1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,040 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Lennar 7 00:00:33,400 --> 00:00:36,920 Speaker 1: is surging today on the prospects of continuing to build 8 00:00:36,920 --> 00:00:39,760 Speaker 1: homes and continuing to have people buy them even as 9 00:00:39,800 --> 00:00:43,600 Speaker 1: they become less affordable. Joining us now is Gary Shilling. 10 00:00:43,840 --> 00:00:46,760 Speaker 1: He is a Bloomberg Opinion Calmness. We're always happy to 11 00:00:46,760 --> 00:00:51,280 Speaker 1: have him on his president of a Gary Shilling and Co. Gary, 12 00:00:51,280 --> 00:00:54,440 Speaker 1: you wrote a column saying US housing will get even 13 00:00:54,720 --> 00:01:00,560 Speaker 1: less affordable. Why, well, they're not. A reason for that 14 00:01:01,400 --> 00:01:05,559 Speaker 1: one is that the construction costs have gone up, Labor 15 00:01:05,640 --> 00:01:09,399 Speaker 1: costs have gone up. A lot of the carpenters, masons, uh, 16 00:01:09,560 --> 00:01:13,800 Speaker 1: plumbers and so on that came from Mexico and elsewhere 17 00:01:13,920 --> 00:01:17,479 Speaker 1: in Central America. Uh, when the housing boom, they've gone home. 18 00:01:18,120 --> 00:01:21,120 Speaker 1: And with immigration policy, it's harder for those people to 19 00:01:21,240 --> 00:01:24,200 Speaker 1: come back. And also economic conditions are better in Mexico, 20 00:01:24,360 --> 00:01:27,640 Speaker 1: so they're happier to stay there. You've also had increases 21 00:01:27,680 --> 00:01:33,399 Speaker 1: in lumber cost is of paraffon imported Canadian lumber, and 22 00:01:33,440 --> 00:01:36,480 Speaker 1: there have been forest fires and insect damage in the 23 00:01:36,520 --> 00:01:39,880 Speaker 1: Pacific Northwest which you've added, which has added the costs. 24 00:01:40,319 --> 00:01:45,880 Speaker 1: Uh so, And and you also also in terms of 25 00:01:46,040 --> 00:01:49,760 Speaker 1: the cost you simply have a lot of builders who 26 00:01:49,800 --> 00:01:54,280 Speaker 1: are in effect concentrating on a higher cost houses because 27 00:01:54,720 --> 00:01:58,440 Speaker 1: those are people who can't afford them, lower lower income 28 00:01:58,480 --> 00:02:00,000 Speaker 1: people a lot of times they don't have a credit 29 00:02:00,040 --> 00:02:02,800 Speaker 1: scores and so on. So villers are saying, I'll concentrate 30 00:02:02,880 --> 00:02:05,800 Speaker 1: on the area where people are less price sensitive. So 31 00:02:06,680 --> 00:02:10,320 Speaker 1: you really do have in effect a shift to higher, 32 00:02:10,400 --> 00:02:14,440 Speaker 1: higher cost housing. And it's it's a number of factors. 33 00:02:15,320 --> 00:02:20,200 Speaker 1: Gary Shilling maybe explain why is it that a segment 34 00:02:20,240 --> 00:02:24,040 Speaker 1: of the economy residential construction, which accounts for just four 35 00:02:24,520 --> 00:02:28,280 Speaker 1: of g d P, Why is this such an important 36 00:02:28,320 --> 00:02:32,160 Speaker 1: area it has a bigger effect. Well, it's bigger. It's 37 00:02:32,200 --> 00:02:35,519 Speaker 1: bigger pen because it is so volatile and its last 38 00:02:35,560 --> 00:02:39,480 Speaker 1: recession really proved it. Now this was this was really 39 00:02:39,560 --> 00:02:43,160 Speaker 1: driven by the collapse in the subprime mortgage sector, and 40 00:02:43,520 --> 00:02:45,919 Speaker 1: it took the economy with it, but you had their 41 00:02:46,440 --> 00:02:51,520 Speaker 1: UH decline. Housing at its peak was six point seven 42 00:02:52,040 --> 00:02:55,320 Speaker 1: of g d P in late two thousand five, then 43 00:02:55,320 --> 00:02:57,880 Speaker 1: it went to two and a half percent two point 44 00:02:57,880 --> 00:03:02,360 Speaker 1: five percent of GDP in two thousand eleven. Well, that 45 00:03:02,440 --> 00:03:06,600 Speaker 1: collapse of four point two percentage points of GDP in itself, 46 00:03:06,639 --> 00:03:08,680 Speaker 1: that is a major recession. It's a matter of fact, 47 00:03:08,880 --> 00:03:12,680 Speaker 1: the whole economy declined attempt to less four point one 48 00:03:12,680 --> 00:03:15,600 Speaker 1: percent of was housing collapse account for more than they 49 00:03:15,639 --> 00:03:18,519 Speaker 1: declined in the economy and that recession that was the 50 00:03:18,560 --> 00:03:21,440 Speaker 1: worst sense in myteen thirty So it's it's a volatility 51 00:03:21,480 --> 00:03:23,040 Speaker 1: and a lot of it has to do with the 52 00:03:23,520 --> 00:03:27,360 Speaker 1: fact that housing is driven by by interest rates. Is 53 00:03:27,560 --> 00:03:29,600 Speaker 1: highly leverage. You think about it, if you had a 54 00:03:29,639 --> 00:03:31,840 Speaker 1: company that was leverage where you can get an f 55 00:03:32,040 --> 00:03:34,800 Speaker 1: h A loan three and a half percent down, Well, 56 00:03:34,800 --> 00:03:37,920 Speaker 1: if you had a company that that that had only 57 00:03:37,960 --> 00:03:41,040 Speaker 1: that amount of capital and the rest was piled you say, boy, 58 00:03:41,080 --> 00:03:43,960 Speaker 1: their way over leverage. But actually housing is so it's 59 00:03:44,040 --> 00:03:46,200 Speaker 1: very sensitive interest rates. And then of course you also 60 00:03:46,240 --> 00:03:50,080 Speaker 1: had that banans of people rushing into subprime mortgages are 61 00:03:50,160 --> 00:03:53,200 Speaker 1: ridiculing afford them, so it was augmented the whole the 62 00:03:53,200 --> 00:03:55,840 Speaker 1: whole cycle on the downside. Well, Gary, I'm just trying 63 00:03:55,880 --> 00:03:58,480 Speaker 1: to understand what the path forward is because a lot 64 00:03:58,480 --> 00:04:02,080 Speaker 1: of people are lamenting the lack of affordable inventory here. 65 00:04:02,760 --> 00:04:04,760 Speaker 1: You're you're predicting that there isn't gonna be much more 66 00:04:04,800 --> 00:04:07,600 Speaker 1: of it because builders aren't really being incentivized to build it, 67 00:04:07,640 --> 00:04:10,840 Speaker 1: and and just the materials and the labor is more expensive. 68 00:04:10,960 --> 00:04:14,200 Speaker 1: So going forward, Uh, this this would seem to be 69 00:04:14,480 --> 00:04:19,039 Speaker 1: supportive of prices right, um, but in the wrong places. 70 00:04:19,600 --> 00:04:21,880 Speaker 1: In other words, that it's going to be perhaps cheaper 71 00:04:21,920 --> 00:04:24,440 Speaker 1: to buy homes on the high end, but it's going 72 00:04:24,520 --> 00:04:28,800 Speaker 1: to get more and more difficult to buy more affordable homes. Yeah, 73 00:04:28,800 --> 00:04:32,240 Speaker 1: and you see that in the in the inventories. Uh uh, 74 00:04:32,520 --> 00:04:35,679 Speaker 1: there is a lot more inventory, you know, months surply, 75 00:04:36,400 --> 00:04:39,400 Speaker 1: Uh that the the inventory relative to the sales in 76 00:04:39,680 --> 00:04:43,520 Speaker 1: the latest month that is much higher in new houses 77 00:04:43,920 --> 00:04:46,840 Speaker 1: than there's for existing houses. And existing houses tend to 78 00:04:46,880 --> 00:04:49,440 Speaker 1: be cheaper. So in effect, you just don't have the 79 00:04:49,520 --> 00:04:52,520 Speaker 1: existing Housesn't that you haven't had a turnover four four 80 00:04:52,640 --> 00:04:56,039 Speaker 1: babies are staying in their houses, they're working longer, allow 81 00:04:56,080 --> 00:04:58,520 Speaker 1: of them need to. They don't have the income to retire. 82 00:04:59,120 --> 00:05:03,440 Speaker 1: You had a huge shopping up of of used houses, 83 00:05:03,480 --> 00:05:08,560 Speaker 1: existing houses brought out of foreclosure by institutional investors, and 84 00:05:08,600 --> 00:05:10,720 Speaker 1: they and they tend to hang on to them. They 85 00:05:10,760 --> 00:05:13,840 Speaker 1: turn don't turn over as fast as normal homeowners. And 86 00:05:13,880 --> 00:05:15,760 Speaker 1: that's the that's the key reason. Both these are key 87 00:05:15,760 --> 00:05:18,480 Speaker 1: reasons that the that the length of time that people 88 00:05:18,480 --> 00:05:20,440 Speaker 1: are staying in the house now is ten years. It 89 00:05:20,600 --> 00:05:22,599 Speaker 1: used to be six years. So you just don't have 90 00:05:22,640 --> 00:05:25,520 Speaker 1: a turnover. You don't have the available supply, particularly of 91 00:05:25,720 --> 00:05:29,839 Speaker 1: existing houses. Garrett, we've been talking about supply. We've spoke 92 00:05:29,880 --> 00:05:33,000 Speaker 1: about the effect of the housing industry on the overall economy. 93 00:05:33,240 --> 00:05:35,479 Speaker 1: Give you about a minute or so, tell us about 94 00:05:35,839 --> 00:05:39,240 Speaker 1: the demand side right now. Well, the demand side is 95 00:05:39,680 --> 00:05:42,320 Speaker 1: seeing is being hurt by a number of factors. One 96 00:05:42,360 --> 00:05:45,720 Speaker 1: is affordability. Uh, particularly for younger people, they simply do 97 00:05:45,800 --> 00:05:48,760 Speaker 1: not have the money the assets. I mean, you know, 98 00:05:48,800 --> 00:05:52,680 Speaker 1: the average the average person under under thirty five has 99 00:05:52,680 --> 00:05:55,680 Speaker 1: got savings of five thousand dollars or lett doesn't go 100 00:05:55,880 --> 00:05:58,960 Speaker 1: very far in terms of buying a house. Uh. Student 101 00:05:59,040 --> 00:06:01,880 Speaker 1: loans are big pressing a factor for many of these people. 102 00:06:02,279 --> 00:06:05,479 Speaker 1: Credit scores. They've brightened up since the Great Recession and 103 00:06:05,560 --> 00:06:09,560 Speaker 1: housing collapse, and they can't meet the credit scores. Uh. 104 00:06:09,720 --> 00:06:12,000 Speaker 1: So you have a number of factors here that really 105 00:06:12,040 --> 00:06:16,320 Speaker 1: make it much more difficult for people to uh to 106 00:06:16,440 --> 00:06:19,479 Speaker 1: afford houses. And you can say this is an imbalance 107 00:06:19,520 --> 00:06:22,599 Speaker 1: and it shouldn't exist forever, but what it really means 108 00:06:22,640 --> 00:06:24,919 Speaker 1: there is a lot more people are being forced to 109 00:06:24,920 --> 00:06:28,799 Speaker 1: to rent now new homes. First time buyers are increasing, 110 00:06:29,400 --> 00:06:33,000 Speaker 1: no question about it. And the gap between mortgages and 111 00:06:33,760 --> 00:06:37,400 Speaker 1: between the mortgages and rents is closing in favor of 112 00:06:37,480 --> 00:06:40,000 Speaker 1: owning owning a house, but it's got a long way 113 00:06:40,040 --> 00:06:43,120 Speaker 1: to go. Thank you very much, Gary Shilling. He is 114 00:06:43,160 --> 00:06:46,400 Speaker 1: the president of a. Gary Shilling and Company. He is 115 00:06:46,440 --> 00:06:50,960 Speaker 1: also a Bloomberg opinion columnists. He also is a wonderful 116 00:06:51,000 --> 00:06:55,600 Speaker 1: honey producer. He has his own bees. Yes he does. Yes, 117 00:06:56,040 --> 00:06:59,440 Speaker 1: yeah a p R. I think it's the term. Well done. 118 00:07:00,320 --> 00:07:14,960 Speaker 1: Thanks very much, Gary Shilling. Hey, Gary Shilling and Company. 119 00:07:17,400 --> 00:07:20,280 Speaker 1: All right, time to talk about commodities with Mike mcloan, 120 00:07:20,360 --> 00:07:24,000 Speaker 1: our commodity strategist for Bloomberg Intelligence. He joins us here 121 00:07:24,000 --> 00:07:26,960 Speaker 1: in our eleven three oh studio and Alan burga agriculture 122 00:07:26,960 --> 00:07:30,240 Speaker 1: reporter for Bloomberg News. He joins us from our Bloomberg 123 00:07:30,320 --> 00:07:33,040 Speaker 1: nine one studios in Washington, d C. And of course 124 00:07:33,320 --> 00:07:37,280 Speaker 1: you can follow Alan on Twitter at Alan Burga. That's 125 00:07:37,400 --> 00:07:41,200 Speaker 1: b J E r g A. Uh, Mike. I want 126 00:07:41,200 --> 00:07:43,920 Speaker 1: to begin with you because let's get the price action 127 00:07:44,080 --> 00:07:45,760 Speaker 1: first of all, and a little bit of the pain. 128 00:07:45,960 --> 00:07:48,960 Speaker 1: Let's start with soybeans. What has been going on. If 129 00:07:48,960 --> 00:07:52,520 Speaker 1: you're a soybean farmer, you're not happy. You're not happy 130 00:07:52,560 --> 00:07:55,200 Speaker 1: with prices, You're happy with production. That's the one problem. 131 00:07:55,280 --> 00:07:58,120 Speaker 1: The good, excellent conditions for this month are the best 132 00:07:58,120 --> 00:08:01,400 Speaker 1: they've been in decades, in fact, basically right at the 133 00:08:01,440 --> 00:08:03,680 Speaker 1: two thousand eleven peak. And I was there in the 134 00:08:03,720 --> 00:08:06,200 Speaker 1: Midwest last weekend and I've just never seen the crop 135 00:08:06,280 --> 00:08:08,920 Speaker 1: look this good, notably in corn, but soybeans are the 136 00:08:08,960 --> 00:08:13,280 Speaker 1: main expert. We have to China, so good conditions, um 137 00:08:13,480 --> 00:08:17,000 Speaker 1: export trade tensions, and then of course the plunge in 138 00:08:17,080 --> 00:08:20,480 Speaker 1: the Brazilian real has been basically a perfect storm for soybeans. 139 00:08:20,520 --> 00:08:24,720 Speaker 1: So looking forward, the question is is this perfect storm sustainable? 140 00:08:24,800 --> 00:08:27,640 Speaker 1: And from these levels it's unlikely. So Allen, come on 141 00:08:27,680 --> 00:08:31,000 Speaker 1: in here. I mean, what could potentially alter this backdrop, 142 00:08:31,040 --> 00:08:34,640 Speaker 1: which is a perfect storm to send corn and soybean 143 00:08:34,679 --> 00:08:38,360 Speaker 1: prices plummeting and uh and leave and leave a lot 144 00:08:38,400 --> 00:08:42,240 Speaker 1: of crops out there, uh without a lot of profit margin. Well, 145 00:08:42,280 --> 00:08:44,200 Speaker 1: there's two things you could do. I mean, one is 146 00:08:44,200 --> 00:08:46,840 Speaker 1: sort of the perennial, which is weather. If you have 147 00:08:47,480 --> 00:08:49,959 Speaker 1: we're getting to to a sensitive period in terms of 148 00:08:49,960 --> 00:08:52,439 Speaker 1: the germination of the crops for corn and soybeans. If 149 00:08:52,480 --> 00:08:55,520 Speaker 1: you have a hot dry spell in the US Midwest, 150 00:08:55,559 --> 00:08:57,840 Speaker 1: that would change the crop out look. Um. Of course, 151 00:08:57,880 --> 00:08:59,760 Speaker 1: you can always hope if you're a U. S. Farmer 152 00:08:59,800 --> 00:09:01,719 Speaker 1: for lack of rain somewhere else. I mean, this is 153 00:09:01,760 --> 00:09:04,680 Speaker 1: a global market with global supply and demand. So those 154 00:09:04,679 --> 00:09:06,640 Speaker 1: are a couple things. That's that's one thing. That The 155 00:09:06,640 --> 00:09:08,679 Speaker 1: other thing, of course, is the policy environment. I mean, 156 00:09:08,800 --> 00:09:10,800 Speaker 1: somebody could blink in the trade war, or the trade 157 00:09:10,800 --> 00:09:13,040 Speaker 1: war could be called off, or something could be done 158 00:09:13,040 --> 00:09:16,160 Speaker 1: in that regard. Another factor is the U. S. Department 159 00:09:16,160 --> 00:09:18,320 Speaker 1: of Agriculture keep saying that that they're going to have 160 00:09:18,960 --> 00:09:22,000 Speaker 1: US farmers backs. That could be through some stepped up 161 00:09:22,000 --> 00:09:25,320 Speaker 1: commodity purchases in the short term that could help support 162 00:09:25,400 --> 00:09:27,880 Speaker 1: prices in the case of a trade war, but you 163 00:09:27,920 --> 00:09:29,400 Speaker 1: in the long run it would just contribute to a 164 00:09:29,440 --> 00:09:32,040 Speaker 1: supply overhang. So that's got to kind of present a 165 00:09:32,080 --> 00:09:34,400 Speaker 1: bit of a mixed picture for the market. Alan a 166 00:09:34,440 --> 00:09:36,960 Speaker 1: little bit more on these policy wars, perhaps on a 167 00:09:36,960 --> 00:09:40,240 Speaker 1: product that isn't necessarily is widely traded anymore, and this 168 00:09:40,280 --> 00:09:43,439 Speaker 1: has to do with cheese and dairy products, particularly on 169 00:09:43,480 --> 00:09:46,120 Speaker 1: the Canadian border. What have you been hearing? You know, 170 00:09:46,640 --> 00:09:49,760 Speaker 1: A lot of the attention on terry and cheese has 171 00:09:49,800 --> 00:09:52,720 Speaker 1: been with with Canada and the tariffs that they have 172 00:09:52,880 --> 00:09:55,880 Speaker 1: on US products and their system of supply management, which 173 00:09:55,920 --> 00:09:58,440 Speaker 1: is something that's become very controversial in the NAFTA talks. 174 00:09:58,640 --> 00:10:00,960 Speaker 1: I would actually draw some of your mentioned to Mexico. 175 00:10:01,120 --> 00:10:04,000 Speaker 1: I mean, for the very reason that Canada doesn't gavel 176 00:10:04,080 --> 00:10:07,360 Speaker 1: out of US market share. It's not actually a big 177 00:10:07,400 --> 00:10:10,640 Speaker 1: supplier a big issue on the markets. Mexico, on the 178 00:10:10,640 --> 00:10:13,679 Speaker 1: other hand, is our biggest export destination, and when you 179 00:10:13,679 --> 00:10:16,040 Speaker 1: start to see some of these duties go into effect 180 00:10:16,280 --> 00:10:19,920 Speaker 1: with Mexico, exports have really what have been supporting dairy 181 00:10:19,960 --> 00:10:22,480 Speaker 1: markets um and if you see that cut off from 182 00:10:22,480 --> 00:10:25,040 Speaker 1: the largest customer, now we see a return to dairy 183 00:10:25,040 --> 00:10:27,839 Speaker 1: gluts that could be very difficult for producers. Mike, come 184 00:10:27,880 --> 00:10:29,640 Speaker 1: on in here. I just want to broaden out and 185 00:10:29,640 --> 00:10:33,640 Speaker 1: take take take a step back and look at commodities overall. 186 00:10:33,640 --> 00:10:37,839 Speaker 1: Bloomberg Commodities index actually has declined for yet a fourth week. 187 00:10:37,880 --> 00:10:40,760 Speaker 1: That is its worst run in more than a year. 188 00:10:41,080 --> 00:10:45,320 Speaker 1: And this comes right after months after behemets from Pimco 189 00:10:45,440 --> 00:10:47,720 Speaker 1: to Goldman. Sachs said, commodities is the place to go. 190 00:10:47,880 --> 00:10:50,600 Speaker 1: This is the bullish bet of the year. It has 191 00:10:50,679 --> 00:10:52,600 Speaker 1: not been. Is it it has not been? Is it 192 00:10:52,640 --> 00:10:55,280 Speaker 1: because of the stronger dollar? Is it because of the 193 00:10:55,320 --> 00:10:57,840 Speaker 1: trade talk? Is it just a perfect storm in a 194 00:10:57,920 --> 00:11:00,320 Speaker 1: lot of different areas. When we're talking not just props, 195 00:11:00,320 --> 00:11:03,240 Speaker 1: we're talking also zinc, We're talking aluminum, We're talking a 196 00:11:03,240 --> 00:11:05,800 Speaker 1: whole bunch of things. I think you nail at first. 197 00:11:05,800 --> 00:11:08,200 Speaker 1: With the dollar. The dollar had a pretty weak first 198 00:11:08,800 --> 00:11:10,800 Speaker 1: first few months of the year. In the last few months, 199 00:11:11,160 --> 00:11:13,520 Speaker 1: basically since the end of March, the Bloomberg dollar necks 200 00:11:13,559 --> 00:11:15,360 Speaker 1: is up about five six percent, and guess what, the 201 00:11:15,360 --> 00:11:18,280 Speaker 1: Bloomberg commodity necks is down almost exactly the same amount. 202 00:11:18,280 --> 00:11:20,240 Speaker 1: So the dollar is a key thing. Also, we've seen 203 00:11:20,280 --> 00:11:23,199 Speaker 1: a peak in energy and crude oil prices. And what's 204 00:11:23,200 --> 00:11:26,760 Speaker 1: really been more surprising is this this plunge in metals, 205 00:11:26,760 --> 00:11:28,840 Speaker 1: and I think the metals at a very good support level. 206 00:11:28,840 --> 00:11:31,760 Speaker 1: Obviously they're the most dollars sensitive, that's the key area. 207 00:11:31,960 --> 00:11:34,280 Speaker 1: And then aggs now aggs are really the ones getting 208 00:11:34,360 --> 00:11:37,480 Speaker 1: hit by trade tensions the most. So these kind of 209 00:11:37,480 --> 00:11:40,320 Speaker 1: areas and these levels of question is is this somewhat 210 00:11:40,360 --> 00:11:43,080 Speaker 1: perfect storm the last few months for commodities last month 211 00:11:43,120 --> 00:11:47,040 Speaker 1: really is it sustainable? I think it's unlikely, unlikely. What 212 00:11:47,080 --> 00:11:49,640 Speaker 1: does that mean? So where people are people actually following 213 00:11:49,640 --> 00:11:52,439 Speaker 1: that that that strategy? Well, yes, I think overall the 214 00:11:52,480 --> 00:11:54,760 Speaker 1: commodity market looks like it's still in a pretty very 215 00:11:54,840 --> 00:11:57,840 Speaker 1: solid recovering period. Now. It had got a little too 216 00:11:57,920 --> 00:12:00,560 Speaker 1: enthusiastic earlier near and my main risk is that crewel 217 00:12:00,559 --> 00:12:02,959 Speaker 1: would peak, and it did, and to me, the main 218 00:12:03,000 --> 00:12:06,080 Speaker 1: potential upside is probably an agriculture and the eggs. But 219 00:12:06,200 --> 00:12:08,560 Speaker 1: now that's a little bit far away from now. But 220 00:12:08,600 --> 00:12:11,040 Speaker 1: as our prey previous, as Allen mentioned, you know, the 221 00:12:11,080 --> 00:12:13,240 Speaker 1: market has still has not even you know, we haven't 222 00:12:13,240 --> 00:12:15,360 Speaker 1: started July in August and that's the key month for eggs. 223 00:12:15,440 --> 00:12:18,040 Speaker 1: But overall. The key thing to remember commanity is this 224 00:12:18,080 --> 00:12:20,480 Speaker 1: bool markets only three years old. Look at stock markets 225 00:12:20,480 --> 00:12:23,040 Speaker 1: about ten years old. And the key issues a dollar. 226 00:12:23,120 --> 00:12:26,040 Speaker 1: If we if this dollar rally, which looks like it's unsustainable, 227 00:12:26,080 --> 00:12:28,280 Speaker 1: if it peaks out soon, the commodity market should come 228 00:12:28,360 --> 00:12:30,400 Speaker 1: right back, and it probably is going to. So Allen, 229 00:12:30,679 --> 00:12:32,600 Speaker 1: come on in here, because I know you've you've got 230 00:12:32,600 --> 00:12:36,000 Speaker 1: a lot of connections to the farming world and you've 231 00:12:36,040 --> 00:12:38,720 Speaker 1: been tracking it for years, and I would love to 232 00:12:38,760 --> 00:12:42,600 Speaker 1: get your sense of whether farmers kind of view this 233 00:12:42,720 --> 00:12:44,880 Speaker 1: the same way as Mike was just portraying it, that 234 00:12:44,920 --> 00:12:48,320 Speaker 1: this is just a perfect storm largely driven by the 235 00:12:48,400 --> 00:12:52,520 Speaker 1: dollar rally that will reverse probably in short order. Or 236 00:12:52,520 --> 00:12:55,440 Speaker 1: are they viewing this as something more substantial that they're 237 00:12:55,480 --> 00:12:57,880 Speaker 1: that they're more concerned about. Well, it kind of depends 238 00:12:57,920 --> 00:13:00,480 Speaker 1: on what you mean by this. If you're talking about 239 00:13:00,480 --> 00:13:02,600 Speaker 1: some of the short term issues in terms of trade 240 00:13:02,600 --> 00:13:05,680 Speaker 1: flows with China and wars with exporters, I do think 241 00:13:05,720 --> 00:13:07,440 Speaker 1: the sentiment is is that something that could be a 242 00:13:07,480 --> 00:13:10,360 Speaker 1: short term pain, but you know there is a hope 243 00:13:10,400 --> 00:13:12,360 Speaker 1: for a long term gain there. You know, farm country 244 00:13:12,440 --> 00:13:14,640 Speaker 1: tends to be very supportive of President Trump, and when 245 00:13:14,640 --> 00:13:17,560 Speaker 1: they're told that he'll have farmers backs and in the 246 00:13:17,600 --> 00:13:19,800 Speaker 1: long run this will lead to a better trade environment, 247 00:13:19,800 --> 00:13:21,720 Speaker 1: a lot of them are willing to believe that message. 248 00:13:22,160 --> 00:13:25,120 Speaker 1: But in terms of the overall commodities outlook, I don't 249 00:13:25,160 --> 00:13:28,880 Speaker 1: think we've seen enough um in terms of adjustment to 250 00:13:28,920 --> 00:13:32,600 Speaker 1: supply and demand for farmers to truly be confident that 251 00:13:32,720 --> 00:13:35,559 Speaker 1: this sort of dull drum period that we've been in 252 00:13:35,600 --> 00:13:39,120 Speaker 1: for about the past half decade is really going to change. 253 00:13:39,480 --> 00:13:42,040 Speaker 1: You know, American farmers, in terms of their productivity, can 254 00:13:42,080 --> 00:13:44,760 Speaker 1: often be their the greatest enemy. And and other you know, 255 00:13:44,920 --> 00:13:47,880 Speaker 1: world productive producers from Brazil and Argentina to the Black 256 00:13:47,920 --> 00:13:50,520 Speaker 1: Sea region have really up their gain too. And so 257 00:13:50,880 --> 00:13:55,160 Speaker 1: from the macro standpoint of supply and demand and global agriculture, 258 00:13:55,200 --> 00:13:57,920 Speaker 1: regardless of the headlines of the day, there has been 259 00:13:57,920 --> 00:14:02,560 Speaker 1: a production and and and demand imbalance that even though 260 00:14:02,679 --> 00:14:04,960 Speaker 1: this year we're seeing some progress on it for the 261 00:14:04,960 --> 00:14:08,400 Speaker 1: first time in about five six years, it's still something 262 00:14:08,440 --> 00:14:10,560 Speaker 1: that is very concerning an agriculture country. And I think 263 00:14:10,600 --> 00:14:13,040 Speaker 1: you would need to have to three years of demand 264 00:14:13,080 --> 00:14:17,400 Speaker 1: outstripping supply before farmers would feel really confident again. Thank 265 00:14:17,400 --> 00:14:19,360 Speaker 1: you so much for joining us both of you. I 266 00:14:19,480 --> 00:14:22,280 Speaker 1: personally have been really interested in the idea that you've 267 00:14:22,320 --> 00:14:25,800 Speaker 1: seen this sell off in commodities after so many firms 268 00:14:25,800 --> 00:14:29,040 Speaker 1: that this was the place to go. Mike mclognan, Commodity 269 00:14:29,080 --> 00:14:33,720 Speaker 1: Strategies for Bloomberg Intelligence, Alan berga Bloomberg agricultural reporter. Thank 270 00:14:33,760 --> 00:14:49,360 Speaker 1: you to both of you. Now we're going to get 271 00:14:49,360 --> 00:14:53,320 Speaker 1: smarter on General Electric with Karen Yubilhart, our industrials analyst 272 00:14:53,360 --> 00:14:58,480 Speaker 1: for Bloomberg Intelligence. Karen, if the ge healthcare business is 273 00:14:58,520 --> 00:15:02,600 Speaker 1: such a great business, why are selling the business? I 274 00:15:02,640 --> 00:15:06,040 Speaker 1: think that they needed to get smaller in a big way, 275 00:15:06,720 --> 00:15:09,800 Speaker 1: and uh, they can't really do much with them Power 276 00:15:10,440 --> 00:15:15,080 Speaker 1: aviation is their ground jewel. I think they the numbers worked. 277 00:15:15,240 --> 00:15:18,360 Speaker 1: It is a different kind of business versus the other 278 00:15:18,560 --> 00:15:21,680 Speaker 1: you know, industrial businesses they're in, and they can really 279 00:15:21,680 --> 00:15:23,280 Speaker 1: pull a lot of cash out of it and solve 280 00:15:23,320 --> 00:15:27,400 Speaker 1: a lot of their other problems. What's left, Uh, Well, 281 00:15:27,440 --> 00:15:30,120 Speaker 1: the aviation business, which is the engine business and the 282 00:15:30,280 --> 00:15:33,960 Speaker 1: all the after related aftermarket and digital etcetera. And that's 283 00:15:34,000 --> 00:15:39,120 Speaker 1: a very very good business with margins almost twenty uh 284 00:15:39,120 --> 00:15:42,440 Speaker 1: so that's a keeper and Power, which is a problem 285 00:15:42,480 --> 00:15:45,080 Speaker 1: so they've got a great business and a problem business, 286 00:15:45,120 --> 00:15:48,560 Speaker 1: but there is upside uh if they can just shrink 287 00:15:48,840 --> 00:15:52,080 Speaker 1: power enough. So that's a multi year thing though, So 288 00:15:52,160 --> 00:15:55,920 Speaker 1: what's the narrative that's driving the shares up seven today? 289 00:15:55,960 --> 00:15:58,520 Speaker 1: That they took a big move that they gave us 290 00:15:58,680 --> 00:16:02,080 Speaker 1: numbers are going to reduce step by twenty five billion dollars. 291 00:16:02,640 --> 00:16:05,000 Speaker 1: A bunch of a lot of the pension is going 292 00:16:05,080 --> 00:16:08,480 Speaker 1: with healthcare, which was another you know, um thing around 293 00:16:08,480 --> 00:16:12,280 Speaker 1: their neck. And so some of these real financial balanchee 294 00:16:12,320 --> 00:16:16,160 Speaker 1: cash full problems can go away with the magnitude of 295 00:16:16,160 --> 00:16:18,160 Speaker 1: the money they can draw from these other assets sales, 296 00:16:18,200 --> 00:16:21,200 Speaker 1: which includes by the way Baker use what happens to 297 00:16:21,240 --> 00:16:26,120 Speaker 1: the dividend, Well, the dividend will stay intact as long 298 00:16:26,160 --> 00:16:28,680 Speaker 1: as the entity is intact, but when they split it 299 00:16:28,760 --> 00:16:31,920 Speaker 1: up in aggregate, the dividend will probably be lower. The 300 00:16:32,000 --> 00:16:34,720 Speaker 1: industrial they will seek to get a yield in line 301 00:16:34,720 --> 00:16:38,160 Speaker 1: with the industrial peers, which will be about to two 302 00:16:38,240 --> 00:16:41,040 Speaker 1: point to two point three percent yield, and then the 303 00:16:41,040 --> 00:16:44,760 Speaker 1: healthcare business will have a lower yield, so net uh, 304 00:16:44,880 --> 00:16:49,280 Speaker 1: it will be down. However, solving these other problems I 305 00:16:49,320 --> 00:16:52,360 Speaker 1: think matters significantly more to the stock. Let's go to 306 00:16:52,400 --> 00:16:55,120 Speaker 1: the conspiracy theories, Karen. Right now, I just want to 307 00:16:55,120 --> 00:16:59,040 Speaker 1: bring up what Dave Wilson noted earlier today. He was saying, 308 00:16:59,080 --> 00:17:02,080 Speaker 1: it's so interesting ge was just booted from the Dow 309 00:17:02,200 --> 00:17:05,800 Speaker 1: Jones Index and now it announces the spinoff and it 310 00:17:05,920 --> 00:17:08,960 Speaker 1: shares our surging. Do you think that the removal of 311 00:17:08,960 --> 00:17:12,640 Speaker 1: the company from the Dow Jones Index actually had anything 312 00:17:12,720 --> 00:17:16,359 Speaker 1: to do with its decision to to do these sales? Now, 313 00:17:17,440 --> 00:17:20,680 Speaker 1: I think the timing was I would think there was 314 00:17:20,720 --> 00:17:23,440 Speaker 1: a little bit of planned timing on that front actually, 315 00:17:23,560 --> 00:17:26,920 Speaker 1: because it happened the same day, right, Um, But I 316 00:17:27,560 --> 00:17:30,560 Speaker 1: don't think a decision might would have the decision would 317 00:17:30,560 --> 00:17:32,159 Speaker 1: have changed because new GI is going to still be 318 00:17:32,240 --> 00:17:35,280 Speaker 1: a much smaller, smaller company. Right. But I think the 319 00:17:35,359 --> 00:17:38,240 Speaker 1: timing is interesting. Well, I mean that the point being 320 00:17:38,320 --> 00:17:40,960 Speaker 1: here that there's less pressure on General Electric to be 321 00:17:41,640 --> 00:17:45,040 Speaker 1: a behemoth, and there's less pressure to sort of maintain 322 00:17:45,080 --> 00:17:48,080 Speaker 1: a certain veneer of anything. They can go try to 323 00:17:48,119 --> 00:17:51,560 Speaker 1: do whatever makes sense for their business, um, without having 324 00:17:51,600 --> 00:17:53,800 Speaker 1: to worry about getting booted out of the index because 325 00:17:53,800 --> 00:17:56,400 Speaker 1: they already happen. Yeah, I don't think they'd make big 326 00:17:56,400 --> 00:17:58,679 Speaker 1: decisions based on that. I think all of this stuff 327 00:17:58,720 --> 00:18:01,560 Speaker 1: was well under way, but I agree it lifts something 328 00:18:01,600 --> 00:18:03,960 Speaker 1: that frankly didn't matter much to the you know, the 329 00:18:04,040 --> 00:18:07,199 Speaker 1: prospects for the company, but it was a news that 330 00:18:07,240 --> 00:18:09,040 Speaker 1: people worried about. Oh, they're gonna get taken out. They're 331 00:18:09,040 --> 00:18:12,040 Speaker 1: gonna get taken out. Well, that's behind us now, Baker Hughes, 332 00:18:12,400 --> 00:18:14,840 Speaker 1: what's the future there? Uh, you know, he got a 333 00:18:14,840 --> 00:18:16,880 Speaker 1: lot of heat because that is um and I said, 334 00:18:16,920 --> 00:18:20,720 Speaker 1: he could have monetized very easily, could have and um 335 00:18:20,880 --> 00:18:24,119 Speaker 1: he the Flannery CEO. Flannery said, look, I'm not going 336 00:18:24,160 --> 00:18:26,040 Speaker 1: to do something quickly just because you want me to 337 00:18:26,040 --> 00:18:28,560 Speaker 1: do something quickly. I want to get the benefits of 338 00:18:28,560 --> 00:18:31,440 Speaker 1: an oil recovery, and I'm not going to sell it now. 339 00:18:31,520 --> 00:18:33,480 Speaker 1: So he said, he'll sell it over two or three years. 340 00:18:33,520 --> 00:18:36,600 Speaker 1: You'll probably sell it in pieces. Strategically they made that 341 00:18:36,680 --> 00:18:39,840 Speaker 1: made sense, but he had such cash issues that you know, 342 00:18:39,920 --> 00:18:41,560 Speaker 1: there was a question of whether he'd be able to 343 00:18:41,600 --> 00:18:46,119 Speaker 1: do that. And now by monetizing healthcare, he gets some 344 00:18:46,160 --> 00:18:49,760 Speaker 1: flexibility to wait for a rebound. What's next for them 345 00:18:49,800 --> 00:18:53,160 Speaker 1: to sell? You know, I think we're kind of done. 346 00:18:53,200 --> 00:18:55,600 Speaker 1: I mean, there might be some little bits and pieces 347 00:18:55,640 --> 00:18:58,720 Speaker 1: in power. Uh, you know that business. The core of 348 00:18:58,720 --> 00:19:01,320 Speaker 1: it is the large gay since steam turbines. But there 349 00:19:01,359 --> 00:19:04,520 Speaker 1: are some other businesses like a small grid business for example, 350 00:19:04,560 --> 00:19:08,440 Speaker 1: you know, transmission and distribution business. Um, there's a few 351 00:19:08,480 --> 00:19:11,959 Speaker 1: other smaller things in power he might want to prune, 352 00:19:12,400 --> 00:19:15,440 Speaker 1: but the big stuff with these two moves is pretty 353 00:19:15,520 --> 00:19:18,000 Speaker 1: much done. Karen Eu wil Heart, thank you. That was 354 00:19:18,040 --> 00:19:21,639 Speaker 1: really really illuminating and explains why the shares are up 355 00:19:21,720 --> 00:19:25,560 Speaker 1: nearly seven p I'm curious about the whole conversation they 356 00:19:25,640 --> 00:19:27,119 Speaker 1: must have had about all right, we're out of the 357 00:19:27,119 --> 00:19:30,440 Speaker 1: down jones, so you don't think it's anything he's giving 358 00:19:30,480 --> 00:19:36,640 Speaker 1: me this look of incredible. I mean that, as Karen said, 359 00:19:36,640 --> 00:19:38,600 Speaker 1: I think that timing is interesting and that may have 360 00:19:38,640 --> 00:19:40,480 Speaker 1: had something to do with it, but I can't imagine 361 00:19:40,480 --> 00:19:44,800 Speaker 1: that the decision to actually do it fair enough Karen, 362 00:19:44,880 --> 00:19:47,160 Speaker 1: you wil Hurt, by the way, it's Industrials analyst for 363 00:19:47,280 --> 00:20:04,840 Speaker 1: Bloomberg Intelligence. We always love getting Hurt insights. It is 364 00:20:04,960 --> 00:20:09,240 Speaker 1: an official The Department of Labor's fiduciary rule is dead. 365 00:20:09,680 --> 00:20:12,439 Speaker 1: Let's find out what that means from Elliott Wise. Bluthy 366 00:20:12,600 --> 00:20:16,160 Speaker 1: is the founder and the chief executive of High Tower Advisors. 367 00:20:16,440 --> 00:20:21,080 Speaker 1: They're based in Chicago and help manage approximately fifty billion 368 00:20:21,240 --> 00:20:24,400 Speaker 1: dollars of customer assets, and I'm sure by the time 369 00:20:24,400 --> 00:20:26,640 Speaker 1: you get done with the interview, they will manage even 370 00:20:26,640 --> 00:20:29,960 Speaker 1: more than fifty billion dollars for customer assets. Elliott, thanks 371 00:20:30,040 --> 00:20:33,120 Speaker 1: very much for coming into the studio. Maybe just refresh 372 00:20:33,200 --> 00:20:36,399 Speaker 1: quickly the people. The fiduciary rule, which was proposed by 373 00:20:36,440 --> 00:20:39,159 Speaker 1: the Department of Labor had to do with retirement accounts, 374 00:20:39,680 --> 00:20:42,479 Speaker 1: but that rule is dead exactly. So this was I 375 00:20:42,520 --> 00:20:46,359 Speaker 1: think that the latest attempt um well intended, and we 376 00:20:46,400 --> 00:20:50,280 Speaker 1: applauded the effort for the agency to implement a true 377 00:20:50,280 --> 00:20:53,280 Speaker 1: fiduciary rule. And for the folks that are listening that 378 00:20:53,600 --> 00:20:56,399 Speaker 1: may not be familiar with that term, you know, think 379 00:20:56,480 --> 00:21:00,000 Speaker 1: think about the way doctors follow the hippocratic oath, or 380 00:21:00,000 --> 00:21:02,600 Speaker 1: a way a lawyer follows a duty to put the 381 00:21:02,640 --> 00:21:06,639 Speaker 1: client interest first. It's a very simple concept. There's no 382 00:21:06,760 --> 00:21:10,320 Speaker 1: caveats to it, there's no exceptions to it. Either you 383 00:21:10,359 --> 00:21:13,240 Speaker 1: put the client interest first or you put your own 384 00:21:13,280 --> 00:21:16,760 Speaker 1: interest first. It's it's really that simple. So when when 385 00:21:16,800 --> 00:21:20,640 Speaker 1: you see the regulators producing thousands of pages of reports 386 00:21:20,720 --> 00:21:23,560 Speaker 1: trying to explain a very simple concept. You know that 387 00:21:23,600 --> 00:21:26,320 Speaker 1: there's been influences that have come to bear to make 388 00:21:26,320 --> 00:21:31,000 Speaker 1: it complicated. And as I say to individuals that we 389 00:21:31,040 --> 00:21:34,800 Speaker 1: talked to clients a lot, if you're confused about whether 390 00:21:34,840 --> 00:21:38,720 Speaker 1: your advisor has a fiduciary duty, or if you're confused 391 00:21:38,720 --> 00:21:42,199 Speaker 1: that they're putting your interest first or not, they're probably not. 392 00:21:42,359 --> 00:21:46,520 Speaker 1: And there's a good reason why there's confusion. So last attempt. Again, 393 00:21:46,560 --> 00:21:48,800 Speaker 1: we've been watching this for years. There was God Frank, 394 00:21:48,920 --> 00:21:51,399 Speaker 1: there was the d O L, there's the sec UH. 395 00:21:51,480 --> 00:21:54,000 Speaker 1: It's dead for now. VISAVI this effort, but it will 396 00:21:54,040 --> 00:21:57,480 Speaker 1: come back. The fiduciary duty discussion is not going away. 397 00:21:57,600 --> 00:22:00,720 Speaker 1: One thing. It is also not going away conflicts of 398 00:22:00,760 --> 00:22:04,000 Speaker 1: interest when it consolutely management tell us about that. Well, 399 00:22:04,040 --> 00:22:06,919 Speaker 1: we started High Tower in two thousand and seven just 400 00:22:07,040 --> 00:22:09,639 Speaker 1: on the eve of the credit crisis, which was a 401 00:22:09,760 --> 00:22:13,399 Speaker 1: massive example of conflicts of interest, and unfortunately in the 402 00:22:13,440 --> 00:22:17,000 Speaker 1: past ten years not a lot has changed in the 403 00:22:17,040 --> 00:22:20,600 Speaker 1: way certain parts of the industry operate. And to keep 404 00:22:20,640 --> 00:22:23,800 Speaker 1: it very simple, if you can get paid a couple 405 00:22:23,800 --> 00:22:27,280 Speaker 1: of different ways, and the person to whom you're looking 406 00:22:27,320 --> 00:22:31,119 Speaker 1: for advice is getting paid one way, and and and 407 00:22:31,200 --> 00:22:34,520 Speaker 1: the product or the service that you're being sold has 408 00:22:34,560 --> 00:22:38,639 Speaker 1: also generated profits elsewhere inside that business. You have a 409 00:22:38,760 --> 00:22:42,159 Speaker 1: conflict of interest, and that conflict of interest is pernicious 410 00:22:42,200 --> 00:22:45,120 Speaker 1: inside of inside of these firms, it results in lots 411 00:22:45,119 --> 00:22:47,960 Speaker 1: of proven example, so people understand this could be things 412 00:22:47,960 --> 00:22:51,880 Speaker 1: like mutual funds. This could be so for example, if 413 00:22:51,920 --> 00:22:55,160 Speaker 1: if a financial advisor and an institution says to you, 414 00:22:55,720 --> 00:22:59,359 Speaker 1: I'm going to charge you one point one basis point 415 00:23:00,080 --> 00:23:02,760 Speaker 1: hundred basis points or one percent point on your assets, 416 00:23:03,200 --> 00:23:07,080 Speaker 1: and I get fifty of those basis points as my compensation, 417 00:23:07,440 --> 00:23:10,240 Speaker 1: and then we pay fifty basis points to the platform 418 00:23:10,359 --> 00:23:12,640 Speaker 1: of products. And look at all these products we have 419 00:23:12,800 --> 00:23:15,840 Speaker 1: and different funds, equity funds and fixed income funds, all 420 00:23:15,840 --> 00:23:19,040 Speaker 1: sorts of funds. And you pay fifty cents or fifty 421 00:23:19,080 --> 00:23:21,720 Speaker 1: basis points for that product and fifty basis points for 422 00:23:21,800 --> 00:23:24,280 Speaker 1: the fee. The client might think, well, that sounds like 423 00:23:24,280 --> 00:23:28,399 Speaker 1: a reasonable proposition. What the client doesn't know is that 424 00:23:28,440 --> 00:23:33,280 Speaker 1: the actual money manager who's behind that platform may only 425 00:23:33,320 --> 00:23:37,160 Speaker 1: get thirty five basis points of the fifty basis points 426 00:23:37,200 --> 00:23:40,359 Speaker 1: that the client is paying the firm. So the the 427 00:23:40,440 --> 00:23:43,920 Speaker 1: institution gets a percentage of the fifty basis points paid 428 00:23:43,960 --> 00:23:47,560 Speaker 1: to the financial advisor, and then hidden is a second 429 00:23:47,720 --> 00:23:51,439 Speaker 1: layer of fees fifteen basis points, that is the cost 430 00:23:51,520 --> 00:23:54,520 Speaker 1: between the product and what are charging the clients. So 431 00:23:54,600 --> 00:23:58,040 Speaker 1: that second layer of fee is a very simple example 432 00:23:58,040 --> 00:24:00,960 Speaker 1: of how the firm is getting paid twice. What's the 433 00:24:01,000 --> 00:24:03,879 Speaker 1: alternative or what is an alternative? The alternative is the 434 00:24:03,960 --> 00:24:08,119 Speaker 1: client should have complete transparency into the cost, and at 435 00:24:08,400 --> 00:24:11,359 Speaker 1: High Tower, for example UH, a client would know what 436 00:24:11,440 --> 00:24:14,639 Speaker 1: the fees are of their products and they would have 437 00:24:14,680 --> 00:24:18,000 Speaker 1: transparency into how much they were paying their financial advisor. 438 00:24:18,280 --> 00:24:22,520 Speaker 1: So pure transparency in a very simple fashion is one 439 00:24:22,600 --> 00:24:27,240 Speaker 1: way to illuminate if a conflict exists or not. And if, 440 00:24:27,560 --> 00:24:30,080 Speaker 1: as many people have complained over the years, you have 441 00:24:30,080 --> 00:24:33,320 Speaker 1: a hard time understanding from your statement exactly how much 442 00:24:33,320 --> 00:24:37,280 Speaker 1: you're paying the firm, then that confusion is probably covering 443 00:24:37,359 --> 00:24:41,840 Speaker 1: up conflicts of interest. Tell us about banks as UH 444 00:24:42,320 --> 00:24:46,000 Speaker 1: money managers and the wealth divisions of banks. So a 445 00:24:46,080 --> 00:24:48,960 Speaker 1: number of years ago, there was a very famous argument 446 00:24:49,000 --> 00:24:52,439 Speaker 1: that said it would be beneficial for the client if 447 00:24:52,480 --> 00:24:56,399 Speaker 1: you brought together different types of financial activities. You should 448 00:24:56,400 --> 00:25:00,280 Speaker 1: bring an insurance company with a bank lending company with 449 00:25:00,320 --> 00:25:03,560 Speaker 1: an asset management company, trading companies, and if you brought 450 00:25:03,560 --> 00:25:06,080 Speaker 1: all this other under one roof, presumably you would get 451 00:25:06,119 --> 00:25:09,359 Speaker 1: quote unquote synergies and that would be better for the client. Well, 452 00:25:09,520 --> 00:25:13,320 Speaker 1: the synergy part was right, but what didn't happen is 453 00:25:13,320 --> 00:25:15,880 Speaker 1: that the benefit didn't go to the client. The benefit 454 00:25:15,880 --> 00:25:17,840 Speaker 1: went to the firm. And so many of the people 455 00:25:17,880 --> 00:25:20,160 Speaker 1: that thought that would benefit the client have now changed 456 00:25:20,280 --> 00:25:24,040 Speaker 1: their story and recognized it's better to have those pieces separated. 457 00:25:24,160 --> 00:25:26,679 Speaker 1: So if you go to a bank, you know the 458 00:25:26,720 --> 00:25:28,560 Speaker 1: product you're getting from the bank, and you know the 459 00:25:28,560 --> 00:25:30,600 Speaker 1: fees that you're paying. If you go to an asset 460 00:25:30,640 --> 00:25:34,320 Speaker 1: manager whose job it is to pick stocks or pig bonds, 461 00:25:34,720 --> 00:25:36,720 Speaker 1: you know how much you're paying for that service. And 462 00:25:36,800 --> 00:25:40,439 Speaker 1: if you go to a fiduciary financial advisor, in the 463 00:25:40,480 --> 00:25:42,240 Speaker 1: same way if you went to see a doctor or 464 00:25:42,240 --> 00:25:46,120 Speaker 1: a lawyer, you would know that that professional owed you 465 00:25:46,320 --> 00:25:50,159 Speaker 1: a legal duty to put your interest first and that 466 00:25:50,200 --> 00:25:53,879 Speaker 1: there was no behind the curtain, multiple layers of fees 467 00:25:54,000 --> 00:25:57,360 Speaker 1: or conflict of interest that would impair the service provider 468 00:25:57,600 --> 00:26:00,600 Speaker 1: providing services that were in your interest. Out the firms. 469 00:26:01,359 --> 00:26:03,920 Speaker 1: I want to turn your attention now to something that 470 00:26:03,960 --> 00:26:07,160 Speaker 1: you've brought under the roof, and this is an acquisition 471 00:26:07,200 --> 00:26:09,440 Speaker 1: that you made in Texas. Tell us about what High 472 00:26:09,440 --> 00:26:13,480 Speaker 1: Towers doing there. Well. So the folks down in Houston, Texas, 473 00:26:14,800 --> 00:26:18,720 Speaker 1: the name of the company as Salient, and the professionals 474 00:26:18,760 --> 00:26:23,080 Speaker 1: there are are truly outstanding. High Tower has a collection 475 00:26:23,119 --> 00:26:26,840 Speaker 1: across the entire country of some of the finest financial 476 00:26:26,880 --> 00:26:29,960 Speaker 1: advisors from many, many different firms, and we take a 477 00:26:29,960 --> 00:26:34,080 Speaker 1: lot of pride in discharging the fiduciary duty and putting 478 00:26:34,080 --> 00:26:37,879 Speaker 1: our clients interest first. And the folks that that joined 479 00:26:38,000 --> 00:26:41,040 Speaker 1: us out of Texas have been building that level of 480 00:26:41,040 --> 00:26:44,600 Speaker 1: fiduciary energy and passion for for many, many years. They 481 00:26:44,600 --> 00:26:47,240 Speaker 1: were already fiduciaries when we met them, and they were 482 00:26:47,240 --> 00:26:51,679 Speaker 1: thrilled to find our infrastructure and technology and culture to 483 00:26:51,760 --> 00:26:54,480 Speaker 1: partner up with us. What came along with that is 484 00:26:54,520 --> 00:26:56,560 Speaker 1: that they were running a trust company as well. So 485 00:26:56,680 --> 00:26:59,440 Speaker 1: High Tower not only picked up a whole slew of 486 00:26:59,600 --> 00:27:02,640 Speaker 1: very fine professionals and a presence in a great state 487 00:27:02,640 --> 00:27:05,399 Speaker 1: of Texas, we also picked up a new capability that 488 00:27:05,480 --> 00:27:08,320 Speaker 1: we can now extend across the country to our other clients. 489 00:27:08,480 --> 00:27:11,879 Speaker 1: All Right, So in maybe thirty thirty five seconds. Given 490 00:27:11,920 --> 00:27:15,040 Speaker 1: that you've put this together, do you have in your 491 00:27:15,119 --> 00:27:18,000 Speaker 1: mind what is what you consider to be a fair 492 00:27:18,119 --> 00:27:22,679 Speaker 1: fee structure for the typical retail investor. Sure? So, fair 493 00:27:22,760 --> 00:27:26,800 Speaker 1: fee schedule is best defined by the relationship between the 494 00:27:26,840 --> 00:27:29,439 Speaker 1: advisor and the client. So one of the areas that 495 00:27:29,480 --> 00:27:31,439 Speaker 1: we take a lot of pride in at High Tower 496 00:27:31,880 --> 00:27:35,920 Speaker 1: is we respect the sophistication of our financial advisors. We 497 00:27:35,960 --> 00:27:39,840 Speaker 1: respect them in their choices on products, we respect them 498 00:27:39,840 --> 00:27:42,800 Speaker 1: in their choices and how to build portfolios, and we 499 00:27:42,840 --> 00:27:46,240 Speaker 1: respect them on how they think they should generate a 500 00:27:46,280 --> 00:27:48,760 Speaker 1: fee from their clients. So there's a tremendous amount of 501 00:27:48,760 --> 00:27:52,800 Speaker 1: flexibility for our financial advisors to look at the human 502 00:27:52,840 --> 00:27:55,920 Speaker 1: beings they service and come up with fair fees. Thanks 503 00:27:56,000 --> 00:27:58,800 Speaker 1: very much for being with Elliott Weissbluth. He is the 504 00:27:58,840 --> 00:28:02,400 Speaker 1: founder and the chief pigs executive of High Tower Advisors. 505 00:28:02,520 --> 00:28:06,679 Speaker 1: They're based in Chicago, helping to manage about fifty billion 506 00:28:06,680 --> 00:28:12,200 Speaker 1: dollars of customer assets. Thanks for listening to the Bloomberg 507 00:28:12,200 --> 00:28:14,879 Speaker 1: P and L podcast. You can subscribe and listen to 508 00:28:14,880 --> 00:28:19,439 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 509 00:28:19,840 --> 00:28:23,400 Speaker 1: I'm Pim Fox, I'm on Twitter at pim Fox. I'm 510 00:28:23,440 --> 00:28:26,720 Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast. 511 00:28:26,760 --> 00:28:29,399 Speaker 1: You can always catch us worldwide on Bloomberg Radio