1 00:00:00,760 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,920 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,560 Speaker 1: at Bloomberg dot com slash podcast. I want to talk soccer, 7 00:00:22,680 --> 00:00:24,799 Speaker 1: but before we can talk soccer, we got to talk 8 00:00:24,840 --> 00:00:29,400 Speaker 1: about interest rates with Ira Jersey, chief US interest rate strategist. Ira. 9 00:00:29,680 --> 00:00:32,879 Speaker 1: I mean, I was under the impression that twenty five 10 00:00:32,920 --> 00:00:36,199 Speaker 1: basis points the next meeting, maybe twenty five after that, 11 00:00:36,320 --> 00:00:39,400 Speaker 1: and then let's pause, see how things are going. But 12 00:00:39,520 --> 00:00:41,519 Speaker 1: now people are telling me I need to folk pencil 13 00:00:42,760 --> 00:00:46,959 Speaker 1: a third twenty five basis point rate increase. What's going 14 00:00:47,000 --> 00:00:50,720 Speaker 1: on with all you fed people? Yeah? Well, obviously over 15 00:00:50,720 --> 00:00:54,640 Speaker 1: the last month you've seen some pretty poor or higher 16 00:00:54,680 --> 00:00:57,800 Speaker 1: than expected inflation data, right, both CPI and the pc 17 00:00:58,040 --> 00:01:00,360 Speaker 1: to flatter and then even just the small warning and 18 00:01:00,400 --> 00:01:03,840 Speaker 1: the reason why rates are selling off today has been 19 00:01:03,920 --> 00:01:07,800 Speaker 1: higher than expected inflation in France and Spain. So with such, 20 00:01:08,240 --> 00:01:12,000 Speaker 1: you know, with inflation still being the worry and the 21 00:01:12,040 --> 00:01:15,640 Speaker 1: fear of central bankers. You continue to see whenever we 22 00:01:15,680 --> 00:01:19,120 Speaker 1: get these surprises surprisingly high inflation prints, you're going to 23 00:01:19,200 --> 00:01:22,440 Speaker 1: bind up pricing in more and more interest rate hikes. 24 00:01:22,440 --> 00:01:25,319 Speaker 1: So yeah, so the market's now pricing in for a 25 00:01:25,400 --> 00:01:29,560 Speaker 1: five and a half percent terminal rate for the Fed 26 00:01:29,560 --> 00:01:32,000 Speaker 1: Fund rate, and I think that and no cut and 27 00:01:32,080 --> 00:01:34,880 Speaker 1: no cuts this year, No no cuts this year. Well, 28 00:01:35,680 --> 00:01:37,560 Speaker 1: I see them coming down to a terminal rate of 29 00:01:37,600 --> 00:01:40,520 Speaker 1: like five thirty something, which is still between five twenty 30 00:01:40,560 --> 00:01:42,800 Speaker 1: five and five fifty. Yeah, so you're still talking about 31 00:01:42,800 --> 00:01:45,520 Speaker 1: you're still talking about maybe a half is of fifty bases, 32 00:01:45,560 --> 00:01:47,800 Speaker 1: a fifty percent chance of a single cut by the 33 00:01:47,880 --> 00:01:49,840 Speaker 1: end of the year. So not a full cut though, 34 00:01:49,880 --> 00:01:52,040 Speaker 1: which is to Matt to your point, is what we 35 00:01:52,040 --> 00:01:55,760 Speaker 1: were pricing, um, and because we're pricing three cuts at 36 00:01:55,800 --> 00:01:59,840 Speaker 1: one point, Yeah, we were pricing We're pricing pretty aggressive cuts, 37 00:02:00,080 --> 00:02:02,600 Speaker 1: people thinking that we were going to have a significant slowdown. 38 00:02:02,840 --> 00:02:04,800 Speaker 1: And that's one of the reasons why the market shifted 39 00:02:04,840 --> 00:02:08,600 Speaker 1: so much, because we were kind of expecting the cumulative, 40 00:02:08,720 --> 00:02:11,120 Speaker 1: you know, rate hikes that we've had, and some of 41 00:02:11,160 --> 00:02:13,919 Speaker 1: the data that we've seen certainly suggests that the economy 42 00:02:14,000 --> 00:02:16,560 Speaker 1: is slowing, but the economy is just not slowing fast 43 00:02:16,639 --> 00:02:20,600 Speaker 1: enough to bring inflation lower. And the interesting piece out 44 00:02:20,600 --> 00:02:24,560 Speaker 1: of the most recent data, UM is services we expected 45 00:02:24,600 --> 00:02:26,799 Speaker 1: to continue to grow. You know, wages are pretty strong. 46 00:02:26,840 --> 00:02:28,960 Speaker 1: We've talked about that on this show before. But but 47 00:02:29,040 --> 00:02:32,120 Speaker 1: importantly in a lot of the data is that goods 48 00:02:32,120 --> 00:02:34,880 Speaker 1: prices didn't continue to fall as most of us expected 49 00:02:35,240 --> 00:02:40,040 Speaker 1: that that to occur, and and mitigating the increases and services. 50 00:02:40,120 --> 00:02:45,120 Speaker 1: So since goods price is basically stabilized at near current levels, um, 51 00:02:45,320 --> 00:02:48,079 Speaker 1: you know, that's that's really given some people some pauses 52 00:02:48,120 --> 00:02:51,880 Speaker 1: to exactly what the future ratepath will be ultimately for 53 00:02:51,880 --> 00:02:53,920 Speaker 1: for the FED and then therefore for the rest of 54 00:02:53,960 --> 00:02:55,840 Speaker 1: the market as well. And that's one reason why we're 55 00:02:56,120 --> 00:02:59,079 Speaker 1: you know, testing four percent on the ten year for example, 56 00:03:00,040 --> 00:03:02,280 Speaker 1: and yeah, you know, I think you get one or 57 00:03:02,280 --> 00:03:05,240 Speaker 1: two more you know, better than expected data prints, and 58 00:03:05,280 --> 00:03:07,640 Speaker 1: we can wind up breaking four percent again and maybe 59 00:03:07,680 --> 00:03:10,359 Speaker 1: testing for in a quarter, which is the next really 60 00:03:10,400 --> 00:03:13,560 Speaker 1: important technical level. It's actually four point two four percent 61 00:03:13,600 --> 00:03:16,600 Speaker 1: if you really want to get pedantic. So I've made 62 00:03:16,600 --> 00:03:19,080 Speaker 1: a career out of ignoring people like you and Lisa 63 00:03:19,120 --> 00:03:21,400 Speaker 1: Bramwood to talk about yield curves and all that kind 64 00:03:21,440 --> 00:03:24,000 Speaker 1: of stuff. But boys, I look at the two year tenure. 65 00:03:24,520 --> 00:03:29,320 Speaker 1: It's negative, it's inverted eighty five basis points. That's the thing, right, 66 00:03:29,320 --> 00:03:32,320 Speaker 1: Should I pay attention to that? Yeah? Well, so the 67 00:03:32,360 --> 00:03:34,720 Speaker 1: market is still thinking that we're going to have high 68 00:03:34,800 --> 00:03:38,080 Speaker 1: rates now and then lower rates later, and that's I 69 00:03:38,120 --> 00:03:41,360 Speaker 1: think that that's a reasonable assumption. I think the question 70 00:03:41,520 --> 00:03:44,760 Speaker 1: becomes and this is where you know, people who try 71 00:03:44,800 --> 00:03:48,400 Speaker 1: to use these indicators and use the market for determining, 72 00:03:48,480 --> 00:03:50,560 Speaker 1: you know, when the market things the recession is going 73 00:03:50,600 --> 00:03:53,800 Speaker 1: to be ends up. That's when these types of indicators 74 00:03:54,040 --> 00:03:56,640 Speaker 1: end up failing. Because the reason why where where we 75 00:03:56,680 --> 00:03:58,720 Speaker 1: are today is not necessarily because we think there's going 76 00:03:58,760 --> 00:04:00,400 Speaker 1: to be a recession. The marketing it's going to be 77 00:04:00,400 --> 00:04:02,360 Speaker 1: a recession this year, but that maybe there's going to 78 00:04:02,400 --> 00:04:04,440 Speaker 1: be a recession in twenty twenty five. And the Fed 79 00:04:04,440 --> 00:04:07,120 Speaker 1: cuts into states zero again, right, that still gets you 80 00:04:07,480 --> 00:04:09,800 Speaker 1: to a ten year that's well below where the two 81 00:04:09,880 --> 00:04:12,560 Speaker 1: year yield is today. The two year yields right at 82 00:04:12,600 --> 00:04:15,520 Speaker 1: fair value, by the way, based on the Fed hiking 83 00:04:15,520 --> 00:04:17,599 Speaker 1: to five and a half percent and then staying there 84 00:04:18,200 --> 00:04:20,560 Speaker 1: for the rest of this year. So the two year 85 00:04:21,000 --> 00:04:23,640 Speaker 1: is probably right. The question is is the ten year 86 00:04:23,760 --> 00:04:26,280 Speaker 1: right or are we going to see inflation be much 87 00:04:26,320 --> 00:04:28,760 Speaker 1: more persistent than we have And that means that you 88 00:04:28,760 --> 00:04:32,440 Speaker 1: can wind up with what we call a bear steepener, 89 00:04:32,520 --> 00:04:34,320 Speaker 1: where you can wind up with ten year yields going 90 00:04:34,400 --> 00:04:36,640 Speaker 1: up in two year yields not doing very much at all. Hey, 91 00:04:36,640 --> 00:04:39,839 Speaker 1: we focus so much on the US because you know, 92 00:04:39,880 --> 00:04:42,080 Speaker 1: it's the greatest country in the world and the only 93 00:04:42,120 --> 00:04:45,760 Speaker 1: place that's important. But nice Over in Europe, you had 94 00:04:45,839 --> 00:04:51,719 Speaker 1: French and Spanish inflation that was stronger than expected, a 95 00:04:51,839 --> 00:04:55,360 Speaker 1: record in France for the Euro Area, and we're now 96 00:04:55,400 --> 00:04:58,640 Speaker 1: expecting or the markets are now pricing in four percent 97 00:04:58,720 --> 00:05:05,200 Speaker 1: for the ecb which is I mean a lot. That's aggressive, right, Um, 98 00:05:05,200 --> 00:05:08,599 Speaker 1: we're looking at the highest level on buns in what 99 00:05:08,839 --> 00:05:13,119 Speaker 1: fifteen years? What's going on over there? And is that 100 00:05:13,520 --> 00:05:17,279 Speaker 1: part of what's driving the trade here? Yeah, it definitely is. 101 00:05:17,320 --> 00:05:21,520 Speaker 1: And today in particular, so you know you've seen you've 102 00:05:21,520 --> 00:05:25,120 Speaker 1: seen actually the European bond market leading the US bond 103 00:05:25,160 --> 00:05:29,080 Speaker 1: market by by about five minutes during the course of 104 00:05:29,080 --> 00:05:33,120 Speaker 1: the day today. Um, and the you know, there is 105 00:05:33,160 --> 00:05:37,239 Speaker 1: a big worry because remember, unlike the US the European 106 00:05:37,279 --> 00:05:39,279 Speaker 1: Central Bank only has a single mandate and that's to 107 00:05:39,360 --> 00:05:42,680 Speaker 1: keep inflation under controls for stable prices. They don't have 108 00:05:42,760 --> 00:05:46,960 Speaker 1: the the same you know, full employment mandate that the 109 00:05:47,080 --> 00:05:50,159 Speaker 1: US and five other central banks have. But so because 110 00:05:50,240 --> 00:05:53,760 Speaker 1: they're so fixated on inflation, when you get higher than 111 00:05:53,800 --> 00:05:57,080 Speaker 1: expected inflation prints, that just means that it's likely that 112 00:05:57,279 --> 00:05:59,440 Speaker 1: the ECB is going to be somewhat more hawkish. They 113 00:05:59,480 --> 00:06:02,919 Speaker 1: were very austious early on in this hiking cycle, but 114 00:06:03,000 --> 00:06:07,640 Speaker 1: now that they've gotten going. Hugh Worthington, who's my colleague 115 00:06:07,640 --> 00:06:11,200 Speaker 1: in London, you know, he expects them to hike twenty 116 00:06:11,520 --> 00:06:14,160 Speaker 1: fifty bases points at the next meeting and then probably 117 00:06:14,200 --> 00:06:16,440 Speaker 1: go a little bit more after. So so you're right, 118 00:06:16,520 --> 00:06:20,360 Speaker 1: like Europe is worried about inflation. Obviously, some of it 119 00:06:20,440 --> 00:06:23,560 Speaker 1: is not related to the economy, right. All the stuff 120 00:06:23,560 --> 00:06:25,760 Speaker 1: going on with the Ukraine and with guests and energy 121 00:06:25,800 --> 00:06:30,440 Speaker 1: prices is a separate issue from the um you know, 122 00:06:30,440 --> 00:06:34,240 Speaker 1: from the underlying economy. But you know, central bankers only 123 00:06:34,240 --> 00:06:36,840 Speaker 1: have a single tool to try and fight inflation, and 124 00:06:36,920 --> 00:06:39,920 Speaker 1: that's doing what they're doing, and that's increasing interestry sure, 125 00:06:39,960 --> 00:06:42,240 Speaker 1: and that they have to fight inflation, as you point out, 126 00:06:42,279 --> 00:06:45,600 Speaker 1: without worrying about unemployment, A because it's not in their 127 00:06:45,600 --> 00:06:48,280 Speaker 1: mandate and be because unemployment just doesn't suck as much 128 00:06:48,279 --> 00:06:50,880 Speaker 1: in Europe as it does here. Socialism, right, you have 129 00:06:51,000 --> 00:06:54,560 Speaker 1: that good stuff, all right, Eira um Manchester United. Presumably 130 00:06:54,560 --> 00:06:56,280 Speaker 1: they're selling a piece of the company. So of course 131 00:06:56,440 --> 00:06:58,560 Speaker 1: my advisors and I we are kicking at tires. I'll 132 00:06:58,600 --> 00:07:01,159 Speaker 1: talk to you about that next time time. Get your input, 133 00:07:01,160 --> 00:07:04,279 Speaker 1: Ira Jersey. He's a chief US interest rate strategist for 134 00:07:04,400 --> 00:07:07,800 Speaker 1: a bloomber cantell just giving us his thoughts on the FED. 135 00:07:08,520 --> 00:07:12,640 Speaker 1: We've got a couple maybe three rate increases coming up 136 00:07:12,880 --> 00:07:16,240 Speaker 1: in twenty twenty three. After that, who knows. We'll keep 137 00:07:16,240 --> 00:07:22,080 Speaker 1: in touch with Ira Jersey. He's got the skinny Pat Gallagher, 138 00:07:22,480 --> 00:07:26,320 Speaker 1: CEO of Gallagher Insurance, so I'm guessing that's like his company. 139 00:07:26,520 --> 00:07:28,680 Speaker 1: This is in York Stock Exchange list of company A 140 00:07:29,200 --> 00:07:33,160 Speaker 1: JG is the ticker I pumping up on my Bloomberg terminal. 141 00:07:33,400 --> 00:07:36,800 Speaker 1: I've got a market cap of forty billion dollars. Pat, 142 00:07:36,840 --> 00:07:39,240 Speaker 1: how come I don't know anything about your company and 143 00:07:39,280 --> 00:07:42,800 Speaker 1: you guys are so big. Tell me about your company 144 00:07:42,960 --> 00:07:47,960 Speaker 1: and where you guys fit in the insurance landscape. Well, okays, 145 00:07:48,040 --> 00:07:50,600 Speaker 1: first of all, thanks for the time today, but it 146 00:07:50,680 --> 00:07:53,680 Speaker 1: is it's unfortunately one sense that we're kind of one 147 00:07:53,680 --> 00:07:56,640 Speaker 1: of the world's best cap secrets. But they're very proud 148 00:07:56,680 --> 00:08:00,200 Speaker 1: of both our heritage and where we are today. We 149 00:08:00,320 --> 00:08:03,080 Speaker 1: started off as a small broker in Chicago. My grandfather 150 00:08:03,120 --> 00:08:06,880 Speaker 1: started the business. Came public in eighty six. Uh finished 151 00:08:06,920 --> 00:08:09,720 Speaker 1: date year, I'm sorry, came Bubalan eighty four. Finished that 152 00:08:09,840 --> 00:08:12,560 Speaker 1: year about a seventy nine million dollar market chap. And 153 00:08:12,680 --> 00:08:16,280 Speaker 1: it's been a really wonderful journey. Now we're one of 154 00:08:16,280 --> 00:08:20,640 Speaker 1: the largest insurance brokerage and riskmans with claim spaying organizations 155 00:08:20,640 --> 00:08:24,800 Speaker 1: in the world, operations over one hundred countries and as 156 00:08:24,840 --> 00:08:27,360 Speaker 1: you say, about a forty billion dollar market cap. Well, 157 00:08:27,360 --> 00:08:31,880 Speaker 1: and the stock chart, Pat is just unreal in how impressive. 158 00:08:31,880 --> 00:08:34,720 Speaker 1: When have we been met? I always um, you know, 159 00:08:34,760 --> 00:08:37,640 Speaker 1: I'll gauge companies by pulling up the comp screen on 160 00:08:37,679 --> 00:08:42,640 Speaker 1: the Bloomberg, which takes a five year snapshot of your 161 00:08:42,679 --> 00:08:47,040 Speaker 1: company versus competitors versus the index, and you're just stopping 162 00:08:47,080 --> 00:08:51,079 Speaker 1: all over everything, Paul, pull up the comp I'm sending 163 00:08:51,240 --> 00:08:55,559 Speaker 1: I'm sending a message to my insurance and also Bloomberg Intelligencing. 164 00:08:55,559 --> 00:08:57,839 Speaker 1: How come I don't know anything about this? Yeah, so 165 00:08:58,480 --> 00:09:04,840 Speaker 1: what is driving your share price up into the right look? 166 00:09:05,120 --> 00:09:07,400 Speaker 1: I think that you know, it's a cliche to talk 167 00:09:07,440 --> 00:09:09,520 Speaker 1: about culture, but that is what I'm going to do. 168 00:09:10,480 --> 00:09:13,040 Speaker 1: We've been very lucky that a large part of our 169 00:09:13,120 --> 00:09:16,680 Speaker 1: organizational growth over the last forty years has been through acquisition. 170 00:09:17,240 --> 00:09:19,439 Speaker 1: We look for people to do a really good job 171 00:09:19,520 --> 00:09:22,040 Speaker 1: of taking care clients, and we bring them in and 172 00:09:22,160 --> 00:09:25,760 Speaker 1: build and hopefully build all kinds of capabilities around them 173 00:09:25,800 --> 00:09:28,599 Speaker 1: that allow them to continue to expand their business. I 174 00:09:28,640 --> 00:09:30,160 Speaker 1: don't want to make this sound like a roll up. 175 00:09:30,200 --> 00:09:32,760 Speaker 1: It's a real corporation, but made up of a lot 176 00:09:32,800 --> 00:09:36,040 Speaker 1: of entrepreneurs I'm really really proud of. If you take 177 00:09:36,040 --> 00:09:37,880 Speaker 1: a look at that chart, I forget what you said 178 00:09:37,920 --> 00:09:39,480 Speaker 1: in terms of how far it is back there. You 179 00:09:39,520 --> 00:09:43,559 Speaker 1: don't got our ten year TSR it's about six hundred percent. 180 00:09:44,480 --> 00:09:46,640 Speaker 1: You look at at our five year TSR, it's over 181 00:09:46,679 --> 00:09:50,240 Speaker 1: two hundred and twenty percent. So I don't like TSR 182 00:09:50,280 --> 00:09:52,679 Speaker 1: as a measure of success on a short term, three year, 183 00:09:52,760 --> 00:09:55,600 Speaker 1: one year I have argument with Street on that, but 184 00:09:55,760 --> 00:09:59,240 Speaker 1: I think if you look five ten, fifteen, twenty five years. 185 00:09:59,640 --> 00:10:01,880 Speaker 1: T I was a really good at nicator of whether 186 00:10:01,960 --> 00:10:03,840 Speaker 1: or not you're delivering for the shareholders. You need to 187 00:10:03,880 --> 00:10:06,520 Speaker 1: see the chart. Yeah, you've basically done that. We've basically 188 00:10:06,559 --> 00:10:09,200 Speaker 1: done that through the whole way. You can click on 189 00:10:09,280 --> 00:10:10,760 Speaker 1: if you pull the TOMP screen, you can click on 190 00:10:10,760 --> 00:10:13,160 Speaker 1: a ten year as well. And it's I mean to me, 191 00:10:13,200 --> 00:10:16,720 Speaker 1: it's it's just the outperformance that's so impressive, because the 192 00:10:16,760 --> 00:10:20,520 Speaker 1: whole industry is done pretty well over the last ten years, 193 00:10:20,960 --> 00:10:26,200 Speaker 1: doubled and tripled. But you've quadrupled, Quinn tupled, sep sep, 194 00:10:26,520 --> 00:10:29,160 Speaker 1: I don't know how say it. Yeah, you're up more 195 00:10:29,160 --> 00:10:34,760 Speaker 1: than six six times UM, so that that's fascinating. Let 196 00:10:34,800 --> 00:10:38,480 Speaker 1: me ask you this then, Pat, what is You've been 197 00:10:38,760 --> 00:10:41,640 Speaker 1: on the board of directors since nineteen eighty six, that 198 00:10:41,800 --> 00:10:44,240 Speaker 1: was back when Paul was still doing KEG stands at 199 00:10:45,280 --> 00:10:52,360 Speaker 1: a duke. Yeah, but is born? What what does the 200 00:10:52,640 --> 00:10:55,400 Speaker 1: rising rate environment look like to you? And how does 201 00:10:55,400 --> 00:11:00,120 Speaker 1: it affect your business after ten years of basically zero um? 202 00:11:00,440 --> 00:11:03,880 Speaker 1: What does it mean to you? This new way of 203 00:11:03,920 --> 00:11:05,960 Speaker 1: life for most of us, but you've been through it 204 00:11:06,000 --> 00:11:09,200 Speaker 1: and back. Let me let me talk about that because 205 00:11:09,200 --> 00:11:11,120 Speaker 1: I think that's a really good point for your listeners 206 00:11:11,640 --> 00:11:14,560 Speaker 1: as everybody frets about inflation and you take a look 207 00:11:14,559 --> 00:11:16,440 Speaker 1: at what's going on in the marketplace, and of course 208 00:11:16,440 --> 00:11:18,760 Speaker 1: the stocks are down. The last year is a terrible year. 209 00:11:19,280 --> 00:11:22,160 Speaker 1: One of the reasons we've outperformed and the industry's outperformed 210 00:11:22,240 --> 00:11:26,720 Speaker 1: is that inflation really is a positive for Gallanthy. Now, 211 00:11:26,720 --> 00:11:29,400 Speaker 1: that doesn't mean that if we have a recession that's 212 00:11:29,400 --> 00:11:31,040 Speaker 1: a positive. And I could talk about that in the 213 00:11:31,040 --> 00:11:34,120 Speaker 1: middle minute. Because our commercial middle market clients are not 214 00:11:34,320 --> 00:11:36,880 Speaker 1: in recession, we can touch on that. But how can 215 00:11:36,920 --> 00:11:42,080 Speaker 1: inflation be positive? Remember, we get paid not on the 216 00:11:42,120 --> 00:11:46,160 Speaker 1: market value of your home, but the replacement cost of 217 00:11:46,280 --> 00:11:49,800 Speaker 1: your home or your building. And as inflation, as inflation 218 00:11:49,920 --> 00:11:54,160 Speaker 1: causes wages in costive construction to go up, insurance companies 219 00:11:54,240 --> 00:11:59,160 Speaker 1: rightfully demand more premium for the increased exposure we win 220 00:11:59,200 --> 00:12:02,760 Speaker 1: in that environment. Secondly, we collect your money and we 221 00:12:02,840 --> 00:12:05,840 Speaker 1: are allowed by agreement with you and our insurance carriers 222 00:12:05,880 --> 00:12:09,040 Speaker 1: to hold that money in most for sixty days. So 223 00:12:09,120 --> 00:12:12,000 Speaker 1: for ten years we've had to do the growth that 224 00:12:12,000 --> 00:12:16,880 Speaker 1: we've done with no fiduciary income on the investial asset, 225 00:12:16,920 --> 00:12:21,120 Speaker 1: which is basically our premium we've collected to our clients. 226 00:12:21,720 --> 00:12:25,000 Speaker 1: That's a substantial lift in a rate environment like we 227 00:12:25,080 --> 00:12:27,719 Speaker 1: had today. So if you go back and you look 228 00:12:27,760 --> 00:12:31,079 Speaker 1: at the Sevanghata invented this growth in a zero rate environment, 229 00:12:31,160 --> 00:12:34,800 Speaker 1: a zero inflation environment, who's the one winner in the 230 00:12:34,920 --> 00:12:38,480 Speaker 1: market when the inflation comes along. It's not the insurance companies. 231 00:12:38,480 --> 00:12:41,800 Speaker 1: And make no mistake, we're not an insurance company. We 232 00:12:41,880 --> 00:12:46,040 Speaker 1: are a broker. So we help our clients manage their 233 00:12:46,120 --> 00:12:49,880 Speaker 1: risk and we use the carriers as our partners do that. 234 00:12:50,520 --> 00:12:55,079 Speaker 1: They take the risk. So if inflation crimps their loss reserves, 235 00:12:55,160 --> 00:12:58,400 Speaker 1: that's their problem, not mine. But as premiums go up, 236 00:12:58,800 --> 00:13:01,880 Speaker 1: I benefit from any cruise commission. Hey, Pat, one of 237 00:13:01,920 --> 00:13:05,040 Speaker 1: the reasons we like to get C suite executives on 238 00:13:05,080 --> 00:13:07,360 Speaker 1: the show, it's just to really talked about how their 239 00:13:07,400 --> 00:13:10,760 Speaker 1: business has evolved. And you know, particularly over the last 240 00:13:10,800 --> 00:13:13,320 Speaker 1: three years with the pandemic. And I know you're based 241 00:13:13,320 --> 00:13:17,000 Speaker 1: in the Chicago area, right in the heart of the 242 00:13:17,080 --> 00:13:19,720 Speaker 1: United States, and you know, as as a founder of 243 00:13:19,760 --> 00:13:23,520 Speaker 1: this company, how has your company, how have your employees change? 244 00:13:23,559 --> 00:13:27,080 Speaker 1: How is your kind of workforce, your office life, how's 245 00:13:27,120 --> 00:13:30,760 Speaker 1: that all changed? Well, first and foremost, I think, you know, 246 00:13:30,920 --> 00:13:32,520 Speaker 1: look when you look at our company. I know, again 247 00:13:32,559 --> 00:13:34,960 Speaker 1: a cliche that our assets got up and done real 248 00:13:35,840 --> 00:13:38,840 Speaker 1: it every day, but it's very very true. I'm really 249 00:13:38,880 --> 00:13:42,800 Speaker 1: really pleased. We just completed our global forty three thousand 250 00:13:42,880 --> 00:13:47,920 Speaker 1: employee survey and the culture is incredibly strong, which I'm 251 00:13:47,960 --> 00:13:50,720 Speaker 1: pleased with, especially with so much so many people working 252 00:13:50,760 --> 00:13:53,600 Speaker 1: from home, so we've gone to kind of a high 253 00:13:53,600 --> 00:13:56,960 Speaker 1: bred model. There's a lot of people in our offices 254 00:13:57,080 --> 00:13:59,480 Speaker 1: three four days a week, and there are people working 255 00:13:59,520 --> 00:14:01,559 Speaker 1: from home, and there are some that will work from 256 00:14:01,559 --> 00:14:06,359 Speaker 1: home continually. So that certainly has changed that. We've benefited 257 00:14:06,440 --> 00:14:11,719 Speaker 1: from the ability to utilize utilize it obviously, but the 258 00:14:11,760 --> 00:14:14,960 Speaker 1: business itself has changed. And the fact that all the 259 00:14:15,000 --> 00:14:18,480 Speaker 1: way down to your smaller accounts, people are demanding expertise, 260 00:14:19,000 --> 00:14:20,760 Speaker 1: and that's why you see so much growth. To you, 261 00:14:21,440 --> 00:14:25,200 Speaker 1: it's no longer just your local agent is your buddy. 262 00:14:25,320 --> 00:14:27,480 Speaker 1: I play golf with them, thanks very much to take 263 00:14:27,520 --> 00:14:31,720 Speaker 1: care of my construction company. That's really changing fast as 264 00:14:31,800 --> 00:14:35,320 Speaker 1: millennials take over. I don't really care that you and 265 00:14:35,440 --> 00:14:38,000 Speaker 1: my dad played golf every weekend. The fact is I 266 00:14:38,080 --> 00:14:40,840 Speaker 1: need somebody to help me handle risk management, and I 267 00:14:40,880 --> 00:14:43,120 Speaker 1: need to know that there's breadth of understanding of what 268 00:14:43,200 --> 00:14:47,640 Speaker 1: I do, and that's strength and capability by industry, so 269 00:14:47,720 --> 00:14:51,680 Speaker 1: I refer women's voticals or niches. Has really changed. Then 270 00:14:51,720 --> 00:14:55,880 Speaker 1: of course you have digitalization and everybody wants two things. 271 00:14:55,920 --> 00:14:58,920 Speaker 1: They want data and analytics want to know what do 272 00:14:59,040 --> 00:15:02,800 Speaker 1: people like me? What kind of claims have you really seen? 273 00:15:03,000 --> 00:15:08,280 Speaker 1: And again there's thirty nine thousand agents and brokers in America, 274 00:15:08,480 --> 00:15:12,280 Speaker 1: the hundredth largest. Last you did thirty million in revenue. 275 00:15:12,960 --> 00:15:17,000 Speaker 1: We posted eight plus billions. So you are getting to 276 00:15:17,040 --> 00:15:19,520 Speaker 1: this point where there's more and more every day A 277 00:15:19,680 --> 00:15:23,560 Speaker 1: David and blythe kind of thing, yep, And so that's 278 00:15:23,720 --> 00:15:26,360 Speaker 1: that's it's a big part of what's so so much 279 00:15:26,480 --> 00:15:31,120 Speaker 1: change going on. That emphasizing culture continues to be the 280 00:15:31,160 --> 00:15:34,400 Speaker 1: most critical thing our management team goes every day. Pat 281 00:15:34,480 --> 00:15:38,640 Speaker 1: just about thirty seconds left. What do you think about 282 00:15:38,720 --> 00:15:41,440 Speaker 1: the possibility of a recession? What's your view on the 283 00:15:41,440 --> 00:15:46,160 Speaker 1: economy going forward? Thirty seconds? Very interesting? Read all the 284 00:15:46,240 --> 00:15:48,920 Speaker 1: same stuff you've read, see the Bloomberg reports as well. 285 00:15:49,080 --> 00:15:52,480 Speaker 1: Understand high tech laying off people, our middle market clients. 286 00:15:52,600 --> 00:15:56,440 Speaker 1: We measure this every single day, by endorsements and by 287 00:15:56,560 --> 00:15:59,360 Speaker 1: and by audits, which means that you pay more if 288 00:15:58,720 --> 00:16:02,080 Speaker 1: you pay me if your sales are up are stronger 289 00:16:02,120 --> 00:16:04,320 Speaker 1: this year than last year. What's the takeaway on that 290 00:16:05,240 --> 00:16:10,960 Speaker 1: our middle market American and global companies are doing extremely well, 291 00:16:11,000 --> 00:16:16,560 Speaker 1: which is why you see the pressure job growth. Fascinating, 292 00:16:16,600 --> 00:16:23,080 Speaker 1: Pat great Stuff really appreciated. This company located in Rolling Meadows, 293 00:16:24,120 --> 00:16:28,400 Speaker 1: Rolling chat Chicago, right near Evanston. You know, it's pretty 294 00:16:28,400 --> 00:16:30,920 Speaker 1: close to the lake. All are just north of Chicago. 295 00:16:31,080 --> 00:16:34,960 Speaker 1: There's great great towns, commuter towns north of Chicago, so 296 00:16:35,000 --> 00:16:37,960 Speaker 1: that's kind of where they are. Rolling Meadows, Michigan, Great Stuff. 297 00:16:37,960 --> 00:16:42,120 Speaker 1: Pat Gallagher, Illinois, Uh yes, thank you very much. He 298 00:16:42,200 --> 00:16:45,640 Speaker 1: started company. He started the company much better than Michigan. 299 00:16:45,720 --> 00:16:48,520 Speaker 1: He started the company in nineteen seventy two as an intern. 300 00:16:48,600 --> 00:16:51,800 Speaker 1: Great Stuff. Pat Gallagher CEO of Gallagher Insurance, Arthur Gallagher 301 00:16:51,840 --> 00:16:53,960 Speaker 1: and Company and the New York SAKA Chains symbol a 302 00:16:54,480 --> 00:16:59,240 Speaker 1: JG forty billion dollars market cap insurance brokerage firm. We 303 00:16:59,280 --> 00:17:03,320 Speaker 1: love getting diverse CEO folks and C suite folks on 304 00:17:03,360 --> 00:17:05,879 Speaker 1: from around the country, different businesses, getting a sense of 305 00:17:05,960 --> 00:17:09,639 Speaker 1: kind of how business is out there in the real world. 306 00:17:12,560 --> 00:17:14,840 Speaker 1: I just feel like in a world of you know, tech, 307 00:17:15,080 --> 00:17:18,679 Speaker 1: there are two mega conferences you have to go to. 308 00:17:18,840 --> 00:17:22,040 Speaker 1: One is Consermer Electronics Show in Vegas that's in January, 309 00:17:22,240 --> 00:17:27,040 Speaker 1: and the other one is the Mobile World Conference in Barcelona. 310 00:17:27,160 --> 00:17:29,760 Speaker 1: And good job, by the way, saying that, thank you, 311 00:17:30,359 --> 00:17:32,960 Speaker 1: I got a five on my ap Spanish. Can't speak 312 00:17:32,960 --> 00:17:36,360 Speaker 1: a lick. Dan O'Brien, president of the America's and Gender 313 00:17:36,440 --> 00:17:40,560 Speaker 1: Manager of HTC, he joins us he is in Barcelona, Dan, 314 00:17:40,960 --> 00:17:42,800 Speaker 1: what's the story here? Like, I did not go to 315 00:17:42,840 --> 00:17:45,119 Speaker 1: CS this year, so I feel like I'm a step 316 00:17:45,160 --> 00:17:48,680 Speaker 1: behind or two on the whole metaverse thing, virtual reality, 317 00:17:48,720 --> 00:17:52,880 Speaker 1: augmented reality, all AI, all that kind of stuff. What 318 00:17:53,119 --> 00:17:58,480 Speaker 1: is the buzz at the Mobile World Conference this year? Well, 319 00:17:58,480 --> 00:18:01,880 Speaker 1: I think thanks for having and apologies for any noise 320 00:18:01,920 --> 00:18:03,720 Speaker 1: that we are actually here on the show floor. But 321 00:18:04,320 --> 00:18:06,960 Speaker 1: there's a lot going on here at Mobile Congress. A 322 00:18:07,000 --> 00:18:10,240 Speaker 1: lot has to do with five G right, and how 323 00:18:10,320 --> 00:18:14,320 Speaker 1: is that going to create the connectivity for the metaverse? Right? 324 00:18:14,680 --> 00:18:18,040 Speaker 1: And you know, how are carriers and companies like infrastructure 325 00:18:18,040 --> 00:18:21,760 Speaker 1: partners like ericson and carriers like Verizon Wireless and AT 326 00:18:21,880 --> 00:18:23,719 Speaker 1: and T Wireless and T Mobile and the likes, and 327 00:18:23,920 --> 00:18:26,400 Speaker 1: how are they going to be the infrastructure providers for 328 00:18:26,480 --> 00:18:29,119 Speaker 1: the metaverse? Right? And then how do companies like HTC 329 00:18:29,359 --> 00:18:32,720 Speaker 1: deliver products and services and solutions for B to B 330 00:18:33,119 --> 00:18:37,040 Speaker 1: and professional users and for consumers that will actually enjoy 331 00:18:37,320 --> 00:18:41,520 Speaker 1: and experience those types of immersive experiences? All right, Dan, 332 00:18:41,800 --> 00:18:44,520 Speaker 1: I get that, and I know everybody there is drinking 333 00:18:44,560 --> 00:18:47,560 Speaker 1: the kool aid. But to be honestly, if I'm a shareholder, 334 00:18:47,600 --> 00:18:52,000 Speaker 1: a large shareholder of Facebook slash Meta, I can't say 335 00:18:52,000 --> 00:18:54,320 Speaker 1: in one sentence, I can't tell you, and I own 336 00:18:54,359 --> 00:18:57,240 Speaker 1: a jillion dollars worth of the stock, I can't tell 337 00:18:57,280 --> 00:18:59,439 Speaker 1: you in one sentence what the metaverse is? What is 338 00:18:59,480 --> 00:19:02,680 Speaker 1: the meta verse to you? And what do you think 339 00:19:02,680 --> 00:19:08,479 Speaker 1: the applications are to you? Sure? Well, the metaverse is 340 00:19:08,640 --> 00:19:11,480 Speaker 1: really just an extension of the Internet and what you 341 00:19:11,600 --> 00:19:15,240 Speaker 1: use today, what you're going to do in the metaverses 342 00:19:15,280 --> 00:19:17,920 Speaker 1: be able to continue to interact with your computers, your 343 00:19:17,960 --> 00:19:21,880 Speaker 1: Android phones, your iPhones, your iPads. You're just now also 344 00:19:21,920 --> 00:19:24,000 Speaker 1: going to be able to interact with this digital content 345 00:19:24,040 --> 00:19:27,440 Speaker 1: as a first person, whether it's with mixed reality glasses 346 00:19:27,520 --> 00:19:30,760 Speaker 1: or virtual reality glasses or augmented reality glasses or or 347 00:19:30,800 --> 00:19:33,320 Speaker 1: glasses that do all of those functions, and you're going 348 00:19:33,320 --> 00:19:36,560 Speaker 1: to be able to actually interact inside of these digital spaces. 349 00:19:37,280 --> 00:19:40,879 Speaker 1: Our version of the metaverseus the viverse, and you know, 350 00:19:41,080 --> 00:19:42,959 Speaker 1: here we think consumers are going to use it for 351 00:19:43,320 --> 00:19:48,080 Speaker 1: productivity and human performance improvement and things like training and 352 00:19:48,119 --> 00:19:51,359 Speaker 1: simulation and education, but it's also going to be used 353 00:19:51,359 --> 00:19:54,919 Speaker 1: for a lot of entertainment and enjoyment as well. What 354 00:19:55,000 --> 00:19:59,480 Speaker 1: are all of these acronyms. I know VR is virtual reality. 355 00:20:00,359 --> 00:20:03,639 Speaker 1: I don't know what XR is or MR is. What 356 00:20:03,720 --> 00:20:08,800 Speaker 1: are all these different kinds of realities? Sure so XR 357 00:20:09,000 --> 00:20:11,879 Speaker 1: is kind of the umbrella. It's extended reality. It's the 358 00:20:11,880 --> 00:20:15,520 Speaker 1: thing that extends you from your real space to a 359 00:20:15,600 --> 00:20:20,040 Speaker 1: fully virtual space. Mixed reality is kind of you're interacting 360 00:20:20,080 --> 00:20:23,119 Speaker 1: with your real world and everything in your space, and 361 00:20:23,240 --> 00:20:25,399 Speaker 1: you can see everything in your space. There's also a 362 00:20:25,400 --> 00:20:28,600 Speaker 1: digital overlay of content that you're also interacting with in 363 00:20:28,640 --> 00:20:31,240 Speaker 1: your real space. So you could be playing a game, 364 00:20:31,560 --> 00:20:34,240 Speaker 1: you know, in your living room where a portal opens 365 00:20:34,280 --> 00:20:35,919 Speaker 1: up on the wall and the aliens come out, and 366 00:20:36,000 --> 00:20:39,000 Speaker 1: you're playing a game shooting at those things. You could 367 00:20:39,040 --> 00:20:41,720 Speaker 1: also be you know, having an educational experience and learning 368 00:20:41,720 --> 00:20:45,040 Speaker 1: about world history or ancient Egypt right and in your 369 00:20:45,080 --> 00:20:47,639 Speaker 1: living room and actually doing it while you actually see 370 00:20:47,720 --> 00:20:50,440 Speaker 1: everything in your living room and including the other people 371 00:20:50,440 --> 00:20:53,720 Speaker 1: in that living room. So it's really kind of a 372 00:20:53,880 --> 00:20:57,240 Speaker 1: mixture of the different levels of immersion that you can have. 373 00:20:57,400 --> 00:21:00,960 Speaker 1: Virtual reality means you are one included from the real 374 00:21:01,000 --> 00:21:04,560 Speaker 1: world and you are completely in a virtual world. So 375 00:21:04,880 --> 00:21:09,160 Speaker 1: dan is the virtual world? Is it a I mean, 376 00:21:09,240 --> 00:21:12,919 Speaker 1: I have to have the headset. Is that just the 377 00:21:12,960 --> 00:21:15,880 Speaker 1: way it is? And it's just a question who has 378 00:21:15,920 --> 00:21:19,680 Speaker 1: the better headset, the better mousetrap. Well, I think we're 379 00:21:20,000 --> 00:21:24,200 Speaker 1: all really driving at the industry to solve a lot 380 00:21:24,200 --> 00:21:27,280 Speaker 1: of these different problems as quickly as possible. We all 381 00:21:27,320 --> 00:21:30,399 Speaker 1: started with virtual reality headsets because the easiest thing to 382 00:21:30,400 --> 00:21:33,400 Speaker 1: do was put somebody inside of a completely virtual environment 383 00:21:33,400 --> 00:21:36,320 Speaker 1: and control that and create the experience for the user. 384 00:21:36,760 --> 00:21:40,040 Speaker 1: Augmented reality and mixed reality are more difficult, and you 385 00:21:40,080 --> 00:21:43,840 Speaker 1: actually have to have a network infrastructure deliver content to 386 00:21:44,080 --> 00:21:48,240 Speaker 1: those type of wearables or headsets. You know, the level 387 00:21:48,280 --> 00:21:50,360 Speaker 1: of yes, we're all you know, in the future, you're 388 00:21:50,359 --> 00:21:52,440 Speaker 1: actually probably not going to have a smartphone anymore. And 389 00:21:52,480 --> 00:21:55,000 Speaker 1: you will be using a wearable where you'll be able 390 00:21:55,000 --> 00:21:57,639 Speaker 1: to actually have an augmented reality experience and just seeing 391 00:21:57,720 --> 00:22:00,760 Speaker 1: overlays of digital content inside of the real world. And 392 00:22:00,800 --> 00:22:02,760 Speaker 1: then you'll also be able to have you know, different 393 00:22:02,840 --> 00:22:05,880 Speaker 1: levels of immersion with those types of headsets. We recently 394 00:22:05,880 --> 00:22:09,800 Speaker 1: announced the XR Elite headset, which actually does virtual reality 395 00:22:09,800 --> 00:22:13,640 Speaker 1: experiences and mixed reality experiences. So we're already moving there. 396 00:22:13,840 --> 00:22:16,639 Speaker 1: I think the industry and all the different OEMs and 397 00:22:16,720 --> 00:22:19,440 Speaker 1: the different companies are trying to solve the different types 398 00:22:19,440 --> 00:22:25,679 Speaker 1: of experiences we can deliver. I'm wondering about HTC and 399 00:22:25,880 --> 00:22:29,000 Speaker 1: what you can do in this country. I know it's 400 00:22:29,480 --> 00:22:32,480 Speaker 1: I think it's a Taiwanese company, right, but a lot 401 00:22:32,520 --> 00:22:35,040 Speaker 1: of Americans are going to think it's Chinese straight away. 402 00:22:35,160 --> 00:22:38,119 Speaker 1: And you've got this you know, China backlash going on. 403 00:22:38,640 --> 00:22:43,040 Speaker 1: What's what's your take on that? You know, growing up here, 404 00:22:43,080 --> 00:22:47,080 Speaker 1: having gone to Marrymount, working your way up through KPMG 405 00:22:47,240 --> 00:22:53,320 Speaker 1: and AT and T, now you're at HTC. Yeah, I think, um, 406 00:22:53,520 --> 00:22:56,359 Speaker 1: you know, Time one is a is a compliant country 407 00:22:56,400 --> 00:22:59,600 Speaker 1: that actually makes compliant products that are very safe for 408 00:22:59,720 --> 00:23:02,639 Speaker 1: being used inside of Dude, I get that I'm just 409 00:23:02,680 --> 00:23:06,560 Speaker 1: saying like there's a slant, right, there's a there's a bias, 410 00:23:08,040 --> 00:23:11,920 Speaker 1: and right away people hear HTC and think, you know, 411 00:23:12,400 --> 00:23:17,320 Speaker 1: because maybe they're not as educated as you. Okay, basically 412 00:23:17,320 --> 00:23:20,399 Speaker 1: a Chinese company. Um, how do you dissuade them of that? 413 00:23:20,760 --> 00:23:24,600 Speaker 1: In marketing? How do you get around that? Sure? Well, 414 00:23:24,680 --> 00:23:29,080 Speaker 1: for starters, we don't take any user behavior or user 415 00:23:29,160 --> 00:23:31,600 Speaker 1: data or collect any of that data. We're actually a 416 00:23:31,720 --> 00:23:36,440 Speaker 1: very privacy first company. UM. So regardless of where people 417 00:23:36,480 --> 00:23:39,560 Speaker 1: think they actually the product was made or whether it 418 00:23:39,600 --> 00:23:42,359 Speaker 1: was made with good intentions. UM. We talk a lot 419 00:23:42,440 --> 00:23:47,879 Speaker 1: about our brand, which is about innovation, creativity and humanity, 420 00:23:48,040 --> 00:23:50,000 Speaker 1: and so all of our products are actually designed to 421 00:23:50,040 --> 00:23:53,480 Speaker 1: actually improve humanity and give people solutions that will actually 422 00:23:53,560 --> 00:23:57,200 Speaker 1: make their lives better. UM. And our products don't data 423 00:23:57,280 --> 00:24:00,080 Speaker 1: mind any of our users or their user behavior. We 424 00:24:00,119 --> 00:24:02,720 Speaker 1: want to protect all of that data as the best 425 00:24:02,800 --> 00:24:05,480 Speaker 1: we can for all of our users. So those are 426 00:24:05,480 --> 00:24:08,000 Speaker 1: the things that we talk about heavily in our marketing 427 00:24:08,760 --> 00:24:10,640 Speaker 1: and about our brand, and we try to really gain 428 00:24:10,680 --> 00:24:13,960 Speaker 1: the trust of our users. And we have a long 429 00:24:14,000 --> 00:24:16,439 Speaker 1: history of making things like smartphones and other products that 430 00:24:16,640 --> 00:24:20,160 Speaker 1: users you know, at one point HTC sold forty eight 431 00:24:20,160 --> 00:24:22,879 Speaker 1: million smartphones a year, and a lot of people were 432 00:24:22,960 --> 00:24:24,600 Speaker 1: using our products and a lot of people have a 433 00:24:24,640 --> 00:24:27,840 Speaker 1: lot of positive sentiment towards our brand. Hey, Dan, just 434 00:24:27,920 --> 00:24:31,840 Speaker 1: about thirty seconds. Is Meta or Samsung? Are they customers 435 00:24:31,840 --> 00:24:38,080 Speaker 1: of HTC or competitors? Well, in some senses competitors, But 436 00:24:39,000 --> 00:24:40,600 Speaker 1: in a lot of ways we were approaching the market 437 00:24:40,680 --> 00:24:44,360 Speaker 1: very differently. You know, Meta is you know, subsidizing their hardware, 438 00:24:44,840 --> 00:24:47,840 Speaker 1: and you know, you know, the user is kind of 439 00:24:47,880 --> 00:24:50,840 Speaker 1: the product, right when it comes to a Facebook product 440 00:24:51,040 --> 00:24:54,000 Speaker 1: or a Meta product. When it comes to our product, 441 00:24:54,880 --> 00:24:57,119 Speaker 1: the HTC product or the FIAT product that we sell you, 442 00:24:57,280 --> 00:24:59,280 Speaker 1: that's the product and you get to use it for 443 00:24:59,359 --> 00:25:01,960 Speaker 1: the benefit of you, whether it's for entertainment or for 444 00:25:02,000 --> 00:25:06,680 Speaker 1: productivity or learning or education. But in terms of Samsung, 445 00:25:06,960 --> 00:25:10,200 Speaker 1: you know, they exited the immersive portfolio and the immersive 446 00:25:10,200 --> 00:25:13,000 Speaker 1: products and so we'll see what they come to market 447 00:25:13,080 --> 00:25:15,440 Speaker 1: with probably in the next year or so. Okay, Dan, 448 00:25:15,560 --> 00:25:19,119 Speaker 1: great stuff, Thanks for phoning in from Barcelona. Great stuff. 449 00:25:19,119 --> 00:25:21,080 Speaker 1: He's at the Mobile World conference there again, one of 450 00:25:21,119 --> 00:25:25,359 Speaker 1: the big big mobile conferences, maybe the biggest. Yeah, exactly right, 451 00:25:25,680 --> 00:25:28,520 Speaker 1: Dan o Brian, President of America's and general manager at 452 00:25:28,760 --> 00:25:34,359 Speaker 1: HTC talking about the metaverse and all things technology. Some 453 00:25:34,440 --> 00:25:41,000 Speaker 1: good stuff there. If you're into the investment banking biz 454 00:25:41,080 --> 00:25:43,280 Speaker 1: like I am, you really pay attention to what the 455 00:25:43,400 --> 00:25:46,879 Speaker 1: big big players, the Morgan Stanley's, the Goldman Sacks of 456 00:25:46,960 --> 00:25:49,320 Speaker 1: JP Morgan's are saying, and we got a big How 457 00:25:49,359 --> 00:25:51,040 Speaker 1: do you do that? How do you do Is there 458 00:25:51,080 --> 00:25:53,040 Speaker 1: any interass that you reach out to? The one person 459 00:25:53,080 --> 00:25:55,239 Speaker 1: that you owe to from is Alison william She's our 460 00:25:55,240 --> 00:25:59,000 Speaker 1: senior banks analyst at Bloomberg Intelligence. Literally one of the 461 00:25:59,119 --> 00:26:01,639 Speaker 1: first analysts be hired. We begged her to join us 462 00:26:01,640 --> 00:26:03,760 Speaker 1: back in the day when we were forming Bloomberg Intelligence. 463 00:26:03,920 --> 00:26:05,960 Speaker 1: She's one of the best on the streets. Alison, you're 464 00:26:06,000 --> 00:26:08,600 Speaker 1: downtown Manhattan. I know it's hard for you to go 465 00:26:08,640 --> 00:26:11,440 Speaker 1: below fourteenth Street, but you're down in the financial district. 466 00:26:11,440 --> 00:26:14,000 Speaker 1: You're at Goldman Sachs. Are you learning anything today? Are 467 00:26:14,000 --> 00:26:17,240 Speaker 1: they telling you in the street anything that maybe is surprising? 468 00:26:19,080 --> 00:26:23,960 Speaker 1: Not a lot, And I would say not surprising. Although 469 00:26:24,320 --> 00:26:26,320 Speaker 1: I'm surprised the stock is down, I don't know. I 470 00:26:26,880 --> 00:26:30,800 Speaker 1: think that we weren't We weren't expecting any new targets 471 00:26:30,960 --> 00:26:33,240 Speaker 1: from the bank. They already sort of you know, talked 472 00:26:33,280 --> 00:26:36,560 Speaker 1: about their strategy shift late last year, kind of gave 473 00:26:36,640 --> 00:26:40,159 Speaker 1: new numbers and so what we were hoping for today 474 00:26:40,200 --> 00:26:43,879 Speaker 1: and I think investors were expecting is you know, details 475 00:26:44,040 --> 00:26:49,320 Speaker 1: on the path to better returns, and so they mapped 476 00:26:49,320 --> 00:26:51,440 Speaker 1: out some things. I would say if there was something 477 00:26:51,480 --> 00:26:55,200 Speaker 1: that was maybe disappointing is on the cost side of things. 478 00:26:55,200 --> 00:26:58,480 Speaker 1: They've missed their sixty percent cost ratio target in recent 479 00:26:58,560 --> 00:27:01,400 Speaker 1: years and than some of the cost cuts that they've 480 00:27:01,440 --> 00:27:04,239 Speaker 1: talked about are you know, are sort of not going 481 00:27:04,280 --> 00:27:07,960 Speaker 1: to get them there this year. Um, But I feel 482 00:27:08,000 --> 00:27:11,040 Speaker 1: like there is potential for downside coming into today just 483 00:27:11,119 --> 00:27:15,359 Speaker 1: because um, you know, there there is a little bit 484 00:27:15,400 --> 00:27:17,520 Speaker 1: of work to do to get to the returns. And 485 00:27:17,560 --> 00:27:21,320 Speaker 1: they kept that return target and they do have you know, 486 00:27:21,400 --> 00:27:23,679 Speaker 1: most banks when they put out these return targets, a 487 00:27:23,680 --> 00:27:27,800 Speaker 1: lot of it is dependent on the cost side of things. UM. 488 00:27:28,080 --> 00:27:31,479 Speaker 1: I think that structural changes to their business are going 489 00:27:31,520 --> 00:27:33,960 Speaker 1: to help get them there. So I think that's that's 490 00:27:33,960 --> 00:27:37,600 Speaker 1: a positive and something tangible. They're going to be working 491 00:27:37,640 --> 00:27:40,280 Speaker 1: down their their their balance sheet and asset management and 492 00:27:40,320 --> 00:27:42,600 Speaker 1: then working to get you know, profitable on the platform 493 00:27:42,640 --> 00:27:46,080 Speaker 1: business it just seems like, I know, Goldman Sacks is 494 00:27:46,160 --> 00:27:50,479 Speaker 1: still you know, top of class in a number of 495 00:27:50,560 --> 00:27:55,280 Speaker 1: different um swaths of the industry. Right, of course, it's 496 00:27:55,320 --> 00:27:59,640 Speaker 1: still Goldman Sacks, but they've had this about face with 497 00:27:59,720 --> 00:28:03,680 Speaker 1: Mark is the consumer business. They've had this reorganization that's 498 00:28:03,680 --> 00:28:07,119 Speaker 1: been a little bit messy. They've led the street in 499 00:28:07,280 --> 00:28:12,280 Speaker 1: terms of having to layoff staff, and now they're holding 500 00:28:12,359 --> 00:28:16,359 Speaker 1: an investor day, the second one. And they used to 501 00:28:16,400 --> 00:28:20,600 Speaker 1: be like above investor days, too good for investor days. 502 00:28:20,640 --> 00:28:24,600 Speaker 1: So is it like a red flag that they're having 503 00:28:24,640 --> 00:28:28,280 Speaker 1: to try and get investors together and convince them that 504 00:28:28,359 --> 00:28:32,399 Speaker 1: it's still a good story. Well, I think you know, 505 00:28:32,600 --> 00:28:36,280 Speaker 1: to me, the consumer business was not successful, but it's 506 00:28:36,320 --> 00:28:39,600 Speaker 1: a small part of it. I mean, the overall bread 507 00:28:39,640 --> 00:28:42,880 Speaker 1: and butter of Goldman is phenomenal and doing great, and 508 00:28:42,960 --> 00:28:46,200 Speaker 1: I think that you know, the market share gains in 509 00:28:46,240 --> 00:28:49,600 Speaker 1: that business which drives the majority of their profits, the 510 00:28:49,800 --> 00:28:52,240 Speaker 1: m and A business, which is one of the most 511 00:28:53,400 --> 00:28:56,200 Speaker 1: you know, sought after businesses on Wall Street. You know, 512 00:28:56,520 --> 00:28:59,000 Speaker 1: they pointed out how their number one for twenty years, 513 00:28:59,000 --> 00:29:01,320 Speaker 1: but I would also point to, you know the fact 514 00:29:01,400 --> 00:29:04,320 Speaker 1: that they have a big margin to the number two players, 515 00:29:04,320 --> 00:29:08,640 Speaker 1: So let's keep that perspective. But I think the investor days, 516 00:29:09,000 --> 00:29:12,160 Speaker 1: you know, they've they've sort of come with the current management, 517 00:29:12,240 --> 00:29:15,760 Speaker 1: it's come with wanting to provide transparency, and it's come 518 00:29:15,800 --> 00:29:18,080 Speaker 1: with some of the newer efforts. You know, you have 519 00:29:18,160 --> 00:29:20,760 Speaker 1: to be good at what you're good at, but always 520 00:29:20,840 --> 00:29:23,840 Speaker 1: keep you know, trying new things. You know, the consumer 521 00:29:23,880 --> 00:29:26,320 Speaker 1: business has not worked out. There's been so much media 522 00:29:26,320 --> 00:29:29,840 Speaker 1: and headlines about that, but the transaction backing business has 523 00:29:29,920 --> 00:29:33,360 Speaker 1: really done well, and you know, I think that's a 524 00:29:33,360 --> 00:29:35,880 Speaker 1: business that we're going to hope to continue to see 525 00:29:35,960 --> 00:29:39,080 Speaker 1: good things from. And the alternatives business, you know, they've 526 00:29:39,200 --> 00:29:42,120 Speaker 1: raised one hundred and eighty billion over the past few years. 527 00:29:42,120 --> 00:29:45,000 Speaker 1: That's you know, in the range of people like you 528 00:29:45,400 --> 00:29:50,040 Speaker 1: know just below Brookfield and then you know a kru 529 00:29:50,680 --> 00:29:53,720 Speaker 1: Blackstone and the leaders, but within that range of like 530 00:29:53,840 --> 00:29:57,800 Speaker 1: Areas and Carlisle, and I think that that's really a 531 00:29:57,880 --> 00:30:01,880 Speaker 1: story for investors that you know, as they continue to 532 00:30:01,920 --> 00:30:05,440 Speaker 1: move some of these investments off their balance sheet into 533 00:30:05,480 --> 00:30:10,240 Speaker 1: the hands of customers, and they're going to release capital, 534 00:30:10,360 --> 00:30:12,800 Speaker 1: improve the returns on the business, improve the profile of 535 00:30:12,800 --> 00:30:15,840 Speaker 1: the business. They've never gotten credit for the returns there, 536 00:30:16,280 --> 00:30:18,560 Speaker 1: and so I think that is really a positive story 537 00:30:18,560 --> 00:30:20,280 Speaker 1: that we're going to see over the next couple of years. 538 00:30:20,440 --> 00:30:22,280 Speaker 1: So Alis, I know from from talking to you and 539 00:30:22,520 --> 00:30:26,160 Speaker 1: from reading your research that Goldman Sachs has typically had, 540 00:30:26,240 --> 00:30:28,280 Speaker 1: you know, some of the highest returns in the industry 541 00:30:28,360 --> 00:30:30,440 Speaker 1: year in and year out. I mean, I've competed against 542 00:30:30,440 --> 00:30:32,200 Speaker 1: them for decades and I know how good they are 543 00:30:32,440 --> 00:30:34,680 Speaker 1: to the extents. To the extet, the returns have been 544 00:30:34,760 --> 00:30:38,480 Speaker 1: lagging recently. Is it just their investments in the consumer 545 00:30:38,480 --> 00:30:41,400 Speaker 1: bank or other parts of their business kind of lagged 546 00:30:41,400 --> 00:30:44,240 Speaker 1: maybe a little bit, So I think it is the 547 00:30:44,320 --> 00:30:46,400 Speaker 1: consumer part. But then you know, I will take you 548 00:30:46,440 --> 00:30:48,280 Speaker 1: back to sort of the business I was just talking about, 549 00:30:48,280 --> 00:30:52,000 Speaker 1: which is their investment business. So, as you said, you've 550 00:30:52,040 --> 00:30:55,720 Speaker 1: known them for a long time, the private equity business 551 00:30:55,800 --> 00:30:59,720 Speaker 1: and their investments has been a significant business for them, 552 00:31:00,000 --> 00:31:03,160 Speaker 1: and in the postfocal world, they've been trying to work 553 00:31:03,240 --> 00:31:07,160 Speaker 1: that down. And while that business contribute to some of 554 00:31:07,200 --> 00:31:11,200 Speaker 1: their returns, investors just really never give them the credit 555 00:31:11,200 --> 00:31:14,400 Speaker 1: for it because it can be very volatile and there 556 00:31:14,600 --> 00:31:17,720 Speaker 1: and so there's there's just generally less of a multiple 557 00:31:17,760 --> 00:31:20,240 Speaker 1: applied to that business and so I think that is 558 00:31:20,280 --> 00:31:23,760 Speaker 1: a part of the strategy to improve returns but also 559 00:31:23,800 --> 00:31:27,080 Speaker 1: improve the quality of that returns through you know, moving 560 00:31:27,160 --> 00:31:31,480 Speaker 1: some of those gains to recurring management type of fees 561 00:31:31,520 --> 00:31:35,760 Speaker 1: which investors do value with a higher multiple, reducing the 562 00:31:35,840 --> 00:31:38,600 Speaker 1: capital that's going to reduce some of their capital requirements. 563 00:31:39,800 --> 00:31:42,520 Speaker 1: The thirty billion Shary purchase, that's almost twenty five percent 564 00:31:42,520 --> 00:31:44,720 Speaker 1: of our market value that they talked about today, that's 565 00:31:44,720 --> 00:31:49,040 Speaker 1: a huge positive. So I think there are some good things. 566 00:31:49,440 --> 00:31:51,800 Speaker 1: As I said, I think, you know, the negative side 567 00:31:51,880 --> 00:31:53,960 Speaker 1: is maybe just that the costs they're going to continue 568 00:31:54,000 --> 00:31:57,400 Speaker 1: to be a headwind. They're investing still in the platform business, 569 00:31:57,480 --> 00:32:01,719 Speaker 1: so it'll take a while. So I think today's just 570 00:32:02,040 --> 00:32:04,160 Speaker 1: a lot of talk about execution. It's hard for the 571 00:32:04,200 --> 00:32:07,840 Speaker 1: stock to turn positively. But I think they're setting good 572 00:32:07,880 --> 00:32:11,800 Speaker 1: targets that they can meet and so you know we're 573 00:32:11,800 --> 00:32:13,360 Speaker 1: going to have to see them them do that over 574 00:32:13,400 --> 00:32:15,960 Speaker 1: the next couple of years. Well, it is interesting to 575 00:32:15,960 --> 00:32:19,200 Speaker 1: see the stock down almost two percent when other financials 576 00:32:19,200 --> 00:32:23,800 Speaker 1: are gaining today. I don't want to leave you without 577 00:32:23,840 --> 00:32:27,480 Speaker 1: getting a chance to talk about credit Suiee, Alison, because 578 00:32:27,480 --> 00:32:31,200 Speaker 1: I know you never tire of the Green Sills, Saga, 579 00:32:31,320 --> 00:32:35,320 Speaker 1: and apparently regulators are now saying Credit Suitee needs to 580 00:32:35,320 --> 00:32:39,680 Speaker 1: hold board meetings occasionally to talk about their biggest counterparties, 581 00:32:39,800 --> 00:32:42,480 Speaker 1: and they have to issue like a responsibility report for 582 00:32:42,520 --> 00:32:45,360 Speaker 1: their top six hundred employees. It seems like so much work. 583 00:32:46,800 --> 00:32:49,560 Speaker 1: It does, and I think this just continues to focus 584 00:32:49,600 --> 00:32:52,920 Speaker 1: on the process for Credit Sweeze. I think you know 585 00:32:53,080 --> 00:32:56,000 Speaker 1: that there were some incremental positives in terms of their 586 00:32:56,560 --> 00:33:00,560 Speaker 1: you know, remaining risk in the US. You know it's done. 587 00:33:00,560 --> 00:33:02,880 Speaker 1: Who's Who's our legal expert, and I depend on him 588 00:33:02,880 --> 00:33:06,480 Speaker 1: for those views. But it just I think, you know, 589 00:33:06,560 --> 00:33:11,840 Speaker 1: from the local regulator perspective, continues to show that they 590 00:33:11,920 --> 00:33:13,520 Speaker 1: have work to do. They're going to continue to be 591 00:33:13,560 --> 00:33:18,840 Speaker 1: under scrutiny. We had news earlier this week. Oh well, 592 00:33:18,880 --> 00:33:22,800 Speaker 1: we had news last week, you know, related to some 593 00:33:23,040 --> 00:33:26,640 Speaker 1: lawsuits about what they had said about flows. So I 594 00:33:26,640 --> 00:33:29,360 Speaker 1: think sort of the legal challenges do you can continue 595 00:33:29,400 --> 00:33:32,560 Speaker 1: for them, and it's just going to be a long process. 596 00:33:32,880 --> 00:33:35,160 Speaker 1: All right, Allison, great stuff, and I recommend after your 597 00:33:35,200 --> 00:33:37,479 Speaker 1: analyst meeting today you hop on the ferry, take it 598 00:33:37,480 --> 00:33:39,480 Speaker 1: over to Hoboken, get the train home. That's a great 599 00:33:39,520 --> 00:33:41,400 Speaker 1: way to commute. That's how I uhould do it back 600 00:33:41,400 --> 00:33:43,880 Speaker 1: in the day from downtown. Alison Williams, Senior Global Banks 601 00:33:44,040 --> 00:33:47,000 Speaker 1: and Asset Manager analyst for Bloomberg Intelligence. She's at Goldman 602 00:33:47,040 --> 00:33:50,600 Speaker 1: Sachs headquarters today in Lower Manhattan for their investor Day, 603 00:33:51,280 --> 00:33:56,760 Speaker 1: giving us the latest on all things Goldman talk technology. 604 00:33:56,800 --> 00:33:59,280 Speaker 1: I'm want to talk Apple and anyway we can go here. 605 00:33:59,280 --> 00:34:00,680 Speaker 1: I mean, got a couple of choices. You can go 606 00:34:00,880 --> 00:34:03,040 Speaker 1: on a rock Rana or you can go Man deep 607 00:34:03,080 --> 00:34:05,680 Speaker 1: sing to me they're interchangeable. They can you can ask 608 00:34:05,720 --> 00:34:09,000 Speaker 1: about hardware, tell them that yeah, I mean, I don't know, 609 00:34:09,400 --> 00:34:13,000 Speaker 1: both are indispensable, indispensable that that's a better word. But 610 00:34:13,080 --> 00:34:15,920 Speaker 1: on a rock RANI. He's actually in seven thirty one 611 00:34:16,120 --> 00:34:19,480 Speaker 1: Lexington Avenue, are Bloomerck Global HQ. So we got him 612 00:34:19,560 --> 00:34:21,719 Speaker 1: here in Ore and there was a big Apple story today. 613 00:34:21,920 --> 00:34:23,719 Speaker 1: There was a big Apple story here as we reached 614 00:34:23,719 --> 00:34:29,040 Speaker 1: out to one of their suppliers in China and these supplier, 615 00:34:29,239 --> 00:34:33,520 Speaker 1: this supplier tells us that they and their competitors, I guess, 616 00:34:33,560 --> 00:34:36,880 Speaker 1: are looking for ways to move out China as quickly 617 00:34:36,880 --> 00:34:39,080 Speaker 1: as possible. I can't imagine that goes down too well 618 00:34:39,080 --> 00:34:41,360 Speaker 1: with the government there, but I can't imagine. Well, anyway, 619 00:34:41,360 --> 00:34:43,719 Speaker 1: we got on Rani here, he's a tech analyst for 620 00:34:43,719 --> 00:34:47,360 Speaker 1: Bloomberg Intelligence Rock. Just summarize Force takes back a little 621 00:34:47,360 --> 00:34:51,759 Speaker 1: bit and just summarize Force. Apple's exposure to China both 622 00:34:51,880 --> 00:34:55,160 Speaker 1: as a supplier of stuff that Apple needs to build 623 00:34:55,520 --> 00:34:58,160 Speaker 1: all the cold products, as well as an end user 624 00:34:58,280 --> 00:35:00,400 Speaker 1: customer base. Talk to us about China that may be 625 00:35:00,480 --> 00:35:03,160 Speaker 1: evolving for Apple. So if you look at the smartphone 626 00:35:03,160 --> 00:35:06,160 Speaker 1: supply chain that has taken I would say decades to build, 627 00:35:06,960 --> 00:35:10,680 Speaker 1: or any supply chain for consumer electronics, Apple pretty much 628 00:35:10,680 --> 00:35:14,560 Speaker 1: depends on China for all hits, all almost all its spots, 629 00:35:14,600 --> 00:35:17,120 Speaker 1: whether it's you know, more than ninety eight percent of 630 00:35:17,160 --> 00:35:20,480 Speaker 1: the iPhones are assembled there. Most of the lower end 631 00:35:20,520 --> 00:35:22,880 Speaker 1: MAX are there, you know, you you just name it. 632 00:35:23,120 --> 00:35:26,600 Speaker 1: Apart from the really high end Max. Everything else is 633 00:35:26,640 --> 00:35:31,080 Speaker 1: assembled in China. So given what the political tensions are, 634 00:35:31,200 --> 00:35:34,439 Speaker 1: it is very logical. And it's not just Apple, it's 635 00:35:34,480 --> 00:35:37,600 Speaker 1: the automotive industry. All industries are thinking how do I 636 00:35:37,719 --> 00:35:41,040 Speaker 1: manage to take some of that supply chain risk outside? 637 00:35:41,400 --> 00:35:43,360 Speaker 1: And this is going to be a big theme for 638 00:35:43,400 --> 00:35:46,440 Speaker 1: the next decade. I'm not surprised about the new story. 639 00:35:46,480 --> 00:35:49,800 Speaker 1: I think more of that will come from exposure. On 640 00:35:49,960 --> 00:35:54,440 Speaker 1: the revenue side, the Greater China region accounts for about 641 00:35:54,440 --> 00:35:57,800 Speaker 1: twenty percent of Apple's revenue, so for in both cases, 642 00:35:57,840 --> 00:36:01,279 Speaker 1: applele is overly exposed to China, whereas a company like 643 00:36:01,320 --> 00:36:03,960 Speaker 1: Microsoft is, Google is not. What did they say about that? 644 00:36:04,080 --> 00:36:07,359 Speaker 1: I mean, if you could make an argument, I can't 645 00:36:07,360 --> 00:36:09,759 Speaker 1: own Apple, I think that China risk is to I 646 00:36:09,760 --> 00:36:12,360 Speaker 1: can't own the stock. But nobody says that. But nobody 647 00:36:12,360 --> 00:36:14,480 Speaker 1: says that, but that you're right. But but Apple's ten 648 00:36:14,520 --> 00:36:17,080 Speaker 1: percent of NASTAC, Apple's what four or five percent of 649 00:36:17,080 --> 00:36:21,080 Speaker 1: the SNP, So you're absolutely right. If something happens tomorrow, 650 00:36:21,480 --> 00:36:24,680 Speaker 1: Apple cannot you know, go out and procure those parts. 651 00:36:24,960 --> 00:36:28,160 Speaker 1: Imagine what would happen to their revenue base because remember, 652 00:36:28,400 --> 00:36:30,320 Speaker 1: you know, the eighty percent of their revenue is products, 653 00:36:30,320 --> 00:36:33,160 Speaker 1: and they have to sell new products every year. So 654 00:36:33,200 --> 00:36:35,560 Speaker 1: it is a big risk. But having said that, they 655 00:36:35,640 --> 00:36:38,120 Speaker 1: performed very well from a supply chain point of view, 656 00:36:38,440 --> 00:36:41,879 Speaker 1: even during the big you know, the I would say, 657 00:36:41,880 --> 00:36:44,399 Speaker 1: the embargo or the big fights we had a few 658 00:36:44,480 --> 00:36:47,839 Speaker 1: years ago, they have been fine. But but you're right, 659 00:36:47,880 --> 00:36:49,480 Speaker 1: it is a big risk. It is a big risk 660 00:36:49,480 --> 00:36:52,000 Speaker 1: for everybody. I'm surprised eighty percent of the revenue is products. 661 00:36:52,000 --> 00:36:54,279 Speaker 1: I would have thought they'd been boosting the services side 662 00:36:54,280 --> 00:36:57,600 Speaker 1: of that. They are boosting, and the services is growing 663 00:36:57,600 --> 00:36:59,759 Speaker 1: in double digits. But having said that, I mean, you know, 664 00:36:59,800 --> 00:37:03,640 Speaker 1: I phone is fifty. So we have a story on 665 00:37:03,680 --> 00:37:07,200 Speaker 1: the terminal that maker of air pods called Gortech, one 666 00:37:07,200 --> 00:37:10,759 Speaker 1: of their suppliers, which is a native China company, is 667 00:37:10,800 --> 00:37:13,960 Speaker 1: looking to move to Vietnam. While they're investing two hundred 668 00:37:13,960 --> 00:37:16,000 Speaker 1: eighty million dollars to put a plant in Vietnam, they're 669 00:37:16,040 --> 00:37:19,759 Speaker 1: looking into an expansion in India. And a lot of 670 00:37:19,760 --> 00:37:21,759 Speaker 1: these other companies are doing the same. And it's not 671 00:37:21,800 --> 00:37:25,040 Speaker 1: just Apple suppliers, right, it's also Sony suppliers, makers of 672 00:37:25,120 --> 00:37:29,120 Speaker 1: the PlayStation and all of these consumer gadgets are they 673 00:37:29,200 --> 00:37:32,520 Speaker 1: Are you seeing that across the industry, just to spread 674 00:37:32,560 --> 00:37:36,920 Speaker 1: out to Vietnam, to India to other countries around China. Yeah, 675 00:37:36,960 --> 00:37:39,279 Speaker 1: And as I said, it's not just consumer electronics. I 676 00:37:39,320 --> 00:37:42,200 Speaker 1: hear this from my friends who make autopods. The real 677 00:37:42,640 --> 00:37:45,200 Speaker 1: mandate over time. Now the question here is how long 678 00:37:45,239 --> 00:37:47,359 Speaker 1: it's going to take. And that's a very very big if. 679 00:37:47,600 --> 00:37:50,520 Speaker 1: But over time, I do expect the global supply chain, 680 00:37:50,760 --> 00:37:52,960 Speaker 1: which is let's say one hundred person independent of China, 681 00:37:53,160 --> 00:37:55,880 Speaker 1: would only be fifty percent China and fifty percent elsewhere. 682 00:37:56,200 --> 00:37:58,640 Speaker 1: That's what I'm thinking. I don't think. I mean, if 683 00:37:58,640 --> 00:38:02,919 Speaker 1: you're China, your incentive is to remain I would think 684 00:38:02,920 --> 00:38:05,279 Speaker 1: your economic incentive would be I want to be the 685 00:38:05,320 --> 00:38:08,160 Speaker 1: supplier to the world. No, they are, but fifty percent 686 00:38:08,239 --> 00:38:09,960 Speaker 1: is big enough too. It's not as if, like you know, 687 00:38:10,000 --> 00:38:12,000 Speaker 1: you can't, what are you gonna do? Cell only half 688 00:38:12,040 --> 00:38:14,319 Speaker 1: to cell phones? Well, and for now also right, I mean, 689 00:38:14,360 --> 00:38:18,120 Speaker 1: they surely they look at the evolution of other countries 690 00:38:18,120 --> 00:38:19,799 Speaker 1: that have gone through the same thing, and they know 691 00:38:20,400 --> 00:38:24,240 Speaker 1: that they can't forever be the supplier to the world. 692 00:38:24,239 --> 00:38:28,640 Speaker 1: They can't forever have these low wage factories. The economy 693 00:38:28,680 --> 00:38:30,960 Speaker 1: has to grow and change over time. And again, you know, 694 00:38:31,040 --> 00:38:33,759 Speaker 1: they it's possible that the number of units you know, 695 00:38:33,800 --> 00:38:36,240 Speaker 1: produced in China will remains the same. But the next 696 00:38:36,360 --> 00:38:38,680 Speaker 1: growth factor, whatever the next ten years of growth is, 697 00:38:38,920 --> 00:38:41,719 Speaker 1: that's done from outside somebody else. Look what happened back 698 00:38:41,719 --> 00:38:45,960 Speaker 1: in November. The Chinese factory that was making iPhone pro model, 699 00:38:46,000 --> 00:38:49,920 Speaker 1: the expensive one got locked down with COVID and the 700 00:38:49,960 --> 00:38:52,680 Speaker 1: you know, Apple missed a fair amount of shipments and 701 00:38:52,680 --> 00:38:55,640 Speaker 1: that so Apple basically said, I'm going to assemble a 702 00:38:55,719 --> 00:38:58,359 Speaker 1: second part of it somebody else. Now again, as I said, 703 00:38:58,400 --> 00:39:00,239 Speaker 1: this is going to take years. This is not something 704 00:39:00,280 --> 00:39:03,680 Speaker 1: you can entangle so quickly, all right. So that brings 705 00:39:03,719 --> 00:39:08,439 Speaker 1: me to India. If I'm an India technology person, I'm 706 00:39:08,440 --> 00:39:11,799 Speaker 1: going over to Cupertino and saying, hey, I'll manufacture your 707 00:39:11,800 --> 00:39:14,360 Speaker 1: stuff in India. I've got as good or better cost structure, 708 00:39:14,360 --> 00:39:16,719 Speaker 1: I've got as good or better workforce, and i don't 709 00:39:16,760 --> 00:39:19,400 Speaker 1: have the China risk. Talk to us about India from 710 00:39:19,440 --> 00:39:22,640 Speaker 1: a technology perspective. No, they are doing it. But historically 711 00:39:22,640 --> 00:39:25,080 Speaker 1: India has been very very you know, I could say, 712 00:39:25,120 --> 00:39:28,360 Speaker 1: focused on software development and less so on hardware. But 713 00:39:28,480 --> 00:39:30,640 Speaker 1: that's already happening that you know, what you just said 714 00:39:30,840 --> 00:39:33,839 Speaker 1: is in process. But having said that, even after a 715 00:39:33,880 --> 00:39:36,480 Speaker 1: lot of these news reports, we just looked at some 716 00:39:36,560 --> 00:39:40,479 Speaker 1: data you know, we got from IDC. Even now, ninety 717 00:39:40,520 --> 00:39:43,280 Speaker 1: eight percent of the phones are still made in China 718 00:39:43,440 --> 00:39:46,000 Speaker 1: from you know, close to ninety nine points some percent, 719 00:39:46,640 --> 00:39:48,759 Speaker 1: so that the India you know, is less than a 720 00:39:48,960 --> 00:39:50,799 Speaker 1: you know, maybe less than one to two percent at 721 00:39:50,800 --> 00:39:55,360 Speaker 1: this point. What is you cover a range of I 722 00:39:55,400 --> 00:39:58,800 Speaker 1: guess B to B companies right on the tech side. 723 00:39:59,160 --> 00:40:01,960 Speaker 1: What is your favorite one? What do you get most excited? 724 00:40:02,000 --> 00:40:06,560 Speaker 1: I look across your research from Workday to IBM, to 725 00:40:06,840 --> 00:40:11,919 Speaker 1: Apple to Salesforce, Microsoft, what makes what makes your job 726 00:40:12,000 --> 00:40:14,239 Speaker 1: exciting for you? I think all these companies are something 727 00:40:14,239 --> 00:40:16,880 Speaker 1: special about them. Each one of them do something very unique. 728 00:40:16,880 --> 00:40:18,799 Speaker 1: But the one that reported last night I'm a big 729 00:40:18,840 --> 00:40:20,840 Speaker 1: fan of is work Day. They are one of the 730 00:40:20,880 --> 00:40:23,920 Speaker 1: most ethically sound companies. They really develop a very good 731 00:40:23,960 --> 00:40:26,520 Speaker 1: software product. They take care of their employees. I mean 732 00:40:26,520 --> 00:40:30,400 Speaker 1: it's a very high quality company, and they grew, you know, numbers, 733 00:40:30,560 --> 00:40:36,120 Speaker 1: pretty bookings pretty impressively last night. But Salesforce reports tomorrow. 734 00:40:36,160 --> 00:40:38,480 Speaker 1: You know they're going through some growing pains. I think 735 00:40:38,520 --> 00:40:40,759 Speaker 1: their numbers are not going to be as good. But 736 00:40:40,920 --> 00:40:42,879 Speaker 1: you know, we have activists invested there, and the big 737 00:40:42,960 --> 00:40:45,160 Speaker 1: question is going to be when does Benihoff say, you 738 00:40:45,160 --> 00:40:47,200 Speaker 1: know what, I've had enough and I'm going to walk away. 739 00:40:47,360 --> 00:40:50,280 Speaker 1: And when that happens, you will see a Microsoft like story, 740 00:40:50,520 --> 00:40:53,719 Speaker 1: you know, emerge over there. But work Day, so they 741 00:40:55,360 --> 00:40:58,120 Speaker 1: they make products we use work Day for example, for 742 00:40:58,160 --> 00:41:01,960 Speaker 1: our benefits management. Yeah. Here at Bloomberg for Bloomberg employe. 743 00:41:01,960 --> 00:41:05,400 Speaker 1: So is the number one cloud R company in the 744 00:41:05,440 --> 00:41:08,240 Speaker 1: world HR company. Yeah, so, fifty five percent of Fortune 745 00:41:08,280 --> 00:41:12,359 Speaker 1: five hundred companies use workday software. But it does. Does 746 00:41:12,520 --> 00:41:14,720 Speaker 1: we use it? Yeah? If you go to manage your benefits, 747 00:41:14,800 --> 00:41:16,920 Speaker 1: change your life insurance coverage, or anything like that, you 748 00:41:16,960 --> 00:41:20,360 Speaker 1: do day software, which is a pretty cool suite of 749 00:41:20,360 --> 00:41:24,279 Speaker 1: software products from a consumer from a user standpoint, Um, 750 00:41:24,920 --> 00:41:28,879 Speaker 1: what's the end story for them? Does a salesforce buy them? 751 00:41:28,920 --> 00:41:31,680 Speaker 1: Does a Microsoft buy them? It would be too big, 752 00:41:31,920 --> 00:41:34,239 Speaker 1: it would be very it's forty seven close to fifty 753 00:41:34,280 --> 00:41:36,360 Speaker 1: billion right now. It'd be very difficult for anybody to 754 00:41:36,400 --> 00:41:38,600 Speaker 1: buy them. But I'll tell you like a very interesting, 755 00:41:39,000 --> 00:41:42,480 Speaker 1: you know, movie story behind it. This company is from, 756 00:41:42,840 --> 00:41:45,680 Speaker 1: you know, from the founders of People's Soft, which went 757 00:41:45,719 --> 00:41:49,359 Speaker 1: through a very ugly battle with Auticle many many years ago, 758 00:41:49,520 --> 00:41:53,239 Speaker 1: and Auticle basically acquired people Soft. And this found out 759 00:41:53,239 --> 00:41:55,439 Speaker 1: who's probably at that time was in his seventies, walked 760 00:41:55,520 --> 00:41:56,960 Speaker 1: up and said, you know what, I'm going to create 761 00:41:56,960 --> 00:42:00,640 Speaker 1: a company, cloud based HR software company and it's baking 762 00:42:00,680 --> 00:42:04,279 Speaker 1: taking share from PeopleSoft since then, so it is. I mean, 763 00:42:04,280 --> 00:42:05,919 Speaker 1: they can make a movie out of this. These guys 764 00:42:05,920 --> 00:42:08,920 Speaker 1: have done such an amazing job. What's the Wall Street 765 00:42:08,920 --> 00:42:11,759 Speaker 1: call on Microsoft these days? And just kind of you know, 766 00:42:11,920 --> 00:42:14,200 Speaker 1: looking at it here. I'm a big fan of the 767 00:42:14,239 --> 00:42:17,000 Speaker 1: CEO there. But the stacks, you know, up four percent 768 00:42:17,080 --> 00:42:19,160 Speaker 1: this year to day, down about fifteen percent on a 769 00:42:19,200 --> 00:42:21,880 Speaker 1: trailing twelve month basis. What's the Microsoft call? The Microsoft 770 00:42:21,880 --> 00:42:23,600 Speaker 1: call is the cloud is going to keep on slowing 771 00:42:23,640 --> 00:42:27,000 Speaker 1: down throughout this year, and hopefully, in my personal view, 772 00:42:27,040 --> 00:42:29,400 Speaker 1: as soon as the FED signals that they're ready to stop, 773 00:42:29,560 --> 00:42:32,720 Speaker 1: I think the business confidence improve, people start spending money 774 00:42:32,880 --> 00:42:36,000 Speaker 1: back again on technology. And when that happens and Microsoft 775 00:42:36,000 --> 00:42:38,480 Speaker 1: comes back and comes back very strong, what is the tech? 776 00:42:38,560 --> 00:42:41,160 Speaker 1: I mean it tech spending for twenty twenty two, twenty 777 00:42:41,200 --> 00:42:44,840 Speaker 1: twenty three. It doesn't decline, right, It's just it's the growth. 778 00:42:45,040 --> 00:42:48,160 Speaker 1: So last five years it has grown. Top twenty software 779 00:42:48,200 --> 00:42:50,720 Speaker 1: companies have grown at an average of twenty percent PTY. 780 00:42:51,160 --> 00:42:53,440 Speaker 1: But this year they're going to grow twelve thirteen percent, 781 00:42:53,880 --> 00:42:56,839 Speaker 1: so shabby compared to last few years, but it's still 782 00:42:56,840 --> 00:43:00,440 Speaker 1: pretty impressive. So, I mean software is still the play, right, 783 00:43:00,480 --> 00:43:03,000 Speaker 1: I mean, it's the cloud. I'm still playing the cloud, right, 784 00:43:03,000 --> 00:43:04,759 Speaker 1: They're still playing the cloud. But this year is a 785 00:43:04,800 --> 00:43:08,160 Speaker 1: bad year for cloud. So everybody is dumping Amazon. Everybody's 786 00:43:08,160 --> 00:43:10,160 Speaker 1: taking you know, getting out of Microsoft because of that. 787 00:43:10,480 --> 00:43:13,120 Speaker 1: But you know, in reality, the long term prospects are 788 00:43:13,120 --> 00:43:15,760 Speaker 1: so good. In fact, this is the biggest case for cloud. 789 00:43:15,840 --> 00:43:19,319 Speaker 1: Is what's happening right now. You have a company, let's 790 00:43:19,320 --> 00:43:21,880 Speaker 1: say a corporation that has had a fixed cost structure 791 00:43:21,880 --> 00:43:24,600 Speaker 1: of it and certainly decides that, okay, ten percent of 792 00:43:24,640 --> 00:43:27,000 Speaker 1: my acts go to the cloud, and now I'm charging 793 00:43:27,000 --> 00:43:30,200 Speaker 1: on a per use basis. Certainly a cost structure becomes variable. 794 00:43:30,480 --> 00:43:33,040 Speaker 1: In the next cycle, you're gonna go out and outsource 795 00:43:33,120 --> 00:43:35,359 Speaker 1: more of that stuff because it's so beneficial for you. 796 00:43:35,520 --> 00:43:37,799 Speaker 1: All Right, good stuff on Rona. Whenever we see them, 797 00:43:37,800 --> 00:43:39,719 Speaker 1: they're in the AI and they're in the AI. They're 798 00:43:39,719 --> 00:43:42,040 Speaker 1: in the AI stuff. Oh that's good, that's good AI. 799 00:43:42,160 --> 00:43:45,239 Speaker 1: Oh that's really good. Yeah. So by that, by that 800 00:43:45,360 --> 00:43:48,120 Speaker 1: Ana rock Rana Techan also Bloomberg Intelligence. Whenever we see 801 00:43:48,160 --> 00:43:50,120 Speaker 1: him running the halls here in New York, we literally 802 00:43:50,120 --> 00:43:51,839 Speaker 1: just grab them, bring him into the studio and get 803 00:43:51,880 --> 00:43:54,560 Speaker 1: the latest dump on what's going on in the world 804 00:43:54,560 --> 00:43:59,319 Speaker 1: of technology. Thanks for listening to the Bloomberg Markets podcast. 805 00:43:59,680 --> 00:44:02,920 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 806 00:44:03,040 --> 00:44:07,000 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 807 00:44:07,000 --> 00:44:10,480 Speaker 1: on Twitter at Matt Miller nineteen seventy three. And I'm 808 00:44:10,520 --> 00:44:13,560 Speaker 1: Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, 809 00:44:13,600 --> 00:44:16,120 Speaker 1: you can always catch us worldwide at Bloomberg Radio