1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,680 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. So 7 00:00:31,760 --> 00:00:35,760 Speaker 1: it turns out that pumping your fist and screaming yeah 8 00:00:36,080 --> 00:00:39,519 Speaker 1: is big business, in fact, somewhere in the order of 9 00:00:39,640 --> 00:00:43,040 Speaker 1: two billion dollars. Here to talk about the cheerleading business 10 00:00:43,440 --> 00:00:46,280 Speaker 1: is Jeff Webb, founder and chairman of Varsity Spirit, which 11 00:00:46,320 --> 00:00:50,400 Speaker 1: is based in Memphis, Tennessee. And Jeff, you know, I'm interested. 12 00:00:50,440 --> 00:00:54,040 Speaker 1: When I think about cheerleading, I think about very much 13 00:00:54,080 --> 00:00:59,200 Speaker 1: an all American type of vision with girls and pigtails 14 00:00:59,240 --> 00:01:02,600 Speaker 1: and pumping their pom poms and wearing those pleated skirts 15 00:01:02,640 --> 00:01:05,399 Speaker 1: and specific sneakers, which I'm sure all costs money, but 16 00:01:05,440 --> 00:01:10,800 Speaker 1: your and I toward a bigger business overseas. So where 17 00:01:10,840 --> 00:01:13,880 Speaker 1: is the cheerleading that's going on outside of the US. So, well, 18 00:01:13,920 --> 00:01:17,520 Speaker 1: it's still in its infancy, but it is definitely a 19 00:01:17,560 --> 00:01:22,080 Speaker 1: gaining momentum. We we actually have an international federation that 20 00:01:22,280 --> 00:01:25,319 Speaker 1: is just recently recognized by the International Olympic Committee, which 21 00:01:25,400 --> 00:01:28,600 Speaker 1: kind of gives you validation as an emerging sport or 22 00:01:29,000 --> 00:01:33,000 Speaker 1: sport that's actually arrived. And we have a hundred and 23 00:01:33,000 --> 00:01:35,479 Speaker 1: ten countries in that federation, so it gives you an 24 00:01:35,480 --> 00:01:38,440 Speaker 1: idea of of where true how much activity there is 25 00:01:38,680 --> 00:01:42,360 Speaker 1: on a broad basis. Now as far as it being deep, uh, 26 00:01:42,400 --> 00:01:44,640 Speaker 1: there's no doubt that the you know, the U s 27 00:01:44,720 --> 00:01:47,280 Speaker 1: has because of its traditions children, has been around the 28 00:01:47,360 --> 00:01:50,040 Speaker 1: US for over a hundred years at school gyms and 29 00:01:50,080 --> 00:01:52,280 Speaker 1: so on. So we have a we have a lot 30 00:01:52,360 --> 00:01:55,600 Speaker 1: more people here involved in cheerleading, but it is beginning 31 00:01:55,640 --> 00:01:57,560 Speaker 1: all over the world and a lot of that just 32 00:01:57,600 --> 00:01:59,400 Speaker 1: has to do with the exposure we've gotten with our 33 00:01:59,760 --> 00:02:03,560 Speaker 1: now sational championships and world championships and uh saw some 34 00:02:03,600 --> 00:02:06,640 Speaker 1: of the educational programs we've been involved in overseas. But 35 00:02:06,680 --> 00:02:09,440 Speaker 1: it's a it's an exciting time. Cheff. I understand that 36 00:02:09,480 --> 00:02:13,040 Speaker 1: you were a yell leader at the University of Oklahoma. 37 00:02:13,200 --> 00:02:17,399 Speaker 1: What is a yell leader? And did your families say, gee, 38 00:02:17,480 --> 00:02:19,440 Speaker 1: you know, law school would have been a good idea, 39 00:02:19,960 --> 00:02:22,919 Speaker 1: but you founded this company. Tell us how it all happened. Yeah, well, yeah, 40 00:02:23,000 --> 00:02:25,160 Speaker 1: later it's the term that was used in in the 41 00:02:25,240 --> 00:02:29,920 Speaker 1: day for the men who were involved in interiorleading. And 42 00:02:30,280 --> 00:02:33,200 Speaker 1: as far as the company itself, yeah, I was gonna 43 00:02:33,240 --> 00:02:34,680 Speaker 1: go to law school. As a matter of fact, that 44 00:02:34,760 --> 00:02:37,480 Speaker 1: was that was the that was the plan after after 45 00:02:37,560 --> 00:02:41,440 Speaker 1: college and um, I've been I've been working uh three 46 00:02:41,560 --> 00:02:43,480 Speaker 1: or four jobs to get through school, and gentleman who 47 00:02:43,560 --> 00:02:46,240 Speaker 1: had a company that did cheerleading camps and clinics, asked 48 00:02:46,280 --> 00:02:47,920 Speaker 1: me to come work for him for a year to 49 00:02:47,919 --> 00:02:50,799 Speaker 1: make money to go to law school. Did that kind 50 00:02:50,800 --> 00:02:52,959 Speaker 1: of came up with different concepts, decided to leave there, 51 00:02:53,320 --> 00:02:55,959 Speaker 1: start my company, and the rest is history, I guess. Well, 52 00:02:56,480 --> 00:02:59,000 Speaker 1: I'm glad you mentioned the camps and the training because 53 00:02:59,040 --> 00:03:01,280 Speaker 1: I wanted to just help people a little bit the 54 00:03:01,360 --> 00:03:03,960 Speaker 1: scale of what is going on, how many people, how 55 00:03:03,960 --> 00:03:06,760 Speaker 1: many camps, and maybe just enlightened everybody that is not 56 00:03:06,880 --> 00:03:10,480 Speaker 1: part of this business. Well, the actually started with the camps, 57 00:03:10,480 --> 00:03:13,240 Speaker 1: and of course now we also have a uniform business 58 00:03:13,280 --> 00:03:17,480 Speaker 1: and also the competitions that we do um throughout the country. 59 00:03:17,520 --> 00:03:20,720 Speaker 1: But the camps themselves are are different than other sports 60 00:03:20,800 --> 00:03:23,200 Speaker 1: camps that are normally for individuals. These are for teams. 61 00:03:23,600 --> 00:03:27,040 Speaker 1: Teams are already selected high school cheerleaders, college cheerleading teams. 62 00:03:27,360 --> 00:03:29,280 Speaker 1: There four days and three nights, usually done on a 63 00:03:29,360 --> 00:03:33,360 Speaker 1: college campus. We have about three hundred thousand students at 64 00:03:33,360 --> 00:03:37,120 Speaker 1: our camps every summer. We're the largest especially camp operator 65 00:03:37,120 --> 00:03:39,640 Speaker 1: of any kind in the world. Jeff, how much has 66 00:03:39,920 --> 00:03:44,120 Speaker 1: cheerleading as a sport moved away from the sidelines of 67 00:03:44,240 --> 00:03:49,040 Speaker 1: sports games and to its own discipline that is completely 68 00:03:49,040 --> 00:03:54,240 Speaker 1: independent of a football game. Well, it's it's interesting there. 69 00:03:54,400 --> 00:03:57,880 Speaker 1: They're now different what we call disciplines of cheer the 70 00:03:57,920 --> 00:04:01,080 Speaker 1: traditional cheerleading that you see at the football games and 71 00:04:01,120 --> 00:04:04,600 Speaker 1: basketball games. It's still it's the largest part of cheerleading 72 00:04:04,640 --> 00:04:07,160 Speaker 1: and we don't want to do anything to take away 73 00:04:07,160 --> 00:04:10,080 Speaker 1: from that. When when when I started the company, the 74 00:04:10,120 --> 00:04:13,040 Speaker 1: idea was to take the traditional leadership role on the 75 00:04:13,080 --> 00:04:15,680 Speaker 1: sidelines at pep rallies and you know, in the in 76 00:04:15,720 --> 00:04:18,680 Speaker 1: the parking lots before the game, and add entertainment and 77 00:04:18,720 --> 00:04:22,520 Speaker 1: athleticism and just kind of modernize it. And I don't 78 00:04:22,520 --> 00:04:26,120 Speaker 1: think any of us realized the the how powerful that 79 00:04:26,120 --> 00:04:29,760 Speaker 1: that combination would be. So for us, it's we look 80 00:04:29,800 --> 00:04:32,560 Speaker 1: as all the all the the actual sport aspect is 81 00:04:32,600 --> 00:04:35,960 Speaker 1: being additive to leadership. We think, you know, college cheerleading, 82 00:04:36,000 --> 00:04:39,160 Speaker 1: high school cheerleading are very important and we don't want 83 00:04:39,160 --> 00:04:41,560 Speaker 1: to do anything take away from the leadership. Having said that, 84 00:04:41,880 --> 00:04:45,320 Speaker 1: there there's also an actual pure sport play that's exists 85 00:04:45,320 --> 00:04:47,720 Speaker 1: here in the US and overseas. Yeah, what I think 86 00:04:47,720 --> 00:04:50,359 Speaker 1: about cheerleading now, I mean I have two sons, and 87 00:04:50,400 --> 00:04:52,240 Speaker 1: if one of them went into cheerleading, I think I'd 88 00:04:52,279 --> 00:04:55,680 Speaker 1: be frightened because I see some of the flips that 89 00:04:55,720 --> 00:04:58,920 Speaker 1: they'll do and come down. I mean, it's it's it's 90 00:04:59,000 --> 00:05:02,200 Speaker 1: really a gymnastic type of endeavor, correct, whether there are 91 00:05:02,200 --> 00:05:05,400 Speaker 1: a lot of acrobatics involved in the entertainment aspect of it. 92 00:05:05,839 --> 00:05:08,039 Speaker 1: And one of the things that has allowed us to 93 00:05:08,400 --> 00:05:11,160 Speaker 1: expand like we have is we've developed all the techniques 94 00:05:11,600 --> 00:05:14,679 Speaker 1: and the progressions of skills to actually do those stunts 95 00:05:14,760 --> 00:05:17,359 Speaker 1: is what they're called, in in a safer way as possible. 96 00:05:17,400 --> 00:05:19,400 Speaker 1: I mean, there was some risk and there were some injuries, 97 00:05:19,400 --> 00:05:22,279 Speaker 1: and one injury is too many, but we've been pretty 98 00:05:22,320 --> 00:05:24,720 Speaker 1: successful in in mapping this out to where it can 99 00:05:24,760 --> 00:05:29,560 Speaker 1: be done in controlled way. Uh your company have they 100 00:05:29,600 --> 00:05:32,960 Speaker 1: have you attracted any interest from by from from buyers 101 00:05:33,040 --> 00:05:35,880 Speaker 1: private equity firms. Well, we're actually we were owned by 102 00:05:35,920 --> 00:05:38,960 Speaker 1: private equity primarily right now. We've been through different types 103 00:05:39,000 --> 00:05:44,400 Speaker 1: of iterations. UM started in proprietor individual proprietorship. We went 104 00:05:44,440 --> 00:05:46,359 Speaker 1: through venture capital. We are a public company for a 105 00:05:46,360 --> 00:05:49,680 Speaker 1: while and have and now with private equity a Charles 106 00:05:49,680 --> 00:05:53,080 Speaker 1: Bank based in Banks in Boston. And we also our 107 00:05:53,120 --> 00:05:55,760 Speaker 1: companies has transformed itself and that we we have our 108 00:05:56,040 --> 00:06:00,280 Speaker 1: traditional cheerleading and school spirit division or un which is 109 00:06:00,360 --> 00:06:03,839 Speaker 1: Varsity Spirit, but we also have a varsity brands has 110 00:06:03,839 --> 00:06:07,000 Speaker 1: a sporting goods sports uniform division called bs IN Sports. 111 00:06:07,560 --> 00:06:10,960 Speaker 1: And also we have a graduation company called her Jones 112 00:06:11,000 --> 00:06:14,080 Speaker 1: which is class rings and so on, and um, you 113 00:06:14,080 --> 00:06:17,479 Speaker 1: know the company itself. The CEO of the companies Adam Blumenfeld, 114 00:06:17,800 --> 00:06:20,080 Speaker 1: who came up through the bs N ranks, and uh 115 00:06:20,400 --> 00:06:22,320 Speaker 1: he and I and our entire management team along with 116 00:06:22,400 --> 00:06:24,800 Speaker 1: Charles Bank work to take the company as far as 117 00:06:24,839 --> 00:06:26,479 Speaker 1: we can take it. I want to thank you for 118 00:06:26,560 --> 00:06:29,520 Speaker 1: coming in and maybe off off Michael give us that 119 00:06:29,600 --> 00:06:33,719 Speaker 1: Oklahoma University of Oklahoma, yell call well done, Bloomer Sooner, 120 00:06:34,279 --> 00:06:36,920 Speaker 1: well done, very good. Jeff Webb is the founder and 121 00:06:37,080 --> 00:06:51,480 Speaker 1: chairman of Varsity Spirit. They are based in Memphis. So 122 00:06:51,560 --> 00:06:56,080 Speaker 1: does the world really need another travel website? Well, apparently 123 00:06:56,120 --> 00:06:58,040 Speaker 1: it does, and here to tell us more about it 124 00:06:58,120 --> 00:07:01,080 Speaker 1: is Bob guccion Jr. He is the founder of wonder 125 00:07:01,200 --> 00:07:05,200 Speaker 1: Lust travel dot com. He's also the founder of Spin magazine, 126 00:07:05,240 --> 00:07:08,880 Speaker 1: Gear and Discover Media. Nice to have you with us, 127 00:07:08,880 --> 00:07:12,560 Speaker 1: Thanks for coming into the studio. Than how do you 128 00:07:12,600 --> 00:07:16,840 Speaker 1: move on from Spin which was music, right, a Gear 129 00:07:17,120 --> 00:07:21,200 Speaker 1: which is gadgets and I believe men's lifestyle and lifestyle, 130 00:07:21,320 --> 00:07:24,160 Speaker 1: and then Discovery Media, which is kind of science. Right, 131 00:07:24,360 --> 00:07:27,000 Speaker 1: it was a science magazine. So how does that morph 132 00:07:27,200 --> 00:07:32,360 Speaker 1: into this next iteration of Bob guccion Jr. Well, actually 133 00:07:32,400 --> 00:07:34,360 Speaker 1: it does. You know know that it had to by 134 00:07:34,400 --> 00:07:38,880 Speaker 1: the way, um as a media editor and businessman, you know, 135 00:07:38,880 --> 00:07:40,960 Speaker 1: I could have just simply said this is a great category. 136 00:07:41,000 --> 00:07:43,280 Speaker 1: But it has because it's really got the same kind 137 00:07:43,320 --> 00:07:49,040 Speaker 1: of uh vain of overwhelming curiosity. You know, when I 138 00:07:49,080 --> 00:07:52,880 Speaker 1: went into the music magazine business always said it isn't 139 00:07:52,880 --> 00:07:55,520 Speaker 1: really a music magazine. It's a magazine for young people 140 00:07:55,840 --> 00:07:59,320 Speaker 1: crossing the threshold between adolescents and young adulthood. It was 141 00:07:59,360 --> 00:08:01,240 Speaker 1: much more than music magazine. It is much more holistic. 142 00:08:01,480 --> 00:08:03,640 Speaker 1: And the same with Wonderless. It's not just a magazine 143 00:08:03,640 --> 00:08:06,640 Speaker 1: about nice places to go. It's about the experience of 144 00:08:06,680 --> 00:08:11,120 Speaker 1: traveling UM, the experiences you can expect, the experiences you 145 00:08:11,120 --> 00:08:17,000 Speaker 1: have had, UM, the sort of awkwardness of of of 146 00:08:17,000 --> 00:08:20,440 Speaker 1: Often travel is very awkward. That's part of the liberating 147 00:08:20,640 --> 00:08:22,560 Speaker 1: beauty of it, you know. I say. The one thing 148 00:08:22,560 --> 00:08:25,040 Speaker 1: about what we travel is always going to happen is 149 00:08:25,080 --> 00:08:27,240 Speaker 1: we are always going to surrender our sense of control. 150 00:08:27,360 --> 00:08:29,520 Speaker 1: It was always a lousory anyway, but we think we 151 00:08:29,560 --> 00:08:33,400 Speaker 1: have a sense of control, and you surrender it um, 152 00:08:33,480 --> 00:08:36,360 Speaker 1: and that is what allows you to take in to 153 00:08:36,440 --> 00:08:39,120 Speaker 1: absorb everything. You're not trying to pick and choose. You're 154 00:08:39,120 --> 00:08:42,000 Speaker 1: actually just absorbing everything because you're like an infant dependent 155 00:08:42,080 --> 00:08:44,439 Speaker 1: on the largess of the people around you. So, Bob, 156 00:08:44,880 --> 00:08:48,480 Speaker 1: the website wonder lust travel dot com launched today and 157 00:08:48,480 --> 00:08:50,760 Speaker 1: I'm looking at it right now, and there's a story 158 00:08:50,800 --> 00:08:53,800 Speaker 1: how to pack from Mars, which makes it really raises 159 00:08:53,800 --> 00:08:59,120 Speaker 1: a question for me. Who's your audience Mostly Martians? You know, 160 00:08:59,120 --> 00:09:01,959 Speaker 1: all the Martians out there, this is for you. Yeah, 161 00:09:02,000 --> 00:09:06,200 Speaker 1: It's the first site exclusively for people from Mars. Um, 162 00:09:06,240 --> 00:09:10,480 Speaker 1: you know this point that the audience question is. I 163 00:09:10,520 --> 00:09:14,120 Speaker 1: think we're looking at, you know, everybody who's smart and 164 00:09:14,160 --> 00:09:17,760 Speaker 1: curious and likes to travel. And I would imagine it's 165 00:09:17,800 --> 00:09:20,360 Speaker 1: going to fall more money as money yes, exactly as 166 00:09:20,360 --> 00:09:23,440 Speaker 1: I say, it's gonna fall more into the gen X 167 00:09:23,480 --> 00:09:26,440 Speaker 1: generation as matured, the baby booners who I am part 168 00:09:26,480 --> 00:09:29,079 Speaker 1: of a hopefully matured and the rest have I don't 169 00:09:29,080 --> 00:09:32,960 Speaker 1: know if I have, um and you know, slightly older millennial, 170 00:09:33,240 --> 00:09:36,600 Speaker 1: the older of the millennial world. But really, anybody's curious, 171 00:09:36,640 --> 00:09:37,840 Speaker 1: as you said, has a bit of money so they 172 00:09:37,840 --> 00:09:40,760 Speaker 1: can get on a plane. But um, I think curiosity 173 00:09:40,800 --> 00:09:42,319 Speaker 1: is the main thing that the had a pack for 174 00:09:42,400 --> 00:09:43,960 Speaker 1: Mars thing was a bit of a sort of joke. 175 00:09:44,280 --> 00:09:47,320 Speaker 1: Started out as a joke, it became a very serious article. Um, 176 00:09:47,360 --> 00:09:52,160 Speaker 1: because you know, our competitors, dearly beloved, the competitors who 177 00:09:52,240 --> 00:09:54,240 Speaker 1: I won't name, I don't want to anybody, but they 178 00:09:54,360 --> 00:09:56,719 Speaker 1: run articles as you may have seen, called how to 179 00:09:56,760 --> 00:10:00,360 Speaker 1: pack Well once is fine, but a hundred times, almost 180 00:10:00,360 --> 00:10:03,319 Speaker 1: two hundred times. These two publications we were actually in 181 00:10:03,360 --> 00:10:05,760 Speaker 1: the list all of them as links. And I just 182 00:10:05,760 --> 00:10:09,040 Speaker 1: just said, looked ugly, but it was it about two 183 00:10:09,120 --> 00:10:11,600 Speaker 1: hundred between videos and articles that they have done about 184 00:10:11,600 --> 00:10:13,480 Speaker 1: how to pack, and I thought, how you know, how 185 00:10:13,559 --> 00:10:15,840 Speaker 1: much is there to say? So I said, but however, 186 00:10:16,040 --> 00:10:18,439 Speaker 1: even they have not done how to pack for Mars. 187 00:10:18,679 --> 00:10:20,840 Speaker 1: And having had a science magazine, I was at NASA 188 00:10:21,080 --> 00:10:22,720 Speaker 1: on a couple of occasions, and I know that they 189 00:10:22,760 --> 00:10:27,080 Speaker 1: have an entire chunk of the entire organization dedicated to 190 00:10:27,120 --> 00:10:28,959 Speaker 1: this one question. How do you pack from ours? It's 191 00:10:29,040 --> 00:10:32,000 Speaker 1: not a small issue, you know, it's a six month flight, 192 00:10:32,040 --> 00:10:36,360 Speaker 1: it's thirty three plus million miles and only one tenth 193 00:10:36,480 --> 00:10:38,960 Speaker 1: of one percent of the entire weight of the spacecraft 194 00:10:39,559 --> 00:10:42,719 Speaker 1: is not fuel or rocket, so the rest of it, 195 00:10:42,960 --> 00:10:47,680 Speaker 1: everything else has to go in all your people scientific equipment. 196 00:10:48,000 --> 00:10:50,280 Speaker 1: So actually they're very strict about what you can take, 197 00:10:50,640 --> 00:10:52,600 Speaker 1: and they have number the heavy down to fifteen pairs 198 00:10:52,640 --> 00:10:55,160 Speaker 1: of clothing, not not sixteen fifteen And they want you 199 00:10:55,240 --> 00:10:57,360 Speaker 1: to bring a book. There was a suggestion, I said, 200 00:10:57,600 --> 00:11:00,040 Speaker 1: to cheap, bring two books, you know, but to a 201 00:11:00,040 --> 00:11:01,559 Speaker 1: fun thingur next one is how to pack for prison, 202 00:11:02,120 --> 00:11:03,880 Speaker 1: because by the way, you can there are things you 203 00:11:03,880 --> 00:11:06,240 Speaker 1: can bring to prison. And after that we can do 204 00:11:06,240 --> 00:11:07,920 Speaker 1: how to pack for the Apocalypse, which by the way, 205 00:11:07,960 --> 00:11:10,400 Speaker 1: should be self defining as the last of the articles. 206 00:11:11,840 --> 00:11:13,280 Speaker 1: What do you let us know when you're going to 207 00:11:13,360 --> 00:11:17,520 Speaker 1: publish that up, that one that's the ultimate trip, you know, Yeah, 208 00:11:17,559 --> 00:11:19,640 Speaker 1: you know, I want you to just offer some examples, 209 00:11:19,720 --> 00:11:22,480 Speaker 1: because that way it maybe crystallizes what you're doing here. 210 00:11:22,520 --> 00:11:26,680 Speaker 1: And I noticed, for example, you've got something papermaking in Korea. 211 00:11:26,840 --> 00:11:30,440 Speaker 1: You also have a recommendation for restaurants in Italy that 212 00:11:30,480 --> 00:11:32,680 Speaker 1: are a little bit different than perhaps the run of 213 00:11:32,720 --> 00:11:35,800 Speaker 1: the mill reviews. Just to give us some examples. Yeah, well, 214 00:11:36,240 --> 00:11:38,320 Speaker 1: the one you're referring to, Hanji, it was a video 215 00:11:38,360 --> 00:11:41,679 Speaker 1: made by a very young and very very talented Korean filmmaker. 216 00:11:42,280 --> 00:11:46,439 Speaker 1: We discovered in Oxford, Mississippi, where I taught for a year, 217 00:11:46,559 --> 00:11:48,680 Speaker 1: so I have a lot of friends and relationships there now. 218 00:11:49,080 --> 00:11:53,439 Speaker 1: So uh. He did this beautiful piece about how to 219 00:11:53,480 --> 00:11:56,360 Speaker 1: make paper, the ancient art of papermaking, which I thought 220 00:11:56,440 --> 00:11:58,920 Speaker 1: was wonderfully ironic given that we're in the digital age, 221 00:11:58,920 --> 00:12:00,920 Speaker 1: and and the piece is about how this is really 222 00:12:00,960 --> 00:12:02,920 Speaker 1: kind of a spring art but just a beautiful piece 223 00:12:02,920 --> 00:12:05,720 Speaker 1: of filmmaking, and it's cultural and you're there, you know, 224 00:12:05,800 --> 00:12:08,880 Speaker 1: every one of my pieces let's say my hours. Everyone 225 00:12:08,880 --> 00:12:12,360 Speaker 1: who wandered us to pieces has to bring you there, 226 00:12:12,960 --> 00:12:14,920 Speaker 1: and that's not just by saying this is a great 227 00:12:14,920 --> 00:12:17,400 Speaker 1: hotel room. We do that too with the Rome Hotel Guide. 228 00:12:17,480 --> 00:12:18,760 Speaker 1: If you want to know where to stay in Rome, 229 00:12:18,880 --> 00:12:21,560 Speaker 1: check our guide out, because we went through all hotels 230 00:12:21,559 --> 00:12:23,440 Speaker 1: and decided these are the best ones and most interesting 231 00:12:23,760 --> 00:12:25,760 Speaker 1: from a mixture of personal experience and research. You know, 232 00:12:25,960 --> 00:12:29,319 Speaker 1: my own experience was very good in that respect. Um 233 00:12:29,400 --> 00:12:31,920 Speaker 1: So another contemple, the one about the restaurants. I think 234 00:12:31,920 --> 00:12:33,840 Speaker 1: you're probably talking about ten places to eat before you 235 00:12:33,880 --> 00:12:36,960 Speaker 1: die and then you can die, and you know that's 236 00:12:36,960 --> 00:12:39,400 Speaker 1: I'm glad you brought it up, because obviously there are 237 00:12:39,640 --> 00:12:42,760 Speaker 1: ten million places you could eat that are gonna be 238 00:12:42,800 --> 00:12:45,520 Speaker 1: interesting on this planet. But I just wanted to pick 239 00:12:45,600 --> 00:12:48,760 Speaker 1: ten places, not all of them restaurants. One of them 240 00:12:48,800 --> 00:12:53,240 Speaker 1: is a Vietnamese barge that my main food writer guy 241 00:12:53,280 --> 00:12:58,240 Speaker 1: called Chris John's as a superb travel writer. He uhs 242 00:12:58,240 --> 00:13:00,000 Speaker 1: best meal ever had in his life, best meal anywhere 243 00:13:00,040 --> 00:13:02,320 Speaker 1: about it? For us? We put that in. I put 244 00:13:02,320 --> 00:13:08,040 Speaker 1: in the Mondo X place before in a drug rehab 245 00:13:08,679 --> 00:13:12,520 Speaker 1: and it's a drug rehab center in Italy. It also 246 00:13:12,559 --> 00:13:15,720 Speaker 1: happens to have amazing food. Yeah, well, world class restaurant, 247 00:13:15,720 --> 00:13:19,880 Speaker 1: world class restaurant and autombiotics. Bob, you know you have 248 00:13:20,320 --> 00:13:25,080 Speaker 1: a very long history in magazines. Your father founded Penthouse, 249 00:13:25,400 --> 00:13:28,640 Speaker 1: which also is into experiences of different natures. Um. But 250 00:13:28,840 --> 00:13:32,319 Speaker 1: I have to wonder, and you talked about how the 251 00:13:32,360 --> 00:13:35,800 Speaker 1: irony of papermaking in a digital era, in a digital 252 00:13:35,920 --> 00:13:39,880 Speaker 1: era where the barrier to entry in magazines is so low, 253 00:13:40,760 --> 00:13:43,319 Speaker 1: what gives you confidence that this will be successful? Oh? 254 00:13:43,400 --> 00:13:50,080 Speaker 1: I think a large doses of stupidity. But alcohol helps well. 255 00:13:50,080 --> 00:13:54,160 Speaker 1: But people have, people have, you know, obviously an immense 256 00:13:54,240 --> 00:13:58,160 Speaker 1: appetite for stupidity. I'm just wondering with my stupid No 257 00:13:58,240 --> 00:14:00,360 Speaker 1: not there is no God, no, no glare we cleared 258 00:14:00,360 --> 00:14:02,600 Speaker 1: that up? No? No, I mean I think I was joking. 259 00:14:02,600 --> 00:14:06,160 Speaker 1: But in one respect, you do have to be dumb 260 00:14:06,240 --> 00:14:09,600 Speaker 1: enough to believe that it will work. And I've done 261 00:14:09,600 --> 00:14:11,480 Speaker 1: that my entire career. You know, I started it's been magazine. 262 00:14:11,600 --> 00:14:13,960 Speaker 1: Literally did not know how to start a magazine. Um. 263 00:14:14,040 --> 00:14:15,679 Speaker 1: In fact, we got all of the pages together and 264 00:14:15,760 --> 00:14:17,240 Speaker 1: we all look at each others at what we do now, 265 00:14:17,240 --> 00:14:19,280 Speaker 1: and everybody I thought you knew. I I thought you knew, 266 00:14:19,520 --> 00:14:20,880 Speaker 1: So I called a friend of mine up come and 267 00:14:20,880 --> 00:14:23,640 Speaker 1: tell me what we did next, and she christens us 268 00:14:23,680 --> 00:14:26,040 Speaker 1: the Land of the Lost Boys. Because literally none of 269 00:14:26,080 --> 00:14:28,760 Speaker 1: us knew then we got the magazine. Now I think, 270 00:14:28,800 --> 00:14:31,800 Speaker 1: I think it's a beautiful, healthy dosage of innocence and 271 00:14:31,880 --> 00:14:35,000 Speaker 1: naivet naive he made inscence is very helpful in these 272 00:14:35,000 --> 00:14:37,360 Speaker 1: times because it keeps you focused on like you might 273 00:14:37,400 --> 00:14:39,360 Speaker 1: as well do the right thing, the thing you had 274 00:14:39,400 --> 00:14:42,520 Speaker 1: in mind, because you don't know how to do it otherwise. 275 00:14:42,840 --> 00:14:44,200 Speaker 1: And the only thing I know how to do is 276 00:14:44,200 --> 00:14:47,120 Speaker 1: tell a good story occasionally, well hopefully a lot more 277 00:14:47,120 --> 00:14:50,880 Speaker 1: and occasionally, and all stories have to be a human beings, 278 00:14:50,880 --> 00:14:53,800 Speaker 1: so that that's a that's a thing. Bob Guccioni Jr. 279 00:14:53,840 --> 00:14:56,560 Speaker 1: Thank you so much for joining us. Bob gucci Founder 280 00:14:56,600 --> 00:14:59,960 Speaker 1: of wonder Lust wonder Lust travel dot com, which is 281 00:15:00,000 --> 00:15:14,360 Speaker 1: based in New York and launched today. Well, we've heard 282 00:15:14,360 --> 00:15:20,560 Speaker 1: a lot about consolidation and partnerships within the airline industry, 283 00:15:21,200 --> 00:15:24,240 Speaker 1: and Avianca Holdings is not immune to that. We're gonna 284 00:15:24,240 --> 00:15:26,840 Speaker 1: be speaking now with someone who knows all about the 285 00:15:26,920 --> 00:15:30,400 Speaker 1: latest partnership agreements, and that is Ernan Rincon, who is 286 00:15:30,440 --> 00:15:34,040 Speaker 1: the chief executive officer of Avianca Holdings, which is based 287 00:15:34,080 --> 00:15:37,320 Speaker 1: in Bogota, Colombia. Her Nan, thank you so much for 288 00:15:37,400 --> 00:15:41,520 Speaker 1: joining us, and I know that Avianca has talked about 289 00:15:41,600 --> 00:15:46,360 Speaker 1: some kind of partnership with content with United Correct where 290 00:15:46,360 --> 00:15:49,240 Speaker 1: what stage is that in right now? Well, thank you 291 00:15:49,280 --> 00:15:52,640 Speaker 1: for having me really pleasure to be here. Last year 292 00:15:53,400 --> 00:15:57,720 Speaker 1: we began to search for a commercial strategic partner that 293 00:15:57,760 --> 00:16:01,040 Speaker 1: would allow Avianca, who serves Let's in America very well, 294 00:16:01,080 --> 00:16:03,720 Speaker 1: to connect well with the United States and North America, 295 00:16:04,200 --> 00:16:07,800 Speaker 1: and after a long process, we chose United as our 296 00:16:07,880 --> 00:16:11,760 Speaker 1: best choice. Many reasons for that. First of all, United 297 00:16:11,880 --> 00:16:15,960 Speaker 1: an Avianca already are part of the State Alliance and 298 00:16:16,040 --> 00:16:19,000 Speaker 1: that provided a very good foundation for us to work together. 299 00:16:19,520 --> 00:16:22,080 Speaker 1: And then we found out that we have similar approaches 300 00:16:22,680 --> 00:16:25,720 Speaker 1: and very complimentary routes. And we're trying to do right 301 00:16:25,720 --> 00:16:29,040 Speaker 1: now is come to an agreement so that our passengers 302 00:16:29,080 --> 00:16:33,520 Speaker 1: from Colombia, South America, Brazil into the United States or 303 00:16:33,600 --> 00:16:35,960 Speaker 1: from the United States into Latin America would have a 304 00:16:35,960 --> 00:16:39,440 Speaker 1: seamless experience either with United within the United States and 305 00:16:39,440 --> 00:16:43,160 Speaker 1: then connect with a Bianca in Latin America or vice versa. 306 00:16:43,520 --> 00:16:45,840 Speaker 1: We make great progress in that negotiation. We meet on 307 00:16:45,880 --> 00:16:48,800 Speaker 1: a weekly basis. We have made great progress and we 308 00:16:48,840 --> 00:16:53,080 Speaker 1: believe we're aspiring to close the agreement in this year. Now, 309 00:16:53,200 --> 00:16:55,480 Speaker 1: you also have something coming up this year and that 310 00:16:55,680 --> 00:16:58,160 Speaker 1: is a court day. I believe it's on the nineteenth 311 00:16:58,160 --> 00:17:00,960 Speaker 1: of September, and I'm wondering if you could just explain 312 00:17:01,320 --> 00:17:04,399 Speaker 1: how this all happened, that you're ending up in a 313 00:17:04,400 --> 00:17:07,440 Speaker 1: court case and in a lawsuit which I believe it's 314 00:17:07,440 --> 00:17:10,359 Speaker 1: your second largest shareholder. That is correct. King's Land is 315 00:17:10,400 --> 00:17:13,360 Speaker 1: the company that file is sued against A Yanka. They 316 00:17:13,400 --> 00:17:17,760 Speaker 1: finally suited against a Bianca United UH Synergy, which is 317 00:17:17,800 --> 00:17:20,119 Speaker 1: the parent company of A Yanka and the from of 318 00:17:20,200 --> 00:17:25,000 Speaker 1: his brothers. We believe that the slaw suit has absolutely 319 00:17:25,040 --> 00:17:27,679 Speaker 1: no merit. As a matter of fact, the judge in 320 00:17:27,760 --> 00:17:32,439 Speaker 1: the state of New York UH ruled in our favor 321 00:17:32,560 --> 00:17:36,560 Speaker 1: the first two instances, and now we have, as you 322 00:17:36,600 --> 00:17:40,560 Speaker 1: clearly said on September nineteen hearing. The hearing is because 323 00:17:40,600 --> 00:17:44,280 Speaker 1: we file for dismissal of the case because there is 324 00:17:44,280 --> 00:17:47,080 Speaker 1: no merit. We're looking forward to having that conversation with 325 00:17:47,119 --> 00:17:49,919 Speaker 1: the judge and we are optimistic that he will judge 326 00:17:50,400 --> 00:17:53,480 Speaker 1: he will rule against in our favor. So you're somewhat 327 00:17:53,520 --> 00:17:57,840 Speaker 1: new to the airline industry. You joined AVIANCA a little 328 00:17:57,840 --> 00:18:02,080 Speaker 1: bit more than a year ago. You're obviously Microsoft Latin America, 329 00:18:02,160 --> 00:18:06,480 Speaker 1: the chief executive officer of that. How is your opinion 330 00:18:07,640 --> 00:18:11,960 Speaker 1: been changed about the airline industry since joining a banca 331 00:18:12,119 --> 00:18:16,639 Speaker 1: and what were you most surprised to learn regarding the 332 00:18:16,720 --> 00:18:19,359 Speaker 1: challenges of this industry. That's a great question, and I 333 00:18:19,400 --> 00:18:21,920 Speaker 1: can give you an answer for hours, but let's let 334 00:18:21,920 --> 00:18:26,600 Speaker 1: me say the following. The number one qualification that I 335 00:18:26,680 --> 00:18:30,320 Speaker 1: had to be considered for CEO of AVIANCA is that 336 00:18:30,359 --> 00:18:34,600 Speaker 1: I have six point five million miles with other airlines, 337 00:18:34,920 --> 00:18:36,639 Speaker 1: So you've You've had a lot of experience in the 338 00:18:36,680 --> 00:18:40,359 Speaker 1: passenger seat, all right there exactly. I have been left 339 00:18:40,400 --> 00:18:43,560 Speaker 1: in airport for three days. I have been given royal 340 00:18:43,560 --> 00:18:46,720 Speaker 1: treatment by other airlines, so I know all the experiences 341 00:18:46,760 --> 00:18:50,639 Speaker 1: that that a passenger can have. But what I'm bringing 342 00:18:50,720 --> 00:18:54,360 Speaker 1: to a YANKA is two things. Number One, the digital 343 00:18:54,400 --> 00:18:59,360 Speaker 1: and information technology background. For many years, fourteen years from Microsoft, 344 00:18:59,800 --> 00:19:04,560 Speaker 1: I help companies embraced technology, change their business model and 345 00:19:04,600 --> 00:19:07,720 Speaker 1: embrace digital. And that's what we're gonna do with Avianca. 346 00:19:08,240 --> 00:19:13,520 Speaker 1: We are transforming Avianca into a digital company that flies aircraft, 347 00:19:13,880 --> 00:19:16,359 Speaker 1: and at the same time, we're building one of the 348 00:19:16,400 --> 00:19:21,160 Speaker 1: top two one of the top two airlines Latin American 349 00:19:21,280 --> 00:19:25,120 Speaker 1: Why serving the whole continent. I love that everybody wants 350 00:19:25,119 --> 00:19:27,920 Speaker 1: to be a tech company. Even airlines are saying We're 351 00:19:27,920 --> 00:19:30,560 Speaker 1: going to be a tech company that also flies planes. 352 00:19:30,720 --> 00:19:32,800 Speaker 1: But I'm wondering, you know, what is the biggest challenge 353 00:19:32,840 --> 00:19:34,679 Speaker 1: to the business model going forward? I know that some 354 00:19:34,720 --> 00:19:39,840 Speaker 1: analysts have some pretty uh ambitious growth targets for Avianca. 355 00:19:39,920 --> 00:19:43,640 Speaker 1: What's the biggest challenge? The biggest challenge is to take 356 00:19:43,720 --> 00:19:48,160 Speaker 1: at ninety seven year old company. Avianca is the oldest 357 00:19:48,400 --> 00:19:51,920 Speaker 1: erline continuously flying in the world, not in an America, 358 00:19:51,920 --> 00:19:54,960 Speaker 1: in the world, taking that rich culture that was not 359 00:19:55,080 --> 00:19:58,000 Speaker 1: digital and transforming into a digital company. What do we 360 00:19:58,040 --> 00:20:00,520 Speaker 1: mean by that? The number one thing that we need 361 00:20:00,560 --> 00:20:05,080 Speaker 1: to do is that every interaction between our passengers and 362 00:20:06,160 --> 00:20:09,760 Speaker 1: Avianca be fully digital at the moment that are we 363 00:20:09,840 --> 00:20:14,200 Speaker 1: identify eighteen points in which a passenger interacts with a Bianca. 364 00:20:14,720 --> 00:20:17,639 Speaker 1: One of those seven eighteen is when they're actually in 365 00:20:17,680 --> 00:20:21,119 Speaker 1: the aircraft. The other seventeen or elsewhere, when you make 366 00:20:21,160 --> 00:20:23,840 Speaker 1: a reservation, when you make a change, when you get 367 00:20:23,840 --> 00:20:26,120 Speaker 1: and check in, when you go to the counter, all 368 00:20:26,160 --> 00:20:29,200 Speaker 1: of that and we're beginning to transform that and we're 369 00:20:29,359 --> 00:20:32,359 Speaker 1: applying digital technology to each one of those eighteen points. 370 00:20:32,440 --> 00:20:36,320 Speaker 1: Let me give you an example. Millennials live in Facebook. 371 00:20:36,840 --> 00:20:39,560 Speaker 1: That's where their life is, and we realize that for 372 00:20:39,640 --> 00:20:42,760 Speaker 1: them to make a reservation, they would have to get 373 00:20:42,800 --> 00:20:46,560 Speaker 1: out of Facebook, go to a bianca and make a reservation. 374 00:20:46,640 --> 00:20:50,840 Speaker 1: We developed a digital assistant that is part of Facebook Messenger, 375 00:20:51,240 --> 00:20:54,200 Speaker 1: and within Facebook, you can make a reservation to fly 376 00:20:54,280 --> 00:20:56,600 Speaker 1: with a bianca. That's what we mean by digital I 377 00:20:56,680 --> 00:20:58,359 Speaker 1: just want to ask you one quick question. This is 378 00:20:58,359 --> 00:21:00,639 Speaker 1: about money. Are you going to be raised any money 379 00:21:00,680 --> 00:21:02,600 Speaker 1: this year? You're going to be doing a dead offering. 380 00:21:02,680 --> 00:21:07,200 Speaker 1: How are you going to proceed? We are planning a 381 00:21:07,240 --> 00:21:11,520 Speaker 1: capital increase of two million dollars. That capital increase has 382 00:21:11,600 --> 00:21:14,200 Speaker 1: been given the green light by the board of directors 383 00:21:14,200 --> 00:21:15,879 Speaker 1: and we're now in the process of doing all the 384 00:21:16,000 --> 00:21:19,600 Speaker 1: legal and financial to raise capital by the hundred million dollars. Well, John, 385 00:21:19,720 --> 00:21:21,520 Speaker 1: thank you very much for being with us. Her Nan 386 00:21:21,680 --> 00:21:25,639 Speaker 1: Rincon he is the chief executive of Avianca holdings. They 387 00:21:25,640 --> 00:21:28,159 Speaker 1: are also expanding in North America. Do you know that 388 00:21:28,160 --> 00:21:30,120 Speaker 1: they have a new route that goes from Boston home 389 00:21:30,119 --> 00:21:34,000 Speaker 1: to Bloomberg one O six one to Bogata. Thank you 390 00:21:34,080 --> 00:21:48,840 Speaker 1: very much. We hear a lot about active versus passive, 391 00:21:48,840 --> 00:21:53,560 Speaker 1: in particular about how money is absolutely pouring into exchange 392 00:21:53,560 --> 00:21:58,200 Speaker 1: traded funds that seek to just passively mimic broad indexes 393 00:21:58,280 --> 00:22:00,840 Speaker 1: and away from active fund But when it comes to 394 00:22:00,920 --> 00:22:03,879 Speaker 1: debt markets, the trend is starting to reverse, and this 395 00:22:04,000 --> 00:22:06,960 Speaker 1: I find really fascinating. Eric Balconis, who does incredible research 396 00:22:07,000 --> 00:22:09,640 Speaker 1: on this, joins us now. Eric Baltnis is senior et 397 00:22:09,760 --> 00:22:13,080 Speaker 1: F analyst for Bloomberg Intelligence and is a font of 398 00:22:13,240 --> 00:22:17,480 Speaker 1: incredible knowledge when it comes to all things fund related. Eric, 399 00:22:17,520 --> 00:22:19,520 Speaker 1: can you give us a sense of just how much 400 00:22:19,760 --> 00:22:25,239 Speaker 1: this trend of money toward passive out of active, how 401 00:22:25,320 --> 00:22:29,920 Speaker 1: much that's reversing within the bond universe? Right, So, when 402 00:22:29,920 --> 00:22:33,480 Speaker 1: we talk about active mutual fun outflows, uh, you look, 403 00:22:33,520 --> 00:22:36,159 Speaker 1: it's pretty bad. We're talking about seven hundred and fifty 404 00:22:36,160 --> 00:22:40,520 Speaker 1: billion over the last five years. However, almost all of 405 00:22:40,560 --> 00:22:42,920 Speaker 1: that is out of equity. That's the story. Nobody really 406 00:22:42,960 --> 00:22:46,440 Speaker 1: talks about UM active fixed income has held held its 407 00:22:46,440 --> 00:22:48,480 Speaker 1: own over the last couple of years. It had maybe 408 00:22:48,480 --> 00:22:51,800 Speaker 1: fifty billion out here and there, but it's cumulative flows 409 00:22:51,840 --> 00:22:54,159 Speaker 1: over the last four years are in positive territory. But 410 00:22:54,200 --> 00:22:57,160 Speaker 1: here's the thing. This year they've taken in a hundred 411 00:22:57,160 --> 00:23:00,359 Speaker 1: billion dollars, which is more than dead ETFs have taken in. 412 00:23:00,520 --> 00:23:02,760 Speaker 1: So it really does kind of screw up a narrative 413 00:23:02,800 --> 00:23:05,040 Speaker 1: here about everything going to a E T S and 414 00:23:05,160 --> 00:23:08,200 Speaker 1: be passive. And the reason they're doing it is because 415 00:23:08,200 --> 00:23:10,760 Speaker 1: they're outperforming. Most of that money is going into the 416 00:23:10,840 --> 00:23:15,639 Speaker 1: corporate bond managers, and those managers are taking advantage of 417 00:23:15,760 --> 00:23:19,640 Speaker 1: what they consider to be a really bad group of indexes, 418 00:23:19,720 --> 00:23:22,879 Speaker 1: namely the AGG They're able to just beat it pretty easily, 419 00:23:23,359 --> 00:23:25,280 Speaker 1: and I think equity managers have a tougher time with 420 00:23:25,320 --> 00:23:28,000 Speaker 1: the SMP. Well, Eric, I wanted to ask you because 421 00:23:28,080 --> 00:23:31,040 Speaker 1: for a number of years there wasn't as reliable of 422 00:23:31,080 --> 00:23:37,520 Speaker 1: an outperformance by active corporate bond fund managers versus broader indexes. 423 00:23:37,760 --> 00:23:43,160 Speaker 1: Is the outperformance particularly notable this year? Yeah, Well, Spiva, 424 00:23:43,320 --> 00:23:46,200 Speaker 1: the SMP five Active versus Index report came out and 425 00:23:46,400 --> 00:23:48,919 Speaker 1: had numbers there were even a little more better than 426 00:23:48,960 --> 00:23:52,000 Speaker 1: ours for them and they started over ten years, five years, 427 00:23:52,080 --> 00:23:55,479 Speaker 1: three years, so it's pretty consistent. Um. Where it doesn't 428 00:23:55,520 --> 00:23:58,719 Speaker 1: work is government government bond fund managers are doing awful, 429 00:23:59,440 --> 00:24:03,520 Speaker 1: but munise and corporate bond fund managers are doing really well. 430 00:24:03,560 --> 00:24:05,960 Speaker 1: And look, part of it is right now, if you 431 00:24:06,000 --> 00:24:09,439 Speaker 1: look at the best performing active fixed income mutual funds, 432 00:24:09,760 --> 00:24:12,760 Speaker 1: like the top five, they all have a higher duration 433 00:24:12,960 --> 00:24:16,159 Speaker 1: and more high yield exposure than the egg. So you 434 00:24:16,200 --> 00:24:18,480 Speaker 1: could call it cheating, you could call it tricks. Whatever 435 00:24:18,560 --> 00:24:21,879 Speaker 1: it has that could turn the other direction though, So 436 00:24:21,960 --> 00:24:23,760 Speaker 1: they are sort of going out on a limb a 437 00:24:23,840 --> 00:24:26,760 Speaker 1: bit to pick up some extra juice, but that adds 438 00:24:26,800 --> 00:24:30,000 Speaker 1: more risks. In other words, you're saying that the broad 439 00:24:30,200 --> 00:24:35,040 Speaker 1: bet among active managers is to have longer dated bonds 440 00:24:35,080 --> 00:24:39,760 Speaker 1: in their portfolios and risk your bonds, specifically investment grade 441 00:24:40,280 --> 00:24:43,440 Speaker 1: credit investors, right, um, And you're basically saying that this 442 00:24:43,640 --> 00:24:46,320 Speaker 1: is a bet that could have absolutely gone the wrong way, 443 00:24:46,359 --> 00:24:49,800 Speaker 1: but they just got lucky or whatever the case may bee. Yeah, 444 00:24:49,920 --> 00:24:52,000 Speaker 1: I mean this is where a bond manager would say, look, 445 00:24:52,080 --> 00:24:53,680 Speaker 1: if it does go the way, I'll be able to 446 00:24:53,720 --> 00:24:56,479 Speaker 1: react way quicker than say a smart bay to et 447 00:24:56,600 --> 00:24:58,399 Speaker 1: F for something and then maybe they will um. In 448 00:24:58,480 --> 00:25:00,600 Speaker 1: the case of Gunlock, he's heavy and the mortgages so 449 00:25:00,720 --> 00:25:02,800 Speaker 1: much so that we had to move his fund into 450 00:25:02,840 --> 00:25:05,840 Speaker 1: the mortgage category. But there's other ways to do it. 451 00:25:06,000 --> 00:25:09,000 Speaker 1: And you know, I work with um Irah Jersey who 452 00:25:09,200 --> 00:25:12,119 Speaker 1: has been just a great resource for Active Fix that 453 00:25:12,160 --> 00:25:14,520 Speaker 1: he used to manage a bond fund, and he also 454 00:25:14,560 --> 00:25:17,159 Speaker 1: talks about there's like it's just a bigger world. I mean, 455 00:25:17,240 --> 00:25:20,040 Speaker 1: you've got liquidity premiums in bonds that aren't on the 456 00:25:20,119 --> 00:25:23,960 Speaker 1: in the index. You know, it's compared to the equity world, 457 00:25:24,000 --> 00:25:26,960 Speaker 1: where there's only four thousand stocks total and there's the 458 00:25:27,040 --> 00:25:28,879 Speaker 1: SMP five hundreds. So if you're a large cap you 459 00:25:28,880 --> 00:25:32,080 Speaker 1: don't have much room to outperform, and the SMP five 460 00:25:32,200 --> 00:25:35,720 Speaker 1: hundred essentially is full of momentum um. You know. Fang 461 00:25:35,840 --> 00:25:37,840 Speaker 1: stocks are a good example. They weren't really a big 462 00:25:37,920 --> 00:25:40,399 Speaker 1: waiting maybe one percent five six years ago. Now there 463 00:25:40,400 --> 00:25:43,720 Speaker 1: are a seven percent waiting and the SMP road those 464 00:25:43,800 --> 00:25:46,679 Speaker 1: stocks up and got their performance as the market cap 465 00:25:46,800 --> 00:25:49,280 Speaker 1: got bigger. So I think this is part of the 466 00:25:49,440 --> 00:25:54,400 Speaker 1: difference between being a bond manager and being an equity manager. Eric, 467 00:25:54,520 --> 00:25:57,160 Speaker 1: I want you to just comment on the concept of size, 468 00:25:57,359 --> 00:25:59,160 Speaker 1: for example, the amount of money that is in an 469 00:25:59,280 --> 00:26:02,760 Speaker 1: exchange trade and funds, because the Guggenheim High Yield Fund 470 00:26:02,800 --> 00:26:05,760 Speaker 1: that beat the benchmark, and I'm just wondering if you 471 00:26:05,760 --> 00:26:09,040 Speaker 1: could put that into context for us. Yeah, so this 472 00:26:09,280 --> 00:26:11,760 Speaker 1: is one where it looked like some security picking and 473 00:26:11,800 --> 00:26:13,400 Speaker 1: it had it had a little bit of senior loans 474 00:26:13,440 --> 00:26:15,840 Speaker 1: in it that the HyG doesn't have that, but it 475 00:26:15,920 --> 00:26:17,920 Speaker 1: didn't do too much. And what I liked about this 476 00:26:18,040 --> 00:26:20,879 Speaker 1: one the Guggenheim High Yield is it's triple C was 477 00:26:20,920 --> 00:26:22,840 Speaker 1: about the same as h y G. But what it 478 00:26:23,200 --> 00:26:26,119 Speaker 1: it's sharp ratio was pretty high. In other words, it 479 00:26:26,680 --> 00:26:29,400 Speaker 1: got has good risk adjusted returns, so it didn't take 480 00:26:29,440 --> 00:26:31,399 Speaker 1: on that much extra risk. And so I think if 481 00:26:31,400 --> 00:26:33,360 Speaker 1: you have a high sharp ratio and you don't see 482 00:26:33,359 --> 00:26:35,879 Speaker 1: anything that's like too far out on a limb, I 483 00:26:35,960 --> 00:26:37,520 Speaker 1: think you have a good manager there. And I think 484 00:26:37,600 --> 00:26:39,760 Speaker 1: that one that's why I highlight it is because I 485 00:26:39,800 --> 00:26:42,639 Speaker 1: couldn't really find anything that was that dramatically risky. At 486 00:26:42,680 --> 00:26:46,280 Speaker 1: the same time, it outperformed without taking too much risk. Eric, 487 00:26:46,400 --> 00:26:48,840 Speaker 1: just another point and maybe just to shift your thoughts here, 488 00:26:49,040 --> 00:26:52,040 Speaker 1: um the percentage of money that is in bond and 489 00:26:52,119 --> 00:26:55,960 Speaker 1: equity markets that are in index products or funds versus 490 00:26:56,119 --> 00:26:59,000 Speaker 1: just the act of funds. Do we see any overall 491 00:26:59,119 --> 00:27:02,719 Speaker 1: numbers for that. It's very low. We're talking about um 492 00:27:03,119 --> 00:27:05,760 Speaker 1: in the equity case. Uh, you're looking at more like 493 00:27:07,800 --> 00:27:10,680 Speaker 1: in the bond case. It's more this is a ballpark 494 00:27:10,840 --> 00:27:14,800 Speaker 1: ten bond e t s and index funds have about 495 00:27:14,840 --> 00:27:18,480 Speaker 1: a ten year or equity has a headstart. Passive equity 496 00:27:18,520 --> 00:27:21,159 Speaker 1: has about a tenure head start on fixed income, so 497 00:27:21,480 --> 00:27:25,200 Speaker 1: they you know, the flows are good, bond flows are 498 00:27:25,800 --> 00:27:27,440 Speaker 1: like debt. E t F flows are good. But the 499 00:27:27,560 --> 00:27:30,000 Speaker 1: thing is e t f s really gotta made a 500 00:27:30,080 --> 00:27:32,480 Speaker 1: killing on the equity side because of that under performance. 501 00:27:32,800 --> 00:27:36,280 Speaker 1: If that our performance persists from active fixed income, e 502 00:27:36,400 --> 00:27:38,399 Speaker 1: t s won't have as big of a space to 503 00:27:38,520 --> 00:27:40,560 Speaker 1: go and enter that market. Well, and Eric, this is 504 00:27:40,640 --> 00:27:43,720 Speaker 1: exactly what I wanted to touch on with you. Do 505 00:27:43,880 --> 00:27:45,879 Speaker 1: you expect from the people that you speak with and 506 00:27:45,960 --> 00:27:50,680 Speaker 1: from your own analyzes that right now we're seeing saturation 507 00:27:51,440 --> 00:27:56,879 Speaker 1: of fixed income specifically within the corporate debt uniform universe, 508 00:27:57,000 --> 00:27:59,639 Speaker 1: or do you think that there still is room for 509 00:27:59,840 --> 00:28:03,880 Speaker 1: a spansion of passive e t F s in this area. Well, 510 00:28:04,000 --> 00:28:06,320 Speaker 1: the big thing that like l q D and T 511 00:28:06,600 --> 00:28:09,840 Speaker 1: and um H y g DO is there being used 512 00:28:09,840 --> 00:28:13,320 Speaker 1: in place of derivatives by institutions. So it's not just 513 00:28:13,520 --> 00:28:16,040 Speaker 1: like the ts IS is competing with the fixed income 514 00:28:16,080 --> 00:28:19,400 Speaker 1: mutual fund. It's also competing with derivatives. So those those 515 00:28:19,480 --> 00:28:22,480 Speaker 1: ETFs are like a whole different species. But for a 516 00:28:22,560 --> 00:28:24,600 Speaker 1: lot of the like the power shares and the SCHWA 517 00:28:24,760 --> 00:28:27,200 Speaker 1: bond ets that are competing with mutual funds, they're not 518 00:28:27,320 --> 00:28:29,919 Speaker 1: you know, they're still pretty small. They they're probably going 519 00:28:30,000 --> 00:28:32,439 Speaker 1: to get assets ultimately because they're so cheap. And one 520 00:28:32,480 --> 00:28:35,000 Speaker 1: thing I've been going over a smart beta. So you 521 00:28:35,080 --> 00:28:36,639 Speaker 1: know how what we just talked about how the AG 522 00:28:36,880 --> 00:28:40,120 Speaker 1: is so beatable, Well that's smart beta. Ets are now 523 00:28:40,200 --> 00:28:43,240 Speaker 1: coming out that take that beatable strategy and just put 524 00:28:43,320 --> 00:28:45,400 Speaker 1: it into an index. So I Shares has a risk 525 00:28:45,480 --> 00:28:49,400 Speaker 1: weighted ETF NEUVIN has a new AGG which is basically 526 00:28:49,400 --> 00:28:51,440 Speaker 1: the AGG with like a little dip into high yield. 527 00:28:51,720 --> 00:28:54,360 Speaker 1: So they're taking the tricks of the fixed income bond 528 00:28:54,400 --> 00:28:57,480 Speaker 1: managers and turning it into an index. If that can 529 00:28:57,600 --> 00:28:59,560 Speaker 1: get root, then the bond managers are going to have 530 00:28:59,600 --> 00:29:01,840 Speaker 1: a problem them because if they're graded against that index, 531 00:29:01,880 --> 00:29:03,400 Speaker 1: it's going to be tougher to beat than the egg. 532 00:29:04,080 --> 00:29:07,960 Speaker 1: And just quickly, Erica, the use of indexes is how's 533 00:29:08,000 --> 00:29:10,840 Speaker 1: that changing? Give you about twenty seconds there. Yeah, the 534 00:29:10,960 --> 00:29:12,920 Speaker 1: use of index is well looked. The I'm sure the 535 00:29:12,960 --> 00:29:15,160 Speaker 1: bond managers love that the agg is still but if 536 00:29:15,200 --> 00:29:17,040 Speaker 1: you look at what they invest in, it's probably not 537 00:29:17,720 --> 00:29:20,600 Speaker 1: the right one. So I think that's something they're going 538 00:29:20,640 --> 00:29:21,920 Speaker 1: to want to keep. But I think the E t 539 00:29:22,040 --> 00:29:23,479 Speaker 1: F market is going to try to prove that, hey, 540 00:29:23,560 --> 00:29:26,560 Speaker 1: look this is actually not the right index. They should 541 00:29:26,560 --> 00:29:28,760 Speaker 1: be graded against these other ones. Well done, all right, 542 00:29:28,800 --> 00:29:31,560 Speaker 1: thanks very much. Eric val Tunis has always our senior 543 00:29:31,600 --> 00:29:35,440 Speaker 1: et F analysts for Bloomberg Intelligence. You can follow him 544 00:29:35,520 --> 00:29:41,280 Speaker 1: on Twitter at Eric Baltunas. Thanks for listening to the 545 00:29:41,320 --> 00:29:44,400 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 546 00:29:44,440 --> 00:29:48,600 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 547 00:29:48,640 --> 00:29:52,520 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 548 00:29:52,880 --> 00:29:56,360 Speaker 1: I'm on Twitter at Lisa Abramo. It's one before the podcast. 549 00:29:56,440 --> 00:30:03,200 Speaker 1: You can always catch us worldwide on Bloomberg Radio KA