1 00:00:08,039 --> 00:00:11,280 Speaker 1: Hello, and welcome to another edition of the Odd Lots Podcast. 2 00:00:11,320 --> 00:00:15,680 Speaker 1: I'm Tracy Allaway and I'm Joe. Wasn't so, Joe? What 3 00:00:15,720 --> 00:00:20,840 Speaker 1: are we talking about today? Analysts? Wait wait, wait before 4 00:00:20,920 --> 00:00:22,400 Speaker 1: we get to that, can we just say this is 5 00:00:22,400 --> 00:00:25,840 Speaker 1: not just another edition of the Outlaws podcast, and that 6 00:00:25,960 --> 00:00:28,680 Speaker 1: this is a special edition of the Outlaws podcast. Why 7 00:00:28,720 --> 00:00:31,560 Speaker 1: is it special because I am in the same room 8 00:00:31,600 --> 00:00:34,159 Speaker 1: with you. I'm looking at your face as we're talking. 9 00:00:34,680 --> 00:00:38,919 Speaker 1: Normally we're in other studios around the world, and so 10 00:00:38,960 --> 00:00:41,120 Speaker 1: it's a very special moment where we happen to both 11 00:00:41,120 --> 00:00:43,040 Speaker 1: be in the same city at the same time. So 12 00:00:43,159 --> 00:00:45,839 Speaker 1: I just want to take a moment to appreciate how 13 00:00:46,120 --> 00:00:48,400 Speaker 1: how nice this is. I like how you say we're 14 00:00:48,440 --> 00:00:50,680 Speaker 1: in the same studios when in reality, I'm sitting on 15 00:00:50,720 --> 00:00:53,600 Speaker 1: my living room floor. Right. I was trying. I didn't 16 00:00:53,600 --> 00:00:57,000 Speaker 1: know if you wanted that information normally to get out there, 17 00:00:57,040 --> 00:00:59,560 Speaker 1: so I use that as euphemism. But yes, normally I'm 18 00:00:59,560 --> 00:01:01,880 Speaker 1: in a student you your in your your living room floor. 19 00:01:02,040 --> 00:01:04,560 Speaker 1: But this time we're in the same studio about ten 20 00:01:04,600 --> 00:01:08,679 Speaker 1: feet away. Right, we are reunited and it feels so good. 21 00:01:08,720 --> 00:01:12,440 Speaker 1: I guess, okay, all right, But in all in all seriousness, 22 00:01:12,520 --> 00:01:15,400 Speaker 1: let's get down to business. We are discussing a topic 23 00:01:15,440 --> 00:01:17,120 Speaker 1: that I think is kind of close to both our 24 00:01:17,160 --> 00:01:22,119 Speaker 1: hearts today, analysts and analyst research. Yes, I don't think 25 00:01:22,160 --> 00:01:25,640 Speaker 1: it's intuitively obvious when someone says, oh, analyst research is 26 00:01:25,680 --> 00:01:27,720 Speaker 1: close to your heart, Maybe that's like not the kind 27 00:01:27,720 --> 00:01:29,520 Speaker 1: of thing that makes a lot of sense to people. 28 00:01:29,959 --> 00:01:33,040 Speaker 1: But I think as people will see and the course 29 00:01:33,040 --> 00:01:37,560 Speaker 1: of our discussion, for both of our careers, analyst research 30 00:01:37,600 --> 00:01:40,399 Speaker 1: has played an important role. Absolutely so. I think a 31 00:01:40,440 --> 00:01:42,880 Speaker 1: lot of people will have noticed by now that there 32 00:01:43,000 --> 00:01:46,600 Speaker 1: is a significant segment of financial media that zeros in 33 00:01:46,720 --> 00:01:50,279 Speaker 1: on the cell side research being produced, and that kind 34 00:01:50,320 --> 00:01:55,160 Speaker 1: of gives people ideas for stories or sometimes the stories themselves. 35 00:01:55,280 --> 00:01:57,480 Speaker 1: You write up an analyst note and it can be 36 00:01:57,520 --> 00:02:01,520 Speaker 1: a big deal. And just so people understand and um, 37 00:02:01,600 --> 00:02:04,360 Speaker 1: when we talk about analyst research in the cell side, 38 00:02:04,880 --> 00:02:07,760 Speaker 1: for those who don't know what those terms mean, we're 39 00:02:07,800 --> 00:02:11,639 Speaker 1: talking about what you've seen those stories like Goldman Sachs 40 00:02:11,760 --> 00:02:15,160 Speaker 1: is bullish on Tesla and and and or Goldman Sacks 41 00:02:15,280 --> 00:02:19,639 Speaker 1: upgrades Tesla to a buy or Morgan Stanley downgrades its 42 00:02:19,680 --> 00:02:23,480 Speaker 1: forecast for the third quarter GDP or whatever it is, 43 00:02:23,480 --> 00:02:26,240 Speaker 1: and you see those headlines, you see those stories, and 44 00:02:26,280 --> 00:02:29,080 Speaker 1: that refers to the people at the big banks typically 45 00:02:29,120 --> 00:02:32,280 Speaker 1: though not always, who write up reports on various things 46 00:02:32,280 --> 00:02:36,120 Speaker 1: and markets in the economy that both you know, traders 47 00:02:36,120 --> 00:02:39,880 Speaker 1: and investors and of course journalists we we like to 48 00:02:39,880 --> 00:02:42,280 Speaker 1: pour through it. So what are we talking about this today? 49 00:02:42,320 --> 00:02:45,320 Speaker 1: All right? So analysts and their research have been a 50 00:02:45,360 --> 00:02:47,120 Speaker 1: big part of our lives. But at the same time, 51 00:02:47,120 --> 00:02:49,800 Speaker 1: the industry has been going through its own i guess, 52 00:02:49,840 --> 00:02:53,840 Speaker 1: existential crisis and also business crisis. In the same way 53 00:02:53,880 --> 00:02:57,600 Speaker 1: that the media has struggled to monetize the stories that 54 00:02:57,639 --> 00:03:01,960 Speaker 1: we're producing, there's a similar question facing the analyst community 55 00:03:02,080 --> 00:03:04,960 Speaker 1: right now. There's also a big, big change coming in 56 00:03:05,000 --> 00:03:08,920 Speaker 1: the form of new regulation called MiFID, which is basically 57 00:03:09,000 --> 00:03:13,240 Speaker 1: going to force the people that produce research to charge 58 00:03:13,280 --> 00:03:16,239 Speaker 1: for it in a way that hasn't been done historically. 59 00:03:16,280 --> 00:03:19,480 Speaker 1: And this is key. Lots of people get research reports 60 00:03:19,520 --> 00:03:23,040 Speaker 1: for free because they trade with the bank, uh and 61 00:03:23,080 --> 00:03:25,480 Speaker 1: they give them commissions in that way, and then the 62 00:03:25,520 --> 00:03:27,680 Speaker 1: research is kind of a free bonus for them. Well, 63 00:03:27,720 --> 00:03:30,880 Speaker 1: I've never understood the business of analyst research, like how 64 00:03:31,160 --> 00:03:33,680 Speaker 1: analysts get paid, How banks make money on it, and 65 00:03:33,720 --> 00:03:36,960 Speaker 1: I certainly don't understand what the new regulations are all 66 00:03:37,000 --> 00:03:39,760 Speaker 1: about or what they're intended to do. So I'm very 67 00:03:39,760 --> 00:03:42,160 Speaker 1: excited about this episode. Who are we going to talk to? 68 00:03:42,320 --> 00:03:43,960 Speaker 1: All right, so we actually have one of my all 69 00:03:44,000 --> 00:03:47,720 Speaker 1: time favorite analysts. It's Steven Abraham's. He used to be 70 00:03:47,920 --> 00:03:52,160 Speaker 1: head of mortgage, bond and securitization research over at Deutsche Bank, 71 00:03:52,480 --> 00:03:56,600 Speaker 1: but he recently left to go found or co found 72 00:03:56,760 --> 00:04:00,240 Speaker 1: mile Post Capital Management and he is now see EO 73 00:04:00,440 --> 00:04:03,080 Speaker 1: over there as well. So should we bring them on? 74 00:04:03,160 --> 00:04:15,880 Speaker 1: Let's do it. Steven, Welcome to the show. Hi, Tracy, 75 00:04:16,600 --> 00:04:20,000 Speaker 1: Hey Joe, how are you so? Maybe just before we begin, 76 00:04:20,080 --> 00:04:22,159 Speaker 1: do you want to give a sort of analyst job 77 00:04:22,240 --> 00:04:26,680 Speaker 1: in a nutshell kind of description? Well, I think a 78 00:04:26,720 --> 00:04:32,440 Speaker 1: good analyst actually is probably a lot like any good journalist. Really. 79 00:04:32,760 --> 00:04:38,120 Speaker 1: You are always basically out there trying to chase the 80 00:04:38,160 --> 00:04:42,080 Speaker 1: biggest possible story that you think might exist in your market. 81 00:04:42,839 --> 00:04:45,280 Speaker 1: You want to get there first, You want to get 82 00:04:45,320 --> 00:04:49,000 Speaker 1: there with the best information, and you want to deliver 83 00:04:49,120 --> 00:04:53,039 Speaker 1: it with all the style you can muster. How you 84 00:04:53,120 --> 00:04:56,560 Speaker 1: do that really depends upon what part of the world 85 00:04:56,560 --> 00:04:59,960 Speaker 1: you're focusing. On. If you're an equity analyst, then you're 86 00:05:00,080 --> 00:05:04,760 Speaker 1: trying to understand the latest about how your company's markets 87 00:05:04,760 --> 00:05:08,120 Speaker 1: may be evolving or the strategies that you're rolling out. 88 00:05:08,960 --> 00:05:11,600 Speaker 1: If you're in fixed income, which is where I've spent 89 00:05:11,680 --> 00:05:17,400 Speaker 1: my career, then uh, you may be focused on the economy. 90 00:05:17,680 --> 00:05:19,839 Speaker 1: You may be focused on what the FED is doing. 91 00:05:20,640 --> 00:05:26,040 Speaker 1: You may be focused on specific twists in your own market. 92 00:05:26,080 --> 00:05:29,040 Speaker 1: Mortgages have been mine, and you just want to get 93 00:05:29,080 --> 00:05:33,840 Speaker 1: there first and get that information out to your audience. 94 00:05:34,040 --> 00:05:35,480 Speaker 1: I have a feeling we're gonna be talking about the 95 00:05:35,480 --> 00:05:38,640 Speaker 1: parallels of journalism and being an analyst a lot on 96 00:05:38,680 --> 00:05:41,719 Speaker 1: this because just hearing you talk, I already have so 97 00:05:41,760 --> 00:05:43,800 Speaker 1: many questions. But you know, one of the questions that 98 00:05:43,880 --> 00:05:46,680 Speaker 1: comes up for a journalist is like, what is a 99 00:05:46,800 --> 00:05:50,640 Speaker 1: job well done? And so I'm curious for you what 100 00:05:50,640 --> 00:05:53,360 Speaker 1: what you during the course of your career have considered 101 00:05:53,400 --> 00:05:56,000 Speaker 1: to be like a job well done? Is it having 102 00:05:57,040 --> 00:06:01,839 Speaker 1: correct calls? Is it wanting people? Is that having people 103 00:06:01,960 --> 00:06:06,359 Speaker 1: want to read your stuff first versus other analysts? Like 104 00:06:06,760 --> 00:06:08,840 Speaker 1: when you look back and I say, okay, I was 105 00:06:08,880 --> 00:06:12,200 Speaker 1: successful at X, what are the how do you benchmark 106 00:06:12,240 --> 00:06:17,200 Speaker 1: yourself well I think it's parts of both what you mentioned. 107 00:06:18,000 --> 00:06:22,960 Speaker 1: I think the audience that you're speaking to UH desperately 108 00:06:23,080 --> 00:06:27,359 Speaker 1: wants UM to be the first to know what is 109 00:06:27,440 --> 00:06:31,680 Speaker 1: changing in their marketplace, and sitting on a trading floor 110 00:06:31,800 --> 00:06:35,760 Speaker 1: or sitting at one of the larger banks usually gives 111 00:06:35,800 --> 00:06:41,000 Speaker 1: you access to tremendous information flow. That information flow can 112 00:06:41,080 --> 00:06:46,479 Speaker 1: come through the traders, because especially at larger places, they're 113 00:06:46,520 --> 00:06:51,159 Speaker 1: seeing the various types of institutions that are buying and 114 00:06:51,320 --> 00:06:55,680 Speaker 1: selling UH. It can come through the salesforce, who can 115 00:06:56,360 --> 00:07:03,040 Speaker 1: often share information about UH, the views of their clients, UH, 116 00:07:03,360 --> 00:07:05,599 Speaker 1: the kinds of assets that they may or may not 117 00:07:05,800 --> 00:07:12,560 Speaker 1: be enthusiastic about. And you can often find in the 118 00:07:12,600 --> 00:07:16,640 Speaker 1: midst of these streams of information little tidbits that you 119 00:07:16,880 --> 00:07:20,800 Speaker 1: suspect are not broadly known in the marketplace, and those 120 00:07:20,800 --> 00:07:23,960 Speaker 1: are the pieces of information that end up moving the market, 121 00:07:24,080 --> 00:07:29,240 Speaker 1: essentially changing the price of one or a sector of 122 00:07:29,320 --> 00:07:33,800 Speaker 1: assets when all other parts of the market, for practical purposes, 123 00:07:33,840 --> 00:07:37,880 Speaker 1: may be standing still. That's the kind of information that 124 00:07:38,120 --> 00:07:41,400 Speaker 1: can make or break an investment portfolio. And that's the 125 00:07:41,480 --> 00:07:45,880 Speaker 1: kind of information that any good member of the by 126 00:07:45,960 --> 00:07:50,320 Speaker 1: side audience wants to hear. So if that's the game, 127 00:07:50,840 --> 00:07:53,560 Speaker 1: you really want to keep your ears open for those 128 00:07:53,560 --> 00:07:57,560 Speaker 1: tidbits of information that you think signal things that could 129 00:07:57,560 --> 00:08:01,680 Speaker 1: move the market. Sometimes they're small, sometimes they can be huge, 130 00:08:02,160 --> 00:08:05,160 Speaker 1: and when you find that, that's a good day, that's 131 00:08:05,160 --> 00:08:08,160 Speaker 1: a job well done. So I've always been curious how 132 00:08:08,200 --> 00:08:14,720 Speaker 1: are analysts perceived within south side banks, because externally, we 133 00:08:14,840 --> 00:08:17,240 Speaker 1: in the financial media zero in on a couple like 134 00:08:17,480 --> 00:08:21,640 Speaker 1: rock star analyst names like Peter Oppenheimer at Goldman or 135 00:08:21,720 --> 00:08:25,800 Speaker 1: Marco Kolonovitch at JP Morgan. Do they have the same 136 00:08:25,960 --> 00:08:30,920 Speaker 1: cashe internally or is analysts and analyst research viewed as 137 00:08:31,000 --> 00:08:35,120 Speaker 1: basically a cost center for the bank? Well, um, I 138 00:08:35,120 --> 00:08:40,080 Speaker 1: think most firms, most firms, at least the places that 139 00:08:40,160 --> 00:08:42,559 Speaker 1: I've worked, and I think this is just broadly true. 140 00:08:43,520 --> 00:08:47,400 Speaker 1: Recognize that that good research and a good analyst just 141 00:08:47,760 --> 00:08:53,360 Speaker 1: separates you from your competitors. If you imagine a market 142 00:08:53,360 --> 00:09:01,559 Speaker 1: where they're really were no good, aggressive, compelling analysts, then 143 00:09:01,640 --> 00:09:05,120 Speaker 1: essentially you have a market where there is simply price 144 00:09:05,200 --> 00:09:09,640 Speaker 1: execution that the bank could offer their clients if the 145 00:09:09,679 --> 00:09:14,920 Speaker 1: analysts brings good information, or if the analyst is able 146 00:09:14,960 --> 00:09:18,160 Speaker 1: to take lots of information and synthesize it in a 147 00:09:18,200 --> 00:09:22,600 Speaker 1: way that allows the audience of investors to understand and 148 00:09:22,640 --> 00:09:28,079 Speaker 1: react to it. That's extremely valuable, and it is a 149 00:09:28,240 --> 00:09:32,199 Speaker 1: service that the bank can provide that many of of 150 00:09:32,240 --> 00:09:38,760 Speaker 1: their clients in turn value and over time will direct 151 00:09:38,960 --> 00:09:43,640 Speaker 1: progressively more of their business towards the providing bank. And 152 00:09:43,679 --> 00:09:47,640 Speaker 1: I think in a well run institution, that's the way 153 00:09:47,800 --> 00:09:52,280 Speaker 1: good research um helps the investor and helps the bank. 154 00:09:52,840 --> 00:09:56,920 Speaker 1: So your last answer there really gets to a question 155 00:09:57,080 --> 00:09:59,040 Speaker 1: that I think a lot of people have about the 156 00:09:59,080 --> 00:10:02,959 Speaker 1: business model Becau has. Let's say you unearthed some great 157 00:10:03,120 --> 00:10:08,440 Speaker 1: negative insight. I want to trade on that a why 158 00:10:08,520 --> 00:10:11,600 Speaker 1: can't I just go trade with a competitor use the 159 00:10:11,640 --> 00:10:14,880 Speaker 1: information that you've get that you've provided me. I have 160 00:10:14,920 --> 00:10:17,640 Speaker 1: a big trade idea. Go trade with a competitor or 161 00:10:17,880 --> 00:10:20,200 Speaker 1: maybe a place a little bit of a trade through 162 00:10:20,240 --> 00:10:23,240 Speaker 1: your bank to sort of show that Okay, thanks for 163 00:10:23,280 --> 00:10:25,440 Speaker 1: that information, but then trade do the bulk of my 164 00:10:25,520 --> 00:10:28,760 Speaker 1: trading somewhere else. There seems to there doesn't seem to 165 00:10:28,760 --> 00:10:32,720 Speaker 1: be a mechanism that naturally connects the bank that offered 166 00:10:32,760 --> 00:10:35,800 Speaker 1: you the really compelling information and a reason to actually 167 00:10:36,200 --> 00:10:40,120 Speaker 1: execute orders through that bank. Yeah, I agree. Um. That 168 00:10:40,200 --> 00:10:44,280 Speaker 1: has always been a problem with with sell side research. 169 00:10:44,920 --> 00:10:49,840 Speaker 1: There's always the issue of free riders. I have never 170 00:10:49,920 --> 00:10:55,600 Speaker 1: seen a completely satisfactory solution for it. I think a 171 00:10:55,679 --> 00:11:01,400 Speaker 1: well organized bank does have the ability to UH roughly speaking, 172 00:11:01,600 --> 00:11:04,920 Speaker 1: track and understand the proportion of the trading business that 173 00:11:05,000 --> 00:11:08,840 Speaker 1: the account is providing to the bank, and that is 174 00:11:09,720 --> 00:11:14,280 Speaker 1: the best way of looking at the ability of the 175 00:11:14,320 --> 00:11:18,880 Speaker 1: analysts to help the bank generate trading revenue and effectively 176 00:11:18,920 --> 00:11:24,200 Speaker 1: pay for the service provided. But it's a imperfect mechanism, 177 00:11:24,320 --> 00:11:27,440 Speaker 1: so it's always been a problem. UM. Talk to us though, 178 00:11:27,559 --> 00:11:30,800 Speaker 1: how the industry has changed over the years, because there 179 00:11:30,920 --> 00:11:35,640 Speaker 1: is a sense nowadays that analysts are facing a little 180 00:11:35,640 --> 00:11:38,680 Speaker 1: bit of maybe crisis is a strong word, but that 181 00:11:38,760 --> 00:11:42,400 Speaker 1: they're struggling with this monetization issue, and it feels like 182 00:11:42,440 --> 00:11:47,400 Speaker 1: that concern has been growing. Has it actually changed well, Um, 183 00:11:47,720 --> 00:11:50,880 Speaker 1: I think that on the equity side, I think it's 184 00:11:51,280 --> 00:11:55,040 Speaker 1: the change is clearer and it seems like we're about 185 00:11:55,080 --> 00:11:58,920 Speaker 1: to go into, you know, arguably a third chapter in 186 00:11:58,960 --> 00:12:02,680 Speaker 1: the equity search model. I'd say the first chapter was 187 00:12:03,440 --> 00:12:08,440 Speaker 1: pre Internet crisis, if you remember that one, UH and 188 00:12:08,559 --> 00:12:16,120 Speaker 1: pre Internet crisis, equity analysts routinely had um special access 189 00:12:16,160 --> 00:12:20,959 Speaker 1: to corporate management, and what they learned in the course 190 00:12:20,960 --> 00:12:25,559 Speaker 1: of those conversations often could be shared with a limited 191 00:12:25,640 --> 00:12:29,839 Speaker 1: range of clients, and it was clear to the bank, 192 00:12:29,880 --> 00:12:31,719 Speaker 1: it was clear to the clients, it was clear to 193 00:12:31,760 --> 00:12:37,120 Speaker 1: the analysts that that was a clubby form of information flow. 194 00:12:37,880 --> 00:12:43,560 Speaker 1: After the crisis, I think regulation stopped that, which created 195 00:12:43,600 --> 00:12:51,080 Speaker 1: frankly fairer markets, and the market is essentially operated in 196 00:12:51,280 --> 00:12:56,320 Speaker 1: a post Internet crisis mode until recently with the introduction 197 00:12:56,520 --> 00:12:59,840 Speaker 1: in the EU at least of the method regulations and 198 00:13:00,200 --> 00:13:04,560 Speaker 1: method obviously is trying to put a very specific price 199 00:13:05,200 --> 00:13:09,120 Speaker 1: on the provision of of research. Whether it will do 200 00:13:09,160 --> 00:13:12,480 Speaker 1: that successfully is still to be determined at an't I 201 00:13:12,679 --> 00:13:19,040 Speaker 1: contrast that though with fixed income research, I would say 202 00:13:19,080 --> 00:13:24,720 Speaker 1: that in many respects fixed income research, since it is 203 00:13:24,880 --> 00:13:29,000 Speaker 1: often focused more on macro issues than on the particulars 204 00:13:29,040 --> 00:13:32,880 Speaker 1: of a management team or a specific balance sheet, Fixed 205 00:13:32,880 --> 00:13:36,360 Speaker 1: income research, at least in terms of its method, the 206 00:13:36,400 --> 00:13:41,080 Speaker 1: way that it interacts with uh internal and external clientele 207 00:13:42,080 --> 00:13:49,760 Speaker 1: hasn't really changed as much over the years. UM. You know, 208 00:13:49,840 --> 00:13:56,600 Speaker 1: obviously there's there's constant awareness of abiding by the evolving 209 00:13:56,679 --> 00:14:01,679 Speaker 1: regulations that need to provide fair and accurate research, and 210 00:14:02,440 --> 00:14:06,160 Speaker 1: there's always been an overriding I think premium attached to 211 00:14:06,200 --> 00:14:14,000 Speaker 1: analysts that provide straight down the middle views of their markets. Um, 212 00:14:14,160 --> 00:14:18,280 Speaker 1: that's not always obvious, but still I think the investing 213 00:14:18,320 --> 00:14:21,400 Speaker 1: side has always been able to identify and appreciate those analysts, 214 00:14:22,200 --> 00:14:26,880 Speaker 1: and and the fixed income and the more macro side 215 00:14:26,880 --> 00:14:32,320 Speaker 1: of the research enterprise has had much less changed than 216 00:14:32,320 --> 00:14:35,240 Speaker 1: the equity side. I think that that's still probably the case. 217 00:14:36,400 --> 00:14:38,760 Speaker 1: I'm so glad we're having this conversation because now I'm 218 00:14:38,760 --> 00:14:41,600 Speaker 1: remembering like millions of questions I've always had about the 219 00:14:41,600 --> 00:14:44,960 Speaker 1: business that I'm so uh that I've always wanted to 220 00:14:45,000 --> 00:14:49,320 Speaker 1: ask someone. So here's your last answer. Why is it 221 00:14:49,400 --> 00:14:56,560 Speaker 1: that by side clients need analysts to understand the markets 222 00:14:56,600 --> 00:14:59,320 Speaker 1: that they're us that they're trading in that they're ostensibly 223 00:14:59,760 --> 00:15:03,400 Speaker 1: get paid quite a bit for to determine, you know, 224 00:15:03,440 --> 00:15:05,440 Speaker 1: what the best stuff to buy and sell us. So, 225 00:15:05,560 --> 00:15:08,320 Speaker 1: in the fixed income space, if someone is a fixed 226 00:15:08,320 --> 00:15:13,280 Speaker 1: income portfolio manager, what is it that you offer them, 227 00:15:13,400 --> 00:15:16,560 Speaker 1: or that fixed income analysts offers that it would be 228 00:15:17,000 --> 00:15:21,360 Speaker 1: uneconomic for them to sort of understand themselves or put 229 00:15:21,360 --> 00:15:26,080 Speaker 1: in the work themselves to figure out well. UM, I 230 00:15:26,120 --> 00:15:31,040 Speaker 1: would say the simplest example, uh, really is the place 231 00:15:31,040 --> 00:15:35,240 Speaker 1: where I started my career, and that is in the 232 00:15:35,320 --> 00:15:43,400 Speaker 1: mortgage space. Analyzing the behavior of homeowners that influence sometimes significantly, 233 00:15:43,480 --> 00:15:49,720 Speaker 1: the value of of those securities. UM. It's a market 234 00:15:49,760 --> 00:15:54,200 Speaker 1: that's particular to the United States, but all mortgage securities 235 00:15:54,240 --> 00:16:00,680 Speaker 1: in the United States give the borrower the right to move, refinance, 236 00:16:00,880 --> 00:16:04,880 Speaker 1: or otherwise pay their loan back early in most cases 237 00:16:04,880 --> 00:16:10,720 Speaker 1: without any kind of penalty. So that creates uncertainty in 238 00:16:10,920 --> 00:16:14,560 Speaker 1: the stream of cash flows that you would get from 239 00:16:14,600 --> 00:16:19,720 Speaker 1: holding that security, and depending upon the nature of the security, 240 00:16:19,720 --> 00:16:24,880 Speaker 1: how it structured, those can have either minor or major 241 00:16:24,960 --> 00:16:30,520 Speaker 1: influence on security value. That really is an exercise in 242 00:16:31,680 --> 00:16:38,440 Speaker 1: gathering tremendous amounts of data and statistically modeling that data. 243 00:16:38,720 --> 00:16:42,360 Speaker 1: So it is far more efficient for that activity to 244 00:16:43,080 --> 00:16:46,880 Speaker 1: occur in a centralized place and for the results of 245 00:16:46,880 --> 00:16:51,040 Speaker 1: that activity to be than delivered to clients, as opposed 246 00:16:51,040 --> 00:16:56,080 Speaker 1: to having every single client separately aggregate the data and 247 00:16:56,120 --> 00:16:59,160 Speaker 1: then do the statistical modeling on their own. So that's 248 00:16:59,200 --> 00:17:04,159 Speaker 1: probably the easiest case. I would also say that it's 249 00:17:04,280 --> 00:17:07,840 Speaker 1: far easier for an analyst even if an analyst is 250 00:17:07,880 --> 00:17:12,400 Speaker 1: just trying to aggregate broad information about the types of 251 00:17:12,400 --> 00:17:16,080 Speaker 1: buyers and sellers in the market. Uh, it's far easier 252 00:17:16,119 --> 00:17:18,639 Speaker 1: for an analyst sitting on a trading floor to aggregate 253 00:17:18,680 --> 00:17:23,240 Speaker 1: that information than it usually would be from most buy 254 00:17:23,359 --> 00:17:27,920 Speaker 1: side analysts. The sell side analysts, in many cases can 255 00:17:28,000 --> 00:17:32,119 Speaker 1: literally walk up and down a couple of aisles, have 256 00:17:32,600 --> 00:17:37,800 Speaker 1: a handful of conversations with sales representatives or traders that 257 00:17:37,840 --> 00:17:42,520 Speaker 1: are interacting with dozens of various accounts over the course 258 00:17:42,800 --> 00:17:46,600 Speaker 1: of just you know, that particular trading day, and get 259 00:17:46,600 --> 00:17:48,960 Speaker 1: a very clear read on what's happening. It would be 260 00:17:49,480 --> 00:17:52,600 Speaker 1: a lot more work for a sell side analyst to 261 00:17:52,920 --> 00:17:56,880 Speaker 1: collect that kind of information over the phone. Now that's 262 00:17:56,920 --> 00:18:01,240 Speaker 1: not always true. If you're at an extremely large asset 263 00:18:01,320 --> 00:18:07,520 Speaker 1: manager UM, they would often have information flow analysts. The 264 00:18:07,600 --> 00:18:11,680 Speaker 1: ability to aggregate data, the ability to analyze that data 265 00:18:12,359 --> 00:18:18,000 Speaker 1: equal to, if not better than, some of the cell 266 00:18:18,119 --> 00:18:23,200 Speaker 1: side shops. But shops that large are few and far between. 267 00:18:23,840 --> 00:18:26,800 Speaker 1: So the provision of that kind of information from the 268 00:18:26,840 --> 00:18:29,720 Speaker 1: cell side, if you want to think of it this way, 269 00:18:29,840 --> 00:18:33,520 Speaker 1: is really kind of a democratizing influence. It captures that 270 00:18:33,600 --> 00:18:36,600 Speaker 1: information in an efficient way, and then it spins it 271 00:18:36,640 --> 00:18:41,600 Speaker 1: out into the marketplace in many cases for investors that 272 00:18:41,600 --> 00:18:45,399 Speaker 1: would be too small and too focused on other things 273 00:18:45,920 --> 00:18:58,399 Speaker 1: on their own to to to do it themselves. I 274 00:18:58,440 --> 00:19:01,359 Speaker 1: want to go back to the media a parallel for 275 00:19:01,400 --> 00:19:05,560 Speaker 1: a little bit. Yeah, more naval gazing. Um well, I 276 00:19:05,560 --> 00:19:08,600 Speaker 1: don't think it's a secret that you know. Traditional journalism 277 00:19:08,680 --> 00:19:11,960 Speaker 1: or media has struggled over the past few years, especially 278 00:19:12,040 --> 00:19:16,800 Speaker 1: in light of the growing influence of the Internet, which 279 00:19:16,920 --> 00:19:21,600 Speaker 1: has made news sort of more commoditized. So a scoop 280 00:19:21,640 --> 00:19:24,600 Speaker 1: only exists for what five or ten minutes before someone 281 00:19:24,600 --> 00:19:28,240 Speaker 1: else is disseminating it to the world arguably one second. 282 00:19:28,960 --> 00:19:32,280 Speaker 1: And it also means that you just have more competitors 283 00:19:32,320 --> 00:19:35,400 Speaker 1: in a variety of forms. Um So, I'm curious when 284 00:19:35,400 --> 00:19:39,200 Speaker 1: it comes to research, did you observe the same things 285 00:19:39,640 --> 00:19:42,399 Speaker 1: and how did you feel? For instance, if you wrote 286 00:19:42,520 --> 00:19:45,600 Speaker 1: a really good note and someone like myself or Joe 287 00:19:45,640 --> 00:19:50,159 Speaker 1: would immediately write it up at say FT Alphabel, my 288 00:19:50,200 --> 00:19:55,399 Speaker 1: old employer or Joe's old employer business insider, well, I 289 00:19:55,400 --> 00:19:59,760 Speaker 1: would say, uh. In most cases, a good analyst loves 290 00:20:00,359 --> 00:20:05,160 Speaker 1: the bullhorn of the media. You love to get magnified 291 00:20:05,200 --> 00:20:10,439 Speaker 1: that way. In many, many cases, the first recipients of 292 00:20:10,520 --> 00:20:17,080 Speaker 1: your work are the institutions that are the clients of 293 00:20:17,160 --> 00:20:20,520 Speaker 1: the firm, and they're typically going to get that information 294 00:20:21,240 --> 00:20:26,199 Speaker 1: on direct distribution. Uh, there's nothing better than having that 295 00:20:26,240 --> 00:20:29,760 Speaker 1: story picked up. In most cases, it won't be picked 296 00:20:29,840 --> 00:20:32,280 Speaker 1: up immediately, but let's just say it's picked up with 297 00:20:32,359 --> 00:20:38,080 Speaker 1: some lag and then magnified in the broader press. It 298 00:20:38,200 --> 00:20:42,400 Speaker 1: kind of sends a couple of messages to the clients 299 00:20:42,400 --> 00:20:45,800 Speaker 1: of the firm. It says you really should pay attention 300 00:20:46,040 --> 00:20:51,159 Speaker 1: when the information arrives because it's it's valuable, it's of 301 00:20:51,240 --> 00:20:54,560 Speaker 1: interest to a broad audience, it has the potential to 302 00:20:54,640 --> 00:20:58,840 Speaker 1: move the market, and it gives you an opportunity to 303 00:20:59,119 --> 00:21:03,800 Speaker 1: act on it. And it sends a broader message to 304 00:21:04,520 --> 00:21:08,040 Speaker 1: entities that may not be dealing with your firm that 305 00:21:08,200 --> 00:21:12,600 Speaker 1: there there are there's a good information flow, a valuable 306 00:21:12,600 --> 00:21:16,440 Speaker 1: information flow coming out of out of UM the Bank. 307 00:21:16,880 --> 00:21:20,119 Speaker 1: So I think that ends up being in positive in 308 00:21:20,200 --> 00:21:23,119 Speaker 1: most cases. In fact, I can't think of a case 309 00:21:23,240 --> 00:21:27,920 Speaker 1: where a media follow through wasn't good news on the 310 00:21:27,960 --> 00:21:31,440 Speaker 1: things that I was working on or that my team 311 00:21:31,480 --> 00:21:33,680 Speaker 1: was working on. All right, but there are some perverse 312 00:21:33,800 --> 00:21:38,040 Speaker 1: things that can happen in this cycle, and so media 313 00:21:38,160 --> 00:21:45,119 Speaker 1: often gets criticized for being hyperbolic or being you know, uh, sensationalist. 314 00:21:45,640 --> 00:21:48,360 Speaker 1: And I'm not gonna name any names, but we all 315 00:21:48,400 --> 00:21:52,160 Speaker 1: know that there are some popular sell side analysts who 316 00:21:52,600 --> 00:21:57,000 Speaker 1: have been wrong on things for many years, predicting recessions, 317 00:21:57,080 --> 00:22:00,920 Speaker 1: predicting crashes, and they're extremely popular, and they're really popular 318 00:22:00,960 --> 00:22:03,680 Speaker 1: in the press because we like to write up bold calls, 319 00:22:04,240 --> 00:22:08,320 Speaker 1: but they are completely everything that nothing they say ever 320 00:22:08,400 --> 00:22:13,480 Speaker 1: comes to pass. And I'm curious whether the cycle but no, 321 00:22:13,760 --> 00:22:16,480 Speaker 1: I no needs to name names, but whether this media 322 00:22:16,520 --> 00:22:20,280 Speaker 1: cycle can encourage people to say provocative things that will 323 00:22:20,320 --> 00:22:23,080 Speaker 1: get picked up in the press but that aren't necessarily 324 00:22:23,760 --> 00:22:27,520 Speaker 1: correct or grounded in good data. I think it does. 325 00:22:28,520 --> 00:22:32,720 Speaker 1: I think it depends upon the market sector and who 326 00:22:32,760 --> 00:22:38,119 Speaker 1: the analysts believes the audience is. If it is a 327 00:22:38,280 --> 00:22:44,080 Speaker 1: retail audience, then you have to find a way of 328 00:22:44,800 --> 00:22:51,000 Speaker 1: penetrating the same clutter as any other provider of information 329 00:22:51,240 --> 00:22:53,760 Speaker 1: to that audience. And we all know that there is 330 00:22:54,320 --> 00:22:57,679 Speaker 1: just a tremendous number of channels that are fighting for 331 00:22:57,720 --> 00:23:02,840 Speaker 1: the attention of somebody sitting in front of a TV, 332 00:23:03,119 --> 00:23:08,639 Speaker 1: in front of a broker's audience or somebody who is 333 00:23:09,280 --> 00:23:14,000 Speaker 1: walking past the front of a store. If your audience 334 00:23:14,240 --> 00:23:19,280 Speaker 1: is an institutional audience, it's not clear to me that 335 00:23:20,160 --> 00:23:26,240 Speaker 1: the same approach works because the institutional audience if the institution, 336 00:23:26,359 --> 00:23:30,360 Speaker 1: the institution ultimately needs to produce a return that will 337 00:23:30,440 --> 00:23:37,520 Speaker 1: justify its fees. Generating that that return is really hard work. 338 00:23:38,200 --> 00:23:42,080 Speaker 1: That's what all the research shows. I think in many 339 00:23:42,080 --> 00:23:44,879 Speaker 1: ways that's the story of asset flows of the last 340 00:23:44,920 --> 00:23:50,719 Speaker 1: few years, that there is steady pressure on asset management fees. 341 00:23:51,280 --> 00:23:59,919 Speaker 1: So you need to find sources of information that are thoughtful, reliable, actionable, 342 00:24:00,840 --> 00:24:04,399 Speaker 1: And if you're an analyst and you can provide that 343 00:24:04,520 --> 00:24:08,600 Speaker 1: kind of information, then your audience is gonna look for 344 00:24:08,640 --> 00:24:14,560 Speaker 1: you rather than necessarily uh considering you as just part 345 00:24:14,560 --> 00:24:18,760 Speaker 1: of the general clutter that comes over the wires. Um. 346 00:24:18,800 --> 00:24:21,919 Speaker 1: So we mentioned mythid a couple of times before, but 347 00:24:21,960 --> 00:24:24,520 Speaker 1: this is the big European regulation coming in that's gonna 348 00:24:24,800 --> 00:24:29,680 Speaker 1: unbundle research from training commissions. Essentially, how do you think 349 00:24:30,000 --> 00:24:33,920 Speaker 1: that's going to change the world of analyst research? We 350 00:24:34,160 --> 00:24:37,000 Speaker 1: can before you answer, can you also explain what the 351 00:24:37,119 --> 00:24:40,720 Speaker 1: reason why? Before? Like what was the situation? Because I 352 00:24:40,760 --> 00:24:43,720 Speaker 1: don't even understand this still, so what what was the 353 00:24:43,760 --> 00:24:46,640 Speaker 1: situation that prompted the EU to think that this regulation 354 00:24:46,720 --> 00:24:48,920 Speaker 1: was necessary? And then also and then of course, how 355 00:24:48,960 --> 00:24:51,760 Speaker 1: that's going to change your world. I can't say that 356 00:24:51,800 --> 00:24:57,880 Speaker 1: I know exactly what was of the EU regulator UM, 357 00:24:57,880 --> 00:25:01,440 Speaker 1: but I will happily read that crystal ball all so 358 00:25:01,840 --> 00:25:05,040 Speaker 1: I would assume that what the regulator is trying to 359 00:25:05,080 --> 00:25:11,080 Speaker 1: do here is unbundle trade execution from the provision of 360 00:25:11,119 --> 00:25:16,400 Speaker 1: other services by a sell side bank. And I suppose 361 00:25:16,480 --> 00:25:20,040 Speaker 1: at some level you could say that UM that will 362 00:25:20,119 --> 00:25:23,600 Speaker 1: create transparency in the marketplace, because then you will be 363 00:25:23,640 --> 00:25:28,919 Speaker 1: able to compare execution as a separate service compared to 364 00:25:30,240 --> 00:25:35,959 Speaker 1: UM research itself. I don't know if we necessarily are 365 00:25:35,960 --> 00:25:39,600 Speaker 1: going to see that result. In the US. We do 366 00:25:39,720 --> 00:25:43,520 Speaker 1: not have at this point regulators taking the same view, 367 00:25:43,880 --> 00:25:46,080 Speaker 1: So there is no effort so far in the US 368 00:25:46,119 --> 00:25:51,119 Speaker 1: to try to unbundle that. And I do have some 369 00:25:51,200 --> 00:25:54,720 Speaker 1: questions about whether that will produce the amount of change 370 00:25:54,880 --> 00:25:59,399 Speaker 1: that the regulators anticipate. One thing that seems relatively clear 371 00:25:59,480 --> 00:26:03,400 Speaker 1: to me is that it's more likely to have an 372 00:26:03,440 --> 00:26:07,320 Speaker 1: impact on the BYE side then it will on the 373 00:26:07,359 --> 00:26:10,760 Speaker 1: cell side, and The reason I suspect it could have 374 00:26:10,800 --> 00:26:14,160 Speaker 1: an impact on the buy side is that it will 375 00:26:14,200 --> 00:26:19,680 Speaker 1: tend to favor institutions large enough to bear the separate 376 00:26:19,720 --> 00:26:25,120 Speaker 1: cost of research. That provision of research, as I indicated earlier, 377 00:26:25,800 --> 00:26:32,120 Speaker 1: in many ways, is a really valuable democratizing influence. Many 378 00:26:32,160 --> 00:26:35,359 Speaker 1: small institutions that may not do a tremendous amount of 379 00:26:35,400 --> 00:26:39,240 Speaker 1: trading with a sell side bank still have access to 380 00:26:39,280 --> 00:26:45,440 Speaker 1: the research flow, and once the sell side starts requiring 381 00:26:45,480 --> 00:26:51,840 Speaker 1: those institutions to pay UH for that provision of service, 382 00:26:52,560 --> 00:26:55,960 Speaker 1: it might become prohibitive. It's certainly I can tell you 383 00:26:56,760 --> 00:26:59,320 Speaker 1: that as somebody who is in the middle of of 384 00:26:59,560 --> 00:27:03,560 Speaker 1: building an asset manager now, you always keep your eye 385 00:27:03,560 --> 00:27:08,760 Speaker 1: on costs, and you're sensitive to the competition over fees 386 00:27:08,880 --> 00:27:12,080 Speaker 1: that exists in the marketplace, and so if you have 387 00:27:12,240 --> 00:27:16,560 Speaker 1: to pay additional fees to buy research, it's something that 388 00:27:16,600 --> 00:27:20,320 Speaker 1: you're going to do very very carefully. So my assumption 389 00:27:20,440 --> 00:27:23,320 Speaker 1: is that at least for institutions that are dealing primarily 390 00:27:24,240 --> 00:27:26,840 Speaker 1: in the EU or that fall under the EU jurisdiction, 391 00:27:27,160 --> 00:27:29,919 Speaker 1: the rules are going to tend to favor concentration of 392 00:27:29,960 --> 00:27:35,040 Speaker 1: asset management UM. In the US, those rules don't really apply, 393 00:27:35,440 --> 00:27:38,399 Speaker 1: and so I think research in general is still going 394 00:27:38,480 --> 00:27:41,640 Speaker 1: to be broadly available to a wide set of investors 395 00:27:42,200 --> 00:27:46,679 Speaker 1: under the same protocols that have existed in the past. 396 00:27:47,480 --> 00:27:50,320 Speaker 1: And so for the time being, provision of research and 397 00:27:50,400 --> 00:27:54,520 Speaker 1: the model in US markets I think is not going 398 00:27:54,560 --> 00:27:59,800 Speaker 1: to change substantially. Yeah, this gets to another sort of 399 00:28:00,040 --> 00:28:03,359 Speaker 1: business model, parallel with media, which is that, you know, 400 00:28:03,400 --> 00:28:05,679 Speaker 1: it's great to talk about we're going to restrict the 401 00:28:05,680 --> 00:28:08,000 Speaker 1: provision of research and only if you pay for it 402 00:28:08,040 --> 00:28:11,199 Speaker 1: you get it. But as everyone knows, you know, there's 403 00:28:11,240 --> 00:28:14,520 Speaker 1: it's hard to stop people from forwarding things, copying things, 404 00:28:14,520 --> 00:28:18,440 Speaker 1: taking screenshots of things. Anyone in the news business has 405 00:28:18,480 --> 00:28:21,960 Speaker 1: seen how difficult it is to put up paywalls. The 406 00:28:22,040 --> 00:28:25,359 Speaker 1: music industry has seen, how seen how difficult it is 407 00:28:25,440 --> 00:28:28,520 Speaker 1: to uh, you know, sell music as opposed to deal 408 00:28:28,560 --> 00:28:31,720 Speaker 1: with piracy. Uh is that really Like? Do people think 409 00:28:31,720 --> 00:28:34,359 Speaker 1: that's realistic that shops that don't want to pay for 410 00:28:34,400 --> 00:28:39,440 Speaker 1: it won't be able to surreptitiously get access to research. Well, 411 00:28:39,480 --> 00:28:43,640 Speaker 1: I think you're absolutely right. Um, I guess the old 412 00:28:43,640 --> 00:28:48,080 Speaker 1: saying was information wants to be free, and the people 413 00:28:48,120 --> 00:28:50,120 Speaker 1: who will be getting the research, I'm sure will be 414 00:28:50,240 --> 00:28:53,040 Speaker 1: quite careful to make sure that they don't violate their 415 00:28:53,080 --> 00:28:59,440 Speaker 1: agreements with the cell side institutions. But people talk at 416 00:28:59,440 --> 00:29:04,920 Speaker 1: the very least east Um. In many respects, information can 417 00:29:04,960 --> 00:29:09,440 Speaker 1: be shared at the very least informally as part of 418 00:29:10,080 --> 00:29:15,040 Speaker 1: just conversations with colleagues and peers in the course of 419 00:29:15,080 --> 00:29:22,560 Speaker 1: doing business. And if information circulates outside the purview of 420 00:29:22,720 --> 00:29:27,440 Speaker 1: the MiFID rules, I'm not sure how you control the 421 00:29:27,480 --> 00:29:30,760 Speaker 1: flow of that information if it comes outside and then 422 00:29:30,840 --> 00:29:36,239 Speaker 1: goes back inside the EU jurisdiction. I understand the the 423 00:29:36,280 --> 00:29:40,640 Speaker 1: aspiration of the regulations and the desire to provide transparency. 424 00:29:40,880 --> 00:29:45,640 Speaker 1: I just think, as you're pointing out, it's really hard 425 00:29:45,720 --> 00:29:49,200 Speaker 1: to do it um in practice. So a few people 426 00:29:49,360 --> 00:29:53,400 Speaker 1: have commented that the era of analysts and analyst researches 427 00:29:53,560 --> 00:29:58,080 Speaker 1: effectively dead. Uh do you agree with that statement? And 428 00:29:58,520 --> 00:30:01,840 Speaker 1: how much can we read in to your own departure 429 00:30:02,080 --> 00:30:06,040 Speaker 1: from the analyst community if you will, Well, I wouldn't 430 00:30:06,080 --> 00:30:10,960 Speaker 1: read too much into my own decision. I think that, um, 431 00:30:11,040 --> 00:30:15,760 Speaker 1: there will always be need for good information. I mean 432 00:30:15,800 --> 00:30:20,560 Speaker 1: that's what makes markets work. In fact, that, in part 433 00:30:20,760 --> 00:30:23,760 Speaker 1: was what I always found to be the most fascinating 434 00:30:23,840 --> 00:30:30,880 Speaker 1: part about Uh, being an analyst. Information and good information 435 00:30:32,160 --> 00:30:36,600 Speaker 1: really is the core of portfolio management, and it's the 436 00:30:36,760 --> 00:30:40,600 Speaker 1: core of investing. And any good investor will tell you 437 00:30:41,120 --> 00:30:44,000 Speaker 1: that a substantial part of their time and effort goes 438 00:30:44,200 --> 00:30:48,800 Speaker 1: into getting their hands on good information and using it 439 00:30:48,840 --> 00:30:54,640 Speaker 1: to make good decisions. So that will not go away. Uh, 440 00:30:54,680 --> 00:30:57,520 Speaker 1: And so there will always be this core need for 441 00:30:57,560 --> 00:31:01,760 Speaker 1: that information. And I suspect there will always be analysts 442 00:31:01,760 --> 00:31:05,720 Speaker 1: of some sort uh that are sitting in the chair 443 00:31:05,880 --> 00:31:10,160 Speaker 1: and trying to generate and disseminate that information. So how 444 00:31:10,160 --> 00:31:15,360 Speaker 1: it gets monetized may change, Uh, the nature of the 445 00:31:15,440 --> 00:31:19,440 Speaker 1: distribution may change, but the core need for that information 446 00:31:20,240 --> 00:31:22,480 Speaker 1: won't go away. I mean, it's impossible for a market 447 00:31:22,480 --> 00:31:25,240 Speaker 1: to function without that, you know. Speaking of the ways 448 00:31:25,280 --> 00:31:27,840 Speaker 1: in which media is getting disrupted, we've seen a lot 449 00:31:27,920 --> 00:31:31,720 Speaker 1: of sort of data journalism or people opening up their 450 00:31:31,760 --> 00:31:34,520 Speaker 1: models and things like that are sort of like attempts 451 00:31:34,520 --> 00:31:38,920 Speaker 1: to open source the gathering of news and stuff like that. 452 00:31:38,960 --> 00:31:42,160 Speaker 1: Do you see that happening in your world? Into your 453 00:31:42,200 --> 00:31:45,240 Speaker 1: world where you know, rather than a sort of pure 454 00:31:45,280 --> 00:31:49,880 Speaker 1: research report, you're providing more tools to access the underlying data. 455 00:31:50,000 --> 00:31:53,920 Speaker 1: Things like that basically just sort of offering ways of 456 00:31:54,240 --> 00:31:58,400 Speaker 1: giving people to manipulate and understand the news themselves. Well, 457 00:31:58,440 --> 00:32:01,360 Speaker 1: I think those kinds of tools have really been certainly 458 00:32:01,400 --> 00:32:06,880 Speaker 1: available in the fixed income world for decades. And again 459 00:32:06,920 --> 00:32:11,920 Speaker 1: back to my own little parochial playground, Um, it was 460 00:32:12,080 --> 00:32:15,920 Speaker 1: routine starting in the late nineteen eighties for the cell 461 00:32:16,040 --> 00:32:21,400 Speaker 1: side to do the kind of data analysis and statistical 462 00:32:21,440 --> 00:32:25,880 Speaker 1: work that I described and then post those models out 463 00:32:26,680 --> 00:32:32,880 Speaker 1: for public consumption. Solomon Brothers was doing it. Uh First Boston, 464 00:32:32,880 --> 00:32:36,000 Speaker 1: which eventually became Credit Suisse was doing it, and eventually 465 00:32:36,440 --> 00:32:39,680 Speaker 1: every shop that wanted to be considered a serious player 466 00:32:40,120 --> 00:32:42,600 Speaker 1: in mortgage securities ended up with their own team of 467 00:32:42,680 --> 00:32:46,160 Speaker 1: modelers and their own efforts to make the results of 468 00:32:46,160 --> 00:32:49,640 Speaker 1: those models available. Uh So, I think that that has 469 00:32:49,640 --> 00:32:51,400 Speaker 1: been out there for a while. There have been some 470 00:32:51,520 --> 00:32:54,840 Speaker 1: private providers that have popped up over the years that 471 00:32:54,920 --> 00:32:58,680 Speaker 1: have become real specialists and providing some kind some of 472 00:32:58,720 --> 00:33:03,600 Speaker 1: these central data source is. But I guess the broader 473 00:33:03,640 --> 00:33:10,400 Speaker 1: idea of crowdsourcing information I haven't seen that used in 474 00:33:10,440 --> 00:33:13,960 Speaker 1: a way that I would consider really effective. I think 475 00:33:13,960 --> 00:33:18,000 Speaker 1: the problem is that in any market, the value of 476 00:33:18,080 --> 00:33:24,360 Speaker 1: information UH quickly degrades, and so if you genuinely believe 477 00:33:24,400 --> 00:33:28,080 Speaker 1: that you have information that nobody else has and that 478 00:33:28,160 --> 00:33:31,320 Speaker 1: it's information material enough to affect the value of an 479 00:33:31,320 --> 00:33:35,320 Speaker 1: asset that you're buying or selling, You're going to use 480 00:33:35,360 --> 00:33:38,800 Speaker 1: that information and transact on it long before you ever 481 00:33:38,880 --> 00:33:42,040 Speaker 1: turn around and start telling your pals at the next shop. 482 00:33:42,840 --> 00:33:44,800 Speaker 1: So by the time the information would get into a 483 00:33:44,880 --> 00:33:49,960 Speaker 1: crowdsourced environment, I'm not sure it really has the zip 484 00:33:50,040 --> 00:33:53,360 Speaker 1: that it that it that it had when the first 485 00:33:53,360 --> 00:33:58,240 Speaker 1: recipient got it all right, Uh, Steven Abraham's CEO and 486 00:33:58,400 --> 00:34:01,120 Speaker 1: co founder of mile Post Opitualt Management, Thank you so 487 00:34:01,200 --> 00:34:04,840 Speaker 1: much for joining us today. Thank you, Tracy, Thank you Joe. 488 00:34:04,960 --> 00:34:20,120 Speaker 1: It was fun. So Joe, I found that conversation fascinating 489 00:34:20,280 --> 00:34:23,279 Speaker 1: partially because, as you know, both of us have been 490 00:34:23,360 --> 00:34:25,800 Speaker 1: so close to the world of analyst research for years 491 00:34:25,840 --> 00:34:29,239 Speaker 1: now totally. I mean both of us sort of started 492 00:34:29,960 --> 00:34:33,600 Speaker 1: our careers blogging more or less, and a huge part 493 00:34:33,640 --> 00:34:37,040 Speaker 1: of that was pouring through all the endless research that 494 00:34:37,080 --> 00:34:40,560 Speaker 1: would hit our inboxes, typically especially at the beginning, through 495 00:34:40,600 --> 00:34:44,399 Speaker 1: surreptitious sources, people who were not officially at banks. Now 496 00:34:44,400 --> 00:34:47,920 Speaker 1: it's now we're sort of more respectable and we get 497 00:34:47,920 --> 00:34:50,200 Speaker 1: stuff from banks, But in the beginning, at least I 498 00:34:50,239 --> 00:34:53,360 Speaker 1: had to like, you know, mooch them from third party sources, 499 00:34:53,760 --> 00:34:57,080 Speaker 1: finding the analysts that had the interesting calls, writing them up, 500 00:34:57,440 --> 00:35:00,480 Speaker 1: posting their charts. So actually learning more about how that 501 00:35:00,520 --> 00:35:03,839 Speaker 1: business works is very enlightening. Yeah, and I guess it's 502 00:35:03,880 --> 00:35:06,640 Speaker 1: kind of comforting as people in journalism to know that 503 00:35:06,680 --> 00:35:11,120 Speaker 1: the issues that we struggle with, everyone who handles information 504 00:35:11,160 --> 00:35:13,560 Speaker 1: seems to be struggling with. And it's difficult because, as 505 00:35:13,560 --> 00:35:17,239 Speaker 1: Steven said, information is the lifeblood of the industry, and 506 00:35:17,320 --> 00:35:21,440 Speaker 1: yet it seems so difficult to monetize that absolutely, and 507 00:35:21,480 --> 00:35:25,640 Speaker 1: that tension between wanting to have you know, as you said, 508 00:35:25,680 --> 00:35:28,400 Speaker 1: at the very end, information loses its value very fast. 509 00:35:28,760 --> 00:35:31,760 Speaker 1: So the tension between wanting something out there but also 510 00:35:31,840 --> 00:35:35,680 Speaker 1: wanting to maintain that exclusivity is something interesting to hear about. 511 00:35:36,040 --> 00:35:39,160 Speaker 1: We were talking before, but in my career in the beginning, 512 00:35:39,200 --> 00:35:42,200 Speaker 1: when we would write about sell side research, often the 513 00:35:42,239 --> 00:35:45,520 Speaker 1: banks would complain that like, oh, you didn't have the 514 00:35:45,680 --> 00:35:48,120 Speaker 1: right to write about that, you weren't authorized to see that. 515 00:35:48,360 --> 00:35:50,319 Speaker 1: And then two years later, those same people at the 516 00:35:50,320 --> 00:35:52,200 Speaker 1: banks with like reach out in the day, why don't 517 00:35:52,200 --> 00:35:56,839 Speaker 1: you ever write about our research anymore. So everyone is 518 00:35:56,880 --> 00:35:59,560 Speaker 1: all navigating the same back and forth tensions. I don't 519 00:35:59,560 --> 00:36:03,000 Speaker 1: think there's some clear answer about what the correct model 520 00:36:03,160 --> 00:36:05,799 Speaker 1: is and how much to keep internal, how much to 521 00:36:05,840 --> 00:36:09,480 Speaker 1: publicize so forth. Yeah, exactly right. The same issues that 522 00:36:09,560 --> 00:36:11,919 Speaker 1: we kind of struggle with, others are struggling with. Two 523 00:36:12,360 --> 00:36:15,880 Speaker 1: all right, shall we call it a day information sharing. 524 00:36:16,000 --> 00:36:18,719 Speaker 1: Let's let's leave at that, and uh, next time we'll 525 00:36:18,760 --> 00:36:20,920 Speaker 1: be uh next episode, we'll be back to you on 526 00:36:21,040 --> 00:36:25,640 Speaker 1: your on your couch or on your floor. All right, Well, 527 00:36:25,640 --> 00:36:28,760 Speaker 1: this has been a special edition of the aw Thoughts podcast. 528 00:36:28,840 --> 00:36:31,880 Speaker 1: I'm Tracy Alloway. You can follow me at Tracy Alloway 529 00:36:31,960 --> 00:36:34,640 Speaker 1: on Twitter, and you can follow me on Twitter at 530 00:36:34,680 --> 00:36:38,240 Speaker 1: the Stalwart and follow our producer Sarah Patterson on Twitter 531 00:36:38,680 --> 00:36:41,600 Speaker 1: at Sarah patt With two teas. Thanks for listening.