1 00:00:00,080 --> 00:00:02,040 Speaker 1: P and L is brought to you by proper Cloth, 2 00:00:02,120 --> 00:00:05,120 Speaker 1: a leader in men's custom shirts, with proprietary smart sized 3 00:00:05,120 --> 00:00:08,720 Speaker 1: technology and top rated customer service. Ordering a custom shirt 4 00:00:08,760 --> 00:00:11,680 Speaker 1: has never been easier. Visit proper cloth dot com to 5 00:00:11,760 --> 00:00:19,960 Speaker 1: order your first custom shirt today. Welcome to the Bloomberg 6 00:00:20,000 --> 00:00:22,599 Speaker 1: P and L Podcast. I'm Pim Fox. Along with my 7 00:00:22,640 --> 00:00:25,759 Speaker 1: co host Lisa Abramowitz. Each day we bring you the 8 00:00:25,800 --> 00:00:29,360 Speaker 1: most important, noteworthy, and useful interviews for you and your money, 9 00:00:29,360 --> 00:00:32,360 Speaker 1: whether at the grocery store or the trading floor. Find 10 00:00:32,400 --> 00:00:35,800 Speaker 1: the Bloomberg P and L Podcast on iTunes, SoundCloud and 11 00:00:36,080 --> 00:00:44,559 Speaker 1: at Bloomberg dot com. All right, let's get a king 12 00:00:44,640 --> 00:00:48,160 Speaker 1: of radio and all media, Paul Sweeney, into the conversation. 13 00:00:48,200 --> 00:00:50,720 Speaker 1: He is our director of North American Research and media 14 00:00:50,760 --> 00:00:56,080 Speaker 1: analyst four Bloomberg Intelligence. Paul, spread a little intelligence force. 15 00:00:56,120 --> 00:00:58,160 Speaker 1: We've got a big week. Let's start off with twenty 16 00:00:58,800 --> 00:01:04,759 Speaker 1: century Fox. They say, but you know, I was thinking right, 17 00:01:05,319 --> 00:01:09,000 Speaker 1: used to they but they also use twentieth century Fox 18 00:01:09,040 --> 00:01:10,959 Speaker 1: I believe still as part of one of their best 19 00:01:11,160 --> 00:01:13,720 Speaker 1: studio right exactly. So it was because I looked at 20 00:01:13,760 --> 00:01:15,680 Speaker 1: it over the weekend. Go ahead, Yeah, this confusing, But 21 00:01:15,720 --> 00:01:18,240 Speaker 1: they're convinced it was a great name change. Yeah, this 22 00:01:18,319 --> 00:01:19,960 Speaker 1: is a This is a great week for for big, 23 00:01:19,959 --> 00:01:22,240 Speaker 1: big media. All the big media companies are reporting, and 24 00:01:22,400 --> 00:01:25,320 Speaker 1: you know, the stocks have generally done pretty well over 25 00:01:25,520 --> 00:01:27,400 Speaker 1: you know, year to date, in over the last twelve months. 26 00:01:27,440 --> 00:01:31,000 Speaker 1: And I think but the big issue for media investors 27 00:01:31,040 --> 00:01:33,800 Speaker 1: this this whole concept of chord cutting and what it 28 00:01:33,840 --> 00:01:37,080 Speaker 1: means to the economics of you know, the cable network 29 00:01:37,160 --> 00:01:41,600 Speaker 1: business in particular, and broadcast networks as well. If people 30 00:01:41,600 --> 00:01:43,880 Speaker 1: are cutting the chord, does that mean less of viewers, 31 00:01:43,959 --> 00:01:47,960 Speaker 1: means less advertising, which means less affiliate fees. And if so, 32 00:01:48,440 --> 00:01:52,160 Speaker 1: what's the trajectory of that downward decline um in those 33 00:01:52,240 --> 00:01:54,000 Speaker 1: kinds of numbers? And that's what investors are trying to 34 00:01:54,000 --> 00:01:55,880 Speaker 1: get a handle on. Okay, well, so we're gonna get 35 00:01:55,920 --> 00:02:00,000 Speaker 1: earnings from twenty first century Fox, Disney, Time, Warner Viacom. 36 00:02:00,120 --> 00:02:02,920 Speaker 1: Which company is the most important to watch to get 37 00:02:02,960 --> 00:02:05,360 Speaker 1: a sense of just how much chord cutting is happening. 38 00:02:05,440 --> 00:02:08,160 Speaker 1: I think Disney is probably the big one simply because 39 00:02:08,160 --> 00:02:11,000 Speaker 1: they have the biggest cable network in ESPN, the most 40 00:02:11,080 --> 00:02:14,000 Speaker 1: valuable cable network in ESPN, And it was Disney a 41 00:02:14,000 --> 00:02:17,800 Speaker 1: little over two years ago. That really started the whole concern, 42 00:02:17,880 --> 00:02:19,919 Speaker 1: the whole issue of cord cutting and the fact that 43 00:02:19,960 --> 00:02:23,040 Speaker 1: it was in fact impacting, uh, the cable television business 44 00:02:23,080 --> 00:02:26,519 Speaker 1: when they said that even the mighty ESPN was losing subscribers, 45 00:02:26,840 --> 00:02:29,919 Speaker 1: uh and that it would cause Disney to reduce their 46 00:02:30,160 --> 00:02:34,240 Speaker 1: profit forecast for ESPN going forward. So that really brought 47 00:02:34,280 --> 00:02:37,079 Speaker 1: home to a media investors that this cord cutting thing 48 00:02:37,240 --> 00:02:40,119 Speaker 1: is real, it's right now, and it's impacting the businesses 49 00:02:40,120 --> 00:02:43,240 Speaker 1: for these companies. So UH, Now, what investors are trying 50 00:02:43,280 --> 00:02:45,560 Speaker 1: to do ever since that point in time a couple 51 00:02:45,560 --> 00:02:47,079 Speaker 1: of years ago, was trying to get a sense of 52 00:02:47,320 --> 00:02:51,040 Speaker 1: again the rate of decline of pay TV subscribers in 53 00:02:51,080 --> 00:02:53,840 Speaker 1: the US. UH. And if you're a bear, then you 54 00:02:53,880 --> 00:02:56,040 Speaker 1: think that rate of decline is steep, and you think 55 00:02:56,080 --> 00:02:58,760 Speaker 1: it's gonna be long term and you've you've gotten out 56 00:02:58,760 --> 00:03:01,320 Speaker 1: of these stocks. If you're more more bullish, I think 57 00:03:01,320 --> 00:03:02,880 Speaker 1: a lot of it, and I think that's what's happened 58 00:03:02,880 --> 00:03:04,960 Speaker 1: with the stocks. A lot of investors have said, Okay, 59 00:03:05,120 --> 00:03:07,480 Speaker 1: we know the chord cutting is happening, but it's going 60 00:03:07,520 --> 00:03:10,360 Speaker 1: to be a very gradual decline. It's nothing that's gonna 61 00:03:11,000 --> 00:03:13,600 Speaker 1: crush these businesses in the near term. Uh, so let's 62 00:03:13,600 --> 00:03:15,880 Speaker 1: try to pick some winners and losers. And then the 63 00:03:15,960 --> 00:03:18,839 Speaker 1: other thing that's happening is, um, we're starting to see 64 00:03:18,880 --> 00:03:22,240 Speaker 1: some of these media companies go direct to consumer over 65 00:03:22,280 --> 00:03:25,000 Speaker 1: the Internet, much like Netflix does with some of their 66 00:03:25,040 --> 00:03:28,760 Speaker 1: own offerings like HBO now from Time Warners a HBO, 67 00:03:29,200 --> 00:03:31,160 Speaker 1: UM and some of the other cable networks have done that. 68 00:03:31,200 --> 00:03:33,240 Speaker 1: Some of the other networks have been joining some of 69 00:03:33,240 --> 00:03:36,720 Speaker 1: these skinny bundles like Sling Television. So I think investors 70 00:03:36,720 --> 00:03:39,760 Speaker 1: are saying chord cutting is an issue. It's a problem. 71 00:03:40,320 --> 00:03:42,720 Speaker 1: The fretting of the big cable TV bundle is a 72 00:03:42,760 --> 00:03:46,560 Speaker 1: negative issue for this industry. But there are degrees of 73 00:03:47,160 --> 00:03:48,840 Speaker 1: how this is gonna play out, and there's gonna be 74 00:03:48,880 --> 00:03:51,400 Speaker 1: some winners and losers um, and I think investors are 75 00:03:51,440 --> 00:03:54,400 Speaker 1: just trying to figure out who those companies are. Is 76 00:03:54,880 --> 00:03:58,600 Speaker 1: twenty first Century Fox a winner? I'm looking at the 77 00:03:58,640 --> 00:04:01,760 Speaker 1: stock is this was a only four dollar stock in September. 78 00:04:02,120 --> 00:04:04,720 Speaker 1: We're now over thirty one. We're going to get the results. 79 00:04:05,280 --> 00:04:10,480 Speaker 1: Uh super Bowl coverage? Do they have all the pieces 80 00:04:10,520 --> 00:04:13,520 Speaker 1: to make this work? Yeah, it's funny. Century Fox owning 81 00:04:13,560 --> 00:04:16,840 Speaker 1: the Fox Network very happy this morning after the overtime 82 00:04:16,880 --> 00:04:19,760 Speaker 1: game last night, a lot more advertising inventory to sell 83 00:04:20,000 --> 00:04:22,000 Speaker 1: at very high prices. So they love the fact that 84 00:04:22,040 --> 00:04:24,200 Speaker 1: it was the first Super Bowl to go the overtime. 85 00:04:24,720 --> 00:04:28,080 Speaker 1: But generally speaking, I think most Fox investors feel pretty 86 00:04:28,080 --> 00:04:30,680 Speaker 1: good about the story because the company has a lot 87 00:04:30,680 --> 00:04:33,560 Speaker 1: of international exposure. They're one of the biggest companies in 88 00:04:33,640 --> 00:04:37,520 Speaker 1: terms of international exposure with their pay TV business globally 89 00:04:37,680 --> 00:04:41,600 Speaker 1: in India and Asia and all through Europe. And the 90 00:04:42,000 --> 00:04:45,160 Speaker 1: bullish case there is that the pay TV industry outside 91 00:04:45,160 --> 00:04:47,080 Speaker 1: of the U S is UH is more of a 92 00:04:47,080 --> 00:04:48,599 Speaker 1: growth story than it is in the U S. The 93 00:04:48,680 --> 00:04:51,160 Speaker 1: U S it's again it's a mature business, susceptible to 94 00:04:51,240 --> 00:04:53,520 Speaker 1: chord cutting. In other parts of the world, it's still 95 00:04:53,520 --> 00:04:56,800 Speaker 1: a growth business. And Fox, along with Discovery Communications, are 96 00:04:56,800 --> 00:04:59,520 Speaker 1: the two companies that are probably best exposed to the 97 00:04:59,560 --> 00:05:02,320 Speaker 1: globe growth of pay television. You know, last night, when 98 00:05:02,320 --> 00:05:04,480 Speaker 1: I was watching the Super Bowl with my seven year 99 00:05:04,480 --> 00:05:07,960 Speaker 1: old son, he said to me these advertisements they are 100 00:05:07,960 --> 00:05:11,400 Speaker 1: also dramatic, he said, do they actually work? And and 101 00:05:11,680 --> 00:05:14,800 Speaker 1: I'm wondering, you know, at a time when more eyeballs 102 00:05:14,880 --> 00:05:19,000 Speaker 1: are on the Internet than on a particular channel. Is 103 00:05:19,040 --> 00:05:21,599 Speaker 1: there some kind of evaluation of how much these ads 104 00:05:21,640 --> 00:05:23,960 Speaker 1: work and are they less willing to pay the advertisers 105 00:05:24,000 --> 00:05:28,240 Speaker 1: less willing to pay premium fees for for displaying their ads. Yeah. 106 00:05:28,279 --> 00:05:30,919 Speaker 1: The You know, the global advertising business is about a 107 00:05:30,920 --> 00:05:33,800 Speaker 1: six d fifty billion dollar a year business that grows 108 00:05:33,800 --> 00:05:37,560 Speaker 1: about three to four to five percent a year. Within that, Uh, 109 00:05:37,640 --> 00:05:40,800 Speaker 1: Internet advertising this clearly the big growth story. It's growing 110 00:05:40,839 --> 00:05:44,960 Speaker 1: about fifteen percent per year. So share of advertising globally 111 00:05:45,000 --> 00:05:48,400 Speaker 1: over the last ten years has dramatically shifted from traditional media, 112 00:05:48,760 --> 00:05:51,360 Speaker 1: uh to digital media. You think about search, you think 113 00:05:51,400 --> 00:05:54,960 Speaker 1: about Google, you think about uh social platforms like Facebook. 114 00:05:55,040 --> 00:05:57,520 Speaker 1: Those are the platforms that are really getting uh the 115 00:05:57,560 --> 00:06:00,720 Speaker 1: incremental ad dollars. That being said, though, uh, and part 116 00:06:00,760 --> 00:06:02,760 Speaker 1: of the reason they're getting the incremental ad dollars is 117 00:06:02,800 --> 00:06:07,200 Speaker 1: that it's easier for them to prove to advertisers that, uh, 118 00:06:07,320 --> 00:06:10,040 Speaker 1: your audience did click on this ad. Um, we can 119 00:06:10,080 --> 00:06:11,880 Speaker 1: prove to you who it was and that that he 120 00:06:11,960 --> 00:06:13,880 Speaker 1: actually saw the ad, and so on and so forth. 121 00:06:13,960 --> 00:06:17,440 Speaker 1: So some of the metrics around um proving the effect 122 00:06:17,680 --> 00:06:21,479 Speaker 1: effectiveness of advertising a little bit better for digital advertising. However, 123 00:06:22,120 --> 00:06:23,960 Speaker 1: as we saw with the Super Bowl last night. You 124 00:06:24,040 --> 00:06:27,039 Speaker 1: put a big audience together on television and advertisers will 125 00:06:27,120 --> 00:06:29,599 Speaker 1: line up to pay five million dollars for a thirty 126 00:06:29,640 --> 00:06:32,760 Speaker 1: second spot. So the real challenge for the traditional media 127 00:06:32,839 --> 00:06:35,320 Speaker 1: is to be able to again continue to aggregate big 128 00:06:35,360 --> 00:06:38,880 Speaker 1: audiences and biggest different today than it was thirty years ago, 129 00:06:39,680 --> 00:06:42,599 Speaker 1: but you know, aggregate big audiences and advertisers will show 130 00:06:42,680 --> 00:06:46,520 Speaker 1: up with ad dollars. So the television business is still 131 00:06:46,520 --> 00:06:50,880 Speaker 1: performing very well relative to the Internet two reasons. One 132 00:06:51,000 --> 00:06:55,000 Speaker 1: it's video and number two, it's still big audiences aggregated. 133 00:06:55,720 --> 00:06:58,400 Speaker 1: I just keep thinking of the sunk costs that exist 134 00:06:58,640 --> 00:07:02,240 Speaker 1: in let's say, the television and broadcast distribution markets and 135 00:07:02,279 --> 00:07:06,360 Speaker 1: the cable markets as opposed to the Internet based systems 136 00:07:06,440 --> 00:07:10,760 Speaker 1: that Facebook is able to take advantage of. Right, yeah, exactly. 137 00:07:10,800 --> 00:07:12,920 Speaker 1: I mean they're piggybacking. I kind of wonder at what 138 00:07:13,040 --> 00:07:15,920 Speaker 1: point does someone play hardball with Facebook and said, you know, 139 00:07:16,120 --> 00:07:19,680 Speaker 1: you're not gonna have anything to write about unless you 140 00:07:20,120 --> 00:07:23,440 Speaker 1: recognize that we're providing that content. Well, yeah, Facebook. You know, 141 00:07:23,440 --> 00:07:26,440 Speaker 1: Mark Zuckerberg just recently in the last one or two quarters, 142 00:07:26,520 --> 00:07:30,040 Speaker 1: has really changed how he's positioning the company both too, 143 00:07:30,360 --> 00:07:32,280 Speaker 1: just just to the world in general. He's calling it 144 00:07:32,320 --> 00:07:35,960 Speaker 1: a video first company, a video centric company. He recognizes 145 00:07:36,080 --> 00:07:39,760 Speaker 1: that the fastest growing advertising stream on the Internet is 146 00:07:39,880 --> 00:07:42,680 Speaker 1: online video, and so he is positioning his company pivot 147 00:07:43,000 --> 00:07:45,880 Speaker 1: pivoting his company there, So a Snapchat, a company that's 148 00:07:45,880 --> 00:07:48,880 Speaker 1: about the go public, really focusing on video. Yeah, well, 149 00:07:48,920 --> 00:07:51,400 Speaker 1: I mean, who wants to read anymore anyway? Paul Sweeney, 150 00:07:51,440 --> 00:07:53,560 Speaker 1: thank you so much for joining us. Paul Sweeney, US 151 00:07:53,640 --> 00:07:57,880 Speaker 1: director of Research and senior Senior Media and Internet analyst 152 00:07:58,160 --> 00:08:00,960 Speaker 1: uh Fort Bloomberg Intelligence. I'm just still stuck on that 153 00:08:02,320 --> 00:08:06,800 Speaker 1: growth in internet ad spending. It just fifty billion dollars 154 00:08:06,800 --> 00:08:21,240 Speaker 1: a year. Now, I'd like to learn a little bit 155 00:08:21,240 --> 00:08:25,600 Speaker 1: more about Chipotle Mexican grill because the shares, Lisa Abramowitz 156 00:08:25,680 --> 00:08:28,360 Speaker 1: are down a little bit more than let's say, five 157 00:08:28,480 --> 00:08:31,600 Speaker 1: five and a half percent, depending upon whether you're looking 158 00:08:31,640 --> 00:08:34,960 Speaker 1: at the open today or the clothes on Friday. Why, Well, 159 00:08:35,040 --> 00:08:36,920 Speaker 1: it was a cover story in Barrens and I just 160 00:08:36,960 --> 00:08:40,600 Speaker 1: got to ask our next guest, Scott rothboard president, founder 161 00:08:40,679 --> 00:08:45,840 Speaker 1: lake US at Management, also Professor of Finance at Seton 162 00:08:45,880 --> 00:08:50,600 Speaker 1: Hall University's uh Stillman's School of Business, Scott rothboard, uh 163 00:08:50,960 --> 00:08:55,199 Speaker 1: C c MG. What what's the future for Chipotle? The 164 00:08:55,240 --> 00:08:59,600 Speaker 1: future for Chipolt is that it needs to seriously take 165 00:08:59,600 --> 00:09:03,560 Speaker 1: a step back and re evaluate its business model. And 166 00:09:03,600 --> 00:09:05,720 Speaker 1: this is the company that was far ahead of the 167 00:09:05,760 --> 00:09:09,559 Speaker 1: rest of the pack for many years. It was trading 168 00:09:09,640 --> 00:09:14,720 Speaker 1: at a multiple which was almost twice, if not more 169 00:09:14,800 --> 00:09:21,280 Speaker 1: than its growth rate. They had some problems two years ago. Um, 170 00:09:21,320 --> 00:09:24,760 Speaker 1: but management pretty mild, I must say. They had problems. Yeah, 171 00:09:24,800 --> 00:09:28,160 Speaker 1: they had they had Okay, um people were sickened by 172 00:09:28,480 --> 00:09:31,720 Speaker 1: eating some of their food. Well, there was two problems. 173 00:09:32,320 --> 00:09:35,120 Speaker 1: One was that some people who ate their food UM 174 00:09:35,360 --> 00:09:38,079 Speaker 1: did catch some sort of disease. And also there was 175 00:09:38,120 --> 00:09:41,679 Speaker 1: a problem with sourcing UM their pork products. Right now, 176 00:09:41,679 --> 00:09:46,040 Speaker 1: there's a company whose mantra is food with integrity. Well, 177 00:09:46,960 --> 00:09:50,880 Speaker 1: people are saying, well, where's the integrity here? Um, And 178 00:09:50,880 --> 00:09:54,360 Speaker 1: and so it's been it's been on a decline. Uh. 179 00:09:54,520 --> 00:09:58,640 Speaker 1: They try to support the business and the stock through 180 00:09:58,960 --> 00:10:02,240 Speaker 1: couponing and and and through other methods. Where you have 181 00:10:02,280 --> 00:10:05,400 Speaker 1: along the stock. I was long the stock years ago, okay, 182 00:10:05,440 --> 00:10:07,839 Speaker 1: And it was in your road, the wave road, the 183 00:10:07,840 --> 00:10:11,680 Speaker 1: wave Okay, Now I went short a few weeks ago. 184 00:10:11,800 --> 00:10:14,120 Speaker 1: You went short to staff. Um, you don't think they 185 00:10:14,120 --> 00:10:17,480 Speaker 1: can really pull out of this. I think this stock 186 00:10:17,640 --> 00:10:21,600 Speaker 1: is going to have to basically gravitate down towards an 187 00:10:21,679 --> 00:10:25,480 Speaker 1: industry multiple of eighteen to two times earning. It's about 188 00:10:25,559 --> 00:10:28,240 Speaker 1: four bucks to share right now. If you look at 189 00:10:28,280 --> 00:10:32,320 Speaker 1: the broader backdrop, Scott, you're not particularly positive generally on 190 00:10:32,360 --> 00:10:36,840 Speaker 1: the whole restaurant sector. No, no, we're not. We We 191 00:10:36,559 --> 00:10:40,040 Speaker 1: we run a special restaurant and food portfolio. I also 192 00:10:40,080 --> 00:10:43,560 Speaker 1: have a newsletter on the restaurant and food industry, and 193 00:10:43,800 --> 00:10:46,960 Speaker 1: we are now in terms of restaurants themselves, we're at 194 00:10:47,000 --> 00:10:50,760 Speaker 1: the lowest exposure to restaurants in many years. Uh. We 195 00:10:50,960 --> 00:10:53,040 Speaker 1: just don't think there's value. They had a tremendous run 196 00:10:53,360 --> 00:10:56,640 Speaker 1: at a part of last year, probably got overvalued. Uh 197 00:10:56,679 --> 00:10:59,800 Speaker 1: and we just don't see that the appetites, so to speak, 198 00:11:00,480 --> 00:11:04,840 Speaker 1: for the consumer, is there in the restaurant space. Um 199 00:11:05,000 --> 00:11:09,000 Speaker 1: and so um Uh So we're we're it has begun 200 00:11:09,080 --> 00:11:11,040 Speaker 1: to pull back this year. We think it will pull 201 00:11:11,080 --> 00:11:13,360 Speaker 1: back a little bit more. And I'm expecting, just like 202 00:11:13,480 --> 00:11:17,160 Speaker 1: last year, back ended year for the restaurant stocks. But 203 00:11:17,200 --> 00:11:19,840 Speaker 1: when I look at something like Chapult, that stock has 204 00:11:19,960 --> 00:11:23,040 Speaker 1: has has bigger problems, and I see this really coming 205 00:11:23,040 --> 00:11:26,480 Speaker 1: down even further. Um. And I think the management needs 206 00:11:26,520 --> 00:11:29,040 Speaker 1: to do a few things. First of all, re evaluate 207 00:11:29,520 --> 00:11:33,840 Speaker 1: its menu, which is stale. UM. It needs to also 208 00:11:34,559 --> 00:11:40,240 Speaker 1: um stop moving into other concepts like chophouse, Asian fusion 209 00:11:40,760 --> 00:11:43,360 Speaker 1: uh and a pizza concept. I mean, there's enough pizza 210 00:11:43,440 --> 00:11:46,240 Speaker 1: concepts out there. UM. And I just think I just 211 00:11:46,280 --> 00:11:48,360 Speaker 1: think that that that they've lost their way, and that 212 00:11:48,480 --> 00:11:51,480 Speaker 1: that happens to a lot of companies. All Right, tell 213 00:11:51,520 --> 00:11:55,360 Speaker 1: me company that's found their way that most investors have overlooked. 214 00:11:56,440 --> 00:12:00,040 Speaker 1: Company is foundl whether that most investors have overlooked in 215 00:11:59,760 --> 00:12:02,200 Speaker 1: the restaurant space or any space. I was looking at 216 00:12:02,360 --> 00:12:07,520 Speaker 1: at Craft Higns, but you you tell us, well, I 217 00:12:07,520 --> 00:12:11,680 Speaker 1: I really think that companies you should be focusing in 218 00:12:11,800 --> 00:12:14,600 Speaker 1: on are lowered down in the food chain. Go for 219 00:12:14,760 --> 00:12:17,080 Speaker 1: I think we've got to look at the agricultural companies, 220 00:12:17,480 --> 00:12:22,080 Speaker 1: and we own some of them, Archid Daniels, Midland, Bungee, UM, 221 00:12:22,320 --> 00:12:26,880 Speaker 1: the Anderson's companies that are are are processing manufacturing the food. 222 00:12:26,960 --> 00:12:29,719 Speaker 1: Because we still need food, whether we're gonna eat it 223 00:12:29,760 --> 00:12:32,080 Speaker 1: at a restaurant or get it at home. Okay, we 224 00:12:32,120 --> 00:12:34,120 Speaker 1: still need the food, and we still need the process 225 00:12:34,200 --> 00:12:38,199 Speaker 1: and produced the basic food stuffs. Although how vulnerable are 226 00:12:38,320 --> 00:12:43,840 Speaker 1: these companies two changes in policy, particularly trade, I think 227 00:12:44,000 --> 00:12:50,040 Speaker 1: that they are more vulnerable to commodity prices, and commodity 228 00:12:50,040 --> 00:12:55,280 Speaker 1: prices are very much um in tune with currency prices. Um. 229 00:12:55,400 --> 00:12:58,280 Speaker 1: But again there's more to it than that, because when 230 00:12:58,320 --> 00:13:01,240 Speaker 1: you look at these companies that the commodity prices have 231 00:13:01,480 --> 00:13:06,479 Speaker 1: a great deal of exposure to things such as weather patterns. Um. 232 00:13:06,520 --> 00:13:10,959 Speaker 1: So So there's do you buy these home delivery businesses? 233 00:13:11,000 --> 00:13:12,760 Speaker 1: You know where they do make the food and it's 234 00:13:12,800 --> 00:13:16,520 Speaker 1: delivered to your home that you cook it at home, right, Yes, 235 00:13:17,400 --> 00:13:20,440 Speaker 1: I think that's that's a very urban concept. I think 236 00:13:20,440 --> 00:13:23,080 Speaker 1: there's more to the world than just New York in 237 00:13:23,240 --> 00:13:26,959 Speaker 1: l A and Chicago and um. You know I I 238 00:13:27,920 --> 00:13:31,000 Speaker 1: live now full time out in Las Vegas. Um. We 239 00:13:31,120 --> 00:13:33,160 Speaker 1: do still have a home here in New Jersey and 240 00:13:33,240 --> 00:13:36,120 Speaker 1: upstate New York. UM. I think when you look in 241 00:13:36,200 --> 00:13:40,480 Speaker 1: between the coasts, there's just no appetite, so to speak. Again, 242 00:13:40,520 --> 00:13:42,240 Speaker 1: I have to use that term for for for those 243 00:13:42,240 --> 00:13:46,160 Speaker 1: types of concepts. Um. Look, I think open table was 244 00:13:46,200 --> 00:13:48,920 Speaker 1: a great idea, UM and that was taken over by Priceline, 245 00:13:48,920 --> 00:13:52,160 Speaker 1: which we own. Thank you so much. Scott Rothbert, president 246 00:13:52,240 --> 00:13:55,960 Speaker 1: and founder of Lakeview Asset Management UH in New Jersey 247 00:13:56,200 --> 00:14:09,240 Speaker 1: and also Las Vegas, also a professor Aton Hall University. 248 00:14:11,440 --> 00:14:13,440 Speaker 1: P and L is brought to you by proper Cloth, 249 00:14:13,520 --> 00:14:16,640 Speaker 1: the leader in men's custom shirts. At proper cloth dot com, 250 00:14:16,760 --> 00:14:20,120 Speaker 1: ordering custom shirts has never been easier. 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I 260 00:14:59,000 --> 00:15:02,080 Speaker 1: want to bring in h John woven Smith, president of 261 00:15:02,160 --> 00:15:05,480 Speaker 1: Genko Shipping in New York City. UH and John, this 262 00:15:05,520 --> 00:15:07,200 Speaker 1: has been sort of one of the big mysteries the 263 00:15:07,320 --> 00:15:10,600 Speaker 1: dry ball market for UH. Several years after the crisis 264 00:15:10,840 --> 00:15:13,640 Speaker 1: was really kind of sounding alarms about the state of 265 00:15:13,720 --> 00:15:15,840 Speaker 1: the global economy, we've seen a little bit of a recovery. 266 00:15:16,240 --> 00:15:18,400 Speaker 1: What is it telling us right now, Well, what it's 267 00:15:18,440 --> 00:15:21,800 Speaker 1: telling is is that we are continuing to see growth 268 00:15:21,840 --> 00:15:24,560 Speaker 1: on the Chinese side, iron ore and coal going into China. 269 00:15:24,840 --> 00:15:26,640 Speaker 1: You know, one of the one of the big misnomers 270 00:15:26,720 --> 00:15:30,040 Speaker 1: I think is that as freight rates um collapsed in 271 00:15:30,120 --> 00:15:32,480 Speaker 1: dry ball shipping and probably bottomed in the first quarter 272 00:15:32,480 --> 00:15:36,160 Speaker 1: of two thousand sixteen. It was not necessarily a global 273 00:15:36,320 --> 00:15:39,160 Speaker 1: demand issue. It was more of the supply of ships 274 00:15:39,160 --> 00:15:41,840 Speaker 1: that are on the water. The sector was overbuilt, and 275 00:15:41,880 --> 00:15:44,400 Speaker 1: so now what we're seeing is those ships are being 276 00:15:44,520 --> 00:15:47,440 Speaker 1: absorbed into the market from growth in demand. We're seeing 277 00:15:47,480 --> 00:15:50,440 Speaker 1: a real slow down on the number of ships that 278 00:15:50,480 --> 00:15:53,640 Speaker 1: are that are delivering. So the supply and demandant balance 279 00:15:54,280 --> 00:15:57,720 Speaker 1: is finally starting to come back into play. So look 280 00:15:57,840 --> 00:16:02,200 Speaker 1: forward about four orders and tell me where you think 281 00:16:02,200 --> 00:16:04,120 Speaker 1: you're going to be, because I mean, I'm going back, 282 00:16:04,480 --> 00:16:08,400 Speaker 1: and we go back a long time. So two thousand fourteen, Uh, 283 00:16:08,560 --> 00:16:11,760 Speaker 1: Jenco stock was a lot different than it is today. 284 00:16:11,760 --> 00:16:15,720 Speaker 1: It's not, you know, nine dollars a share, but this 285 00:16:15,840 --> 00:16:19,000 Speaker 1: was you know, two stock at one time. Yeah, a lot, 286 00:16:19,120 --> 00:16:21,120 Speaker 1: a lot has happened a lot of a lot of 287 00:16:21,160 --> 00:16:24,240 Speaker 1: ships have passed under that bridge. A lot has happening. Again, 288 00:16:24,280 --> 00:16:26,880 Speaker 1: as I said, it really has been a supply issue. 289 00:16:26,920 --> 00:16:30,120 Speaker 1: There were so many ships that were delivered two thousand fourteen, 290 00:16:30,200 --> 00:16:34,680 Speaker 1: two thousand fifteen, and even last year, and now that 291 00:16:34,640 --> 00:16:37,920 Speaker 1: that delivery schedule is really starting to come off. Just 292 00:16:37,960 --> 00:16:40,160 Speaker 1: to give me example, you know, this is the lowest 293 00:16:40,320 --> 00:16:43,240 Speaker 1: order book that we have seen since two thousand three, 294 00:16:43,280 --> 00:16:45,840 Speaker 1: with only nine percent of the fleet on order, and 295 00:16:45,880 --> 00:16:48,240 Speaker 1: we only expect one to two percent of the fleet 296 00:16:48,280 --> 00:16:51,200 Speaker 1: delivering this year. And you back that up on the 297 00:16:51,240 --> 00:16:54,280 Speaker 1: demand side, where you're talking two to three percent growth. 298 00:16:54,320 --> 00:16:57,800 Speaker 1: So again you're finally starting to see the beginnings of 299 00:16:57,840 --> 00:17:00,600 Speaker 1: a of a cyclical recovery. Do you think that some 300 00:17:00,680 --> 00:17:04,680 Speaker 1: of this protectionist UH sort of wave that's sweeping a 301 00:17:04,760 --> 00:17:08,320 Speaker 1: lot of different countries and this feeling of anti global 302 00:17:08,400 --> 00:17:13,000 Speaker 1: trade could potentially derail this recovery that we're seeing. I 303 00:17:13,040 --> 00:17:15,040 Speaker 1: think what you have to what you have to focus 304 00:17:15,080 --> 00:17:19,120 Speaker 1: on is is think about what China is actually importing UM. 305 00:17:19,160 --> 00:17:22,960 Speaker 1: And by the way, with the exception of of soybeans, UM, 306 00:17:23,040 --> 00:17:26,000 Speaker 1: really nothing is being exported from the US into China. 307 00:17:26,280 --> 00:17:28,879 Speaker 1: It's mostly coming out of Brazil into China on the 308 00:17:28,920 --> 00:17:32,320 Speaker 1: iron or Front, Australia into China on the iron or Front, 309 00:17:32,560 --> 00:17:35,080 Speaker 1: Australia into China on the coal front, and those are 310 00:17:35,119 --> 00:17:37,520 Speaker 1: the growth areas that that we're seeing. So I don't 311 00:17:37,760 --> 00:17:41,680 Speaker 1: I don't feel that protectionism, whatever may come down the road, 312 00:17:42,040 --> 00:17:45,360 Speaker 1: would affect those trades. And the interesting thing is what 313 00:17:45,400 --> 00:17:49,480 Speaker 1: we're seeing is volume increases, particularly now out of Brazil. 314 00:17:49,800 --> 00:17:52,760 Speaker 1: Most of the volume increases over the last few years 315 00:17:52,760 --> 00:17:55,760 Speaker 1: has come out of Australia, which is a shorter trade 316 00:17:55,800 --> 00:17:58,720 Speaker 1: route into China, and they've been taking market share away 317 00:17:58,760 --> 00:18:01,919 Speaker 1: from the Brazilian producers. Now the Brazilian producers look like 318 00:18:01,920 --> 00:18:03,399 Speaker 1: they're going to be able to claw back some of 319 00:18:03,400 --> 00:18:06,960 Speaker 1: that market share. And Brazil to China takes twice as long, 320 00:18:07,040 --> 00:18:09,240 Speaker 1: so these ships are out of action for for longer 321 00:18:09,280 --> 00:18:15,440 Speaker 1: and that should lift freight rates. The specific routs that 322 00:18:15,760 --> 00:18:17,800 Speaker 1: that you're taking just give people a little idea of 323 00:18:17,840 --> 00:18:20,320 Speaker 1: you know, what you're actually moving, how long some you 324 00:18:20,320 --> 00:18:22,440 Speaker 1: know the ships, just how big is the fleet and 325 00:18:22,480 --> 00:18:25,600 Speaker 1: so on. Well, so jenko Um just taking a step 326 00:18:25,600 --> 00:18:28,560 Speaker 1: back for a second. We actually did raise equity and 327 00:18:28,680 --> 00:18:31,679 Speaker 1: refinance our bank debt in November of last year, and 328 00:18:31,720 --> 00:18:35,000 Speaker 1: the whole idea was to position the company in a 329 00:18:35,080 --> 00:18:38,200 Speaker 1: position of strength for recovering markets. So you look at 330 00:18:38,200 --> 00:18:40,840 Speaker 1: what Jenko is doing. We have sixty ships today on 331 00:18:40,920 --> 00:18:43,320 Speaker 1: the water. We have our very large ships which are 332 00:18:43,440 --> 00:18:46,000 Speaker 1: cape size ships that are predominantly shipping iron ore and 333 00:18:46,080 --> 00:18:50,159 Speaker 1: coal again from Brazilian too China, Australian to China. And 334 00:18:50,200 --> 00:18:52,399 Speaker 1: then we also have exposure to what we call the 335 00:18:52,440 --> 00:18:56,359 Speaker 1: minor bulks, which is your grains, your your GYP sum, 336 00:18:56,400 --> 00:18:59,560 Speaker 1: your sugar, your salt, cement, those type of products that 337 00:18:59,600 --> 00:19:01,680 Speaker 1: were also of seeing growth on in terms of just 338 00:19:01,840 --> 00:19:05,320 Speaker 1: normal GDP growth around the world. So you have amazing 339 00:19:05,359 --> 00:19:08,879 Speaker 1: insight into what the true growth is in China. I 340 00:19:08,920 --> 00:19:12,560 Speaker 1: would imagine you're singularly positioned to do that. UM, do 341 00:19:12,600 --> 00:19:15,080 Speaker 1: you think that a lot of the discussion that has 342 00:19:15,160 --> 00:19:19,880 Speaker 1: been happening about uh China's economy slowing down materially and 343 00:19:20,000 --> 00:19:22,320 Speaker 1: that any growth that we're seeing is really coming from 344 00:19:22,560 --> 00:19:25,560 Speaker 1: government stimulus and their money propping up in markets. Do 345 00:19:25,560 --> 00:19:28,000 Speaker 1: you think that that's accurate or are we actually seeing, 346 00:19:28,200 --> 00:19:31,960 Speaker 1: um some studying of of of growth in China. I 347 00:19:31,960 --> 00:19:34,160 Speaker 1: think you're seeing study of growth in China, but make 348 00:19:34,240 --> 00:19:37,480 Speaker 1: no mistake. A lot of this is infrastructure spending, right, 349 00:19:37,520 --> 00:19:39,960 Speaker 1: that is what drives the steel industry, that is what 350 00:19:40,119 --> 00:19:44,359 Speaker 1: drives iron ore imports with public money, with with public money. 351 00:19:44,400 --> 00:19:48,159 Speaker 1: That's absolutely correct. Um And uh, you know what what 352 00:19:48,240 --> 00:19:50,600 Speaker 1: has also been happening though, is you've you've seen some 353 00:19:50,640 --> 00:19:54,879 Speaker 1: consolidation on the steel industry, it moving more into private hands, 354 00:19:55,000 --> 00:19:58,000 Speaker 1: which is obviously good for the economy as a whole. Um. 355 00:19:58,080 --> 00:20:00,600 Speaker 1: And then just switching gears on the coal side again, 356 00:20:01,440 --> 00:20:07,080 Speaker 1: cole volumes into China. Imports dropped thirty in two thousand fifteen. 357 00:20:07,760 --> 00:20:11,359 Speaker 1: There for two thousand sixteen they've actually been up, so 358 00:20:11,400 --> 00:20:13,679 Speaker 1: that has actually been helpful as well. And that is 359 00:20:13,680 --> 00:20:17,000 Speaker 1: a cleaner product the coal coming out of Australia going 360 00:20:17,040 --> 00:20:20,560 Speaker 1: into China than actual domestic Chinese coal, so that's been 361 00:20:20,560 --> 00:20:25,880 Speaker 1: helpful also. Any uh, any pushback, any thoughts about the 362 00:20:26,320 --> 00:20:31,040 Speaker 1: new trade policies as expressed by President Trump. I mean, 363 00:20:31,080 --> 00:20:33,119 Speaker 1: you're traveling around the world, you know a lot of 364 00:20:33,119 --> 00:20:37,000 Speaker 1: people in the high levels of business. What's been the reaction. Look, 365 00:20:37,040 --> 00:20:39,600 Speaker 1: I think I think it's a cautionary reaction. I mean, 366 00:20:39,800 --> 00:20:43,399 Speaker 1: as I said, in terms of dry bulk shipping. Um, 367 00:20:43,520 --> 00:20:46,000 Speaker 1: we don't see too much of an effect that will 368 00:20:46,000 --> 00:20:48,320 Speaker 1: take place because the Chinese will be importing ourn or 369 00:20:48,359 --> 00:20:51,880 Speaker 1: from Brazil and Australia. The coal will be coming in. UM. 370 00:20:51,920 --> 00:20:56,200 Speaker 1: On the grain side, China still needs, we still need soybeans. 371 00:20:56,359 --> 00:20:59,040 Speaker 1: Those will come in. UM. I think the real question 372 00:20:59,119 --> 00:21:01,719 Speaker 1: is what happens on on the finish good side, right, 373 00:21:01,800 --> 00:21:04,600 Speaker 1: come from China into into the US. But that's a 374 00:21:04,600 --> 00:21:07,760 Speaker 1: different industry from what we're involved in. What's the biggest 375 00:21:07,840 --> 00:21:11,080 Speaker 1: risk for you this year? Look? I think UM, I 376 00:21:11,119 --> 00:21:13,880 Speaker 1: think the biggest risk and it's always been this and 377 00:21:14,040 --> 00:21:17,520 Speaker 1: that is China, right and and the steel industry. Um. Again, 378 00:21:17,640 --> 00:21:20,919 Speaker 1: we're seeing firm steel prices, we're seeing growth on the 379 00:21:20,960 --> 00:21:24,119 Speaker 1: steel side, and all of that. You know, you you 380 00:21:24,200 --> 00:21:27,480 Speaker 1: then get into the iron ore imports coming into China. 381 00:21:27,520 --> 00:21:30,439 Speaker 1: And I can't stress this enough because you know, you 382 00:21:30,520 --> 00:21:32,919 Speaker 1: see a lot of news articles out there that talk about, 383 00:21:33,240 --> 00:21:36,000 Speaker 1: you know, China slowing down. But we've saw iron and 384 00:21:36,040 --> 00:21:38,760 Speaker 1: imports up six and a half percent last year. We 385 00:21:38,800 --> 00:21:42,000 Speaker 1: expect growth rates of four to five percent this year. 386 00:21:42,320 --> 00:21:43,840 Speaker 1: And as I said, a lot of that's going to 387 00:21:43,880 --> 00:21:45,720 Speaker 1: be coming out of Brazil. On the growth side, which 388 00:21:45,800 --> 00:21:47,719 Speaker 1: is a longer whole trade. You have to wonder how 389 00:21:47,800 --> 00:21:50,520 Speaker 1: much of that is coming from a sustainable growth and 390 00:21:50,560 --> 00:22:05,520 Speaker 1: government spending or not. We shall see US banks, particularly 391 00:22:05,560 --> 00:22:09,040 Speaker 1: the sixth biggest, could return more than one hundred billion 392 00:22:09,160 --> 00:22:13,800 Speaker 1: dollars in capital to investors through share buy backs and 393 00:22:14,000 --> 00:22:17,960 Speaker 1: other measures as a result of the removal of some 394 00:22:18,080 --> 00:22:19,960 Speaker 1: of the Dodd Frank provisions. I want to bring in 395 00:22:20,280 --> 00:22:24,280 Speaker 1: Charles Peabody, managing director and research analyst at Compass Point 396 00:22:24,359 --> 00:22:26,399 Speaker 1: Research and Trading in New York City, to get a 397 00:22:26,440 --> 00:22:30,040 Speaker 1: sense of how realistic it is that shareholders will see 398 00:22:30,080 --> 00:22:35,920 Speaker 1: this kind of incredible, uh capital redistribution back to them. Charles, 399 00:22:36,000 --> 00:22:38,040 Speaker 1: do you think that this sort of seems like a 400 00:22:38,160 --> 00:22:43,040 Speaker 1: likely possibility for shareholders in the short term? In the 401 00:22:43,080 --> 00:22:47,159 Speaker 1: short term, no, um, you know, over an extended period 402 00:22:47,160 --> 00:22:51,720 Speaker 1: of time, it's it's likely, very possible. But if you 403 00:22:51,800 --> 00:22:54,320 Speaker 1: take City Group, which I think in that article said 404 00:22:54,560 --> 00:22:57,719 Speaker 1: they had access of twenty seven point five billion dollars 405 00:22:57,720 --> 00:23:02,720 Speaker 1: of capital, that would require them reducing their common equity 406 00:23:02,800 --> 00:23:06,600 Speaker 1: Tier one ratio by two basis points. And I don't 407 00:23:06,640 --> 00:23:11,560 Speaker 1: think the regulators view the company is that less complex 408 00:23:11,760 --> 00:23:15,480 Speaker 1: today to to allow that. Even if there is some 409 00:23:15,560 --> 00:23:19,280 Speaker 1: kind of overhaulved at Frank. Yeah, even if there is 410 00:23:19,320 --> 00:23:21,760 Speaker 1: some over I mean, a two hundred based point reduction 411 00:23:21,800 --> 00:23:24,880 Speaker 1: in their common equity Tier one capital ratio would get 412 00:23:24,880 --> 00:23:27,320 Speaker 1: you that twenty seven billion. That's a lot of capital 413 00:23:28,240 --> 00:23:32,320 Speaker 1: um decline. And again, I don't know what the assumptions 414 00:23:32,320 --> 00:23:36,320 Speaker 1: are behind this, but you know there is a there 415 00:23:36,359 --> 00:23:39,000 Speaker 1: seems to be an assumption that the world is a 416 00:23:39,040 --> 00:23:44,760 Speaker 1: steady state, positive place, and therefore earnings growing, capital grows. Well, 417 00:23:44,800 --> 00:23:47,359 Speaker 1: we saw in the fourth quarter that capital was actually 418 00:23:47,400 --> 00:23:50,720 Speaker 1: destroyed at both City Group and Bank America because of 419 00:23:50,880 --> 00:23:53,920 Speaker 1: higher rates. I want you to go a little bit 420 00:23:53,920 --> 00:23:57,280 Speaker 1: more deeply into that the connection between those higher rates 421 00:23:57,520 --> 00:24:03,040 Speaker 1: and the capital requirements. But also just maybe you can 422 00:24:03,119 --> 00:24:08,119 Speaker 1: help us understand the value that we're talking about. Is 423 00:24:08,119 --> 00:24:11,640 Speaker 1: it based on analysis or is it based on last trade? 424 00:24:11,680 --> 00:24:15,880 Speaker 1: For example, Tim, I'm not sure what you mean by 425 00:24:16,000 --> 00:24:18,520 Speaker 1: that last question. Well, just that just the fact that 426 00:24:18,560 --> 00:24:22,120 Speaker 1: you know, when you don't have a marketplace for many 427 00:24:22,160 --> 00:24:25,439 Speaker 1: of the securities or many of the assets, uh, that 428 00:24:25,480 --> 00:24:29,359 Speaker 1: can affect their value. Oh. Absolutely, I mean, you know 429 00:24:30,240 --> 00:24:33,400 Speaker 1: the two questions you asked. One in terms of the 430 00:24:33,640 --> 00:24:37,240 Speaker 1: white capital is destroyed as rate rise as you create 431 00:24:37,280 --> 00:24:42,480 Speaker 1: these unrealized losses in your debt security portfolio. Um and 432 00:24:42,520 --> 00:24:46,000 Speaker 1: there are there are other minor adjustments as well, um 433 00:24:46,119 --> 00:24:49,919 Speaker 1: and and so when you assume, you know higher earnings power, 434 00:24:50,040 --> 00:24:53,240 Speaker 1: you're probably assuming a higher rate environment and better margins, 435 00:24:53,800 --> 00:24:57,080 Speaker 1: but that has unintended consequences to what happens to your 436 00:24:57,560 --> 00:24:59,880 Speaker 1: shareholder's equity. So we saw a book value at both 437 00:25:00,040 --> 00:25:02,440 Speaker 1: of a in a city group decline in the fourth quarter, 438 00:25:02,520 --> 00:25:07,480 Speaker 1: and regulatory capital actually decline in absolute dollar terms. UM. So, 439 00:25:08,760 --> 00:25:11,840 Speaker 1: in terms of what you are alluding to, in a 440 00:25:12,160 --> 00:25:15,200 Speaker 1: environment where debt spreads wide now, which you I think 441 00:25:15,240 --> 00:25:20,280 Speaker 1: you'll see as the economic activity matures, um, you're going 442 00:25:20,280 --> 00:25:22,600 Speaker 1: to see a migration from what we call level one 443 00:25:22,600 --> 00:25:25,000 Speaker 1: assets to level two assets, to level three assets and 444 00:25:25,119 --> 00:25:27,600 Speaker 1: level three assets as they grow required that you hold 445 00:25:27,680 --> 00:25:31,040 Speaker 1: more capital that you can't return as much. Right, Charles, 446 00:25:31,160 --> 00:25:34,240 Speaker 1: We've heard some discussion that one provision of the Dodd 447 00:25:34,280 --> 00:25:36,720 Speaker 1: Frank Act that Congress is going to target will be 448 00:25:36,720 --> 00:25:41,200 Speaker 1: the vocal rule, which prohibits banks from treating with their 449 00:25:41,240 --> 00:25:45,040 Speaker 1: own money. I'm wondering, from your perspective, do you think 450 00:25:45,080 --> 00:25:49,080 Speaker 1: that if the vocal rule is overturned, that the biggest 451 00:25:49,160 --> 00:25:53,040 Speaker 1: US banks would restart their prop trading desks and have 452 00:25:53,440 --> 00:25:56,680 Speaker 1: the desire to go back to using their own money 453 00:25:56,720 --> 00:26:00,600 Speaker 1: to make markets. You know, I think the banks want 454 00:26:01,359 --> 00:26:06,600 Speaker 1: reduced reporting requirements as it relates to their trading operations. UM. 455 00:26:06,640 --> 00:26:08,960 Speaker 1: But yeah, I think there are pockets where they will. 456 00:26:09,119 --> 00:26:12,720 Speaker 1: For example, I've heard the banks UM say they would 457 00:26:12,760 --> 00:26:17,480 Speaker 1: like to be UM more free in how they trade 458 00:26:17,520 --> 00:26:20,879 Speaker 1: and hedge their treasury portfolios. As you know, under the 459 00:26:20,920 --> 00:26:24,159 Speaker 1: vocal rule, they still can do take proprietary positions in 460 00:26:24,240 --> 00:26:27,760 Speaker 1: cash trading, but they can in derivatives trading, and so 461 00:26:28,040 --> 00:26:29,760 Speaker 1: they would like, I think, to be able to use 462 00:26:29,840 --> 00:26:34,720 Speaker 1: the derivatives trading of treasuries to hedge and their positioning. 463 00:26:35,640 --> 00:26:38,680 Speaker 1: And that would be good for a volume in those contracts, 464 00:26:38,720 --> 00:26:41,359 Speaker 1: I would imagine. Right, so we're talking, they probably would 465 00:26:41,400 --> 00:26:44,000 Speaker 1: them Yes, I think you're right, and and add some 466 00:26:44,040 --> 00:26:46,879 Speaker 1: liquidity to the marketplace. What about other markets? Do you 467 00:26:46,880 --> 00:26:48,679 Speaker 1: think that they're going to start of rev up their 468 00:26:48,680 --> 00:26:52,679 Speaker 1: prop prop desks. I'd be surprised if they did it 469 00:26:52,760 --> 00:26:55,359 Speaker 1: in the commodity space, UM. As you know, most of 470 00:26:55,400 --> 00:26:59,880 Speaker 1: them did divest themselves of their physical commodity UM business. 471 00:27:00,200 --> 00:27:02,400 Speaker 1: You know, energy is probably one area where they might 472 00:27:02,520 --> 00:27:08,800 Speaker 1: come back. Um, but I think the CEOs are actually 473 00:27:09,119 --> 00:27:14,680 Speaker 1: thankful that they don't have to compete on a prop basis. Well, 474 00:27:14,720 --> 00:27:16,960 Speaker 1: it certainly levels the playing field if you can't play, 475 00:27:17,520 --> 00:27:21,760 Speaker 1: well done. Thanks very much, Charles Peabody, Managing Director, Research Annalysts, 476 00:27:21,800 --> 00:27:24,680 Speaker 1: Compass Point Research and Trading. I just got to say 477 00:27:24,720 --> 00:27:27,840 Speaker 1: that I've never met anyone who knows as much about 478 00:27:27,880 --> 00:27:37,399 Speaker 1: the banking industry as Charles Peabody. He's great. Thanks for 479 00:27:37,480 --> 00:27:40,120 Speaker 1: listening to the Bloomberg P and L podcast. You can 480 00:27:40,160 --> 00:27:44,560 Speaker 1: subscribe and listen to interviews at iTunes, SoundCloud, or whatever 481 00:27:44,880 --> 00:27:48,360 Speaker 1: podcast platform you prefer. I'm pim Fox. I'm out there 482 00:27:48,400 --> 00:27:51,439 Speaker 1: on Twitter at pim Fox. I'm out there on Twitter 483 00:27:51,560 --> 00:27:54,520 Speaker 1: at Lisa Abramo. It's one before the podcast. You can 484 00:27:54,520 --> 00:28:05,800 Speaker 1: always catch us worldwide on Bloomberg Radio. P and L 485 00:28:05,920 --> 00:28:07,879 Speaker 1: is brought to you by proper Cloth, a leader in 486 00:28:07,960 --> 00:28:11,400 Speaker 1: men's custom shirts, with proprietary smart sized technology and top 487 00:28:11,480 --> 00:28:15,160 Speaker 1: rated customer service. Ordering a custom shirt has never been easier. 488 00:28:15,440 --> 00:28:18,080 Speaker 1: Visit proper cloth dot com to order your first custom 489 00:28:18,160 --> 00:28:19,000 Speaker 1: shirt today.