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Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you.

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Speaker 1: Along with my co host Lisa Brahmas. Each day we

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Speaker 1: bring you the most noteworthy and useful interviews for you

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Speaker 1: and your money, whether at the grocery store or the

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Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast

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Speaker 1: or wherever you listen to podcasts, as well as at

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Speaker 1: Bloomberg dot com. Let's switch gears, though, sticking with Wall

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Speaker 1: Street and talk about broker commissions today. This morning there

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Speaker 1: was news that Charles Schwab is eliminating commissions for stocks,

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Speaker 1: ETFs and options listed on US or Canadian exchanges. The

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Speaker 1: race to the bottom accelerates. David Ridder, Payments and specialty finance,

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Speaker 1: analyst for a bloomersig Intelligence, joining us from Princeton, New Jersey. David,

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Speaker 1: what do you make the news? Well, it's been something

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Speaker 1: that's been a long time coming. I mean, obviously speed

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Speaker 1: compression and brokerage and an asset management more broadly is

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Speaker 1: nothing new. I mean, interactive brokers made their own move

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Speaker 1: last week to cut commissions to zero for basic stock

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Speaker 1: trades um So I think it's going to have a

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Speaker 1: very different impact on the different players in the market.

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Speaker 1: In Schwab's case, um, you know, they only earned about

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Speaker 1: their net revenue from trading commissions versus um E Trade

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Speaker 1: and TD merrit Trade, where it's more than thirty five.

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Speaker 1: And I think you're seeing that reflected in the action

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Speaker 1: this morning. But but Schwab is really more an asset

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Speaker 1: gatherer than anything, and so I see this move for

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Speaker 1: them is a recognition of the fact that, you know,

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Speaker 1: we don't want to lose customers and assets in a

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Speaker 1: long term to these new stock trading apps, whether it

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Speaker 1: be robin Hood or whether it be JP Morgan's. You invest,

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Speaker 1: because that's how they make money. They make money on

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Speaker 1: new net new assets coming into the company. Uh. And

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Speaker 1: then you know of their revenue is net interest incomes.

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Speaker 1: So they're essentially a bank, right, so they're paying low

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Speaker 1: interest and reinvesting that money and safe security. So that's

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Speaker 1: the real driver, not trading missions. Insentially, look at the

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Speaker 1: stocks you mentioned, Dave Schwapp down nine, TD America trade

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Speaker 1: down about today in each trade down, so kind of

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Speaker 1: right in line with what you were saying. And my

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Speaker 1: question is kind of talk to us about some of

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Speaker 1: these new technological competitors that you mentioned kind of robin

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Speaker 1: Hood and things like that give us a sense of

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Speaker 1: what they are and what kind of market share are

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Speaker 1: they taking. Yeah, well, in the case of robin Hood,

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Speaker 1: you know, very rapid growth company, several million customers already

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Speaker 1: offering quote unquote free trades. I think what's under recognized though,

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Speaker 1: is uh nothing's free, right in the case of all

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Speaker 1: of these retail brokers that charge the customer of zero trading, See,

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Speaker 1: they're sending those trades to market makers, so companies like

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Speaker 1: Citadel and they're getting paid what's called payment for order

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Speaker 1: flow for those transactions. So in their release last week,

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Speaker 1: Interactive Brokers was very candid. They said, well, you know,

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Speaker 1: this is how we get paid. And if you still

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Speaker 1: want best, best execute ship, you can take our uh

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Speaker 1: four feet product instead of our free products. So I

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Speaker 1: just thought that was an interesting way to approach it.

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Speaker 1: But uh, you know, certainly these things are having an impact,

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Speaker 1: and for Schwab, they finally said to themselves, look, we

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Speaker 1: we don't want to lose uh these customers because they're

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Speaker 1: young people, right, so they're really the future drivers of

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Speaker 1: their growth. Right now, I'm looking at Schwab shares down

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Speaker 1: now more than nine so shareholders aren't buying it. Yeah.

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Speaker 1: I mean, I think for both of them. When I

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Speaker 1: described a minute ago what percentage of revenue they get

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Speaker 1: from trading commissions, um, I think the market is pricing

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Speaker 1: in perhaps half of that revenue going away. It's interesting, though,

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Speaker 1: because the last round of price cuts was a couple

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Speaker 1: of years ago. Fidelity sort of kicked it off by

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Speaker 1: going to four trade and Schwab matched them. What happened

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Speaker 1: across the entire industry was fascinating is that the net

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Speaker 1: inflows to the companies and the trading volumes increased, so

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Speaker 1: it actually drew in more customers. And so again I

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Speaker 1: think that Schwab's rationale here is we're trying to remove

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Speaker 1: any impediment to folks either getting more active or becoming

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Speaker 1: active in the markets for the very first time, and

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Speaker 1: then going forward into the future. So I'm not sure

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Speaker 1: we'll see exactly that again this time, but that's what

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Speaker 1: we saw last time. David Riddard, thanks so much for

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Speaker 1: joining us David's payments and specialty finance analysts for Bloomberg

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Speaker 1: Intelligence and joining us from the Bloomberg headquarters in Princeton,

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Speaker 1: New Jersey. I want to read a a tweet from

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Speaker 1: President Trump. Quote, as I predicted, j PAL and the

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Speaker 1: Federal Reserve have allowed the dollar to get so strong,

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Speaker 1: especially relative to all other currencies that are manufacturers are

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Speaker 1: being negatively affected, fed rate too high. They are their

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Speaker 1: own worst enemies. They don't have a clue, pathetic clamation

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Speaker 1: point end quote. So let's dig a little bit deeper

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Speaker 1: with that asset background. Uh. Tim Fury, chairman of the

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Speaker 1: Manufacturing Business Survey for the Institute of Supply Management, joins

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Speaker 1: us on the phone from Florida. So, Tim, quite, the

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Speaker 1: manufacturing data for the month of September much much lower

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Speaker 1: than people were looking for. What's your takeaway, Yeah, Hi, Paul, Yes,

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Speaker 1: So, so so it was a disappointment for sure, and it's

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Speaker 1: been driven by demand. For the second straight month we

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Speaker 1: had demand in the contraction mode. And more importantly this

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Speaker 1: month compared to last month, is that the three sub

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Speaker 1: indexes that support that demand number we're all in negative

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Speaker 1: territory two, which is a concern. So let me let

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Speaker 1: me just talk quickly about the new export order down

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Speaker 1: to forty one, which is a pretty heavy contraction. We've

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Speaker 1: had two prior months of contraction, but not to that level.

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Speaker 1: And about eighteen percent manufacturing GDP is exported, So without

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Speaker 1: that new export order coming up, I don't I would

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Speaker 1: be very surprised if that new order number currently or

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Speaker 1: forty seven point three gets above the fifty point. How

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Speaker 1: much is the decline in exports due to the stronger dollar, Well,

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Speaker 1: it's you know, it's hard to tell. I get comments

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Speaker 1: about that. Percent of my comments are tariff and trade related. Uh,

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Speaker 1: we're talking low single digits on the on the currency side.

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Speaker 1: So there's no doubt that from a supply manager perspective,

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Speaker 1: the trade issues are a much begger concern than our currency. So,

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Speaker 1: but I can't really put it into specifics beyond that. So, Tim,

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Speaker 1: the we have a you know, I guess my question

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Speaker 1: is when do we have a trend here? We had

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Speaker 1: August atteint one contraction and then coming in with this

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Speaker 1: data at forty seven point eight even bigger contraction. When

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Speaker 1: from your perspective at the Institute for Supply Management, do

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Speaker 1: you start sensing a trend here? Well, last month I

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Speaker 1: was asked several times about whether this was a blip,

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Speaker 1: and especially to come above fifty. I was hopeful that

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Speaker 1: the month of September would have a decently strong new

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Speaker 1: order number, which would allow production to expand again and

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Speaker 1: get us back about fifty. But I think, you know,

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Speaker 1: given the week new order numbers about the same level

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Speaker 1: as last month, nothing worse, nothing better, But you know,

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Speaker 1: supporting that is really the backlog of order numbers forty

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Speaker 1: five point one, which declined again this month. I was

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Speaker 1: hoping that that would would jump back up, so but

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Speaker 1: the backlog week, it means that you really don't have

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Speaker 1: as much to work on next month as you did

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Speaker 1: the prior month. Very concerning. And then you look at

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Speaker 1: the inventory number at forty seven give or take, it

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Speaker 1: says that supply managers are really watching their input materials

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Speaker 1: so that they're not going to get stuck with something

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Speaker 1: that they don't need. The two things that you look

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Speaker 1: at from a general manager standpoint is how much materially

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Speaker 1: you have taken in and the number one number two

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Speaker 1: is what's your head count? And I think we're at

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Speaker 1: that point where people are looking at that. We're when

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Speaker 1: the planning season here, for most plans get kind of

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Speaker 1: consummated by the end of November, and the employment count

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Speaker 1: has to really be looked that closer here because there's

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Speaker 1: no doubt we have a more production capacity that we

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Speaker 1: need to meet the new order level. We've been burning

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Speaker 1: into the back on now for fourth rate months. At

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Speaker 1: some point you have to make a decision. Tim Furi,

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Speaker 1: thank you so much, chairman of the Manufacturing Business Survey

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Speaker 1: Institute for Supply Management, joining us the phone from Florida.

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Speaker 1: What we've been talking about nineteen is being the year

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Speaker 1: where we get a lot of big, high profile unicorn

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Speaker 1: IPOs coming out of Silicon Valley, and I think a

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Speaker 1: little bit of a hindsight here, it's been kind of

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Speaker 1: a mixed bag. We've had some mixed performance, some real duds.

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Speaker 1: We've actually had some deals pulled. Most notably we work

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Speaker 1: um and um Endeavor was also pulled. To get a

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Speaker 1: sense of what's going on in the US I p

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Speaker 1: O market, we welcome Jackie Kelly, Jackie's America's I p

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Speaker 1: O leader for Ernst and Young joins us here in

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Speaker 1: our Bloomberg Interactive Broker studio. So Jackie, thanks so much

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Speaker 1: for joining us. You know again, we there's so much

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Speaker 1: anticipation for some of these big high profile deals coming public,

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Speaker 1: Uber Lift and all those types of things. It's been

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Speaker 1: kind of a mixed bag. What do you think the

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Speaker 1: I p O market is telling us these days? Well, um,

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Speaker 1: you know, the markets are actually the sentiments really positive.

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Speaker 1: Behind the scenes, Let's just say that we have a

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Speaker 1: few of the higher profile I p O s that

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Speaker 1: have been working through some market issues and other things.

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Speaker 1: But really this is a long term game. At the

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Speaker 1: end of the day. Uh, we're very excited that the

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Speaker 1: pipeline is very robust and UH, despite some of the

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Speaker 1: turbulence in the markets. Uh, the we still have a

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Speaker 1: number of companies lined up right now in the healthcare

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Speaker 1: sector that are looking to price over the next week

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Speaker 1: or two. And we have a number of companies also

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Speaker 1: in technology and other sectors that are getting on file

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Speaker 1: and interested in going public over the next let's say

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Speaker 1: six months plus. How much disappointment are you hearing from

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Speaker 1: your clients at this point and fear as they look

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Speaker 1: at the pipeline getting ready and then they look at

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Speaker 1: the wee work and the endeavor I p O s

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Speaker 1: that were both pulled or iced. Are you having trouble

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Speaker 1: convincing your clients? No, it's still good. It's very interesting. So, UM,

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Speaker 1: I think there's a lot of resilience to some of

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Speaker 1: these the turbulence in the markets and some of the pricings.

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Speaker 1: Companies are really focused, which is great, on getting themselves ready.

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Speaker 1: I think they recognize and this has been a few

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Speaker 1: years now that we've been in this sort of market

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Speaker 1: where things can shift on a dime with you. You

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Speaker 1: can be thinking you're going to price in a great

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Speaker 1: market and then you know, something changes and then the

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Speaker 1: market is not great. So companies are really focused on

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Speaker 1: getting themselves ready. They are focused on getting into the

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Speaker 1: filing process which is now available as confidential for everyone,

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Speaker 1: so everybody can get into the confidential filing process, get

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Speaker 1: themselves ready, and be ready to take advantage of a

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Speaker 1: market window win that market window opens. What do you

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Speaker 1: think some of them? What do you think the market

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Speaker 1: has been telling us with some of these high profile misfires.

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Speaker 1: Is our corporate culture becoming bigger part of kind of

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Speaker 1: what investors are looking for? I'm thinking in Uber, I'm

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Speaker 1: thinking we work you know where there's definitely been some

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Speaker 1: issues with some of the insiders or maybe some of

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Speaker 1: the corporate governance and think things like that. Yeahs, As

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Speaker 1: we're working with companies today, we focus on a number

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Speaker 1: of things and it really is about getting the whole

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Speaker 1: company ready to be a public company, and a critical

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Speaker 1: part of that is governance and an organization. There's sort

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Speaker 1: of the traditional sort of corporate governance and a lot

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Speaker 1: of us think about board governance, et cetera. But there's

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Speaker 1: also just sort of the governance and oversight from the

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Speaker 1: tone at the top of how you run your business.

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Speaker 1: And I think a lot of times, um, you know,

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Speaker 1: as companies are growing so quickly, UH, companies have to

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Speaker 1: start putting in infrastructure policies, a lot of things that

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Speaker 1: very mature companies are already well familiar with. But these

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Speaker 1: but governance as top of the agenda. I think all

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Speaker 1: strong governance function in place. So our own Schnelly Boss

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Speaker 1: are getting together in Silicon Valley, UH, and they do

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Speaker 1: not invite Wall Street because they are displeased with Wall

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Speaker 1: Do you think it's Wall streets fault that we saw

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Speaker 1: some less than optimal performances from some of the I

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Speaker 1: very complex. UM. One of the most important things as

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Speaker 1: And being a predictable business is a very challenging thing

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Speaker 1: I think what's been great is that many of these

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Speaker 1: and so UM, you know, I don't know that you

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Speaker 1: know ultimately, UM companies own uh their decision on timing.

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Speaker 1: They need to think seriously about am I ready to

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Speaker 1: be a public company? Am I running a predictable business?

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Speaker 1: Do I have that governance and controls and those things

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Speaker 1: and beat expectations and things like that. Jackie Kelly, thank

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Speaker 1: you so much. For being with us. Jackie Kelly is

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Speaker 1: American's I p O, America's I p O leader for

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Speaker 1: Ernst and Young, joining us here in our bloomg inter

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Speaker 1: Active Broker studios. It's almost lunch here on Wall Street.

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Speaker 1: I think it's time to take a look at some pizza,

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Speaker 1: in particular Papa John's ticker p z Z a uh.

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Speaker 1: And we are so lucky to have Rob Lynch here

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Speaker 1: in our Bloomgard Active broker studios. He's CEO of Papa

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Speaker 1: John's International. He's been CEO for a hot month and

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Speaker 1: after coming in after a tumultuous period of time. Shares

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Speaker 1: of Papa John's up this year, but that follows at

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Speaker 1: nearly declined last year. What was the biggest challenge for you,

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Speaker 1: Rob when you came into the company, given uh, the

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Speaker 1: sort of unceremonious exit of the previous leader. Now, I

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Speaker 1: think the biggest challenge has been um making sure that

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Speaker 1: everyone is focused on the future. You know, we need

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Speaker 1: to move beyond um those tumultuous times. And you know,

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Speaker 1: I've been surprised that the resiliency of this of this company,

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Speaker 1: our franchisees are employees are all ready to do great

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Speaker 1: things and so that makes it a lot easier for

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Speaker 1: me to come in and drive change and get us

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Speaker 1: going on in the right direction. I'm a big pizza eater,

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Speaker 1: huge pizza eater, that's my you know, desert island food. So, um,

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Speaker 1: talk to us about the pizza business in the US

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Speaker 1: is a growing how's the market share shifting around between

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Speaker 1: chains like yourselves and you know, the mom and pops

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Speaker 1: and so on and so forth. Sure, you know, um,

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Speaker 1: the pizza business is a pretty stable business. Um, you know,

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Speaker 1: I've think the the interesting thing about the pizza industry

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Speaker 1: is all the technological disruption that's going on in the industry.

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Speaker 1: You know, pizza has owned delivery for a long time.

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Speaker 1: When you wanted something delivered, it was either pizza or

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Speaker 1: you know, Chinese food, right, And today you can get

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Speaker 1: anything through the third party aggregators. And so I think

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Speaker 1: the challenge for us is figuring out how we continue

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Speaker 1: to grow and frankly thrive in these new times. And

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Speaker 1: disruption creates opportunity, and so you know, we are focused

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Speaker 1: on and working with these new um companies with these

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Speaker 1: new capabilities to to create a symbiotic relationship where we

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Speaker 1: can both do great things. Over the next few years.

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Speaker 1: So can you give us an example of some innovation

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Speaker 1: I mean other than say an algorithm to better match

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Speaker 1: people and and sort of the delivery individuals, etcetera. Are

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Speaker 1: there any other advancements that you're looking at from a

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Speaker 1: technology standpoint? Yeah, I mean I think that you know,

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Speaker 1: our mobile application ordering is up about sixty sent year

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Speaker 1: on year, right, so people are definitely moving into the

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Speaker 1: application channel versus the phones and even the web ordering

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Speaker 1: that we used to that used to be so prevalent.

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Speaker 1: So you know, for us, that's a huge opportunity because

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Speaker 1: we take that that customer and you know data and

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Speaker 1: leverage that their purchase data to understand what their needs

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Speaker 1: are and target them more effectively with offers that are

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Speaker 1: most relevant for them. So we're not sending them a

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Speaker 1: bunch of spam or a bunch of you know, offers

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Speaker 1: that they don't care about. So um analytics and back

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Speaker 1: in artificial intelligence are allowing us to serve our customers better.

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Speaker 1: So what percentage of your businesses franchise e versus own stores?

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Speaker 1: And how do you think about that? Because I know

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Speaker 1: every you know, restaurant company has a kind of a

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Speaker 1: different view on that. Yeah, you know, I I love

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Speaker 1: it that we have a flexible balance sheet. We own

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Speaker 1: about of the system domestically and franchise is on about

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Speaker 1: and so that allows us to two seed markets with

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Speaker 1: our restaurants and bring in new franchise e s or

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Speaker 1: if and help some of our other French our current

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Speaker 1: franchisees grow and and and really maximize the opportunity in

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Speaker 1: those markets. You know, we new restaurant development as a

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Speaker 1: key indicator of a healthy system. Internationally, we're all franchise

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Speaker 1: We have two thousand restaurants internationally, we're number three globally

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Speaker 1: and pizza delivery UM and so you know that model

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Speaker 1: obviously is a franchise only model, and that allows us

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Speaker 1: to find partners in the geographies that we want to

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Speaker 1: move into who who know that marketplace, know the real estate,

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Speaker 1: know how to do business there. So we we are

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Speaker 1: definitely UM a blended company. There's a lot of talk

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Speaker 1: about the tight labor market. Do you find that it's

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Speaker 1: difficult to hire and retain people? Are more difficult than

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Speaker 1: it than it has been previously? And you were, uh,

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Speaker 1: the CEO of RBS previously, so this isn't new for

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Speaker 1: you in terms of running a food services company. Yeah,

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Speaker 1: it's it's definitely not a Papa John's problem. It is

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Speaker 1: is an industry challenge, right, I mean record low levels

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Speaker 1: of unemployment. I mean a lot of great things for

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Speaker 1: our country. It makes it a little bit tougher for

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Speaker 1: for companies like US and and so um. It just

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Speaker 1: makes it that much more important to foster UM a

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Speaker 1: culture that people want to be a part of, right

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Speaker 1: and to be the kind of the employer of choice

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Speaker 1: in the choice in the markets in which we compete.

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Speaker 1: And so that's been a big part of of what

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Speaker 1: I focused on coming in as the new CEO. How

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Speaker 1: do we make sure that we move kind of past

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Speaker 1: where we've been focused on the future and build, you know,

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Speaker 1: a culture where people feel like they have a future

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Speaker 1: that's bright. So looking forward, what's the kind of the

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Speaker 1: market I know it's a competitive marketplace. What's kind of

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Speaker 1: the marketing strategy that you guys like to employ to

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Speaker 1: kind of establish your brand in the marketplace, maybe differentiate

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Speaker 1: your brand in the marketplace? Do you use traditional media,

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Speaker 1: new media? What's what's working best for you guys? Pizza pizza,

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Speaker 1: Pizza pizza. That's our competitors. That's a competitor. We're better ingredients,

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Speaker 1: better pizza, and I like ours a lot better. Um,

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Speaker 1: but that's okay. Sorry to call you out. Please call

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Speaker 1: me out every time. I love it. Uh. Now you

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Speaker 1: know we we we want to communicate with our customers

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Speaker 1: and the most engaging and compelling way. I mean, we

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Speaker 1: still leverage television obviously is a big advertising channel. Um,

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Speaker 1: but the media industry is changing almost as rapidly as

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Speaker 1: the delivery industry, and so UM, we are focused on

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Speaker 1: making sure that that we've made the right investments in

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Speaker 1: technology and then the channels that our customers are moving towards.

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Speaker 1: I already mentioned the mobile applications. So UM, we're focused

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Speaker 1: on connecting with our customers across all the channels. You

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Speaker 1: came in here and said that your first job was

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Speaker 1: making pizzas. Is that correct? Um? And here you are

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Speaker 1: running a pizza chain franchise operator. I'm just wondering what

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Speaker 1: is your favorite pizza? First of all, my favorite pizza.

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Speaker 1: That's an easy one. Papa John's mushroom pizza. Mushroom pizza.

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Speaker 1: I don't know if you know this, most people don't,

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Speaker 1: but we actually use Baby Portobellows mushrooms on our pizza

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Speaker 1: Like that's a testament to the kind of quality, right,

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Speaker 1: and we chop them fresh in our restaurants every day. Okay,

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Speaker 1: do you ever make pizza. I've made probably about a

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Speaker 1: hundred and fifty thousand pizzas in my life, I know,

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Speaker 1: but yeah, Ceo. So, I have spent the last three

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Speaker 1: or four weeks going around this country meeting with my

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Speaker 1: franchise ease and every time I get there, you know,

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Speaker 1: they're expecting me to be kind of afraid of the

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Speaker 1: back of house, right, And I walk in and you know,

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Speaker 1: I've got my my shirt and my I roll up

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Speaker 1: my sleeves and I'm like, okay, let's sling some dough

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Speaker 1: and I started making pizza. I love it. I absolutely

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Speaker 1: love it. I got, you know, I got Like yesterday,

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Speaker 1: I was here in New York. I was up on

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Speaker 1: Fourth Street at one of our great franchisees restaurants, and

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Speaker 1: you know, I walk in and I've got my suit on,

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Speaker 1: I take the jacket off, but I walk, you know,

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Speaker 1: back back of house, make a pizza. Finish up. I've

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Speaker 1: got flower all over my slacks and shoes. Yeah, I'm like,

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Speaker 1: if you know, if you're not gonna to have flower

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Speaker 1: on your shoes. You're not a pizza maker. So yeah,

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Speaker 1: that's it. That's the story. That's a takeaway. Love it.

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Speaker 1: You don't have flower on your shoes, you got some

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Speaker 1: other business. Robert Lynch, chief executive Officer Papa John's International,

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Speaker 1: joining us here on our Bloomberg Interactor Broker Studio giving

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Speaker 1: us the up to date on Papa John's International. P

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Speaker 1: z z A is the symbol. Thanks for listening to

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Speaker 1: the Bloomberg pen L podcast. You can subscribe and listen

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Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: I'm Paul Sweeney. I'm on Twitter at p T Sweeney.

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Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram

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Speaker 1: wits one Before the podcast, you can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio