1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,080 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Right now, 7 00:00:32,120 --> 00:00:35,080 Speaker 1: I want to dig a little bit into the distressed 8 00:00:35,360 --> 00:00:38,680 Speaker 1: debt market. George Schultz is chief executive officer of Schultz 9 00:00:38,680 --> 00:00:41,800 Speaker 1: Asset Management, which oversees about two million dollars and is 10 00:00:41,840 --> 00:00:44,839 Speaker 1: based in Purchase, New York. And George, you know, when 11 00:00:44,880 --> 00:00:47,519 Speaker 1: I talked to distressed debt investors, a lot of them 12 00:00:47,520 --> 00:00:49,720 Speaker 1: are tearing their hair out because the size of the 13 00:00:49,760 --> 00:00:53,400 Speaker 1: distressed debt market is shrunk to about the smallest since 14 00:00:53,600 --> 00:00:56,800 Speaker 1: right before the financial crisis, and it seems like there 15 00:00:56,800 --> 00:00:59,480 Speaker 1: just isn't enough to stress to go around. Are you trying? 16 00:00:59,520 --> 00:01:03,120 Speaker 1: Are you tear in your hair out? What's left of 17 00:01:03,120 --> 00:01:06,480 Speaker 1: it that I've already corned most of it out? But alright, then, 18 00:01:07,880 --> 00:01:11,080 Speaker 1: are there any opportunities right now? There are? There are, 19 00:01:11,120 --> 00:01:13,720 Speaker 1: There are a lot of opportunities, especially in the energy market. 20 00:01:13,760 --> 00:01:16,160 Speaker 1: A lot of companies in the oil and gas space 21 00:01:16,600 --> 00:01:19,399 Speaker 1: and in the coal industry have defaulted in the past 22 00:01:19,440 --> 00:01:22,360 Speaker 1: eighteen months, and many of them have emerged now. So 23 00:01:22,440 --> 00:01:26,160 Speaker 1: there are a lot of post reor equities trading as 24 00:01:26,160 --> 00:01:30,160 Speaker 1: we call them, companies that have restructured, gone through a 25 00:01:30,200 --> 00:01:33,720 Speaker 1: reorganization event and now trade as post reord equities, but 26 00:01:33,760 --> 00:01:36,839 Speaker 1: many of them aren't that well known. UM. Interestingly, many 27 00:01:36,880 --> 00:01:39,800 Speaker 1: of them are very cheap, but they're not in the 28 00:01:39,840 --> 00:01:43,759 Speaker 1: form of debt anymore. They're they're mostly trading as equities now. 29 00:01:46,520 --> 00:01:50,240 Speaker 1: Sure one is Energy twenty one, a company that's interesting 30 00:01:50,480 --> 00:01:54,880 Speaker 1: UH and much cheaper. There's another one, Sampson Resources that 31 00:01:54,880 --> 00:02:00,000 Speaker 1: that was formerly one of the largest natural gas leverage 32 00:02:00,120 --> 00:02:04,160 Speaker 1: bios ever restructured, came out of bankruptcy last year. There's 33 00:02:04,160 --> 00:02:05,720 Speaker 1: a lot of smaller ones, a lot of them aren't 34 00:02:05,760 --> 00:02:08,720 Speaker 1: that well known. And then there are some companies in 35 00:02:08,720 --> 00:02:12,959 Speaker 1: other industries that trade as UH post distress equities as well, 36 00:02:13,840 --> 00:02:18,000 Speaker 1: like for example, came out of restructuring several years ago, 37 00:02:18,040 --> 00:02:20,680 Speaker 1: and there's an interesting news with that today with a 38 00:02:20,760 --> 00:02:24,639 Speaker 1: potential Chinese investor looking to buy the company. Another one, 39 00:02:24,760 --> 00:02:30,000 Speaker 1: Hawaiian Telcom, which is a telecommunications company that restructured several 40 00:02:30,080 --> 00:02:34,200 Speaker 1: years ago and was recently sold to Cincinnati Bell at 41 00:02:34,200 --> 00:02:37,520 Speaker 1: a nice premium. And a third one also in a 42 00:02:37,520 --> 00:02:42,760 Speaker 1: different industry, Tropicana, which is a casino company that's been 43 00:02:42,800 --> 00:02:45,919 Speaker 1: that was restructured several years ago. UM had been trading 44 00:02:45,960 --> 00:02:50,040 Speaker 1: as post distress equity and most recently benefited from a 45 00:02:50,120 --> 00:02:52,440 Speaker 1: huge stock buy back. So there's plenty going on, it's 46 00:02:52,480 --> 00:02:55,919 Speaker 1: just not in the form of distress debt UM. It's 47 00:02:55,960 --> 00:02:59,880 Speaker 1: more post distress equities these days, although I would imagine 48 00:03:00,000 --> 00:03:02,240 Speaker 1: it you have a lot of competition because it seems 49 00:03:02,320 --> 00:03:06,839 Speaker 1: like investors are fighting for any scrap of an opportunity 50 00:03:06,919 --> 00:03:10,360 Speaker 1: they can find, just because of the incredibly high valuations 51 00:03:10,360 --> 00:03:14,080 Speaker 1: and public liquid markets right now. Have you found that 52 00:03:14,120 --> 00:03:16,400 Speaker 1: there is a lot of competition here or are these 53 00:03:16,400 --> 00:03:19,880 Speaker 1: opportunities too small and too speculative to really attract the 54 00:03:19,919 --> 00:03:25,320 Speaker 1: big money. I think they're too small for the big money. 55 00:03:25,360 --> 00:03:29,360 Speaker 1: A lot of the competition recently has been people pumping 56 00:03:29,400 --> 00:03:34,920 Speaker 1: money into big name ets and index funds UM and, 57 00:03:34,920 --> 00:03:38,400 Speaker 1: and there's also been a lot of chasing of returns 58 00:03:38,440 --> 00:03:40,920 Speaker 1: in the sixth income market. Now we're clearly in a 59 00:03:41,040 --> 00:03:45,640 Speaker 1: market where UH there's monetary tightening that's starting. UM interest 60 00:03:45,720 --> 00:03:48,160 Speaker 1: rates are still at very low levels, but we expect 61 00:03:48,160 --> 00:03:51,280 Speaker 1: them to rise. And now coming into the fall, it 62 00:03:51,280 --> 00:03:54,240 Speaker 1: looks like the SAID will be starting to reverse. It's 63 00:03:54,360 --> 00:03:58,160 Speaker 1: it's quantitative using program, and with that we expect six 64 00:03:58,240 --> 00:04:01,839 Speaker 1: income securities to trade off. So we think the best 65 00:04:01,840 --> 00:04:04,760 Speaker 1: opportunity right now is in equities, but but not in 66 00:04:04,880 --> 00:04:08,200 Speaker 1: blindly throwing money at et s and the largest companies 67 00:04:08,240 --> 00:04:12,120 Speaker 1: like Google and Facebook and Microsoft. Rather, I think it's 68 00:04:12,120 --> 00:04:15,400 Speaker 1: going to pay more to work as an active manager 69 00:04:15,600 --> 00:04:19,719 Speaker 1: and look for specific opportunities. And yes, sometimes they're smaller companies, 70 00:04:19,960 --> 00:04:23,480 Speaker 1: but the but the valuation there makes it worthwhile to 71 00:04:23,720 --> 00:04:27,080 Speaker 1: to focus there. How have you changed your mix of 72 00:04:27,279 --> 00:04:30,880 Speaker 1: investments to more heavily weight equities versus debt? I mean, 73 00:04:30,920 --> 00:04:34,400 Speaker 1: you're you completely out of your debt investments in preparation 74 00:04:34,560 --> 00:04:37,839 Speaker 1: for some kind of market disruption in the wake of 75 00:04:37,880 --> 00:04:40,440 Speaker 1: the end of QI or the beginning of the unwine. 76 00:04:40,440 --> 00:04:41,960 Speaker 1: I don't want to make it sound so dramatic, since 77 00:04:42,000 --> 00:04:45,040 Speaker 1: they want to put us to sleep with this unwined. Yeah, 78 00:04:45,040 --> 00:04:46,719 Speaker 1: we we have a decent amount of cash on the 79 00:04:46,720 --> 00:04:51,040 Speaker 1: sidelines ourselves right now. UM typically over a cycle, we 80 00:04:51,120 --> 00:04:55,400 Speaker 1: will our portfolios will evolve from being more heavily weighted 81 00:04:55,480 --> 00:04:58,400 Speaker 1: to distress debt when the default rate is high and 82 00:04:58,400 --> 00:05:01,560 Speaker 1: when the opportunities are plentiful too, when the default rate 83 00:05:01,600 --> 00:05:04,640 Speaker 1: drops and is expected to climb again, to focus more 84 00:05:04,680 --> 00:05:06,840 Speaker 1: on the equity side. So right now we're much more 85 00:05:06,880 --> 00:05:09,880 Speaker 1: focused on the equity side. I expect that going forward 86 00:05:09,920 --> 00:05:12,719 Speaker 1: as the faults start to rise again with with higher 87 00:05:12,760 --> 00:05:16,200 Speaker 1: interest rates, that's where we'll be shorting more equities and 88 00:05:16,279 --> 00:05:19,640 Speaker 1: eventually growing our fixed income book again. But right now 89 00:05:19,680 --> 00:05:21,880 Speaker 1: we're much more focused on equities and and and they 90 00:05:21,960 --> 00:05:26,000 Speaker 1: tend to be event driven because usually when equities traded 91 00:05:26,080 --> 00:05:29,440 Speaker 1: very cheap levels, good things happened to those companies over time, 92 00:05:29,839 --> 00:05:32,320 Speaker 1: and that's what we've seen recently with a few names 93 00:05:32,360 --> 00:05:36,039 Speaker 1: I mentioned earlier. Energy twenty one and Samson Resources caught 94 00:05:36,080 --> 00:05:38,520 Speaker 1: my attention in particular because I remember back in two thousand, 95 00:05:38,560 --> 00:05:41,960 Speaker 1: fourteen and two fifteen, these were just decimated. I mean, 96 00:05:41,960 --> 00:05:45,120 Speaker 1: it was sort of watching a sort of train wreck 97 00:05:45,200 --> 00:05:46,840 Speaker 1: in front of your eyes when you looked at the 98 00:05:47,040 --> 00:05:50,600 Speaker 1: debt prices of these particular companies during that time. I'm 99 00:05:50,640 --> 00:05:53,719 Speaker 1: sure they did go into bankruptcy, how much is your 100 00:05:53,800 --> 00:05:57,560 Speaker 1: wager on their out of bankruptcy equity? How much does 101 00:05:57,600 --> 00:06:00,560 Speaker 1: it depend on oil prices staying where they are or 102 00:06:00,880 --> 00:06:05,480 Speaker 1: going higher. Well, these are commodity companies and they definitely 103 00:06:06,000 --> 00:06:10,640 Speaker 1: are dependent on a good stable price of either natural 104 00:06:10,680 --> 00:06:14,520 Speaker 1: gas or oil depending on the company. But interestingly, for 105 00:06:14,560 --> 00:06:18,520 Speaker 1: those two companies, they benefit from having left behind massive 106 00:06:18,560 --> 00:06:22,160 Speaker 1: amount of debt when they're restructured. For Sampson, I think 107 00:06:22,160 --> 00:06:26,440 Speaker 1: it left behind about six billion of of of debt 108 00:06:27,160 --> 00:06:29,880 Speaker 1: in its restructuring and now there there's there's post re 109 00:06:30,040 --> 00:06:33,440 Speaker 1: or equity, but it is private. It doesn't trade uh 110 00:06:33,760 --> 00:06:36,560 Speaker 1: in too liquid of a fashion. Energy twenty one is 111 00:06:36,560 --> 00:06:39,200 Speaker 1: also a little bit less liquid. That company I believe 112 00:06:39,279 --> 00:06:42,240 Speaker 1: left behind about three billion in debt and other liabilities. 113 00:06:42,279 --> 00:06:45,760 Speaker 1: So the good news with commodity companies when their restructure 114 00:06:46,360 --> 00:06:49,240 Speaker 1: is yes, you're still dependent on a healthy commodity market, 115 00:06:49,680 --> 00:06:52,320 Speaker 1: but fortunately the balance sheet can be much cleaner, and 116 00:06:52,400 --> 00:06:55,200 Speaker 1: you basically get a fresh a fresh star at a 117 00:06:55,200 --> 00:06:57,600 Speaker 1: new lease on life. That you think about it um 118 00:06:57,680 --> 00:06:59,599 Speaker 1: and if you have a little luck over the longer 119 00:06:59,720 --> 00:07:04,000 Speaker 1: term with commodities, you should do well. Another interesting sector 120 00:07:04,120 --> 00:07:07,719 Speaker 1: is the coal space. In the coal industry, there have 121 00:07:07,800 --> 00:07:11,119 Speaker 1: been just practically every major coal company in the US 122 00:07:11,160 --> 00:07:13,480 Speaker 1: filed for bankruptcy in the past twenty four months and 123 00:07:13,480 --> 00:07:17,680 Speaker 1: then came out. So companies like arch Coal and Peabody Energy, 124 00:07:18,160 --> 00:07:22,280 Speaker 1: we're trading at extremely cheap prices. And the the interesting 125 00:07:22,320 --> 00:07:24,559 Speaker 1: thing in the coal market is that there are several 126 00:07:24,560 --> 00:07:28,040 Speaker 1: types of coal, not just steam coal, which gets burned 127 00:07:28,080 --> 00:07:32,320 Speaker 1: to generate electricity, but also metallurgical coal, which is used 128 00:07:32,320 --> 00:07:36,119 Speaker 1: in making steal um, and that market has recovered quite nicely. 129 00:07:36,280 --> 00:07:39,400 Speaker 1: So a number of the coal companies are trading at 130 00:07:39,520 --> 00:07:43,560 Speaker 1: very cheap valuations through their equities as well, and that's 131 00:07:43,560 --> 00:07:46,280 Speaker 1: another area of focus for US lately. George, just in 132 00:07:46,360 --> 00:07:49,160 Speaker 1: thirty seconds when you were talking about your preference for 133 00:07:49,200 --> 00:07:51,440 Speaker 1: equities to bonds, it sounds like you think, I think 134 00:07:51,520 --> 00:07:56,240 Speaker 1: that equities can keep rallying even if benchmark rates sell off. 135 00:07:57,080 --> 00:08:01,960 Speaker 1: Thirty seconds. Why, yeah, Again, it's it's not at a 136 00:08:02,040 --> 00:08:04,080 Speaker 1: high level. It's not you know, the biggest of the 137 00:08:04,080 --> 00:08:06,720 Speaker 1: big names. It's not the SMP in general. It's more 138 00:08:06,760 --> 00:08:10,320 Speaker 1: individual companies that are trading at extremely cheap prices. Again, 139 00:08:10,760 --> 00:08:13,080 Speaker 1: you know, good things tend to happen the cheap companies 140 00:08:13,120 --> 00:08:16,000 Speaker 1: over time when they're so cheap because their their distress 141 00:08:16,040 --> 00:08:17,720 Speaker 1: and nobody wants to have anything to do with them. 142 00:08:17,760 --> 00:08:21,000 Speaker 1: That's usually when you find some bargains. George Schultz, thank 143 00:08:21,040 --> 00:08:23,800 Speaker 1: you so much for joining us. Truly, uh fascinating to 144 00:08:23,840 --> 00:08:26,440 Speaker 1: dig into some of these specific names that hold probably 145 00:08:26,480 --> 00:08:30,280 Speaker 1: more promised than broad indices at these incredibly high valuations. 146 00:08:30,280 --> 00:08:33,600 Speaker 1: George Schultz is chief executive officer of Schultz Asset Management, 147 00:08:33,720 --> 00:08:36,320 Speaker 1: which oversees about two hundred million dollars and is based 148 00:08:36,559 --> 00:08:51,559 Speaker 1: in Purchase, New York. Herbal life it is the story 149 00:08:51,600 --> 00:08:54,280 Speaker 1: that just keeps on giving. Met Townsends is here in 150 00:08:54,320 --> 00:08:56,400 Speaker 1: the Bloomberg eleven three our studios. Met Townsend is a 151 00:08:56,440 --> 00:08:59,760 Speaker 1: global business reporter for Bloomberg News. And I know that. 152 00:09:00,000 --> 00:09:02,080 Speaker 1: And all of a sudden, you saw the shares surging 153 00:09:02,120 --> 00:09:04,480 Speaker 1: this morning. You just got this excitement in you in 154 00:09:04,600 --> 00:09:07,679 Speaker 1: pre market, you know, you're shaking your head back. It's back. 155 00:09:07,840 --> 00:09:09,760 Speaker 1: You get to talk about it to get what's going on. 156 00:09:09,800 --> 00:09:11,600 Speaker 1: So so this has to do with Carl I can. 157 00:09:11,720 --> 00:09:15,480 Speaker 1: Of course, herbal life was brought into our consciousness when 158 00:09:15,520 --> 00:09:18,920 Speaker 1: there was a spat between Bill Ackman and Carl Icon 159 00:09:19,120 --> 00:09:23,640 Speaker 1: over at Acman very in a high profile manner departed 160 00:09:23,640 --> 00:09:26,800 Speaker 1: from the company. Now we have carl Icon remaining. Why 161 00:09:26,840 --> 00:09:29,040 Speaker 1: are the shares surging so much this morning? So the 162 00:09:29,080 --> 00:09:31,360 Speaker 1: company came out and said that they are going to 163 00:09:32,200 --> 00:09:35,680 Speaker 1: do a tender offer to buy back roughly six million 164 00:09:35,720 --> 00:09:38,800 Speaker 1: dollars worth of shares um at sixty eight bucks. So 165 00:09:38,840 --> 00:09:42,080 Speaker 1: the stock basically has been trading up towards sixty eight dollars. 166 00:09:42,800 --> 00:09:47,040 Speaker 1: And they also said that they were in buyout talks 167 00:09:47,120 --> 00:09:50,360 Speaker 1: or preliminary biot talks with someone which they didn't name, 168 00:09:50,600 --> 00:09:54,079 Speaker 1: which we're trying to figure out that to think the 169 00:09:54,120 --> 00:09:57,199 Speaker 1: company public. And they had been in talks roughly since November, 170 00:09:57,240 --> 00:10:00,160 Speaker 1: and these talks ended roughly last week. And so the 171 00:10:00,200 --> 00:10:03,880 Speaker 1: company take the company private. Yes, take the company private, 172 00:10:04,480 --> 00:10:07,160 Speaker 1: and which is something that Icon was rumored to be 173 00:10:07,240 --> 00:10:10,080 Speaker 1: looking at as well. Um, So that news kind of 174 00:10:10,280 --> 00:10:12,720 Speaker 1: creates this idea that, oh, maybe this will happen eventually, 175 00:10:12,720 --> 00:10:14,839 Speaker 1: a company will like a private equity firm, will take 176 00:10:14,840 --> 00:10:18,199 Speaker 1: a private another reason for the shares to go up, okay. 177 00:10:18,280 --> 00:10:22,120 Speaker 1: And then there also was this agreement that carl Icon, Yes, 178 00:10:22,320 --> 00:10:25,199 Speaker 1: I agreed to back off, right, so I kind of 179 00:10:25,200 --> 00:10:28,240 Speaker 1: agreed not to buy any shares for two years and 180 00:10:28,320 --> 00:10:30,959 Speaker 1: sort of let this this process play out of their 181 00:10:31,040 --> 00:10:34,880 Speaker 1: sort of strategy and how they're going forward. Um again, Icon, 182 00:10:35,320 --> 00:10:38,560 Speaker 1: biggest shareholder of Verbal Life, has five representatives on the 183 00:10:38,559 --> 00:10:41,439 Speaker 1: Third Team member board, so he's heavily invested in this 184 00:10:41,480 --> 00:10:45,360 Speaker 1: company doing well. Um and you know this is a 185 00:10:45,400 --> 00:10:48,240 Speaker 1: fight that goes back. Actman first short of the stock 186 00:10:48,320 --> 00:10:52,280 Speaker 1: or publicly announced his his short in uh the end 187 00:10:52,320 --> 00:10:55,040 Speaker 1: of two thousand and twelve, so we're four plus years 188 00:10:55,040 --> 00:10:59,200 Speaker 1: now into this. Shortly after Acman disclosed his short, Icon 189 00:10:59,280 --> 00:11:00,920 Speaker 1: came out as a bull on the stock, bought a 190 00:11:00,960 --> 00:11:03,600 Speaker 1: big steak, and they've had this public They've had a 191 00:11:03,600 --> 00:11:06,640 Speaker 1: couple of public sparring matches going back and forth over 192 00:11:06,679 --> 00:11:10,760 Speaker 1: the years. Obviously, Wall Streets loved all this drama. And 193 00:11:11,000 --> 00:11:14,720 Speaker 1: here we are. So so Herbal Life is a company 194 00:11:14,760 --> 00:11:18,160 Speaker 1: that is under this FTC order. This is kind of 195 00:11:18,160 --> 00:11:21,360 Speaker 1: this convoluted story. So into down sixty and the FTC 196 00:11:21,520 --> 00:11:24,520 Speaker 1: came out after an investigation and said, Herbal Life, we 197 00:11:24,520 --> 00:11:26,120 Speaker 1: don't like some parts of your business in the US. 198 00:11:26,160 --> 00:11:28,839 Speaker 1: You need to change there. In the process of doing that, 199 00:11:29,080 --> 00:11:30,720 Speaker 1: Actmin is still n in their belief that this will 200 00:11:30,760 --> 00:11:34,280 Speaker 1: eventually hurt the company and in the stockwell decline. Well, 201 00:11:34,360 --> 00:11:36,120 Speaker 1: right now, I'm looking at Herbal Life shares that are 202 00:11:36,200 --> 00:11:39,640 Speaker 1: up more than fort so far this year. So uh, 203 00:11:39,920 --> 00:11:43,720 Speaker 1: Acman got out probably rightly so at least based on 204 00:11:43,840 --> 00:11:46,679 Speaker 1: this year's performance when it came to betting against this company. 205 00:11:46,720 --> 00:11:48,120 Speaker 1: Met Towns, and thank you so much for joining us, 206 00:11:48,160 --> 00:11:51,040 Speaker 1: Matt town saying, global business reporter for Bloomberg News. And 207 00:11:51,040 --> 00:11:57,000 Speaker 1: speaking of Carl Icon, he resigned from his special regulatory 208 00:11:57,080 --> 00:12:02,119 Speaker 1: advisory role to President Trump. Tendered his letter of resignation 209 00:12:02,200 --> 00:12:04,600 Speaker 1: on Friday. Sort of odd letter. I want to bring 210 00:12:04,600 --> 00:12:08,440 Speaker 1: in Mario Parker. He's agricultural reporter for Bloomberg News in 211 00:12:08,440 --> 00:12:11,640 Speaker 1: our Chicago bureau. And uh, Mario, can you just tell 212 00:12:11,720 --> 00:12:15,960 Speaker 1: us a little bit about why Carl Icon, a billionaire investor, 213 00:12:16,240 --> 00:12:21,320 Speaker 1: resigned from this position and what this position was? Sure? Absolutely, Lisa, 214 00:12:21,640 --> 00:12:27,880 Speaker 1: so Uh. Carl Icon was named special advisor on regulations 215 00:12:28,000 --> 00:12:32,240 Speaker 1: to President Trump. Um uh a little over a month 216 00:12:32,600 --> 00:12:38,360 Speaker 1: um or so after Trump's victory in November. He was 217 00:12:38,400 --> 00:12:44,120 Speaker 1: an early endorser of President Trump's campaign. Um. Someone that's 218 00:12:44,360 --> 00:12:47,559 Speaker 1: President Trump name checked quite a bit on the stop um, 219 00:12:47,840 --> 00:12:52,920 Speaker 1: particularly about his business acumen, etcetera. And so what was 220 00:12:52,960 --> 00:12:57,880 Speaker 1: happening during the same time was that Icon is a 221 00:12:57,920 --> 00:13:03,920 Speaker 1: major owner of an independent oil refiner, CVR Energy, and 222 00:13:04,120 --> 00:13:08,000 Speaker 1: CVR Energy, among with a select few of other refiners, 223 00:13:08,000 --> 00:13:12,000 Speaker 1: had been pushing for changes to UH the US ethanol 224 00:13:12,080 --> 00:13:15,560 Speaker 1: mandate UM, saying that the cost to comply with the 225 00:13:15,600 --> 00:13:20,640 Speaker 1: program were too onerous, and so Icon had become kind 226 00:13:20,640 --> 00:13:23,720 Speaker 1: of the public face of this campaign as well, UH 227 00:13:23,760 --> 00:13:28,880 Speaker 1: really kind of pushing the Environmental Protection Agency to UM 228 00:13:28,920 --> 00:13:34,920 Speaker 1: to make these changes UM. After President Trump assumed office 229 00:13:35,200 --> 00:13:39,760 Speaker 1: and after again UM Mr Icon's UM designation or appointment 230 00:13:39,800 --> 00:13:44,160 Speaker 1: as a special regulatory Advisor, there was increased scrutiny about 231 00:13:44,200 --> 00:13:46,880 Speaker 1: whether or not he would be using that position to 232 00:13:47,480 --> 00:13:50,160 Speaker 1: kind of influence UM that change that he had been 233 00:13:50,160 --> 00:13:53,600 Speaker 1: advocating for H for the better part of the the 234 00:13:53,760 --> 00:13:58,640 Speaker 1: last year. And UH was there any evidence that this 235 00:13:58,960 --> 00:14:04,520 Speaker 1: increased rutiny and potential legal jeopardy. As a New Yorker 236 00:14:04,640 --> 00:14:07,640 Speaker 1: article kind of put it right after UH Carl Icon 237 00:14:07,760 --> 00:14:10,000 Speaker 1: resigned from the board, that this was the reason for 238 00:14:10,080 --> 00:14:15,959 Speaker 1: his resignation. Well, the letter that Mr Icon sent UM 239 00:14:16,160 --> 00:14:20,600 Speaker 1: sent to President Trump on Friday, you know, referring to 240 00:14:20,680 --> 00:14:25,120 Speaker 1: this departure, he specifically mentioned that he only spoke about 241 00:14:25,160 --> 00:14:29,840 Speaker 1: broad matters of policy affecting the refining industry. UM and 242 00:14:29,880 --> 00:14:34,160 Speaker 1: that UM, you know, he shared, you know, his limited 243 00:14:34,200 --> 00:14:39,320 Speaker 1: knowledge about certain insights with uncertain subjects. But what we 244 00:14:39,480 --> 00:14:44,040 Speaker 1: know and what are reporting has shown. Uh, both myself 245 00:14:44,080 --> 00:14:48,720 Speaker 1: and our colleague Jen de Louis and Washington was that UM. 246 00:14:48,840 --> 00:14:51,280 Speaker 1: Earlier this year, Mr Icon was trying to broke her 247 00:14:51,320 --> 00:14:56,320 Speaker 1: a deal between the administration and the biofuels lobby. What 248 00:14:56,480 --> 00:15:00,800 Speaker 1: happened once that that news broke UM, it had an 249 00:15:00,920 --> 00:15:04,440 Speaker 1: impact on different markets ranging from corn to crude oil 250 00:15:04,520 --> 00:15:09,080 Speaker 1: to gasoline UM out of concern or speculation that Mr 251 00:15:09,240 --> 00:15:11,440 Speaker 1: Icon would prevail in this rule he was trying to 252 00:15:11,440 --> 00:15:13,520 Speaker 1: get changed. Essentially, the rule he was trying to get 253 00:15:13,600 --> 00:15:16,920 Speaker 1: changed would move the owners from refiners like the one 254 00:15:16,960 --> 00:15:21,000 Speaker 1: that he owns closer to the customer UM that that 255 00:15:21,120 --> 00:15:26,120 Speaker 1: delivers the gas, the gas and ethanol to two gasoline stations. Yeah. 256 00:15:26,120 --> 00:15:28,680 Speaker 1: And you guys did some great reporting on how much 257 00:15:28,720 --> 00:15:32,080 Speaker 1: money he made off of just market speculation that the 258 00:15:32,160 --> 00:15:35,840 Speaker 1: rule would be changed. Uh. And his letter is fascinating 259 00:15:35,960 --> 00:15:38,600 Speaker 1: and very odd, and I recommend everybody read it. UH. 260 00:15:38,680 --> 00:15:40,640 Speaker 1: Sort of him resigning from a non job where he 261 00:15:40,680 --> 00:15:55,280 Speaker 1: did nothing, but it's not illegal and he's resigning. Well. 262 00:15:55,400 --> 00:15:57,080 Speaker 1: For a number of years we heard quite a bit 263 00:15:57,120 --> 00:15:59,880 Speaker 1: about pure to pure lending. It was going to completely 264 00:16:00,000 --> 00:16:04,760 Speaker 1: disrupt the big financial firms in the industry. Then there 265 00:16:04,840 --> 00:16:07,640 Speaker 1: was some skepticism. Now we're kind of getting to this 266 00:16:07,760 --> 00:16:12,920 Speaker 1: new equilibrium where big banks are trying to incorporate more 267 00:16:13,280 --> 00:16:16,680 Speaker 1: peer to peer type technology into their day to day routines. 268 00:16:16,720 --> 00:16:19,720 Speaker 1: Here to join us is Jared Hecked. He's CEO and 269 00:16:19,840 --> 00:16:23,040 Speaker 1: co founder of Fundera, which is based in New York 270 00:16:23,280 --> 00:16:28,400 Speaker 1: and is an online lender specifically trying to hook up 271 00:16:28,800 --> 00:16:33,240 Speaker 1: businesses with people that have money, whether it's banks, or 272 00:16:33,280 --> 00:16:37,240 Speaker 1: whether it's hedge funds, or whether it's you name it. Jared, 273 00:16:37,280 --> 00:16:41,160 Speaker 1: can you give me a sense of how many transactions 274 00:16:41,360 --> 00:16:46,280 Speaker 1: your platform has been facilitating of late? Uh, it's about 275 00:16:46,320 --> 00:16:48,760 Speaker 1: three years old, right, Yeah, so we're first off, thanks 276 00:16:48,760 --> 00:16:51,640 Speaker 1: for having me, Lisa. Um. So we're around three years old. 277 00:16:51,760 --> 00:16:54,640 Speaker 1: To date, we've done close to half a billion dollars 278 00:16:54,640 --> 00:16:57,680 Speaker 1: in volume through our platform, servicing around eight thousand different 279 00:16:57,680 --> 00:17:01,600 Speaker 1: small business owners. Uh, and currently around twenty five million 280 00:17:01,600 --> 00:17:04,600 Speaker 1: dollars a month is facilitated through our platform. So what's 281 00:17:04,640 --> 00:17:08,119 Speaker 1: the model. Here, a business wants to get a loan, 282 00:17:08,600 --> 00:17:10,800 Speaker 1: how do you come into the picture here. Yeah, So, 283 00:17:10,840 --> 00:17:13,600 Speaker 1: generally speaking, a small business owner has a problem or 284 00:17:13,640 --> 00:17:16,280 Speaker 1: an opportunity, and they think that some form of credit 285 00:17:16,359 --> 00:17:19,159 Speaker 1: can be a viable solution for that. UM they'll do 286 00:17:19,200 --> 00:17:21,720 Speaker 1: a search for something like small business loans or line 287 00:17:21,720 --> 00:17:24,840 Speaker 1: of credit in in search of actually educating themselves on 288 00:17:24,840 --> 00:17:28,240 Speaker 1: what they're eligible for, and they'll they'll stumble on fundera UM. 289 00:17:28,320 --> 00:17:31,120 Speaker 1: We then provide business owners an immense amount of education 290 00:17:31,119 --> 00:17:33,359 Speaker 1: and literature about the different types of products that are 291 00:17:33,400 --> 00:17:36,159 Speaker 1: accessible to business owners and the different types of lenders 292 00:17:36,160 --> 00:17:39,119 Speaker 1: that actually service them. We also provide them what we 293 00:17:39,160 --> 00:17:42,560 Speaker 1: call a common application, so it's a very easy way 294 00:17:42,600 --> 00:17:45,040 Speaker 1: for a business owner to enter in a bit of information, 295 00:17:45,200 --> 00:17:48,159 Speaker 1: provide a little bit of documentation. We then verify some 296 00:17:48,240 --> 00:17:51,000 Speaker 1: of that information and determine which lenders and products in 297 00:17:51,000 --> 00:17:54,440 Speaker 1: our network they're actually eligible for. Those products spanned from 298 00:17:54,440 --> 00:17:56,960 Speaker 1: things like business credit cards that would be provided by 299 00:17:57,119 --> 00:18:00,000 Speaker 1: the American Expresses, Capital, wand and Chases of the world 300 00:18:00,000 --> 00:18:02,800 Speaker 1: old to online loans and lines of credit that are 301 00:18:02,840 --> 00:18:05,840 Speaker 1: provided by companies like Lending Club, on Deck, Cabbage, and 302 00:18:05,880 --> 00:18:09,640 Speaker 1: Swift Capital. So This is something more than just peer 303 00:18:09,640 --> 00:18:13,080 Speaker 1: to peer lending or even pure lending. This is more 304 00:18:13,280 --> 00:18:18,480 Speaker 1: like being an online business advisor, some kind of combination 305 00:18:18,640 --> 00:18:23,040 Speaker 1: between a robo advisor and UH an online platform to 306 00:18:23,080 --> 00:18:25,280 Speaker 1: hook you up with lending. That's exactly right, with the 307 00:18:25,320 --> 00:18:28,359 Speaker 1: core focus on, you know, advisory services and education and 308 00:18:28,400 --> 00:18:32,200 Speaker 1: then the matchmaking and taking a lot of the cumbersome 309 00:18:32,200 --> 00:18:34,720 Speaker 1: issues and applying for a loan and uncertainty out of 310 00:18:34,760 --> 00:18:37,280 Speaker 1: that process. How do you make money? We make money. 311 00:18:37,320 --> 00:18:40,200 Speaker 1: Every time alone is offered and accepted on our platform, 312 00:18:40,520 --> 00:18:42,800 Speaker 1: a lender or an issuer will pay us what is 313 00:18:42,920 --> 00:18:46,240 Speaker 1: essentially the equivalent of a referral fate. And that's largely 314 00:18:46,240 --> 00:18:48,399 Speaker 1: done because we're stripping out a lot of marketing costs 315 00:18:48,400 --> 00:18:51,800 Speaker 1: and operational costs from their system because we really take 316 00:18:51,840 --> 00:18:54,399 Speaker 1: care of all the search for the business owner and 317 00:18:54,440 --> 00:18:57,479 Speaker 1: the packaging process as well. It sounds like kind of 318 00:18:57,480 --> 00:19:00,760 Speaker 1: the business model for some of the middle get lenders, 319 00:19:00,800 --> 00:19:02,879 Speaker 1: of which there are many, and I imagine that the 320 00:19:02,880 --> 00:19:07,640 Speaker 1: competition is pretty fierce. Is that right? Yeah? I think 321 00:19:07,640 --> 00:19:10,640 Speaker 1: the business model is similar to some of the companies 322 00:19:10,680 --> 00:19:13,880 Speaker 1: on the consumer end, like credit Karma or potentially nerd 323 00:19:13,880 --> 00:19:17,440 Speaker 1: wallet UM where We're really focused on orienting a potential 324 00:19:17,480 --> 00:19:20,840 Speaker 1: borrower around what's actually out there for them. UM. But 325 00:19:20,880 --> 00:19:23,840 Speaker 1: the competition, to your point, is fierce, right, there's a 326 00:19:23,880 --> 00:19:25,640 Speaker 1: lot of people that are trying to get in front 327 00:19:25,680 --> 00:19:28,040 Speaker 1: of small business owners. We just take I think, a 328 00:19:28,119 --> 00:19:31,000 Speaker 1: very deliberate and focused approach that's not about selling a 329 00:19:31,000 --> 00:19:34,000 Speaker 1: business owner, but more of oriented around educating a business owner. 330 00:19:34,280 --> 00:19:37,000 Speaker 1: So what types of businesses have used your platform? Who 331 00:19:37,080 --> 00:19:39,880 Speaker 1: runs the gamut? I'd say the most popular industries are 332 00:19:40,040 --> 00:19:44,400 Speaker 1: somewhat conventional mainstream businesses, whether those are retail shops or restaurants. 333 00:19:44,480 --> 00:19:46,520 Speaker 1: We do a lot of work with independent consultants and 334 00:19:46,560 --> 00:19:50,160 Speaker 1: contractors as well. They might be veterinarians or doctor's offices. 335 00:19:50,200 --> 00:19:51,800 Speaker 1: I think the thing that we've learned is that no 336 00:19:51,920 --> 00:19:55,040 Speaker 1: too small business owners are alike, so we really try 337 00:19:55,080 --> 00:19:58,000 Speaker 1: and provide a comprehensive solution to all the business owners 338 00:19:58,000 --> 00:20:00,320 Speaker 1: that are out there. Interesting, and you said that you 339 00:20:00,359 --> 00:20:04,080 Speaker 1: did raise a twenty million dollars equity financing UM, And 340 00:20:04,119 --> 00:20:07,160 Speaker 1: I'm wondering whether you put any of your own money 341 00:20:07,280 --> 00:20:10,320 Speaker 1: up or is it purely in operations that you have 342 00:20:10,480 --> 00:20:14,680 Speaker 1: to continue as far as having the educational resources and 343 00:20:15,160 --> 00:20:18,639 Speaker 1: arranging all of the connecting lenders to the platform. So 344 00:20:18,720 --> 00:20:21,840 Speaker 1: did I put any of my own personal money? Now? 345 00:20:21,920 --> 00:20:24,040 Speaker 1: I mean, like on an ongoing basis, is there the 346 00:20:24,080 --> 00:20:27,760 Speaker 1: company's money capital up in the platform. We don't lend 347 00:20:27,800 --> 00:20:31,159 Speaker 1: a single dollar. We think that that's really important because 348 00:20:31,200 --> 00:20:34,280 Speaker 1: it enables us to maintain a high degree of objectivity. 349 00:20:34,640 --> 00:20:37,399 Speaker 1: Um the second we start lending capital, all of our 350 00:20:37,480 --> 00:20:40,760 Speaker 1: lender partners would generally believe that we're trying to actually 351 00:20:40,800 --> 00:20:43,480 Speaker 1: be the primary lender of record. And I also think 352 00:20:43,480 --> 00:20:46,000 Speaker 1: it biases us in a way that's unfavorable to the 353 00:20:46,040 --> 00:20:49,680 Speaker 1: business owner because then our intentions may not be quite clear. 354 00:20:49,720 --> 00:20:51,520 Speaker 1: We're really there to help find them the best product 355 00:20:51,520 --> 00:20:54,080 Speaker 1: and lender for their needs. You know, one thing that 356 00:20:54,160 --> 00:20:56,919 Speaker 1: a lot of big banks have complained about is that 357 00:20:56,960 --> 00:21:01,360 Speaker 1: the demand for loans, specifically among size and smaller businesses 358 00:21:01,400 --> 00:21:05,359 Speaker 1: just isn't there. That people aren't investing in UH, in 359 00:21:05,480 --> 00:21:10,040 Speaker 1: their infrastructure or their businesses. Do you find the same thing, Well, 360 00:21:10,440 --> 00:21:12,880 Speaker 1: we're not really talking about mid market loans here at Fondera, 361 00:21:12,960 --> 00:21:15,320 Speaker 1: you know, generally speaking, or the average sized loan that 362 00:21:15,359 --> 00:21:18,400 Speaker 1: a customer wants to our platform is around sixty dollars. 363 00:21:19,040 --> 00:21:22,399 Speaker 1: We don't see any slowdown demand or appetite for business 364 00:21:22,440 --> 00:21:24,760 Speaker 1: owners who are looking for working capital to invest in 365 00:21:24,800 --> 00:21:27,439 Speaker 1: their growth. And what about due diligence? What kind of 366 00:21:27,480 --> 00:21:30,400 Speaker 1: due diligence is there on the system on the platform 367 00:21:30,560 --> 00:21:32,280 Speaker 1: UM SO, I think it's two fold. We do due 368 00:21:32,280 --> 00:21:34,800 Speaker 1: diligence on every single small business owner that comes to 369 00:21:34,800 --> 00:21:37,760 Speaker 1: FUNDERA and starts to submit an application. We work with 370 00:21:37,880 --> 00:21:40,120 Speaker 1: third party credit bureaus and a bunch of third party 371 00:21:40,200 --> 00:21:42,359 Speaker 1: data providers to make sure that the business is real 372 00:21:42,880 --> 00:21:45,520 Speaker 1: UM and that's really done so that we're making sure 373 00:21:45,520 --> 00:21:47,040 Speaker 1: that the business owner has to do as little work 374 00:21:47,240 --> 00:21:50,720 Speaker 1: as possible, and it's a high quality service for our 375 00:21:50,760 --> 00:21:52,680 Speaker 1: lender partners so they know that the information that they're 376 00:21:52,680 --> 00:21:55,880 Speaker 1: getting is real inbedded. And then we also do due 377 00:21:55,880 --> 00:21:58,119 Speaker 1: diligence in regards to the types of lenders that we 378 00:21:58,160 --> 00:22:01,520 Speaker 1: work with. Since we're providing us service to a business owner, 379 00:22:01,520 --> 00:22:02,920 Speaker 1: we want to make sure that the lenders that are 380 00:22:02,960 --> 00:22:07,679 Speaker 1: on our platform are high integrity, you know, technology enabled 381 00:22:07,760 --> 00:22:10,600 Speaker 1: lenders that are going to provide a great service with 382 00:22:10,680 --> 00:22:13,480 Speaker 1: competitive and compelling rates out there. Where do you think 383 00:22:13,520 --> 00:22:16,200 Speaker 1: the peer to peer industry is heading right now? UM 384 00:22:16,280 --> 00:22:18,840 Speaker 1: that's a great question. I think that in the peer 385 00:22:18,840 --> 00:22:22,560 Speaker 1: to peer industry or just online lending, non bank lending, 386 00:22:22,800 --> 00:22:25,199 Speaker 1: I think what we're seeing is the bigger lenders are 387 00:22:25,240 --> 00:22:29,120 Speaker 1: becoming more stable and increasingly big overtime, and I think 388 00:22:29,119 --> 00:22:32,280 Speaker 1: that we're seeing a hyper competitive market for the smaller 389 00:22:32,280 --> 00:22:34,639 Speaker 1: players where it makes them very difficult for them to 390 00:22:34,680 --> 00:22:38,479 Speaker 1: actually get traction and prove that they're sustainable, viable businesses. So, 391 00:22:38,960 --> 00:22:41,080 Speaker 1: like most markets, as they mature, the bigger players are 392 00:22:41,080 --> 00:22:44,320 Speaker 1: getting bigger and becoming increasingly viable and stronger in the market. 393 00:22:44,880 --> 00:22:47,040 Speaker 1: Jared hec thank you so much for joining me. Thank you. 394 00:22:47,520 --> 00:22:52,320 Speaker 1: It's a fascinating time for online lending and uh, frankly 395 00:22:52,400 --> 00:22:55,200 Speaker 1: online advising and kind of margically two is really interesting. 396 00:22:55,280 --> 00:22:58,480 Speaker 1: Jared Hect is chief executive officer and co founder of Fondero, 397 00:22:58,520 --> 00:23:01,720 Speaker 1: which is based in New York and has been around 398 00:23:01,760 --> 00:23:17,560 Speaker 1: since two thousand fourteen. Well, starting at the beginning of 399 00:23:17,720 --> 00:23:20,560 Speaker 1: next year, a new regime of regulations will go into 400 00:23:20,600 --> 00:23:25,720 Speaker 1: effect in Europe that potentially could vastly change the way 401 00:23:25,880 --> 00:23:30,360 Speaker 1: that European investment managers consume research. But the changes may 402 00:23:30,359 --> 00:23:32,679 Speaker 1: be more profound than that. Here to talk about that 403 00:23:32,760 --> 00:23:36,440 Speaker 1: is Sarah Jones, UK finance reporter for Bloomberg News, coming 404 00:23:36,440 --> 00:23:39,880 Speaker 1: to us from our London bureau. Sarah, can you give 405 00:23:39,960 --> 00:23:43,160 Speaker 1: us just a sense, a very quick brief overview of 406 00:23:43,200 --> 00:23:46,760 Speaker 1: what these MITED regulations are and what some of the 407 00:23:46,760 --> 00:23:50,280 Speaker 1: big concerns are about its implementation at this point? Hid 408 00:23:50,280 --> 00:23:53,600 Speaker 1: there sure? The I mean I can see outsets regulators. 409 00:23:53,600 --> 00:23:56,520 Speaker 1: What regulators are trying to do is make the system 410 00:23:56,560 --> 00:24:01,119 Speaker 1: more transparent and make individual industry players, whether it be 411 00:24:01,119 --> 00:24:04,320 Speaker 1: asset managers or the sales side, more accountable us to 412 00:24:04,400 --> 00:24:07,080 Speaker 1: how money has been invested in how you know client 413 00:24:07,160 --> 00:24:10,080 Speaker 1: what clients are actually paying for. So it's starting off 414 00:24:10,080 --> 00:24:12,639 Speaker 1: to make more transparent, make it safer. But of course 415 00:24:12,640 --> 00:24:15,440 Speaker 1: see consequence of that as is you start to enforce 416 00:24:15,440 --> 00:24:18,320 Speaker 1: some of this regulation and starts become more prescriptive. Is 417 00:24:18,680 --> 00:24:22,120 Speaker 1: you start to get these other unintended effects. Um So, 418 00:24:22,240 --> 00:24:24,639 Speaker 1: you know, an obvious one is job losses within the 419 00:24:24,680 --> 00:24:28,040 Speaker 1: research part. But it's not just research. That's I mean, 420 00:24:28,080 --> 00:24:31,679 Speaker 1: research is more controversial part of the of the new rules, 421 00:24:31,760 --> 00:24:34,480 Speaker 1: but it's it's it's it's going to affect everything from 422 00:24:34,600 --> 00:24:38,680 Speaker 1: creating volumes to um to you know, how how many 423 00:24:38,720 --> 00:24:41,440 Speaker 1: funds were sold by a distributor on the continent. It's 424 00:24:41,520 --> 00:24:44,200 Speaker 1: very far reaching, and then those consequences aren't yet known yet. 425 00:24:44,920 --> 00:24:49,080 Speaker 1: Talking about the implementation of this rule, my understanding is 426 00:24:49,119 --> 00:24:51,760 Speaker 1: that a lot of investment firms are quite behind under 427 00:24:51,800 --> 00:24:55,119 Speaker 1: the implementation. Is there any chance that, I don't know, 428 00:24:55,280 --> 00:24:59,000 Speaker 1: people might get a bit of a extra cushion of 429 00:24:59,040 --> 00:25:02,160 Speaker 1: time to implement this or do you expect a rush 430 00:25:02,240 --> 00:25:04,600 Speaker 1: of changes to happen in the next few months. Well, 431 00:25:04,640 --> 00:25:07,200 Speaker 1: I think all firms, whether it's self side to buy side, 432 00:25:07,240 --> 00:25:11,119 Speaker 1: aiming to be compliant. But I think given the vast 433 00:25:11,320 --> 00:25:13,359 Speaker 1: impact it's going to have, I think regulators are going 434 00:25:13,400 --> 00:25:15,439 Speaker 1: to give a sort of a buffer period. I mean, 435 00:25:15,480 --> 00:25:18,520 Speaker 1: certainly in research for example. UM I think the UK 436 00:25:18,680 --> 00:25:20,840 Speaker 1: regulator at least has said, well, you don't have to 437 00:25:20,880 --> 00:25:23,240 Speaker 1: determine prices for the next you know, you've got three 438 00:25:23,240 --> 00:25:25,280 Speaker 1: months before you figure out exactly how you're going to 439 00:25:25,280 --> 00:25:28,719 Speaker 1: price for research, which has it's been a good because 440 00:25:28,920 --> 00:25:30,639 Speaker 1: at this stage and I'll be really, I mean everybody 441 00:25:30,720 --> 00:25:32,800 Speaker 1: is still keeping their cards quite close to their chest. 442 00:25:32,840 --> 00:25:35,240 Speaker 1: So that's one example. I mean, as for others, UM, 443 00:25:35,680 --> 00:25:37,880 Speaker 1: I think it's it's it's going to be a work 444 00:25:37,880 --> 00:25:43,760 Speaker 1: in progress. Sarah, you were talking about potential slowdowns in trade. 445 00:25:43,840 --> 00:25:45,919 Speaker 1: Can you talk about can you sort of walk us 446 00:25:46,000 --> 00:25:50,160 Speaker 1: through how that would transpire and what in the regulations 447 00:25:50,359 --> 00:25:54,440 Speaker 1: would lead to that outcome. So this particular reporting was 448 00:25:54,520 --> 00:25:58,800 Speaker 1: done by our London based regulator reporter Celebrush. So, I mean, 449 00:25:58,840 --> 00:26:00,960 Speaker 1: I didn't do the number crunchy on this, but the 450 00:26:01,000 --> 00:26:05,359 Speaker 1: gist of what his report was about was very conflicting 451 00:26:06,080 --> 00:26:09,600 Speaker 1: rules between let's say the US and the UK, and 452 00:26:09,640 --> 00:26:12,159 Speaker 1: it sees rules and around how you trade that that 453 00:26:12,240 --> 00:26:16,000 Speaker 1: could potentially um have an impact. Now how long that 454 00:26:16,040 --> 00:26:17,719 Speaker 1: impact will last? I mean, I'm sure you know it's 455 00:26:17,720 --> 00:26:19,359 Speaker 1: the dust settle, it all go back to normal, but 456 00:26:19,400 --> 00:26:22,480 Speaker 1: it could be quite disruptive um and so much so 457 00:26:22,680 --> 00:26:24,879 Speaker 1: that some of the lobby groups are coming out and 458 00:26:24,960 --> 00:26:28,879 Speaker 1: begging that, you know, they could delay these regulations as 459 00:26:28,880 --> 00:26:32,720 Speaker 1: it pertains to say derivatives trading until after the regime 460 00:26:32,800 --> 00:26:36,240 Speaker 1: sort of sorry, the regulators between individual companies that of 461 00:26:36,280 --> 00:26:40,280 Speaker 1: reconcile because at the moment they're rather conflicting and and 462 00:26:40,320 --> 00:26:42,760 Speaker 1: so and hence the confusion. I mean, these are question 463 00:26:42,800 --> 00:26:45,159 Speaker 1: marks and whether that you know, it might be it 464 00:26:45,240 --> 00:26:47,320 Speaker 1: might be just it might be settled before January. But 465 00:26:47,359 --> 00:26:49,359 Speaker 1: it's only five months out, so you have to wonder 466 00:26:49,800 --> 00:26:53,600 Speaker 1: how how how quickly they're going to resolve this problem, 467 00:26:53,680 --> 00:26:56,160 Speaker 1: you know, sir, I have to wonder, we've already seen 468 00:26:56,880 --> 00:27:01,040 Speaker 1: thousands of cuts from research departments across street over the 469 00:27:01,119 --> 00:27:04,720 Speaker 1: past number of years. Have all of the sort of 470 00:27:05,040 --> 00:27:10,520 Speaker 1: job productions been baked in because these regulations are no secret? Yeah? Quite, 471 00:27:11,119 --> 00:27:13,640 Speaker 1: I don't think so. Um as this. I think every 472 00:27:13,680 --> 00:27:16,199 Speaker 1: analyst still has a job as it stands now. I 473 00:27:16,200 --> 00:27:18,359 Speaker 1: haven't heard of any you know, job cuts and analysts, 474 00:27:18,480 --> 00:27:21,040 Speaker 1: you know, certainly this year. Um. I mean, I'm sure 475 00:27:21,080 --> 00:27:23,159 Speaker 1: there have been. Maybe people are starting to sort of 476 00:27:23,200 --> 00:27:24,680 Speaker 1: read the you know, the writings on the wall and 477 00:27:24,920 --> 00:27:28,840 Speaker 1: do other things. McKinsey put McKinsey put out a decent report. 478 00:27:29,000 --> 00:27:31,840 Speaker 1: So it's quite interesting that since the crisis, you know, 479 00:27:31,920 --> 00:27:34,480 Speaker 1: in sales and and and sales trading, you know, you've 480 00:27:34,480 --> 00:27:37,119 Speaker 1: seen the head counts drop by something like what is 481 00:27:37,119 --> 00:27:40,399 Speaker 1: it forty in sales and trading, and for research it's 482 00:27:40,440 --> 00:27:42,480 Speaker 1: sort of a cash equity research we're talking about. This 483 00:27:42,520 --> 00:27:45,040 Speaker 1: is not even including credit research. It's fallen by just 484 00:27:45,160 --> 00:27:49,520 Speaker 1: twelve percent since twenty eleven, So, you know, and next 485 00:27:49,560 --> 00:27:52,120 Speaker 1: coupled with the with the the data that they expect, 486 00:27:52,880 --> 00:27:56,000 Speaker 1: you know, investment spending in research for investment banks to 487 00:27:56,080 --> 00:27:59,000 Speaker 1: sort of dropped by thirty So I mean, I mean, 488 00:27:59,240 --> 00:28:01,239 Speaker 1: you know, I don't there's any hard numbers about how 489 00:28:01,240 --> 00:28:03,159 Speaker 1: many how many job losses there will be, but I 490 00:28:03,200 --> 00:28:05,840 Speaker 1: think less demand for research surely that's going to mean 491 00:28:05,880 --> 00:28:07,920 Speaker 1: less demand for analysts. Yeah. Well, one thing that I've 492 00:28:07,920 --> 00:28:09,639 Speaker 1: heard when I've talked to people about this is that 493 00:28:09,680 --> 00:28:14,199 Speaker 1: they're expecting the top banks to continue with their staff. 494 00:28:14,200 --> 00:28:16,240 Speaker 1: In other words, the Bank of America is the GP 495 00:28:16,359 --> 00:28:19,120 Speaker 1: Morgans of the world. Uh, it's the sort of mid 496 00:28:19,119 --> 00:28:21,679 Speaker 1: tier banks that are probably going to suffer the biggest 497 00:28:21,760 --> 00:28:24,560 Speaker 1: job losses because you're going to have sort of nothing 498 00:28:24,600 --> 00:28:27,800 Speaker 1: between the top tier research shops and the sort of 499 00:28:27,960 --> 00:28:31,719 Speaker 1: niche specialists that could potentially charge less because they've got 500 00:28:31,800 --> 00:28:34,680 Speaker 1: lower overhead. And then the middle is what's going to 501 00:28:34,760 --> 00:28:39,200 Speaker 1: get really crunched. Um. And so I've seen that yet exactly. 502 00:28:39,280 --> 00:28:42,000 Speaker 1: So it's the sort of barbel between you know, the 503 00:28:42,040 --> 00:28:46,200 Speaker 1: bold brackets and sort of the bespoke specialist housing houses 504 00:28:46,320 --> 00:28:48,720 Speaker 1: rather and so what happens in the middle, I guess 505 00:28:48,800 --> 00:28:50,520 Speaker 1: the conversations that I was having in Again, this is 506 00:28:50,520 --> 00:28:52,920 Speaker 1: all anecdotal as yet because its actually happen. There's no 507 00:28:52,960 --> 00:28:56,160 Speaker 1: hearten of us data yet. Um, if you're not ranked 508 00:28:56,280 --> 00:28:58,240 Speaker 1: in the top I mean as the managers are going 509 00:28:58,240 --> 00:28:59,760 Speaker 1: through a moment of okay, well how do how do 510 00:28:59,760 --> 00:29:01,920 Speaker 1: we've your research? And we have to be more discerning. 511 00:29:02,200 --> 00:29:03,800 Speaker 1: So if you're not ranked in the top three or 512 00:29:03,840 --> 00:29:06,080 Speaker 1: four and you it happened to fall out of it 513 00:29:06,160 --> 00:29:08,040 Speaker 1: in five seven, you know, why would you keep paying 514 00:29:08,080 --> 00:29:11,600 Speaker 1: for that research? It's expensive? So and that's yeah, Thank 515 00:29:11,640 --> 00:29:13,600 Speaker 1: you so much and I'm sure that we will continue 516 00:29:13,640 --> 00:29:17,120 Speaker 1: to follow this. Sarah Jones, UK finance reporter with Bloomberg News, 517 00:29:17,320 --> 00:29:22,040 Speaker 1: coming to us from London. Thank you so much. Thanks 518 00:29:22,080 --> 00:29:24,720 Speaker 1: for listening to the Bloomberg P and L podcast. You 519 00:29:24,760 --> 00:29:28,560 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud 520 00:29:28,640 --> 00:29:32,120 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 521 00:29:32,160 --> 00:29:36,160 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 522 00:29:36,280 --> 00:29:38,880 Speaker 1: It's one before the podcast. You can always catch us 523 00:29:38,920 --> 00:29:40,480 Speaker 1: worldwide on Bloomberg Radio.