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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 3: I would love to be a fly on the wall

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Speaker 3: through your weekend because it's no secret that private equity

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Speaker 3: interest has been in and around the regional banks. Were

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Speaker 3: you interested at all in buying First Republic assets?

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Speaker 4: So assets? Yet?

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Speaker 5: We're always interested in buying assets, but not in the

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Speaker 5: banking business. We like others. We're not banks, we don't

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Speaker 5: intend to be banks. We don't buy banks. But if

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Speaker 5: we can be supportive of restructuring of the banking system

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Speaker 5: through the purchase of assets, absolutely.

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Speaker 3: Now I want you to look beyond even just today

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Speaker 3: because we have the First Republic sale to JP Morgan.

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Speaker 3: But you have Jamie Dimond saying that the banking crisis

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Speaker 3: is almost over. Do you see a whole second wave

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Speaker 3: of this crisis coming?

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Speaker 5: I think part one of the banking crisis is over

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Speaker 5: and I would never disagree with Jamie because this is

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Speaker 5: his job and he lives it. But if my observation

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Speaker 5: is what's happened so far totally predictable, marked to market

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Speaker 5: losses and treasury security is well known to everyone, structure

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Speaker 5: of deposits above minimum guarantees well known to everyone. Are

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Speaker 5: we surprised we shouldn't be. Everyone knew what was happening here.

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Speaker 5: Rising rates created the stress. The interesting thing to me

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Speaker 5: is not whether these street banks failed, it's what's the

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Speaker 5: business of regional banking going forward?

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Speaker 4: Think about it.

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Speaker 5: Forty two billion left SVB in four hours without a line.

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Speaker 4: So you're now the CEO of a big regional bank.

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Speaker 5: Your cost of funds is up, your regulatory costs are up.

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Speaker 4: Can you lend money?

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Speaker 5: Or is your business model going to need to change,

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Speaker 5: going to need to evolve. I think that's what's interesting.

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Speaker 5: And I think we have a second wave in commercial

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Speaker 5: real estate.

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Speaker 3: The second wave in commercial real estate. Do you think

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Speaker 3: that that wave pertains to the banking system at large

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Speaker 3: or a broader set of investors?

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Speaker 4: I think it is.

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Speaker 5: Look, there are lots of people own real estate across

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Speaker 5: the world, across the economy. Investors who own real estate,

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Speaker 5: suffer losses. Investors suffer losses all the time growth stocks

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Speaker 5: go down, investor suffer losses. That to me is not

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Speaker 5: systemic in any way. A banking system which has government

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Speaker 5: guarantees where people put their money in a trust relationship,

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Speaker 5: if they suffer significant losses, that's what causes concern, and

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Speaker 5: that's what we have here. It won't be systemic in

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Speaker 5: my view, but it'll be concentrated. Regional banks once again

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Speaker 5: are the primary lenders to many of our regional real

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Speaker 5: estate issues.

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Speaker 3: Now, we just saw this morning the big get bigger,

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Speaker 3: JP Morgan buying a massive regional bank. But what happens

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Speaker 3: to the banking system moving forward? You mentioned there will

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Speaker 3: be changes. What does the new banking system look like

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Speaker 3: coming out of these troubles.

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Speaker 5: I think it's already changed. We have yet to adjust

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Speaker 5: to the changes of two thousand and eight. So if

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Speaker 5: you think about two thousand and eight and Dodd Frank,

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Speaker 5: ostensibly the legislation was to restrict the exposure of the

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Speaker 5: US economy to large, systemically important banks. By the way

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Speaker 5: it worked, banks are less than twenty percent of all

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Speaker 5: lending in the US. The new banks, by the way,

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Speaker 5: are investors. Everyone who's at this conference today, in some

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Speaker 5: way or another participates in the banking system. But if

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Speaker 5: you ask about banking proper, I do think in the

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Speaker 5: short term we're going to see the big get bigger.

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Speaker 5: People fly to safety when you have any.

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Speaker 4: Sort of crisis.

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Speaker 5: JP Morgan is positioned to step into fixed safe first

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Speaker 5: Republic should not be surprised. But regional banks are a

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Speaker 5: very attractive political entity.

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Speaker 4: Everyone has a regional bank.

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Speaker 5: It'll be interesting to see how the system deals with

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Speaker 5: the fundamental issues facing regional banking.

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Speaker 3: Yeah, well, you mentioned banking system has already been our

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Speaker 3: only twenty percent of the country's lending here, So what

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Speaker 3: does that mean for who will and will not be

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Speaker 3: able to have access to credit in the future.

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Speaker 5: Look, we are I'll say it at a country level,

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Speaker 5: we are fifty percent of the world's capital. We are

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Speaker 5: Our businesses benefit, our government benefit, our consumers benefit. We

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Speaker 5: already have unrestricted assets to credit. Sometimes it's more expensive,

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Speaker 5: sometimes it's less expensive. Go anywhere else in the world.

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Speaker 5: We are the envy of the world. No one has

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Speaker 5: what we have, So I don't know that it gets

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Speaker 5: to who has access to credit. The democratization of credit

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Speaker 5: through the investor investment marketplace has already created unparalleled access.

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Speaker 3: Now, if you think about the commercial real estate issues

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Speaker 3: that we've been talking about, I'm really wondering. I know,

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Speaker 3: over at Apollo, you guys look at things security by security,

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Speaker 3: sometimes building by building. What are the office vacancies telling

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Speaker 3: you about the state of the commercial real estate market.

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Speaker 5: It's a bad day to be an office owner in

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Speaker 5: San Francisco and Chicago.

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Speaker 4: I mean, we could get more.

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Speaker 5: Granular than that, but I step back and again try

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Speaker 5: to put it in big picture. Every piece of real

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Speaker 5: estate everywhere in the world that was purchased pre the

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Speaker 5: run up in interest rates as a result of the

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Speaker 5: change in interest rates is now worthless.

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Speaker 4: We've had such a move in.

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Speaker 5: Interest rates and real estate is an interest rate sensitive activity,

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Speaker 5: that everything is worthless. It does not mean it won't

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Speaker 5: come back, It does not mean it won't ultimately be

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Speaker 5: a good investment. But in the short term we have

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Speaker 5: significant dislocation. But we also have this change in how

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Speaker 5: people use real estate. Office being the most visible, we

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Speaker 5: are going to see losses.

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Speaker 3: Now I'm sitting here in conversation with Mark Rowan, the

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Speaker 3: CEO of Apollop Global Management, now, Mark, you mentioned this

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Speaker 3: kind of pain that the office system is still yet

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Speaker 3: to see the office buildings and the commercial real estate.

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Speaker 3: Now what does that mean not just for investors in

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Speaker 3: commercial real estate, but also investors in the regional banks

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Speaker 3: as a derivative effect. Do you think the market is

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Speaker 3: still under counting how bad things can get?

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Speaker 5: I think the market has yet to ask the long

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Speaker 5: term question. Right now, the question being asked is is

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Speaker 5: the bank safe? Will there be a run on a bank?

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Speaker 5: Will it survive?

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Speaker 4: Safety?

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Speaker 5: I believe has been our primary focus. But we've already

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Speaker 5: seen and the government can make this safe with the

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Speaker 5: stroke of a pen. I believe the banking system to

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Speaker 5: be safe. That is different than what is the business

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Speaker 5: of a regional bank going forward? If you don't know

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Speaker 5: how sticky your deposits are, if your cost of funds

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Speaker 5: is high, your cost of operations is high, what is.

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Speaker 4: Your business model going forward?

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Speaker 5: Like every other industry that has had to adjust to technology,

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Speaker 5: regional banking is going to have to adjust to technology.

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Speaker 5: I'll be shocked if five years from now the business

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Speaker 5: model of a regional bank looks like what they do today.

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Speaker 3: Now, let's take a big step back for a second.

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Speaker 3: Because there's this big understanding in the industry that you're

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Speaker 3: in that you can't unwind twelve years of easy money

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Speaker 3: so easily. And you saw a lot of hiccups already,

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Speaker 3: the LDI crisis in the UK now, the regional banking crisis,

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Speaker 3: the crypto crash. What else is still yet to break.

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Speaker 5: It's hard to be a predictor of what else is

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Speaker 5: to break. But I look at places in the world

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Speaker 5: where we have mismatches between liquid asset liquid liabilities, like

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Speaker 5: a bank borrow short and len long. We have other

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Speaker 5: places in the world where that same build up has

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Speaker 5: taken place ten years twelve years of easy money forced

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Speaker 5: people to do unnatural things to look for yield and

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Speaker 5: to look for rate of return. LDI was the first

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Speaker 5: time systemically the question was called. LDI was nothing more

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Speaker 5: than a misplaced expectation in the part of UK institutions

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Speaker 5: that public securities were liquid. They found out they're only

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Speaker 5: liquid on the way up, they're not liquid on the

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Speaker 5: way down. We have that same in certain open end

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Speaker 5: of mutual funds. We've seen it in ETFs in point

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Speaker 5: of stress. We've seen it even in some private vehicles

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Speaker 5: in point of stress. So this is not a public

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Speaker 5: or private issue. This is a mismatch between the underlying

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Speaker 5: liquidity of assets and the structure of liabilities.

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Speaker 3: Well, speaking of the public markets, there's some question about

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Speaker 3: how well the public markets have actually held up in

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Speaker 3: the base of some of this. You know, how safe

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Speaker 3: can you feel in the fact that you have liquidity.

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Speaker 5: Look, I stepped and I think about what's happened in

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Speaker 5: the world and the difference between public and private. We

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Speaker 5: used to think public was safe and private was risky.

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Speaker 5: We now know public can be risky as well. We

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Speaker 5: now have found out that private can be both safe

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Speaker 5: and risky. What we're talking about is differing degrees of liquidity.

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Speaker 5: What we have elected to do in our industry and

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Speaker 5: certainly for.

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Speaker 4: Apollo, is we focus on private.

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Speaker 5: And the reason we focus on private is we don't

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Speaker 5: believe there is sustainable alpha excess return in publicly traded markets,

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Speaker 5: particularly in publicly traded debt markets. Therefore, if investors come

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Speaker 5: to us for excess return, we need to step away

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Speaker 5: from daily liquid markets. Fortunately, there's plenty.

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Speaker 4: For us to do now.

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Speaker 3: Just this morning there was news about arrival of Yours.

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Speaker 3: Blackstone facing another wave of redemptions when it comes to

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Speaker 3: its semi liquid vehicle. When it comes to the real

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Speaker 3: estate market, you know, a lot of big private credit funds,

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Speaker 3: big private equity funds are trying to court retail investors.

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Speaker 3: When you look at some of the hiccups that some

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Speaker 3: of the current funds are facing in the market, here

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Speaker 3: some of the challenges when it comes to the investors

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Speaker 3: ask for their money back with the for long dated investments.

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Speaker 3: You're on the other side. What does this tell you

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Speaker 3: about the direction of travel? Is investor confidence in retail

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Speaker 3: semi liquid funds becoming dented in disenvironment?

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Speaker 5: I don't know about dented. First, I think Blackstone is

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Speaker 5: doing exactly the right thing. I think the industry owes

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Speaker 5: them a debt of gratitude because they are teaching investors

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Speaker 5: that alternatives are not an ATM. Now they're in an

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Speaker 5: asset class that is under stressed because people are concerned

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Speaker 5: about real estate valuations, and they are redeeming because they

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Speaker 5: think valuations are headed down. Blackstone is behaving responsibly and

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Speaker 5: doing exactly what they are supposed to do and what

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Speaker 5: these vehicles are designed to do. But I look forward

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Speaker 5: and I think about the structure of our business. I

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Speaker 5: think retail investors high net worth are going to be

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Speaker 5: fifty percent allocated to alternatives in the next five years. No, fifty,

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Speaker 5: but not alternatives private equity and hedge funds. Alternatives are

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Speaker 5: just alternatives to publicly traded.

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Speaker 4: Stocks and bonds. They go from double A to equity.

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Speaker 3: What do you say to people who criticize the private

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Speaker 3: markets the credit markets in particular, is masking some of

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Speaker 3: the risks that would be in public credit markets.

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Speaker 5: I think the easiest thing to value as a bond

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Speaker 5: bonds are cash flows, intrat rate and duration, and bonds

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Speaker 5: adjusts quickly. The fact is, better risk reward has been

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Speaker 5: available in private markets than in public markets for much

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Speaker 5: of the last ten to twelve years. Everyone in our

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Speaker 5: industry has picked a different segment. The segment we've picked

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Speaker 5: is private investment grade. Private investment grade is something people

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Speaker 5: haven't even contemplated. Think about what banks used to do,

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Speaker 5: what ge capital used to do. That's the business we've built,

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Speaker 5: and at four hundred billion of private credit, mostly investment grade, unfortunately,

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Speaker 5: we're not relevant. It sounds like a lot four hundred billion,

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Speaker 5: but we're talking about a forty trillion dollar market.

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Speaker 4: We have a long way to go.

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Speaker 3: Hundred billion, but getting bigger as well. There's a lot

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Speaker 3: of discussion in Washington, for example, about regulating non banks.

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Speaker 3: Do you think that you will face tighter regulation as

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Speaker 3: things to procure?

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Speaker 5: I think we all face tighter regulation. That is clearly

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Speaker 5: the direction of travel. Ultimately people look for, is the

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Speaker 5: information available? Yes, the information is already public. Are we

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Speaker 5: mismatched in terms of borrowing short and lending long? No,

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Speaker 5: We're actually countercyclical, and the vast majority of institutions countercyclical

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Speaker 5: as well.

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Speaker 4: Are we levered No? Are we concentrated?

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Speaker 6: No?

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Speaker 4: Are we a diversifier for the economy? Yes.

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Speaker 5: At the end of the day, the US financial system

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Speaker 5: is the envy of the world.

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Speaker 4: We are fifty percent of all the action everywhere in

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Speaker 4: the world, and it's a result of.

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Speaker 5: Decisions made along the way to allow investors to be

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Speaker 5: suppliers of credit.

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Speaker 3: Well, I think that's the other part of the argument here.

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Speaker 4: If not you, then who that's the choice?

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Speaker 5: The US economy, the world economy will need a certain

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Speaker 5: amount of credit, and the choices are you will allow

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Speaker 5: it to be supplied exclusively by the banking system, backed

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Speaker 5: by government guarantees, as we have in many foreign countries,

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Speaker 5: or do we allow investors broadly defined retail investors, high

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Speaker 5: net worth investors, pension investors, institutions to participate and get

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Speaker 5: diversification and socialization of risk. Investors for the most part,

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Speaker 5: are prepared for things that go up and down, things.

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Speaker 3: That go up and down. You had mentioned kind of

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Speaker 3: the benefits of the private markets in terms of return

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Speaker 3: opportunities here in the credit markets. I'm curious about what

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Speaker 3: you think about the current state of investment grade when

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Speaker 3: you look at the public markets. There has been a

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Speaker 3: lot of discussion about how eerily calm that spreads have

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Speaker 3: been behaving in the face of what many feel is

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Speaker 3: a pending recession. Do you think that there's more risks

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Speaker 3: under the surface when you look at public credit.

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Speaker 5: I don't think there's more risks under the surface. I

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Speaker 5: think that you have a confused market. You have lots

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Speaker 5: of talk about recession, and you have a yield curve

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Speaker 5: the shape of which is.

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Speaker 4: Up and then down.

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Speaker 5: So it does not surprise me that investors who are

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Speaker 5: being offered yields today of a certain magnitude are active

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Speaker 5: in locking them in, especially after a decade of very

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Speaker 5: low rates.

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Speaker 3: Well, you've mentioned also I've heard you say a few

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Speaker 3: times that kind of the era equity is eroding here.

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Speaker 3: Does that make a bigger kind of secular push to

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Speaker 3: credit in general?

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Speaker 4: I think it does.

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Speaker 5: I think this is an amazing entry point for credit,

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Speaker 5: not just because we're in it, but because of what's transpired.

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Speaker 5: Equity we printed eight trillion dollars from two thousand and

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Speaker 5: eight until twenty twenty two. Exactly what was supposed to

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Speaker 5: happen happened. Now that we've started withdrawing it. Entry point

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Speaker 5: for credit is fabulous. Has adjusted very quickly. Liquidity has eroded,

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Speaker 5: banking crisis has further roded it. We have a unique

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Speaker 5: entry point for credit. It will not always be this good.

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Speaker 5: Equity has adjusted somewhat, but not nearly as much as

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Speaker 5: credit now.

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Speaker 3: Also, I mean we've seen from the banking system that

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Speaker 3: what was safe yesterday can be rated as junk tomorrow.

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Speaker 3: Do not believe that we would be facing the greater

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Speaker 3: wave of downgrades.

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Speaker 4: I think all pricement, there's no doubt.

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Speaker 5: But if you are concerned about the direction of travel,

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Speaker 5: if there's uncertainty, I would almost always rather be top

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Speaker 5: of the capital structure, senior secured.

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Speaker 4: You tend to get paid back.

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Speaker 5: So for our shop, the bet we've made has been

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Speaker 5: on private investment grade.

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Speaker 4: I like our hand.

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Speaker 5: I would rather play our hand than anyone else's hand

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Speaker 5: in our industry.

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Speaker 3: Now, I'm kind of curious about Apollo's plans throughout the

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Speaker 3: rest of this year. You're looking across Wall Street, You're

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Speaker 3: seeing a lot of people either slimming back on hiring

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Speaker 3: or flat out letting go of thousands of staff. What

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Speaker 3: opportunity do you see there? Given Apollo has already tremendously

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Speaker 3: added to have headgn in the.

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Speaker 4: Last we will continue to grow.

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Speaker 5: We've already said our business will be up in the

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Speaker 5: asset management side. We've told the street better than twenty

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Speaker 5: five percent this year, on the retirement services side, better

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Speaker 5: than twenty percent this year. And that's with an overlay

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Speaker 5: to our strategy of what we call no new toys.

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Speaker 5: And the reason no new toys is not to add

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Speaker 5: new things. The upside from simply executing the business plan

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Speaker 5: that's in front of us is so high that the

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Speaker 5: price of distraction is just very hard to contemplate. So

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Speaker 5: I think twenty three for us, we will grow, we

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Speaker 5: will add team, but we will do it in the

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Speaker 5: context of the envelope of our business that exists and

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Speaker 5: no new toys.

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Speaker 3: Are you finding it very easy these days to hire

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Speaker 3: from the banks or even the technology companies that are

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Speaker 3: slums back.

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Speaker 4: It's never easy to hire. This is always about culture.

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Speaker 4: But we have.

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Speaker 5: Grown the team tremendously and in fact is the limitter

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Speaker 5: of our growth. At the end of the day, we

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Speaker 5: provide our client's judgment, and that judgment comes from people

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Speaker 5: being at Apollo for a long time and integrating into

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Speaker 5: our culture. We can only grow as fast as we

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Speaker 5: can culturally absorb people.

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Speaker 4: There's a natural hedge.

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Speaker 5: If you will, or a natural limitter to our growth,

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Speaker 5: and we watch that balance very very carefully.

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Speaker 3: Before I let you go, before Wednesday's big FED day,

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Speaker 3: what do you expect in terms of the direction of

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Speaker 3: travel when you look at the interest rate trajectory for

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Speaker 3: the rest of this year and what it means for

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Speaker 3: the state of markets.

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Speaker 5: Look, I think there's a there's a push pull. I

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Speaker 5: think the direction of travel Wednesday is going to be up.

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Speaker 4: It'll all depends about the.

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Speaker 5: Language that surrounds it and the activities that take place

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Speaker 5: following it. If we have a second leg of this

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Speaker 5: banking crisis that I obviously augurs for slower. If we

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Speaker 5: don't and we continue to see the wage pressures that

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Speaker 5: we just saw, it'll be tougher.

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Speaker 7: You're listening to the team. Hen's are live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 7: the iHeartRadio app and the Bloomberg Business app, or listen

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Speaker 7: on demand wherever you get your podcasts.

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Speaker 1: Let's bring in Herman Chance, speaking of Bloomberg Intelligence. He

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Speaker 1: covers the regional banks here. So Herman, I guess it's done.

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Speaker 1: JP Morgan, First Republic. You know, we kind of went

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Speaker 1: into Friday thinking something's going to happen. JP Morgan was

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Speaker 1: certainly on the list. We kind of wake up Monday morning.

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Speaker 2: Here way up there at the time, top of the list. Boom,

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Speaker 2: they got it. What a shocker? What did how did

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Speaker 2: why did they?

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Speaker 4: What did J?

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Speaker 3: I guess?

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Speaker 4: How did jpmore win?

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Speaker 1: What did they do to put them over the top

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Speaker 1: to beat out Bank of America and.

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Speaker 2: P and C and some others? Yeah?

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Speaker 8: Sure, so what Bank of.

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Speaker 2: America declined to even participate in the addiction? Okay, so

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Speaker 2: did US Bank? And we know that PNC and citizens

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Speaker 2: were invited.

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Speaker 8: But I'm assuming they probably made a bid, but really

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Speaker 8: assumption what really put JP Morgan over the top is

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Speaker 8: that they are acquiring all of the assets that are underwater,

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Speaker 8: both on the loans and security side, Whereas any potential

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Speaker 8: regional bank that would have made a bid probably would

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Speaker 8: have just cherry picked the best and most attractive assets

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Speaker 8: and left these underwater securities and loans with the FDIC. So,

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Speaker 8: in effect, the FDIC made the best choice in limiting

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Speaker 8: the losses to the Deposit Insurance Fund by doing the

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Speaker 8: deal with JP.

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Speaker 1: We don't know, this probably isn't in your remit. But

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Speaker 1: the flip side to that is that now we kind

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Speaker 1: of set a precedent for a JP Morgan or I

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Speaker 1: don't know, somebody else that's of that ILK, that they're really,

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Speaker 1: you know, the lender of last resort, that they're really

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Speaker 1: the backstop. It may not be the regulators.

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Speaker 8: Yeah, we just wrote about a little bit about this

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Speaker 8: with respect to PNC, that was in our mind the

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Speaker 8: most likely acquire of the First Republic assets and deposits.

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Speaker 8: And if the regulators are going to let these systemically

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Speaker 8: important banks acquire these failed banks, then it makes the

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Speaker 8: region is less likely to be able to absorb these

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Speaker 8: these types of deals because the FDIC would most likely

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Speaker 8: prefer to deal with the largest banks because they can

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Speaker 8: acquire the entirety of these troubled assets onto their own balance.

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Speaker 2: Shot, let's parse this out because there's also a lot

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Speaker 2: of spin here. There's a lot of politics. The FDIC

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Speaker 2: doesn't want to be blamed for bailing out there rich,

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Speaker 2: which they did, and they didn't want to take the

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Speaker 2: bank into receiver ship, so went to JP Morgan. But

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Speaker 2: they had to first take the bank into receivership. Right,

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Speaker 2: how much is the FDIC going to have to pay

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Speaker 2: initially and how much are they going to have to

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Speaker 2: guarantee in terms of insurance to convince Jamie Diamond, who remember,

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Speaker 2: wouldn't even take a call for SBB because his board

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Speaker 2: wouldn't let him. Now his board's got lenient in just

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Speaker 2: six weeks time. How much does the FDIC really have

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Speaker 2: to shell out in this big bail out of the rich.

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Speaker 8: The FDIC estimated in the press release it's going to

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Speaker 8: be a thirteen billion dollar hit to the Deposit Insurance Fund, which,

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Speaker 8: in the grand scheme of things, is better versus the

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Speaker 8: twenty billion dollar hit they're taking with the SVB failure,

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Speaker 8: So dealing with JP Morgan is more is more advantageous

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Speaker 8: for the regulators, and the FDFC is offering a lost

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Speaker 8: your agreement on the loans for First Republic and their

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Speaker 8: offering so financing.

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Speaker 2: Lost share agreement. So they had to pay thirteen billion

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Speaker 2: upfront and they're going to have to pay the other

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Speaker 2: at least nine billion down the line because JP Morgan

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Speaker 2: and their slides estimated that the loans they bought are

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Speaker 2: worth twenty two billion dollars less than par.

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Speaker 8: Right, so they're taking a thirteen percent haircut on the loans,

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Speaker 8: which is much larger than what we've seen out the others.

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Speaker 8: For example, the other failed bank deal that we found

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Speaker 8: from a New York community and signature, they were only

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Speaker 8: taking a five percent haircut. So it just reflects the

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Speaker 8: underwater nature of the loan book that First Republic had.

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Speaker 1: All right, Herman, thank you once again for coming to

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Speaker 1: our rescue, bringing it making it all clear here what's

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Speaker 1: happening on the regional bank front. Herman Chann from Bloomberg Intelligence.

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Speaker 7: You're listening to the tape cats are Live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 7: You can also listen live on Amazon Alexa from our

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Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: A little preview, what maybe the markets are thinking about

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Speaker 1: when we get to that FED day. Let's bring in

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Speaker 1: one of our all time faves, and whenever we see

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Speaker 1: her running around the Bloomberg HQ, we grab bring her

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Speaker 1: down here to the studio. Liz McCormick, Chief correspondent of

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Speaker 1: Global macro Markets with Bloomberg News List, Thanks so much

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Speaker 1: for joining us here. What are you going to be

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Speaker 1: looking for this week? I mean, we've got the Fed

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Speaker 1: on Wednesday, We've got economic data. Every time we turn around,

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Speaker 1: there's something being released throughout this week. What are you

445
00:21:38,400 --> 00:21:40,000
Speaker 1: looking at? What do you think the markets are looking at?

446
00:21:40,320 --> 00:21:42,480
Speaker 9: Well, yeah, it's like a blockbuster week. We have the

447
00:21:42,520 --> 00:21:45,160
Speaker 9: Fed and also on Wednesday, for the bond walks, there's

448
00:21:45,200 --> 00:21:48,359
Speaker 9: a Treasury refunding, you know, so the Treasury Department weighs

449
00:21:48,359 --> 00:21:51,879
Speaker 9: in on their thoughts about borrowing, and then payrolls on Friday.

450
00:21:51,600 --> 00:21:54,639
Speaker 2: And wait, what is the Treasury refunding, they weigh in,

451
00:21:55,160 --> 00:21:56,160
Speaker 2: they just give commentary.

452
00:21:56,320 --> 00:21:59,240
Speaker 9: No no, no, So they say, hey, this is our

453
00:21:59,240 --> 00:22:02,000
Speaker 9: borrowing plan for the quarter. So you know, dealers are

454
00:22:02,000 --> 00:22:04,720
Speaker 9: always looking are they going to increase auction sizes more

455
00:22:04,760 --> 00:22:07,560
Speaker 9: notes and bonds this time? Given the constraints of the

456
00:22:07,600 --> 00:22:09,800
Speaker 9: debt limit, their kind of hands are tied. They think

457
00:22:09,800 --> 00:22:12,560
Speaker 9: they're going to keep notes in bonds stable, but they're

458
00:22:12,600 --> 00:22:13,400
Speaker 9: looking for insight.

459
00:22:13,520 --> 00:22:16,199
Speaker 2: You know, does every sentence have an asterisk at this

460
00:22:16,280 --> 00:22:19,520
Speaker 2: time or do they say, like, actually, as of now,

461
00:22:19,720 --> 00:22:23,600
Speaker 2: we don't have enough money to borrow at anything at all.

462
00:22:23,760 --> 00:22:25,679
Speaker 2: I mean, well, that's exactly right.

463
00:22:25,680 --> 00:22:27,720
Speaker 9: If you look at Luke crandall from rights and he

464
00:22:27,880 --> 00:22:30,560
Speaker 9: was writing that some of these they give some financing

465
00:22:30,640 --> 00:22:33,119
Speaker 9: estimates today and then the refunding is Wednesday, but that

466
00:22:33,359 --> 00:22:36,280
Speaker 9: Treasury has been assuming each time they do these numbers

467
00:22:36,600 --> 00:22:39,000
Speaker 9: that there is a resolution of the debt ceiling, which

468
00:22:39,040 --> 00:22:41,520
Speaker 9: of course hasn't happened. So it's a lot of asterisks

469
00:22:41,600 --> 00:22:44,000
Speaker 9: and if and only so that's why they're going to

470
00:22:44,080 --> 00:22:46,480
Speaker 9: try to like do nothing with the big kahunas the

471
00:22:46,520 --> 00:22:49,600
Speaker 9: notes and bonds and just give some more guidance because

472
00:22:49,800 --> 00:22:52,119
Speaker 9: there's a lot of people saying, you know, there's going

473
00:22:52,200 --> 00:22:54,919
Speaker 9: to be a wave of new treasury bills after we

474
00:22:54,920 --> 00:22:57,359
Speaker 9: get through the debt limit because they've been kind of

475
00:22:57,359 --> 00:23:00,960
Speaker 9: cutting them back dealing with the extraordinary measures and to

476
00:23:00,960 --> 00:23:02,119
Speaker 9: stay under the debt limit.

477
00:23:02,800 --> 00:23:04,080
Speaker 3: So there's the short end.

478
00:23:04,080 --> 00:23:06,520
Speaker 9: Folks have a lot on their mind. You know, bills

479
00:23:06,680 --> 00:23:08,960
Speaker 9: as you talk about, a lot affect the curve. There's

480
00:23:09,000 --> 00:23:11,320
Speaker 9: pricing of the you know, risk of the debt ceiling.

481
00:23:11,480 --> 00:23:13,879
Speaker 9: Let's not buy the bills in certain areas, so for

482
00:23:14,200 --> 00:23:16,320
Speaker 9: the bond folks, and there's other things that they'll kind

483
00:23:16,320 --> 00:23:19,320
Speaker 9: of communicate about their plans. So but on the FOMC,

484
00:23:19,480 --> 00:23:21,600
Speaker 9: I was listening to you guys chatting with Jess and

485
00:23:21,640 --> 00:23:25,120
Speaker 9: I think she kind of really nailed it. That people

486
00:23:25,200 --> 00:23:28,119
Speaker 9: are saying, well, stocks and things are holding it okay

487
00:23:28,160 --> 00:23:31,880
Speaker 9: because the market is priced for like hike, a pause,

488
00:23:32,080 --> 00:23:34,320
Speaker 9: a pivot, and a cut. That's like Tom s e

489
00:23:34,520 --> 00:23:37,199
Speaker 9: of A seven's report always says that. But if the

490
00:23:37,240 --> 00:23:39,560
Speaker 9: Fed doesn't signal that, or if they you know, hike

491
00:23:39,640 --> 00:23:42,240
Speaker 9: one more time and make it sound like wow, there's

492
00:23:42,280 --> 00:23:44,720
Speaker 9: a chance we have to do more or just really

493
00:23:44,760 --> 00:23:47,760
Speaker 9: try to push back on this surety for cuts, then

494
00:23:47,800 --> 00:23:50,480
Speaker 9: they're talk but yes, yes, might take a hit, you know,

495
00:23:50,600 --> 00:23:51,879
Speaker 9: So that's what people are looking for.

496
00:23:51,920 --> 00:23:53,640
Speaker 1: What does he have to say, Well, that's what they

497
00:23:53,800 --> 00:23:56,800
Speaker 1: I mean. So if that's what they have been saying

498
00:23:56,880 --> 00:24:00,600
Speaker 1: consistently the Federal Reserve, So if they don't say it

499
00:24:00,680 --> 00:24:03,680
Speaker 1: as consistently this time, that in and of itself is news,

500
00:24:04,040 --> 00:24:04,720
Speaker 1: right right.

501
00:24:04,800 --> 00:24:08,439
Speaker 9: In fact, Anna Wong at Bloomberg Economics is calling for

502
00:24:08,480 --> 00:24:10,920
Speaker 9: a hawkish hike, right, you know, But I said, the

503
00:24:11,000 --> 00:24:14,400
Speaker 9: problem is the market doesn't seem to take it that way.

504
00:24:14,560 --> 00:24:17,080
Speaker 2: So I don't know what all has to say.

505
00:24:17,240 --> 00:24:21,280
Speaker 1: You and some other folks, Garfield Reynolds and Red Pickered

506
00:24:21,320 --> 00:24:24,320
Speaker 1: are out with something a note today or I guess

507
00:24:24,400 --> 00:24:26,679
Speaker 1: call it a piece of journalism. I don't know what

508
00:24:26,720 --> 00:24:29,400
Speaker 1: you call it. In research we called research note. Anyway,

509
00:24:29,680 --> 00:24:32,960
Speaker 1: it's good reporting. I think I know stagflation when I

510
00:24:33,000 --> 00:24:37,000
Speaker 1: see it. It's a slowing economy and high inflation. That's stagflation.

511
00:24:37,800 --> 00:24:39,800
Speaker 1: That sounds bad, is it?

512
00:24:40,200 --> 00:24:42,480
Speaker 9: Well, it depends on what you're in, right, You try

513
00:24:42,560 --> 00:24:44,480
Speaker 9: to and I keep saying to people, this is maybe

514
00:24:44,560 --> 00:24:47,119
Speaker 9: not your mother's stagflation. It's like, you know, people are

515
00:24:47,119 --> 00:24:51,400
Speaker 9: calling it stagflation light, so maybe zero to one percent growth,

516
00:24:52,160 --> 00:24:56,320
Speaker 9: inflation staying above the Fed's target, so not the horrific

517
00:24:56,600 --> 00:24:59,879
Speaker 9: horrible seventies, but not great, So you got to kind

518
00:24:59,920 --> 00:25:00,640
Speaker 9: of pick your spot.

519
00:25:00,760 --> 00:25:04,520
Speaker 2: So real stagflation is inflation with contraction.

520
00:25:04,760 --> 00:25:05,040
Speaker 4: Exact.

521
00:25:05,080 --> 00:25:07,399
Speaker 2: Mean, it's pretty basic. And I know everyone's tried to

522
00:25:07,400 --> 00:25:10,399
Speaker 2: make up new definitions over the past couple of years.

523
00:25:10,440 --> 00:25:13,560
Speaker 2: But if you have inflation and if you have a contraction,

524
00:25:14,000 --> 00:25:17,120
Speaker 2: that's stagflation. That's not in the Miller household.

525
00:25:17,240 --> 00:25:21,080
Speaker 1: Yes, that's that's a Midwestern and we have no debt ceiling.

526
00:25:21,640 --> 00:25:24,600
Speaker 9: Yeah, there's just so many things on the radar here,

527
00:25:24,680 --> 00:25:27,640
Speaker 9: you know. And I was joking with a colleague, you know, inflation,

528
00:25:27,840 --> 00:25:30,040
Speaker 9: even though you hear, oh, certain things are getting better,

529
00:25:30,200 --> 00:25:30,600
Speaker 9: I don't know.

530
00:25:30,640 --> 00:25:33,200
Speaker 1: When I go shopping, I'm like, wow, that.

531
00:25:33,440 --> 00:25:35,000
Speaker 2: Those berries are expensive.

532
00:25:35,160 --> 00:25:38,200
Speaker 9: I think I can live on bananas, you know, whatever's cheaper.

533
00:25:38,640 --> 00:25:40,920
Speaker 2: Everything I do is more expense. I had I broke

534
00:25:40,960 --> 00:25:42,960
Speaker 2: my iPhone. I had to buy a new one. I

535
00:25:43,000 --> 00:25:45,439
Speaker 2: don't even want to tell you how much it costs. Well,

536
00:25:45,440 --> 00:25:48,719
Speaker 2: I went to the movies on Saturday. Very expensive. I

537
00:25:48,720 --> 00:25:49,280
Speaker 2: want shopping.

538
00:25:49,280 --> 00:25:51,320
Speaker 1: This week, I went to a factory outlet store for

539
00:25:51,359 --> 00:25:52,120
Speaker 1: the first time in my.

540
00:25:52,080 --> 00:25:54,720
Speaker 2: Life, the first time you've ever been to a factory

541
00:25:54,720 --> 00:25:57,320
Speaker 2: outlet store? Yes, which one? Did you go to? Nike?

542
00:25:59,040 --> 00:26:00,879
Speaker 1: So just just you didn't go to one of the

543
00:26:00,960 --> 00:26:03,320
Speaker 1: factory Alan malls. It was the factory out of malls,

544
00:26:03,600 --> 00:26:05,240
Speaker 1: the Shore Factory out let.

545
00:26:05,080 --> 00:26:06,440
Speaker 2: Mall in fall Es.

546
00:26:06,560 --> 00:26:09,320
Speaker 1: Actually it's got had everything every brand. I didn't know

547
00:26:09,320 --> 00:26:11,840
Speaker 1: that this whole world existed. I saw a movie about

548
00:26:11,920 --> 00:26:12,959
Speaker 1: Nike this weekend.

549
00:26:12,960 --> 00:26:15,439
Speaker 2: I want to see that. I want to air the

550
00:26:15,440 --> 00:26:19,359
Speaker 2: Air Jordan movie. My wife loved it and I thought

551
00:26:19,359 --> 00:26:22,240
Speaker 2: it was pretty good. And Liz ask him how he

552
00:26:22,320 --> 00:26:25,280
Speaker 2: got there. He drove in a Sure, we drove there

553
00:26:25,320 --> 00:26:29,520
Speaker 2: in a white Rolls Royce ghost with red bright red

554
00:26:29,600 --> 00:26:30,440
Speaker 2: leather interior.

555
00:26:30,640 --> 00:26:35,720
Speaker 1: What do you not notice us and see in his

556
00:26:35,880 --> 00:26:38,560
Speaker 1: town that didn't even stand out? It's just like, oh yeah,

557
00:26:38,600 --> 00:26:40,879
Speaker 1: that's just the Miller's all right. Liz McCormick, thanks so

558
00:26:40,960 --> 00:26:42,960
Speaker 1: much for joining us. Lots of echo data, lots of

559
00:26:42,960 --> 00:26:45,320
Speaker 1: fun stuff we'll keep an eye on all week.

560
00:26:46,880 --> 00:26:50,280
Speaker 7: You're listening to the team Ken's Are Live program Bloomberg

561
00:26:50,320 --> 00:26:53,719
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com,

562
00:26:53,800 --> 00:26:56,920
Speaker 7: the iHeartRadio app, and the Bloomberg Business app or listen

563
00:26:57,000 --> 00:26:59,120
Speaker 7: on demand wherever you get your podcasts.

564
00:27:01,080 --> 00:27:03,840
Speaker 2: I want to talk ETFs. Ye, right now. I love

565
00:27:03,920 --> 00:27:07,560
Speaker 2: talking about ETFs. You have a show TV show by ETF. Yes,

566
00:27:07,600 --> 00:27:09,640
Speaker 2: and it's a you know, it's a more than ten

567
00:27:09,840 --> 00:27:15,160
Speaker 2: trillion dollar industry globally. Forecasts are for the ETF industry

568
00:27:15,200 --> 00:27:18,359
Speaker 2: to double within the next I think five years, so

569
00:27:19,040 --> 00:27:20,719
Speaker 2: right now seven trillion in the US.

570
00:27:20,760 --> 00:27:22,320
Speaker 1: And that's why the young guys are going to the

571
00:27:22,320 --> 00:27:23,080
Speaker 1: ETF business.

572
00:27:23,160 --> 00:27:25,480
Speaker 2: Yes, but there's some old people in ETFs as well.

573
00:27:25,560 --> 00:27:28,040
Speaker 1: Okay, were you with Northern Trust before I was with

574
00:27:28,080 --> 00:27:31,120
Speaker 1: the Trust. I haven't even brought him in, But here's

575
00:27:31,160 --> 00:27:34,680
Speaker 1: the story. Our next guest was with Northern Trust in Chicago.

576
00:27:34,920 --> 00:27:38,560
Speaker 1: The crustiest money you could ever imagine that all the

577
00:27:38,600 --> 00:27:40,880
Speaker 1: money in the Midwest, Northern Trust manages. You go into

578
00:27:40,880 --> 00:27:43,440
Speaker 1: their offices in Chicago, it's like the nineteen thirties, which

579
00:27:43,480 --> 00:27:44,600
Speaker 1: is awesome, which was.

580
00:27:44,640 --> 00:27:46,840
Speaker 2: When Chicago was at its peak.

581
00:27:47,160 --> 00:27:49,960
Speaker 1: Right, And so this young buck a Northern Trust gets

582
00:27:50,000 --> 00:27:52,560
Speaker 1: trained up in the crusty world of pensions and all

583
00:27:52,560 --> 00:27:54,359
Speaker 1: that kind of stuff and he goes to the et business.

584
00:27:54,359 --> 00:27:57,000
Speaker 2: Well, that actuallyins it. I think it's a pretty convincing product.

585
00:27:57,040 --> 00:27:59,080
Speaker 2: He also worked at Invesco, one of the biggest ETF

586
00:27:59,119 --> 00:28:02,440
Speaker 2: issuers in the business. Tim Urbanowitz is in the studio.

587
00:28:03,160 --> 00:28:05,720
Speaker 2: Thank you, Tim for coming to New York and joining

588
00:28:05,800 --> 00:28:09,080
Speaker 2: us here in the in the studio. It's always great

589
00:28:09,080 --> 00:28:12,120
Speaker 2: to have guests live. You are the head of research

590
00:28:12,200 --> 00:28:15,359
Speaker 2: at Innovator ETFs. Now after the experience, we've talked about

591
00:28:15,359 --> 00:28:18,680
Speaker 2: your CV already, and you went to Wheaton College as well,

592
00:28:18,760 --> 00:28:23,520
Speaker 2: so you're all in when it comes to Chicago. Tell

593
00:28:23,600 --> 00:28:27,040
Speaker 2: us first of all about Innovator ETFs and what drew

594
00:28:27,080 --> 00:28:27,800
Speaker 2: you to that firm.

595
00:28:28,040 --> 00:28:31,919
Speaker 6: Yeah, So Innovator ETFs it was actually founded by the

596
00:28:31,960 --> 00:28:35,359
Speaker 6: same two partners that founded the Power Shares ETF franchise

597
00:28:35,720 --> 00:28:38,880
Speaker 6: back in the early two thousands, Bruce Bond, John Southern.

598
00:28:39,000 --> 00:28:41,840
Speaker 6: That business was then sold to Investco, fourth largest ETF

599
00:28:41,960 --> 00:28:44,120
Speaker 6: business in the world. Now, so I had the opportunity

600
00:28:44,120 --> 00:28:46,200
Speaker 6: to work at power Shares for a while, really cut

601
00:28:46,200 --> 00:28:48,800
Speaker 6: my teeth in the ETF business. Learn a little bit

602
00:28:48,800 --> 00:28:52,360
Speaker 6: about it. You saw power Shares grow to the monster

603
00:28:52,440 --> 00:28:54,960
Speaker 6: that it is now and then Innovator. You know, Bruce

604
00:28:55,000 --> 00:28:58,680
Speaker 6: and John founded Innovator back in twenty and seventeen, and

605
00:28:58,760 --> 00:29:01,280
Speaker 6: the idea was really you know, the first time, it

606
00:29:01,360 --> 00:29:04,000
Speaker 6: was how do we take the ETF rapper put a

607
00:29:04,000 --> 00:29:06,200
Speaker 6: more intelligent strategy underneath the hood, and that was how

608
00:29:06,280 --> 00:29:09,520
Speaker 6: smart beta was born. This time around with Innovator, it

609
00:29:09,560 --> 00:29:12,880
Speaker 6: was how do we take some of the interesting payoffs

610
00:29:12,880 --> 00:29:15,600
Speaker 6: that we're seeing in the structured noteworld and make those

611
00:29:15,640 --> 00:29:18,720
Speaker 6: more efficient. How do we use the ETF wrapper to

612
00:29:18,760 --> 00:29:22,520
Speaker 6: provide the tax efficiency, the liquidity, get rid of the

613
00:29:22,560 --> 00:29:24,920
Speaker 6: lock up period, surrender charges, all that stuff that you

614
00:29:25,000 --> 00:29:27,520
Speaker 6: see in the structured noteworld and just make that experience

615
00:29:27,600 --> 00:29:30,360
Speaker 6: much more efficient for investors. And that's really how Innovator

616
00:29:30,440 --> 00:29:30,760
Speaker 6: was birth.

617
00:29:31,080 --> 00:29:33,400
Speaker 2: And this is I mean, the ets we're going to

618
00:29:33,440 --> 00:29:35,640
Speaker 2: talk about now are part of a whole new class.

619
00:29:35,720 --> 00:29:38,560
Speaker 2: You had your playing vanilla atfs. Of course, I think

620
00:29:38,600 --> 00:29:42,120
Speaker 2: now thirty years ago was when they first put out

621
00:29:42,160 --> 00:29:46,560
Speaker 2: the spies, and then you had smart beta ETFs. You know,

622
00:29:47,160 --> 00:29:49,920
Speaker 2: different weighting on stocks and the index for example, is

623
00:29:49,920 --> 00:29:52,920
Speaker 2: one way that people do that. Then you had thematic ETFs,

624
00:29:52,920 --> 00:29:56,600
Speaker 2: which were all the rage last year. And now buffers

625
00:29:56,760 --> 00:29:59,680
Speaker 2: have become Buffers is like a keyword now. But you

626
00:29:59,760 --> 00:30:04,120
Speaker 2: say a barrier APRJ for example, is your innovative innovator

627
00:30:04,200 --> 00:30:08,560
Speaker 2: premium income, thirty percent barrier ETF. What exactly does this

628
00:30:08,680 --> 00:30:09,280
Speaker 2: product do?

629
00:30:09,640 --> 00:30:11,560
Speaker 6: Yeah, so, I mean you look at the category of

630
00:30:11,640 --> 00:30:14,239
Speaker 6: we call it defined outcome investing, and really this is

631
00:30:14,280 --> 00:30:17,360
Speaker 6: when we talk to advisors more than anything else. What

632
00:30:17,400 --> 00:30:20,400
Speaker 6: their clients want to do is to remove as many

633
00:30:20,400 --> 00:30:24,400
Speaker 6: of the unknowns out there as possible, and really a

634
00:30:24,440 --> 00:30:27,720
Speaker 6: buffer and even a barrier. They do that by providing

635
00:30:27,760 --> 00:30:30,960
Speaker 6: a defined or known outcome, so we really remove the

636
00:30:31,000 --> 00:30:34,040
Speaker 6: guesswork altogether. So with a barrier, what we're striving to

637
00:30:34,080 --> 00:30:38,360
Speaker 6: do is provide a defined level of high income with

638
00:30:38,720 --> 00:30:42,880
Speaker 6: built in risk management, so a known barrier against losses

639
00:30:43,000 --> 00:30:46,280
Speaker 6: over the outcome period. So APRJ you have a thirty

640
00:30:46,360 --> 00:30:50,960
Speaker 6: percent barrier against losses over the next twelve months.

641
00:30:51,080 --> 00:30:53,720
Speaker 2: With meaning you can lose up to thirty percent but

642
00:30:53,800 --> 00:30:54,360
Speaker 2: no more.

643
00:30:54,280 --> 00:30:56,120
Speaker 6: Meaning that if the market were to go down on

644
00:30:56,160 --> 00:30:59,080
Speaker 6: a price return basis anywhere from zero to thirty percent

645
00:30:59,640 --> 00:31:02,240
Speaker 6: from a April to April, you would be fully protected

646
00:31:02,240 --> 00:31:02,960
Speaker 6: from those losses.

647
00:31:03,000 --> 00:31:06,600
Speaker 2: Oh sorry, okay, you can. You can avoid losses down

648
00:31:06,640 --> 00:31:09,040
Speaker 2: to thirty percent, but when it's if it loses more

649
00:31:09,080 --> 00:31:12,320
Speaker 2: than thirty percent, which God forbid, right, then you've got

650
00:31:12,360 --> 00:31:14,280
Speaker 2: to start taking a hit exactly.

651
00:31:14,320 --> 00:31:16,240
Speaker 6: So that's when you would see if you break that

652
00:31:16,320 --> 00:31:19,280
Speaker 6: thirty percent barrier, that's when you're down one for one

653
00:31:19,320 --> 00:31:22,280
Speaker 6: with the market the whole way. The difference here is

654
00:31:22,320 --> 00:31:24,840
Speaker 6: that you're always going to get that income, so that

655
00:31:24,920 --> 00:31:28,040
Speaker 6: distribution rate is known and that continues to be paid

656
00:31:28,080 --> 00:31:30,280
Speaker 6: out regardless of if we break the barrier or not.

657
00:31:31,000 --> 00:31:34,320
Speaker 6: So at APRJ, that thirty percent barrier level, just given

658
00:31:34,440 --> 00:31:36,760
Speaker 6: a client's view of the market right now, that is

659
00:31:36,760 --> 00:31:39,240
Speaker 6: one of the most popular strategies that we've seen since

660
00:31:39,320 --> 00:31:41,960
Speaker 6: launching one of the biggest asset gatherers. Just you know,

661
00:31:41,960 --> 00:31:43,480
Speaker 6: if you don't think the market's going to go down

662
00:31:43,520 --> 00:31:45,920
Speaker 6: more than thirty percent, to be able to say, hey,

663
00:31:46,000 --> 00:31:49,840
Speaker 6: I can get you that seven percent rate with no guesswork,

664
00:31:50,440 --> 00:31:52,640
Speaker 6: it's a very powerful conversation for the advisor to hit

665
00:31:52,760 --> 00:31:53,440
Speaker 6: and have with their clients.

666
00:31:53,600 --> 00:31:55,200
Speaker 2: Paul, a thirty percent drop on the S and P

667
00:31:55,280 --> 00:31:57,280
Speaker 2: five hunder it would take us to twenty nine nineteen.

668
00:31:57,360 --> 00:31:59,600
Speaker 1: Oh that's not good, so it's pretty far down. So

669
00:32:00,040 --> 00:32:02,240
Speaker 1: what's in there for you guys? I'm get seven percent,

670
00:32:02,280 --> 00:32:06,560
Speaker 1: I got downside protection. You're not doing this for free.

671
00:32:06,400 --> 00:32:08,920
Speaker 6: So we charge a management fee. Seventy nine basis point

672
00:32:09,080 --> 00:32:12,520
Speaker 6: expense ratio. That's all we get other than that. We're

673
00:32:12,560 --> 00:32:15,560
Speaker 6: setting the options package on day one of the strategy,

674
00:32:16,120 --> 00:32:18,240
Speaker 6: and we set that package. That's how we're able to

675
00:32:18,280 --> 00:32:21,160
Speaker 6: deliver that defined outcome. So there's nothing else other than

676
00:32:21,200 --> 00:32:21,960
Speaker 6: that expense ratio.

677
00:32:22,120 --> 00:32:25,960
Speaker 2: You have another one, PAPR. That's the innovator. You asked

678
00:32:25,960 --> 00:32:31,760
Speaker 2: equity fifteen percent power buffer ETF. I guess this is similar, right,

679
00:32:31,960 --> 00:32:33,719
Speaker 2: what's the difference between the buffer and a barrier.

680
00:32:34,320 --> 00:32:36,680
Speaker 6: It's similar, but there's also a big difference. So similar

681
00:32:36,680 --> 00:32:38,480
Speaker 6: in the sense that you have a defined outcome, so

682
00:32:38,520 --> 00:32:40,680
Speaker 6: we know whatever the market does, we're going to have

683
00:32:40,720 --> 00:32:45,080
Speaker 6: that fifteen percent downside buffer in place. So with a buffer,

684
00:32:46,000 --> 00:32:47,920
Speaker 6: no matter where the market goes, So let's say the

685
00:32:47,920 --> 00:32:50,800
Speaker 6: market goes down fifty percent, you're always going to have

686
00:32:50,840 --> 00:32:54,040
Speaker 6: that fifteen percent downside protection in place. So in that

687
00:32:54,080 --> 00:32:56,720
Speaker 6: scenario the market goes down fifty percent, you would be

688
00:32:56,760 --> 00:32:59,719
Speaker 6: down thirty five percent. On the flip side of that,

689
00:33:00,120 --> 00:33:04,760
Speaker 6: Unlike the barrier, you have upside potential with the buffer ETF,

690
00:33:04,840 --> 00:33:08,840
Speaker 6: So PAPR you're capturing the first fifteen give or take

691
00:33:08,880 --> 00:33:12,320
Speaker 6: fifteen percent of the upside of the sens P five

692
00:33:12,400 --> 00:33:16,719
Speaker 6: hundred ETF's price return with that fifteen percent built in

693
00:33:16,760 --> 00:33:18,720
Speaker 6: buffer against losses.

694
00:33:18,920 --> 00:33:22,480
Speaker 2: So right now, so instead of the seven percent guaranteed return,

695
00:33:23,120 --> 00:33:25,160
Speaker 2: you're allowed to take part in the upside up to

696
00:33:25,480 --> 00:33:27,560
Speaker 2: about fifteen percent exactly.

697
00:33:27,800 --> 00:33:31,280
Speaker 6: You get that upside appreciation. And I think part of

698
00:33:31,320 --> 00:33:33,800
Speaker 6: it is, you know, why you're seeing this defined outcome

699
00:33:33,840 --> 00:33:36,400
Speaker 6: in buffer category one of the fastest growing categories of

700
00:33:36,400 --> 00:33:39,400
Speaker 6: ETFs again this year, is because a lot of clients

701
00:33:39,440 --> 00:33:41,680
Speaker 6: look at the market they say, Okay, is it really

702
00:33:41,680 --> 00:33:43,960
Speaker 6: going to go up more than fifteen percent? All the

703
00:33:44,000 --> 00:33:48,680
Speaker 6: headwinds that we have, restrictive monetary policy, all the impacts

704
00:33:48,720 --> 00:33:51,600
Speaker 6: of the past hikes that we've seen, the chances of

705
00:33:51,680 --> 00:33:54,040
Speaker 6: that A lot of advisors think that's very low. So

706
00:33:54,240 --> 00:33:56,120
Speaker 6: they view this as a very good trade off to

707
00:33:56,160 --> 00:33:58,160
Speaker 6: be able to help hedge some of that recession risk.

708
00:33:58,480 --> 00:34:00,880
Speaker 2: But Paul apr Jam, I mean, you're talking all the

709
00:34:00,880 --> 00:34:02,960
Speaker 2: time about putting money in the two year YEP for

710
00:34:03,040 --> 00:34:06,040
Speaker 2: four point one percent right now, which makes sense. But

711
00:34:06,480 --> 00:34:08,239
Speaker 2: if you don't think the market's going to fall more

712
00:34:08,280 --> 00:34:12,480
Speaker 2: than thirty percent, which is serious crater edge YEP, then

713
00:34:12,600 --> 00:34:14,920
Speaker 2: you're going to get seven percent with apr.

714
00:34:14,640 --> 00:34:17,480
Speaker 1: J, I tell you, these guys selling me right here,

715
00:34:18,160 --> 00:34:22,160
Speaker 1: here's I stand. So who's actually just consistens of that

716
00:34:22,600 --> 00:34:25,840
Speaker 1: flows in into these funds? Yep, So inception the barrier.

717
00:34:25,880 --> 00:34:29,360
Speaker 6: ETFs launched at the beginning of April, and we've already

718
00:34:29,360 --> 00:34:32,400
Speaker 6: seen over sixty million dollars of inflows in just the

719
00:34:32,400 --> 00:34:35,160
Speaker 6: first few weeks, which, if you know about getting ETFs

720
00:34:35,200 --> 00:34:37,600
Speaker 6: off the ground, that's that's there's been a lot of demand.

721
00:34:37,800 --> 00:34:39,799
Speaker 6: I think a lot of that demand has really come

722
00:34:39,880 --> 00:34:42,840
Speaker 6: from a lot of advisors that have seen the benefits

723
00:34:42,880 --> 00:34:46,000
Speaker 6: that come with the defined outcome wrapper and they're just

724
00:34:46,040 --> 00:34:48,239
Speaker 6: translating them over. So they had this on their you know,

725
00:34:48,360 --> 00:34:51,120
Speaker 6: the equity side for the price return. Now they're transferringing

726
00:34:51,120 --> 00:34:53,360
Speaker 6: that over to the income sleeve with their portfolio. So

727
00:34:53,360 --> 00:34:56,279
Speaker 6: how do I replace things like high yield bonds with

728
00:34:56,360 --> 00:34:59,960
Speaker 6: a thirty barrier or you know, even investment grade bond?

729
00:35:01,120 --> 00:35:03,400
Speaker 6: How can we put those in that sleeve?

730
00:35:04,280 --> 00:35:06,799
Speaker 1: How many ETFs are there out there? It seems like

731
00:35:07,040 --> 00:35:09,319
Speaker 1: you guys are coming through the door every week with

732
00:35:09,520 --> 00:35:11,560
Speaker 1: new things that every time I'm like, boy, that's cool,

733
00:35:11,840 --> 00:35:13,960
Speaker 1: that's interesting. How many ETFs are out there? And how

734
00:35:13,960 --> 00:35:15,200
Speaker 1: do you differentiate yourself.

735
00:35:15,680 --> 00:35:17,480
Speaker 6: So we have I don't know what the industry right now,

736
00:35:17,520 --> 00:35:18,440
Speaker 6: it's hard to keep track of.

737
00:35:18,480 --> 00:35:20,239
Speaker 2: I feel like it's growing quickly close.

738
00:35:20,360 --> 00:35:23,440
Speaker 6: Yeah, it is. We have about ninety in our lineup,

739
00:35:23,840 --> 00:35:26,360
Speaker 6: and really, you know, we don't just launch anything, but

740
00:35:26,440 --> 00:35:29,919
Speaker 6: our goal is to really take ideas that clients want

741
00:35:29,960 --> 00:35:31,719
Speaker 6: exposure to. We look at what's going on in the

742
00:35:31,719 --> 00:35:34,879
Speaker 6: structured note world, what are sales like there, what are

743
00:35:34,880 --> 00:35:38,360
Speaker 6: clients gravitating towards, and again taking those payoff profiles that

744
00:35:38,400 --> 00:35:41,919
Speaker 6: have been very successful, whether it be a buffer all.

745
00:35:41,600 --> 00:35:44,000
Speaker 1: The time, Matt, that's kind of what my guys pitch

746
00:35:44,120 --> 00:35:44,600
Speaker 1: me all the time.

747
00:35:44,760 --> 00:35:47,560
Speaker 6: Yeah, and we're taking that. We're doing it for cheaper

748
00:35:47,600 --> 00:35:50,640
Speaker 6: without the bank credit risk, which is obviously becoming more

749
00:35:50,640 --> 00:35:53,719
Speaker 6: and more important, without the lock ups, the surrenders. You know,

750
00:35:53,760 --> 00:35:57,719
Speaker 6: the ETF rapper is just so advantageous and so beneficial

751
00:35:57,719 --> 00:36:00,560
Speaker 6: in so many ways. We're really just taking at and

752
00:36:00,600 --> 00:36:03,520
Speaker 6: gravitating toward ideas that we know advisors already need in

753
00:36:03,520 --> 00:36:04,120
Speaker 6: their portfolio.

754
00:36:04,760 --> 00:36:07,160
Speaker 2: What's the best place to live around Chicago, what's the

755
00:36:07,280 --> 00:36:12,000
Speaker 2: what's the uh Wheaton looks great, right, Lake Forest. I've

756
00:36:12,000 --> 00:36:13,320
Speaker 2: heard a lot about up there.

757
00:36:13,680 --> 00:36:17,360
Speaker 6: What's the Uh, Well, I'm a big fan of Wheaton, Illinois.

758
00:36:17,360 --> 00:36:20,240
Speaker 6: We're calling it basically outside of New York ETF capital

759
00:36:20,239 --> 00:36:20,799
Speaker 6: of the World too.

760
00:36:21,040 --> 00:36:24,040
Speaker 2: Lot of it really is the ETF capital of the world.

761
00:36:24,120 --> 00:36:26,279
Speaker 2: I mean, Eric Beltunas was this just there and did

762
00:36:26,280 --> 00:36:28,720
Speaker 2: like six meetings in that little suburb.

763
00:36:29,000 --> 00:36:31,480
Speaker 6: He was in our office walking just point to point.

764
00:36:31,600 --> 00:36:33,320
Speaker 6: So it's a great, little, great little town.

765
00:36:33,440 --> 00:36:34,000
Speaker 2: Go figure.

766
00:36:34,239 --> 00:36:36,200
Speaker 1: Somebody's got to do it right, all right, Wheaton, Illinois.

767
00:36:36,200 --> 00:36:39,240
Speaker 1: Timber Bannitt's Bandwitz, I'm sorry. Timber Bannowitz, head of research

768
00:36:39,400 --> 00:36:42,680
Speaker 1: at Innovator ETFs. Joinings here in our Bloomberg Interactive Brookers studio.

769
00:36:42,960 --> 00:36:46,080
Speaker 7: You're listening to the tape cans are live program Bloomberg

770
00:36:46,160 --> 00:36:49,759
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

771
00:36:49,800 --> 00:36:53,040
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

772
00:36:53,080 --> 00:36:55,880
Speaker 7: You can also listen live on Amazon Alexa from our

773
00:36:55,920 --> 00:36:59,840
Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven.

774
00:37:01,920 --> 00:37:06,040
Speaker 1: Matt, did you know that AI stands for Artificial intelligence?

775
00:37:06,200 --> 00:37:08,560
Speaker 2: I had heard had heard about that. I think that's

776
00:37:08,560 --> 00:37:09,279
Speaker 2: becoming a thing.

777
00:37:10,000 --> 00:37:12,040
Speaker 1: I think it's something that we need to pay attention

778
00:37:12,080 --> 00:37:14,960
Speaker 1: to I'm not gonna I don't know anything about this thing,

779
00:37:14,960 --> 00:37:16,680
Speaker 1: but our next guest does and that's why.

780
00:37:16,600 --> 00:37:18,560
Speaker 2: We got him in our Bloomberg Interactive Broker studio.

781
00:37:18,640 --> 00:37:22,239
Speaker 1: Krishna Gupta, chairman of Presto Automation, Christian, thanks so much

782
00:37:22,280 --> 00:37:24,120
Speaker 1: for joining us here. Can you tell us what you

783
00:37:24,120 --> 00:37:27,840
Speaker 1: guys do at Presto Automation, which, by the way, publicly

784
00:37:27,880 --> 00:37:30,960
Speaker 1: traded company pr ST is a simpler to put into

785
00:37:31,000 --> 00:37:31,760
Speaker 1: Bloomberg terminal.

786
00:37:33,000 --> 00:37:36,160
Speaker 10: Yeah, so thanks for having me and really excited to

787
00:37:36,160 --> 00:37:39,839
Speaker 10: talk about AI and Presto here. So Presto is quite

788
00:37:39,880 --> 00:37:43,760
Speaker 10: simply an enterprise AI business for the restaurant industry. Restaurants, okay,

789
00:37:43,840 --> 00:37:46,880
Speaker 10: and very simply. What we're looking to do is automate

790
00:37:46,920 --> 00:37:49,640
Speaker 10: every drive through in the country, so using voice AI

791
00:37:49,920 --> 00:37:51,759
Speaker 10: instead of having a human. I mean, I'll just ask

792
00:37:51,760 --> 00:37:53,719
Speaker 10: a simple question. Do you think in three years time

793
00:37:53,760 --> 00:37:55,279
Speaker 10: there's going to be a human taking your order in

794
00:37:55,280 --> 00:37:55,799
Speaker 10: the drive through?

795
00:37:56,680 --> 00:37:59,919
Speaker 2: I guess it depends where we go, right because.

796
00:38:00,200 --> 00:38:02,759
Speaker 1: No, now that you mention it, no, I'll go with

797
00:38:02,760 --> 00:38:05,160
Speaker 1: you on this one. So tell us how it works,

798
00:38:05,160 --> 00:38:07,799
Speaker 1: how you think it's going to evolve? Yeah, well, it

799
00:38:07,840 --> 00:38:09,560
Speaker 1: works very simply can I actually drive up and say

800
00:38:09,640 --> 00:38:12,120
Speaker 1: number two with a coke? Well, when you drive up,

801
00:38:12,160 --> 00:38:13,799
Speaker 1: someone says, hi, what would you like to have?

802
00:38:13,960 --> 00:38:14,080
Speaker 7: Right?

803
00:38:14,120 --> 00:38:16,279
Speaker 10: Right, So that's what our AI will do.

804
00:38:16,440 --> 00:38:16,600
Speaker 11: Hi.

805
00:38:16,760 --> 00:38:18,680
Speaker 10: You know, it's like they ask you what would it

806
00:38:18,760 --> 00:38:21,719
Speaker 10: like to have? Then you might well that we're gonna

807
00:38:21,719 --> 00:38:24,000
Speaker 10: get to that. It's very interesting. So he's gonna say

808
00:38:24,120 --> 00:38:26,680
Speaker 10: number two, or he's gonna say I want whatever, and

809
00:38:26,719 --> 00:38:29,440
Speaker 10: then they'll say, okay, great, would you like fries with that?

810
00:38:29,719 --> 00:38:32,240
Speaker 10: Would you like a drink with that? It's hot outside?

811
00:38:32,280 --> 00:38:35,400
Speaker 10: Would you like an ice drink with that? So you know,

812
00:38:35,760 --> 00:38:37,880
Speaker 10: let's sort of split up what the value proposition is

813
00:38:37,920 --> 00:38:40,520
Speaker 10: for the restaurant. The obvious one is there's some labor

814
00:38:40,840 --> 00:38:43,319
Speaker 10: labor cost savings. And there's a reason why this is

815
00:38:43,360 --> 00:38:46,440
Speaker 10: relevant today. We're a really specific and interesting moment in

816
00:38:46,520 --> 00:38:51,240
Speaker 10: time where labor costs are rising, and so in the past,

817
00:38:51,320 --> 00:38:54,000
Speaker 10: you know, restaurants hadn't adopted much AI or technology because

818
00:38:54,040 --> 00:38:56,200
Speaker 10: labor costs were low. And then the other thing is

819
00:38:56,200 --> 00:38:59,640
Speaker 10: the AI technology has developed. We couldn't do this eighteen

820
00:38:59,680 --> 00:39:02,399
Speaker 10: twenty four months ago, and so the fact that those

821
00:39:02,440 --> 00:39:05,680
Speaker 10: things have converged, so there's clearly a labor automation play.

822
00:39:05,960 --> 00:39:07,719
Speaker 10: But then the other part is, you know, to what

823
00:39:07,719 --> 00:39:10,320
Speaker 10: Matt was talking about is the upsell, and the upsell

824
00:39:10,400 --> 00:39:14,000
Speaker 10: is something I obsess over because the human being, the

825
00:39:14,040 --> 00:39:17,560
Speaker 10: minimum wage employee is not up selling. They're forgetting to upsell.

826
00:39:17,640 --> 00:39:19,880
Speaker 10: They get tired top sell. They are very far from

827
00:39:19,920 --> 00:39:23,200
Speaker 10: an optimal up cell. And we look at our team incentive,

828
00:39:23,280 --> 00:39:25,160
Speaker 10: right and they have no incentive. They have no incentive,

829
00:39:25,400 --> 00:39:28,360
Speaker 10: and so so whereas for us, the AI never gets tired,

830
00:39:28,640 --> 00:39:32,800
Speaker 10: it never forgets, and we are increasingly making it more optimal.

831
00:39:32,920 --> 00:39:35,120
Speaker 10: You know, right now we can we can personalize it

832
00:39:35,120 --> 00:39:37,959
Speaker 10: to some extent by time of day, weather or maybe

833
00:39:37,960 --> 00:39:40,200
Speaker 10: what you ordered. Over time, I'll be able to reach

834
00:39:40,239 --> 00:39:41,960
Speaker 10: your license plate, I'll be able to sink into the

835
00:39:41,960 --> 00:39:45,560
Speaker 10: loyalty system and say, okay, Krishna driving through. You know,

836
00:39:45,920 --> 00:39:48,360
Speaker 10: clearly he's ordered a vegan burger. He probably wants a

837
00:39:48,400 --> 00:39:51,720
Speaker 10: vegan brownie because it's a chocolate addict. And so that level,

838
00:39:51,880 --> 00:39:54,520
Speaker 10: like the perfect upsell, does three things. It makes people,

839
00:39:55,640 --> 00:39:58,080
Speaker 10: you know, move through the sort of drive through is

840
00:39:58,080 --> 00:40:00,279
Speaker 10: still in a very fast way while increasing the check

841
00:40:00,360 --> 00:40:03,160
Speaker 10: size by a few percent. And the other thing it

842
00:40:03,160 --> 00:40:05,719
Speaker 10: does it leads the customers happier, you know, like customers

843
00:40:05,719 --> 00:40:07,879
Speaker 10: walk away feeling like they got something that they didn't

844
00:40:07,920 --> 00:40:11,319
Speaker 10: necessarily know they wanted. So yeah, that's it's it's very

845
00:40:11,360 --> 00:40:12,800
Speaker 10: simple to understand, and that's what we do.

846
00:40:13,560 --> 00:40:17,680
Speaker 2: So what I mean, you founded this business in twenty seventeen,

847
00:40:17,760 --> 00:40:19,600
Speaker 2: but you say you didn't have the technology to do

848
00:40:19,640 --> 00:40:23,280
Speaker 2: what you're doing eighteen twenty four months ago. What changed?

849
00:40:23,800 --> 00:40:26,239
Speaker 2: I mean, what motivated you to found it before you

850
00:40:26,280 --> 00:40:28,760
Speaker 2: had the technology and what changed since you started the company.

851
00:40:29,600 --> 00:40:31,680
Speaker 10: So we actually started the company more than a decade

852
00:40:31,680 --> 00:40:34,800
Speaker 10: ago out of MIT, and the the sort of impetus

853
00:40:34,840 --> 00:40:36,160
Speaker 10: was always engineering school.

854
00:40:36,239 --> 00:40:37,839
Speaker 2: Yeah, I've heard of it. I've heard of it. They're

855
00:40:37,840 --> 00:40:38,560
Speaker 2: pretty good at here.

856
00:40:39,320 --> 00:40:41,840
Speaker 10: Yeah, we're okay, you know. And so so you know,

857
00:40:41,880 --> 00:40:44,239
Speaker 10: we started it initially to do the same thing, which

858
00:40:44,280 --> 00:40:47,640
Speaker 10: is drive labor automation and increased revenue. But initially the

859
00:40:47,719 --> 00:40:50,120
Speaker 10: use case was at the table. So we have tablets

860
00:40:50,160 --> 00:40:52,240
Speaker 10: at the table where you can order, you can play,

861
00:40:52,360 --> 00:40:54,839
Speaker 10: you can pay, and that's that's a business that's out there.

862
00:40:54,880 --> 00:40:59,080
Speaker 10: It's several large chains using that technology. Three four years ago,

863
00:40:59,160 --> 00:41:01,879
Speaker 10: we realized that the same kind of labor automation play,

864
00:41:01,960 --> 00:41:05,120
Speaker 10: especially as we headed into COVID, we realized could be

865
00:41:05,160 --> 00:41:08,240
Speaker 10: applied to the drive through and that's where we started.

866
00:41:08,280 --> 00:41:10,239
Speaker 10: COVID is what forced us to start thinking about it.

867
00:41:10,280 --> 00:41:12,080
Speaker 10: So I would say our current business is a direct

868
00:41:12,080 --> 00:41:13,040
Speaker 10: output of COVID.

869
00:41:13,840 --> 00:41:16,640
Speaker 1: So talk to us about some of the conversations you're having.

870
00:41:16,640 --> 00:41:17,319
Speaker 2: I don't know who you.

871
00:41:17,239 --> 00:41:20,360
Speaker 1: Can discuss disclose with whom, But where are you in

872
00:41:20,440 --> 00:41:23,919
Speaker 1: terms of the discussions here and rolling out the technology

873
00:41:23,960 --> 00:41:25,439
Speaker 1: and how's it going?

874
00:41:25,560 --> 00:41:29,480
Speaker 2: Is it better for bigger chains? For example? I can

875
00:41:29,560 --> 00:41:32,440
Speaker 2: see how this would work really well with a McDonald's.

876
00:41:32,600 --> 00:41:36,520
Speaker 2: Everybody knows that order the menu is pretty simple, and

877
00:41:36,520 --> 00:41:40,600
Speaker 2: it would be more difficult I guess a more customizable,

878
00:41:40,760 --> 00:41:43,040
Speaker 2: smaller fast food restaurant.

879
00:41:44,040 --> 00:41:47,000
Speaker 10: Yeah, so it works for everyone, right, It really does.

880
00:41:47,080 --> 00:41:49,719
Speaker 10: I'm not gonna comment on a specific name, and what

881
00:41:49,760 --> 00:41:51,840
Speaker 10: we have out there publicly is we work with checkers

882
00:41:51,880 --> 00:41:54,440
Speaker 10: in Del Taco. At the end of the day, it

883
00:41:54,440 --> 00:41:57,920
Speaker 10: works for everyone because everyone has the same challenges right

884
00:41:57,920 --> 00:41:59,719
Speaker 10: now in the industry, whether you're a large chain or

885
00:42:00,080 --> 00:42:03,560
Speaker 10: mull chain. Labor is hard to find, it's expensive, and

886
00:42:03,600 --> 00:42:06,200
Speaker 10: then you know you have a menu that's constantly changing.

887
00:42:06,239 --> 00:42:08,680
Speaker 10: You need to figure out a way so there's complexity

888
00:42:08,680 --> 00:42:11,839
Speaker 10: in the technology, and so when we think about how

889
00:42:11,840 --> 00:42:15,200
Speaker 10: we roll it out, we are thinking very actively about

890
00:42:15,200 --> 00:42:17,799
Speaker 10: what the corporate cares about and what the franchisees care about.

891
00:42:17,800 --> 00:42:20,000
Speaker 10: And this is one of the technologies, not every technology

892
00:42:20,000 --> 00:42:22,560
Speaker 10: and hospitality actually it's a few of them are with

893
00:42:22,680 --> 00:42:27,560
Speaker 10: a franchise ease really wanted because they see the value proposition.

894
00:42:27,680 --> 00:42:30,760
Speaker 10: These see the ROI, and then they're going to corporate

895
00:42:30,840 --> 00:42:33,480
Speaker 10: and saying can we have this? And then corporate is

896
00:42:33,520 --> 00:42:36,240
Speaker 10: sort of doing their evaluation and doing what the corporate does.

897
00:42:36,840 --> 00:42:39,960
Speaker 10: But it's been really energizing for us to hear from

898
00:42:39,960 --> 00:42:43,799
Speaker 10: franchisees directly and understand their need. And so when we

899
00:42:43,920 --> 00:42:46,080
Speaker 10: roll out where we sell to corporate, we are actively

900
00:42:46,080 --> 00:42:48,600
Speaker 10: thinking about the franchise e population first and form.

901
00:42:48,640 --> 00:42:51,759
Speaker 2: Is there a legacy problem because the systems, the automated

902
00:42:51,880 --> 00:42:54,440
Speaker 2: voice systems that we already deal with. I was on

903
00:42:54,480 --> 00:42:59,360
Speaker 2: the phone at the horizon for two hours yesterday. They suck.

904
00:43:00,120 --> 00:43:01,160
Speaker 2: They're really bad.

905
00:43:01,560 --> 00:43:01,759
Speaker 10: You know.

906
00:43:02,080 --> 00:43:04,359
Speaker 2: The worst thing that can happen is if I call

907
00:43:04,400 --> 00:43:07,440
Speaker 2: a service department and I get a computer and I

908
00:43:07,440 --> 00:43:10,600
Speaker 2: immediately start saying agent, agent, agent, give me a human.

909
00:43:11,080 --> 00:43:13,880
Speaker 2: Now I can imagine a better use case at a

910
00:43:14,000 --> 00:43:16,799
Speaker 2: drive through, But do you have a difficulty selling it

911
00:43:16,840 --> 00:43:19,400
Speaker 2: because the automated systems the computer voices were used to

912
00:43:19,640 --> 00:43:21,200
Speaker 2: have been so useless.

913
00:43:21,840 --> 00:43:24,080
Speaker 10: It's a great question. And and you know, I would

914
00:43:24,120 --> 00:43:26,279
Speaker 10: say we talk a lot about AI, I mean talk

915
00:43:26,320 --> 00:43:29,080
Speaker 10: a lot about generative AI these days, but you know,

916
00:43:29,680 --> 00:43:32,040
Speaker 10: the drive through actually ends up being one of the

917
00:43:32,080 --> 00:43:36,560
Speaker 10: most immediately actionable and scalable like applications of generative AI

918
00:43:36,800 --> 00:43:39,800
Speaker 10: in the enterprise. The other one would be customer service

919
00:43:39,840 --> 00:43:42,560
Speaker 10: to some extent, but customer service is actually much harder

920
00:43:42,840 --> 00:43:44,319
Speaker 10: because you have to deal with you know, you're on

921
00:43:44,360 --> 00:43:46,920
Speaker 10: the phone with Verizon, and I know that business very well.

922
00:43:46,960 --> 00:43:49,400
Speaker 10: I'm a large share holder of another company that works

923
00:43:49,440 --> 00:43:53,399
Speaker 10: with companies like Verizon, so you know that business. You're

924
00:43:53,440 --> 00:43:55,319
Speaker 10: dealing with an angry customer that can go in all

925
00:43:55,400 --> 00:43:58,359
Speaker 10: kinds of different directions. And you know the baseball game

926
00:43:58,520 --> 00:44:02,120
Speaker 10: this that in the through, you have a relatively confined

927
00:44:02,160 --> 00:44:04,719
Speaker 10: situation where you have only so many different ways it

928
00:44:04,719 --> 00:44:06,319
Speaker 10: can go. Now it can go in different ways, so

929
00:44:06,320 --> 00:44:09,319
Speaker 10: it's not so trivial. You know, you might think, you know, hey,

930
00:44:09,360 --> 00:44:11,000
Speaker 10: I want a chocolate shit. Oh no, actually I want

931
00:44:11,000 --> 00:44:13,440
Speaker 10: a strawberry shake. Oh what about your special? Can I

932
00:44:13,480 --> 00:44:16,120
Speaker 10: get fries with that? Honey? What do you want?

933
00:44:16,160 --> 00:44:16,319
Speaker 4: You know?

934
00:44:16,400 --> 00:44:18,319
Speaker 10: So there is sort of complexity in terms of what

935
00:44:18,360 --> 00:44:19,880
Speaker 10: the voice has to pick up on.

936
00:44:20,000 --> 00:44:23,200
Speaker 2: What's the original frosty they're offering me now, Vanilla or chocolate?

937
00:44:23,239 --> 00:44:24,920
Speaker 2: It's one of frosty. When I was a kid, there

938
00:44:25,000 --> 00:44:26,480
Speaker 2: was only one choice there, you go.

939
00:44:26,560 --> 00:44:28,720
Speaker 10: Well, so now there's gonna be a lot more choices.

940
00:44:28,760 --> 00:44:28,920
Speaker 9: You know.

941
00:44:29,080 --> 00:44:31,840
Speaker 10: I'm very upset still that Starbucks killed the pistachio latte

942
00:44:31,880 --> 00:44:33,840
Speaker 10: from three months ago, but apparently no one else seems

943
00:44:33,840 --> 00:44:37,319
Speaker 10: to like it, so so, you know, I think there

944
00:44:37,480 --> 00:44:41,480
Speaker 10: is there's a real opportunity to the voice qualities. When

945
00:44:41,480 --> 00:44:43,520
Speaker 10: I said this couldn't be done eighteen twenty four months ago,

946
00:44:43,760 --> 00:44:45,840
Speaker 10: it's partially because the quality of the voices and the

947
00:44:45,920 --> 00:44:49,319
Speaker 10: humanness of the voices has improved dramatically too, so it

948
00:44:49,440 --> 00:44:53,080
Speaker 10: is increasingly sounding more conversational, and at the end of

949
00:44:53,120 --> 00:44:55,319
Speaker 10: the day, our goal is just to make it as

950
00:44:55,400 --> 00:44:58,160
Speaker 10: much like a human frankly better than a human, right,

951
00:44:58,200 --> 00:45:00,160
Speaker 10: so that you're getting in and out of their as

952
00:45:00,200 --> 00:45:01,640
Speaker 10: fast as you can and getting what you want.

953
00:45:01,840 --> 00:45:06,640
Speaker 1: All right, interesting stuff, interesting, practical application of artificial intelligence

954
00:45:07,040 --> 00:45:11,000
Speaker 1: in the hospitality business. Christiana Gupta, chairman of Presto Automation

955
00:45:11,480 --> 00:45:16,080
Speaker 1: Trades PRST is the ticker. It went public via a

956
00:45:16,160 --> 00:45:18,960
Speaker 1: spack as a lot of companies will want to do

957
00:45:19,000 --> 00:45:21,040
Speaker 1: back in the day, so I want to keep an

958
00:45:21,040 --> 00:45:21,880
Speaker 1: eye on this one.

959
00:45:22,160 --> 00:45:25,320
Speaker 7: You're listening to the tape Cat's are live program Bloomberg

960
00:45:25,360 --> 00:45:28,960
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

961
00:45:29,000 --> 00:45:32,239
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

962
00:45:32,280 --> 00:45:35,080
Speaker 7: You can also listen live on Amazon Alexa from our

963
00:45:35,120 --> 00:45:39,120
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven

964
00:45:39,200 --> 00:45:41,160
Speaker 7: thirty Man.

965
00:45:41,719 --> 00:45:44,480
Speaker 1: To be perfectly honest with you, I know absolutely nothing

966
00:45:44,560 --> 00:45:47,520
Speaker 1: about insurance, ignorant to the nth degree, and I've tried

967
00:45:47,560 --> 00:45:50,839
Speaker 1: to educate myself, but it just doesn't help. Fortunately, I've

968
00:45:50,880 --> 00:45:51,880
Speaker 1: got some good people.

969
00:45:51,680 --> 00:45:52,200
Speaker 2: Helping me out.

970
00:45:52,200 --> 00:45:55,239
Speaker 1: I think, or maybe they're fleecing me, but I think

971
00:45:55,239 --> 00:45:57,359
Speaker 1: I'm in good shape. But I know I like the

972
00:45:57,480 --> 00:46:00,319
Speaker 1: business and I like talking to Pat Gallagher. He's the

973
00:46:00,360 --> 00:46:04,640
Speaker 1: CEO of Gallagher Insurance and the stock simles a JG.

974
00:46:04,800 --> 00:46:06,600
Speaker 1: You put that in there and then you hit GP

975
00:46:06,719 --> 00:46:08,799
Speaker 1: for to get the graph. The stock is hitting an

976
00:46:08,840 --> 00:46:12,719
Speaker 1: all time high today two d and ten dollars. Not

977
00:46:12,800 --> 00:46:14,719
Speaker 1: too shabby. It's up twelve percent year to date, up

978
00:46:14,719 --> 00:46:18,480
Speaker 1: twenty seven percent over at trailing twelve months. Pat, congratulations

979
00:46:18,520 --> 00:46:19,320
Speaker 1: on the stock price.

980
00:46:19,360 --> 00:46:19,839
Speaker 2: Good for you.

981
00:46:20,160 --> 00:46:22,600
Speaker 1: Why is your stock hitting an all time high?

982
00:46:22,640 --> 00:46:25,440
Speaker 11: Well, thank you guys for having me on. Look. I

983
00:46:25,480 --> 00:46:27,279
Speaker 11: think a couple of things are happening that make a

984
00:46:27,320 --> 00:46:30,880
Speaker 11: lot of sense to me. Number One, we're finding that

985
00:46:30,960 --> 00:46:35,000
Speaker 11: our middle market clients, that Corporate America and the tech

986
00:46:35,040 --> 00:46:38,440
Speaker 11: companies are not necessarily indicative of what's happening in our

987
00:46:38,440 --> 00:46:41,280
Speaker 11: client base. Our clients are healthy, their businesses are growing.

988
00:46:41,960 --> 00:46:45,160
Speaker 11: We are seeing infrastructure spending in construction accounts, et cetera,

989
00:46:45,200 --> 00:46:48,000
Speaker 11: et cetera, and so the recession that has been touted

990
00:46:48,000 --> 00:46:50,400
Speaker 11: in the press for the last twelve months has not

991
00:46:50,640 --> 00:46:53,879
Speaker 11: yet at least hit our major base of where our

992
00:46:53,880 --> 00:46:57,200
Speaker 11: clients are, and they continue to be healthy. Secondly, rates

993
00:46:57,280 --> 00:47:00,280
Speaker 11: in the insurance industry continue to rise, and that's because

994
00:47:00,360 --> 00:47:03,480
Speaker 11: loss costs are up in large part due to inflation

995
00:47:03,840 --> 00:47:08,799
Speaker 11: and nuclear settlements, judgments by juries, which is forcing lost

996
00:47:08,880 --> 00:47:12,120
Speaker 11: costs on insurance companies to rise, and they're covering those

997
00:47:12,200 --> 00:47:16,120
Speaker 11: by raising premiums. And lastly, we have inflation. And when

998
00:47:16,120 --> 00:47:18,239
Speaker 11: you look around the world and try to find an

999
00:47:18,239 --> 00:47:22,040
Speaker 11: industry that does well with inflation, they're few and far behind.

1000
00:47:22,520 --> 00:47:26,120
Speaker 11: And the insurance brokerage space does well. When your property

1001
00:47:26,200 --> 00:47:30,719
Speaker 11: values rise, your premiums rise, our commissions rise, makes it

1002
00:47:30,760 --> 00:47:32,680
Speaker 11: more difficult for us to do the placement for you

1003
00:47:32,719 --> 00:47:35,320
Speaker 11: if you're a large portfolio. But nonetheless we get paid

1004
00:47:35,320 --> 00:47:37,759
Speaker 11: for it, and I think that's what's happening. We fall

1005
00:47:37,800 --> 00:47:39,920
Speaker 11: on a lot of screens. We look very good, we're

1006
00:47:40,040 --> 00:47:43,239
Speaker 11: very healthy, and the company's done extremely well over the

1007
00:47:43,320 --> 00:47:47,800
Speaker 11: last number of years. So also we're not extraordinarily priced

1008
00:47:48,120 --> 00:47:50,760
Speaker 11: at a high multiple. We're at a multiple that fits

1009
00:47:50,800 --> 00:47:54,200
Speaker 11: the SMP makes sense in a business that makes sense,

1010
00:47:54,280 --> 00:47:58,440
Speaker 11: that is a business that everybody needs, that's growing organically

1011
00:47:58,640 --> 00:48:00,680
Speaker 11: and by acquisition everyday, single quarter.

1012
00:48:01,360 --> 00:48:05,040
Speaker 2: So first I want to touch on one thing that

1013
00:48:05,200 --> 00:48:06,960
Speaker 2: has well. I guess it has a lot to do

1014
00:48:07,000 --> 00:48:10,840
Speaker 2: with the business, but not day to day operations. You

1015
00:48:11,120 --> 00:48:15,040
Speaker 2: were voted among the world's most ethical companies. I thought

1016
00:48:15,080 --> 00:48:17,840
Speaker 2: of that when Paul said he's trusts the guys he

1017
00:48:17,920 --> 00:48:21,160
Speaker 2: has advising him, or maybe he's getting fleeced. I'm taking

1018
00:48:21,239 --> 00:48:24,240
Speaker 2: it from this award that you don't fleece people.

1019
00:48:25,080 --> 00:48:26,840
Speaker 11: Well, you know what, I really appreciate you bringing that

1020
00:48:26,920 --> 00:48:29,879
Speaker 11: up because we're extremely proud of that. So thirteenth year

1021
00:48:29,920 --> 00:48:34,040
Speaker 11: we've been recognized by the Ethisphere Institute, whose role is

1022
00:48:34,080 --> 00:48:38,719
Speaker 11: to promote ethical behavior in the business community on a

1023
00:48:38,760 --> 00:48:41,840
Speaker 11: global basis. The only award this to about one hundred

1024
00:48:41,840 --> 00:48:45,359
Speaker 11: and thirty five companies. The process by which we go

1025
00:48:45,960 --> 00:48:49,399
Speaker 11: to apply for this award is incredibly onerous, and it's

1026
00:48:49,640 --> 00:48:53,920
Speaker 11: very important to our culture to continue to emphasize from

1027
00:48:54,000 --> 00:48:56,760
Speaker 11: the day that my grandfather started this business in nineteen

1028
00:48:56,800 --> 00:49:03,000
Speaker 11: twenty seven, ethical behavior is critical to our success. Never

1029
00:49:03,280 --> 00:49:06,040
Speaker 11: ever forget it, and we take that right to the

1030
00:49:06,640 --> 00:49:10,080
Speaker 11: mail room, and we're proud of this award recognizes that

1031
00:49:10,200 --> 00:49:10,640
Speaker 11: I take it.

1032
00:49:10,600 --> 00:49:14,439
Speaker 2: Your grandfather with Arthur J. Gallagher and and how cool

1033
00:49:14,440 --> 00:49:17,200
Speaker 2: would it be to have your initials as the ticker? Yeah,

1034
00:49:17,400 --> 00:49:20,960
Speaker 2: for the company, AJG is the ticker. And every time

1035
00:49:21,040 --> 00:49:23,680
Speaker 2: I point this stock out to somebody, I have been

1036
00:49:23,719 --> 00:49:25,920
Speaker 2: pointing it out a lot since we last spoke to you, Pat.

1037
00:49:26,880 --> 00:49:30,760
Speaker 2: They're always blown away by the size and the value

1038
00:49:30,960 --> 00:49:33,240
Speaker 2: of the company. How do you deal with getting that big?

1039
00:49:33,320 --> 00:49:37,040
Speaker 2: Is it hard, you know, because I imagine at this

1040
00:49:37,239 --> 00:49:40,600
Speaker 2: size you have to always be hiring more employees.

1041
00:49:41,160 --> 00:49:41,759
Speaker 4: With the kind of.

1042
00:49:41,680 --> 00:49:43,680
Speaker 2: Regulation that we deal with, you have to have a

1043
00:49:43,760 --> 00:49:47,920
Speaker 2: huge compliance department. I mean, the operation must be so

1044
00:49:48,080 --> 00:49:50,800
Speaker 2: large that your grandfather might not even recognize it today.

1045
00:49:51,280 --> 00:49:53,319
Speaker 11: Well I'm sure you wouldn't recognize it at all, but

1046
00:49:53,320 --> 00:49:55,920
Speaker 11: thank you for bringing that up. I mean, first of all,

1047
00:49:55,960 --> 00:49:58,359
Speaker 11: I think we've built just an outstanding team, and it's

1048
00:49:58,400 --> 00:50:01,399
Speaker 11: a team that over the years, have to each other. Look,

1049
00:50:01,440 --> 00:50:04,239
Speaker 11: we've got to build a chassis that can put a

1050
00:50:04,280 --> 00:50:06,279
Speaker 11: twenty billion dollar company on top of it.

1051
00:50:06,360 --> 00:50:06,480
Speaker 5: Now.

1052
00:50:06,480 --> 00:50:08,040
Speaker 11: The other thing, too, is when you talk about all

1053
00:50:08,040 --> 00:50:10,640
Speaker 11: the things you just mentioned, people look at us to go, oh,

1054
00:50:10,719 --> 00:50:13,960
Speaker 11: Gallagher's on its way to ten billion. But remember, we

1055
00:50:14,040 --> 00:50:16,920
Speaker 11: count the revenue that we get as commissioned So if

1056
00:50:16,920 --> 00:50:20,880
Speaker 11: we're a manufacturer, in essence, our revenues would be ten

1057
00:50:21,160 --> 00:50:25,680
Speaker 11: times because they're counting their gross revenues, we're counting net.

1058
00:50:25,880 --> 00:50:29,640
Speaker 11: So it makes the company even bigger. But we've got

1059
00:50:29,640 --> 00:50:32,560
Speaker 11: a chassis that deals with that. Our professional back room

1060
00:50:32,640 --> 00:50:36,600
Speaker 11: is outstanding. You're correct. We have a significant compliance component

1061
00:50:37,320 --> 00:50:40,040
Speaker 11: and we're proud of that. Our people get it and

1062
00:50:40,120 --> 00:50:43,360
Speaker 11: I'll tell you what I'm most proud of of anything

1063
00:50:43,400 --> 00:50:46,880
Speaker 11: we've accomplished, including our stock price, which is really just

1064
00:50:46,960 --> 00:50:50,960
Speaker 11: beginning its run, is that this culture has hung together.

1065
00:50:51,760 --> 00:50:54,440
Speaker 11: I started with this company in nineteen seventy two is

1066
00:50:54,480 --> 00:50:56,560
Speaker 11: an intern We didn't have one hundred and twenty people,

1067
00:50:57,200 --> 00:50:59,800
Speaker 11: and today the culture feels the same as it did

1068
00:51:00,320 --> 00:51:03,840
Speaker 11: forty six thousand employees later. And that is the answer

1069
00:51:03,920 --> 00:51:05,439
Speaker 11: to our success.

1070
00:51:05,239 --> 00:51:07,879
Speaker 1: That is an impressive We have a listener writing in

1071
00:51:08,200 --> 00:51:10,880
Speaker 1: pat His name is Matthew Pallazola. He's kind of a

1072
00:51:11,719 --> 00:51:14,840
Speaker 1: plant because he's the insurance CENTERLS for Bloomberg Intelligence. He

1073
00:51:14,920 --> 00:51:19,160
Speaker 1: asked that your company's been going into the non admitted market,

1074
00:51:19,320 --> 00:51:21,840
Speaker 1: so he's suggesting maybe you describe what that market is

1075
00:51:21,920 --> 00:51:23,600
Speaker 1: and kind of why you're in the market, what trends

1076
00:51:23,600 --> 00:51:24,239
Speaker 1: are you seeing there.

1077
00:51:24,920 --> 00:51:27,239
Speaker 11: So not admitted is referred to in the industry as

1078
00:51:27,320 --> 00:51:30,879
Speaker 11: excess and surplus and what not admitted does not mean

1079
00:51:30,920 --> 00:51:34,319
Speaker 11: that they can't trade. It means that they're not regulated

1080
00:51:34,360 --> 00:51:37,560
Speaker 11: by the state to form and rate in the state

1081
00:51:37,640 --> 00:51:40,040
Speaker 11: that they're applying their insurance. And you have to tell

1082
00:51:40,080 --> 00:51:42,400
Speaker 11: the client that you have to say, look, I am

1083
00:51:42,480 --> 00:51:46,239
Speaker 11: not XYZ insurance company who file files their rates and

1084
00:51:46,640 --> 00:51:51,360
Speaker 11: has governmental oversight. I can basically sell you the coverage

1085
00:51:51,360 --> 00:51:54,280
Speaker 11: I want at the price I want. That's excess and surplus,

1086
00:51:54,719 --> 00:51:58,120
Speaker 11: and that market is growing exponentially because of the fact

1087
00:51:58,239 --> 00:52:01,600
Speaker 11: that the regulated carriers are having a very hard time

1088
00:52:01,640 --> 00:52:04,440
Speaker 11: getting the rates they need, and every one of them

1089
00:52:04,440 --> 00:52:06,759
Speaker 11: are putting rates up and having to go to regulators

1090
00:52:06,760 --> 00:52:10,840
Speaker 11: to get those approved. And insurance is something that's absolutely necessary.

1091
00:52:10,920 --> 00:52:14,800
Speaker 11: So those that trade around those rules appropriately, by the way,

1092
00:52:15,239 --> 00:52:16,640
Speaker 11: I don't want to make it sound like they're doing

1093
00:52:16,640 --> 00:52:20,719
Speaker 11: anything wrong. Access in surplus is a very very important

1094
00:52:20,760 --> 00:52:23,239
Speaker 11: part of the market, especially when you look at things

1095
00:52:23,280 --> 00:52:27,399
Speaker 11: like California fire, earthquake, Florida wind, that type of thing,

1096
00:52:27,880 --> 00:52:32,120
Speaker 11: And that market has always existed, but now it's growing

1097
00:52:32,120 --> 00:52:35,920
Speaker 11: at a much faster pace than normal because losses have

1098
00:52:36,080 --> 00:52:36,840
Speaker 11: been so great.

1099
00:52:37,040 --> 00:52:38,600
Speaker 1: Well, that kind of goes to my next question.

1100
00:52:38,640 --> 00:52:38,879
Speaker 2: Pat.

1101
00:52:39,880 --> 00:52:42,000
Speaker 1: It seems like almost every week every month, we see

1102
00:52:42,080 --> 00:52:44,839
Speaker 1: some devastation going through the state of Florida, whether it's

1103
00:52:44,920 --> 00:52:49,360
Speaker 1: hurricanes or floods or tornadoes. Talk to us about insurance

1104
00:52:49,360 --> 00:52:52,399
Speaker 1: in Florida. Can can anybody ensure that area down there?

1105
00:52:52,920 --> 00:52:55,760
Speaker 11: Well, there's another factor in Florida that is really difficult,

1106
00:52:55,800 --> 00:52:59,120
Speaker 11: and I think the governor's rightfully trying to address it.

1107
00:52:59,239 --> 00:53:02,239
Speaker 11: The state has passed and needs to make sure it

1108
00:53:02,280 --> 00:53:07,280
Speaker 11: holds to it to tort reform, because Florida has a very,

1109
00:53:07,400 --> 00:53:10,520
Speaker 11: very litigious nature. So here it is the darling of

1110
00:53:10,560 --> 00:53:13,000
Speaker 11: the business community. You know, what a great place to trade,

1111
00:53:13,040 --> 00:53:16,239
Speaker 11: and it is and we low taxes, et cetera, et cetera,

1112
00:53:16,320 --> 00:53:18,520
Speaker 11: and a great economy and people are moving down there

1113
00:53:18,600 --> 00:53:22,759
Speaker 11: left and right. But there's the tort situation there is

1114
00:53:23,000 --> 00:53:26,080
Speaker 11: really really difficult for insurance companies. So add that to

1115
00:53:26,120 --> 00:53:28,920
Speaker 11: the fact that you've got floods and surge and wind,

1116
00:53:29,640 --> 00:53:32,800
Speaker 11: and you hit right on the reason access and surplus

1117
00:53:32,840 --> 00:53:36,440
Speaker 11: is growing so quickly because it is a very difficult

1118
00:53:36,480 --> 00:53:39,040
Speaker 11: place to insure. And I'll tell you my friends all

1119
00:53:39,080 --> 00:53:40,920
Speaker 11: over the state have called me, can you help me

1120
00:53:40,960 --> 00:53:43,520
Speaker 11: on my homeowners? Can you do something about my insurance?

1121
00:53:43,760 --> 00:53:45,239
Speaker 11: And I'll say to them one thing, do you have

1122
00:53:45,280 --> 00:53:45,840
Speaker 11: a quote?

1123
00:53:46,360 --> 00:53:46,520
Speaker 6: Yeah?

1124
00:53:46,600 --> 00:53:51,279
Speaker 11: Yeah, yeah, but it's expensive by it yep, So it is.

1125
00:53:51,320 --> 00:53:53,839
Speaker 11: You raise a very good point. It's a difficult state

1126
00:53:53,920 --> 00:53:57,160
Speaker 11: for insurers to make money in, and the state and

1127
00:53:57,239 --> 00:53:59,719
Speaker 11: the governor are trying to address that. And I think appropriately.

1128
00:53:59,760 --> 00:54:02,320
Speaker 2: So, Pat, let me just ask you how you've dealt

1129
00:54:02,520 --> 00:54:05,200
Speaker 2: with the rate risk that has taken out now four

1130
00:54:05,239 --> 00:54:09,760
Speaker 2: banks in six weeks. You know it's easy to fault

1131
00:54:09,880 --> 00:54:15,000
Speaker 2: those managers in hindsight, but at the time, you know,

1132
00:54:15,120 --> 00:54:17,799
Speaker 2: treasuries seem like a safe bet, mortgages a super rich

1133
00:54:17,840 --> 00:54:19,799
Speaker 2: people seem like a safe bet. How have you dealt

1134
00:54:19,800 --> 00:54:22,880
Speaker 2: with that risk without having the same problems as these others.

1135
00:54:23,360 --> 00:54:28,520
Speaker 11: Well, remember, we're brokers and we're not frankly risk takers.

1136
00:54:28,560 --> 00:54:31,759
Speaker 11: So when you look at an insurance company, we're the

1137
00:54:31,800 --> 00:54:34,120
Speaker 11: ones who packish your risk. So we're the ones that

1138
00:54:34,160 --> 00:54:36,840
Speaker 11: would when we started the conversation, you know you're getting advice.

1139
00:54:36,960 --> 00:54:40,200
Speaker 11: We would typically be the ones giving advice and making

1140
00:54:40,200 --> 00:54:43,040
Speaker 11: sure that your placement was with a licensed carrier. Then

1141
00:54:43,080 --> 00:54:45,840
Speaker 11: when the loss happens in your house burns down, we

1142
00:54:45,920 --> 00:54:49,719
Speaker 11: don't pay it. So similarly to the banking industry, we

1143
00:54:49,840 --> 00:54:53,319
Speaker 11: aren't the major buyer of those bonds, et cetera. We

1144
00:54:53,440 --> 00:54:56,240
Speaker 11: take a dollar, we keep a dime, We send ninety

1145
00:54:56,280 --> 00:54:59,200
Speaker 11: cents to an insurance company. So I really don't have

1146
00:54:59,239 --> 00:55:02,280
Speaker 11: any commentary about the banking industry because I'm not expert

1147
00:55:02,320 --> 00:55:02,480
Speaker 11: in that.

1148
00:55:02,520 --> 00:55:04,920
Speaker 1: At all, well, that sounds like a good business you're in.

1149
00:55:05,080 --> 00:55:05,960
Speaker 2: Yeah know what I mean.

1150
00:55:06,280 --> 00:55:09,400
Speaker 1: That's like an asset asset you know, kind of liability

1151
00:55:09,480 --> 00:55:12,040
Speaker 1: light business. And Pat's the only guy that can make

1152
00:55:12,040 --> 00:55:14,480
Speaker 1: insurance interesting to me. I don't know how he does it.

1153
00:55:14,560 --> 00:55:17,120
Speaker 1: Pat Gallagher, thanks so much for joining us. As always,

1154
00:55:17,239 --> 00:55:21,799
Speaker 1: Pack Gallagher the CEO of Gallagher Insurance, formerly known as

1155
00:55:21,960 --> 00:55:25,680
Speaker 1: Arthur Gallagher and Company Arthur J. Gallagher, which gives you

1156
00:55:25,719 --> 00:55:28,680
Speaker 1: the symbol a J G on your terminy. You punch

1157
00:55:28,760 --> 00:55:31,000
Speaker 1: that into your Bloomberg terminal, you'll see a forty five

1158
00:55:31,040 --> 00:55:33,760
Speaker 1: billion dollar market at company that's hitting all time highs.

1159
00:55:34,239 --> 00:55:37,520
Speaker 1: That's not too shabby.

1160
00:55:38,840 --> 00:55:41,920
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1161
00:55:41,960 --> 00:55:45,760
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1162
00:55:45,840 --> 00:55:49,560
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1163
00:55:49,760 --> 00:55:52,960
Speaker 2: at Matt Miller nineteen seventy three. And I'm fall Sweeney.

1164
00:55:53,040 --> 00:55:55,640
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you

1165
00:55:55,680 --> 00:55:59,080
Speaker 1: can always catch us worldwide at Bloomberg Radio