WEBVTT - The Fed, Insurance, VR, and Goldman (Podcast) 0:00:00.760 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.920 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.560 at Bloomberg dot com slash podcast. I want to talk soccer, 0:00:22.680 --> 0:00:24.799 but before we can talk soccer, we got to talk 0:00:24.840 --> 0:00:29.400 about interest rates with Ira Jersey, chief US interest rate strategist. Ira. 0:00:29.680 --> 0:00:32.879 I mean, I was under the impression that twenty five 0:00:32.920 --> 0:00:36.199 basis points the next meeting, maybe twenty five after that, 0:00:36.320 --> 0:00:39.400 and then let's pause, see how things are going. But 0:00:39.520 --> 0:00:41.519 now people are telling me I need to folk pencil 0:00:42.760 --> 0:00:46.959 a third twenty five basis point rate increase. What's going 0:00:47.000 --> 0:00:50.720 on with all you fed people? Yeah? Well, obviously over 0:00:50.720 --> 0:00:54.640 the last month you've seen some pretty poor or higher 0:00:54.680 --> 0:00:57.800 than expected inflation data, right, both CPI and the pc 0:00:58.040 --> 0:01:00.360 to flatter and then even just the small warning and 0:01:00.400 --> 0:01:03.840 the reason why rates are selling off today has been 0:01:03.920 --> 0:01:07.800 higher than expected inflation in France and Spain. So with such, 0:01:08.240 --> 0:01:12.000 you know, with inflation still being the worry and the 0:01:12.040 --> 0:01:15.640 fear of central bankers. You continue to see whenever we 0:01:15.680 --> 0:01:19.120 get these surprises surprisingly high inflation prints, you're going to 0:01:19.200 --> 0:01:22.440 bind up pricing in more and more interest rate hikes. 0:01:22.440 --> 0:01:25.319 So yeah, so the market's now pricing in for a 0:01:25.400 --> 0:01:29.560 five and a half percent terminal rate for the Fed 0:01:29.560 --> 0:01:32.000 Fund rate, and I think that and no cut and 0:01:32.080 --> 0:01:34.880 no cuts this year, No no cuts this year. Well, 0:01:35.680 --> 0:01:37.560 I see them coming down to a terminal rate of 0:01:37.600 --> 0:01:40.520 like five thirty something, which is still between five twenty 0:01:40.560 --> 0:01:42.800 five and five fifty. Yeah, so you're still talking about 0:01:42.800 --> 0:01:45.520 you're still talking about maybe a half is of fifty bases, 0:01:45.560 --> 0:01:47.800 a fifty percent chance of a single cut by the 0:01:47.880 --> 0:01:49.840 end of the year. So not a full cut though, 0:01:49.880 --> 0:01:52.040 which is to Matt to your point, is what we 0:01:52.040 --> 0:01:55.760 were pricing, um, and because we're pricing three cuts at 0:01:55.800 --> 0:01:59.840 one point, Yeah, we were pricing We're pricing pretty aggressive cuts, 0:02:00.080 --> 0:02:02.600 people thinking that we were going to have a significant slowdown. 0:02:02.840 --> 0:02:04.800 And that's one of the reasons why the market shifted 0:02:04.840 --> 0:02:08.600 so much, because we were kind of expecting the cumulative, 0:02:08.720 --> 0:02:11.120 you know, rate hikes that we've had, and some of 0:02:11.160 --> 0:02:13.919 the data that we've seen certainly suggests that the economy 0:02:14.000 --> 0:02:16.560 is slowing, but the economy is just not slowing fast 0:02:16.639 --> 0:02:20.600 enough to bring inflation lower. And the interesting piece out 0:02:20.600 --> 0:02:24.560 of the most recent data, UM is services we expected 0:02:24.600 --> 0:02:26.799 to continue to grow. You know, wages are pretty strong. 0:02:26.840 --> 0:02:28.960 We've talked about that on this show before. But but 0:02:29.040 --> 0:02:32.120 importantly in a lot of the data is that goods 0:02:32.120 --> 0:02:34.880 prices didn't continue to fall as most of us expected 0:02:35.240 --> 0:02:40.040 that that to occur, and and mitigating the increases and services. 0:02:40.120 --> 0:02:45.120 So since goods price is basically stabilized at near current levels, um, 0:02:45.320 --> 0:02:48.079 you know, that's that's really given some people some pauses 0:02:48.120 --> 0:02:51.880 to exactly what the future ratepath will be ultimately for 0:02:51.880 --> 0:02:53.920 for the FED and then therefore for the rest of 0:02:53.960 --> 0:02:55.840 the market as well. And that's one reason why we're 0:02:56.120 --> 0:02:59.079 you know, testing four percent on the ten year for example, 0:03:00.040 --> 0:03:02.280 and yeah, you know, I think you get one or 0:03:02.280 --> 0:03:05.240 two more you know, better than expected data prints, and 0:03:05.280 --> 0:03:07.640 we can wind up breaking four percent again and maybe 0:03:07.680 --> 0:03:10.359 testing for in a quarter, which is the next really 0:03:10.400 --> 0:03:13.560 important technical level. It's actually four point two four percent 0:03:13.600 --> 0:03:16.600 if you really want to get pedantic. So I've made 0:03:16.600 --> 0:03:19.080 a career out of ignoring people like you and Lisa 0:03:19.120 --> 0:03:21.400 Bramwood to talk about yield curves and all that kind 0:03:21.440 --> 0:03:24.000 of stuff. But boys, I look at the two year tenure. 0:03:24.520 --> 0:03:29.320 It's negative, it's inverted eighty five basis points. That's the thing, right, 0:03:29.320 --> 0:03:32.320 Should I pay attention to that? Yeah? Well, so the 0:03:32.360 --> 0:03:34.720 market is still thinking that we're going to have high 0:03:34.800 --> 0:03:38.080 rates now and then lower rates later, and that's I 0:03:38.120 --> 0:03:41.360 think that that's a reasonable assumption. I think the question 0:03:41.520 --> 0:03:44.760 becomes and this is where you know, people who try 0:03:44.800 --> 0:03:48.400 to use these indicators and use the market for determining, 0:03:48.480 --> 0:03:50.560 you know, when the market things the recession is going 0:03:50.600 --> 0:03:53.800 to be ends up. That's when these types of indicators 0:03:54.040 --> 0:03:56.640 end up failing. Because the reason why where where we 0:03:56.680 --> 0:03:58.720 are today is not necessarily because we think there's going 0:03:58.760 --> 0:04:00.400 to be a recession. The marketing it's going to be 0:04:00.400 --> 0:04:02.360 a recession this year, but that maybe there's going to 0:04:02.400 --> 0:04:04.440 be a recession in twenty twenty five. And the Fed 0:04:04.440 --> 0:04:07.120 cuts into states zero again, right, that still gets you 0:04:07.480 --> 0:04:09.800 to a ten year that's well below where the two 0:04:09.880 --> 0:04:12.560 year yield is today. The two year yields right at 0:04:12.600 --> 0:04:15.520 fair value, by the way, based on the Fed hiking 0:04:15.520 --> 0:04:17.599 to five and a half percent and then staying there 0:04:18.200 --> 0:04:20.560 for the rest of this year. So the two year 0:04:21.000 --> 0:04:23.640 is probably right. The question is is the ten year 0:04:23.760 --> 0:04:26.280 right or are we going to see inflation be much 0:04:26.320 --> 0:04:28.760 more persistent than we have And that means that you 0:04:28.760 --> 0:04:32.440 can wind up with what we call a bear steepener, 0:04:32.520 --> 0:04:34.320 where you can wind up with ten year yields going 0:04:34.400 --> 0:04:36.640 up in two year yields not doing very much at all. Hey, 0:04:36.640 --> 0:04:39.839 we focus so much on the US because you know, 0:04:39.880 --> 0:04:42.080 it's the greatest country in the world and the only 0:04:42.120 --> 0:04:45.760 place that's important. But nice Over in Europe, you had 0:04:45.839 --> 0:04:51.719 French and Spanish inflation that was stronger than expected, a 0:04:51.839 --> 0:04:55.360 record in France for the Euro Area, and we're now 0:04:55.400 --> 0:04:58.640 expecting or the markets are now pricing in four percent 0:04:58.720 --> 0:05:05.200 for the ecb which is I mean a lot. That's aggressive, right, Um, 0:05:05.200 --> 0:05:08.599 we're looking at the highest level on buns in what 0:05:08.839 --> 0:05:13.119 fifteen years? What's going on over there? And is that 0:05:13.520 --> 0:05:17.279 part of what's driving the trade here? Yeah, it definitely is. 0:05:17.320 --> 0:05:21.520 And today in particular, so you know you've seen you've 0:05:21.520 --> 0:05:25.120 seen actually the European bond market leading the US bond 0:05:25.160 --> 0:05:29.080 market by by about five minutes during the course of 0:05:29.080 --> 0:05:33.120 the day today. Um, and the you know, there is 0:05:33.160 --> 0:05:37.239 a big worry because remember, unlike the US the European 0:05:37.279 --> 0:05:39.279 Central Bank only has a single mandate and that's to 0:05:39.360 --> 0:05:42.680 keep inflation under controls for stable prices. They don't have 0:05:42.760 --> 0:05:46.960 the the same you know, full employment mandate that the 0:05:47.080 --> 0:05:50.159 US and five other central banks have. But so because 0:05:50.240 --> 0:05:53.760 they're so fixated on inflation, when you get higher than 0:05:53.800 --> 0:05:57.080 expected inflation prints, that just means that it's likely that 0:05:57.279 --> 0:05:59.440 the ECB is going to be somewhat more hawkish. They 0:05:59.480 --> 0:06:02.919 were very austious early on in this hiking cycle, but 0:06:03.000 --> 0:06:07.640 now that they've gotten going. Hugh Worthington, who's my colleague 0:06:07.640 --> 0:06:11.200 in London, you know, he expects them to hike twenty 0:06:11.520 --> 0:06:14.160 fifty bases points at the next meeting and then probably 0:06:14.200 --> 0:06:16.440 go a little bit more after. So so you're right, 0:06:16.520 --> 0:06:20.360 like Europe is worried about inflation. Obviously, some of it 0:06:20.440 --> 0:06:23.560 is not related to the economy, right. All the stuff 0:06:23.560 --> 0:06:25.760 going on with the Ukraine and with guests and energy 0:06:25.800 --> 0:06:30.440 prices is a separate issue from the um you know, 0:06:30.440 --> 0:06:34.240 from the underlying economy. But you know, central bankers only 0:06:34.240 --> 0:06:36.840 have a single tool to try and fight inflation, and 0:06:36.920 --> 0:06:39.920 that's doing what they're doing, and that's increasing interestry sure, 0:06:39.960 --> 0:06:42.240 and that they have to fight inflation, as you point out, 0:06:42.279 --> 0:06:45.600 without worrying about unemployment, A because it's not in their 0:06:45.600 --> 0:06:48.280 mandate and be because unemployment just doesn't suck as much 0:06:48.279 --> 0:06:50.880 in Europe as it does here. Socialism, right, you have 0:06:51.000 --> 0:06:54.560 that good stuff, all right, Eira um Manchester United. Presumably 0:06:54.560 --> 0:06:56.280 they're selling a piece of the company. So of course 0:06:56.440 --> 0:06:58.560 my advisors and I we are kicking at tires. I'll 0:06:58.600 --> 0:07:01.159 talk to you about that next time time. Get your input, 0:07:01.160 --> 0:07:04.279 Ira Jersey. He's a chief US interest rate strategist for 0:07:04.400 --> 0:07:07.800 a bloomber cantell just giving us his thoughts on the FED. 0:07:08.520 --> 0:07:12.640 We've got a couple maybe three rate increases coming up 0:07:12.880 --> 0:07:16.240 in twenty twenty three. After that, who knows. We'll keep 0:07:16.240 --> 0:07:22.080 in touch with Ira Jersey. He's got the skinny Pat Gallagher, 0:07:22.480 --> 0:07:26.320 CEO of Gallagher Insurance, so I'm guessing that's like his company. 0:07:26.520 --> 0:07:28.680 This is in York Stock Exchange list of company A 0:07:29.200 --> 0:07:33.160 JG is the ticker I pumping up on my Bloomberg terminal. 0:07:33.400 --> 0:07:36.800 I've got a market cap of forty billion dollars. Pat, 0:07:36.840 --> 0:07:39.240 how come I don't know anything about your company and 0:07:39.280 --> 0:07:42.800 you guys are so big. Tell me about your company 0:07:42.960 --> 0:07:47.960 and where you guys fit in the insurance landscape. Well, okays, 0:07:48.040 --> 0:07:50.600 first of all, thanks for the time today, but it 0:07:50.680 --> 0:07:53.680 is it's unfortunately one sense that we're kind of one 0:07:53.680 --> 0:07:56.640 of the world's best cap secrets. But they're very proud 0:07:56.680 --> 0:08:00.200 of both our heritage and where we are today. We 0:08:00.320 --> 0:08:03.080 started off as a small broker in Chicago. My grandfather 0:08:03.120 --> 0:08:06.880 started the business. Came public in eighty six. Uh finished 0:08:06.920 --> 0:08:09.720 date year, I'm sorry, came Bubalan eighty four. Finished that 0:08:09.840 --> 0:08:12.560 year about a seventy nine million dollar market chap. And 0:08:12.680 --> 0:08:16.280 it's been a really wonderful journey. Now we're one of 0:08:16.280 --> 0:08:20.640 the largest insurance brokerage and riskmans with claim spaying organizations 0:08:20.640 --> 0:08:24.800 in the world, operations over one hundred countries and as 0:08:24.840 --> 0:08:27.360 you say, about a forty billion dollar market cap. Well, 0:08:27.360 --> 0:08:31.880 and the stock chart, Pat is just unreal in how impressive. 0:08:31.880 --> 0:08:34.720 When have we been met? I always um, you know, 0:08:34.760 --> 0:08:37.640 I'll gauge companies by pulling up the comp screen on 0:08:37.679 --> 0:08:42.640 the Bloomberg, which takes a five year snapshot of your 0:08:42.679 --> 0:08:47.040 company versus competitors versus the index, and you're just stopping 0:08:47.080 --> 0:08:51.079 all over everything, Paul, pull up the comp I'm sending 0:08:51.240 --> 0:08:55.559 I'm sending a message to my insurance and also Bloomberg Intelligencing. 0:08:55.559 --> 0:08:57.839 How come I don't know anything about this? Yeah, so 0:08:58.480 --> 0:09:04.840 what is driving your share price up into the right look? 0:09:05.120 --> 0:09:07.400 I think that you know, it's a cliche to talk 0:09:07.440 --> 0:09:09.520 about culture, but that is what I'm going to do. 0:09:10.480 --> 0:09:13.040 We've been very lucky that a large part of our 0:09:13.120 --> 0:09:16.680 organizational growth over the last forty years has been through acquisition. 0:09:17.240 --> 0:09:19.439 We look for people to do a really good job 0:09:19.520 --> 0:09:22.040 of taking care clients, and we bring them in and 0:09:22.160 --> 0:09:25.760 build and hopefully build all kinds of capabilities around them 0:09:25.800 --> 0:09:28.599 that allow them to continue to expand their business. I 0:09:28.640 --> 0:09:30.160 don't want to make this sound like a roll up. 0:09:30.200 --> 0:09:32.760 It's a real corporation, but made up of a lot 0:09:32.800 --> 0:09:36.040 of entrepreneurs I'm really really proud of. If you take 0:09:36.040 --> 0:09:37.880 a look at that chart, I forget what you said 0:09:37.920 --> 0:09:39.480 in terms of how far it is back there. You 0:09:39.520 --> 0:09:43.559 don't got our ten year TSR it's about six hundred percent. 0:09:44.480 --> 0:09:46.640 You look at at our five year TSR, it's over 0:09:46.679 --> 0:09:50.240 two hundred and twenty percent. So I don't like TSR 0:09:50.280 --> 0:09:52.679 as a measure of success on a short term, three year, 0:09:52.760 --> 0:09:55.600 one year I have argument with Street on that, but 0:09:55.760 --> 0:09:59.240 I think if you look five ten, fifteen, twenty five years. 0:09:59.640 --> 0:10:01.880 T I was a really good at nicator of whether 0:10:01.960 --> 0:10:03.840 or not you're delivering for the shareholders. You need to 0:10:03.880 --> 0:10:06.520 see the chart. Yeah, you've basically done that. We've basically 0:10:06.559 --> 0:10:09.200 done that through the whole way. You can click on 0:10:09.280 --> 0:10:10.760 if you pull the TOMP screen, you can click on 0:10:10.760 --> 0:10:13.160 a ten year as well. And it's I mean to me, 0:10:13.200 --> 0:10:16.720 it's it's just the outperformance that's so impressive, because the 0:10:16.760 --> 0:10:20.520 whole industry is done pretty well over the last ten years, 0:10:20.960 --> 0:10:26.200 doubled and tripled. But you've quadrupled, Quinn tupled, sep sep, 0:10:26.520 --> 0:10:29.160 I don't know how say it. Yeah, you're up more 0:10:29.160 --> 0:10:34.760 than six six times UM, so that that's fascinating. Let 0:10:34.800 --> 0:10:38.480 me ask you this then, Pat, what is You've been 0:10:38.760 --> 0:10:41.640 on the board of directors since nineteen eighty six, that 0:10:41.800 --> 0:10:44.240 was back when Paul was still doing KEG stands at 0:10:45.280 --> 0:10:52.360 a duke. Yeah, but is born? What what does the 0:10:52.640 --> 0:10:55.400 rising rate environment look like to you? And how does 0:10:55.400 --> 0:11:00.120 it affect your business after ten years of basically zero um? 0:11:00.440 --> 0:11:03.880 What does it mean to you? This new way of 0:11:03.920 --> 0:11:05.960 life for most of us, but you've been through it 0:11:06.000 --> 0:11:09.200 and back. Let me let me talk about that because 0:11:09.200 --> 0:11:11.120 I think that's a really good point for your listeners 0:11:11.640 --> 0:11:14.560 as everybody frets about inflation and you take a look 0:11:14.559 --> 0:11:16.440 at what's going on in the marketplace, and of course 0:11:16.440 --> 0:11:18.760 the stocks are down. The last year is a terrible year. 0:11:19.280 --> 0:11:22.160 One of the reasons we've outperformed and the industry's outperformed 0:11:22.240 --> 0:11:26.720 is that inflation really is a positive for Gallanthy. Now, 0:11:26.720 --> 0:11:29.400 that doesn't mean that if we have a recession that's 0:11:29.400 --> 0:11:31.040 a positive. And I could talk about that in the 0:11:31.040 --> 0:11:34.120 middle minute. Because our commercial middle market clients are not 0:11:34.320 --> 0:11:36.880 in recession, we can touch on that. But how can 0:11:36.920 --> 0:11:42.080 inflation be positive? Remember, we get paid not on the 0:11:42.120 --> 0:11:46.160 market value of your home, but the replacement cost of 0:11:46.280 --> 0:11:49.800 your home or your building. And as inflation, as inflation 0:11:49.920 --> 0:11:54.160 causes wages in costive construction to go up, insurance companies 0:11:54.240 --> 0:11:59.160 rightfully demand more premium for the increased exposure we win 0:11:59.200 --> 0:12:02.760 in that environment. Secondly, we collect your money and we 0:12:02.840 --> 0:12:05.840 are allowed by agreement with you and our insurance carriers 0:12:05.880 --> 0:12:09.040 to hold that money in most for sixty days. So 0:12:09.120 --> 0:12:12.000 for ten years we've had to do the growth that 0:12:12.000 --> 0:12:16.880 we've done with no fiduciary income on the investial asset, 0:12:16.920 --> 0:12:21.120 which is basically our premium we've collected to our clients. 0:12:21.720 --> 0:12:25.000 That's a substantial lift in a rate environment like we 0:12:25.080 --> 0:12:27.719 had today. So if you go back and you look 0:12:27.760 --> 0:12:31.079 at the Sevanghata invented this growth in a zero rate environment, 0:12:31.160 --> 0:12:34.800 a zero inflation environment, who's the one winner in the 0:12:34.920 --> 0:12:38.480 market when the inflation comes along. It's not the insurance companies. 0:12:38.480 --> 0:12:41.800 And make no mistake, we're not an insurance company. We 0:12:41.880 --> 0:12:46.040 are a broker. So we help our clients manage their 0:12:46.120 --> 0:12:49.880 risk and we use the carriers as our partners do that. 0:12:50.520 --> 0:12:55.079 They take the risk. So if inflation crimps their loss reserves, 0:12:55.160 --> 0:12:58.400 that's their problem, not mine. But as premiums go up, 0:12:58.800 --> 0:13:01.880 I benefit from any cruise commission. Hey, Pat, one of 0:13:01.920 --> 0:13:05.040 the reasons we like to get C suite executives on 0:13:05.080 --> 0:13:07.360 the show, it's just to really talked about how their 0:13:07.400 --> 0:13:10.760 business has evolved. And you know, particularly over the last 0:13:10.800 --> 0:13:13.320 three years with the pandemic. And I know you're based 0:13:13.320 --> 0:13:17.000 in the Chicago area, right in the heart of the 0:13:17.080 --> 0:13:19.720 United States, and you know, as as a founder of 0:13:19.760 --> 0:13:23.520 this company, how has your company, how have your employees change? 0:13:23.559 --> 0:13:27.080 How is your kind of workforce, your office life, how's 0:13:27.120 --> 0:13:30.760 that all changed? Well, first and foremost, I think, you know, 0:13:30.920 --> 0:13:32.520 look when you look at our company. I know, again 0:13:32.559 --> 0:13:34.960 a cliche that our assets got up and done real 0:13:35.840 --> 0:13:38.840 it every day, but it's very very true. I'm really 0:13:38.880 --> 0:13:42.800 really pleased. We just completed our global forty three thousand 0:13:42.880 --> 0:13:47.920 employee survey and the culture is incredibly strong, which I'm 0:13:47.960 --> 0:13:50.720 pleased with, especially with so much so many people working 0:13:50.760 --> 0:13:53.600 from home, so we've gone to kind of a high 0:13:53.600 --> 0:13:56.960 bred model. There's a lot of people in our offices 0:13:57.080 --> 0:13:59.480 three four days a week, and there are people working 0:13:59.520 --> 0:14:01.559 from home, and there are some that will work from 0:14:01.559 --> 0:14:06.359 home continually. So that certainly has changed that. We've benefited 0:14:06.440 --> 0:14:11.719 from the ability to utilize utilize it obviously, but the 0:14:11.760 --> 0:14:14.960 business itself has changed. And the fact that all the 0:14:15.000 --> 0:14:18.480 way down to your smaller accounts, people are demanding expertise, 0:14:19.000 --> 0:14:20.760 and that's why you see so much growth. To you, 0:14:21.440 --> 0:14:25.200 it's no longer just your local agent is your buddy. 0:14:25.320 --> 0:14:27.480 I play golf with them, thanks very much to take 0:14:27.520 --> 0:14:31.720 care of my construction company. That's really changing fast as 0:14:31.800 --> 0:14:35.320 millennials take over. I don't really care that you and 0:14:35.440 --> 0:14:38.000 my dad played golf every weekend. The fact is I 0:14:38.080 --> 0:14:40.840 need somebody to help me handle risk management, and I 0:14:40.880 --> 0:14:43.120 need to know that there's breadth of understanding of what 0:14:43.200 --> 0:14:47.640 I do, and that's strength and capability by industry, so 0:14:47.720 --> 0:14:51.680 I refer women's voticals or niches. Has really changed. Then 0:14:51.720 --> 0:14:55.880 of course you have digitalization and everybody wants two things. 0:14:55.920 --> 0:14:58.920 They want data and analytics want to know what do 0:14:59.040 --> 0:15:02.800 people like me? What kind of claims have you really seen? 0:15:03.000 --> 0:15:08.280 And again there's thirty nine thousand agents and brokers in America, 0:15:08.480 --> 0:15:12.280 the hundredth largest. Last you did thirty million in revenue. 0:15:12.960 --> 0:15:17.000 We posted eight plus billions. So you are getting to 0:15:17.040 --> 0:15:19.520 this point where there's more and more every day A 0:15:19.680 --> 0:15:23.560 David and blythe kind of thing, yep, And so that's 0:15:23.720 --> 0:15:26.360 that's it's a big part of what's so so much 0:15:26.480 --> 0:15:31.120 change going on. That emphasizing culture continues to be the 0:15:31.160 --> 0:15:34.400 most critical thing our management team goes every day. Pat 0:15:34.480 --> 0:15:38.640 just about thirty seconds left. What do you think about 0:15:38.720 --> 0:15:41.440 the possibility of a recession? What's your view on the 0:15:41.440 --> 0:15:46.160 economy going forward? Thirty seconds? Very interesting? Read all the 0:15:46.240 --> 0:15:48.920 same stuff you've read, see the Bloomberg reports as well. 0:15:49.080 --> 0:15:52.480 Understand high tech laying off people, our middle market clients. 0:15:52.600 --> 0:15:56.440 We measure this every single day, by endorsements and by 0:15:56.560 --> 0:15:59.360 and by audits, which means that you pay more if 0:15:58.720 --> 0:16:02.080 you pay me if your sales are up are stronger 0:16:02.120 --> 0:16:04.320 this year than last year. What's the takeaway on that 0:16:05.240 --> 0:16:10.960 our middle market American and global companies are doing extremely well, 0:16:11.000 --> 0:16:16.560 which is why you see the pressure job growth. Fascinating, 0:16:16.600 --> 0:16:23.080 Pat great Stuff really appreciated. This company located in Rolling Meadows, 0:16:24.120 --> 0:16:28.400 Rolling chat Chicago, right near Evanston. You know, it's pretty 0:16:28.400 --> 0:16:30.920 close to the lake. All are just north of Chicago. 0:16:31.080 --> 0:16:34.960 There's great great towns, commuter towns north of Chicago, so 0:16:35.000 --> 0:16:37.960 that's kind of where they are. Rolling Meadows, Michigan, Great Stuff. 0:16:37.960 --> 0:16:42.120 Pat Gallagher, Illinois, Uh yes, thank you very much. He 0:16:42.200 --> 0:16:45.640 started company. He started the company much better than Michigan. 0:16:45.720 --> 0:16:48.520 He started the company in nineteen seventy two as an intern. 0:16:48.600 --> 0:16:51.800 Great Stuff. Pat Gallagher CEO of Gallagher Insurance, Arthur Gallagher 0:16:51.840 --> 0:16:53.960 and Company and the New York SAKA Chains symbol a 0:16:54.480 --> 0:16:59.240 JG forty billion dollars market cap insurance brokerage firm. We 0:16:59.280 --> 0:17:03.320 love getting diverse CEO folks and C suite folks on 0:17:03.360 --> 0:17:05.879 from around the country, different businesses, getting a sense of 0:17:05.960 --> 0:17:09.639 kind of how business is out there in the real world. 0:17:12.560 --> 0:17:14.840 I just feel like in a world of you know, tech, 0:17:15.080 --> 0:17:18.679 there are two mega conferences you have to go to. 0:17:18.840 --> 0:17:22.040 One is Consermer Electronics Show in Vegas that's in January, 0:17:22.240 --> 0:17:27.040 and the other one is the Mobile World Conference in Barcelona. 0:17:27.160 --> 0:17:29.760 And good job, by the way, saying that, thank you, 0:17:30.359 --> 0:17:32.960 I got a five on my ap Spanish. Can't speak 0:17:32.960 --> 0:17:36.360 a lick. Dan O'Brien, president of the America's and Gender 0:17:36.440 --> 0:17:40.560 Manager of HTC, he joins us he is in Barcelona, Dan, 0:17:40.960 --> 0:17:42.800 what's the story here? Like, I did not go to 0:17:42.840 --> 0:17:45.119 CS this year, so I feel like I'm a step 0:17:45.160 --> 0:17:48.680 behind or two on the whole metaverse thing, virtual reality, 0:17:48.720 --> 0:17:52.880 augmented reality, all AI, all that kind of stuff. What 0:17:53.119 --> 0:17:58.480 is the buzz at the Mobile World Conference this year? Well, 0:17:58.480 --> 0:18:01.880 I think thanks for having and apologies for any noise 0:18:01.920 --> 0:18:03.720 that we are actually here on the show floor. But 0:18:04.320 --> 0:18:06.960 there's a lot going on here at Mobile Congress. A 0:18:07.000 --> 0:18:10.240 lot has to do with five G right, and how 0:18:10.320 --> 0:18:14.320 is that going to create the connectivity for the metaverse? Right? 0:18:14.680 --> 0:18:18.040 And you know, how are carriers and companies like infrastructure 0:18:18.040 --> 0:18:21.760 partners like ericson and carriers like Verizon Wireless and AT 0:18:21.880 --> 0:18:23.719 and T Wireless and T Mobile and the likes, and 0:18:23.920 --> 0:18:26.400 how are they going to be the infrastructure providers for 0:18:26.480 --> 0:18:29.119 the metaverse? Right? And then how do companies like HTC 0:18:29.359 --> 0:18:32.720 deliver products and services and solutions for B to B 0:18:33.119 --> 0:18:37.040 and professional users and for consumers that will actually enjoy 0:18:37.320 --> 0:18:41.520 and experience those types of immersive experiences? All right, Dan, 0:18:41.800 --> 0:18:44.520 I get that, and I know everybody there is drinking 0:18:44.560 --> 0:18:47.560 the kool aid. But to be honestly, if I'm a shareholder, 0:18:47.600 --> 0:18:52.000 a large shareholder of Facebook slash Meta, I can't say 0:18:52.000 --> 0:18:54.320 in one sentence, I can't tell you, and I own 0:18:54.359 --> 0:18:57.240 a jillion dollars worth of the stock, I can't tell 0:18:57.280 --> 0:18:59.439 you in one sentence what the metaverse is? What is 0:18:59.480 --> 0:19:02.680 the meta verse to you? And what do you think 0:19:02.680 --> 0:19:08.479 the applications are to you? Sure? Well, the metaverse is 0:19:08.640 --> 0:19:11.480 really just an extension of the Internet and what you 0:19:11.600 --> 0:19:15.240 use today, what you're going to do in the metaverses 0:19:15.280 --> 0:19:17.920 be able to continue to interact with your computers, your 0:19:17.960 --> 0:19:21.880 Android phones, your iPhones, your iPads. You're just now also 0:19:21.920 --> 0:19:24.000 going to be able to interact with this digital content 0:19:24.040 --> 0:19:27.440 as a first person, whether it's with mixed reality glasses 0:19:27.520 --> 0:19:30.760 or virtual reality glasses or augmented reality glasses or or 0:19:30.800 --> 0:19:33.320 glasses that do all of those functions, and you're going 0:19:33.320 --> 0:19:36.560 to be able to actually interact inside of these digital spaces. 0:19:37.280 --> 0:19:40.879 Our version of the metaverseus the viverse, and you know, 0:19:41.080 --> 0:19:42.959 here we think consumers are going to use it for 0:19:43.320 --> 0:19:48.080 productivity and human performance improvement and things like training and 0:19:48.119 --> 0:19:51.359 simulation and education, but it's also going to be used 0:19:51.359 --> 0:19:54.919 for a lot of entertainment and enjoyment as well. What 0:19:55.000 --> 0:19:59.480 are all of these acronyms. I know VR is virtual reality. 0:20:00.359 --> 0:20:03.639 I don't know what XR is or MR is. What 0:20:03.720 --> 0:20:08.800 are all these different kinds of realities? Sure so XR 0:20:09.000 --> 0:20:11.879 is kind of the umbrella. It's extended reality. It's the 0:20:11.880 --> 0:20:15.520 thing that extends you from your real space to a 0:20:15.600 --> 0:20:20.040 fully virtual space. Mixed reality is kind of you're interacting 0:20:20.080 --> 0:20:23.119 with your real world and everything in your space, and 0:20:23.240 --> 0:20:25.399 you can see everything in your space. There's also a 0:20:25.400 --> 0:20:28.600 digital overlay of content that you're also interacting with in 0:20:28.640 --> 0:20:31.240 your real space. So you could be playing a game, 0:20:31.560 --> 0:20:34.240 you know, in your living room where a portal opens 0:20:34.280 --> 0:20:35.919 up on the wall and the aliens come out, and 0:20:36.000 --> 0:20:39.000 you're playing a game shooting at those things. You could 0:20:39.040 --> 0:20:41.720 also be you know, having an educational experience and learning 0:20:41.720 --> 0:20:45.040 about world history or ancient Egypt right and in your 0:20:45.080 --> 0:20:47.639 living room and actually doing it while you actually see 0:20:47.720 --> 0:20:50.440 everything in your living room and including the other people 0:20:50.440 --> 0:20:53.720 in that living room. So it's really kind of a 0:20:53.880 --> 0:20:57.240 mixture of the different levels of immersion that you can have. 0:20:57.400 --> 0:21:00.960 Virtual reality means you are one included from the real 0:21:01.000 --> 0:21:04.560 world and you are completely in a virtual world. So 0:21:04.880 --> 0:21:09.160 dan is the virtual world? Is it a I mean, 0:21:09.240 --> 0:21:12.919 I have to have the headset. Is that just the 0:21:12.960 --> 0:21:15.880 way it is? And it's just a question who has 0:21:15.920 --> 0:21:19.680 the better headset, the better mousetrap. Well, I think we're 0:21:20.000 --> 0:21:24.200 all really driving at the industry to solve a lot 0:21:24.200 --> 0:21:27.280 of these different problems as quickly as possible. We all 0:21:27.320 --> 0:21:30.399 started with virtual reality headsets because the easiest thing to 0:21:30.400 --> 0:21:33.400 do was put somebody inside of a completely virtual environment 0:21:33.400 --> 0:21:36.320 and control that and create the experience for the user. 0:21:36.760 --> 0:21:40.040 Augmented reality and mixed reality are more difficult, and you 0:21:40.080 --> 0:21:43.840 actually have to have a network infrastructure deliver content to 0:21:44.080 --> 0:21:48.240 those type of wearables or headsets. You know, the level 0:21:48.280 --> 0:21:50.360 of yes, we're all you know, in the future, you're 0:21:50.359 --> 0:21:52.440 actually probably not going to have a smartphone anymore. And 0:21:52.480 --> 0:21:55.000 you will be using a wearable where you'll be able 0:21:55.000 --> 0:21:57.639 to actually have an augmented reality experience and just seeing 0:21:57.720 --> 0:22:00.760 overlays of digital content inside of the real world. And 0:22:00.800 --> 0:22:02.760 then you'll also be able to have you know, different 0:22:02.840 --> 0:22:05.880 levels of immersion with those types of headsets. We recently 0:22:05.880 --> 0:22:09.800 announced the XR Elite headset, which actually does virtual reality 0:22:09.800 --> 0:22:13.640 experiences and mixed reality experiences. So we're already moving there. 0:22:13.840 --> 0:22:16.639 I think the industry and all the different OEMs and 0:22:16.720 --> 0:22:19.440 the different companies are trying to solve the different types 0:22:19.440 --> 0:22:25.679 of experiences we can deliver. I'm wondering about HTC and 0:22:25.880 --> 0:22:29.000 what you can do in this country. I know it's 0:22:29.480 --> 0:22:32.480 I think it's a Taiwanese company, right, but a lot 0:22:32.520 --> 0:22:35.040