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Mizuho Securities Adding Staff and Specialties · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Well,
• 0:33
  Speaker 1: we now quote bitcoin spot prices here at Bloomberg because
• 0:37
  Speaker 1: it has gotten that hot. And here to talk about
• 0:40
  Speaker 1: sort of the agony that this presents to the biggest
• 0:43
  Speaker 1: Wall Street banks is Shinelli Basak. She's insurance company is
• 0:46
  Speaker 1: a boutique investment banks reporter for Bloomberg News. She's also
• 0:49
  Speaker 1: getting her m b A at n y U. And
• 0:52
  Speaker 1: before we get into the details of what to expect
• 0:55
  Speaker 1: right before bitcoin starts trading on the futures exchange this Sunday,
• 0:59
  Speaker 1: for the first time time, you said that they're crypto
• 1:01
  Speaker 1: clubs and everyone's a crypto trader in your MBA classes.
• 1:04
  Speaker 1: And it's shocking how many people talk about it in
• 1:07
  Speaker 1: an MBA program. It comes up almost every day. What
• 1:09
  Speaker 1: are they talking about? They're talking about how they can
• 1:12
  Speaker 1: trade it. All their friends are in the market in
• 1:14
  Speaker 1: some fashion, whether they're in technology somehow or whether they're
• 1:18
  Speaker 1: at a bank and thinking of leaving actually to kind
• 1:21
  Speaker 1: of you know, get into the market in different ways
• 1:23
  Speaker 1: to do what well. For example, one of the biggest
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  Speaker 1: investors we know in this space is Mike Novograds, right,
• 1:29
  Speaker 1: I mean Mike Novagrads has people he's hired from Millennium,
• 1:32
  Speaker 1: Goldman and Morgan Stanley, right. So you know, while the
• 1:35
  Speaker 1: big banks have been very slow to get in, we've
• 1:37
  Speaker 1: seen talent move to places where they can do more
• 1:40
  Speaker 1: active in the market. Curious, how do they expect this
• 1:43
  Speaker 1: to be cleared? If a lot of the banks are
• 1:46
  Speaker 1: not willing to do that, how do you clear a trade?
• 1:49
  Speaker 1: I am very curious to see what volumes look like
• 1:52
  Speaker 1: on Sunday and Monday. I've been asking everybody what they're expecting.
• 1:55
  Speaker 1: Because Golvin has said they'll be able to do it immediately.
• 1:59
  Speaker 1: All the other banks pretty much have said they're not
• 2:01
  Speaker 1: going to be ready on day one, or they're not
• 2:03
  Speaker 1: going to do it at all. They're still waiting. What's
• 2:05
  Speaker 1: the main obstacle is that the margins that people have
• 2:08
  Speaker 1: to post. The margins are wicked high. How are they
• 2:11
  Speaker 1: they used to be? But after so much volatility the
• 2:15
  Speaker 1: last couple of weeks, CEBO actually raised the requirements. So
• 2:18
  Speaker 1: that means that anybody looking to make a bitcoin trade
• 2:22
  Speaker 1: has to post forty four percent of whatever the trade
• 2:25
  Speaker 1: they're trying to put on the equivalent of that in
• 2:28
  Speaker 1: some kind of hard asset cash correct aside. And and
• 2:32
  Speaker 1: so what does that mean? If the price goes, you know,
• 2:34
  Speaker 1: up rapidly, then the banks have to be worried about it. Right,
• 2:37
  Speaker 1: the price yesterday alone surge. So if this is something
• 2:41
  Speaker 1: that is going to be tradeable, what is going to
• 2:45
  Speaker 1: be the deliverable cash? It's actually cash settled, a cash settled,
• 2:50
  Speaker 1: So really everybody, all they just want to do is
• 2:52
  Speaker 1: they're just trading this to make dollars. They're using this
• 2:55
  Speaker 1: to make money. Well, that's the other question that's coming
• 2:57
  Speaker 1: up here too, right, I mean, because it's cash, that'll
• 3:00
  Speaker 1: the shows that the futures market is pretty much a
• 3:02
  Speaker 1: speculators market, right, and so there's kind of inherent differences
• 3:05
  Speaker 1: between how people trade bitcoin now and how they will
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  Speaker 1: be trading them moving forward. There was a story on
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  Speaker 1: the Bloomberg that cited a statistic that I thought was
• 3:14
  Speaker 1: rather shocking that when thousand investors, which is a relatively
• 3:18
  Speaker 1: small pool in the scheme of the millions of investors
• 3:20
  Speaker 1: out there, only when thousand investors account for of the
• 3:24
  Speaker 1: bitcoin holdings, what potential risks does that concentration offer up. Well,
• 3:30
  Speaker 1: it's definitely a huge concentration risk, and I think it's
• 3:32
  Speaker 1: also another reason people are kind of excited for the
• 3:34
  Speaker 1: futures market. They're hoping that a lot of big institutional
• 3:37
  Speaker 1: investors will start to get into the market because now
• 3:39
  Speaker 1: we know the investors are not necessarily institutions. Pensions are
• 3:43
  Speaker 1: not investing in bitcoin, they're really worried about custody issues.
• 3:47
  Speaker 1: Endowments are not really although people are in talks with
• 3:50
  Speaker 1: endowments of certainly they're not investing in this yet, so
• 3:54
  Speaker 1: it's kind of limited. But it's also a lot of
• 3:56
  Speaker 1: retail investors also, So really it's you know, it'sbody once
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  Speaker 1: told me the average age of a bitcoin investors twenty two.
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  Speaker 1: I don't know how true that is, but it's it's
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  Speaker 1: what I'm trying to do at the younger generation. So okay, right, well,
• 4:11
  Speaker 1: let's hope not. The thing that occurs to me though,
• 4:15
  Speaker 1: is if you have to put up so much margin,
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  Speaker 1: and if the trade moves against you during whatever time train,
• 4:22
  Speaker 1: you know, before it expires, Uh, how are you going
• 4:26
  Speaker 1: to manage the big price swing? So you're gonna then
• 4:29
  Speaker 1: get a call from your broker whoever is executing the trade,
• 4:33
  Speaker 1: saying you better put more money in the account by
• 4:35
  Speaker 1: you know, four o'clock, or we're going to close out
• 4:37
  Speaker 1: your account. Because it can go up and it can
• 4:39
  Speaker 1: go down as much as we've seen what is the
• 4:42
  Speaker 1: fifteen thousand one day, ten thousand another day, You're gonna
• 4:46
  Speaker 1: have to be constantly monitoring your margin. Require That's absolutely true,
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  Speaker 1: and the people are already thinking about that right now.
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  Speaker 1: And um, you know, I wonder too. It means you
• 4:57
  Speaker 1: also have less leverage on the investment, right So I'm
• 4:59
  Speaker 1: wondering if it makes it somehow less attractive. So let's
• 5:02
  Speaker 1: talk about the deliberations that are going on inside the
• 5:05
  Speaker 1: biggest Wall Street banks right now. Goldman Sachs, as Pin
• 5:09
  Speaker 1: was saying, has decided to start clearing bitcoin futures from
• 5:13
  Speaker 1: day one. What's the debate internally here? The debate internally
• 5:17
  Speaker 1: comes from a couple of ways. We talked about the
• 5:19
  Speaker 1: volatility for a while that's definitely a huge concern reputational risk.
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  Speaker 1: I mean, we've seen every bank CEO come out in
• 5:26
  Speaker 1: some fashion saying something the most promised in An example
• 5:29
  Speaker 1: of this is Jamie Diamond who has called it a
• 5:31
  Speaker 1: bubble and a fraud. UM. However, JP Morgan, that doesn't
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  Speaker 1: mean their clients are not asking about it, and they
• 5:37
  Speaker 1: have to and they they are one of the people
• 5:39
  Speaker 1: that have been weighing offering the futures contracts to their clients.
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  Speaker 1: So there's this inherent disconnect between what they have to
• 5:45
  Speaker 1: address to clients and how maybe the banks feel about it.
• 5:48
  Speaker 1: There's also no your customer, customer and undering leandering concerns
• 5:52
  Speaker 1: with with these contracts as well. Is it useful to
• 5:55
  Speaker 1: to think of bitcoin as a commodity or is a currency?
• 5:59
  Speaker 1: That's the big debate, right what what? What is it? Um?
• 6:03
  Speaker 1: You know there there are arguments for it to be both. UM.
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  Speaker 1: I think that generally, walking into the futures market, people
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  Speaker 1: are behaving as if it's a currency. I gotta say,
• 6:13
  Speaker 1: one thing that I'm struck by is that the actual
• 6:15
  Speaker 1: price that you can get on bitcoin is completely different
• 6:18
  Speaker 1: from coin based to other other exchanges. So you have
• 6:22
  Speaker 1: to wonder what the real value is and how are
• 6:25
  Speaker 1: people not going to just simply get scammed? Right, We're
• 6:28
  Speaker 1: definitely wondering kind of what the differentiation is among different
• 6:32
  Speaker 1: exchanges and also not only just bitcoin, but now you
• 6:35
  Speaker 1: have a lot of other options to invest in the
• 6:37
  Speaker 1: cryptocurrency space and how those prices are connected to each other.
• 6:41
  Speaker 1: One of the biggest mysteries in this world, for example,
• 6:44
  Speaker 1: is tether. We had a fantastic story and if you
• 6:46
  Speaker 1: haven't read it yet, I really suggest you guys look
• 6:48
  Speaker 1: at it. By might not licening you know what is
• 6:50
  Speaker 1: underpinning the value of tether. Well, we'll go and we'll
• 6:54
  Speaker 1: explore that at another time. I want to thank you
• 6:56
  Speaker 1: very much for being with us, just as shoes gold shoes. Uh.
• 7:00
  Speaker 1: The Commodity Futures Trading Commission says that bitcoin is a
• 7:05
  Speaker 1: commodity anyway, Thanks very much, Snali boss, much appreciated, and uh,
• 7:10
  Speaker 1: we'll be looking forward to more reports on what happens
• 7:12
  Speaker 1: to bitcoin. I have a feeling Sunday is going to
• 7:14
  Speaker 1: be an important day. Blame Japanese banks for the flat
• 7:36
  Speaker 1: treasury curve. That's according to City Group strategists. Here with
• 7:39
  Speaker 1: us is the CEO of the U S arm of
• 7:41
  Speaker 1: a Japanese bank, to comment on those Japanese flows and
• 7:45
  Speaker 1: what they're doing to US markets. Jerry Rosieri, president and
• 7:47
  Speaker 1: chief executive officer of Missoojo Securities, joins us here in
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  Speaker 1: our eleven three studios. Jerry, thank you so much for
• 7:53
  Speaker 1: joining us. SO is this the case? Is it Japanese
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  Speaker 1: banks that are flooding into longer term US treasure ease
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  Speaker 1: that's keeping the yield curve flat? Well, that has been
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  Speaker 1: the case over many years. UH. You know, foreign foreign
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  Speaker 1: holdings by the Japanese have increased substantially over the last
• 8:13
  Speaker 1: five to seven years. Up over that time period. UM,
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  Speaker 1: I think the bigger movement into US treasuries and and
• 8:24
  Speaker 1: similar risk risk free assets was in two thousand sixteen
• 8:29
  Speaker 1: two thousand seventeen. It's been less of a fixed income story. UH.
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  Speaker 1: And in fact, we've seen evidence that the banks and UH,
• 8:38
  Speaker 1: particularly the regional banks in Japan will be pulling back
• 8:41
  Speaker 1: a little bit, much of that dictated by the regulator.
• 8:47
  Speaker 1: To be really clear, they've pulled back a little bit
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  Speaker 1: on their investments in US treasuries, I would say, not
• 8:54
  Speaker 1: not pulling back in terms of UH selling assets, but
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  Speaker 1: the pace of buying, I would say, has has lessened.
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  Speaker 1: So this is not exactly the dynamic that well, I think,
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  Speaker 1: I think. You know, whenever you see moves, particularly in
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  Speaker 1: the U S treasury market, you'll curve flattening, you'll curve steeping. Uh.
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  Speaker 1: It's it's always common to to blame uh, non US
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  Speaker 1: investors oftentimes Asia. Uh, you know, and uh and uh.
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  Speaker 1: Certainly the Japanese are large holders at last China of
• 9:27
  Speaker 1: US treasuries. I just want to ask a little bit
• 9:29
  Speaker 1: and maybe get an update. I know in twenty fifteen,
• 9:32
  Speaker 1: Missouho paid what about three billion dollars for the loan
• 9:35
  Speaker 1: book of Royal Bank of Scotland. Right about that was
• 9:38
  Speaker 1: a thirty six and a half billion dollar loan book
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  Speaker 1: for North America. Can you give us an update on
• 9:43
  Speaker 1: that and whether if you were to be able to
• 9:46
  Speaker 1: buy that today, what would that be worth? Well, they
• 9:50
  Speaker 1: were basically a loan commitments, So the reason we pursued
• 9:55
  Speaker 1: that transaction was to elevate our client penetration here in
• 10:02
  Speaker 1: the America's So the book itself was interesting, but more importantly,
• 10:07
  Speaker 1: we are looking to establish long term lending relationships in
• 10:11
  Speaker 1: the US and that's what we've actually done. We've uh,
• 10:14
  Speaker 1: we've more than uh I think for top tier lending
• 10:17
  Speaker 1: relationships of increased ten times over the last two and
• 10:21
  Speaker 1: a half years. And you're hiring human beings, right, Yeah.
• 10:24
  Speaker 1: So with the the the asset purchase in and of
• 10:26
  Speaker 1: itself was interesting, but we actually wouldn't have pursued that
• 10:30
  Speaker 1: unless we were able to bring a number of people
• 10:33
  Speaker 1: over from the institution. So we took on about a
• 10:35
  Speaker 1: hundred and twenty people from RBS along with those assets.
• 10:40
  Speaker 1: Just with respect to MISSOO Securities, how much has it
• 10:44
  Speaker 1: expanded and how much do you plan to continue expanding
• 10:47
  Speaker 1: from a head count perspective? Sure? So so in the
• 10:49
  Speaker 1: US I joined the company two thousand, ten UM and
• 10:52
  Speaker 1: we securities, we were maybe a little over three hundred people.
• 10:56
  Speaker 1: Uh now we're hentering heading towards eight hundred UM. It's
• 11:01
  Speaker 1: been a h I say, a measured expansion. We've tried
• 11:05
  Speaker 1: to uh move at a pace that sort of suits
• 11:09
  Speaker 1: our organizations tolerants. Uh. And but having said that, uh,
• 11:13
  Speaker 1: it's been very targeted. So it's been capital markets, so
• 11:17
  Speaker 1: debt capital markets, it's been equity capital markets. We've expended
• 11:19
  Speaker 1: our high yield business over the last couple of years,
• 11:22
  Speaker 1: also on the sales and trading front as well, growing
• 11:24
  Speaker 1: out our equity platform as well as diversifying our fixed
• 11:27
  Speaker 1: income platform. Any thoughts are maybe comparisons between now and
• 11:32
  Speaker 1: the and the time of Lehman Brothers. Whether the banks
• 11:35
  Speaker 1: and the brokerage firms have they changed at least the
• 11:38
  Speaker 1: way that they perceived their balance sheets? I mean, does
• 11:41
  Speaker 1: that inform the day to day operations of of the organization?
• 11:44
  Speaker 1: I mean things are you know, I'm former Leman Brothers.
• 11:47
  Speaker 1: I was there for twenty three years, so I know
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  Speaker 1: that situation well. But uh yeah, the environment is a
• 11:52
  Speaker 1: lot different. I mean there's less leverage, uh you know,
• 11:55
  Speaker 1: the regulatory environments different. Um but you know, I would
• 12:01
  Speaker 1: say that uh you know, the the industries have been
• 12:03
  Speaker 1: expanding since two thousand and eight. Uh so employments up
• 12:08
  Speaker 1: in business actually is pretty decent. Where is the biggest
• 12:11
  Speaker 1: opportunity for MISSOO host securities in US markets? Is it
• 12:16
  Speaker 1: highel bond trading? Is it underwriting investment grade bonds? So
• 12:19
  Speaker 1: we're we're already top ten in corporate investment grade debt
• 12:22
  Speaker 1: in the U S which is trading in terms of
• 12:25
  Speaker 1: origination UH. In terms of trading activities, we've been aggressively
• 12:30
  Speaker 1: expanding our equity platform UH and cash businesses. We're working
• 12:36
  Speaker 1: on both derivatives and ffects for fixed income UH and
• 12:39
  Speaker 1: equities UM. In the fixed income side, we've been expanding
• 12:45
  Speaker 1: our security securitized products area as well as in our
• 12:48
  Speaker 1: high yield trading area. And just real quick, are you
• 12:50
  Speaker 1: using balance sheet? Yes? We do? And is that increasing?
• 12:55
  Speaker 1: Our balance sheet has been relatively stable. UM, it's but
• 13:00
  Speaker 1: it's not a constraint on our business. I would say,
• 13:03
  Speaker 1: thanks very much for coming in and spending time with us.
• 13:05
  Speaker 1: Much appreciate it. Very interesting UH. Jerry Rozsieri is the
• 13:09
  Speaker 1: president and the chief executive of Missouho Security. Total addressable market?
• 13:34
  Speaker 1: What is it? And why does it matter? Well, we
• 13:37
  Speaker 1: have Bill Smede to help us answer this question. He
• 13:39
  Speaker 1: is the chief executive officer and chief investment officer for
• 13:42
  Speaker 1: smed Capital Management. They're based in Seattle, helping to manage
• 13:46
  Speaker 1: more than two point two billion dollars and you can
• 13:49
  Speaker 1: follow Bill on Twitter at Smede Cap, s m E
• 13:54
  Speaker 1: A d cap alright, smead cap. What is total addressable
• 13:59
  Speaker 1: market t A M. Well, it means how many possible
• 14:04
  Speaker 1: customers or how many possible widgets that you can sell
• 14:10
  Speaker 1: based on the population available and those that have access
• 14:14
  Speaker 1: to what you're doing. And it's become quite a popular
• 14:18
  Speaker 1: thing where you know, we're we're ten years into maybe
• 14:21
  Speaker 1: the best stretch that growth has ever had against value.
• 14:25
  Speaker 1: So when when when valuations aren't very enjoyable to talk about,
• 14:30
  Speaker 1: it's pretty easy for growth people to kind of slip
• 14:32
  Speaker 1: into talking about possibilities and potential and uh, total addressable
• 14:38
  Speaker 1: market is a way to to think about potential. Well,
• 14:41
  Speaker 1: I could guess, I could say potentially at one point
• 14:43
  Speaker 1: I was going to play for the NBA, but I
• 14:45
  Speaker 1: knew that wasn't gonna happen, So potential goes out the window.
• 14:48
  Speaker 1: Does this make any sense? Well, you know it doesn't
• 14:54
  Speaker 1: certain circumstances. I think you know. Warren Buffett says, what
• 14:57
  Speaker 1: the wise man does at the beginning of the fool
• 14:59
  Speaker 1: to us at the end. So so let me give
• 15:01
  Speaker 1: you an example. When he bought Coca Cola, he actually
• 15:05
  Speaker 1: paid a much higher price earnings ratio than he normally
• 15:08
  Speaker 1: used to pay. He paid eighteen times earnings. But he
• 15:11
  Speaker 1: could see that Coke was in the early stages of
• 15:15
  Speaker 1: beginning to sell soda pop all over the world rather
• 15:19
  Speaker 1: than just the you know, the most sophisticated parts of
• 15:22
  Speaker 1: the world. And so you know, by the time he
• 15:25
  Speaker 1: got done, we were on a one week mission trip
• 15:28
  Speaker 1: with our family and they were drinking phantom on a
• 15:30
  Speaker 1: relatively deserted island off the coast to Honduras. And that
• 15:34
  Speaker 1: was about ten years ago, right, So they went from
• 15:37
  Speaker 1: from mainly mainly dominating the highly populated parts of the
• 15:41
  Speaker 1: western world and they went all the way around the world.
• 15:44
  Speaker 1: So that market got addressed by Coca Cola. So it's
• 15:47
  Speaker 1: a good time to think about it at the beginning,
• 15:50
  Speaker 1: but but it's it's not good at all when you
• 15:53
  Speaker 1: get in the late stages of a lot of financial
• 15:55
  Speaker 1: euphoria like we are now to think about that because
• 15:58
  Speaker 1: it usually breeds trouble. Bill, What could be in your
• 16:03
  Speaker 1: mind the next Coca Cola, if not on that scale,
• 16:05
  Speaker 1: but has the potential to really take off. I think
• 16:08
  Speaker 1: you did home in on some pharmaceutical companies. Correct. Well, yeah,
• 16:13
  Speaker 1: the there's an enormous population, both in the States and
• 16:17
  Speaker 1: Europe of of baby boomers and osteo processes is a
• 16:22
  Speaker 1: is a malady that that has a tendency to hit
• 16:25
  Speaker 1: as you get older, and it's especially prevalent in women.
• 16:29
  Speaker 1: And so you know, m Gen makes the most successful
• 16:34
  Speaker 1: uh drug for treating osteo process Prola, and then as
• 16:38
  Speaker 1: a bit of good fortune, they found out in testing
• 16:41
  Speaker 1: thirty people that it also caused tumors that were close
• 16:45
  Speaker 1: to the bone to stop growing, and they sell that
• 16:48
  Speaker 1: as Xchieva. And so you know, even though that's a
• 16:51
  Speaker 1: blockbuster already prolia Is, it's just got a lot of
• 16:54
  Speaker 1: population in its way, and and that's something that the
• 16:58
  Speaker 1: company has to look forward to. Another case, in Mgen's case,
• 17:02
  Speaker 1: they're introducing Rapata, and the health insurance industry has been
• 17:06
  Speaker 1: slow to take it on given all the tweets and
• 17:08
  Speaker 1: grief associated with pharmaceutical prices. So uh it's been a
• 17:14
  Speaker 1: slow to be adopted. But if you combine that with staatens,
• 17:18
  Speaker 1: people with terrible high bad cholesterol dropped down to about
• 17:22
  Speaker 1: seventy bad cholesterol. In effect, we could have a nation
• 17:25
  Speaker 1: of marathon runners running around people that were formerly had
• 17:29
  Speaker 1: the blood of of someone with severe heart disease potential
• 17:33
  Speaker 1: and and and very likely at some point time to
• 17:36
  Speaker 1: get hit by heart attack or stroke to a bunch
• 17:38
  Speaker 1: of marathon runners around running around because of the way
• 17:41
  Speaker 1: that this attacks bad cholesterol in the bloodstream. Well, Bill,
• 17:44
  Speaker 1: eventually those marathon runners might have to head home. Can
• 17:48
  Speaker 1: you talk about the home building market and specifically Lenar Well, Yeah,
• 17:53
  Speaker 1: Leonard now owns more build uble lots than anybody because
• 17:57
  Speaker 1: they're they're merging with call Atlantic and UH as you
• 18:02
  Speaker 1: go forward, the three things that are gonna be tough
• 18:04
  Speaker 1: to deal with to build all the homes we're gonna need,
• 18:06
  Speaker 1: and the total addressable market is that some large percentage
• 18:11
  Speaker 1: I think Zillo is on the cutting edge of of
• 18:13
  Speaker 1: measuring this, some very large percentage of the millennials that
• 18:17
  Speaker 1: our ages twenty two tote are going to end up
• 18:20
  Speaker 1: buying a home, and many of those homes need to
• 18:22
  Speaker 1: be built because the people at the other end aren't
• 18:25
  Speaker 1: moving out of their homes as fast as people are
• 18:27
  Speaker 1: moving in. So so UH, having a lot of buildable
• 18:31
  Speaker 1: lots is one of the ingredients that would help you
• 18:34
  Speaker 1: meet that addressable market. And then of course the labor
• 18:37
  Speaker 1: is going to be a big challenge. Right. We think
• 18:40
  Speaker 1: that you might see a very generous green card set
• 18:44
  Speaker 1: up for people in carpentry, plumbing, electricians, etcetera. Uh, bricklayers, roofers,
• 18:50
  Speaker 1: you name it, and and uh and then the materials
• 18:54
  Speaker 1: and we could see some inflation in the materials as well.
• 18:57
  Speaker 1: But uh, that's right, those are in front of us
• 19:00
  Speaker 1: because even today, the home building that's being done today
• 19:04
  Speaker 1: is way better than five years ago. But it wouldn't
• 19:07
  Speaker 1: It would have been a bad number in nineteen sixty,
• 19:10
  Speaker 1: seventy eighty five or ninety five. Rights, it's we're as
• 19:14
  Speaker 1: still at recession low levels of home building compared to
• 19:19
  Speaker 1: past decades. Okay, but Bill, when does the stock get
• 19:22
  Speaker 1: too expensive? I mean you're looking at Lenar right now.
• 19:25
  Speaker 1: The stock is up within so far this year and
• 19:29
  Speaker 1: it sports a pe of over sixteen for a home builder, right, So, so, uh,
• 19:36
  Speaker 1: what you've got here is a historically cyclical business in
• 19:40
  Speaker 1: a secular surge, and we think we're we've finished the
• 19:44
  Speaker 1: third inning is where we think we are now what
• 19:47
  Speaker 1: that means PIM and for low turnover portfolio managers like
• 19:51
  Speaker 1: the US, this is one of the challenge of being
• 19:53
  Speaker 1: our investors is we want to sit through whatever correction
• 19:57
  Speaker 1: comes next to get to where this is going to
• 20:00
  Speaker 1: be in five or six years. So you're right. This industry,
• 20:03
  Speaker 1: the earnings are growing twenty percent a year on about
• 20:07
  Speaker 1: ten revenue growth. Right, So there's people out here in
• 20:12
  Speaker 1: Seattle excited about the company whose revenue is growing and
• 20:16
  Speaker 1: whose profits don't go at all. And this is an
• 20:19
  Speaker 1: industry whose revenue is growing ten percent and the profits
• 20:22
  Speaker 1: are growing twenty So you're absolutely right. They've had a
• 20:25
  Speaker 1: good run. They could have a correction at any time. Fact,
• 20:27
  Speaker 1: this market could have a correction at any time. But
• 20:30
  Speaker 1: for the long duration investor that wants to catch this
• 20:32
  Speaker 1: next five to ten years aging of the Moneial group,
• 20:36
  Speaker 1: it's a nice addressable market to consider. Build. Another way
• 20:39
  Speaker 1: to hedge against the downturn is holding more cash? Are
• 20:43
  Speaker 1: you doing that? No? We we We kind of made
• 20:47
  Speaker 1: a decision ten year our fund are our fund will
• 20:50
  Speaker 1: be ten years old, our strategy ten years old right
• 20:53
  Speaker 1: after the first of the year, and and we just
• 20:56
  Speaker 1: made a choice. At the beginning. We assume that most
• 21:00
  Speaker 1: of the people that would invest with us, we would
• 21:02
  Speaker 1: be a part of their total portfolio. Someone else is
• 21:05
  Speaker 1: likely doing the asset allocation, and so we don't really
• 21:09
  Speaker 1: feel like we have any special competency to time the market.
• 21:13
  Speaker 1: In fact, you know what we got started at the
• 21:17
  Speaker 1: beginning of Oh wait, the next fourteen months was the
• 21:20
  Speaker 1: worst market decline in eighty years, So I don't think
• 21:23
  Speaker 1: people should be coming to us for market timing. Bill Smide,
• 21:26
  Speaker 1: thank you so much for joining us. Bill Smeede, Chief
• 21:28
  Speaker 1: executive Officer and chief investment Officer. It's Smeed a capital
• 21:32
  Speaker 1: management overseeing two point two billion dollars in Seattle. What
• 21:56
  Speaker 1: would you like to do for a job? Perhaps a
• 21:59
  Speaker 1: game to hester you don't need any experience for that,
• 22:02
  Speaker 1: or a heavy equipment operator. We hope you have experience
• 22:05
  Speaker 1: for that. Here to help us understand the job market
• 22:07
  Speaker 1: right now is the chief executive of Zip Recruiter. Ian
• 22:11
  Speaker 1: Siegel is also the founder. Great to have you with us,
• 22:13
  Speaker 1: ce In, Thanks for spending time. You know, I was
• 22:16
  Speaker 1: looking at your side, looking at a trending job titles,
• 22:19
  Speaker 1: trending job types, and I'm seeing that one of them
• 22:24
  Speaker 1: is a boat captain. Where does this information come from? Well,
• 22:31
  Speaker 1: we a Zipp Recruiter, are probably the single largest starting
• 22:37
  Speaker 1: point for small and mid sized businesses that do job
• 22:41
  Speaker 1: posting in America, and so we end up getting all
• 22:46
  Speaker 1: the interesting jobs on our site. So if you, for example,
• 22:51
  Speaker 1: run a small ship business, or let's say you are
• 22:54
  Speaker 1: in a hurricane struck area and hurricanes have knocked out
• 22:59
  Speaker 1: your business that will last few months, then it seems
• 23:02
  Speaker 1: likely that you're going to go on a hiring binge
• 23:05
  Speaker 1: right now to restock the captains for your ships. So
• 23:09
  Speaker 1: I is it fair to say that zip recruiter is
• 23:12
  Speaker 1: sort of a byproduct or caters to the gig economy. Well, certainly,
• 23:18
  Speaker 1: the gig economy makes up a lot of the jobs
• 23:21
  Speaker 1: that you will find on our site, and that's because
• 23:23
  Speaker 1: the gig economy increasingly represents a large percentage of opportunities
• 23:28
  Speaker 1: for people to work in America. So, whether it's Uber
• 23:31
  Speaker 1: or list or delivery Hero or a multitude of on
• 23:34
  Speaker 1: demand services, the gig economy has become a material option
• 23:39
  Speaker 1: for a lot of job diggers, not just for full
• 23:41
  Speaker 1: time work, but also as a second job to bolster
• 23:46
  Speaker 1: their income. So in one thing that a lot of
• 23:50
  Speaker 1: economists sort of decry is that there isn't a tremendous
• 23:53
  Speaker 1: amount of visibility into the gig economy. And I'm wondering,
• 23:57
  Speaker 1: from your perspective, you probably have one of the best
• 24:00
  Speaker 1: views into it. Frankly, and I'm wondering what kinds of
• 24:03
  Speaker 1: wage increases are you are you seeing and and has
• 24:06
  Speaker 1: that been a positive trend that you've been noticing? Well,
• 24:11
  Speaker 1: I mean, if you if you look at the health
• 24:14
  Speaker 1: of the global job market and want to see global,
• 24:17
  Speaker 1: I mean in the United States. Uh, you know, you're
• 24:19
  Speaker 1: at four point one percent unemployment, which is a seventeen
• 24:23
  Speaker 1: year low. You've had ninety two months of the economy
• 24:26
  Speaker 1: adding jobs in a row, and so you're really looking
• 24:29
  Speaker 1: at what some would call peak employment. And when you're
• 24:32
  Speaker 1: in that kind of environment, what happens is there is
• 24:35
  Speaker 1: a dearth of talent searching for work, and so employers
• 24:38
  Speaker 1: are forced to do things like raise wages to induce
• 24:40
  Speaker 1: people to leave jobs they currently have and come to
• 24:43
  Speaker 1: the those employers opportunities. So the gig economy um isn't
• 24:48
  Speaker 1: really benefiting from that wage increase. The gig economy is
• 24:52
  Speaker 1: more like a foundation upon which if you want to
• 24:55
  Speaker 1: work today, there is an opportunity out there for you
• 24:57
  Speaker 1: to go get. But if you are looking for are
• 25:00
  Speaker 1: more full time work and a more traditional role. Right
• 25:04
  Speaker 1: now is a great time, probably one of the greatest
• 25:06
  Speaker 1: times in our lifetime to be a job seeker. So
• 25:09
  Speaker 1: are you saying that there's sort of a divergence here
• 25:12
  Speaker 1: with sort of the standard jobs being much more sort
• 25:16
  Speaker 1: of competitive and higher paying and paying even higher wages,
• 25:20
  Speaker 1: whereas in the gig economy you're not seeing those pay
• 25:22
  Speaker 1: raises exactly. And and part of why you're seeing people
• 25:29
  Speaker 1: uh be more patient in their job search is because
• 25:33
  Speaker 1: the employees who are working in a gig economy are
• 25:36
  Speaker 1: using it as a secondary source of income or is
• 25:38
  Speaker 1: a bridging income between opportunities as they look for work
• 25:41
  Speaker 1: that they would consider more meaningful. Well, Ian, when I
• 25:44
  Speaker 1: asked you about being a boat captain, I thought you
• 25:46
  Speaker 1: were going to say that you've got an algorithm or
• 25:48
  Speaker 1: a way to aggregate all of the information that comes
• 25:52
  Speaker 1: to your site and to your specific company. I'm wondering, then,
• 25:59
  Speaker 1: how do you automate the process of matching the right
• 26:03
  Speaker 1: person with the right job or is that left up
• 26:07
  Speaker 1: to the company that's looking for the worker. Oh no, no, no, no,
• 26:12
  Speaker 1: we are not just at the bleeding edge. We're sorry.
• 26:16
  Speaker 1: We're not the cutting edge of technology. We're at the
• 26:18
  Speaker 1: bleeding edge right now. There is technology that has evolved
• 26:22
  Speaker 1: over the last two years, often referred to as machine
• 26:25
  Speaker 1: learning or sometimes called deep learning. It's an approach to
• 26:29
  Speaker 1: building algorithms that do things that humans will never be
• 26:33
  Speaker 1: able to match. You give us an example behind absolutely
• 26:38
  Speaker 1: so uh when you use one of these algorithms instead
• 26:42
  Speaker 1: of doing a traditional match the way you would rationally
• 26:46
  Speaker 1: do it, which is I, for example, have been a
• 26:48
  Speaker 1: product manager in my career. Old school algorithms would say
• 26:52
  Speaker 1: I'm going to find all the jobs that have product
• 26:54
  Speaker 1: manager in the job title, and I will just show
• 26:57
  Speaker 1: you those jobs. Today, the technolog is so good, it says,
• 27:01
  Speaker 1: I'm going to look at everyone who's ever searched for
• 27:03
  Speaker 1: product manager in there in the history of this company,
• 27:06
  Speaker 1: and then see all the other job titles that they've
• 27:08
  Speaker 1: ever looked for, and as a result of that, they're
• 27:11
  Speaker 1: able to cluster opportunities that might be interesting to you
• 27:14
  Speaker 1: that a traditional search engine would not be able to surface.
• 27:17
  Speaker 1: And that's really the tip of the iceberg, because with
• 27:20
  Speaker 1: these algorithms we can start to use signal data from
• 27:23
  Speaker 1: the job seekers themselves, so we know, for example, if
• 27:26
  Speaker 1: ten job seekers go look at a specific job and
• 27:29
  Speaker 1: none of them apply, there is something unappealing about that job,
• 27:32
  Speaker 1: and the algorithm is smart enough to stop showing it.
• 27:36
  Speaker 1: Ian How does zip recruiter make money? So zip Recruiter
• 27:41
  Speaker 1: was built with a very simple premise is that a
• 27:44
  Speaker 1: lot of small businesses don't have the time to figure
• 27:46
  Speaker 1: out which job board they should be posting too. So
• 27:49
  Speaker 1: zip recruiter enables you, if you are a hiring manager,
• 27:52
  Speaker 1: supposed to over a hundred job sites with a single click,
• 27:56
  Speaker 1: and then all the candidates from all those different sites
• 27:58
  Speaker 1: come into one easy to review list. And in as
• 28:02
  Speaker 1: far as wages go, can you track individual wage offers
• 28:08
  Speaker 1: or salary requirements on the site? Yeah, so we get
• 28:13
  Speaker 1: you know, high hundreds of thousands of jobs directly posted
• 28:17
  Speaker 1: through zip recruiter every month, and one of the pieces
• 28:21
  Speaker 1: of information we capture about every one of those opportunities
• 28:24
  Speaker 1: is what salary is being offered. We use a BLS
• 28:27
  Speaker 1: based definition of low skilled, mid skilled, and high skilled
• 28:31
  Speaker 1: so we can watch trends that occur in the hiring market.
• 28:34
  Speaker 1: And just to make it simple, across all levels, all
• 28:38
  Speaker 1: skill levels, in the past year, there has been wage increase,
• 28:42
  Speaker 1: So it is, as I said, a great time to
• 28:45
  Speaker 1: be a job seeker. So I just not to harp
• 28:48
  Speaker 1: on this, but who pays you. Which is it? Is
• 28:50
  Speaker 1: it the job seeker or is it the potential employer?
• 28:55
  Speaker 1: It's the employers who pay us in order to do
• 28:58
  Speaker 1: that job distribution and collect Canada, it's we never charged
• 29:01
  Speaker 1: job seekers for anything. Okay, what what is next for
• 29:05
  Speaker 1: ZIP recruiter? Is there a way to tell whether it's
• 29:08
  Speaker 1: been a successful match and then you use that same
• 29:11
  Speaker 1: algorithm or an unsuccessful match brings some kind of remedy
• 29:16
  Speaker 1: or correction. I mean it's been Honestly, it's the most
• 29:20
  Speaker 1: exciting time it's ever been to be working in the
• 29:24
  Speaker 1: job category. The technology that has evolved, uh is so
• 29:29
  Speaker 1: advanced it's starting to feel like magic. So historically, from
• 29:33
  Speaker 1: the time you posted a job to the time you
• 29:35
  Speaker 1: sell that job, it would take you between forty five
• 29:38
  Speaker 1: and sixty days. And now literally almost instantly after you
• 29:42
  Speaker 1: post a job, we're able to go cherry pick the
• 29:45
  Speaker 1: very best candidates that are in market and notified and
• 29:48
  Speaker 1: instantly of just that job going live, which is inducing
• 29:52
  Speaker 1: unbelievable high quality candidates literally within an hour of a
• 29:56
  Speaker 1: job being posted. The entire recruiting process moving towards an
• 30:00
  Speaker 1: almost real time experience, and it's going to be a
• 30:03
  Speaker 1: real disruption to the way people hire. Ian Segel, thank
• 30:06
  Speaker 1: you so much for joining us. Ian Siegel, co founder
• 30:08
  Speaker 1: and chief executive officer of Zip Recruiter. Thanks for listening
• 30:16
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 30:19
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 30:22
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 30:26
  Speaker 1: at pim Fox. I'm on Twitter at Lisa abramowits one
• 30:30
  Speaker 1: before the podcast. You can always catch us worldwide on
• 30:33
  Speaker 1: Bloomberg Radio.