WEBVTT - Mizuho Securities Adding Staff and Specialties 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.160 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Well, 0:00:33.280 --> 0:00:37.960 we now quote bitcoin spot prices here at Bloomberg because 0:00:37.960 --> 0:00:40.080 it has gotten that hot. And here to talk about 0:00:40.360 --> 0:00:43.040 sort of the agony that this presents to the biggest 0:00:43.080 --> 0:00:46.199 Wall Street banks is Shinelli Basak. She's insurance company is 0:00:46.240 --> 0:00:49.400 a boutique investment banks reporter for Bloomberg News. She's also 0:00:49.800 --> 0:00:52.479 getting her m b A at n y U. And 0:00:52.960 --> 0:00:55.120 before we get into the details of what to expect 0:00:55.720 --> 0:00:59.280 right before bitcoin starts trading on the futures exchange this Sunday, 0:00:59.320 --> 0:01:01.760 for the first time time, you said that they're crypto 0:01:01.800 --> 0:01:04.720 clubs and everyone's a crypto trader in your MBA classes. 0:01:04.800 --> 0:01:07.399 And it's shocking how many people talk about it in 0:01:07.400 --> 0:01:09.920 an MBA program. It comes up almost every day. What 0:01:09.959 --> 0:01:12.160 are they talking about? They're talking about how they can 0:01:12.200 --> 0:01:14.240 trade it. All their friends are in the market in 0:01:14.280 --> 0:01:18.640 some fashion, whether they're in technology somehow or whether they're 0:01:18.680 --> 0:01:21.200 at a bank and thinking of leaving actually to kind 0:01:21.200 --> 0:01:23.279 of you know, get into the market in different ways 0:01:23.640 --> 0:01:26.920 to do what well. For example, one of the biggest 0:01:27.040 --> 0:01:29.760 investors we know in this space is Mike Novograds, right, 0:01:29.800 --> 0:01:32.400 I mean Mike Novagrads has people he's hired from Millennium, 0:01:32.440 --> 0:01:35.480 Goldman and Morgan Stanley, right. So you know, while the 0:01:35.480 --> 0:01:37.600 big banks have been very slow to get in, we've 0:01:37.600 --> 0:01:40.160 seen talent move to places where they can do more 0:01:40.200 --> 0:01:43.720 active in the market. Curious, how do they expect this 0:01:43.840 --> 0:01:46.119 to be cleared? If a lot of the banks are 0:01:46.120 --> 0:01:49.120 not willing to do that, how do you clear a trade? 0:01:49.440 --> 0:01:52.160 I am very curious to see what volumes look like 0:01:52.240 --> 0:01:55.400 on Sunday and Monday. I've been asking everybody what they're expecting. 0:01:55.600 --> 0:01:58.880 Because Golvin has said they'll be able to do it immediately. 0:01:59.360 --> 0:02:01.440 All the other banks pretty much have said they're not 0:02:01.480 --> 0:02:03.080 going to be ready on day one, or they're not 0:02:03.120 --> 0:02:05.160 going to do it at all. They're still waiting. What's 0:02:05.200 --> 0:02:08.360 the main obstacle is that the margins that people have 0:02:08.440 --> 0:02:11.600 to post. The margins are wicked high. How are they 0:02:11.080 --> 0:02:15.600 they used to be? But after so much volatility the 0:02:15.680 --> 0:02:18.880 last couple of weeks, CEBO actually raised the requirements. So 0:02:18.960 --> 0:02:22.280 that means that anybody looking to make a bitcoin trade 0:02:22.320 --> 0:02:25.720 has to post forty four percent of whatever the trade 0:02:25.720 --> 0:02:28.400 they're trying to put on the equivalent of that in 0:02:28.480 --> 0:02:31.959 some kind of hard asset cash correct aside. And and 0:02:32.000 --> 0:02:33.960 so what does that mean? If the price goes, you know, 0:02:34.400 --> 0:02:37.040 up rapidly, then the banks have to be worried about it. Right, 0:02:37.120 --> 0:02:41.720 the price yesterday alone surge. So if this is something 0:02:41.760 --> 0:02:45.040 that is going to be tradeable, what is going to 0:02:45.080 --> 0:02:50.480 be the deliverable cash? It's actually cash settled, a cash settled, 0:02:50.520 --> 0:02:52.280 So really everybody, all they just want to do is 0:02:52.280 --> 0:02:55.200 they're just trading this to make dollars. They're using this 0:02:55.280 --> 0:02:57.799 to make money. Well, that's the other question that's coming 0:02:57.840 --> 0:03:00.000 up here too, right, I mean, because it's cash, that'll 0:03:00.160 --> 0:03:02.000 the shows that the futures market is pretty much a 0:03:02.040 --> 0:03:05.639 speculators market, right, and so there's kind of inherent differences 0:03:05.680 --> 0:03:08.000 between how people trade bitcoin now and how they will 0:03:08.040 --> 0:03:11.400 be trading them moving forward. There was a story on 0:03:11.440 --> 0:03:14.079 the Bloomberg that cited a statistic that I thought was 0:03:14.160 --> 0:03:18.320 rather shocking that when thousand investors, which is a relatively 0:03:18.360 --> 0:03:20.600 small pool in the scheme of the millions of investors 0:03:20.600 --> 0:03:23.920 out there, only when thousand investors account for of the 0:03:24.080 --> 0:03:30.520 bitcoin holdings, what potential risks does that concentration offer up. Well, 0:03:30.520 --> 0:03:32.880 it's definitely a huge concentration risk, and I think it's 0:03:32.919 --> 0:03:34.880 also another reason people are kind of excited for the 0:03:34.880 --> 0:03:37.600 futures market. They're hoping that a lot of big institutional 0:03:37.600 --> 0:03:39.920 investors will start to get into the market because now 0:03:39.960 --> 0:03:43.800 we know the investors are not necessarily institutions. Pensions are 0:03:43.840 --> 0:03:47.560 not investing in bitcoin, they're really worried about custody issues. 0:03:47.680 --> 0:03:50.520 Endowments are not really although people are in talks with 0:03:50.600 --> 0:03:54.120 endowments of certainly they're not investing in this yet, so 0:03:54.360 --> 0:03:56.160 it's kind of limited. But it's also a lot of 0:03:56.200 --> 0:04:00.440 retail investors also, So really it's you know, it'sbody once 0:04:00.480 --> 0:04:02.960 told me the average age of a bitcoin investors twenty two. 0:04:03.200 --> 0:04:06.280 I don't know how true that is, but it's it's 0:04:06.280 --> 0:04:11.360 what I'm trying to do at the younger generation. So okay, right, well, 0:04:11.920 --> 0:04:14.839 let's hope not. The thing that occurs to me though, 0:04:15.040 --> 0:04:17.400 is if you have to put up so much margin, 0:04:17.960 --> 0:04:22.120 and if the trade moves against you during whatever time train, 0:04:22.240 --> 0:04:25.960 you know, before it expires, Uh, how are you going 0:04:26.000 --> 0:04:29.520 to manage the big price swing? So you're gonna then 0:04:29.560 --> 0:04:33.280 get a call from your broker whoever is executing the trade, 0:04:33.279 --> 0:04:35.039 saying you better put more money in the account by 0:04:35.200 --> 0:04:37.000 you know, four o'clock, or we're going to close out 0:04:37.000 --> 0:04:39.680 your account. Because it can go up and it can 0:04:39.720 --> 0:04:42.760 go down as much as we've seen what is the 0:04:42.880 --> 0:04:46.239 fifteen thousand one day, ten thousand another day, You're gonna 0:04:46.240 --> 0:04:51.520 have to be constantly monitoring your margin. Require That's absolutely true, 0:04:51.680 --> 0:04:54.040 and the people are already thinking about that right now. 0:04:54.520 --> 0:04:57.039 And um, you know, I wonder too. It means you 0:04:57.080 --> 0:04:59.640 also have less leverage on the investment, right So I'm 0:04:59.640 --> 0:05:02.920 wondering if it makes it somehow less attractive. So let's 0:05:02.920 --> 0:05:05.960 talk about the deliberations that are going on inside the 0:05:05.960 --> 0:05:09.159 biggest Wall Street banks right now. Goldman Sachs, as Pin 0:05:09.279 --> 0:05:13.320 was saying, has decided to start clearing bitcoin futures from 0:05:13.400 --> 0:05:17.400 day one. What's the debate internally here? The debate internally 0:05:17.560 --> 0:05:19.359 comes from a couple of ways. We talked about the 0:05:19.400 --> 0:05:23.440 volatility for a while that's definitely a huge concern reputational risk. 0:05:23.560 --> 0:05:26.440 I mean, we've seen every bank CEO come out in 0:05:26.520 --> 0:05:29.839 some fashion saying something the most promised in An example 0:05:29.880 --> 0:05:31.600 of this is Jamie Diamond who has called it a 0:05:31.600 --> 0:05:35.200 bubble and a fraud. UM. However, JP Morgan, that doesn't 0:05:35.200 --> 0:05:37.560 mean their clients are not asking about it, and they 0:05:37.600 --> 0:05:39.240 have to and they they are one of the people 0:05:39.279 --> 0:05:42.000 that have been weighing offering the futures contracts to their clients. 0:05:42.240 --> 0:05:45.000 So there's this inherent disconnect between what they have to 0:05:45.200 --> 0:05:48.200 address to clients and how maybe the banks feel about it. 0:05:48.400 --> 0:05:52.039 There's also no your customer, customer and undering leandering concerns 0:05:52.080 --> 0:05:55.080 with with these contracts as well. Is it useful to 0:05:55.080 --> 0:05:58.960 to think of bitcoin as a commodity or is a currency? 0:05:59.160 --> 0:06:03.159 That's the big debate, right what what? What is it? Um? 0:06:03.200 --> 0:06:06.839 You know there there are arguments for it to be both. UM. 0:06:06.880 --> 0:06:09.640 I think that generally, walking into the futures market, people 0:06:09.640 --> 0:06:13.080 are behaving as if it's a currency. I gotta say, 0:06:13.160 --> 0:06:15.120 one thing that I'm struck by is that the actual 0:06:15.200 --> 0:06:18.359 price that you can get on bitcoin is completely different 0:06:18.440 --> 0:06:22.000 from coin based to other other exchanges. So you have 0:06:22.080 --> 0:06:25.160 to wonder what the real value is and how are 0:06:25.200 --> 0:06:28.680 people not going to just simply get scammed? Right, We're 0:06:28.720 --> 0:06:32.920 definitely wondering kind of what the differentiation is among different 0:06:32.920 --> 0:06:35.919 exchanges and also not only just bitcoin, but now you 0:06:35.960 --> 0:06:37.520 have a lot of other options to invest in the 0:06:37.560 --> 0:06:41.400 cryptocurrency space and how those prices are connected to each other. 0:06:41.800 --> 0:06:43.920 One of the biggest mysteries in this world, for example, 0:06:44.000 --> 0:06:46.039 is tether. We had a fantastic story and if you 0:06:46.040 --> 0:06:48.320 haven't read it yet, I really suggest you guys look 0:06:48.360 --> 0:06:50.479 at it. By might not licening you know what is 0:06:50.560 --> 0:06:54.520 underpinning the value of tether. Well, we'll go and we'll 0:06:54.760 --> 0:06:56.719 explore that at another time. I want to thank you 0:06:56.800 --> 0:07:00.159 very much for being with us, just as shoes gold shoes. Uh. 0:07:00.279 --> 0:07:05.080 The Commodity Futures Trading Commission says that bitcoin is a 0:07:05.160 --> 0:07:10.280 commodity anyway, Thanks very much, Snali boss, much appreciated, and uh, 0:07:10.560 --> 0:07:12.840 we'll be looking forward to more reports on what happens 0:07:12.880 --> 0:07:14.760 to bitcoin. I have a feeling Sunday is going to 0:07:14.800 --> 0:07:35.880 be an important day. Blame Japanese banks for the flat 0:07:36.000 --> 0:07:39.200 treasury curve. That's according to City Group strategists. Here with 0:07:39.280 --> 0:07:41.480 us is the CEO of the U S arm of 0:07:41.600 --> 0:07:45.000 a Japanese bank, to comment on those Japanese flows and 0:07:45.040 --> 0:07:47.800 what they're doing to US markets. Jerry Rosieri, president and 0:07:47.880 --> 0:07:50.920 chief executive officer of Missoojo Securities, joins us here in 0:07:50.920 --> 0:07:53.560 our eleven three studios. Jerry, thank you so much for 0:07:53.640 --> 0:07:56.360 joining us. SO is this the case? Is it Japanese 0:07:56.400 --> 0:08:00.280 banks that are flooding into longer term US treasure ease 0:08:00.360 --> 0:08:04.720 that's keeping the yield curve flat? Well, that has been 0:08:04.720 --> 0:08:08.480 the case over many years. UH. You know, foreign foreign 0:08:08.480 --> 0:08:13.120 holdings by the Japanese have increased substantially over the last 0:08:13.200 --> 0:08:19.720 five to seven years. Up over that time period. UM, 0:08:19.760 --> 0:08:23.880 I think the bigger movement into US treasuries and and 0:08:24.040 --> 0:08:28.440 similar risk risk free assets was in two thousand sixteen 0:08:29.160 --> 0:08:32.880 two thousand seventeen. It's been less of a fixed income story. UH. 0:08:32.920 --> 0:08:38.000 And in fact, we've seen evidence that the banks and UH, 0:08:38.080 --> 0:08:41.040 particularly the regional banks in Japan will be pulling back 0:08:41.040 --> 0:08:46.000 a little bit, much of that dictated by the regulator. 0:08:47.480 --> 0:08:49.880 To be really clear, they've pulled back a little bit 0:08:50.040 --> 0:08:54.440 on their investments in US treasuries, I would say, not 0:08:54.440 --> 0:08:58.280 not pulling back in terms of UH selling assets, but 0:08:58.920 --> 0:09:01.880 the pace of buying, I would say, has has lessened. 0:09:02.679 --> 0:09:06.040 So this is not exactly the dynamic that well, I think, 0:09:06.080 --> 0:09:09.000 I think. You know, whenever you see moves, particularly in 0:09:09.000 --> 0:09:12.840 the U S treasury market, you'll curve flattening, you'll curve steeping. Uh. 0:09:13.280 --> 0:09:17.320 It's it's always common to to blame uh, non US 0:09:17.360 --> 0:09:23.240 investors oftentimes Asia. Uh, you know, and uh and uh. 0:09:23.400 --> 0:09:27.000 Certainly the Japanese are large holders at last China of 0:09:27.200 --> 0:09:29.679 US treasuries. I just want to ask a little bit 0:09:29.679 --> 0:09:32.240 and maybe get an update. I know in twenty fifteen, 0:09:32.400 --> 0:09:35.520 Missouho paid what about three billion dollars for the loan 0:09:35.640 --> 0:09:38.559 book of Royal Bank of Scotland. Right about that was 0:09:38.600 --> 0:09:40.520 a thirty six and a half billion dollar loan book 0:09:40.520 --> 0:09:43.439 for North America. Can you give us an update on 0:09:43.480 --> 0:09:46.720 that and whether if you were to be able to 0:09:46.760 --> 0:09:50.360 buy that today, what would that be worth? Well, they 0:09:50.400 --> 0:09:55.320 were basically a loan commitments, So the reason we pursued 0:09:55.400 --> 0:10:02.000 that transaction was to elevate our client penetration here in 0:10:02.040 --> 0:10:07.560 the America's So the book itself was interesting, but more importantly, 0:10:07.640 --> 0:10:11.040 we are looking to establish long term lending relationships in 0:10:11.080 --> 0:10:13.880 the US and that's what we've actually done. We've uh, 0:10:14.160 --> 0:10:17.200 we've more than uh I think for top tier lending 0:10:17.240 --> 0:10:21.480 relationships of increased ten times over the last two and 0:10:21.480 --> 0:10:24.280 a half years. And you're hiring human beings, right, Yeah. 0:10:24.320 --> 0:10:26.600 So with the the the asset purchase in and of 0:10:26.640 --> 0:10:30.079 itself was interesting, but we actually wouldn't have pursued that 0:10:30.440 --> 0:10:33.080 unless we were able to bring a number of people 0:10:33.160 --> 0:10:35.199 over from the institution. So we took on about a 0:10:35.240 --> 0:10:39.880 hundred and twenty people from RBS along with those assets. 0:10:40.440 --> 0:10:44.000 Just with respect to MISSOO Securities, how much has it 0:10:44.080 --> 0:10:46.960 expanded and how much do you plan to continue expanding 0:10:47.000 --> 0:10:49.080 from a head count perspective? Sure? So so in the 0:10:49.200 --> 0:10:52.680 US I joined the company two thousand, ten UM and 0:10:52.760 --> 0:10:56.160 we securities, we were maybe a little over three hundred people. 0:10:56.840 --> 0:11:01.000 Uh now we're hentering heading towards eight hundred UM. It's 0:11:01.000 --> 0:11:05.880 been a h I say, a measured expansion. We've tried 0:11:05.960 --> 0:11:09.200 to uh move at a pace that sort of suits 0:11:09.200 --> 0:11:13.440 our organizations tolerants. Uh. And but having said that, uh, 0:11:13.720 --> 0:11:16.959 it's been very targeted. So it's been capital markets, so 0:11:17.120 --> 0:11:19.840 debt capital markets, it's been equity capital markets. We've expended 0:11:19.880 --> 0:11:21.840 our high yield business over the last couple of years, 0:11:22.440 --> 0:11:24.959 also on the sales and trading front as well, growing 0:11:24.960 --> 0:11:27.680 out our equity platform as well as diversifying our fixed 0:11:27.679 --> 0:11:32.240 income platform. Any thoughts are maybe comparisons between now and 0:11:32.280 --> 0:11:35.640 the and the time of Lehman Brothers. Whether the banks 0:11:35.679 --> 0:11:38.360 and the brokerage firms have they changed at least the 0:11:38.360 --> 0:11:41.439 way that they perceived their balance sheets? I mean, does 0:11:41.440 --> 0:11:44.760 that inform the day to day operations of of the organization? 0:11:44.960 --> 0:11:47.320 I mean things are you know, I'm former Leman Brothers. 0:11:47.360 --> 0:11:49.240 I was there for twenty three years, so I know 0:11:49.280 --> 0:11:52.440 that situation well. But uh yeah, the environment is a 0:11:52.440 --> 0:11:55.400 lot different. I mean there's less leverage, uh you know, 0:11:55.520 --> 0:12:01.120 the regulatory environments different. Um but you know, I would 0:12:01.120 --> 0:12:03.640 say that uh you know, the the industries have been 0:12:03.640 --> 0:12:07.920 expanding since two thousand and eight. Uh so employments up 0:12:08.080 --> 0:12:11.880 in business actually is pretty decent. Where is the biggest 0:12:11.960 --> 0:12:15.960 opportunity for MISSOO host securities in US markets? Is it 0:12:16.320 --> 0:12:19.880 highel bond trading? Is it underwriting investment grade bonds? So 0:12:19.920 --> 0:12:22.680 we're we're already top ten in corporate investment grade debt 0:12:22.840 --> 0:12:25.280 in the U S which is trading in terms of 0:12:25.320 --> 0:12:30.400 origination UH. In terms of trading activities, we've been aggressively 0:12:30.400 --> 0:12:36.120 expanding our equity platform UH and cash businesses. We're working 0:12:36.200 --> 0:12:39.640 on both derivatives and ffects for fixed income UH and 0:12:39.800 --> 0:12:44.959 equities UM. In the fixed income side, we've been expanding 0:12:45.000 --> 0:12:48.040 our security securitized products area as well as in our 0:12:48.120 --> 0:12:50.880 high yield trading area. And just real quick, are you 0:12:50.960 --> 0:12:54.679 using balance sheet? Yes? We do? And is that increasing? 0:12:55.320 --> 0:13:00.560 Our balance sheet has been relatively stable. UM, it's but 0:13:00.640 --> 0:13:03.000 it's not a constraint on our business. I would say, 0:13:03.480 --> 0:13:05.440 thanks very much for coming in and spending time with us. 0:13:05.520 --> 0:13:09.559 Much appreciate it. Very interesting UH. Jerry Rozsieri is the 0:13:09.640 --> 0:13:34.240 president and the chief executive of Missouho Security. Total addressable market? 0:13:34.600 --> 0:13:37.160 What is it? And why does it matter? Well, we 0:13:37.200 --> 0:13:39.400 have Bill Smede to help us answer this question. He 0:13:39.480 --> 0:13:42.600 is the chief executive officer and chief investment officer for 0:13:42.720 --> 0:13:46.480 smed Capital Management. They're based in Seattle, helping to manage 0:13:46.480 --> 0:13:49.800 more than two point two billion dollars and you can 0:13:49.920 --> 0:13:54.400 follow Bill on Twitter at Smede Cap, s m E 0:13:54.480 --> 0:13:59.359 A d cap alright, smead cap. What is total addressable 0:13:59.440 --> 0:14:04.360 market t A M. Well, it means how many possible 0:14:04.480 --> 0:14:09.440 customers or how many possible widgets that you can sell 0:14:10.320 --> 0:14:14.319 based on the population available and those that have access 0:14:14.360 --> 0:14:18.000 to what you're doing. And it's become quite a popular 0:14:18.040 --> 0:14:21.760 thing where you know, we're we're ten years into maybe 0:14:21.800 --> 0:14:24.800 the best stretch that growth has ever had against value. 0:14:25.240 --> 0:14:29.680 So when when when valuations aren't very enjoyable to talk about, 0:14:30.320 --> 0:14:32.880 it's pretty easy for growth people to kind of slip 0:14:32.920 --> 0:14:38.119 into talking about possibilities and potential and uh, total addressable 0:14:38.120 --> 0:14:41.120 market is a way to to think about potential. Well, 0:14:41.160 --> 0:14:43.560 I could guess, I could say potentially at one point 0:14:43.600 --> 0:14:45.360 I was going to play for the NBA, but I 0:14:45.440 --> 0:14:48.480 knew that wasn't gonna happen, So potential goes out the window. 0:14:48.800 --> 0:14:54.560 Does this make any sense? Well, you know it doesn't 0:14:54.360 --> 0:14:57.920 certain circumstances. I think you know. Warren Buffett says, what 0:14:57.920 --> 0:14:59.840 the wise man does at the beginning of the fool 0:14:59.840 --> 0:15:01.880 to us at the end. So so let me give 0:15:01.880 --> 0:15:05.680 you an example. When he bought Coca Cola, he actually 0:15:05.720 --> 0:15:08.280 paid a much higher price earnings ratio than he normally 0:15:08.360 --> 0:15:11.440 used to pay. He paid eighteen times earnings. But he 0:15:11.480 --> 0:15:15.000 could see that Coke was in the early stages of 0:15:15.120 --> 0:15:19.280 beginning to sell soda pop all over the world rather 0:15:19.320 --> 0:15:22.240 than just the you know, the most sophisticated parts of 0:15:22.240 --> 0:15:25.000 the world. And so you know, by the time he 0:15:25.080 --> 0:15:28.200 got done, we were on a one week mission trip 0:15:28.240 --> 0:15:30.760 with our family and they were drinking phantom on a 0:15:30.800 --> 0:15:34.480 relatively deserted island off the coast to Honduras. And that 0:15:34.520 --> 0:15:37.200 was about ten years ago, right, So they went from 0:15:37.240 --> 0:15:41.480 from mainly mainly dominating the highly populated parts of the 0:15:41.520 --> 0:15:44.200 western world and they went all the way around the world. 0:15:44.200 --> 0:15:47.840 So that market got addressed by Coca Cola. So it's 0:15:47.880 --> 0:15:49.720 a good time to think about it at the beginning, 0:15:50.720 --> 0:15:53.160 but but it's it's not good at all when you 0:15:53.240 --> 0:15:55.520 get in the late stages of a lot of financial 0:15:55.560 --> 0:15:58.360 euphoria like we are now to think about that because 0:15:58.400 --> 0:16:02.960 it usually breeds trouble. Bill, What could be in your 0:16:03.000 --> 0:16:05.280 mind the next Coca Cola, if not on that scale, 0:16:05.360 --> 0:16:08.160 but has the potential to really take off. I think 0:16:08.160 --> 0:16:13.360 you did home in on some pharmaceutical companies. Correct. Well, yeah, 0:16:13.760 --> 0:16:17.440 the there's an enormous population, both in the States and 0:16:17.480 --> 0:16:21.720 Europe of of baby boomers and osteo processes is a 0:16:22.280 --> 0:16:25.720 is a malady that that has a tendency to hit 0:16:25.800 --> 0:16:29.280 as you get older, and it's especially prevalent in women. 0:16:29.760 --> 0:16:34.120 And so you know, m Gen makes the most successful 0:16:34.600 --> 0:16:38.720 uh drug for treating osteo process Prola, and then as 0:16:38.760 --> 0:16:41.840 a bit of good fortune, they found out in testing 0:16:41.840 --> 0:16:45.360 thirty people that it also caused tumors that were close 0:16:45.440 --> 0:16:48.040 to the bone to stop growing, and they sell that 0:16:48.160 --> 0:16:51.640 as Xchieva. And so you know, even though that's a 0:16:51.640 --> 0:16:54.880 blockbuster already prolia Is, it's just got a lot of 0:16:54.920 --> 0:16:58.320 population in its way, and and that's something that the 0:16:58.360 --> 0:17:01.960 company has to look forward to. Another case, in Mgen's case, 0:17:02.000 --> 0:17:06.159 they're introducing Rapata, and the health insurance industry has been 0:17:06.200 --> 0:17:08.840 slow to take it on given all the tweets and 0:17:08.960 --> 0:17:14.280 grief associated with pharmaceutical prices. So uh it's been a 0:17:14.359 --> 0:17:18.159 slow to be adopted. But if you combine that with staatens, 0:17:18.640 --> 0:17:22.800 people with terrible high bad cholesterol dropped down to about 0:17:22.840 --> 0:17:25.800 seventy bad cholesterol. In effect, we could have a nation 0:17:25.840 --> 0:17:29.600 of marathon runners running around people that were formerly had 0:17:29.640 --> 0:17:33.160 the blood of of someone with severe heart disease potential 0:17:33.440 --> 0:17:36.159 and and and very likely at some point time to 0:17:36.160 --> 0:17:38.440 get hit by heart attack or stroke to a bunch 0:17:38.440 --> 0:17:41.480 of marathon runners around running around because of the way 0:17:41.480 --> 0:17:44.600 that this attacks bad cholesterol in the bloodstream. Well, Bill, 0:17:44.680 --> 0:17:48.560 eventually those marathon runners might have to head home. Can 0:17:48.600 --> 0:17:53.440 you talk about the home building market and specifically Lenar Well, Yeah, 0:17:53.520 --> 0:17:57.680 Leonard now owns more build uble lots than anybody because 0:17:57.880 --> 0:18:01.960 they're they're merging with call Atlantic and UH as you 0:18:02.040 --> 0:18:04.320 go forward, the three things that are gonna be tough 0:18:04.400 --> 0:18:06.920 to deal with to build all the homes we're gonna need, 0:18:06.920 --> 0:18:11.280 and the total addressable market is that some large percentage 0:18:11.359 --> 0:18:13.760 I think Zillo is on the cutting edge of of 0:18:13.840 --> 0:18:17.000 measuring this, some very large percentage of the millennials that 0:18:17.040 --> 0:18:20.399 our ages twenty two tote are going to end up 0:18:20.400 --> 0:18:22.399 buying a home, and many of those homes need to 0:18:22.440 --> 0:18:25.280 be built because the people at the other end aren't 0:18:25.320 --> 0:18:27.600 moving out of their homes as fast as people are 0:18:27.640 --> 0:18:31.080 moving in. So so UH, having a lot of buildable 0:18:31.119 --> 0:18:33.959 lots is one of the ingredients that would help you 0:18:34.080 --> 0:18:37.800 meet that addressable market. And then of course the labor 0:18:37.920 --> 0:18:40.680 is going to be a big challenge. Right. We think 0:18:40.720 --> 0:18:44.120 that you might see a very generous green card set 0:18:44.200 --> 0:18:50.639 up for people in carpentry, plumbing, electricians, etcetera. Uh, bricklayers, roofers, 0:18:50.880 --> 0:18:54.440 you name it, and and uh and then the materials 0:18:54.480 --> 0:18:57.159 and we could see some inflation in the materials as well. 0:18:57.280 --> 0:19:00.120 But uh, that's right, those are in front of us 0:19:00.160 --> 0:19:04.560 because even today, the home building that's being done today 0:19:04.680 --> 0:19:07.440 is way better than five years ago. But it wouldn't 0:19:07.440 --> 0:19:10.399 It would have been a bad number in nineteen sixty, 0:19:10.840 --> 0:19:14.920 seventy eighty five or ninety five. Rights, it's we're as 0:19:14.920 --> 0:19:19.159 still at recession low levels of home building compared to 0:19:19.240 --> 0:19:22.120 past decades. Okay, but Bill, when does the stock get 0:19:22.200 --> 0:19:25.120 too expensive? I mean you're looking at Lenar right now. 0:19:25.160 --> 0:19:29.119 The stock is up within so far this year and 0:19:29.240 --> 0:19:35.679 it sports a pe of over sixteen for a home builder, right, So, so, uh, 0:19:36.160 --> 0:19:40.119 what you've got here is a historically cyclical business in 0:19:40.200 --> 0:19:44.560 a secular surge, and we think we're we've finished the 0:19:44.640 --> 0:19:47.040 third inning is where we think we are now what 0:19:47.160 --> 0:19:50.960 that means PIM and for low turnover portfolio managers like 0:19:51.040 --> 0:19:53.640 the US, this is one of the challenge of being 0:19:53.640 --> 0:19:57.640 our investors is we want to sit through whatever correction 0:19:57.760 --> 0:20:00.080 comes next to get to where this is going to 0:20:00.119 --> 0:20:03.639 be in five or six years. So you're right. This industry, 0:20:03.840 --> 0:20:07.600 the earnings are growing twenty percent a year on about 0:20:07.640 --> 0:20:12.760 ten revenue growth. Right, So there's people out here in 0:20:12.800 --> 0:20:16.479 Seattle excited about the company whose revenue is growing and 0:20:16.480 --> 0:20:19.040 whose profits don't go at all. And this is an 0:20:19.080 --> 0:20:22.000 industry whose revenue is growing ten percent and the profits 0:20:22.000 --> 0:20:25.080 are growing twenty So you're absolutely right. They've had a 0:20:25.080 --> 0:20:27.680 good run. They could have a correction at any time. Fact, 0:20:27.720 --> 0:20:29.560 this market could have a correction at any time. But 0:20:30.000 --> 0:20:32.440 for the long duration investor that wants to catch this 0:20:32.520 --> 0:20:35.800 next five to ten years aging of the Moneial group, 0:20:36.000 --> 0:20:39.520 it's a nice addressable market to consider. Build. Another way 0:20:39.560 --> 0:20:43.320 to hedge against the downturn is holding more cash? Are 0:20:43.440 --> 0:20:47.400 you doing that? No? We we We kind of made 0:20:47.440 --> 0:20:50.760 a decision ten year our fund are our fund will 0:20:50.760 --> 0:20:53.879 be ten years old, our strategy ten years old right 0:20:53.880 --> 0:20:56.840 after the first of the year, and and we just 0:20:56.920 --> 0:20:59.880 made a choice. At the beginning. We assume that most 0:21:00.000 --> 0:21:02.840 of the people that would invest with us, we would 0:21:02.840 --> 0:21:05.840 be a part of their total portfolio. Someone else is 0:21:05.880 --> 0:21:09.840 likely doing the asset allocation, and so we don't really 0:21:09.920 --> 0:21:13.280 feel like we have any special competency to time the market. 0:21:13.800 --> 0:21:17.480 In fact, you know what we got started at the 0:21:17.480 --> 0:21:19.959 beginning of Oh wait, the next fourteen months was the 0:21:20.000 --> 0:21:23.640 worst market decline in eighty years, So I don't think 0:21:23.640 --> 0:21:26.439 people should be coming to us for market timing. Bill Smide, 0:21:26.480 --> 0:21:28.720 thank you so much for joining us. Bill Smeede, Chief 0:21:28.720 --> 0:21:32.520 executive Officer and chief investment Officer. It's Smeed a capital 0:21:32.560 --> 0:21:56.879 management overseeing two point two billion dollars in Seattle. What 0:21:56.920 --> 0:21:59.359 would you like to do for a job? Perhaps a 0:21:59.520 --> 0:22:01.840 game to hester you don't need any experience for that, 0:22:02.000 --> 0:22:04.960 or a heavy equipment operator. We hope you have experience 0:22:05.040 --> 0:22:07.639 for that. Here to help us understand the job market 0:22:07.720 --> 0:22:11.159 right now is the chief executive of Zip Recruiter. Ian 0:22:11.320 --> 0:22:13.399 Siegel is also the founder. Great to have you with us, 0:22:13.400 --> 0:22:16.359 ce In, Thanks for spending time. You know, I was 0:22:16.400 --> 0:22:19.560 looking at your side, looking at a trending job titles, 0:22:19.840 --> 0:22:23.960 trending job types, and I'm seeing that one of them 0:22:24.160 --> 0:22:31.120 is a boat captain. Where does this information come from? Well, 0:22:31.720 --> 0:22:37.160 we a Zipp Recruiter, are probably the single largest starting 0:22:37.240 --> 0:22:41.440 point for small and mid sized businesses that do job 0:22:41.480 --> 0:22:46.200 posting in America, and so we end up getting all 0:22:46.240 --> 0:22:50.440 the interesting jobs on our site. So if you, for example, 0:22:51.160 --> 0:22:54.080 run a small ship business, or let's say you are 0:22:54.600 --> 0:22:59.160 in a hurricane struck area and hurricanes have knocked out 0:22:59.200 --> 0:23:02.360 your business that will last few months, then it seems 0:23:02.440 --> 0:23:05.000 likely that you're going to go on a hiring binge 0:23:05.119 --> 0:23:09.399 right now to restock the captains for your ships. So 0:23:09.560 --> 0:23:12.080 I is it fair to say that zip recruiter is 0:23:12.200 --> 0:23:18.800 sort of a byproduct or caters to the gig economy. Well, certainly, 0:23:18.800 --> 0:23:21.040 the gig economy makes up a lot of the jobs 0:23:21.080 --> 0:23:22.960 that you will find on our site, and that's because 0:23:23.000 --> 0:23:28.000 the gig economy increasingly represents a large percentage of opportunities 0:23:28.040 --> 0:23:31.240 for people to work in America. So, whether it's Uber 0:23:31.560 --> 0:23:34.639 or list or delivery Hero or a multitude of on 0:23:34.720 --> 0:23:39.120 demand services, the gig economy has become a material option 0:23:39.359 --> 0:23:41.840 for a lot of job diggers, not just for full 0:23:41.840 --> 0:23:46.480 time work, but also as a second job to bolster 0:23:46.640 --> 0:23:50.359 their income. So in one thing that a lot of 0:23:50.400 --> 0:23:53.639 economists sort of decry is that there isn't a tremendous 0:23:53.640 --> 0:23:57.320 amount of visibility into the gig economy. And I'm wondering, 0:23:57.440 --> 0:23:59.920 from your perspective, you probably have one of the best 0:24:00.080 --> 0:24:03.239 views into it. Frankly, and I'm wondering what kinds of 0:24:03.320 --> 0:24:06.800