1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,920 Speaker 1: at Bloomberg dot com slash podcast. Katie, I'm not sure 7 00:00:21,920 --> 00:00:24,840 Speaker 1: if you're aware of my market moving called here, but 8 00:00:24,880 --> 00:00:27,080 Speaker 1: I just kind of feel like all the bad news 9 00:00:27,080 --> 00:00:28,680 Speaker 1: is are kind of in the market. I know, rates 10 00:00:28,680 --> 00:00:32,000 Speaker 1: are going up, that's in the market. Our names you're 11 00:00:32,000 --> 00:00:35,520 Speaker 1: coming down, that's kind of in the market. So don't 12 00:00:35,520 --> 00:00:37,600 Speaker 1: I just buy stocks and buy bonds and stuff like 13 00:00:37,640 --> 00:00:40,839 Speaker 1: that now so that I could sit in cash? You 14 00:00:40,880 --> 00:00:43,239 Speaker 1: could sit in cash. I guess now I'm getting you know, 15 00:00:43,320 --> 00:00:45,360 Speaker 1: on the two year, I'm getting four point four nine 16 00:00:45,360 --> 00:00:47,520 Speaker 1: percent on my two years. So who knows? Phil Ta's 17 00:00:47,600 --> 00:00:50,440 Speaker 1: he's the CEO of T'sset Management. He has to do 18 00:00:50,479 --> 00:00:53,560 Speaker 1: this for a living. That got a couple of bill 19 00:00:53,760 --> 00:00:57,040 Speaker 1: under management. Phil, what are you doing in this marketplace? 20 00:00:57,040 --> 00:00:59,480 Speaker 1: Because I know you and your team you had been 21 00:00:59,600 --> 00:01:03,320 Speaker 1: real a long cash for a while. Um, what are 22 00:01:03,320 --> 00:01:05,440 Speaker 1: you doing these days. Yeah, so we were almost nine 23 00:01:05,959 --> 00:01:09,399 Speaker 1: cash for the majority of this year. You can do that. 24 00:01:09,520 --> 00:01:12,679 Speaker 1: We can, In fact, we manage funds and ets that 25 00:01:12,720 --> 00:01:15,520 Speaker 1: are able to go fully defensive in cash or be 26 00:01:15,600 --> 00:01:19,360 Speaker 1: fully headed with options. But we were driven partially back 27 00:01:19,360 --> 00:01:21,320 Speaker 1: into the market into high yield bonds last week, and 28 00:01:21,360 --> 00:01:24,480 Speaker 1: that represents about fifty percent of our business. But you know, 29 00:01:24,560 --> 00:01:26,680 Speaker 1: I don't I wouldn't say that we're optimistic, but I 30 00:01:26,720 --> 00:01:28,520 Speaker 1: think that there's a possibility that we can continue to 31 00:01:28,560 --> 00:01:30,120 Speaker 1: move higher. I mean, you said, go ahead and just 32 00:01:30,200 --> 00:01:33,520 Speaker 1: put money in stocks and bonds. I feel like there's 33 00:01:33,560 --> 00:01:37,959 Speaker 1: such a recency bias towards declines being very short term, 34 00:01:38,240 --> 00:01:40,120 Speaker 1: like we saw in the pandemic, that we're all just 35 00:01:40,160 --> 00:01:42,839 Speaker 1: expecting this to be over. But I kind of doubt 36 00:01:42,880 --> 00:01:45,080 Speaker 1: that it is. And I think maybe looking at the 37 00:01:45,120 --> 00:01:47,800 Speaker 1: Internet double burst where it happened two thousand, two thousand, 38 00:01:48,040 --> 00:01:50,720 Speaker 1: two thousand, two to two and a half years, is 39 00:01:50,760 --> 00:01:52,800 Speaker 1: the kind of market that we're going to be looking 40 00:01:52,840 --> 00:01:56,000 Speaker 1: forward to. I want to talk about junk bonds. That's 41 00:01:56,080 --> 00:02:01,040 Speaker 1: really interesting. I call them high yield. I'm sorry, let 42 00:02:01,040 --> 00:02:04,360 Speaker 1: me use the government name. So those high yield bond 43 00:02:04,400 --> 00:02:06,720 Speaker 1: funds I track e t f s. That's my day 44 00:02:06,800 --> 00:02:10,280 Speaker 1: job here at Bloomberg News. Influence into high yield debt. 45 00:02:10,280 --> 00:02:12,359 Speaker 1: E t f s have been on fire, So it's 46 00:02:12,360 --> 00:02:14,560 Speaker 1: interesting to hear you say that. Tell us a little 47 00:02:14,560 --> 00:02:17,600 Speaker 1: more about that flip. What triggered it to co out 48 00:02:17,600 --> 00:02:20,920 Speaker 1: of cash into junk debt? I said it. Well, so 49 00:02:21,000 --> 00:02:23,440 Speaker 1: it could be it could be managers like us. Certainly 50 00:02:23,440 --> 00:02:26,480 Speaker 1: we came in with around seven million dollars last week. 51 00:02:27,040 --> 00:02:29,399 Speaker 1: But what if you look at high yeld bonds seven 52 00:02:29,840 --> 00:02:32,679 Speaker 1: dollars to work last week? Yes, that's real money. Yeah, 53 00:02:32,760 --> 00:02:36,560 Speaker 1: write that down? Could you do that? Like? How did you? 54 00:02:37,000 --> 00:02:38,800 Speaker 1: How did you just tell us? How? Like how a 55 00:02:38,880 --> 00:02:41,480 Speaker 1: manager does that? So you know, the market is so 56 00:02:41,600 --> 00:02:45,120 Speaker 1: liquid for places like high yield bonds and and certainly 57 00:02:45,560 --> 00:02:47,760 Speaker 1: you know stocks if you look at the major blend indices, 58 00:02:48,000 --> 00:02:49,880 Speaker 1: so it's not a problem to come into the market 59 00:02:49,880 --> 00:02:52,120 Speaker 1: and not really move it and take that type of 60 00:02:52,120 --> 00:02:54,640 Speaker 1: a position. But it could be traitors like us, because 61 00:02:54,680 --> 00:02:56,600 Speaker 1: if you look at the history of high yield bonds, 62 00:02:57,280 --> 00:02:59,720 Speaker 1: they tend to not move that much per day on average, 63 00:02:59,720 --> 00:03:02,519 Speaker 1: they move about maybe twenty basis points, So you don't 64 00:03:02,520 --> 00:03:04,119 Speaker 1: get whipsode if you have to come in and out. 65 00:03:04,520 --> 00:03:06,520 Speaker 1: You know, we're driven by trend following algorithms. So it's 66 00:03:06,560 --> 00:03:08,280 Speaker 1: possible that we came in last week and we could 67 00:03:08,320 --> 00:03:11,840 Speaker 1: be out again this week. But look, there's a potential 68 00:03:11,840 --> 00:03:14,720 Speaker 1: here with yielded around nine and a half percent. Uh, 69 00:03:14,760 --> 00:03:18,079 Speaker 1: if markets move up this fourth quarter and we get 70 00:03:18,080 --> 00:03:19,840 Speaker 1: that kind of yield plus a little bit of appreciation, 71 00:03:19,840 --> 00:03:21,800 Speaker 1: that could be a decent trade. I think. All right, 72 00:03:22,040 --> 00:03:25,720 Speaker 1: just just kind of for giggles here, Elon Musk is 73 00:03:25,720 --> 00:03:28,359 Speaker 1: refinancing his Twitter debt today. Do you buy any of 74 00:03:28,520 --> 00:03:30,600 Speaker 1: any of his new debt come into the market? Would 75 00:03:30,639 --> 00:03:35,640 Speaker 1: you be interested in and Elon musk debt package for Twitter? 76 00:03:35,760 --> 00:03:37,720 Speaker 1: Not what you know about Twitter. I would love to 77 00:03:37,720 --> 00:03:41,920 Speaker 1: answer that question with authority and with knowledge, but I don't. Unfortunately, 78 00:03:41,960 --> 00:03:44,360 Speaker 1: when we buy how yield bonds were buying just looking 79 00:03:44,360 --> 00:03:48,840 Speaker 1: at in disease and I guess when you're buying high yield, 80 00:03:49,120 --> 00:03:52,880 Speaker 1: you have to have a call on a recession, how deep, 81 00:03:53,400 --> 00:03:55,880 Speaker 1: how long it will be? Are you concerned about that 82 00:03:55,920 --> 00:03:58,440 Speaker 1: as you go into some higher yielding paper. Yeah, So 83 00:03:58,480 --> 00:04:01,320 Speaker 1: when we come in because we've follow trends and they 84 00:04:01,320 --> 00:04:03,480 Speaker 1: can move lower and have us out again, this week. 85 00:04:03,480 --> 00:04:06,840 Speaker 1: We're not so worried about that. What we like though, 86 00:04:07,040 --> 00:04:09,800 Speaker 1: is positions that come in after we've had a decline 87 00:04:09,840 --> 00:04:11,839 Speaker 1: like we've had of around fifteen percent and high yield bonds, 88 00:04:11,840 --> 00:04:14,720 Speaker 1: so that potentially produces opportunity. Look back to the financial 89 00:04:14,720 --> 00:04:17,120 Speaker 1: crisis there we saw high yield bonds move around down 90 00:04:17,120 --> 00:04:21,080 Speaker 1: around twenty you know, eight the following year they advanced 91 00:04:21,120 --> 00:04:24,200 Speaker 1: fifty percent. So the opportunity is there, we just don't 92 00:04:24,240 --> 00:04:28,480 Speaker 1: know if it's right now or maybe sometime in or later. 93 00:04:29,200 --> 00:04:32,479 Speaker 1: So given that you are trend following, how often do 94 00:04:32,560 --> 00:04:35,760 Speaker 1: you make these sort of big allocation shifts that you 95 00:04:35,880 --> 00:04:38,440 Speaker 1: just made from cash into high yield for example. Yeah, 96 00:04:38,480 --> 00:04:40,760 Speaker 1: So so we manage six funds and two e t 97 00:04:41,080 --> 00:04:43,800 Speaker 1: s and they and they make up equities and high 98 00:04:43,839 --> 00:04:47,839 Speaker 1: yield bonds on average across our whole platform. We're buying 99 00:04:47,920 --> 00:04:50,520 Speaker 1: or and selling, maybe making two to three round turns 100 00:04:50,560 --> 00:04:53,040 Speaker 1: for a year, so not a lot. It's some people 101 00:04:53,080 --> 00:04:55,160 Speaker 1: refer to it as turtle trading, so we're not. We're 102 00:04:55,200 --> 00:04:57,279 Speaker 1: not speculating and trying to make it take advantage of 103 00:04:57,360 --> 00:04:59,680 Speaker 1: just any one day move. We're really trying to take 104 00:04:59,720 --> 00:05:02,560 Speaker 1: advant page of moves that that lasts over several months. 105 00:05:02,600 --> 00:05:06,320 Speaker 1: But that sounds like trying to market time, which I've 106 00:05:06,320 --> 00:05:09,200 Speaker 1: thought as a tough business. Yeah, so it's really tough 107 00:05:09,240 --> 00:05:11,960 Speaker 1: business until you see the market move down and you 108 00:05:11,960 --> 00:05:14,000 Speaker 1: don't participate. That's what you really want to do. But 109 00:05:14,400 --> 00:05:17,919 Speaker 1: market timing is an interesting phrase, and it refers technically 110 00:05:17,960 --> 00:05:19,720 Speaker 1: to people that are out there trying to predict what's 111 00:05:19,760 --> 00:05:22,080 Speaker 1: going to happen in the markets, which we don't do 112 00:05:22,120 --> 00:05:26,080 Speaker 1: and we don't recommend uh historically. However, though, if you 113 00:05:26,360 --> 00:05:28,479 Speaker 1: are able to just follow trends and be out in 114 00:05:28,480 --> 00:05:31,960 Speaker 1: the early phase of declines before they move down significantly, 115 00:05:32,440 --> 00:05:35,120 Speaker 1: and then just right out and be in cash as 116 00:05:35,120 --> 00:05:38,080 Speaker 1: we have been a lot this year, and then attempt 117 00:05:38,080 --> 00:05:40,320 Speaker 1: to come in the very early stage of advances, it 118 00:05:40,360 --> 00:05:43,600 Speaker 1: can be very favorable. Look, even if you don't return 119 00:05:43,680 --> 00:05:46,599 Speaker 1: what the markets return, if your investors are participating in 120 00:05:46,640 --> 00:05:48,600 Speaker 1: that big move lower, that can be a huge benefit 121 00:05:48,640 --> 00:05:52,039 Speaker 1: to them. All right, great stuff. Really appreciate getting your 122 00:05:52,040 --> 00:05:53,840 Speaker 1: points of view. It's a different point of view, and 123 00:05:53,880 --> 00:05:56,599 Speaker 1: we appreciate hearing that. Phil Taste, he's the CEO of 124 00:05:56,640 --> 00:06:01,080 Speaker 1: Ta's asset management. He joins us Live and Bloomberg Interactive 125 00:06:01,120 --> 00:06:06,359 Speaker 1: broker studio. And you always appreciate that we're at the 126 00:06:06,400 --> 00:06:10,000 Speaker 1: time of the year where university endowments are reporting the 127 00:06:10,120 --> 00:06:13,440 Speaker 1: returns on their endowments for the trailing twelve months and 128 00:06:13,560 --> 00:06:16,440 Speaker 1: in June of this year, and you think back a 129 00:06:16,520 --> 00:06:21,560 Speaker 1: year ago, they were talking fifty fifty positive returns, just 130 00:06:21,680 --> 00:06:25,280 Speaker 1: extraordinary numbers. But as we all know, two has been 131 00:06:25,279 --> 00:06:27,120 Speaker 1: the other side of that coin. We've got equity markets down, 132 00:06:27,960 --> 00:06:31,039 Speaker 1: fixed income markets down load of mid teens, so you'd 133 00:06:31,040 --> 00:06:33,840 Speaker 1: expect to see some returns like that, but we're not. 134 00:06:34,400 --> 00:06:37,600 Speaker 1: We're seeing kind of flat minus two, minus four, minus five. 135 00:06:38,000 --> 00:06:40,919 Speaker 1: What's going on here? Let's check in with Gabrov Patankar. 136 00:06:41,040 --> 00:06:44,599 Speaker 1: He covers all that stuff for Bloomberg Intelligence, and he 137 00:06:44,680 --> 00:06:47,640 Speaker 1: joins us here in a Bloomberg Interactive broker studio because 138 00:06:47,680 --> 00:06:49,800 Speaker 1: he does not phone it, and he comes in, uh, 139 00:06:49,839 --> 00:06:53,320 Speaker 1: in line. Here, here's my concern or here's my guess. 140 00:06:53,640 --> 00:06:56,760 Speaker 1: They're not marketing their private equity investments to market. Is 141 00:06:56,800 --> 00:06:59,800 Speaker 1: that the case? That's a that's a very very good, 142 00:07:00,160 --> 00:07:02,080 Speaker 1: very very good and very well informed gas. But I 143 00:07:02,080 --> 00:07:03,760 Speaker 1: think there's much more to it. So if you just 144 00:07:03,800 --> 00:07:06,480 Speaker 1: peel the onion a little bit, all the university pension 145 00:07:06,480 --> 00:07:08,520 Speaker 1: plans have done extremely well over the years. As we 146 00:07:08,560 --> 00:07:11,800 Speaker 1: all know, they followed the Yale model and really took 147 00:07:11,840 --> 00:07:14,200 Speaker 1: on a liquid risk, which conceptual is not such a 148 00:07:14,200 --> 00:07:17,360 Speaker 1: bad thing. If your liabilities are are over the long term, 149 00:07:17,360 --> 00:07:20,040 Speaker 1: you should be investing over the long term. Having said that, 150 00:07:20,800 --> 00:07:23,480 Speaker 1: a lot of the private managers the mark to markets 151 00:07:23,760 --> 00:07:26,760 Speaker 1: in this particular situation is very subjective. It's about when 152 00:07:26,760 --> 00:07:30,080 Speaker 1: your auditor comes in and and literally goes through asset 153 00:07:30,080 --> 00:07:32,760 Speaker 1: by asset. There's a one or two or three or 154 00:07:32,760 --> 00:07:35,280 Speaker 1: even a four quarter delay from time to time. There's 155 00:07:35,320 --> 00:07:39,480 Speaker 1: also inconsistencies but on how different managers mark the same 156 00:07:39,520 --> 00:07:42,840 Speaker 1: investment for different investors based on different mandates, or how 157 00:07:43,240 --> 00:07:46,360 Speaker 1: different managers mark the same investment in different investors portfolio. 158 00:07:46,400 --> 00:07:49,160 Speaker 1: So it's extremely complex. I think we're just at the 159 00:07:49,200 --> 00:07:52,400 Speaker 1: beginning of these marks beginning to manifest themselves. I think 160 00:07:52,400 --> 00:07:54,960 Speaker 1: the expectation for a lot of managers would have been 161 00:07:55,000 --> 00:07:57,520 Speaker 1: to just wait it out and over a period of 162 00:07:57,560 --> 00:08:00,440 Speaker 1: time the markets might come back and they don't really 163 00:08:00,440 --> 00:08:02,400 Speaker 1: ever have to mark. But as we all know, that 164 00:08:02,720 --> 00:08:05,640 Speaker 1: is not going to happen. I'm emailing your note literally 165 00:08:05,640 --> 00:08:07,600 Speaker 1: as we speak down to my good buddy Neil triple 166 00:08:07,680 --> 00:08:10,120 Speaker 1: It at the Duke University Management Committee. So get his 167 00:08:10,160 --> 00:08:13,920 Speaker 1: thoughts well to that point. I mean, is there a 168 00:08:14,000 --> 00:08:17,200 Speaker 1: period in time where they do have to come out 169 00:08:17,320 --> 00:08:20,800 Speaker 1: with their mark to market returns just and say what 170 00:08:20,920 --> 00:08:23,560 Speaker 1: the raw number is there, Katie. That's a great question, 171 00:08:23,560 --> 00:08:25,120 Speaker 1: and I think this time the canary is going to 172 00:08:25,200 --> 00:08:26,960 Speaker 1: come out of the coal mine. When it comes to 173 00:08:28,120 --> 00:08:31,840 Speaker 1: the smaller pension plans, smaller US public pension plans, as 174 00:08:31,880 --> 00:08:34,800 Speaker 1: you know, the good old state pension plans, there's a 175 00:08:34,800 --> 00:08:37,000 Speaker 1: lot of scrutiny. There's a lot of both the political 176 00:08:37,040 --> 00:08:40,520 Speaker 1: scrutiny as as as well as an investment comedy scrutiny, 177 00:08:40,760 --> 00:08:44,000 Speaker 1: and there's zero incentive to really extend and pretends. I 178 00:08:44,080 --> 00:08:47,439 Speaker 1: think some of the same managers that have also been 179 00:08:47,520 --> 00:08:49,520 Speaker 1: recipients of capital from state plans are going to have 180 00:08:49,559 --> 00:08:51,920 Speaker 1: to be forced to mark their books down. I think 181 00:08:51,920 --> 00:08:54,120 Speaker 1: he has to answer your question. Ear end would be 182 00:08:54,120 --> 00:08:56,920 Speaker 1: a very interesting time when auditors, some of the largest 183 00:08:56,920 --> 00:08:59,400 Speaker 1: auditors in the world, are going to really have to 184 00:08:59,440 --> 00:09:01,720 Speaker 1: come to the table will and think about these private 185 00:09:01,760 --> 00:09:04,280 Speaker 1: assets in a very very objective fashion. And I think 186 00:09:04,280 --> 00:09:05,959 Speaker 1: there could be significant marks. I think some of the 187 00:09:06,040 --> 00:09:09,880 Speaker 1: endowment CEOs, including Navika, have been on record saying that 188 00:09:09,920 --> 00:09:12,440 Speaker 1: there's a bunch of turbulence that lies ahead, and so 189 00:09:12,920 --> 00:09:14,840 Speaker 1: I do expect that the year end is perhaps a 190 00:09:14,840 --> 00:09:17,320 Speaker 1: good time, or early next year is when we start 191 00:09:17,320 --> 00:09:21,000 Speaker 1: seeing distance manifesting. I'm looking at your research note here, 192 00:09:21,080 --> 00:09:23,400 Speaker 1: and you know that Yale, which is kind of the 193 00:09:23,480 --> 00:09:26,959 Speaker 1: leader in university endowment investment in terms of you know, 194 00:09:27,120 --> 00:09:29,360 Speaker 1: kind of really thinking outside the box, maybe becoming very 195 00:09:29,400 --> 00:09:32,920 Speaker 1: aggressive as opposed to the traditional sixty for equity bond portfolio, 196 00:09:33,320 --> 00:09:38,520 Speaker 1: they've got upwards in privates or alternatives. Wow, I didn't 197 00:09:38,520 --> 00:09:42,080 Speaker 1: know it was that high, but I guess that's the 198 00:09:42,120 --> 00:09:44,000 Speaker 1: way they're doing here. That's how that you look for 199 00:09:44,080 --> 00:09:47,040 Speaker 1: yield and what had been a zero interest rate environment. 200 00:09:47,559 --> 00:09:49,520 Speaker 1: But the Yale model has been what it has been 201 00:09:49,559 --> 00:09:52,400 Speaker 1: has been very successful and the gold standard for a 202 00:09:52,440 --> 00:09:55,400 Speaker 1: lot of other smaller endowments and many others. In fact, 203 00:09:55,400 --> 00:09:57,920 Speaker 1: even in the pension world. To follow Having said that 204 00:09:57,920 --> 00:10:00,760 Speaker 1: the forty three number for three percent there might actually 205 00:10:01,040 --> 00:10:02,959 Speaker 1: even be a much lower number than what it could 206 00:10:03,000 --> 00:10:05,200 Speaker 1: be because, as you know, the last three to six months, 207 00:10:05,400 --> 00:10:07,960 Speaker 1: there's a lot of managers that come back to the 208 00:10:08,320 --> 00:10:12,160 Speaker 1: allocators for reapping, come back to the allocators for incremental 209 00:10:12,280 --> 00:10:14,640 Speaker 1: capital calls and things of that nature. Is actually that number, 210 00:10:14,880 --> 00:10:16,719 Speaker 1: if one way to speculate, it could be much not 211 00:10:16,960 --> 00:10:19,480 Speaker 1: of the party three percent as well. Now, that is 212 00:10:19,520 --> 00:10:23,640 Speaker 1: a very very large equity risk that that Yale has 213 00:10:23,679 --> 00:10:26,400 Speaker 1: in the book, and traditionally endowment is supposed to have 214 00:10:26,440 --> 00:10:29,000 Speaker 1: a much higher equity risk. But again, if you add 215 00:10:29,120 --> 00:10:32,560 Speaker 1: liquidity marks that are not being taken and the capital 216 00:10:32,600 --> 00:10:35,520 Speaker 1: commitment calls coming in, this becomes a pretty significant risk. 217 00:10:36,120 --> 00:10:39,160 Speaker 1: So a significant risk. I mean, how worried are you? 218 00:10:39,240 --> 00:10:42,640 Speaker 1: How worried should we be about that? Because all I 219 00:10:42,760 --> 00:10:45,840 Speaker 1: hear right now when it comes to the treasury market, 220 00:10:45,920 --> 00:10:49,760 Speaker 1: the public equity market, liquidity is hard to come by 221 00:10:49,880 --> 00:10:52,880 Speaker 1: when it matters. I mean that's a bit of an exaggeration, 222 00:10:52,880 --> 00:10:55,920 Speaker 1: but we've been hearing about liquidity risks all year long. 223 00:10:56,000 --> 00:10:59,640 Speaker 1: Now we're talking about the liquid markets, actually a liquid markets. 224 00:10:59,640 --> 00:11:03,520 Speaker 1: How can a into you? No, I'm reasonably concerned. I 225 00:11:03,520 --> 00:11:06,199 Speaker 1: mean having said that endowments are not I'm not saying 226 00:11:06,320 --> 00:11:08,240 Speaker 1: there's going to be a run on endowments or endowments 227 00:11:08,280 --> 00:11:09,600 Speaker 1: are going at a business that's not what I'm saying. 228 00:11:09,600 --> 00:11:11,120 Speaker 1: But what I'm saying is there's going to be a 229 00:11:11,120 --> 00:11:14,120 Speaker 1: significant cost for concern because the endowments are sometimes on 230 00:11:14,240 --> 00:11:17,720 Speaker 1: the bigger hands that feeds operating budgets of universities. So 231 00:11:17,840 --> 00:11:19,560 Speaker 1: when you think of cash flows, when you think of 232 00:11:19,640 --> 00:11:22,960 Speaker 1: matching cash flows, I think that there are significant problems 233 00:11:22,960 --> 00:11:25,600 Speaker 1: already based on some of the antidotal conversations we've had 234 00:11:25,600 --> 00:11:27,960 Speaker 1: with managers that are lower in duration that the endowments 235 00:11:27,960 --> 00:11:29,920 Speaker 1: want to fund, but they don't have the liquidity to 236 00:11:29,920 --> 00:11:31,679 Speaker 1: fund those assets. Now, how are they going to get 237 00:11:31,679 --> 00:11:34,960 Speaker 1: that liquidity is by secondarying out some of their private exposure. 238 00:11:35,160 --> 00:11:37,480 Speaker 1: Why are they not secondarying out that exposure at any 239 00:11:37,480 --> 00:11:39,480 Speaker 1: good speed is because they're not getting the marks that 240 00:11:39,520 --> 00:11:41,360 Speaker 1: they want. And why are they not getting the masks? 241 00:11:41,360 --> 00:11:43,640 Speaker 1: Because there is no buyer for this And there's no 242 00:11:43,679 --> 00:11:46,720 Speaker 1: buyer because the next set of buyers where public pensions, 243 00:11:46,960 --> 00:11:48,480 Speaker 1: and they're not going to buy it at at the 244 00:11:48,559 --> 00:11:51,559 Speaker 1: price that the endowments want to sell. All right, are 245 00:11:51,600 --> 00:11:56,280 Speaker 1: good friends up in Cambridge, Massachusetts, Harvard, they've stepped up 246 00:11:56,280 --> 00:12:00,520 Speaker 1: their investments in hedge funds. What's up with that? Yeah, 247 00:12:01,120 --> 00:12:03,680 Speaker 1: that's a great question, Harvard. For the longest period of time, 248 00:12:03,720 --> 00:12:05,719 Speaker 1: while it's the largest endowment, has kind of been a 249 00:12:05,760 --> 00:12:07,920 Speaker 1: laggered when it comes to performance. But over the last 250 00:12:08,360 --> 00:12:10,920 Speaker 1: three to four years, Harvard has really taken a slightly 251 00:12:11,080 --> 00:12:14,720 Speaker 1: different stance for other endowments based on whatever little public 252 00:12:14,720 --> 00:12:18,000 Speaker 1: information we have, and what they have tried to do 253 00:12:18,120 --> 00:12:21,880 Speaker 1: is pivot more around reducing the duration of the alternatives portfolio. 254 00:12:21,920 --> 00:12:24,720 Speaker 1: And I think Um the CEO of Narvika, and Ric's 255 00:12:24,720 --> 00:12:27,160 Speaker 1: Locan the CIO have been on record to talk about that, 256 00:12:27,280 --> 00:12:29,400 Speaker 1: and I think it makes a lot of sense, and 257 00:12:29,440 --> 00:12:32,360 Speaker 1: these kind of turbulent markets where you're collecting some rent 258 00:12:32,960 --> 00:12:35,800 Speaker 1: and reducing the duration of the alternatives portfolio while managing through. 259 00:12:36,240 --> 00:12:39,080 Speaker 1: Not that Harvard does not have a liquid private equity 260 00:12:39,080 --> 00:12:40,960 Speaker 1: exposure where the capital calls may be coming, but they're 261 00:12:40,960 --> 00:12:43,000 Speaker 1: able to manage through a little bit better than some 262 00:12:43,040 --> 00:12:46,120 Speaker 1: of the other endowments like Washington or Yale or Princeton, 263 00:12:46,200 --> 00:12:49,160 Speaker 1: which might have very very high degree of capital calls 264 00:12:49,200 --> 00:12:52,679 Speaker 1: and more liquidly. Illequially, we only have about a minute left, 265 00:12:52,679 --> 00:12:56,640 Speaker 1: but you also write the endowments have outperformed public pension 266 00:12:56,640 --> 00:12:58,800 Speaker 1: funds by about a hundred seventy paces points over the 267 00:12:58,840 --> 00:13:02,240 Speaker 1: past ten years. You say that could converge. What's behind 268 00:13:02,240 --> 00:13:07,240 Speaker 1: that call. Look, that's a very bold call to make, Katie. 269 00:13:07,240 --> 00:13:08,600 Speaker 1: But there are a couple of reasons why I feel 270 00:13:08,640 --> 00:13:10,840 Speaker 1: strongly about this. Endowments have always been the cool kids 271 00:13:10,840 --> 00:13:13,920 Speaker 1: in the block. Public pensions not not so much. Now, 272 00:13:14,040 --> 00:13:15,840 Speaker 1: what is really going to fundamentally change? You know what? 273 00:13:15,920 --> 00:13:17,880 Speaker 1: Because they were not as school, they never really got 274 00:13:17,920 --> 00:13:21,000 Speaker 1: up the liquidity spectrum. What they have is out there 275 00:13:21,000 --> 00:13:23,800 Speaker 1: in the open domain. It's tested every three months. There 276 00:13:23,800 --> 00:13:29,360 Speaker 1: are politicians, investors, um citizens scrutinizing it. And they were 277 00:13:29,360 --> 00:13:31,160 Speaker 1: a little bit behind the curve. And that's gonna come 278 00:13:31,200 --> 00:13:33,000 Speaker 1: back to their rescue. And they are actually going to 279 00:13:33,040 --> 00:13:35,400 Speaker 1: be in a unique situation where they could actually deploy 280 00:13:35,440 --> 00:13:38,360 Speaker 1: to some of these secondaries or distressed funds at a time, 281 00:13:38,480 --> 00:13:40,920 Speaker 1: which is very very interesting to be deploying capital in 282 00:13:40,920 --> 00:13:44,560 Speaker 1: their liquid markets. Alright, some good stuff there as always 283 00:13:45,200 --> 00:13:48,640 Speaker 1: patank car ahead of alternative investments and manager research at 284 00:13:48,640 --> 00:13:52,280 Speaker 1: Bloomberg Intelligence. He's got a really good noe doubt that's 285 00:13:52,280 --> 00:13:54,040 Speaker 1: getting the attention a lot of folks out there, and 286 00:13:54,080 --> 00:13:57,200 Speaker 1: the pension fund business and the endowment business, uh, talking 287 00:13:57,200 --> 00:13:59,440 Speaker 1: about some of those returns and again some just some 288 00:13:59,559 --> 00:14:01,959 Speaker 1: extra in he returns over the last couple of years 289 00:14:02,240 --> 00:14:04,440 Speaker 1: from some of these university endowments, and of course they 290 00:14:04,480 --> 00:14:06,880 Speaker 1: were blowing their own horn, but you might be paying 291 00:14:06,920 --> 00:14:15,360 Speaker 1: for that here in some of these results being reported recently. Katie, 292 00:14:15,360 --> 00:14:17,960 Speaker 1: we got w T I crude oil any seven dollars 293 00:14:18,000 --> 00:14:20,400 Speaker 1: about you know a barrel here? It seems like it's 294 00:14:20,480 --> 00:14:22,920 Speaker 1: kind of settled into that kind of range. But I 295 00:14:22,920 --> 00:14:25,400 Speaker 1: want to talk about the global supply and demand of oil, 296 00:14:25,440 --> 00:14:27,880 Speaker 1: and for that we talked to Fernando Valley. He's a 297 00:14:27,920 --> 00:14:30,920 Speaker 1: senior analyst to Bloomberg Intelligence. He's been covering this energy 298 00:14:30,960 --> 00:14:34,240 Speaker 1: business for like decades, and Katie, he says he knows 299 00:14:34,480 --> 00:14:39,480 Speaker 1: four languages. English, that's debatable, Portuguese. Willias from Brazil's will 300 00:14:39,480 --> 00:14:41,960 Speaker 1: give him that Spanish. It's basically the same thing as Portuguese. 301 00:14:42,000 --> 00:14:45,360 Speaker 1: So you give him that German. I'm not giving him 302 00:14:45,400 --> 00:14:47,880 Speaker 1: credit for that. I need to see him like in 303 00:14:47,920 --> 00:14:51,040 Speaker 1: a conversation with Matt Miller to give him credit for German. Sure, 304 00:14:51,080 --> 00:14:54,800 Speaker 1: the ultimate has exactly Fernando, We'll give you credit for 305 00:14:54,840 --> 00:14:59,240 Speaker 1: knowing the oil business. Um, what's the call here? I 306 00:14:59,280 --> 00:15:02,520 Speaker 1: know you guys Bloomberg intelligence. You have your demand models, 307 00:15:02,880 --> 00:15:06,240 Speaker 1: your supply models. This is a commodity after all, and 308 00:15:06,240 --> 00:15:08,800 Speaker 1: it's supplying demand. What are your models telling you now 309 00:15:08,800 --> 00:15:13,720 Speaker 1: about where CREWD may be going? Well? Hi, Paul and 310 00:15:14,040 --> 00:15:19,000 Speaker 1: first Good and Morrigan and Shodan's montag bones Poita, Uh 311 00:15:19,040 --> 00:15:25,800 Speaker 1: so well schooling exactly. Um. Well, the first thing is 312 00:15:25,840 --> 00:15:29,160 Speaker 1: that the market is as uncertain as you are. And 313 00:15:29,280 --> 00:15:33,600 Speaker 1: if you look at the positions derivatives positions, uh, they 314 00:15:33,600 --> 00:15:37,560 Speaker 1: show a lot of divergence. Uh if we are near 315 00:15:38,120 --> 00:15:42,280 Speaker 1: the highs on the long positions for Brent and for distillance, 316 00:15:42,720 --> 00:15:49,239 Speaker 1: but when you put a UH call, but call options 317 00:15:49,400 --> 00:15:53,920 Speaker 1: were actually towards the lower half of the percentiles. Because 318 00:15:53,960 --> 00:15:57,000 Speaker 1: the market is unsure, what is going to be the 319 00:15:57,040 --> 00:15:59,640 Speaker 1: strongest hold. Will it be the lack of supply that 320 00:15:59,680 --> 00:16:04,600 Speaker 1: we've talked about over time or the economic pressures that 321 00:16:04,640 --> 00:16:08,040 Speaker 1: we're starting to see emerge in Western Europe and now 322 00:16:08,440 --> 00:16:10,720 Speaker 1: with China and the locked ins, And we think for 323 00:16:10,760 --> 00:16:14,200 Speaker 1: the remainder of two those economic pressures are just too 324 00:16:14,280 --> 00:16:18,400 Speaker 1: much for the supply to really make UH inroads. But 325 00:16:18,800 --> 00:16:21,320 Speaker 1: as we go through and we look at the history 326 00:16:21,360 --> 00:16:25,920 Speaker 1: of how recessions and even the pressions have impacted oil demand. Uh, 327 00:16:26,040 --> 00:16:28,840 Speaker 1: they tend to be short lived impact on consumption because 328 00:16:28,960 --> 00:16:33,480 Speaker 1: ultimately energy is what gets us out of the economic slowdown, 329 00:16:33,560 --> 00:16:36,720 Speaker 1: So demand tends to recover relatively quickly, and that's when 330 00:16:36,760 --> 00:16:40,240 Speaker 1: we think that the supply gap will really emerge. And 331 00:16:40,320 --> 00:16:43,920 Speaker 1: so I mean putting that into some numbers, if I see, uh, 332 00:16:44,280 --> 00:16:46,880 Speaker 1: you know, w T I at about eighty seven dollars 333 00:16:47,320 --> 00:16:49,760 Speaker 1: right now, to Paul's point, feels like we've been hanging 334 00:16:49,760 --> 00:16:53,320 Speaker 1: around there for a while, just bumping below ninety. I mean, 335 00:16:53,880 --> 00:16:58,160 Speaker 1: where's the floor, where's the ceiling? Well, I think with 336 00:16:58,440 --> 00:17:01,720 Speaker 1: w T I, there is avential that as we end 337 00:17:01,840 --> 00:17:06,639 Speaker 1: November and a strategic petrol and reserve releases, we're gonna 338 00:17:06,760 --> 00:17:09,320 Speaker 1: get a little bit of a catch up to brent UM. 339 00:17:09,359 --> 00:17:13,359 Speaker 1: But then the two benchmarks may may drop a little 340 00:17:13,359 --> 00:17:17,080 Speaker 1: bit further. And you know, they never fall linearly. So 341 00:17:17,240 --> 00:17:21,320 Speaker 1: could we see seventies It's probably an acceptable range, but 342 00:17:21,480 --> 00:17:24,359 Speaker 1: it could go to fifty depending on how bad the 343 00:17:24,400 --> 00:17:28,040 Speaker 1: economic news are, and especially if we see something uh 344 00:17:28,280 --> 00:17:32,600 Speaker 1: of a renewed lockdown in China or um more austerity 345 00:17:32,720 --> 00:17:37,080 Speaker 1: in Western Europe. Um. But then the ceiling, I mean, 346 00:17:37,480 --> 00:17:40,520 Speaker 1: I think for now we're probably going to be capped 347 00:17:40,560 --> 00:17:42,360 Speaker 1: at a hundred for the remainder of the year, even 348 00:17:42,400 --> 00:17:46,400 Speaker 1: if we have positive news on the economic front um. 349 00:17:46,440 --> 00:17:49,840 Speaker 1: But then when we look at the long term, you know, 350 00:17:49,880 --> 00:17:51,720 Speaker 1: the sky is the limit. When you look at diesel, 351 00:17:51,760 --> 00:17:55,119 Speaker 1: today we near two hundred dollars a barrel for diesel, 352 00:17:55,240 --> 00:17:57,840 Speaker 1: So if you put that into context, that would be 353 00:17:58,560 --> 00:18:00,720 Speaker 1: with typical margins that would be a hundred and fifty 354 00:18:00,760 --> 00:18:04,520 Speaker 1: to a hundred and seventy dollars. Brent A Fornando, we 355 00:18:04,520 --> 00:18:07,119 Speaker 1: we woke up this morning to what looks like a 356 00:18:07,440 --> 00:18:10,639 Speaker 1: change in leadership in Brazil. I pulled up the shares 357 00:18:10,640 --> 00:18:13,440 Speaker 1: of Petro boss uh and they're down five percent today. 358 00:18:14,240 --> 00:18:18,480 Speaker 1: Your view of how the global energy market is looking 359 00:18:18,600 --> 00:18:23,040 Speaker 1: at Brazil with potentially a new leader, Yeah, well it's 360 00:18:23,080 --> 00:18:28,200 Speaker 1: the old leader uh and we've we've known what he's 361 00:18:28,240 --> 00:18:30,760 Speaker 1: done in the past, and there are two fears really. 362 00:18:31,000 --> 00:18:34,280 Speaker 1: One is that he slows down exploration. That's something they did. 363 00:18:34,359 --> 00:18:38,120 Speaker 1: Brazil made the largest discoveries in the world and over 364 00:18:38,240 --> 00:18:42,240 Speaker 1: thirty years during his first term, but they were slow 365 00:18:42,280 --> 00:18:45,439 Speaker 1: to develop it and and then Petro Bras became the 366 00:18:45,480 --> 00:18:49,159 Speaker 1: most indebted oil company in the world during his terms. 367 00:18:49,280 --> 00:18:53,159 Speaker 1: And his his successor dema recess, and the fear is 368 00:18:53,240 --> 00:18:56,040 Speaker 1: he's talked about building refineries again. And we have a 369 00:18:56,080 --> 00:18:59,960 Speaker 1: no doubt that we talked about that because under his terms, 370 00:19:00,280 --> 00:19:03,879 Speaker 1: Petrobiz was supposed to build five refineries. They spent nearly 371 00:19:04,000 --> 00:19:07,280 Speaker 1: forty billion dollars on those five refineries, but only half 372 00:19:07,320 --> 00:19:10,800 Speaker 1: of them half of one was completed. So they were 373 00:19:10,800 --> 00:19:13,120 Speaker 1: supposed to build nearly a million barrels of a day 374 00:19:13,119 --> 00:19:16,480 Speaker 1: of refining capacity, and to this date we only have 375 00:19:16,600 --> 00:19:19,320 Speaker 1: about a hundred fifteen thousand barrels a day. So that's 376 00:19:19,359 --> 00:19:23,160 Speaker 1: the fears that the heat UH returns to those days 377 00:19:23,200 --> 00:19:28,280 Speaker 1: of overspending and not returning capital to shareholders. So does 378 00:19:28,320 --> 00:19:30,360 Speaker 1: that is that I mean, does that spell bad news 379 00:19:30,440 --> 00:19:36,359 Speaker 1: potentially for UH Latin American oil companies broadly beyond just 380 00:19:36,440 --> 00:19:40,760 Speaker 1: the biggest well, I think they they have been following 381 00:19:40,800 --> 00:19:45,320 Speaker 1: their own paths down They have governments that aren't necessarily 382 00:19:45,359 --> 00:19:48,080 Speaker 1: market friendly. You can see Echo Patrol with Gustavo Petro 383 00:19:48,480 --> 00:19:53,280 Speaker 1: in Colombia. He's talked about subsidizing fuel prices directly from 384 00:19:53,320 --> 00:19:57,640 Speaker 1: Echo Petrol, which has its own negative impacts. YEPF obviously 385 00:19:57,680 --> 00:20:02,040 Speaker 1: hamstrung by the massive ramp been inflation in Argentina. Um. 386 00:20:02,080 --> 00:20:05,320 Speaker 1: They continue to grow, but their profitability and cash flow 387 00:20:05,359 --> 00:20:09,720 Speaker 1: has a lagged peers significantly, so they aren't very active 388 00:20:09,720 --> 00:20:13,560 Speaker 1: in Brazil. Eco patrol a little bit more than hitepf UM. 389 00:20:13,600 --> 00:20:16,560 Speaker 1: But you know, I think that silver lining is since 390 00:20:16,760 --> 00:20:20,919 Speaker 1: Lula's last term, there have been changes in regulations in 391 00:20:21,000 --> 00:20:23,680 Speaker 1: Brazil that make it harder for him to interfere. Petro 392 00:20:23,760 --> 00:20:26,520 Speaker 1: Brass has also sold a lot of assets, so he 393 00:20:26,560 --> 00:20:29,440 Speaker 1: doesn't It doesn't have the same impact on the Brazilian 394 00:20:29,440 --> 00:20:31,680 Speaker 1: economy that it did back in the in the early 395 00:20:31,720 --> 00:20:34,840 Speaker 1: two thousand's. Looking at the stock for Petro Boss spoiler, 396 00:20:34,840 --> 00:20:38,199 Speaker 1: the last traveling in twelve months up up like a 397 00:20:38,240 --> 00:20:40,720 Speaker 1: lot of other big oil companies, So we'll have to 398 00:20:40,720 --> 00:20:42,920 Speaker 1: see how that place out and real quickly ten seconds. 399 00:20:43,920 --> 00:20:46,119 Speaker 1: World Cup coming up in a few weeks. Are you 400 00:20:46,160 --> 00:20:49,000 Speaker 1: just picking Brazil? I mean I have to, but I 401 00:20:49,080 --> 00:20:53,080 Speaker 1: also say my Brazilian team, Flamngo won the South American Championships, 402 00:20:53,080 --> 00:20:55,879 Speaker 1: So go Flamingo. Oh good stuff, there are we got 403 00:20:55,880 --> 00:20:57,560 Speaker 1: the world I'm gonna I'm gonna be into the World 404 00:20:57,560 --> 00:20:59,639 Speaker 1: Cup this year. I'm gonna force myself to watch a 405 00:20:59,680 --> 00:21:03,879 Speaker 1: lot of is and my sleeper pick Netherlands. How about 406 00:21:03,920 --> 00:21:07,640 Speaker 1: that mine too? Now, I just decided exactly so we'll 407 00:21:07,640 --> 00:21:09,720 Speaker 1: see that. All right, good stuff there for now. No Vale, 408 00:21:09,840 --> 00:21:14,240 Speaker 1: he covers all things global energy for Bloomberg Intelligence. I 409 00:21:14,280 --> 00:21:16,280 Speaker 1: should be doing it for decades. We really appreciate getting 410 00:21:16,320 --> 00:21:23,480 Speaker 1: his global perspective here on this global market. Katie, you 411 00:21:23,600 --> 00:21:25,919 Speaker 1: know how much I love logistics, so I want to 412 00:21:25,920 --> 00:21:27,960 Speaker 1: get righted to our next guest, Drew Wilkerson. He's the 413 00:21:28,000 --> 00:21:31,159 Speaker 1: CEO of r x OH. He's currently x p O 414 00:21:31,320 --> 00:21:34,320 Speaker 1: s president of North American Transportation. He will become chief 415 00:21:34,359 --> 00:21:37,320 Speaker 1: executive officer of the company's plan spinoff of its tech 416 00:21:37,520 --> 00:21:42,120 Speaker 1: enabled broker services platform. R x OH XPO, the big 417 00:21:42,160 --> 00:21:46,200 Speaker 1: logistics company, reported some numbers today, some better and expected 418 00:21:46,480 --> 00:21:51,080 Speaker 1: ep SH stuck up about five percent today. Drew, thanks 419 00:21:51,080 --> 00:21:53,280 Speaker 1: so much for joining us. Give us the highlights, uh, 420 00:21:53,600 --> 00:21:57,119 Speaker 1: from your earnings. I mean, I want to talk supply 421 00:21:57,280 --> 00:21:59,840 Speaker 1: chain and logistics and things like that, but your numbers 422 00:21:59,840 --> 00:22:01,959 Speaker 1: tell me that maybe things are getting a little bit 423 00:22:01,960 --> 00:22:04,800 Speaker 1: better out there. Yeah, Paul, thank you so much for 424 00:22:04,840 --> 00:22:07,239 Speaker 1: having me excited to be here with you. When you 425 00:22:07,280 --> 00:22:09,879 Speaker 1: look at what we did this quarter as a company, 426 00:22:09,880 --> 00:22:14,280 Speaker 1: at XPO. We grew revenue three billion of revenue, which 427 00:22:14,320 --> 00:22:18,920 Speaker 1: was up three percent, our highest third quarter with adjusted 428 00:22:18,960 --> 00:22:22,200 Speaker 1: IBADA in the company's history, a three D fifty two million. 429 00:22:22,960 --> 00:22:25,480 Speaker 1: We had solid operating leverage when you look at the 430 00:22:25,520 --> 00:22:27,879 Speaker 1: part of the business that I oversee that will be 431 00:22:28,000 --> 00:22:31,440 Speaker 1: r x so as of tomorrow morning. Um. We saw 432 00:22:31,720 --> 00:22:35,040 Speaker 1: strong volume growth. So volume was up for US nine 433 00:22:35,119 --> 00:22:37,439 Speaker 1: percent on a year of a year basis. It was 434 00:22:37,480 --> 00:22:40,359 Speaker 1: the most amount of volume that we've ever moved in 435 00:22:40,400 --> 00:22:42,520 Speaker 1: a quarter. And we did this, and we did this 436 00:22:42,760 --> 00:22:46,399 Speaker 1: with strong profits. We operated at a gross profit percentage 437 00:22:46,760 --> 00:22:50,840 Speaker 1: of nineteen percent and we grew our overall gross profit 438 00:22:50,920 --> 00:22:54,080 Speaker 1: dollars by thirty one percent on a year of a 439 00:22:54,160 --> 00:22:56,919 Speaker 1: year basis. So it was a great quarter for XPO, 440 00:22:57,040 --> 00:22:58,679 Speaker 1: and it's a great time for us to be spinning 441 00:22:58,680 --> 00:23:01,080 Speaker 1: out as r XO with a ton momentum at our back. 442 00:23:01,520 --> 00:23:06,000 Speaker 1: We'll tell us a little bit about the spinoff expected tomorrow, 443 00:23:06,119 --> 00:23:09,280 Speaker 1: So what is the thinking behind that. Obviously, like you said, 444 00:23:09,640 --> 00:23:12,280 Speaker 1: too great time to spin off. How long has this 445 00:23:12,320 --> 00:23:14,680 Speaker 1: been in the works. It's been in the works. We 446 00:23:14,720 --> 00:23:17,359 Speaker 1: announced it in March of this year that we were 447 00:23:17,400 --> 00:23:19,240 Speaker 1: looking to spend it off. And this is the second 448 00:23:19,240 --> 00:23:21,280 Speaker 1: spin off we've done. We did one last year with 449 00:23:21,359 --> 00:23:24,960 Speaker 1: our contract logistics business, which is g x SO. So 450 00:23:25,000 --> 00:23:27,040 Speaker 1: we're keeping a lot of X and o's in the family. 451 00:23:27,440 --> 00:23:29,720 Speaker 1: But with with with with this business that is spinning 452 00:23:29,760 --> 00:23:33,560 Speaker 1: off tomorrow. It is our tech enabled truck brokerage platform. 453 00:23:33,680 --> 00:23:37,600 Speaker 1: We're the fourth largest truckload broker in the country. And 454 00:23:37,640 --> 00:23:40,680 Speaker 1: if you look over the last eight years from through 455 00:23:41,960 --> 00:23:45,440 Speaker 1: the brokers grew at a phenomenal rate. It grew over 456 00:23:45,560 --> 00:23:49,000 Speaker 1: a non percent KAGAR. During that same time period, we 457 00:23:49,080 --> 00:23:52,360 Speaker 1: grew it over a twenty seven percent KAGAR and that's 458 00:23:52,440 --> 00:23:54,879 Speaker 1: nearly three times what the industry is growing. Is because 459 00:23:54,920 --> 00:23:57,760 Speaker 1: of our investment in technology. We've got a first mover 460 00:23:57,840 --> 00:24:01,520 Speaker 1: advantage in technology. We've been investing into it for over 461 00:24:01,560 --> 00:24:04,800 Speaker 1: a decade and this allowed us to outperform the market 462 00:24:04,840 --> 00:24:08,880 Speaker 1: and take share profitably. All Right, Drew Amy Mars one 463 00:24:08,880 --> 00:24:12,119 Speaker 1: of our top top reporters at Bloomberg Radio. She was 464 00:24:12,200 --> 00:24:14,760 Speaker 1: also a graduate of the University of South Carolina. So 465 00:24:14,760 --> 00:24:20,639 Speaker 1: maybe you guys can exactly big game, who are you playing? Well, 466 00:24:20,920 --> 00:24:23,480 Speaker 1: we just lost in Missouri, but we're playing Vanderbilt, so hopefully, 467 00:24:23,520 --> 00:24:25,800 Speaker 1: oh yeah, that'll be that that should be w all right, Drew. 468 00:24:25,880 --> 00:24:28,760 Speaker 1: I started my career covering the the trucking stocks took 469 00:24:28,760 --> 00:24:31,040 Speaker 1: a bunch of the public back in the day, So 470 00:24:31,119 --> 00:24:33,520 Speaker 1: I think I kind of know about the trucking business. 471 00:24:33,520 --> 00:24:35,800 Speaker 1: I know how important it is to the US economy. 472 00:24:36,040 --> 00:24:38,280 Speaker 1: I'd love to get your view of kind of where 473 00:24:38,280 --> 00:24:42,680 Speaker 1: we are in this whole supply chain snarl, if you will, 474 00:24:42,720 --> 00:24:46,159 Speaker 1: that we've been dealing with since the pandemic. From your perspective, 475 00:24:46,240 --> 00:24:48,280 Speaker 1: kind of where are we now and and and and 476 00:24:48,320 --> 00:24:50,639 Speaker 1: how close are we to maybe getting things back to 477 00:24:50,760 --> 00:24:54,800 Speaker 1: quasi normal. The last several years, there's been a lot 478 00:24:54,880 --> 00:24:58,480 Speaker 1: of chaos in the transportation market, and for us, you know, 479 00:24:58,600 --> 00:25:01,520 Speaker 1: volatility is not a bad thing, and customers lean into 480 00:25:01,600 --> 00:25:04,800 Speaker 1: us when there when there's volatile times. Volatile times means 481 00:25:04,840 --> 00:25:07,119 Speaker 1: that the market could be the load of truck ratio 482 00:25:07,200 --> 00:25:09,800 Speaker 1: could be tight, or it could be loose. We have 483 00:25:09,880 --> 00:25:13,480 Speaker 1: seen the truckload market loosen over the last six to 484 00:25:13,640 --> 00:25:17,640 Speaker 1: eight months. And you know, we're operating at strong margins 485 00:25:17,680 --> 00:25:21,640 Speaker 1: with within that of the third quarter, operating at ninetent 486 00:25:21,720 --> 00:25:26,439 Speaker 1: gross profit dollars. Okay, So, as you've mentioned, the market 487 00:25:26,480 --> 00:25:29,960 Speaker 1: has loosened quite substantially. What do you see it as 488 00:25:30,000 --> 00:25:35,639 Speaker 1: the biggest risk at this point when you look overall 489 00:25:35,680 --> 00:25:38,840 Speaker 1: at volume, we're seeing different things from different customers. You know, 490 00:25:38,960 --> 00:25:41,560 Speaker 1: some of our retail and e commerce customers as a whole, 491 00:25:41,640 --> 00:25:43,359 Speaker 1: that vertical is down for us on a year of 492 00:25:43,359 --> 00:25:45,560 Speaker 1: a year basis, But what we're hearing from our other 493 00:25:45,600 --> 00:25:48,280 Speaker 1: customers is a is a really good story. Overall, pretty 494 00:25:48,359 --> 00:25:50,560 Speaker 1: much all of our other verticals are up on a 495 00:25:50,640 --> 00:25:53,359 Speaker 1: year of a year basis in terms of volume. And 496 00:25:53,400 --> 00:25:55,960 Speaker 1: as we look out, customers are going to continue to 497 00:25:56,000 --> 00:25:58,520 Speaker 1: come to r x SO for two reasons. One, they're 498 00:25:58,560 --> 00:26:00,879 Speaker 1: gonna come to us because we provide best service and 499 00:26:00,960 --> 00:26:04,520 Speaker 1: solutions with technology that gives them complete visibility of what's 500 00:26:04,560 --> 00:26:07,680 Speaker 1: going on for the life of a shipment. And then two, 501 00:26:07,760 --> 00:26:10,959 Speaker 1: they're going to continue to look in who the leaders 502 00:26:11,000 --> 00:26:13,720 Speaker 1: are within the market, and r x SO has established 503 00:26:13,760 --> 00:26:16,720 Speaker 1: itself as one of the transportation leaders, growing three times 504 00:26:16,800 --> 00:26:18,640 Speaker 1: than the industry has grown over the last eight year. 505 00:26:19,240 --> 00:26:21,480 Speaker 1: And true, ever since I followed the trucking business now 506 00:26:21,560 --> 00:26:24,639 Speaker 1: more than thirty years, it's been a labor shortage that 507 00:26:24,760 --> 00:26:28,679 Speaker 1: you know, the near turnover in the trucking industry, and 508 00:26:28,720 --> 00:26:32,000 Speaker 1: I'm guessing it's it's no different today. Maybe the pandemics 509 00:26:32,000 --> 00:26:36,600 Speaker 1: made it even worse. How do you guys deal with that? Well, first, 510 00:26:36,640 --> 00:26:38,640 Speaker 1: we love the carriers that we that we work with. 511 00:26:38,680 --> 00:26:42,040 Speaker 1: This quarter, we actually added ten thousand carriers star are 512 00:26:42,280 --> 00:26:45,320 Speaker 1: r XO Connect platform. So to your point, there's definitely 513 00:26:45,400 --> 00:26:49,000 Speaker 1: been a turnover in the driver industry, but carriers like 514 00:26:49,119 --> 00:26:51,359 Speaker 1: just like customers are coming to do business with r 515 00:26:51,520 --> 00:26:54,000 Speaker 1: x So we have so much volume that they don't 516 00:26:54,040 --> 00:26:56,280 Speaker 1: have to leave the system to find their next load. 517 00:26:56,760 --> 00:26:59,920 Speaker 1: We also do a rewards program that gives them disc 518 00:27:00,000 --> 00:27:03,800 Speaker 1: council things that matter to drivers most things like fuel, tire, 519 00:27:04,200 --> 00:27:07,200 Speaker 1: roadside maintenance. And we've got a system that is so 520 00:27:07,280 --> 00:27:09,080 Speaker 1: easy for them to use that they can pick up 521 00:27:09,080 --> 00:27:12,120 Speaker 1: their cell phone, they can book a load, they can negotiate, 522 00:27:12,480 --> 00:27:15,680 Speaker 1: They do all of that with no interaction. So we've 523 00:27:15,680 --> 00:27:18,200 Speaker 1: had great success with with the carrier basis. We've got 524 00:27:18,240 --> 00:27:21,760 Speaker 1: over a hundred thousand carriers and our r XO Connect 525 00:27:21,800 --> 00:27:23,920 Speaker 1: platform we've got access to a million and a half 526 00:27:23,920 --> 00:27:27,879 Speaker 1: truck so we have massive amounts of capacity and a 527 00:27:27,920 --> 00:27:30,560 Speaker 1: long runway to continue that growth. All right, so you 528 00:27:30,560 --> 00:27:33,640 Speaker 1: guys spent out tomorrow, right, TRIU. We spent out tomorrow. 529 00:27:33,680 --> 00:27:35,640 Speaker 1: We we we will be ringing the bell at nine 530 00:27:35,680 --> 00:27:37,639 Speaker 1: thirty in the morning, all right. R XO is a 531 00:27:37,720 --> 00:27:40,720 Speaker 1: symbols that right, all right. So it's a simple alright 532 00:27:40,760 --> 00:27:43,040 Speaker 1: that trading on a one issued basis right now, So 533 00:27:43,080 --> 00:27:45,880 Speaker 1: you put that into your Bloomberg terminal. R XO, uh, 534 00:27:45,920 --> 00:27:49,080 Speaker 1: you'll get that business again being spun off from XPO 535 00:27:49,160 --> 00:27:53,439 Speaker 1: tomorrow standalone business. Drew Walkers and CEO of our x 536 00:27:53,640 --> 00:27:57,520 Speaker 1: OH talking to us about the logistics business, the supply chain, 537 00:27:57,760 --> 00:28:04,199 Speaker 1: all things that moves goods across this country. You know, 538 00:28:04,280 --> 00:28:07,199 Speaker 1: we now have a little bit of perspective here on 539 00:28:07,320 --> 00:28:10,119 Speaker 1: the changes that took place in China over the last 540 00:28:10,880 --> 00:28:13,880 Speaker 1: month or so with presidency getting another five year term 541 00:28:13,920 --> 00:28:15,800 Speaker 1: and a little bit of perspective here. And I need 542 00:28:15,840 --> 00:28:19,119 Speaker 1: to complete reset of how I should think about it 543 00:28:19,119 --> 00:28:21,320 Speaker 1: and maybe the markets and investors to think about it. 544 00:28:21,359 --> 00:28:23,960 Speaker 1: And for that we turned to Leland Miller. He's the 545 00:28:24,000 --> 00:28:27,160 Speaker 1: CEO of the China Basebook International. And folks the China 546 00:28:27,200 --> 00:28:30,119 Speaker 1: Basebook International. These folks, these folks, they get their own data. 547 00:28:30,480 --> 00:28:32,840 Speaker 1: They have boots on the ground, they you know, so 548 00:28:32,880 --> 00:28:34,639 Speaker 1: they don't rely on the government or anything like that. 549 00:28:34,680 --> 00:28:39,920 Speaker 1: They have really really you know, amazing granular data and 550 00:28:39,960 --> 00:28:42,040 Speaker 1: it gives them some pretty good insights. So Leland, thanks 551 00:28:42,080 --> 00:28:45,400 Speaker 1: so much for joining us here. I mean, what is 552 00:28:45,520 --> 00:28:49,480 Speaker 1: your perspective, What are you telling your clients about China 553 00:28:49,520 --> 00:28:54,320 Speaker 1: over the next five years? What should we expect much 554 00:28:54,400 --> 00:28:57,680 Speaker 1: lower growth? You know, there there's two there's two different 555 00:28:57,760 --> 00:29:00,480 Speaker 1: dynamics that are going on right now, one structure and 556 00:29:00,520 --> 00:29:04,320 Speaker 1: one cyclical, and people are getting them very mixed up. Cyclically, 557 00:29:04,520 --> 00:29:08,960 Speaker 1: we have COVID zero that has been crushing demand, hurting supply, 558 00:29:09,080 --> 00:29:12,280 Speaker 1: crushing demand and just causing havoc throughout twenty two but 559 00:29:12,280 --> 00:29:15,360 Speaker 1: but really for several years now. But the bigger, the 560 00:29:15,440 --> 00:29:17,800 Speaker 1: bigger issue at least it will be the bigger issue 561 00:29:17,800 --> 00:29:21,360 Speaker 1: for China long term, is the structural slowdown economy. This 562 00:29:21,480 --> 00:29:24,680 Speaker 1: is the diminishment of the property sector as a key 563 00:29:24,720 --> 00:29:29,000 Speaker 1: growth driver. This is less credit going into reckless credit 564 00:29:29,000 --> 00:29:33,520 Speaker 1: expansion to zombie companies. All this is happening a lot 565 00:29:33,600 --> 00:29:36,920 Speaker 1: less and we're going to see a much more precipitous 566 00:29:36,920 --> 00:29:41,040 Speaker 1: slowdown over the coming years. That that said, right now, 567 00:29:41,160 --> 00:29:44,440 Speaker 1: you've got particularly smothered growth because the COVID zero. So 568 00:29:44,520 --> 00:29:46,080 Speaker 1: you have the potential for a little bounce up so 569 00:29:46,120 --> 00:29:49,600 Speaker 1: along the way, but structurally we're going much much slower. 570 00:29:50,040 --> 00:29:52,760 Speaker 1: So Leland on the topic of COVID zero, you know, 571 00:29:52,840 --> 00:29:56,440 Speaker 1: covering the movements in Chinese stock markets last week, just 572 00:29:56,600 --> 00:30:01,760 Speaker 1: absolutely crushed after paying stacked as lead ship ranks with loyalists. 573 00:30:01,760 --> 00:30:04,520 Speaker 1: The explanation there was that we're probably going to get 574 00:30:04,520 --> 00:30:09,200 Speaker 1: a continuation of these COVID zero policies. Does that narrative 575 00:30:09,200 --> 00:30:10,920 Speaker 1: hold water with you when you just think about the 576 00:30:11,080 --> 00:30:15,720 Speaker 1: really brutal asset reaction, Yeah, it does, But I think 577 00:30:15,720 --> 00:30:17,400 Speaker 1: it's it's even more than that. I think we're going 578 00:30:17,440 --> 00:30:20,040 Speaker 1: to get a continuation of not just COVID euro but 579 00:30:20,240 --> 00:30:23,280 Speaker 1: all of the she policies that investors have come to 580 00:30:23,480 --> 00:30:26,280 Speaker 1: really really dislike. You know, what we kept hearing for 581 00:30:26,320 --> 00:30:29,680 Speaker 1: the past year or so was that just wait, just wait, 582 00:30:30,920 --> 00:30:34,360 Speaker 1: anomaly will wait for it's a Party Congress year. Oh 583 00:30:34,360 --> 00:30:38,000 Speaker 1: WAWO is not doing too well way to the Party Congress. 584 00:30:38,040 --> 00:30:40,480 Speaker 1: And I think what the Party Congress was was just 585 00:30:40,720 --> 00:30:44,720 Speaker 1: the last straw where the bull argument on China having 586 00:30:44,760 --> 00:30:47,920 Speaker 1: some policy pivot on growth on stibulus of COVID zero, 587 00:30:48,160 --> 00:30:50,840 Speaker 1: it just blew apart. And that's why you saw market 588 00:30:50,840 --> 00:30:55,160 Speaker 1: wide surrender across the board on Chinese assets, Leland. If 589 00:30:55,160 --> 00:30:59,800 Speaker 1: I'm a CEO of a U S domaliciled global corporation, 590 00:31:00,920 --> 00:31:04,280 Speaker 1: can I allocate capitals China? Can I invest in China? 591 00:31:04,320 --> 00:31:07,200 Speaker 1: Can I bank on China for the next five years 592 00:31:07,240 --> 00:31:10,360 Speaker 1: or ten years? Well, you have to be really careful. 593 00:31:10,640 --> 00:31:13,200 Speaker 1: You know, so much money went into this for decades, 594 00:31:13,280 --> 00:31:16,360 Speaker 1: which very little thought. The idea there's you know, over 595 00:31:16,400 --> 00:31:19,560 Speaker 1: a billion consumers, they'll just start buying stuff. And even 596 00:31:19,560 --> 00:31:21,920 Speaker 1: if they won't, my board is forcing me to go 597 00:31:22,000 --> 00:31:24,440 Speaker 1: into China. So let's just do this. I think at 598 00:31:24,480 --> 00:31:27,400 Speaker 1: this point there are opportunities in Shina. Sure, but you 599 00:31:27,480 --> 00:31:30,920 Speaker 1: have to evaluate the conditions on the ground much differently. 600 00:31:31,160 --> 00:31:33,680 Speaker 1: You're not going to have the wild upside that a 601 00:31:33,680 --> 00:31:35,920 Speaker 1: lot of people thought. You're not gonna have a lot 602 00:31:35,920 --> 00:31:39,000 Speaker 1: of sectors that are going to be kept uh bolstered 603 00:31:39,040 --> 00:31:42,080 Speaker 1: because of credit. You're not going to have uh you know, 604 00:31:42,120 --> 00:31:45,320 Speaker 1: you're not gonna have this this robust consumer economy that 605 00:31:45,360 --> 00:31:48,520 Speaker 1: people thought. So you sure, there are opportunities to if 606 00:31:48,520 --> 00:31:51,720 Speaker 1: you pick your sectors right, to make some money. But 607 00:31:51,720 --> 00:31:54,400 Speaker 1: but really you have to think this through because this 608 00:31:54,480 --> 00:31:58,640 Speaker 1: is not an automatic victory story. And conversely, Leland, if 609 00:31:58,640 --> 00:32:01,480 Speaker 1: I'm president g and I one of my stated goals 610 00:32:01,560 --> 00:32:04,840 Speaker 1: is to be a world leader, not participate in the world, 611 00:32:04,840 --> 00:32:08,040 Speaker 1: but be a leader. Can he achieve that if he 612 00:32:08,120 --> 00:32:12,120 Speaker 1: has kind of a China first, inward looking, not non 613 00:32:12,200 --> 00:32:17,280 Speaker 1: engagement type of mentality, Well, you know, probably not, but 614 00:32:17,320 --> 00:32:20,280 Speaker 1: he sure thinks he can. And I think the mindset 615 00:32:20,440 --> 00:32:23,040 Speaker 1: from from the from she and the rest of the 616 00:32:23,080 --> 00:32:28,280 Speaker 1: top leadership is we have to get China prepared for leadership. 617 00:32:28,640 --> 00:32:32,160 Speaker 1: And that means not just juicing growth, not not you know, 618 00:32:32,200 --> 00:32:34,560 Speaker 1: default to the playbook. We need to have much more 619 00:32:34,560 --> 00:32:37,560 Speaker 1: self reliance. We need to sever our connections on the 620 00:32:37,560 --> 00:32:39,959 Speaker 1: technology side as much as possible with the West so 621 00:32:40,000 --> 00:32:42,360 Speaker 1: that we're not going to be caught through some you know, 622 00:32:42,560 --> 00:32:46,160 Speaker 1: export control disaster. So a lot of what they think 623 00:32:46,200 --> 00:32:49,680 Speaker 1: they need to do is just necessary pain. And everyone thought, oh, 624 00:32:49,720 --> 00:32:51,360 Speaker 1: it's just a matter of months before you know, he 625 00:32:51,680 --> 00:32:54,040 Speaker 1: flips his fingers and his pain point has been reached 626 00:32:54,040 --> 00:32:56,400 Speaker 1: and he reverses. Course, that is not going to happen. 627 00:32:57,600 --> 00:33:00,240 Speaker 1: And so Leland really quickly about thirty seconds here this 628 00:33:00,480 --> 00:33:03,680 Speaker 1: potential structural slowdown in Chinese growth, What does that mean? 629 00:33:04,120 --> 00:33:06,680 Speaker 1: For the rest of emerging markets and for the world 630 00:33:06,720 --> 00:33:10,360 Speaker 1: at large. What it means is that is that China 631 00:33:10,440 --> 00:33:12,280 Speaker 1: can get through this if they do all the things right, 632 00:33:12,280 --> 00:33:14,000 Speaker 1: they can get this through this okay and have a 633 00:33:14,080 --> 00:33:17,880 Speaker 1: have a stronger, albeit slower economy. But all the countries 634 00:33:17,920 --> 00:33:19,680 Speaker 1: around the world that think that China is going to 635 00:33:19,720 --> 00:33:23,800 Speaker 1: be producing these large levels of growth, big infrastructure, endless 636 00:33:23,840 --> 00:33:26,840 Speaker 1: demand for commodities, they're in real trouble if they haven't 637 00:33:26,840 --> 00:33:29,240 Speaker 1: been diversifying, and most of these countries have not been 638 00:33:29,240 --> 00:33:32,040 Speaker 1: over the past several years. Ten seconds, Leland, are you 639 00:33:32,080 --> 00:33:36,040 Speaker 1: a bull or bear on China next five years? Well, 640 00:33:36,560 --> 00:33:38,640 Speaker 1: I'm a bull because I think she is doing some 641 00:33:38,680 --> 00:33:41,360 Speaker 1: of the structural stuff necessary in order to turn around 642 00:33:41,360 --> 00:33:44,200 Speaker 1: the economy. But it doesn't mean there's gonna be high 643 00:33:44,240 --> 00:33:45,560 Speaker 1: levels of growth, and I think that's the first thing 644 00:33:45,600 --> 00:33:48,120 Speaker 1: investors shooting in away from this. Yeah, good stuff, all right, Leland, 645 00:33:48,120 --> 00:33:49,920 Speaker 1: Thanks so much for taking the time. We always appreciate 646 00:33:50,240 --> 00:33:54,960 Speaker 1: getting your informed perspective on China. Some Yeah, I don't know. 647 00:33:55,080 --> 00:33:56,800 Speaker 1: I guess it wasn't change. I guess it was a 648 00:33:56,800 --> 00:34:00,480 Speaker 1: continuation of the existing policy. But uh, in to see 649 00:34:00,480 --> 00:34:03,160 Speaker 1: how China evolves over the next five years as a 650 00:34:03,200 --> 00:34:08,799 Speaker 1: global player. Leela Millar, China, bag Book International. Today's Big 651 00:34:08,800 --> 00:34:11,799 Speaker 1: Take story is a big one. We want to get 652 00:34:11,880 --> 00:34:13,239 Speaker 1: right to it. And of course you can listen to 653 00:34:13,239 --> 00:34:16,160 Speaker 1: the Big Take podcast on the I Heart Radio app, 654 00:34:16,560 --> 00:34:18,759 Speaker 1: Apple and anywhere else you get your podcast and listen 655 00:34:18,800 --> 00:34:20,760 Speaker 1: to The Big Take every night at eleven pm Eastern 656 00:34:20,840 --> 00:34:23,120 Speaker 1: on Bloomberg Radio. Today's is a big one. Kelsey Butler 657 00:34:23,600 --> 00:34:27,400 Speaker 1: joins us and along with Patricia Hurtado, Kelsey reported on 658 00:34:27,480 --> 00:34:30,279 Speaker 1: an amazing story here. The US Supreme Court is considering 659 00:34:30,680 --> 00:34:33,680 Speaker 1: a radical overhaul of the college admissions process that would 660 00:34:33,719 --> 00:34:38,160 Speaker 1: alter the country's most elite institutions and workplaces. We're talking 661 00:34:38,160 --> 00:34:40,799 Speaker 1: about affirmative action. Kelsey, thanks so much for joining us here. 662 00:34:41,960 --> 00:34:45,640 Speaker 1: Exactly what is the court? What's on the court stock 663 00:34:45,680 --> 00:34:49,440 Speaker 1: at this term? Here? Sure? So right now there are 664 00:34:49,480 --> 00:34:52,719 Speaker 1: two cases that are currently before the court, and UM, 665 00:34:52,760 --> 00:34:55,000 Speaker 1: just given the makeup of the court, what are reporting 666 00:34:55,000 --> 00:34:57,880 Speaker 1: and selling us in the U kind of conservative of 667 00:34:57,920 --> 00:35:01,680 Speaker 1: the court, It's very likely, um, that affirmative action as 668 00:35:01,680 --> 00:35:04,640 Speaker 1: we know it could go go away, which means that schools, 669 00:35:04,680 --> 00:35:08,080 Speaker 1: both public and private universities that are that it is 670 00:35:08,640 --> 00:35:11,479 Speaker 1: will no longer be able to consider race it as 671 00:35:11,600 --> 00:35:14,400 Speaker 1: part of the admissions process when they're deciding who to 672 00:35:14,480 --> 00:35:17,880 Speaker 1: allow into their schools, and Kelsey walk us through the 673 00:35:17,920 --> 00:35:21,160 Speaker 1: potential ramifications. They're one of the first lines in your story. 674 00:35:21,200 --> 00:35:23,839 Speaker 1: You write that when the practice ended in California, the 675 00:35:23,880 --> 00:35:27,560 Speaker 1: state's most selective campuses saw minority enrollment dropping more than 676 00:35:27,719 --> 00:35:31,480 Speaker 1: fifty percent. Is that a blueprint for what could be 677 00:35:31,520 --> 00:35:36,640 Speaker 1: to come? Certainly we've seen affirmative action UM in college 678 00:35:36,640 --> 00:35:40,120 Speaker 1: admissions go away in UM you know, across the country. 679 00:35:40,200 --> 00:35:43,480 Speaker 1: Right now, it's not allowed in nine states, and in 680 00:35:43,520 --> 00:35:45,480 Speaker 1: those days, there's been a ton of research that really 681 00:35:45,480 --> 00:35:48,320 Speaker 1: has shown that immediate drop off. California is one example, 682 00:35:48,840 --> 00:35:54,080 Speaker 1: Michigan is another. UM. Minorities, specifically black Native American UM 683 00:35:54,120 --> 00:35:58,200 Speaker 1: students had a huge drop off in the most selective institutions, 684 00:35:58,360 --> 00:36:01,400 Speaker 1: and it's they really haven't caught up. And we're talking 685 00:36:01,400 --> 00:36:04,320 Speaker 1: about more than a decade in some of those places. 686 00:36:05,080 --> 00:36:07,680 Speaker 1: How long How long has affirmative action been around? It 687 00:36:07,719 --> 00:36:10,000 Speaker 1: just seems like it's always been around, But I just 688 00:36:10,040 --> 00:36:12,920 Speaker 1: I don't know when it really came about. So it's 689 00:36:12,920 --> 00:36:15,600 Speaker 1: been around since the Civil rights era. UM. The first 690 00:36:15,640 --> 00:36:18,040 Speaker 1: time that the Supreme Court weighed in on affirmative action 691 00:36:18,120 --> 00:36:20,799 Speaker 1: was in the seventies. Um, and it kind of uh 692 00:36:20,880 --> 00:36:23,840 Speaker 1: set a blueprint for the way race is considered in 693 00:36:23,880 --> 00:36:27,080 Speaker 1: the college admissions process, which means there's no such thing 694 00:36:27,120 --> 00:36:30,200 Speaker 1: as a quota. Um, it's just part of the holistic 695 00:36:30,239 --> 00:36:33,440 Speaker 1: picture that an admissions office kind of looks at when 696 00:36:33,440 --> 00:36:36,239 Speaker 1: they are deciding who to admit. Again, in those days 697 00:36:36,440 --> 00:36:40,200 Speaker 1: where it's allowed, as I mentioned nine, it is banned 698 00:36:41,280 --> 00:36:44,319 Speaker 1: and Kelsey, I mean, given that long history, how long 699 00:36:44,360 --> 00:36:47,200 Speaker 1: they've known affirmative action in the US, Why now, why 700 00:36:47,280 --> 00:36:51,200 Speaker 1: is this being considered now? Um? So there is a 701 00:36:51,239 --> 00:36:55,279 Speaker 1: special interest group that has kind of um champion this issue. Uh, 702 00:36:55,320 --> 00:36:58,920 Speaker 1: and they are kind of bringing this issue up before 703 00:36:58,960 --> 00:37:04,440 Speaker 1: the court. They are arguing that the practice discriminates against 704 00:37:04,480 --> 00:37:08,160 Speaker 1: Asian American students and essentially keeps them out of these 705 00:37:08,200 --> 00:37:12,440 Speaker 1: elite institutions. And uh, now really is the time that 706 00:37:12,960 --> 00:37:16,600 Speaker 1: they've been able to kind of bring this back up again? 707 00:37:16,800 --> 00:37:20,560 Speaker 1: I will say, though, affirmative action has been something that 708 00:37:20,600 --> 00:37:23,960 Speaker 1: has come up before the Supreme Court many many times. UM, 709 00:37:24,200 --> 00:37:27,600 Speaker 1: and so this is looking like the time it might 710 00:37:27,640 --> 00:37:30,759 Speaker 1: go away. But it's been decided and affirmed by the 711 00:37:30,800 --> 00:37:34,080 Speaker 1: court several times over like as it relates to higher education, 712 00:37:34,200 --> 00:37:36,879 Speaker 1: is this just for public universities or would it also 713 00:37:36,920 --> 00:37:42,200 Speaker 1: apply to private universities? So, because the two cases that 714 00:37:42,239 --> 00:37:45,280 Speaker 1: are before the court, one is a private school Harvard, 715 00:37:45,719 --> 00:37:47,920 Speaker 1: I have heard of it, UM, the oh there is 716 00:37:47,960 --> 00:37:51,920 Speaker 1: a public institution UM. It could very well have an 717 00:37:52,000 --> 00:37:56,359 Speaker 1: impact on both types of institution. What are we hearing 718 00:37:56,360 --> 00:37:59,320 Speaker 1: from Corporate America? They kind of weighed in here and 719 00:37:59,440 --> 00:38:03,560 Speaker 1: kind of what they like to see the ramifications. Certainly, 720 00:38:03,600 --> 00:38:05,719 Speaker 1: I think one really interesting thing in my reporting with 721 00:38:05,800 --> 00:38:07,799 Speaker 1: reading through a lot of the court briefs UM, the 722 00:38:07,920 --> 00:38:11,640 Speaker 1: arguments for UM and against this UM, and there was 723 00:38:11,680 --> 00:38:15,239 Speaker 1: one brief in UM one of the court cases, a 724 00:38:15,360 --> 00:38:19,800 Speaker 1: whole host of companies including Google, General, Electric, Jet Blue, 725 00:38:20,280 --> 00:38:24,000 Speaker 1: UM basically said this is important for them and said 726 00:38:24,000 --> 00:38:27,680 Speaker 1: that they without affirmative action, they will lose access to 727 00:38:27,760 --> 00:38:31,319 Speaker 1: a pipeline of highly qualified future workers and it's going 728 00:38:31,360 --> 00:38:34,040 Speaker 1: to make them harder for them to hit diversity goals 729 00:38:34,040 --> 00:38:37,440 Speaker 1: and targets that they have for their own organizations. And 730 00:38:37,520 --> 00:38:41,439 Speaker 1: Kelsey walk us through the timeline here. What are the 731 00:38:42,160 --> 00:38:46,239 Speaker 1: you know, potential milestones to watch as this story develops. 732 00:38:47,520 --> 00:38:51,840 Speaker 1: Certainly so arguments are happening this week. Our reporters are 733 00:38:52,120 --> 00:38:54,880 Speaker 1: going to be following it closely and highlighting UM, you know, 734 00:38:54,960 --> 00:38:57,920 Speaker 1: all the big kind of moments in those arguments. The 735 00:38:57,920 --> 00:39:01,200 Speaker 1: Supreme Court likely won't make it this vision until next year, 736 00:39:01,280 --> 00:39:04,160 Speaker 1: so we'll certainly be following that, and then we'll see 737 00:39:04,160 --> 00:39:07,399 Speaker 1: the impact in the schools in the year or two 738 00:39:07,520 --> 00:39:10,719 Speaker 1: years to come, because obviously we know admissions decisions are 739 00:39:10,760 --> 00:39:13,360 Speaker 1: a little bit on a lag, so we'll start seeing 740 00:39:13,360 --> 00:39:18,000 Speaker 1: it in UM freshman classes thereafter. And does this affirmative 741 00:39:18,040 --> 00:39:22,160 Speaker 1: action issue does it effect? Is it applied to companies 742 00:39:22,239 --> 00:39:25,400 Speaker 1: or they just kind of keeping the scope to colleges 743 00:39:25,440 --> 00:39:30,319 Speaker 1: and universities. Well, what could happen is, you know, as 744 00:39:30,320 --> 00:39:34,520 Speaker 1: I mentioned, companies will be impacted because of the basically 745 00:39:34,560 --> 00:39:37,440 Speaker 1: what the cohort of elite institutions is going to look 746 00:39:37,440 --> 00:39:39,479 Speaker 1: like as far as their student bodies. And it could 747 00:39:39,480 --> 00:39:43,480 Speaker 1: open the door to UM companies being hamstrung in the 748 00:39:43,520 --> 00:39:47,839 Speaker 1: way that they make hiring decisions as well. And so, 749 00:39:47,960 --> 00:39:50,680 Speaker 1: I mean, Paul asked a little bit about what Corporate 750 00:39:50,719 --> 00:39:54,080 Speaker 1: America's response has been. Outside of Corporate America, I mean, 751 00:39:54,120 --> 00:39:57,440 Speaker 1: are there any groups leading a pushback effort here, what 752 00:39:57,480 --> 00:40:02,320 Speaker 1: does that effort look like. We've seen in UM places 753 00:40:02,360 --> 00:40:06,879 Speaker 1: like California. UM, there have been kind of community organization, 754 00:40:06,960 --> 00:40:09,959 Speaker 1: activist groups that have tried to push back on these 755 00:40:10,000 --> 00:40:14,200 Speaker 1: types of things. Not too long ago, there was a 756 00:40:14,200 --> 00:40:17,839 Speaker 1: ballot measure UM to try to bring affirmative actions back 757 00:40:17,880 --> 00:40:21,279 Speaker 1: in the state, and it actually didn't pass, so it's 758 00:40:21,320 --> 00:40:24,600 Speaker 1: still banned in the state of California. There's certainly been 759 00:40:24,760 --> 00:40:28,239 Speaker 1: kind of this, uh, this movement to try to bring 760 00:40:28,280 --> 00:40:32,160 Speaker 1: it back in some places, but UM, you know, it's certainly, 761 00:40:33,080 --> 00:40:35,120 Speaker 1: as I mentioned, there are a lot of misconceptions about it, 762 00:40:35,239 --> 00:40:38,799 Speaker 1: so sometimes it's not as popular with people as one 763 00:40:38,880 --> 00:40:42,200 Speaker 1: might think. Yeah, interesting story. As always, the Big Take 764 00:40:42,239 --> 00:40:45,600 Speaker 1: stories always kind of tackle the big issues. Kelsey Butler, 765 00:40:46,160 --> 00:40:50,200 Speaker 1: equality reporter for Bloomberg News, with a Big Take story here. 766 00:40:50,239 --> 00:40:54,720 Speaker 1: You can listen to The Big Take podcast on iHeart Radio, app, 767 00:40:55,480 --> 00:40:58,160 Speaker 1: Apple and anyone else You get your podcast and listen 768 00:40:58,200 --> 00:41:01,920 Speaker 1: to The Big Take every night at eleven pm Eastern 769 00:41:02,440 --> 00:41:08,120 Speaker 1: on Bloomberg Radio. Thanks for listening to the Bloomberg Markets podcast. 770 00:41:08,480 --> 00:41:11,640 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 771 00:41:11,840 --> 00:41:15,719 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 772 00:41:15,760 --> 00:41:19,120 Speaker 1: on Twitter at Matt Miller N seventy three. Put on 773 00:41:19,239 --> 00:41:22,320 Speaker 1: Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast. 774 00:41:22,360 --> 00:41:25,120 Speaker 1: You can always catch us worldwide at Bloomberg Radio