: But another story that caught our eye this morning. Freddie

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Speaker 2: Mercury's Kensington home is going on the market. It's being

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Speaker 2: sold by his friend Mary Austin, who inherited from him

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Speaker 2: when he died in nineteen ninety one. She's been speaking

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Speaker 2: exclusively to our colleague Sarah Rappaport from Bloomberg Pursuits. It's

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Speaker 2: a fascinating conversation. The house itself is stunning in many

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Speaker 2: many senses of that word.

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Speaker 8: Yeah.

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Speaker 1: I walked past Sarah's desk last week when she had

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Speaker 1: got the brochure of the how I mean fabulous, absolutely amazing.

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Speaker 1: It had pictures of the dressing room Eddie Mercury, Yeah, amazing, as.

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Speaker 2: An FM carved into the marble of the after the

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Speaker 2: main bedroom, as well as an eight bedroom house tucked

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Speaker 2: away in Kensington. It's I mean, it still contains many

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Speaker 2: of the original design features that he put in place

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Speaker 2: when he when he bought the house. Sarah talks about

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Speaker 2: having a strong sense of personality.

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Speaker 1: Come on, well, thirty million pounds is it right? Okay,

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Speaker 1: Well we'll see who snaps that up. Very interesting story.

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Speaker 1: Sarah Rappaport from Bloomberg Pursuits. Of course, one of the

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Speaker 1: best jobs in the building with that story.

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Speaker 2: For us, let's get more now on one of the

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Speaker 2: big stories in the investing world, hedge funds. Piling inter

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Speaker 2: sector's top strategy from twenty twenty three investing in these

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Speaker 2: insurance linked to securities or catastrophe bonds. But the risks

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Speaker 2: get associated with them are getting harder to calculate, bimbricks.

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Speaker 2: Charlie Willes joins us now for more Morning to you. Charnie,

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Speaker 2: tell us a bit more about then this cat bond

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Speaker 2: strategy they're prot such a big winner for hedge funds

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Speaker 2: last year. Is it still such a good bet?

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Speaker 8: Yeah?

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Speaker 9: Well, I mean this is a really fascinating story because

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Speaker 9: it gets at how climate change is changing, how finance

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Speaker 9: needs to assess risk. And so last year cat bonds

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Speaker 9: as they're known, with these catastrophe bonds were the best

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Speaker 9: performing asset class for hedge funds. They brought a nearly

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Speaker 9: twenty percent return. And the deal here is interesting, right,

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Speaker 9: So they these cat bonds are used by insurers to

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Speaker 9: kind of insure against the big ones. So these losses

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Speaker 9: that are just kind of too big to cover, they

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Speaker 9: securitize those losses and investors, you know, bet that you

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Speaker 9: know the catastrophe won't come. But what's been increasingly happening

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Speaker 9: is these sort of secondary perils tend to happen. So

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Speaker 9: there's a lot of property in areas where there might

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Speaker 9: be more floods, more wildfires, more sort of you know,

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Speaker 9: not huge ones, but smaller ones, and those are actually

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Speaker 9: you know, reassessing, forcing investors and insurers to reassess how

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Speaker 9: they calculate risk. And there's more investors come to the strategy,

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Speaker 9: it actually could make it less profitable and just a

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Speaker 9: lot more difficult to invest on.

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Speaker 1: Yeah, absolutely, the changing picture when it comes to climate.

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Speaker 1: You've also been looking then at the earnings of Berkshire Hathaway.

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Speaker 1: Cash was king. I mean this is also something that

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Speaker 1: Warren Buffett has talked about before, the lack of deals

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Speaker 1: out there for him.

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Speaker 9: Yeah exactly. I mean, look, Berkshire Hathaway famous for its

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Speaker 9: insurance businesses as well, and yes, that was a record

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Speaker 9: cash pile that they reported this weekend with their annual

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Speaker 9: letter as well as their results, one hundred sixty seven

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Speaker 9: point six billion dollars in cash, which is a lot.

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Speaker 9: And I mean, look, this is something that Berkshire has

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Speaker 9: long done, right because of their insurance business, they have

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Speaker 9: to keep a lot of cash on hand. They invest,

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Speaker 9: you know, one of the most famous value investors in

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Speaker 9: the entire world, but you know, in a higher rate environment.

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Speaker 9: And I think having a lot of that cash on

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Speaker 9: hand is bringing a lot less scrutiny than I think

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Speaker 9: it probably would otherwise.

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Speaker 2: These earnings are always very closely watched as being a

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Speaker 2: proxy for US economic health because it's such a diverse

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Speaker 2: business as well. What sort of signals did we get

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Speaker 2: then from this report about the wider economy?

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Speaker 9: It was interesting. So operating earnings, which are the metric

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Speaker 9: that Buffett prefers because they don't take into account the

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Speaker 9: unrealized losses and gains on his investment portfolio. At Berkshire Hathway,

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Speaker 9: they were up from last year in the same period,

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Speaker 9: so eight point four to eight billion versus the same

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Speaker 9: period last year six point six three billion, and you know,

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Speaker 9: on trend this morning. They were aided by insurance, so

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Speaker 9: the insurance companies in the Berkshire Hathway portfolio were able

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Speaker 9: to increase premiums, but the claims were lower at some

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Speaker 9: of the businesses, but they were dragged down the earnings

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Speaker 9: overall by some difficulties in rail and some difficulties in utilities.

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Speaker 9: Those were mentioned in Buffett's annual letter, which is you know,

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Speaker 9: famously parsed by investors. He interestingly meant some difficulties with

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Speaker 9: regulation and wage negotiations at rail, which is a little

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Speaker 9: bit unusual for Buffett because he tends not to criticize

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Speaker 9: some of the regulatory moves coming from Washington.

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Speaker 1: Okay, that's interesting. It was also the first annual letter

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Speaker 1: since berusha's vice chairman, Charliemonga passed away, so also very

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Speaker 1: interesting moment in terms of change at Berkshire Hathaway. Thank

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Speaker 1: you so much shat Charlie Wells for being with us

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Speaker 1: then taking us through the latest on hedge funds and

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Speaker 1: the results from Berkshire Hathaway.

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Speaker 2: Now, global trade ministers are gathering in Abu Dhabi for

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Speaker 2: the World Trade Organizations Summit, amid a tide of trade

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Speaker 2: protection and questions over the WTOS relevance. Our trade reporter

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Speaker 2: Eric Martin joins us now from Abudabi. From Morgan morning

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Speaker 2: to you, Eric, how big are the stakes then at

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Speaker 2: this meeting? Does the organization still have the power and

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Speaker 2: the cloud to be able to secure global agreement?

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Speaker 8: Well, that absolutely is an open question. You know, we've

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Speaker 8: seen the WTO kind of losing a slowly voting relevance

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Speaker 8: over really the last more than decade. It's been more

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Speaker 8: than ten years since the Doha Development Round bailed in

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Speaker 8: twenty eleven, and we've seen a real absence of global

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Speaker 8: agreements through the WTM since then. What we have seen

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Speaker 8: is more regional agreements, things like are set in Asia

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Speaker 8: or like the CPTPP, also in the Indopacidic, which of

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Speaker 8: course Donald Trump withdrew the US from in his first

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Speaker 8: days in office in twenty seventeen. But so the WTO

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Speaker 8: really is under pressure to show that it can still

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Speaker 8: produce global agreements or even preserve the status quo in

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Speaker 8: terms of preventing greater fragmentation in trade.

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Speaker 3: Yeah.

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Speaker 1: Absolutely, So what do you think the key issues then

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Speaker 1: will be that they will try to focus on and

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Speaker 1: find some some agreement and momentum on.

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Speaker 8: Well, one key test will be whether in a WTO

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Speaker 8: can renew what's called the e commerce moratorium. This is

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Speaker 8: a prohibition on countries applying tariffs on digital trade. So

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Speaker 8: think of a movie that you would download in Bali

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Speaker 8: from Netflix, or a book that you would would download

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Speaker 8: when you're abroad right now. All of these kinds of

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Speaker 8: digital trans first are prohibited from facing duties customs duties,

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Speaker 8: but some countries like Indonesia as well as some indication

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Speaker 8: from India and South Africa, that there's interest in being

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Speaker 8: able to raise revenue from these kinds of sales in

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Speaker 8: this kind of trade. So that's one key thing to

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Speaker 8: watch is whether this will be preserved and rolled over,

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Speaker 8: renewed as it always has been every couple of years

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Speaker 8: since nineteen ninety eight, or whether we're going to finally

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Speaker 8: see a breakdown in that consensus there. Remember, WTO operates

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Speaker 8: by consensus. It only takes one out of one hundred

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Speaker 8: and sixty six members to prevent agreement on any topic. So,

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Speaker 8: especially in today's charged geoplitical world and rivalry between US

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Speaker 8: and China and fragmentation, that.

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Speaker 2: Is a tall arnor Yeah, that's a really interesting point actually,

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Speaker 2: because the WTO is a sort of a forum for

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Speaker 2: these geopolitical differences. We were hearing from China's Commerce ministry

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Speaker 2: only today disputing claims from the US that it's flouting

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Speaker 2: WTO rules.

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Speaker 8: Absolutely. This is a report that we saw on Friday

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Speaker 8: from the US Trade Representative talking about how in the

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Speaker 8: US view, China continues to have practices that allowt the

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Speaker 8: WTO requirement that member nations be market based economies and

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Speaker 8: saying wto excuse me, China continues to be non market economy,

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Speaker 8: and we.

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Speaker 2: Saw strong pushback from Beijing.

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Speaker 8: Saying that it is not in violation of global trade

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Speaker 8: rules from in their opinion, of course, the US maintains

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Speaker 8: tariffs one hundreds of billions of dollars of Chinese exports annually,

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Speaker 8: and so certainly we see spillover from this rivalry and

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Speaker 8: list tension between the world's two largest economies into the

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Speaker 8: rest of the UK WTO.

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