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

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Speaker 1: my co host Matt Miller.

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

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

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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

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Speaker 3: Interesting news here this morning.

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Speaker 1: To start out the day on the political side, on

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Speaker 1: the local New York side of things, George Santos, the

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Speaker 1: embattled Republican congressman from New York, was charged by US

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Speaker 1: prosecutors with fraud and money laundering critty.

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Speaker 3: This is an interesting story on.

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Speaker 1: The local side, but it also goes to just you know,

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Speaker 1: Congress and various pieces of legislation, including the debt ceiling,

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Speaker 1: and how this may impact some of that. So we

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Speaker 1: want to break down kind of what the legal side

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Speaker 1: of this is for mister Santos. We welcome Nick Ackerman,

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Speaker 1: former assistant special Watergate prosecutor Michael Zelden, former federal prosecutor

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Speaker 1: the US Department of Justice. Nick, I want to start

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Speaker 1: with you just give us a sense of how this

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Speaker 1: is going to play out today for mister Santos.

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Speaker 4: Well, he's going to show up before a federal district

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Speaker 4: court judge in the Eastern District in New York, and

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Speaker 4: he's going to be arraigned. He's going to be fingerprinted

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Speaker 4: first and photographed. He'll go in and he'll plead not guilty,

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Speaker 4: I assume, and that will be it. Bail will be set,

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Speaker 4: and I would assume that he'll be released on his

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Speaker 4: own recognisance. But that really is just the start of

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Speaker 4: the process. I mean, from that point on, he's going

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Speaker 4: to have to decide whether he makes a deal with

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Speaker 4: the US Attorney's office or he fights it. And I'm

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Speaker 4: just starting to look at this indictment right now, and

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Speaker 4: I mean, there is it just seems like overwhelming evidence

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Speaker 4: of fraud and deceit here, starting with his campaign and

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Speaker 4: raising money and using those funds basically for his own

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Speaker 4: personal use, you know, including luxury designer clothing and personal

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Speaker 4: credit card payments. And it goes on from there with

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Speaker 4: him basically taking money out with respect to funds from

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Speaker 4: the pandemic program that would have allowed him to get

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Speaker 4: money if he had been unemployed, when in fact, the

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Speaker 4: indictment charges he was employed. And it goes on from there.

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Speaker 4: So I think he's got really no choice here but

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Speaker 4: to try and make a deal, all of which I

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Speaker 4: think will probably wind up with him resigning from this

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Speaker 4: House seat.

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Speaker 5: Would bring this into some perspective for us when it

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Speaker 5: comes to timing here, because we do have a presidential

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Speaker 5: election coming up, not to mention the debt ceiling debate

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Speaker 5: in that will go on for the next two weeks

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Speaker 5: or so. How long are these legal proceedings expected to take.

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Speaker 4: Well, this could take anywhere up to a year if

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Speaker 4: he decides to fight it. I mean, if he goes

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Speaker 4: through the process of getting discovery, making motions, pre trial motions,

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Speaker 4: and then going to trial, this could take up to year.

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Speaker 4: On the other hand, if you read this indictment and

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Speaker 4: you look at the evidence that's laid out in the

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Speaker 4: indictment itself, that would be a pretty futile effort in

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Speaker 4: the sense that any effort to really fight this would

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Speaker 4: be nothing more than entering into a long term guilty

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Speaker 4: plea basically because it sounds like the government has really

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Speaker 4: got him solid on this case.

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Speaker 1: And you know, the political political ramifications here are very

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Speaker 1: important here. You know, the dead ceiling passed two seventeen

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Speaker 1: to two fifteen with Santos voting, and so without Santos,

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Speaker 1: the fate of that bill will become much less clear

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Speaker 1: it might have been, you know, two sixteen to two sixteen.

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Speaker 1: So this is the math really is important here as

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Speaker 1: it related to mister Santo's seat. Michael Zelden, if you

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Speaker 1: were resented, if you were representing an advised or advising

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Speaker 1: mister Santos, what would you advise him to do today

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Speaker 1: and over the next several.

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Speaker 6: Days work out the best plea deal he can.

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Speaker 3: Yeah, it seems to be the play.

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Speaker 6: Yes, well, I was the chief of the money laundering

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Speaker 6: and as a forfeiture office in the Justice Department, and

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Speaker 6: these money laundering charges look pretty solid. What he is

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Speaker 6: accused of doing is acquiring money under false pretenses and

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Speaker 6: then having that what they call specified on lawful activity,

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Speaker 6: the money derived from crime. He then engaged in additional

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Speaker 6: financial transactions over ten thousand dollars. Those are almost impossible

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Speaker 6: charges to win on if the source of the money

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Speaker 6: was in fact fraud, And it seems pretty clear in

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Speaker 6: the first five counts of this indictment that he did

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Speaker 6: in fact solicit money under false pretenses. So he's also

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Speaker 6: being charged with false statements to the House of Representatives.

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Speaker 6: Also again a very straightforward paper case that you either

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Speaker 6: made a statement that's true or you didn't make a

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Speaker 6: statement that's true. There's not a lot of movement in

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Speaker 6: there from a defense motions standpoint, and then they're asking

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Speaker 6: for forfeiture of all the proceeds of his ill gotten gains.

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Speaker 6: So I think the play is workout of plea and

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Speaker 6: resign from Congress. But he's not that sort of person.

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Speaker 3: Yeah, Michael, how he does it?

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Speaker 1: Yeah, what type of plea would be reasonable? Do you

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Speaker 1: think at this point, given what you know about the indictment.

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Speaker 6: Something that caps his exposure to five years? The money

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Speaker 6: laundering statute is a twenty year maximum penalty, and the

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Speaker 6: way the sentencing around money laundering works is it depends

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Speaker 6: on the value of the monies that you laundered. And

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Speaker 6: he's probably facing eightish years of actual time on this

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Speaker 6: indictment where he convicted of all the charges, and I

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Speaker 6: think that he'd like to try to stick within a

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Speaker 6: five year period of time. The prosecutors, I don't think,

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Speaker 6: are going to treat him softly because of his public position.

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Speaker 6: I think that in these public eruption types of cases.

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Speaker 6: The government likes to make statements about this because as

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Speaker 6: a not only crime, but a breach of public trust.

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Speaker 6: So I think he's got a difficult road ahead of him.

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Speaker 5: Nick hopping in here, because George Santas isn't the only

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Speaker 5: one in legal hot water right now. President Trump is

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Speaker 5: as well yet again, this time with the case that

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Speaker 5: he's lost against Egene Carroll. Walk us through the consequences there.

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Speaker 4: Well, the consequences aren't good because basically he's been labeled

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Speaker 4: now as sex predator. And if you're running for president

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Speaker 4: and you're trying to get votes from half of the constituents,

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Speaker 4: which are women, it's not really helpful in that term.

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Speaker 4: It's also not helpful in the suburban areas where he

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Speaker 4: needs to get votes that he didn't get the last time,

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Speaker 4: where it was really women that made the difference in

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Speaker 4: giving the presidency to Joe Biden. So from a political

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Speaker 4: standpoint point, this is a complete horror show for the Republicans.

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Speaker 4: It couldn't be any worse. It's also I think a

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Speaker 4: harbinger of things to come with respect to the New

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Speaker 4: York DA's indictment. If you look at what happened here, Basically,

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Speaker 4: Donald Trump lost this case right after his lawyer cross

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Speaker 4: examined Gene Carroll for two and a half days. There

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Speaker 4: was absolutely no reason, you know, from a defense standpoint,

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Speaker 4: if what you're trying to prove is that she was

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Speaker 4: incredible to actually bolster her credibility by asking you questions

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Speaker 4: that let her explain things, let her give her full statements,

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Speaker 4: allowed her to show how the alleged assault actually took place.

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Speaker 4: And you know, by the time you got through her

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Speaker 4: cross examination, I mean, you could see the same thing

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Speaker 4: happening with the New York indictment in the sense that

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Speaker 4: you've got two cooperating witnesses, both Michael Cohen, who was

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Speaker 4: Trump's former lawyer, and David Tecker, who was the head

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Speaker 4: of the National Inquirer, that are going to be cross examined.

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Speaker 4: And if this case is any kind of sort of

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Speaker 4: preview of what's going to happen in the criminal case,

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Speaker 4: it's going to be the same thing. They're going to

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Speaker 4: do the same kind of cross examination of Michael Cohen

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Speaker 4: and David Pecker and will essentially enhance their credibility in

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Speaker 4: the situation where both of these individuals are corroborated by

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Speaker 4: documents with Gene Carroll. There were no witnesses, nobody saw

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Speaker 4: what happened. It was simply her testimony. This case is

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Speaker 4: much more solid and a cross examination like that is

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Speaker 4: not going to be helpful to Donald Trump.

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Speaker 1: All Right, a busy, busy morning for legal issues. It's

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Speaker 1: not necessarily what we thought we were going to do

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Speaker 1: waking up this morning, but there's a lot to cover,

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Speaker 1: and I think we did an admiral job thanks to

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Speaker 1: our guest Nick Ackerman, former assistant Special Watergate prosecutor, and

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Speaker 1: Michael Zelden, former federal prosecutor US Department of Justice.

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Speaker 7: You're listening to the Team Ken's are Live program Bloomberg

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

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

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Speaker 7: on demand wherever you get your podcast.

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Speaker 1: We did get that inflation print this morning. The CPI

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Speaker 1: kind of came right in line with expectations. Maybe if

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Speaker 1: you dig dig deep, like Michael McKee and the other

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Speaker 1: economists tend to do, you get a little sense of

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Speaker 1: maybe it's softening a little bit. Let's chicken with professional

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Speaker 1: Anaka Treon, chief economist for Van launschat Kempen Anka. What

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Speaker 1: did you take away from this CPI print this morning?

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Speaker 8: Hi, Well, it looks like, you know, we're sort of

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Speaker 8: in this neither here nor their zone where it's not

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Speaker 8: clear enough in the data that inflation is abating, but

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Speaker 8: it's also not clear enough that it's accelerating. And I

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Speaker 8: think that's what makes this whole monetary policy the climate

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Speaker 8: really confusing, because I think the main thing that's important

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Speaker 8: is central banks, to Fared, the ECB, all of them

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Speaker 8: have been quite outspoken about their information target. We're still

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Speaker 8: nowhere near their target, and you still see also again

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Speaker 8: in the latest data, evidence of stickiness, especially around services inflation,

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Speaker 8: especially around wages.

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Speaker 5: Well, top, was that again about shelter costs here, because

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Speaker 5: something that is so striking to me is that the

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Speaker 5: shelter costs piece of this report. You're not seeing the

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Speaker 5: same deceleration that I think a lot of people would

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Speaker 5: expect one year after the FED started hiking rates, even

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Speaker 5: with the lag baked in. Shouldn't shelter have taken a

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Speaker 5: bigger hit by now?

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Speaker 4: Yeah?

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Speaker 8: And I think it's just a function of figuring out

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Speaker 8: how long the time lags are, and obviously the time

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Speaker 8: lag between the purchase prices of houses versus the rental pricing.

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Speaker 8: And I think that's just what makes this whole thing

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Speaker 8: so computing, because it's not just about a single source

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Speaker 8: of pricing pressure with an inflation you know, it's not

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Speaker 8: just about the energy costs. We've moved away from that.

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Speaker 8: The baton is being passed from one source of price

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Speaker 8: pressure to another, and they all have their respective time lags,

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Speaker 8: which just makes it quite complicated.

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Speaker 1: And anaka, I'm looking at the CPI X Food and

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Speaker 1: Energy year of year of five point five percent that

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Speaker 1: came in line with expectations. It's down from five point

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Speaker 1: six percent last month, but boy, that number feels sticky

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Speaker 1: to me. How do you expect that number to trend

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Speaker 1: over the you know, the next six months or so.

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Speaker 8: Well, we think it's quite sticky too, and we've been

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Speaker 8: saying it for a while, but we're amazed at how

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Speaker 8: output the markets are and expecting a u turn in

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Speaker 8: policy rates by the Fed. And the only way the

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Speaker 8: Fed is going to u turn and actually start cutting

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Speaker 8: rates in about four months time, which is what markets expect,

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Speaker 8: is if there's really tangible proof of consistent declines in

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Speaker 8: core inflation, and to your point, it still looks pretty sticky.

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Speaker 8: So that's the biggest risk that we see for markets

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Speaker 8: when you talk.

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Speaker 5: About risks we're seeing for markets, though inflation is just

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Speaker 5: part of the story, I would argue a bigger part

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Speaker 5: of the story. But then you have all this kind

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Speaker 5: of debt ceiling. I don't want to call it drama,

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Speaker 5: but drama. What is the trade there? I mean, in

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Speaker 5: this circumstance that no one really thinks is going to

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Speaker 5: finally come to fruition, It's going to be an eleventh

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Speaker 5: hour development, what is the trade if we do indeed

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Speaker 5: see the clock strike twelve and there's no agreement.

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Speaker 8: Yeah, I mean, I think the likelihood of the debt

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Speaker 8: ceiling not being written the way we're all looking for

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Speaker 8: me we think is rather low, because I mean, the

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Speaker 8: US government simply cannot afford to go into default. And

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Speaker 8: I mean, just look how proactive policymakers were around you know,

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Speaker 8: the SVBS as First Republic. As soon as you see

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Speaker 8: signs of crisis, they're there to fix, they're there to rescue.

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Speaker 8: And I think the same will apply this time. I

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Speaker 8: think the trade is I mean, it's basically adding to

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Speaker 8: the backdrop of complexity, volatility. And it's ironic because you know,

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Speaker 8: the volatility that we're seeing is much more in the

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Speaker 8: bond market than the top markets. Look at the VIXSUS

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Speaker 8: moving dex and that's the sort of inherent volatility and

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Speaker 8: you know, well one of the most important parts of

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Speaker 8: capital markets. Actually, it just depicts the picture we're.

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Speaker 1: In and like it real quickly. Thirty seconds give us

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Speaker 1: a sense of how inflation is in Europe.

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Speaker 8: So inflation in Europe it's very similar to the US.

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Speaker 8: It's the stickiness and I think the most try thinking

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Speaker 8: about Europe what I mentioned about the energy crisis. All

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Speaker 8: the tension was on energy prices in Europe because of

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Speaker 8: this energy crisis, Ukraine war and you know, energy shortages,

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Speaker 8: et cetera. I mean, gas prices in Europe have fallen

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Speaker 8: all the way back right pre Ukraine, pre everything. Wow,

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Speaker 8: yet plation is still really high, really sticky, and we

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Speaker 8: really have a wage inflation problem.

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Speaker 3: Interesting.

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Speaker 1: Interesting, All right, Anica, We could go on and on

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Speaker 1: a lot more questions.

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Speaker 3: We'll talk to you soon.

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Speaker 1: Anica Treon, chief economist for Van Loonshot Kempen.

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Speaker 7: You're listening to the tape Cat's Are Live program Bloomberg

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

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

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

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

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Speaker 3: Your work A talk preferred Stock. I sold some preferred

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Speaker 3: stock back in the day.

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Speaker 1: Every once in a while it comes into fashion, and

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Speaker 1: I would sling a lot of that stuff.

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Speaker 5: It definitely himitt in fashion today, right, No dental Warren Buffett, Yep.

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Speaker 1: Absolutely, he gets He always gets the high yielding stock.

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Speaker 1: He gets people when they're down, they're desperate, Golden Sacks,

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Speaker 1: Occidental Patrol. I mean he gets that preferred stock. He's

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Speaker 1: very smart about that stuff. All right, let's talk about

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Speaker 1: the van K Preferred Securities Ex Financials et pf XF

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Speaker 1: for the kids out there with the Bloomberg terminal.

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Speaker 3: Brandon Zoski, did I get that? Awesome?

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Speaker 1: Brandon Rakzoski, VP and Director of Product Management at Vanek,

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Speaker 1: joins us live here in our Bloomberg Interactive Broker studio.

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Speaker 1: So Brandon, talk to us about your preferred stock. Etf

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Speaker 1: EX Financials talked to why ex financials and kind of

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Speaker 1: what are you guys looking to do?

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Speaker 9: Yeah, yeah, yeah, it's it's a little bit ironic that

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Speaker 9: we're talking about our ETF now, you know, it sounds

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Speaker 9: like it was made for the.

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Speaker 3: Last two months exactly. I don't want anything to do

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Speaker 3: with financials.

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Speaker 9: We actually launched the CTF. We listed it back in

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Speaker 9: twenty twelve, over another years ago. Okay, right, So we

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Speaker 9: launched this when the preferred market was heating up. It

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Speaker 9: was post global financial crisis. Rates we're at zero. Investors

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Speaker 9: were looking for income, but the global financial crisis was

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Speaker 9: fresh in everybody's mind. And you know, fast forward a

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Speaker 9: decade and the US banking system was by and large stable.

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Speaker 9: So pretty much the reason we launched the CTF the

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Speaker 9: diversification away from financials preferred secure curities. You know, it

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Speaker 9: didn't really come into play until two months ago. And

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Speaker 9: what I think a lot of investors don't know about

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Speaker 9: the preferred market is it's dominated by banks, insurance companies,

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Speaker 9: and financials. So anybody, any investor that's looking to a fund,

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Speaker 9: you know, mutual fund ETF and looking at the broad

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Speaker 9: preferred security space, they're getting very heavy financials exposure and

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Speaker 9: they've they've if they didn't know that already, they've they've

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Speaker 9: certainly woken up to that over the last two months.

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Speaker 9: So so we like this ETF within the space. It's

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Speaker 9: it's a way for investors to diversify away from that

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Speaker 9: heavy financials exposure they get elsewhere.

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Speaker 5: So Brandon, let's brown this out a little bit.

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Speaker 3: We're talking about financials.

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Speaker 5: We've got to talk about the banking crisis. Is it

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Speaker 5: still a crisis or are we kind of passed that?

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Speaker 7: Yeah?

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Speaker 9: I mean, I don't know that anyone can tell you

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Speaker 9: that definitively in that and that that's why why, that's

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Speaker 9: why investors have to be aware of their risks, right,

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Speaker 9: I mean we see, you know, you hear about a

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Speaker 9: new bank every every day, so you know, it's it

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Speaker 9: all started two months ago. It's been two months and

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Speaker 9: we're hearing about you know, name the Pack, the West,

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Speaker 9: whatever it might be. You've got these banks, and you

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Speaker 9: look at the preferred securities market, you look at broad indexes,

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Speaker 9: and regional banks are still despite the selloff, regional banks

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Speaker 9: are still accounting for ten to fifteen percent of these

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Speaker 9: broad indexes. So there's risk and exposure that are in

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Speaker 9: these ETFs and investors should be aware of them because

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Speaker 9: these are the shares that are getting hurt the most.

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Speaker 5: Well, is that a part of the market that's just

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Speaker 5: going to get wiped out? I mean, this isn't an

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Speaker 5: equal comparison, but when I'm thinking wiped out, I'm thinking

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Speaker 5: that's kind of the eighty one bond story from Credit SUITEZ,

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Speaker 5: where just a class of investors just got wiped out.

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Speaker 5: Is that something that could happen if you continue to

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Speaker 5: see these bank failures.

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Speaker 9: We lived through this in the global financial crisis and

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Speaker 9: it didn't get wiped out. I don't think it will

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Speaker 9: get wiped out. I think there's a lot of investors

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Speaker 9: right now that are actually looking to that space as

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Speaker 9: a value opportunity. These are just so well so over

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Speaker 9: sold at the moment. So if you can be opportunistic

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Speaker 9: and you can look to some of these regional banks

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Speaker 9: and some of their preferred shares, if you're willing to

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Speaker 9: take on that risk, there could be reward. But if

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Speaker 9: you're a buy and holding investor that's just looking for

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Speaker 9: that monthly income check and you're not willing to to

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Speaker 9: to to weather that volatility in your portfolio, then then

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Speaker 9: you should really think twice about about initiating exposure in

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Speaker 9: some of these these broad indexed products.

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Speaker 1: All right, so when your ETF pf XF is the ticker,

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Speaker 1: what do you guys own there?

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Speaker 9: Yeah, so okay, so you're you're you're cutting out a

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Speaker 9: big chunk of the market. When you exclude financial banks, insurance,

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Speaker 9: that's seventy to seventy five percent assisted market.

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Speaker 3: Yet yeah, the.

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Speaker 9: Whole financial sectors, it's it's dominant. So what you're left with,

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Speaker 9: You've got utilities, You've got which.

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Speaker 3: I pitched prefers to in telecom companies back again, Yeah.

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Speaker 9: It's a it's a big portion of p effects. You know,

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Speaker 9: that's twenty percent of the portfolio sold a few and

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Speaker 9: then you've got.

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Speaker 3: Wait, how many telecom companies are there?

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Speaker 1: There's a lot, there's tower companies, there's all kinds of stuff.

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Speaker 1: Well back in the day, I mean, is celling your telephone,

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Speaker 1: fixed line, wireless?

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Speaker 3: This is back in the day.

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Speaker 9: So yeah, no, you still you got AT and T

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Speaker 9: as a portion of the portfolio.

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Speaker 5: Quest you know, you haves AT and T and Hoverizon

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Speaker 5: like what else is there?

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Speaker 10: But fair enough?

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Speaker 9: Continue but nonetheless, and then in real estate, that's of

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Speaker 9: course on top of everyone's mind. So you are going

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Speaker 9: to get some read exposure through this through this preferred ETF.

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Speaker 9: So that's something to be aware of. But you know,

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Speaker 9: the wonderful thing about this ETF we lived, as I mentioned,

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Speaker 9: we lived through this period where systemic risk in the

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Speaker 9: US banking system just wasn't top of mind for investors.

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Speaker 9: So what else did this CTF give you? It gives

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Speaker 9: you a bit of a yield pickup. So X financials

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Speaker 9: prefers tend to have a little bit of a higher yield.

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Speaker 9: They've got a lower duration profile because these bank and

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Speaker 9: financial institution prefers they're perpetual, they're you know, they're very

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Speaker 9: long dated. So you're getting this yield pick up with

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Speaker 9: lower duration, lower call risk, and that all comes in

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Speaker 9: this this X financials wrapper.

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Speaker 5: So when I think lower duration an X financial rapper,

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Speaker 5: I mean immediately think tech stocks. From from my perspective,

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Speaker 5: it doesn't feel like there's a ton of exposure to

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Speaker 5: that here.

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Speaker 9: No, that, yeah, you don't see that from the tech sector,

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Speaker 9: the traditional high flying growth stocks. They're just not heavy

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Speaker 9: issues with preferred securities.

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Speaker 1: So as you think about putting stuff into this ETF,

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Speaker 1: what are some of the characteristics that you rule.

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Speaker 3: Is there a certain minimum.

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Speaker 1: Yield you want to see, is a certain credit profile

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Speaker 1: you want to see? How do you guys screen for

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Speaker 1: some names to get into the CTF.

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Speaker 9: We, you know, we work within a rule book, a

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Speaker 9: framework that applies to the index. It's a nice ice

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Speaker 9: index and it's basically built to be very broad and

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Speaker 9: inclusive when you know, the simple exclusion of course is

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Speaker 9: financials issuers and their underlying issues. But you know, we

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Speaker 9: look to fixed rate, floating rate. You know, these can

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Speaker 9: be investment grade, non investment grade, they can actually be

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Speaker 9: not not rated. There's a lot of you know, rates

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Speaker 9: out there that they don't go through the step of

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Speaker 9: obtaining a rating. So there's a very broad profile to this,

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Speaker 9: to this CTF, and it's a complicated space. And I

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Speaker 9: think that's why investors have looked to mutual funds and

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Speaker 9: ETFs because there are calls, there are mandatory converts applicable

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Speaker 9: to some of these preferred shairs. So so it's it's

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Speaker 9: pretty broad, it's pretty inclusive. But by market cap waiting

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Speaker 9: the sex financials market, you are getting that you know,

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Speaker 9: attractive yield, pick up, lower duration profile and and you're

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Speaker 9: avoiding to some degree because you know, the whole market

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Speaker 9: gets impacted by these sell offs, but you're avoiding quite

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Speaker 9: a bit of the sell off that we've that we've

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Speaker 9: experienced the last two to three months.

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Speaker 5: When just looking at the fun flows on this ticker,

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Speaker 5: folks p FXF. You can look up the fun flows

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Speaker 5: on new Bloomberg terminal as well. You were getting it's

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Speaker 5: been two months of just straight inflows for this ETTF.

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Speaker 5: What do you think might turn that around?

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Speaker 9: Well, so what we've seen so far as you see

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Speaker 9: the broad preferred ETFs and some of the financial specific

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Speaker 9: they bled assets. Of course, there's some people coming, you know,

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Speaker 9: getting out of the out of the game, at least temporarily,

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Speaker 9: so that some of that has, it seems, has come

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Speaker 9: to r E TF where they want to maintain that

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Speaker 9: preferred exposure that yield right now it's like seven percent

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Speaker 9: yield to the to the asset class, but they don't

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Speaker 9: want to get that that banking exposure. So we've seen

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Speaker 9: some inflows and when you look at the trailing periods

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Speaker 9: year to date, even over the one year period, it's

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Speaker 9: it's one of the leading flow getters within the preferred space.

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Speaker 9: So I think there's going to be continued interest there

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Speaker 9: and then you know we're talking about rates and what

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Speaker 9: the federal do next, and within preferreds, that call risk

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Speaker 9: is a big deal. So as as we reach a

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Speaker 9: point where we can start to you know, expect cuts

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Speaker 9: whenever that may be a lot of these preferred preferred

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Speaker 9: issues will will be possibly called and then you know,

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Speaker 9: reinvesting at lower rates. So lower call profile in our

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Speaker 9: ETF has made it attractive historically when rates are actually declining.

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Speaker 9: So I think there is a lot of you know,

435
00:22:30,960 --> 00:22:34,399
Speaker 9: tail end and and and prospects moving forward for this

436
00:22:34,480 --> 00:22:37,000
Speaker 9: ex financials slice of the preferred market.

437
00:22:37,320 --> 00:22:40,520
Speaker 3: Is Vannik primarily or totally an ETF shop?

438
00:22:40,800 --> 00:22:42,400
Speaker 9: No, no, no, We've got a yeah, I know, we've

439
00:22:42,400 --> 00:22:44,480
Speaker 9: got a history back to nineteen fifty five. We started

440
00:22:44,480 --> 00:22:47,359
Speaker 9: as a as a you know, traditional actively managed mutual

441
00:22:47,359 --> 00:22:47,879
Speaker 9: fund company.

442
00:22:48,000 --> 00:22:50,480
Speaker 1: So what percentage of your business today is ETFs because

443
00:22:50,480 --> 00:22:51,800
Speaker 1: it seems like that is just one of the great

444
00:22:51,800 --> 00:22:53,800
Speaker 1: growth stories I've seen in my yeah, thirty some odd

445
00:22:53,840 --> 00:22:54,520
Speaker 1: years in the street.

446
00:22:55,280 --> 00:22:58,239
Speaker 9: The majority, so you know, sixty seventy percent of our

447
00:22:58,240 --> 00:23:00,520
Speaker 9: assets are tied to ETFs. We got in the ETF

448
00:23:00,560 --> 00:23:02,800
Speaker 9: industry in the two thousand and six, so ahead of

449
00:23:03,280 --> 00:23:05,080
Speaker 9: head of the curve, not not not the in the

450
00:23:05,080 --> 00:23:05,520
Speaker 9: first wave.

451
00:23:05,600 --> 00:23:08,720
Speaker 3: But and you folks, and you focus on this this preferred.

452
00:23:08,520 --> 00:23:11,480
Speaker 9: Yeah, yeah, a wide set of our ETF offerings.

453
00:23:11,600 --> 00:23:13,960
Speaker 1: Okay, and what else? What else is seeing big inflows

454
00:23:14,440 --> 00:23:15,360
Speaker 1: into vannik.

455
00:23:15,240 --> 00:23:18,840
Speaker 9: Oh, you know, we've got interest across the across we offer,

456
00:23:19,160 --> 00:23:21,040
Speaker 9: you know, exposure to a lot of different asset classes.

457
00:23:21,080 --> 00:23:23,199
Speaker 9: One that we are particularly focused on, and we have

458
00:23:23,280 --> 00:23:26,040
Speaker 9: been for quite some time is within the US equity market.

459
00:23:26,119 --> 00:23:29,600
Speaker 9: You know, risks are abound, so we think that with

460
00:23:29,720 --> 00:23:33,320
Speaker 9: uncertain markets, you should really concentrate on quality companies, high

461
00:23:33,400 --> 00:23:35,800
Speaker 9: quality companies. And we've offered for for greater than ten

462
00:23:35,880 --> 00:23:38,320
Speaker 9: years in ETF M A T which is near and

463
00:23:38,359 --> 00:23:41,040
Speaker 9: dear to my heart, which leverages morning Star and morning

464
00:23:41,080 --> 00:23:45,000
Speaker 9: Stars equity research analysts input to identify these high quality

465
00:23:45,000 --> 00:23:47,200
Speaker 9: companies that are that are attractively priced. So we've seen

466
00:23:47,280 --> 00:23:49,320
Speaker 9: you know, seven hundred and fifty million come in this

467
00:23:49,440 --> 00:23:50,440
Speaker 9: year end of that ETF.

468
00:23:50,480 --> 00:23:52,720
Speaker 1: Good stuff, but that is just such a great growth business.

469
00:23:52,720 --> 00:23:56,199
Speaker 1: You picked a good place to be brand at rec Zoski.

470
00:23:56,400 --> 00:23:59,480
Speaker 1: He is a VP and and director of Product Management

471
00:23:59,480 --> 00:24:03,200
Speaker 1: at Vann proud graduate of Slippery Rock University, which I'm

472
00:24:03,200 --> 00:24:03,679
Speaker 1: familiar with.

473
00:24:03,720 --> 00:24:06,360
Speaker 3: It's just north of Pittsburgh, right, got that? Yeah there, Yes,

474
00:24:06,880 --> 00:24:08,760
Speaker 3: I love that, you know it? Yeah? Absolutely, it's good

475
00:24:08,760 --> 00:24:11,360
Speaker 3: stuffy people. Oh, it's good stuff, good people coming out

476
00:24:11,359 --> 00:24:11,640
Speaker 3: of there.

477
00:24:12,920 --> 00:24:16,760
Speaker 7: You're listening to the Team ken'sar Live program Bloomberg Markets

478
00:24:16,800 --> 00:24:19,879
Speaker 7: weekdays at ten am Eastern on Bloomberg dot Com, the

479
00:24:19,960 --> 00:24:23,119
Speaker 7: iHeartRadio app, and the Bloomberg Business App, or listen on

480
00:24:23,160 --> 00:24:25,160
Speaker 7: demand wherever you get your podcasts.

481
00:24:27,160 --> 00:24:30,080
Speaker 1: Let's talk a little bit about what is an extraordinarily

482
00:24:30,080 --> 00:24:33,000
Speaker 1: serious topic, and it looks like there's really no end

483
00:24:33,119 --> 00:24:35,199
Speaker 1: in sight. But the question now is is here we

484
00:24:35,240 --> 00:24:37,800
Speaker 1: are in May, we start hearing a lot of news

485
00:24:37,840 --> 00:24:40,560
Speaker 1: out of Ukraine and Russia about perhaps a spring counter

486
00:24:40,680 --> 00:24:43,919
Speaker 1: offensive by the Ukrainians. We want to get the latest

487
00:24:44,000 --> 00:24:47,119
Speaker 1: on that. Angela Stent joins us. She is a senior

488
00:24:47,119 --> 00:24:50,000
Speaker 1: fellow at the Brooking Institute and author of the book

489
00:24:50,480 --> 00:24:51,480
Speaker 1: Putin's World.

490
00:24:51,320 --> 00:24:54,440
Speaker 3: Russia against the West and with the Rest.

491
00:24:54,520 --> 00:24:59,880
Speaker 1: Angela, potentially a critical time in this war in Ukraine.

492
00:25:00,480 --> 00:25:01,919
Speaker 1: What do you think are the next steps that we

493
00:25:02,000 --> 00:25:03,760
Speaker 1: may see from the Ukrainians.

494
00:25:04,800 --> 00:25:07,760
Speaker 11: Well, we are waiting as you said, for this counter offensive,

495
00:25:08,840 --> 00:25:12,359
Speaker 11: it's been talked about really for weeks now, and the

496
00:25:12,480 --> 00:25:14,800
Speaker 11: Ukrainians of course aren't going to say when it's going

497
00:25:14,840 --> 00:25:17,280
Speaker 11: to happen and how they're going to do it, but

498
00:25:17,400 --> 00:25:21,000
Speaker 11: we are waiting for them to push back against where

499
00:25:21,000 --> 00:25:24,440
Speaker 11: the Russian troops are in the southeast of the country particularly,

500
00:25:25,440 --> 00:25:28,560
Speaker 11: and they I think have been waiting for the American

501
00:25:28,640 --> 00:25:33,280
Speaker 11: and also on the NATO country's equipment to arrive, the planes,

502
00:25:34,040 --> 00:25:37,520
Speaker 11: the tanks and everything else. But it really will be

503
00:25:37,600 --> 00:25:40,879
Speaker 11: quite decisive because if they're not able to push back

504
00:25:41,080 --> 00:25:44,679
Speaker 11: the Russian troops substantially, then we really will continue to

505
00:25:44,680 --> 00:25:46,360
Speaker 11: be in the stalemate going forward.

506
00:25:46,920 --> 00:25:48,960
Speaker 12: To what extent Angela, do you see the win in

507
00:25:49,000 --> 00:25:53,399
Speaker 12: Bakmu as an indicator of Ukrainian success moving forward in

508
00:25:53,440 --> 00:25:54,040
Speaker 12: the offensive?

509
00:25:55,560 --> 00:25:58,560
Speaker 11: So the Ukrainians have held out there all the time

510
00:25:58,600 --> 00:26:02,000
Speaker 11: because they didn't they wanted to engage the Russians there.

511
00:26:02,200 --> 00:26:05,600
Speaker 11: It's not crucial to their ability to succeed there, but

512
00:26:05,680 --> 00:26:07,760
Speaker 11: it would help them that they were able to take it.

513
00:26:08,600 --> 00:26:10,800
Speaker 1: So my question, I have many questions, but one of

514
00:26:10,800 --> 00:26:14,639
Speaker 1: my big big questions is the support that mister Putin

515
00:26:15,160 --> 00:26:19,160
Speaker 1: has or believes he has with the Russian people. Aren't

516
00:26:19,160 --> 00:26:21,280
Speaker 1: the Russian people smartened to know that this is just

517
00:26:21,440 --> 00:26:25,280
Speaker 1: a com colossal mistake on so many levels. Does he

518
00:26:25,320 --> 00:26:27,879
Speaker 1: really enjoy the support of the Russian people?

519
00:26:28,880 --> 00:26:33,120
Speaker 11: Well, you know, the only independent remaining pulling out sit

520
00:26:33,240 --> 00:26:37,359
Speaker 11: there still is showing that about seventy percent of the

521
00:26:37,359 --> 00:26:40,680
Speaker 11: population support the war, some of them actively and a

522
00:26:40,720 --> 00:26:43,720
Speaker 11: lot of them just passively, although fifty percent of them

523
00:26:43,760 --> 00:26:47,200
Speaker 11: say there should be negotiations. So if they're only listening

524
00:26:47,240 --> 00:26:50,520
Speaker 11: to state controlled media, they don't really know how disastrous

525
00:26:50,600 --> 00:26:53,960
Speaker 11: the amilitary aspect of this has been. And of course

526
00:26:54,040 --> 00:26:57,720
Speaker 11: a million Russians have left since the war began. Those

527
00:26:57,760 --> 00:26:59,600
Speaker 11: are the people, of course who don't support the war

528
00:26:59,840 --> 00:27:03,240
Speaker 11: or who don't want to be drafted. But he does.

529
00:27:03,600 --> 00:27:06,400
Speaker 11: Putin still appear to enjoy the support.

530
00:27:07,520 --> 00:27:10,280
Speaker 12: To Paul's point, though, I wonder to what extent the

531
00:27:10,520 --> 00:27:15,080
Speaker 12: Russian military is still continuing to buy in on Putin's narrative.

532
00:27:15,119 --> 00:27:17,719
Speaker 12: Has that changed at all?

533
00:27:18,040 --> 00:27:19,760
Speaker 11: As far as we can see, it hasn't. But you

534
00:27:19,800 --> 00:27:23,439
Speaker 11: have this battle going on between Yevgeny Progossion, who's the

535
00:27:23,480 --> 00:27:26,360
Speaker 11: head of the mercenary group that's been doing Wagner, which

536
00:27:26,359 --> 00:27:28,640
Speaker 11: has been doing a lot of the fighting and then

537
00:27:28,760 --> 00:27:33,040
Speaker 11: the actual regular military, and he has been accusing them

538
00:27:33,600 --> 00:27:37,160
Speaker 11: of being incompetent, and they, of course have been pushing back.

539
00:27:38,119 --> 00:27:41,199
Speaker 11: So I'm sure that there are people in the Russian

540
00:27:41,200 --> 00:27:43,960
Speaker 11: military to understand that this is who know that this

541
00:27:44,119 --> 00:27:47,800
Speaker 11: is going badly, and Progussion himself has been very very

542
00:27:47,840 --> 00:27:50,640
Speaker 11: critical and saying it's going badly, and so I think

543
00:27:50,680 --> 00:27:53,160
Speaker 11: the Russian people are going to be hearing much more

544
00:27:53,160 --> 00:27:56,440
Speaker 11: of that going forward. It's pretty amazing that yesterday at

545
00:27:56,440 --> 00:27:59,480
Speaker 11: the May nine Victory Day Parade there was just one

546
00:27:59,560 --> 00:28:03,000
Speaker 11: tank on display, and that was a Soviet hero from

547
00:28:03,080 --> 00:28:06,640
Speaker 11: the nineteen forties, right where they normally have hundreds of them.

548
00:28:06,760 --> 00:28:10,040
Speaker 11: So people must be questioning that, Angela.

549
00:28:10,520 --> 00:28:13,439
Speaker 1: You know, the scenario that I keep coming back to,

550
00:28:13,480 --> 00:28:14,880
Speaker 1: and I think a lot of folks do, is it's

551
00:28:14,960 --> 00:28:18,239
Speaker 1: just there's just no end insight and this is going

552
00:28:18,280 --> 00:28:20,919
Speaker 1: to be a stalemate, and boy, and nobody wants to

553
00:28:20,960 --> 00:28:25,280
Speaker 1: see that. I mean, is Putin prepared for that type

554
00:28:25,280 --> 00:28:29,720
Speaker 1: of situation where this could be a multi year stalemate.

555
00:28:30,880 --> 00:28:33,119
Speaker 11: So I think Putin understands that this will be a

556
00:28:33,160 --> 00:28:36,040
Speaker 11: long war, but what he still believes that Russia can

557
00:28:36,119 --> 00:28:40,400
Speaker 11: win because he believes that as time goes by, the

558
00:28:40,440 --> 00:28:44,720
Speaker 11: Western resolve to support Ukraine will weaken. He's looking to

559
00:28:44,960 --> 00:28:48,240
Speaker 11: our elections next year to see who's elected president, what

560
00:28:48,320 --> 00:28:51,600
Speaker 11: happens to both Houses of Congress and to a number

561
00:28:51,640 --> 00:28:54,960
Speaker 11: of European countries. Are people going to be willing still

562
00:28:55,000 --> 00:28:58,640
Speaker 11: to pay so much to support Ukraine. We're all running

563
00:28:58,680 --> 00:29:02,000
Speaker 11: out of ammunition, even we the United States, and tags

564
00:29:02,000 --> 00:29:05,200
Speaker 11: and things like that. So that's just calculus that in

565
00:29:05,240 --> 00:29:08,440
Speaker 11: the end Russia will prevail because the West one continues

566
00:29:08,440 --> 00:29:09,560
Speaker 11: supporting Ukraine.

567
00:29:09,840 --> 00:29:13,080
Speaker 12: Well, speaking of exactly what you're talking about Western support waning,

568
00:29:13,160 --> 00:29:15,320
Speaker 12: the big discussion in Washington right now is about the

569
00:29:15,360 --> 00:29:18,440
Speaker 12: debt ceiling. Angel I wonder how a debate like that

570
00:29:18,520 --> 00:29:22,120
Speaker 12: sits with you, given that it obviously takes resources and

571
00:29:22,160 --> 00:29:24,959
Speaker 12: attention away from what's going on in the ground on

572
00:29:25,000 --> 00:29:26,000
Speaker 12: the ground in Ukraine.

573
00:29:27,000 --> 00:29:30,280
Speaker 11: Well, I mean, it's a very important domestic issue for us,

574
00:29:30,480 --> 00:29:34,840
Speaker 11: you know, determining our future. So it's clear that, you know,

575
00:29:34,960 --> 00:29:38,960
Speaker 11: I think it's it's commendable that Ukraine had disappeared, you know,

576
00:29:39,080 --> 00:29:41,440
Speaker 11: from the media, with all these other things going on,

577
00:29:42,160 --> 00:29:43,959
Speaker 11: and so I think it's just important to keep as

578
00:29:44,040 --> 00:29:46,640
Speaker 11: much focus on that as you can, given all the

579
00:29:46,760 --> 00:29:48,280
Speaker 11: domestic priorities that we have.

580
00:29:49,160 --> 00:29:52,160
Speaker 1: Andrew from your sources and the folks you speak with.

581
00:29:52,680 --> 00:29:55,480
Speaker 1: Is there any scenario or what are the odds that

582
00:29:56,120 --> 00:29:59,040
Speaker 1: Ukraine and this counter offensive could have a just a

583
00:29:59,200 --> 00:30:03,719
Speaker 1: breakout per performance and really push Russia back and you know,

584
00:30:03,800 --> 00:30:06,880
Speaker 1: if not completely defeat them, make it all but certain.

585
00:30:06,960 --> 00:30:09,120
Speaker 1: Is there any realistic chance that they could have that

586
00:30:09,240 --> 00:30:09,880
Speaker 1: kind of success.

587
00:30:10,800 --> 00:30:13,600
Speaker 11: I mean, it is possible. We don't know exactly how

588
00:30:13,640 --> 00:30:17,640
Speaker 11: they're going to conduct this counter offensive. You know, their

589
00:30:17,840 --> 00:30:21,280
Speaker 11: military has performed surprisingly well really since the beginning of

590
00:30:21,280 --> 00:30:26,160
Speaker 11: the war, So it's possible. I don't think people in

591
00:30:26,200 --> 00:30:30,680
Speaker 11: this country think that it's very likely, but it's possible, Angela.

592
00:30:30,920 --> 00:30:33,720
Speaker 1: You know, I know the next big shoot to drop

593
00:30:33,720 --> 00:30:37,840
Speaker 1: as it relates to armaments would be aircraft, most notably

594
00:30:37,880 --> 00:30:42,600
Speaker 1: fixed wing aircraft. Is there any scenario or is there

595
00:30:42,600 --> 00:30:43,840
Speaker 1: a scenario where you think.

596
00:30:43,960 --> 00:30:46,640
Speaker 3: The US would would go that route, make that step.

597
00:30:47,560 --> 00:30:50,240
Speaker 11: Well, so far that Biden administration and President Biden has

598
00:30:50,240 --> 00:30:53,360
Speaker 11: said that we're not going to supply the Ukrainians with

599
00:30:53,440 --> 00:30:57,000
Speaker 11: these spider aircraft. On the other hand, the British are

600
00:30:57,080 --> 00:30:59,880
Speaker 11: going to There is a debate going on in this country.

601
00:31:00,280 --> 00:31:01,960
Speaker 11: And if you look at the pattern of what we've

602
00:31:02,000 --> 00:31:04,880
Speaker 11: done for Ukraine since the war began, often we've been

603
00:31:05,000 --> 00:31:07,600
Speaker 11: slow saying yes, but then in the end we've done it.

604
00:31:07,720 --> 00:31:10,040
Speaker 11: So I wouldn't rule out but we will supply the

605
00:31:10,120 --> 00:31:13,120
Speaker 11: Ukrainians with this air with just these aircraft. But at

606
00:31:13,160 --> 00:31:15,280
Speaker 11: the moment it's not on the cards.

607
00:31:16,080 --> 00:31:19,720
Speaker 12: And Angela, give us your six months Outlook, what do

608
00:31:19,760 --> 00:31:22,000
Speaker 12: you think the headline is going to be when we

609
00:31:22,040 --> 00:31:23,360
Speaker 12: bring you on six months.

610
00:31:23,080 --> 00:31:27,880
Speaker 11: From now, Well, hopefully the headline would be the Russians

611
00:31:27,880 --> 00:31:31,080
Speaker 11: have had to retreat under the Ukrainians have taken back

612
00:31:31,120 --> 00:31:32,040
Speaker 11: some more territory.

613
00:31:32,880 --> 00:31:36,920
Speaker 1: And Angela, mister Putin, before we let go, just what

614
00:31:36,960 --> 00:31:39,000
Speaker 1: do you think you know, you've done so much work

615
00:31:39,640 --> 00:31:41,880
Speaker 1: with with your book on mister Putin, what do you

616
00:31:41,880 --> 00:31:45,120
Speaker 1: think his mindset is these days?

617
00:31:46,520 --> 00:31:49,200
Speaker 11: Well? I do believe that he believes he's a war

618
00:31:49,240 --> 00:31:52,280
Speaker 11: with NATO and the United States and that Ukraine is

619
00:31:52,360 --> 00:31:55,240
Speaker 11: just a porn in this and he thinks that the

620
00:31:55,400 --> 00:31:58,760
Speaker 11: US and NATO is our out to get Russia. He's

621
00:31:58,800 --> 00:32:01,600
Speaker 11: now saying that you know, the war was begun by NATA,

622
00:32:01,600 --> 00:32:04,400
Speaker 11: which of course is completely not true. And so it's

623
00:32:04,440 --> 00:32:07,320
Speaker 11: you know, it's a besiege fortress for him, but it's

624
00:32:07,360 --> 00:32:10,320
Speaker 11: still one where apparently he believes that Russia will prevail.

625
00:32:11,600 --> 00:32:13,320
Speaker 1: Just amazing. All right, Angela, thank you so much for

626
00:32:13,400 --> 00:32:15,520
Speaker 1: joining us. Angela Stentz, she's a senior fellow at the

627
00:32:15,520 --> 00:32:16,840
Speaker 1: Brookings Institute.

628
00:32:17,520 --> 00:32:18,480
Speaker 3: Really a good.

629
00:32:18,360 --> 00:32:20,560
Speaker 1: View on what's going on over there in Ukraine. She's

630
00:32:20,600 --> 00:32:23,200
Speaker 1: the author of the book Putin's World, Russia against the

631
00:32:23,200 --> 00:32:25,560
Speaker 1: West and with the Rest, and that certainly seems to

632
00:32:25,600 --> 00:32:26,320
Speaker 1: be what's playing out.

633
00:32:26,520 --> 00:32:29,640
Speaker 7: You're listening to the tape catch aur live program Bloomberg

634
00:32:29,680 --> 00:32:33,280
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

635
00:32:33,320 --> 00:32:35,360
Speaker 7: tune in app, Bloomberg dot Com.

636
00:32:35,120 --> 00:32:36,560
Speaker 13: And the Bloomberg Business App.

637
00:32:36,600 --> 00:32:39,400
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00:32:39,440 --> 00:32:44,440
Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

639
00:32:45,720 --> 00:32:47,360
Speaker 3: Let's talk about the Ito market.

640
00:32:47,400 --> 00:32:50,000
Speaker 1: Brian Lynch Joints, and she says of market insight at

641
00:32:50,000 --> 00:32:52,760
Speaker 1: Equity Zen Brand, thanks for joining us in our Bloomberg

642
00:32:52,800 --> 00:32:55,200
Speaker 1: Interactive Brokers studio. You get a gold star for coming in,

643
00:32:55,320 --> 00:32:57,880
Speaker 1: not phoning it in like a lot of people want

644
00:32:57,960 --> 00:32:58,120
Speaker 1: to do.

645
00:32:58,960 --> 00:33:00,680
Speaker 3: Brand. Just tell us what you guys, do it equities

646
00:33:00,760 --> 00:33:01,920
Speaker 3: in here, sure.

647
00:33:01,720 --> 00:33:04,720
Speaker 14: So thanks for having me and Equity Zen. We're pre

648
00:33:04,840 --> 00:33:09,280
Speaker 14: IPO investment platform, so we help both accredited investors and

649
00:33:09,520 --> 00:33:13,360
Speaker 14: institutions invest in private companies while they're still in their

650
00:33:13,400 --> 00:33:16,360
Speaker 14: late stages. And we also help shareholders sell their shares

651
00:33:16,680 --> 00:33:19,000
Speaker 14: and get liquidity while their companies are still private.

652
00:33:19,520 --> 00:33:22,440
Speaker 12: So how's the IPO market look in particularly after some

653
00:33:22,520 --> 00:33:24,240
Speaker 12: of the banking stuff we just went through.

654
00:33:24,440 --> 00:33:28,320
Speaker 14: Yeah, I would say the IPO window is not wide open,

655
00:33:28,520 --> 00:33:31,120
Speaker 14: but we're starting to see it crack open a bit.

656
00:33:31,920 --> 00:33:35,040
Speaker 14: As you'd mentioned, ken View, is this successful IPO that

657
00:33:35,120 --> 00:33:37,960
Speaker 14: we had last week that was the largest IPO we've

658
00:33:37,960 --> 00:33:40,520
Speaker 14: had in the US since Rivian in twenty twenty one.

659
00:33:41,120 --> 00:33:43,440
Speaker 14: Traded up twenty two percent on its first day. So

660
00:33:43,840 --> 00:33:46,479
Speaker 14: that's a good indicator for some of these companies who

661
00:33:46,520 --> 00:33:50,080
Speaker 14: are sitting on the sidelines. We've got the VIS trading

662
00:33:50,200 --> 00:33:54,160
Speaker 14: or measuring more at seventeen or so. The NAZAC had

663
00:33:54,160 --> 00:33:56,040
Speaker 14: a bit of a rally this year, so there are

664
00:33:56,040 --> 00:33:58,640
Speaker 14: some positive indicators, but there's still a lot of uncertainty

665
00:33:58,680 --> 00:34:02,680
Speaker 14: in the market even where rates are given the state

666
00:34:02,680 --> 00:34:04,959
Speaker 14: of inflation and the fact that there just haven't been

667
00:34:05,000 --> 00:34:05,840
Speaker 14: a lot of IPOs.

668
00:34:06,120 --> 00:34:10,000
Speaker 1: Yeah, and it's interesting, I gotta think and just listening

669
00:34:10,040 --> 00:34:12,160
Speaker 1: from the conference calls for a lot of big investment banks,

670
00:34:12,440 --> 00:34:15,279
Speaker 1: the pipeline is just bulging. I mean there's a lot

671
00:34:15,280 --> 00:34:17,239
Speaker 1: of company because a lot of companies have they've been

672
00:34:17,280 --> 00:34:21,279
Speaker 1: waiting for twelve eighteen months for this market to open up.

673
00:34:21,440 --> 00:34:24,799
Speaker 1: So what are you what's your activity been as you

674
00:34:24,800 --> 00:34:27,200
Speaker 1: talk to companies, as you're talking to employees about I

675
00:34:27,239 --> 00:34:29,960
Speaker 1: need to get some liquidity in my investments. Are you

676
00:34:30,000 --> 00:34:33,239
Speaker 1: seeing a pickup and activity in your business because they

677
00:34:33,239 --> 00:34:35,160
Speaker 1: can't get liquid in the public markets.

678
00:34:35,680 --> 00:34:39,880
Speaker 14: Absolutely, so there is huge pens up demand for liquidity.

679
00:34:39,960 --> 00:34:43,360
Speaker 14: You think about it. There are over twelve hundred unicorn companies,

680
00:34:43,360 --> 00:34:46,839
Speaker 14: so these companies valued at over a billion dollars three

681
00:34:46,920 --> 00:34:50,359
Speaker 14: trillion in value amongst these companies, and many, as you said,

682
00:34:50,400 --> 00:34:53,480
Speaker 14: expected to have an exit twelve eighteen months ago and

683
00:34:53,719 --> 00:34:56,440
Speaker 14: that just hasn't happened. So in the meantime, we are

684
00:34:56,480 --> 00:34:59,160
Speaker 14: talking to a lot of companies who realize that they

685
00:34:59,200 --> 00:35:03,799
Speaker 14: are only early shareholders who need liquidity, and then the

686
00:35:03,840 --> 00:35:07,879
Speaker 14: shareholders directly themselves, who on an individual level are maybe

687
00:35:08,000 --> 00:35:09,800
Speaker 14: trying to put a down payment on a house or

688
00:35:09,880 --> 00:35:13,680
Speaker 14: payoff student loans. And on a more institutional level, you've

689
00:35:13,680 --> 00:35:17,840
Speaker 14: got early stage investors who are looking to recycle capital

690
00:35:17,880 --> 00:35:20,800
Speaker 14: into new investments. So there's a huge need for liquidity

691
00:35:20,840 --> 00:35:24,480
Speaker 14: and an equity zene. We're really addressing that by brokering

692
00:35:24,520 --> 00:35:26,720
Speaker 14: these secondary transactions in the private markets.

693
00:35:27,200 --> 00:35:30,440
Speaker 12: Have any of those liquidity challenges though, sort of changed

694
00:35:30,480 --> 00:35:33,640
Speaker 12: the calculation for folks who are considering an IPO but

695
00:35:33,680 --> 00:35:36,120
Speaker 12: that are not sure yet. Have you seen a change

696
00:35:36,160 --> 00:35:37,360
Speaker 12: in that sort of thinking?

697
00:35:38,160 --> 00:35:42,160
Speaker 14: Yeah, I would say the IPO market didn't seem so

698
00:35:42,360 --> 00:35:46,520
Speaker 14: welcoming for companies, and most companies have been sitting on

699
00:35:46,560 --> 00:35:49,600
Speaker 14: the sidelines. But I think some of the positive indicators

700
00:35:49,920 --> 00:35:55,120
Speaker 14: we've seen are giving companies more food for thought. Maybe

701
00:35:55,120 --> 00:35:57,239
Speaker 14: this is something that we could do in late Q three,

702
00:35:57,640 --> 00:35:59,960
Speaker 14: early Q four. So we see a lot of companies

703
00:36:00,160 --> 00:36:03,160
Speaker 14: putting the pieces in places in preparation for an IPO,

704
00:36:03,680 --> 00:36:07,160
Speaker 14: understanding both that they have capital needs and liquidity needs.

705
00:36:07,360 --> 00:36:10,160
Speaker 14: And as we hear more of these companies confidentially filing,

706
00:36:10,400 --> 00:36:12,760
Speaker 14: I think we'll start to see more of those stories happen.

707
00:36:13,200 --> 00:36:16,799
Speaker 1: Silicon Valley Bank, What did the mise of Silicon Valley

708
00:36:16,800 --> 00:36:20,320
Speaker 1: Bank The trouble's there. What did that mean for your company,

709
00:36:20,400 --> 00:36:23,000
Speaker 1: your market, this pre IPO trading market.

710
00:36:23,360 --> 00:36:26,200
Speaker 14: Yeah, I think one of the main things we've seen

711
00:36:26,640 --> 00:36:30,640
Speaker 14: is that there's just less funding options because of this,

712
00:36:30,920 --> 00:36:34,840
Speaker 14: available to private companies. So Silicon Valley Bank was the

713
00:36:34,960 --> 00:36:39,040
Speaker 14: lender of choice for private companies. They really owned that market,

714
00:36:39,120 --> 00:36:42,239
Speaker 14: and in their absence, there hasn't been another player who's

715
00:36:42,280 --> 00:36:46,000
Speaker 14: stepped up to help these private companies who are looking

716
00:36:46,040 --> 00:36:49,319
Speaker 14: to raise debt capital. That, coupled with the fact that

717
00:36:49,440 --> 00:36:52,799
Speaker 14: rates are up so capital isn't cheap anymore, has made

718
00:36:52,800 --> 00:36:56,200
Speaker 14: that a harder avenue for companies to pursue that are

719
00:36:56,239 --> 00:36:59,000
Speaker 14: trying to raise funding. So they can choose to raise

720
00:36:59,000 --> 00:37:02,800
Speaker 14: funding in the prime imry private market most of the time,

721
00:37:03,320 --> 00:37:07,279
Speaker 14: given where they probably last raised, that will be with

722
00:37:07,360 --> 00:37:11,279
Speaker 14: a down round versus these twenty twenty one valuations. But

723
00:37:11,320 --> 00:37:15,239
Speaker 14: then the other option is to IPO. So there's it's

724
00:37:15,280 --> 00:37:19,360
Speaker 14: a tricky decision and there's difficulties amongst the different routes,

725
00:37:19,680 --> 00:37:21,520
Speaker 14: but pros and cons depending on the needs of a

726
00:37:21,560 --> 00:37:22,280
Speaker 14: given company.

727
00:37:22,800 --> 00:37:24,960
Speaker 12: Well, you make a really good point though about nobody

728
00:37:25,000 --> 00:37:29,400
Speaker 12: really stepping up in the loss of an SVB, and

729
00:37:29,480 --> 00:37:32,160
Speaker 12: I wonder to what extent something like that. You know

730
00:37:32,360 --> 00:37:34,960
Speaker 12: the fact that we continue to talk about we're not

731
00:37:35,040 --> 00:37:38,120
Speaker 12: in a banking crisis, it's totally over. But given that

732
00:37:38,160 --> 00:37:43,600
Speaker 12: we haven't seen a kind of another SVB pop up,

733
00:37:43,640 --> 00:37:46,200
Speaker 12: does that make you question the idea that the banking

734
00:37:46,239 --> 00:37:48,040
Speaker 12: crisis is totally well and done.

735
00:37:48,640 --> 00:37:52,359
Speaker 14: Yeah, I'd say it's too soon to say that things are.

736
00:37:52,520 --> 00:37:54,800
Speaker 14: You know that it's completely in the rear view mirror.

737
00:37:55,440 --> 00:37:57,719
Speaker 14: We're seeing that with the First Republic. You know, it

738
00:37:57,760 --> 00:38:00,319
Speaker 14: seems like there was less coverage of that or you know,

739
00:38:00,520 --> 00:38:03,880
Speaker 14: didn't have the same you know, wow factor as svb's

740
00:38:03,880 --> 00:38:07,600
Speaker 14: collapse did. But a lot of these private companies, I

741
00:38:07,600 --> 00:38:10,040
Speaker 14: think it was a good lesson in you know, how

742
00:38:10,120 --> 00:38:13,200
Speaker 14: you diversify your banking partners, how do you make sure

743
00:38:13,320 --> 00:38:16,040
Speaker 14: that you have the right risk measures in place to

744
00:38:16,160 --> 00:38:19,920
Speaker 14: survive these types of events, and how do you sustain

745
00:38:20,000 --> 00:38:22,319
Speaker 14: your capital for periods of volatility.

746
00:38:22,920 --> 00:38:24,680
Speaker 1: You Know what I noticed during my career is my

747
00:38:25,160 --> 00:38:27,520
Speaker 1: friends on the West coast in Silicon Valley, it's much

748
00:38:27,560 --> 00:38:30,920
Speaker 1: more of an equity culture. They're much more comfortable with

749
00:38:31,000 --> 00:38:34,000
Speaker 1: taking equity risk and form of stock options, all that

750
00:38:34,040 --> 00:38:35,759
Speaker 1: type of stuff, whereas here on the East coast, my

751
00:38:35,800 --> 00:38:37,480
Speaker 1: Wall Street buddies just give us the cash.

752
00:38:37,760 --> 00:38:39,560
Speaker 3: I don't need any stock. I got enough exposure.

753
00:38:40,880 --> 00:38:43,000
Speaker 1: So but on the West coast, I mean, they're given

754
00:38:43,040 --> 00:38:45,799
Speaker 1: all these options and restricted stock units and.

755
00:38:45,800 --> 00:38:47,400
Speaker 3: All this stuff. I don't know what it is, but

756
00:38:47,400 --> 00:38:48,440
Speaker 3: that stuff expires.

757
00:38:49,000 --> 00:38:51,239
Speaker 1: What do I go back to my employer and say, hey,

758
00:38:51,360 --> 00:38:54,440
Speaker 1: this IPO windows closed. I got all these options and

759
00:38:54,560 --> 00:38:55,359
Speaker 1: RSUs and things.

760
00:38:55,640 --> 00:38:57,440
Speaker 3: Do you re up them? What happens or did they

761
00:38:57,480 --> 00:38:59,799
Speaker 3: just come to you and say, find me a bit

762
00:38:59,800 --> 00:39:00,479
Speaker 3: for these things.

763
00:39:01,360 --> 00:39:03,880
Speaker 14: It's a big problem that we're seeing a lot of

764
00:39:03,920 --> 00:39:06,400
Speaker 14: these companies that are still private, to your point, have

765
00:39:06,560 --> 00:39:09,279
Speaker 14: options that expire after ten years, and some of these

766
00:39:09,280 --> 00:39:13,359
Speaker 14: companies have been private for ten fifteen years, however long

767
00:39:13,360 --> 00:39:16,880
Speaker 14: it's been. So we're talking to both private companies who

768
00:39:16,920 --> 00:39:20,280
Speaker 14: are looking to put better programs in place to facilitate liquidity,

769
00:39:20,560 --> 00:39:23,120
Speaker 14: and then the employees themselves, who are taking it under

770
00:39:23,160 --> 00:39:26,480
Speaker 14: their own portion to go out and find a liquidity solution.

771
00:39:27,280 --> 00:39:30,920
Speaker 14: And I think, to your point, there's a need for

772
00:39:31,040 --> 00:39:34,920
Speaker 14: liquidity so that employees can actually feel the value of

773
00:39:34,960 --> 00:39:37,839
Speaker 14: these shares and realize, Okay, these are worth something. So

774
00:39:38,280 --> 00:39:40,640
Speaker 14: maybe I'm not getting the cash up front, but these

775
00:39:40,680 --> 00:39:44,320
Speaker 14: shares actually have value and there's a reason behind this

776
00:39:44,400 --> 00:39:47,240
Speaker 14: sweat equity. So I think that's a really big important

777
00:39:47,280 --> 00:39:50,319
Speaker 14: consideration where the secondary market is helping.

778
00:39:50,800 --> 00:39:53,360
Speaker 1: People still want I mean, are you sensing a change

779
00:39:53,400 --> 00:39:57,080
Speaker 1: in I don't know, people maybe want more cash less

780
00:39:57,080 --> 00:39:59,640
Speaker 1: stock or do we still have that Particularly with some

781
00:39:59,680 --> 00:40:02,120
Speaker 1: of the you know, the technology companies, they really do

782
00:40:02,200 --> 00:40:06,400
Speaker 1: have that equity culture. If you will, that stock option culture,

783
00:40:06,440 --> 00:40:08,279
Speaker 1: I can get really hit it big. What are your

784
00:40:08,280 --> 00:40:10,520
Speaker 1: sense that people, maybe even after the pandemic, are saying,

785
00:40:10,680 --> 00:40:12,960
Speaker 1: I like a little bit more certainty in my life.

786
00:40:13,160 --> 00:40:13,359
Speaker 9: Yeah.

787
00:40:13,400 --> 00:40:17,560
Speaker 14: I would say that this current market environment has decreased

788
00:40:17,960 --> 00:40:22,560
Speaker 14: risk aversion generally speaking. So if that's for employees, for investors,

789
00:40:22,640 --> 00:40:25,719
Speaker 14: for the broader population, and I think.

790
00:40:26,400 --> 00:40:27,640
Speaker 12: It's not it used to be.

791
00:40:27,719 --> 00:40:29,960
Speaker 14: Maybe this thought of you join a startup, you're going

792
00:40:29,960 --> 00:40:32,080
Speaker 14: to get equity, it's going to be worth millions, and

793
00:40:32,280 --> 00:40:35,319
Speaker 14: you know that's the story that was sold and that's

794
00:40:35,360 --> 00:40:37,279
Speaker 14: not going to be the case for all companies. So

795
00:40:37,600 --> 00:40:41,000
Speaker 14: even as an employee, similar to what investors are doing,

796
00:40:41,320 --> 00:40:43,360
Speaker 14: you maybe have to do a bit more due diligence

797
00:40:43,400 --> 00:40:46,160
Speaker 14: and what is the runway for this company, what is

798
00:40:46,200 --> 00:40:49,520
Speaker 14: the growth potential, what do their financials look like? And

799
00:40:49,640 --> 00:40:51,600
Speaker 14: is this where I want to invest my time and

800
00:40:51,640 --> 00:40:54,360
Speaker 14: my sweat equity with the hope that that's worth something

801
00:40:54,360 --> 00:40:54,759
Speaker 14: one day.

802
00:40:55,280 --> 00:40:57,520
Speaker 12: Right, Like if you look at a BuzzFeed, for example,

803
00:40:57,680 --> 00:40:59,760
Speaker 12: I think a lot of people were excited about the IPO,

804
00:40:59,840 --> 00:41:01,920
Speaker 12: but then oh, we have to cut costs, so the

805
00:41:01,960 --> 00:41:03,120
Speaker 12: news division is over.

806
00:41:03,200 --> 00:41:06,440
Speaker 1: Right, exactly, So is there liquidity? How is the liquidity

807
00:41:06,440 --> 00:41:08,320
Speaker 1: in your market? Which is kind of this pre market

808
00:41:08,360 --> 00:41:09,720
Speaker 1: trading of some of these stocks.

809
00:41:10,520 --> 00:41:13,640
Speaker 14: Yeah, So what we saw a lot of last year

810
00:41:13,760 --> 00:41:16,200
Speaker 14: was that the bid ask spread was just really wide

811
00:41:16,280 --> 00:41:19,600
Speaker 14: because sellers were still holding on to these twenty twenty

812
00:41:19,600 --> 00:41:22,719
Speaker 14: one valuations and saying I'm not selling, you know, my

813
00:41:22,840 --> 00:41:25,799
Speaker 14: shares at a discount, where investors were saying, look, it's

814
00:41:25,800 --> 00:41:28,840
Speaker 14: what's happened in the public markets. Companies are trading down

815
00:41:29,000 --> 00:41:32,759
Speaker 14: thirty forty percent. I'm not buying at these prices. So

816
00:41:33,360 --> 00:41:36,040
Speaker 14: it was a bit of, you know, a back and

817
00:41:36,120 --> 00:41:39,200
Speaker 14: forth between the two. And we're at a place now

818
00:41:39,280 --> 00:41:43,760
Speaker 14: where markets are being made more and trades are happening

819
00:41:43,880 --> 00:41:46,759
Speaker 14: on average out of forty one percent discount to a

820
00:41:46,800 --> 00:41:49,680
Speaker 14: company's last funding round, on our platform. So that's a

821
00:41:49,680 --> 00:41:52,560
Speaker 14: bit of where the market is as sellers capitulate a

822
00:41:52,560 --> 00:41:55,520
Speaker 14: bit and understand that the market has certainly changed.

823
00:41:55,560 --> 00:41:58,759
Speaker 1: That's what you call a down round. Brian Lynch, thank

824
00:41:58,760 --> 00:42:01,200
Speaker 1: you so much for joining us. Really preciate it, Brion Lynch.

825
00:42:01,200 --> 00:42:03,920
Speaker 1: She's head of market insight at equity Zen kind of

826
00:42:03,960 --> 00:42:06,640
Speaker 1: dealing in that kind of pre ipo marketplace for a

827
00:42:06,680 --> 00:42:09,080
Speaker 1: lot of these companies and a lot of individuals looking

828
00:42:09,080 --> 00:42:12,840
Speaker 1: for some liquidity with their stockholding, so always good to

829
00:42:12,880 --> 00:42:14,440
Speaker 1: get an update on that market.

830
00:42:14,800 --> 00:42:17,880
Speaker 7: You're listening to the tape Cat's are live program Bloomberg

831
00:42:17,960 --> 00:42:21,520
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

832
00:42:21,600 --> 00:42:23,560
Speaker 7: tune in app, Bloomberg dot com, and.

833
00:42:23,520 --> 00:42:24,840
Speaker 13: The Bloomberg Business App.

834
00:42:24,880 --> 00:42:27,680
Speaker 7: You can also listen live on Amazon Alexa from our

835
00:42:27,680 --> 00:42:32,760
Speaker 7: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

836
00:42:34,440 --> 00:42:37,120
Speaker 1: Let's talk commodities. So when you want to talk commodities,

837
00:42:37,160 --> 00:42:37,520
Speaker 1: you got.

838
00:42:37,400 --> 00:42:38,040
Speaker 3: To do a couple of things.

839
00:42:38,560 --> 00:42:42,239
Speaker 1: GLCO go for those of you playing in front of

840
00:42:42,239 --> 00:42:44,800
Speaker 1: a Bloomberg terminal, that gives you the global commodities prices

841
00:42:44,800 --> 00:42:47,319
Speaker 1: for energy, metals, ags, all that kind of stuff. It

842
00:42:47,400 --> 00:42:49,000
Speaker 1: just puts it up on one screen and very helpful

843
00:42:49,040 --> 00:42:50,680
Speaker 1: to me. And then the second thing you got to

844
00:42:50,719 --> 00:42:52,320
Speaker 1: do is you got to get a couple of experts

845
00:42:52,440 --> 00:42:55,200
Speaker 1: from Bloomberg Intelligence, and we got them in studio, both

846
00:42:55,239 --> 00:42:58,880
Speaker 1: of them. Mike McLoone senior macro strategist for Bloomberg Intelligence

847
00:42:59,320 --> 00:43:01,000
Speaker 1: based in my maybe. We got them up here for

848
00:43:01,000 --> 00:43:02,960
Speaker 1: a week, so we pull them in this studio whatever

849
00:43:03,000 --> 00:43:06,040
Speaker 1: we can. Fernando Valle, he covers all the energy stuff

850
00:43:06,040 --> 00:43:10,719
Speaker 1: for Bloomberg Intelligence. So we got YouTube gentlemen here with us.

851
00:43:11,320 --> 00:43:15,480
Speaker 1: Let's start with oil. I don't know, let's go with you, Fernando.

852
00:43:15,520 --> 00:43:18,320
Speaker 1: I got WTI crude oil seventy two bucks a barrel.

853
00:43:18,520 --> 00:43:21,200
Speaker 1: It wasn't eighty when your friends at OPEC cut production,

854
00:43:21,320 --> 00:43:22,040
Speaker 1: but we're.

855
00:43:21,840 --> 00:43:23,520
Speaker 3: Back down to seventy two.

856
00:43:23,640 --> 00:43:26,759
Speaker 1: What's the outlook for kind of crude and across the

857
00:43:26,840 --> 00:43:27,440
Speaker 1: energy space.

858
00:43:27,960 --> 00:43:30,360
Speaker 15: Well, today we got some really positive numbers on the

859
00:43:30,400 --> 00:43:32,600
Speaker 15: gasoline and diesel side that can probably give it some

860
00:43:33,280 --> 00:43:36,600
Speaker 15: give it a little bit of respite from the pain

861
00:43:36,680 --> 00:43:40,160
Speaker 15: that it suffered since the OPEC cut, and especially because

862
00:43:40,239 --> 00:43:44,759
Speaker 15: there's the highest net short position in derivatives for both

863
00:43:45,000 --> 00:43:47,680
Speaker 15: WTI and diesel in over three years. So we see

864
00:43:47,680 --> 00:43:51,399
Speaker 15: a real coiled technical situation that could generate some short

865
00:43:51,480 --> 00:43:54,600
Speaker 15: term positive momentum. But you know, as Mike has talked

866
00:43:54,760 --> 00:43:58,160
Speaker 15: a lot and myself as well, longer term is really

867
00:43:58,160 --> 00:44:01,000
Speaker 15: about the economy. In the economy is showing signs that

868
00:44:01,040 --> 00:44:04,239
Speaker 15: it's slowing, we still don't see the FED pivoting to

869
00:44:04,360 --> 00:44:08,480
Speaker 15: cutting rates. They may slow down their hikes and ultimately

870
00:44:08,480 --> 00:44:11,960
Speaker 15: that will impact consumption and that will lead to oil

871
00:44:11,960 --> 00:44:15,560
Speaker 15: prices to struggle to break over eighty through the remainder

872
00:44:15,600 --> 00:44:16,000
Speaker 15: of the year.

873
00:44:16,280 --> 00:44:19,280
Speaker 1: And Maddie, here's the Mike McLoone call. As I remember

874
00:44:19,360 --> 00:44:22,480
Speaker 1: now may have changed long gold, short oil.

875
00:44:22,880 --> 00:44:26,480
Speaker 10: Still and copper too. Long gold, short oil, short copper.

876
00:44:26,600 --> 00:44:29,319
Speaker 10: It's basically long gold, short hour commodities.

877
00:44:28,960 --> 00:44:32,080
Speaker 3: Long gold short commodities. Why am I doing that?

878
00:44:32,600 --> 00:44:35,280
Speaker 10: The bent towards recession, so let's liquid.

879
00:44:35,280 --> 00:44:35,959
Speaker 3: It tells us.

880
00:44:35,840 --> 00:44:39,879
Speaker 10: From commodities right now, Copper is basically on the cust

881
00:44:39,960 --> 00:44:43,200
Speaker 10: of dropping on the year. It's about unchanged and gold's

882
00:44:43,239 --> 00:44:45,319
Speaker 10: up eleven percent. Now some of that is because we

883
00:44:45,320 --> 00:44:47,680
Speaker 10: have this budget impass coming out, but it's the current

884
00:44:47,719 --> 00:44:50,760
Speaker 10: trajectory and the Fed is still tightening, has been tightening

885
00:44:50,840 --> 00:44:54,480
Speaker 10: typically for this to reverse, it's an indicase of going

886
00:44:54,520 --> 00:44:57,359
Speaker 10: to this recession. We need massive amount of liquidity from

887
00:44:57,400 --> 00:45:00,279
Speaker 10: the FED long and variable lags from easing, and they

888
00:45:00,280 --> 00:45:03,440
Speaker 10: haven't even started that. So from a commoditis standpoint, I

889
00:45:03,480 --> 00:45:05,640
Speaker 10: look at crude oil down ten percent on this year,

890
00:45:05,719 --> 00:45:08,759
Speaker 10: could actually drop another twenty or thirty percent only if

891
00:45:08,760 --> 00:45:11,360
Speaker 10: we don't head for recession and our colleague on along

892
00:45:11,400 --> 00:45:16,160
Speaker 10: from Blueberg intelligences, that starts in July, and then I

893
00:45:16,200 --> 00:45:19,360
Speaker 10: look at it is what stops that, and I'm afraid

894
00:45:19,440 --> 00:45:21,000
Speaker 10: with this credit crisis, it's just going.

895
00:45:20,960 --> 00:45:21,439
Speaker 3: To get worse.

896
00:45:21,719 --> 00:45:24,399
Speaker 12: Can I ask the dumb question here? Gas up three

897
00:45:24,440 --> 00:45:27,000
Speaker 12: percent in the CPI print today, But based on what

898
00:45:27,080 --> 00:45:29,480
Speaker 12: you're saying, I think, yay, maybe my gas is going

899
00:45:29,520 --> 00:45:30,279
Speaker 12: to get cheaper now.

900
00:45:30,520 --> 00:45:32,560
Speaker 10: So let's go to PPI tomorrow when you want to

901
00:45:32,560 --> 00:45:34,800
Speaker 10: talk commodities. Fernando smiling. If we can't see him, I

902
00:45:34,880 --> 00:45:38,400
Speaker 10: can't here, can't see him on radio, but producer pricing

903
00:45:38,560 --> 00:45:41,040
Speaker 10: is going to come tomorrow. That's a high beta version

904
00:45:41,080 --> 00:45:44,520
Speaker 10: of PPI. It's basically about two beta. It means two

905
00:45:44,560 --> 00:45:47,279
Speaker 10: times of CPI and it's dropping at the fastest pace

906
00:45:47,360 --> 00:45:51,000
Speaker 10: in history. It's highly correlated the commodities. Commodities are collapsing.

907
00:45:51,040 --> 00:45:53,439
Speaker 10: I think it's going to mimic. The lowest ever, which

908
00:45:53,520 --> 00:45:56,319
Speaker 10: was from July year over year measure was July two

909
00:45:56,320 --> 00:45:59,960
Speaker 10: thousand and nine PPI that month that for that year

910
00:46:00,000 --> 00:46:03,080
Speaker 10: measures down six point nine percent. We're heading towards zech

911
00:46:03,280 --> 00:46:05,839
Speaker 10: is when we get to July thirteenth this year, it'll

912
00:46:05,840 --> 00:46:08,680
Speaker 10: measure from the peak it'll be for June PPI. That's

913
00:46:08,680 --> 00:46:11,239
Speaker 10: when crudeill peaked and commodities peak last year. So what

914
00:46:11,280 --> 00:46:14,360
Speaker 10: we're seeing is a major flush and indication of a

915
00:46:14,480 --> 00:46:17,239
Speaker 10: lack of demand pull for nano mention. It might have

916
00:46:17,280 --> 00:46:20,040
Speaker 10: supply issues, but that lack of the world's tilting towards

917
00:46:20,080 --> 00:46:22,839
Speaker 10: that recession. Commodities are reflecting it. So I think you're

918
00:46:22,880 --> 00:46:24,760
Speaker 10: fully going to see more that deflationary trends.

919
00:46:24,760 --> 00:46:28,279
Speaker 1: All right, against my better judgment, But I'm hearing that

920
00:46:28,320 --> 00:46:30,439
Speaker 1: you two guys are working on some joint research together.

921
00:46:30,440 --> 00:46:33,200
Speaker 1: I got an energy analyst who actually covers companies for

922
00:46:33,239 --> 00:46:35,360
Speaker 1: living commodity strategist.

923
00:46:35,680 --> 00:46:37,080
Speaker 3: What kind of trouble you guys getting into.

924
00:46:37,440 --> 00:46:41,080
Speaker 15: Well, we're really discussing the outlook for commodities based on

925
00:46:41,200 --> 00:46:45,839
Speaker 15: both you know, Mike's top down in my bottoms up analysis,

926
00:46:46,120 --> 00:46:48,920
Speaker 15: and you know, speaking on the supply side, you're also

927
00:46:49,040 --> 00:46:51,839
Speaker 15: because of the lower energy prices in Europe, you've had

928
00:46:51,840 --> 00:46:55,600
Speaker 15: an increase in refinery throughput in Europe. What that means

929
00:46:55,719 --> 00:46:59,120
Speaker 15: is we're going to get more imports into the East Coast. Remember,

930
00:46:59,320 --> 00:47:01,360
Speaker 15: we can't really ship a lot of products from the

931
00:47:01,360 --> 00:47:01,839
Speaker 15: Gulf Coast.

932
00:47:01,840 --> 00:47:05,120
Speaker 3: And I get like the President, I'm fixing that we have.

933
00:47:05,040 --> 00:47:07,960
Speaker 15: My vote, okay, and so we get it a lot

934
00:47:08,000 --> 00:47:11,799
Speaker 15: from Europe. And with that utilization going up, uh, then

935
00:47:11,960 --> 00:47:14,600
Speaker 15: chances are that we are going to see lower gasoline

936
00:47:14,600 --> 00:47:17,080
Speaker 15: prices in the East Coast. But again, the biggest driver

937
00:47:17,600 --> 00:47:20,719
Speaker 15: of gasoling prices is really oil price. And then the

938
00:47:20,760 --> 00:47:23,800
Speaker 15: only caveat that I say is that we have the

939
00:47:24,400 --> 00:47:27,839
Speaker 15: biggest net short position in three years. When we get

940
00:47:27,840 --> 00:47:30,400
Speaker 15: positive numbers like we did today, that could lead to

941
00:47:30,440 --> 00:47:34,120
Speaker 15: a temporary unwind because everyone's expecting negative numbers and then

942
00:47:34,160 --> 00:47:36,840
Speaker 15: when they don't come, they have to cover their shorts

943
00:47:37,080 --> 00:47:39,360
Speaker 15: and that can create a short squeeze in higher prices.

944
00:47:39,440 --> 00:47:40,280
Speaker 13: But that's temporary.

945
00:47:40,320 --> 00:47:42,680
Speaker 15: The fundamentals are really not there right now. As Mike

946
00:47:42,840 --> 00:47:45,560
Speaker 15: was mentioning on the demand poll, and then higher supply.

947
00:47:45,680 --> 00:47:47,200
Speaker 10: So I can fill up on that. And we're going

948
00:47:47,280 --> 00:47:51,600
Speaker 10: to probably be calling President Biden a crudel trading maestro,

949
00:47:52,280 --> 00:47:55,799
Speaker 10: because when he released the SPR last year, a strategic

950
00:47:56,920 --> 00:47:58,080
Speaker 10: got it, thank you?

951
00:47:58,120 --> 00:47:59,920
Speaker 1: Which are I just found out our bunch of k

952
00:48:00,320 --> 00:48:04,279
Speaker 1: under underground in like Oklahoma and Texas or Louisiana or something.

953
00:48:04,320 --> 00:48:09,640
Speaker 10: Good place to store cruel and sold is salt salt caverns.

954
00:48:09,640 --> 00:48:12,160
Speaker 3: No idea about that. It's a commodity thing.

955
00:48:13,200 --> 00:48:15,640
Speaker 10: But the key thing that we were published on is Fernando.

956
00:48:15,800 --> 00:48:17,920
Speaker 10: His bottom up always helps me with the data I

957
00:48:17,960 --> 00:48:19,560
Speaker 10: get into the macro. And I like to point out

958
00:48:19,560 --> 00:48:23,200
Speaker 10: if I've been focused on the massive over production of

959
00:48:23,400 --> 00:48:26,719
Speaker 10: North America, US and Canada crude oil liquid fields, member,

960
00:48:26,719 --> 00:48:28,360
Speaker 10: I come from the farm. I have to take ethanol

961
00:48:28,600 --> 00:48:31,920
Speaker 10: versus consumption that right now on an annual basis is

962
00:48:32,000 --> 00:48:36,640
Speaker 10: running about one point seven billion barrels. That's about five

963
00:48:36,800 --> 00:48:39,759
Speaker 10: times a current SPR. That's not an annual one year

964
00:48:39,840 --> 00:48:43,160
Speaker 10: so back at the the crisis, remember when we had

965
00:48:43,160 --> 00:48:44,319
Speaker 10: the financial crisis, it.

966
00:48:44,239 --> 00:48:45,080
Speaker 3: Was the opposite.

967
00:48:45,200 --> 00:48:48,040
Speaker 10: It was about deficit of four billion barrels. So we

968
00:48:48,080 --> 00:48:51,080
Speaker 10: have a massive oversupply in the US now Fernando points out,

969
00:48:51,360 --> 00:48:54,920
Speaker 10: that's the macro. There's issues with with you know, with

970
00:48:55,040 --> 00:48:57,680
Speaker 10: exports and imports, and you know it's a big country

971
00:48:57,680 --> 00:49:00,040
Speaker 10: in Canada. Crude ol comes exports to the Gulf. But

972
00:49:00,080 --> 00:49:03,040
Speaker 10: the fact is the SPR is not eating anymore except

973
00:49:03,040 --> 00:49:05,120
Speaker 10: for things like hurricanes, because we are no longer in

974
00:49:05,160 --> 00:49:06,200
Speaker 10: net we're net exporter.

975
00:49:06,920 --> 00:49:11,680
Speaker 1: So all right, how does the government restock this spr?

976
00:49:11,719 --> 00:49:13,560
Speaker 1: Did they send some guy downe in the pits and

977
00:49:13,560 --> 00:49:14,600
Speaker 1: he starts buying oil.

978
00:49:14,680 --> 00:49:15,920
Speaker 3: Well, here's the way I suggested.

979
00:49:16,000 --> 00:49:19,120
Speaker 10: That's why he's a maestro. When kamandis aren't backwardation, which

980
00:49:19,160 --> 00:49:23,440
Speaker 10: means the current price is higher than the further out price,

981
00:49:23,640 --> 00:49:27,400
Speaker 10: it's best to sell that. And that's what President Biden did. Enough,

982
00:49:27,400 --> 00:49:29,560
Speaker 10: if you're a trader, you can on paper by those

983
00:49:29,600 --> 00:49:33,120
Speaker 10: futures and reload on paper and just take the livery.

984
00:49:33,480 --> 00:49:35,840
Speaker 10: But he basically sold an average price last year of

985
00:49:35,840 --> 00:49:38,600
Speaker 10: Crudell's ninety three dollars of barrel. So it implies a

986
00:49:38,840 --> 00:49:42,680
Speaker 10: rough math that we brought in twenty billion dollars of revenue. Now,

987
00:49:42,719 --> 00:49:45,480
Speaker 10: if he buys back, if we buy back all those barrels,

988
00:49:45,480 --> 00:49:47,400
Speaker 10: which is about two hundred and twenty million barrels. I

989
00:49:47,400 --> 00:49:50,239
Speaker 10: think Fernano can confirm that that and be a net

990
00:49:50,280 --> 00:49:53,279
Speaker 10: cost of about fifteen billion dollars. So net net, the

991
00:49:53,280 --> 00:49:55,440
Speaker 10: president would have made five billion dollars if we do

992
00:49:55,560 --> 00:49:56,319
Speaker 10: that soon.

993
00:49:57,520 --> 00:49:57,719
Speaker 3: Wow.

994
00:49:58,080 --> 00:50:00,840
Speaker 1: I'd never thought about it that way, So I guess

995
00:50:01,040 --> 00:50:01,560
Speaker 1: we'll see that.

996
00:50:01,960 --> 00:50:03,320
Speaker 3: The only thing I do on energy, I mean, you

997
00:50:03,360 --> 00:50:04,200
Speaker 3: guys do all this stuff.

998
00:50:04,239 --> 00:50:07,200
Speaker 1: I just look at the daily national average gasoline price

999
00:50:07,239 --> 00:50:10,560
Speaker 1: for America comes from American Automobile Association. It's three dollars

1000
00:50:10,560 --> 00:50:12,600
Speaker 1: and fifty three cents, starting to trend down a little bit.

1001
00:50:12,719 --> 00:50:14,480
Speaker 1: That's my energy call. But you guys are the experts.

1002
00:50:14,640 --> 00:50:17,320
Speaker 1: We appreciate you coming in. Fernando Valley and Mike mcglohan,

1003
00:50:17,400 --> 00:50:19,680
Speaker 1: they cover all this energy stuff, all the commodity stuff.

1004
00:50:19,680 --> 00:50:22,759
Speaker 1: For Bloomberg Intelligence, they do some great joint research b

1005
00:50:23,000 --> 00:50:31,040
Speaker 1: I COOMD for the commodity stuff, and BIGNTOG that gets

1006
00:50:31,080 --> 00:50:33,799
Speaker 1: you all the integrated oil stuff. So you get that

1007
00:50:33,840 --> 00:50:34,920
Speaker 1: on Bloomberg Intelligence.

1008
00:50:35,200 --> 00:50:38,320
Speaker 7: You're listening to the tape cats are live program Bloomberg

1009
00:50:38,360 --> 00:50:41,960
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

1010
00:50:42,040 --> 00:50:44,120
Speaker 7: tune in app, Bloomberg dot Com.

1011
00:50:43,800 --> 00:50:45,239
Speaker 13: And the Bloomberg Business app.

1012
00:50:45,280 --> 00:50:48,120
Speaker 7: You can also listen live on Amazon Alexa from our

1013
00:50:48,120 --> 00:50:53,160
Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

1014
00:50:54,080 --> 00:50:56,600
Speaker 1: Let's talk about the hotel business kicking into the summer

1015
00:50:56,719 --> 00:50:57,600
Speaker 1: travel season.

1016
00:50:58,000 --> 00:50:58,839
Speaker 3: See what's happening there.

1017
00:50:58,880 --> 00:51:02,320
Speaker 1: We can do that with Patrick Pacious, CEO of Choice Hotels.

1018
00:51:02,320 --> 00:51:06,160
Speaker 1: That's a New York Stock Exchange listed company. CHH is

1019
00:51:06,200 --> 00:51:08,520
Speaker 1: a ticker to put into your Bloomberg terminal. I'm taking

1020
00:51:08,560 --> 00:51:10,319
Speaker 1: a look at it right now. It's done about three

1021
00:51:10,320 --> 00:51:13,279
Speaker 1: point six percent today, up about eight percent year to date.

1022
00:51:13,360 --> 00:51:15,879
Speaker 1: It's got a market cap of about six point two

1023
00:51:16,040 --> 00:51:20,680
Speaker 1: billion dollars. Patrick is the CEO, former Navy officer, so

1024
00:51:20,719 --> 00:51:23,920
Speaker 1: we thank him for service. But for me, the highlight

1025
00:51:24,000 --> 00:51:26,560
Speaker 1: of his resume is he is an undergraduate of the

1026
00:51:26,680 --> 00:51:30,320
Speaker 1: Duke University. Okay, so he can stay. Patrick, thanks so

1027
00:51:30,400 --> 00:51:31,880
Speaker 1: much for joining us here. I know you guys just

1028
00:51:31,920 --> 00:51:35,280
Speaker 1: reported some results here. What were the highlights.

1029
00:51:35,920 --> 00:51:38,640
Speaker 16: Yeah, so we had a very strong first quarter. Actually

1030
00:51:38,680 --> 00:51:43,719
Speaker 16: record revenue and record earnings. RevPAR which is revenue per

1031
00:51:43,760 --> 00:51:47,560
Speaker 16: available room, that's the earnings metric we use at the

1032
00:51:47,640 --> 00:51:51,200
Speaker 16: hotel space was up six percent in the first quarter,

1033
00:51:51,360 --> 00:51:54,399
Speaker 16: and that's pretty remarkable when you look at last year,

1034
00:51:54,480 --> 00:51:57,799
Speaker 16: our first quarter numbers were up ten percent over the

1035
00:51:57,840 --> 00:52:02,720
Speaker 16: pre pandemic levels. So we really see a significant pickup

1036
00:52:02,760 --> 00:52:05,799
Speaker 16: in both demand and in rate in our business, and

1037
00:52:05,840 --> 00:52:08,719
Speaker 16: it's flowing through to our hotels like comfort in and

1038
00:52:08,800 --> 00:52:10,800
Speaker 16: quality in Patrick.

1039
00:52:11,280 --> 00:52:13,680
Speaker 12: Just to ask the Bloomberg question, you guys are struggling

1040
00:52:13,719 --> 00:52:16,160
Speaker 12: a bit down the most in seven weeks here. What's

1041
00:52:16,200 --> 00:52:19,160
Speaker 12: the market getting wrong in its reaction to your earnings?

1042
00:52:19,920 --> 00:52:21,879
Speaker 16: Yeah, I think the market is probably trading a little

1043
00:52:21,920 --> 00:52:25,239
Speaker 16: bit more on macro than it is on looking at

1044
00:52:25,480 --> 00:52:27,880
Speaker 16: the bicro and so of what's going on. You know,

1045
00:52:27,920 --> 00:52:30,759
Speaker 16: when we talk about our long term fundamentals in the

1046
00:52:30,840 --> 00:52:34,279
Speaker 16: travel business right now, there are I call them the

1047
00:52:34,360 --> 00:52:38,799
Speaker 16: four rs. They're rising wages, retirements, remote work, and the

1048
00:52:38,800 --> 00:52:41,680
Speaker 16: rebuilding of America that is going to bring more room

1049
00:52:41,800 --> 00:52:45,319
Speaker 16: nights and more customers to the mid scale hotels, the

1050
00:52:45,360 --> 00:52:48,239
Speaker 16: economy hotels, the extent is stay hotels that we have.

1051
00:52:48,880 --> 00:52:52,759
Speaker 16: You look at rising wages. You know, in February, the

1052
00:52:53,320 --> 00:52:57,799
Speaker 16: Atlanta Fed Tracker shows the average median American salary is

1053
00:52:57,840 --> 00:53:01,399
Speaker 16: six and a half percent higher. Security costs of living

1054
00:53:01,440 --> 00:53:05,120
Speaker 16: adjustment was up eight point seven percent, so consumers have

1055
00:53:05,239 --> 00:53:09,000
Speaker 16: more money. People are retiring more. There's three and a

1056
00:53:09,040 --> 00:53:12,760
Speaker 16: half million people every year who are arriving at retirement age.

1057
00:53:13,120 --> 00:53:15,600
Speaker 16: They want their dollar to stretch further, So staying at

1058
00:53:15,640 --> 00:53:18,239
Speaker 16: a comfort in or a quality in when they get

1059
00:53:18,239 --> 00:53:21,319
Speaker 16: out on the road is important. And then you look

1060
00:53:21,320 --> 00:53:25,439
Speaker 16: at remote work, which has really been pretty interesting. It's

1061
00:53:25,440 --> 00:53:30,120
Speaker 16: spreading out, particularly leisure travel demand as well as business

1062
00:53:30,120 --> 00:53:33,799
Speaker 16: travel into the shoulder days of the weekend. So we

1063
00:53:33,880 --> 00:53:37,080
Speaker 16: have seen occupancy gains on Thursday night and Sunday night,

1064
00:53:37,640 --> 00:53:40,400
Speaker 16: which have traditionally not been part of the weekend of business.

1065
00:53:41,239 --> 00:53:44,200
Speaker 16: And then the rebuilding of America, whether it's the Infrastructure Bill,

1066
00:53:44,280 --> 00:53:48,919
Speaker 16: the Chips Act, the incredible amount of manufacturing construction that's

1067
00:53:48,960 --> 00:53:53,200
Speaker 16: going on across our country as companies are looking to

1068
00:53:53,239 --> 00:53:56,799
Speaker 16: bring the supply chain back home. We're really seeing all

1069
00:53:56,840 --> 00:54:00,719
Speaker 16: of that create demand in the long term hotels that

1070
00:54:01,280 --> 00:54:02,400
Speaker 16: are in our portfolio.

1071
00:54:02,719 --> 00:54:05,160
Speaker 1: So looking at your portfolio more, I guess on the

1072
00:54:05,160 --> 00:54:07,239
Speaker 1: affordable side, I guess you guys would characterize it, but

1073
00:54:07,239 --> 00:54:09,239
Speaker 1: I know you've had some plans to kind of lean

1074
00:54:09,280 --> 00:54:11,880
Speaker 1: in a little bit into this extended stay side of

1075
00:54:11,920 --> 00:54:13,680
Speaker 1: the business. Talk to us about that strategy and what

1076
00:54:13,680 --> 00:54:15,200
Speaker 1: the competitive landscape looks there.

1077
00:54:15,960 --> 00:54:20,440
Speaker 16: Yeah, it's really a fortunate mismatch between supply and demand.

1078
00:54:20,520 --> 00:54:25,120
Speaker 16: So demand for extended stay product, meaning a hotel room

1079
00:54:25,120 --> 00:54:27,600
Speaker 16: that has a kitchen to it, has a living area

1080
00:54:27,680 --> 00:54:31,560
Speaker 16: to it, is really double what the purpose built supply

1081
00:54:31,880 --> 00:54:34,959
Speaker 16: is in the United States, and so we have really

1082
00:54:35,040 --> 00:54:37,239
Speaker 16: leaned in, particularly in the last five years. We're the

1083
00:54:37,280 --> 00:54:41,920
Speaker 16: growth leader in that segment brands like Woodspring Suites, Everholme Suites,

1084
00:54:41,960 --> 00:54:45,480
Speaker 16: Mainstad Suburban and it's really for people who are staying

1085
00:54:45,520 --> 00:54:49,240
Speaker 16: twenty to thirty nights in a location, and the demand

1086
00:54:49,280 --> 00:54:52,919
Speaker 16: drivers for that are things like traveling nurses, folks who

1087
00:54:52,960 --> 00:54:56,160
Speaker 16: need to be on site in a particular location for

1088
00:54:56,200 --> 00:54:59,399
Speaker 16: more than a week's time and really having that mid

1089
00:54:59,440 --> 00:55:02,840
Speaker 16: mid price product for them is something consumers are looking

1090
00:55:02,840 --> 00:55:04,759
Speaker 16: for and businesses are looking for. And we've got some

1091
00:55:04,800 --> 00:55:06,160
Speaker 16: great brands to meet that need.

1092
00:55:06,360 --> 00:55:10,040
Speaker 1: But I mean, you've got some competition there, Marriott, Hilton, Hyatt,

1093
00:55:10,120 --> 00:55:10,719
Speaker 1: they're there too.

1094
00:55:10,760 --> 00:55:12,520
Speaker 3: How do you position yourself.

1095
00:55:12,880 --> 00:55:14,880
Speaker 16: Well, we really position it with we have a proven

1096
00:55:14,920 --> 00:55:17,080
Speaker 16: operating model. So it's one thing to say you're an

1097
00:55:17,120 --> 00:55:19,920
Speaker 16: extended stay hotel, but for us, five nights is not

1098
00:55:19,960 --> 00:55:23,719
Speaker 16: an extended stay. We're talking twenty nights, and that's really

1099
00:55:23,719 --> 00:55:25,880
Speaker 16: the base of business that we have in our hotels.

1100
00:55:26,200 --> 00:55:28,640
Speaker 16: We have a bit of a first mover advantage. We

1101
00:55:28,719 --> 00:55:32,719
Speaker 16: have a pretty effective install base of over four hundred hotels,

1102
00:55:33,040 --> 00:55:35,839
Speaker 16: and we've been growing the number of hotels in that

1103
00:55:35,960 --> 00:55:39,200
Speaker 16: segment at double digit compound annual growth rates and we

1104
00:55:39,239 --> 00:55:41,600
Speaker 16: expect that to last for the next five years.

1105
00:55:42,160 --> 00:55:44,600
Speaker 12: Paul brings up a great point about competition though, and

1106
00:55:44,680 --> 00:55:47,600
Speaker 12: the long term stay piece makes me think about Airbnb.

1107
00:55:48,400 --> 00:55:50,960
Speaker 12: Not a great outlook from them today. Is that good

1108
00:55:51,000 --> 00:55:52,920
Speaker 12: or bad news for you?

1109
00:55:52,920 --> 00:55:55,520
Speaker 16: You know, they really don't compete where we do, so

1110
00:55:55,600 --> 00:55:58,600
Speaker 16: there I think their average daily rate from a year

1111
00:55:58,600 --> 00:56:01,880
Speaker 16: ago was like one hundred and fifty dollars. Ours system

1112
00:56:01,920 --> 00:56:04,280
Speaker 16: wide is more like ninety eight dollars, so we're playing

1113
00:56:04,280 --> 00:56:06,799
Speaker 16: in a lower price point. We also play in a

1114
00:56:06,800 --> 00:56:10,799
Speaker 16: lot of secondary and tertiary travel markets where there's just

1115
00:56:10,960 --> 00:56:14,680
Speaker 16: less Airbnb inventory. Airbnb tends to be more urban, more

1116
00:56:14,719 --> 00:56:19,400
Speaker 16: destination type driven. And then our length of stay for

1117
00:56:19,480 --> 00:56:22,200
Speaker 16: our transient hotels is usually one to two nights, not

1118
00:56:22,800 --> 00:56:25,640
Speaker 16: where Airbnb is more like a week. And then extended

1119
00:56:25,680 --> 00:56:27,480
Speaker 16: stay is on the other side of the spectrum. As

1120
00:56:27,520 --> 00:56:29,640
Speaker 16: I said in that twenty night range, so we're not

1121
00:56:29,719 --> 00:56:33,080
Speaker 16: really a direct in competition for them at that same

1122
00:56:33,120 --> 00:56:35,839
Speaker 16: price point, so it gives us a real opportunity I think,

1123
00:56:35,880 --> 00:56:38,240
Speaker 16: to go after those consumers who are looking to stretch

1124
00:56:38,280 --> 00:56:39,080
Speaker 16: their dollars.

1125
00:56:39,520 --> 00:56:41,880
Speaker 12: That makes a lot of sense, and thanks for explaining that.

1126
00:56:41,880 --> 00:56:45,239
Speaker 12: But I do wonder Airbnb's saying, yikes, we're expecting a

1127
00:56:45,280 --> 00:56:49,120
Speaker 12: decrease in travel. Are you concerned about that broader outlook

1128
00:56:49,200 --> 00:56:50,239
Speaker 12: impacting you at all.

1129
00:56:51,239 --> 00:56:54,640
Speaker 16: We're not looking at long term decrease in travel. In fact,

1130
00:56:54,640 --> 00:56:58,240
Speaker 16: we just had two weeks ago now about five thousand

1131
00:56:58,280 --> 00:57:00,520
Speaker 16: of our owners and general managers to together at our

1132
00:57:00,520 --> 00:57:03,080
Speaker 16: annual convention. They come from all over the country and

1133
00:57:03,120 --> 00:57:06,680
Speaker 16: actually all over the world. They're pretty optimistic and as

1134
00:57:06,719 --> 00:57:10,480
Speaker 16: an industry, because supply growth has been fairly muted over

1135
00:57:10,480 --> 00:57:13,040
Speaker 16: the last two years, demand is going to hit record

1136
00:57:13,080 --> 00:57:15,960
Speaker 16: levels in twenty twenty four and twenty twenty five, So

1137
00:57:16,040 --> 00:57:19,040
Speaker 16: we feel really confident about the long term health of

1138
00:57:19,080 --> 00:57:23,760
Speaker 16: the consumer traveling, particularly in the in the midpoint mid

1139
00:57:23,760 --> 00:57:25,600
Speaker 16: price range where our hotels compete.

1140
00:57:25,680 --> 00:57:27,440
Speaker 1: Hey, Patrick, I'd love to get your thoughts on kind

1141
00:57:27,480 --> 00:57:31,080
Speaker 1: of for your brands, your customer, whether it give us

1142
00:57:31,080 --> 00:57:34,840
Speaker 1: a sense of you know, vacation traveler, leisure traveler versus

1143
00:57:34,920 --> 00:57:37,320
Speaker 1: maybe a business traveler. What's your makeup now and what

1144
00:57:37,360 --> 00:57:38,440
Speaker 1: trends are you seeing with those two?

1145
00:57:39,200 --> 00:57:42,800
Speaker 16: Yeah, our traditional mix is about seventy percent leisure travel,

1146
00:57:42,840 --> 00:57:47,120
Speaker 16: about thirty percent business travel. As I said, the size

1147
00:57:47,120 --> 00:57:49,640
Speaker 16: of the pie of leisure travel is getting larger. It's

1148
00:57:49,720 --> 00:57:52,920
Speaker 16: driven by those factors I talked about, you know, remote

1149
00:57:53,000 --> 00:57:56,040
Speaker 16: work and retirements and the like. But what we're seeing

1150
00:57:56,040 --> 00:57:59,280
Speaker 16: also on the business travel side. Our industry verticals are

1151
00:57:59,320 --> 00:58:02,360
Speaker 16: what we call well, we play in both suits and boots,

1152
00:58:02,400 --> 00:58:06,120
Speaker 16: but it's really the boots side of the business, the construction, logistics,

1153
00:58:06,440 --> 00:58:11,400
Speaker 16: transportation verticals that are really expanding right now with a

1154
00:58:11,440 --> 00:58:13,240
Speaker 16: lot of those trends I talked about earlier.

1155
00:58:13,920 --> 00:58:16,600
Speaker 12: I wonder about the business travel side because when we

1156
00:58:16,640 --> 00:58:19,320
Speaker 12: talk to some of the airlines, they've said it's tough

1157
00:58:19,360 --> 00:58:22,880
Speaker 12: when business travel decreases because those are the big spenders.

1158
00:58:23,200 --> 00:58:26,280
Speaker 12: Employees are able to spend a little more when it's

1159
00:58:26,320 --> 00:58:29,520
Speaker 12: not their money being The idea is the decrease in

1160
00:58:29,520 --> 00:58:31,080
Speaker 12: business travel hitting you guys at.

1161
00:58:31,040 --> 00:58:35,200
Speaker 16: All, it's not. It's really we're not back to the

1162
00:58:35,240 --> 00:58:39,000
Speaker 16: twenty nineteen levels yet, but we still are fairly close.

1163
00:58:39,040 --> 00:58:41,240
Speaker 16: We seem to inch closer and closer to it each

1164
00:58:41,440 --> 00:58:43,680
Speaker 16: each quarter. You know, when you look at the airline

1165
00:58:43,720 --> 00:58:47,360
Speaker 16: business versus ours, we're primarily in drive two locations. We

1166
00:58:47,400 --> 00:58:50,440
Speaker 16: have six thousand hotels in the United States. Four thousand

1167
00:58:50,520 --> 00:58:53,360
Speaker 16: of those are within one mile of an interstate exit.

1168
00:58:53,520 --> 00:58:55,040
Speaker 3: Cracker that's a cracker bottle.

1169
00:58:55,360 --> 00:58:58,160
Speaker 16: Just travel gets tougher, consumers are more willing to get

1170
00:58:58,160 --> 00:59:00,960
Speaker 16: on the road, and we're in all the destinations you

1171
00:59:00,960 --> 00:59:02,880
Speaker 16: want to go to, and we're everywhere along the way.

1172
00:59:02,920 --> 00:59:05,479
Speaker 16: That's the way we think about it. So it really

1173
00:59:05,480 --> 00:59:07,640
Speaker 16: gives us an opportunity, I think as people might turn

1174
00:59:07,680 --> 00:59:11,680
Speaker 16: away from air travel and more into drive to locations,

1175
00:59:11,720 --> 00:59:13,520
Speaker 16: for us to pick up business along the way.

1176
00:59:13,680 --> 00:59:15,760
Speaker 3: Patrick, you mentioned kind of a limited supply.

1177
00:59:15,960 --> 00:59:19,920
Speaker 1: Does that lead you to build morete motels around the country.

1178
00:59:20,440 --> 00:59:23,640
Speaker 16: Certainly that limited supply in that extended stay segment, that's

1179
00:59:23,680 --> 00:59:27,520
Speaker 16: exactly what we're seeing. It is probably the highest demand

1180
00:59:27,520 --> 00:59:30,280
Speaker 16: for hotel development right now is in that segment. It's

1181
00:59:30,360 --> 00:59:33,040
Speaker 16: as you mentioned, there's a lot of other competitors who

1182
00:59:33,040 --> 00:59:34,720
Speaker 16: are trying to get into the space, but it is

1183
00:59:34,760 --> 00:59:37,560
Speaker 16: something that we are continuing to see a lot of

1184
00:59:37,600 --> 00:59:40,920
Speaker 16: interest where we play. The price point we play out

1185
00:59:41,040 --> 00:59:44,160
Speaker 16: to build a mid scale extended stay hotel is probably

1186
00:59:44,160 --> 00:59:47,680
Speaker 16: about a twenty million dollar all in project, and so

1187
00:59:48,000 --> 00:59:51,120
Speaker 16: our franchisees generally tend to put about fifty percent of

1188
00:59:51,160 --> 00:59:55,320
Speaker 16: the equity in, so the amount of debt that they

1189
00:59:55,360 --> 00:59:57,320
Speaker 16: have to take on is not as significant as is

1190
00:59:57,360 --> 01:00:00,800
Speaker 16: if you're building a luxury hotel. So we are seeing

1191
01:00:00,800 --> 01:00:04,360
Speaker 16: our pipeline about nine hundred and twenty five hotels today

1192
01:00:04,400 --> 01:00:06,600
Speaker 16: and our pipeline, and about fifty percent of that is

1193
01:00:06,640 --> 01:00:11,600
Speaker 16: already financed, either because it's an extended stay hotel that's

1194
01:00:11,600 --> 01:00:14,160
Speaker 16: already about to open, or we do a lot of

1195
01:00:14,200 --> 01:00:17,640
Speaker 16: conversions from other brands and independent hotels into our brands,

1196
01:00:17,840 --> 01:00:21,439
Speaker 16: and generally that dollar amount to convert from another brand

1197
01:00:21,440 --> 01:00:23,560
Speaker 16: into our hotels is a much smaller check to write

1198
01:00:23,720 --> 01:00:25,960
Speaker 16: and usually self financed by the asset itself.

1199
01:00:25,960 --> 01:00:27,720
Speaker 3: Gotcha all right, Patrick, thank you so much for joining us.

1200
01:00:27,760 --> 01:00:30,080
Speaker 1: Really appreciate getting the update on your company and on

1201
01:00:30,120 --> 01:00:34,680
Speaker 1: the hotel motel space. Patrick Pacious, CEO of Choice Hotels.

1202
01:00:37,440 --> 01:00:40,520
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1203
01:00:40,560 --> 01:00:44,320
Speaker 2: subscribe and listen to interviews in Apple podcasts, or whatever

1204
01:00:44,400 --> 01:00:45,920
Speaker 2: podcast platform you prefer.

1205
01:00:46,280 --> 01:00:47,080
Speaker 3: I'm Matt Miller.

1206
01:00:47,360 --> 01:00:50,760
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three, and

1207
01:00:50,880 --> 01:00:51,560
Speaker 2: I Fall Sweeney.

1208
01:00:51,600 --> 01:00:53,160
Speaker 3: I'm on Twitter at pt Sweeney.

1209
01:00:53,200 --> 01:00:55,880
Speaker 1: Before the podcast, you can always catch us worldwide at

1210
01:00:55,880 --> 01:00:57,640
Speaker 1: Bloomberg Radio