TD Ameritrade Holding Corporation (NYSE:AMTD)
UBS Global Financial Services Conference Call
May 09, 2012 09:20 am ET
Fred Tomczyk - President & CEO
Alex Kramm - UBS
Alex Kramm - UBS
All right, good morning. Alright, continuing here, or actually starting up with the first (inaudible), we are going have present here. I guess actually the only one in this conference and I think the first time in my two years here that Ameritrade is here, but telling us more about challenges in the retail environment, but also the growth opportunities longer term in the US retail and institutional market is TD Ameritrade and Fred Tomczyk.
Thanks, Alex, and good morning, everyone. I just had to shut off my iPhone there. I'm going to walk through the deck here that you have. I won't go through each page, but I'll just talk briefly to the essence of what's in here and then I will take questions. But the deck you're going to see is laid out about why you should consider investing in TD Ameritrade and I will try to explain the essence of our strategy, how we've managed through the environment. We've executed well against that strategy in what we are trying to do as we head forward. And as Alex said you know it's all in the face of some pretty stiff macro headwinds here with lots of articles in the last couple of days about the retail investor, but also interest rates. But through that environment we have been able to gather assets now. We are going into our fourth year of double-digit asset gathering which I don't think you will find anybody else in the brokerage or wealth management space growing at those rates.
It's our Safe Harbor statement, but you know really our vision is to be the better investment firm for today's investor and very much have a continuous improvement culture that's were the word better comes from that we're constantly trying to get better as an organization, leverage technology and change the way we do things. And about today's investor is all about making sure that we are relevant to the investor today and you know I have seen many business models in the wealth management and in the banking business and insurance business that design a business model and get stuck in that model and the market changes and their customer changes and they refuse to – they just have trouble adapting. So the organization is quite adaptable.
There is six things you ought to consider. When you look at TD Ameritrade, number one is we do run a unique and differentiated business model. I will talk about that for a few minutes. We are the leader in the retail trading, clearly the leader in option trading, retail option trading in what you'd call the active trader part market or people that are more actively engaged in the market on a regular basis trading day in and day out.
We would also say you know as I said earlier we have been gathering assets at 10% to 12% for 3.5 years now and we are going into our fourth year that we feel you know we are definitely shooting to be four years in a row and in the midst of the kind of environment we have had in the last 3.5 years, that's pretty darn good and I don't think you will see anyone else gathering assets at the rate that we are.
We have a unique relationship with TD and for those of either invested in TD Ameritrade or considering an investment I think it's really important you understand that because that allows us to run a really unique business model that generates a lot of free cash flow. Essentially our earnings are plus or minus 5% or 10% but you know basically all free cash flow for deployment either through acquisition and we have been an aggressive acquirer through history and a good acquirer, a good consolidator of the industry, but we have also been disciplined and we have also started to embark on a more robust return of capital strategy and I will talk about that.
It may not seem like it's a long way away, but we are well positioned for rising interest rates. I don't think you will find many stocks that have as much upside as TD Ameritrade does in a rising rate environment over a period of time. Others may have more upside in the first year, but we would say that we have more upside than anyone on a relative basis over a period of time because of the way we are structured and what is the strategy we run. And we are good stores of shareholder capital and I will talk about that.
So you know really when you look at us, we pretty much our strategy is all set for line up as best as we can with what we see as those secular trends in the market that are long and quite strong and that's really how we line ourselves up to drive strong organic growth. Secondly, we do run a business model that's different than our competitors and others in the brokerage space and because of that relationship with TD drives a lot of free cash flow and then we are good stores of shareholder capital and I think when you put those three together that should drive superior growth and superior returns over the long haul.
The business model you know basically we have a client-centric model and we are true, probably the most committed to a multi-channel approach to the market. As you can see here we have six different distribution channels, all are designed at different parts of the markets for different reasons, but all are incented to just do what's right for the client and that means referring to another channel, then we will also do that. But it's all designed around gathering assets and selling certain products and services in each of those channels that we want sold or serviced. We use an open product, open architecture and you can see here all the various products and services and we would argue that you know a lot of people will say well you got to annuitize assets, we are annuitizing assets at a very good clip, but we are not doing it as an asset manager, much rather we look at the world as keeping it open architecture, but we will be a wrapper or a packager of products of best-in-class asset management products and that way we believe we can capture the bulk, most of the spread between retail and institutional money management without getting into having to be an asset manager which I would say if you're an active manager, it is a difficult market and if you're an indexer the industry is quite consolidated already.
And on the secular trends you know whether it's the internet growth and mobile and mobile is here to stay and growing quite rapidly. The growth in active traders or self-directed investors particularly with younger people and the overall you know baby boomers going through and getting closer to retirement, we lineup well be that and there is no question despite what you know some wirehouses and brokers may say, but there is a clear and pronounced trend over a longer of time for advisers to move into independent models whether that's an independent broker dealer or an independent registered investment advisor.
And that's clearly one of our focuses. So again a unique and very differentiated business model that is well aligned with the secular trends. You can see here what our pre-tax margin and what our return on client assets looks like and when you see the return on client asset numbers unlike a lot of other people that show you that number as a revenue number, that is a net number. That's not a gross number, that's a net.
And we can run this model and you can see through this crisis where a lot of people's earnings are down substantially in financial services, we have been able to keep our earnings relatively flat through strong growth and a different cash management strategy which I'll talk about later. But because of that business model what TD allows us to run a business model has low capital intensity, a relatively high return on equity, strong cash and capital generation and then basically it allows us to earn superior margins combined with pretty much our continuous focus on efficiencies and processes. On the trading side, we have leadership here. You can see the trends in retail trades per day. I won't go through all the points here but we do run a three-tiered trading strategy platform.
So we have a normal site for the average investor; one in between called Trade Architect for the people that are starting to get more engaged and more active; and then thinkorswim, which is the premiere package for professional, semi-professional traders, and in particular people that want to trade options and futures. It's a very powerful platform and it's been rated the best platform in the market for options five years in a row.
So it's a very good platform for that. And we like options. They've had very good growth in retail option trading. And one of the beauties of options is they expire, which means your trading patterns tend to be more resilient because you have to continue to place that trade. You see on the asset gathering side here, the path, if you went back to 2007 we were at about $12 billion of net new assets.
So we've been growing here at double-digit rates for 3.5 years in a row. This is our fourth year. We have a very strong sales and service culture. Just about every channel we have has responsibilities for servicing, but also upselling and selling; so very strong there and so we've got very good momentum, both retail and institutional. And we just launched our new ad campaign, which is working well for us.
Our new accounts in the last quarter were the best quarter we've had since March of 2010. We've had very strong growth in breakaway brokers. We're up 11% year-over-year so far this year. And our technology platform and our advisor business, which is called (inaudible), has been rated the best technology platform for advisors in the market by Morningstar. While this is the part I emphasized earlier to make sure people understand is the unique relationship with TD.
So we basically, all of our client cash and the brokerage business, yes, there's trading, yes, there's asset gathering and 12b-1s, et cetera and wrap-fees, but you make a lot of your money on client cash. And that's why our industry has faced a lot of headwinds here because when interest rates have gone actually down to near zero and the yield curve has been dampening down with five-year treasuries now under 80 basis points, that's been a significant headwind to fight through.
But just about all of our client cash actually, except [forward sweep], we say on our own balance sheet, which is the low $10 billion. The rest of it is largely swapped through TD Bank. About $5 billion of that goes into money market funds, which we pay them 6 basis points into the asset management. And then, we basically take the rest of the fee. In this market, that's not much. And then, the rest of it basically goes into bank deposit account at TD.
We've basically put that on a synthetic bond ladder that works off a LIBOR swap curve. And so every month we roll it. So you can think about it as a five-year bond ladder that works off a swap curve. We pay them 25 basis points for their capital and cost, and then we basically pay the FDIC insurance. And so, when you net that all out, it allows us to have a superior yield on our client cash.
And we can pay the same or better rates than a money market fund can in just about any market and still earn superior returns as long as the yield curve has inclined to it. So this also protects us in down markets like this. But it allows us -- that enables us because we have roughly $58 billion sitting in those deposits that we're earning about 140 basis points right now. It has significant upside.
If I remind you, in 2008 our net interest margins were 450 basis points. Today, they're 170, if you could take that all in. So we're very well positioned for rising rates. You can see that on here. It's a point where we are almost $80 billion of interest sensitive assets. If you include money market funds and interest sensitive assets which we do, you can see the impact to earnings per share assuming a parallel shift to the yield curve and a rise in interest rates of 100 basis points.
And this is an important point to understand. In year one it's $0.28, but in year two that grows to $0.39, and in year three that grows to $0.50 as the bond ladder walls into higher yielding markets. And so, that is one difference with us that we have that continuous improvement basically for about a five-year period in a rising rate environment. So we're very well positioned not just for the short-term pop but also for the long-term rise.
And we have substantial earnings power in a more normal interest rate environment. A point I like to make here is just when you look at this, you can see basically that while we've had significant net interest margin compression, you can see we've gone from, in the December of '09, from 187. It was much higher back in 2008, and it was north of 300. And you look at March of 2012, you can see we've had substantial compression here.
You can see the fed funds. You can also see the five-year swap rates, which have dropped from 265 to 117. These are averages for the quarter. But we've been able to grow the revenue at double-digit rates on these balances because of our strong organic growth and our shifting of assets out of money market funds and into the deposit account, and extending and taking the duration.
And you can see here if you went from the September quarter of 2010 to the September quarter of 2011, that's a 25% growth rate in these earnings on the deposits. And so far this year it's 8%. And you can see here over the previous year, it was 13% year-to-date growth year-over-year. So despite that compression we've been able to grow through it, largely through the combination of a strong organic growth and the revision in our cash management strategy.
On the stewards of shareholder capital, you can see here, over the last 3.5 years, we've either deployed through the acquisition of thinkorswim or through buybacks and introducing a dividend strategy that we introduced 18 months ago, increased our dividend by 20% this year, that we've returned just in excess of 90% of what we've earned through the benefit of our shareholders. We have received -- we were targeting a single A rating.
We got there with S&P and with Fitch, and we have Moody's reviewing us this summer. That's the third upgrade since 2009. We've been upgraded now six notches since the crisis began. I don't think you'll find another financial company. If you find any company that's had a six notch upgrade in their credit rating in the midst of this environment we've been in for the last three to four years. And we do target 40% to 60% return of capital.
And we do more on opportunity, that's why you see the 90%. It's because we have run that strategy. And on opportunities, such as weakness in our stock price or acquisition opportunity, we get much more aggressive. This April I think we released our metric yesterday. The macro environment, I don't need to tell anybody in this room, is still challenging.
We're very focused on maintaining our strong momentum and organic growth, growing interest sensitive balances and the fee-based balances, and both of those are important. And we have tight strategies on both of those.
The trading side, we continue to introduce new products, services and platforms to make sure that people can trade as much as they wish and know-how to trade in both good markets and bad markets. And we’re very focused on process and expense management. We have a robust lean initiative going on right now that’s been expanded to roughly half of the organization.
And we have a sourcing initiative, we’re going on to try and keep our expenses in check while we handle the kind of organic growth that we’ve been doing and to continue to keep that growth up and handle without increasing expenses.
We were 370 in the quarter, in the second quarter in our expense run rate excluding advertising and we’re going try to manage that to be flat to down for the rest of the fiscal year.
Now if you do the math on that year-over-year that will be flat year-over-year expenses to maybe up 1%. And so that’s really what management is targeting.
We’ve returned 65% of earnings year-to-date and we continue to evaluate every strategic opportunity to try and take advantage of just our balance sheet and our cash position to the benefit of our shareholders.
So with that, I won’t draw this as just a repeat, but basically the company is very focused on driving strong organic growth, we have been doing that now for almost four years. So we drive superior growth with a superior business model that generates lot of free cash flow, and we also are pretty good source of capital and been aggressive either deploying or returning capital and we believe that doing those things overtime will result in superior price earnings multiples and superior stock appreciation.
With that, I’ll start to take questions.
Alex Kramm - UBS
I think we’ve got a mic in the back here, but while that goes around maybe I’ll just, I think you touched on April just very briefly, so maybe if there is anything you want to elaborate on, I mean from a trading perspective it look like you gave an update a month ago, and things have deteriorated just a little bit from there, but we also entered earnings season which is usually a time when people should get a little bit more involved.
On the other hand I think given the backdrop of the markets being down, your assets were I think down less. So it looks like your strong asset inflow still continues; so maybe on those two items, maybe you can flush it out a little bit more what you have seen?
On the asset gathering you are right on. I mean we don’t publish monthly metrics, and so I am not going to start today. But, I would tell you we were happy with our asset gathering in the month of April.
The month of April is particularly the tax payment month and you’ll see some firms that will have negative numbers and so actually we came through that month, it’s always a month you watch closely. We came through that month quite well and are quite happy with it. So the asset gathering side continues to go well.
On the trading side, I think you’ve still got a lot of apathy in the market, and you’ve got this unusual market. The way I describe it when I talk more publicly, typically when people ask me on TV or media, is you should think about our clients in three segments and if you think about the RIA’s, the independent Registered Investment Advisors, they clearly have moved their clients into the market and have taken advantage of the rally and that has not abated.
And so they tend to be bullish right now and they’ve been aggressive. Our client cash as a percentage of client assets in that channel is at a low point for the last five years. So they’ve definitely moved in and have bought into the rally.
If you take a look at the active investors, they are always going to be in market and they can trade in almost any market. But they’re not up year-over-year and are basically flattish. And the reason for that is because we’ve had up until very, very recently, we’ve had low actual intraday volatility but we’ve had very low VIX as well.
And so we’ve got this market where we’ve got a lot of uncertainty that’s driven by headlines in media around the world and at time outside of Europe where there is not much volatility and you can see that in all the exchange volumes, you can see that in our volumes. Our volumes are pretty highly correlated to the New York Stock Exchange and the NASDAQ volumes.
And lastly, if you look at what I would call the more average long-term investor, they are on the sidelines and you can see that also in mutual fund flows that are not and still continue to be out of equities and into balanced funds and bond funds. So there is no question that group is basically on the sidelines and that’s the articles you see whether it’s in the New York Times or USA TODAY. Yeah?
Alex Kramm - UBS
Could you please describe the competitive landscape for asset gathering in the RIA channel and then just with traditional customer assets, what percent of market share you think you’re getting versus your competitors and how that’s changed over the last few quarters?
I don’t have that explicit market share number, that’s a hard number to get because some of the players are not public. But I would suffice it to say of all, we’re actually doing very well on that market. And I would say a couple of things, when I talked to RIA’s, prospective RIA’s or existing RIA’s, we measure CSI net advocate score, and basically, our scores are at very high levels right now. So we get very good self promotion inside the RIA community from our existing advisors are very high on us.
The second thing is we do run a technology, when I talked about Veo. We run open architecture style to that within parameters that if you want to use a CRM system, a lot of our competitors are trying to force you on to a preferred solution that their technology can handle and they can make more efficient for them.
Rerun it, basically no, you can use whatever CRM system you want, but within the certain constraints like this. So they have to pass certain security standards and data format strategies, so that we’re not doing it manually, we’re doing it automatically. And we have a robust API between us and them and that’s how we integrate.
And so we have 65 different vendors that participate in that offer. And so if you talk to an independent broker or an independent RIA, they don’t want to be told what CRM system they want to use, because they have one that they like and it works for them, they want to stay with it.
So that’s worked well. It’s also turned the vendors in advocates on our behalf. So if you really want to see net advocate in action, you can see it inside our RIA channel. So on that channel, we’ve done very well. We’re growing very fast and so there is no question in our mind when we look at it we’re definitely gaining market share. And we’re growing that channel at significant rates above our peers.
Alex Kramm - UBS
I am just going to jump in here, again. I think earlier this year, maybe it’s too soon, but you’ve talked about, I think its part of lean actually too where you are revamping some of your account opening procedures, for example.
And I think there is a couple of other things that maybe you can just remind us what else some of these new initiatives are, but are you seeing any benefit, is that measurable yet in terms of you know not as many people going in the process of signing up and then they are falling away, I mean obviously your account growth was pretty strong in the first quarter, so is that an early sign already or is still too early.
So we actually started with new accounts. So in our industry you drive people to your website and then you try to pull them through and pulling them all away through the open an account and funding account is part of the challenge of anybody that uses e-marketing and online channels that you have to be able to manage that and we manage that all in a funnel where people that come in, how many (inaudible) do we pull through to get a name and address and an email and a phone number and then how many we get through to open the account and then how many we pull through to actually fund the account in each of those four steps.
And so we have lots of opportunities to get better at that and we've known that and we have applied lean methods to each step in that process and you have to do all four steps and so we have done it and we are well on our way in retail new account opening in the call centers, in the brokerage operations area and in the institutional administration and operations area, so all of our big people and processing groups.
When you open up 2500 to 3000 accounts each and every day, getting that right and automating that, that's a lot of accounts everyday. You are basically getting that right is worth a lot but that will drive more of a growth and efficiency. The other three will drive and it has been to the client experience and will drive the efficiencies, no question. All I would say going as well if not better than we expected, but I would say we are not ready to put up numbers to say what those are, to a broad market until we get further along.
A challenge now which I have asked the Chief Operating Officer and the CFO to work on is well now that you are seeing these how do we make sure we capture them and what do we do with them because I run the organizations and this will just dissipate into other things that people want to do unless you have a process and a discipline to prevent that and some of it will come and some of it will probably save or help finance new investments and growth or keep the growth up without increasing expenses and headcount whereas other ones we will basically take to the bottom, but you want to make sure that that comes into the center where senior management can make those decisions to keep the growth up, you don't want it to just happen haphazardly in the organization to everybody’s favorite thing. And so that's the steps we are going through now.
Alex Kramm - UBS
The RIA trend has been a terrific long term trend and a tailwind for not only Ameritrade, but the industry broadly, how much is left there? When you think about what's going on you know the brokers are obviously fighting for bigger and bigger producers. The regional brokers claim they can step in where, below the big broker, so how much is left to the shift to RIA, what are you seeing, can you help us understand that a bit?
I think you've got to look at the RIA. The industry so the way I stand back and say well, there's two trends, there's been a long-term secular trend that you are talking about and I think you have to look our industry essentially has been built as a disrupter of that trend, so that the wirehouses essentially move up market and want to deal with bigger producers and $1 million plus clients and if you work through the math of running a full service broker, a full commission broker, you are definitely and that math will tell you that's what you have to do and you need a different model for the mass affluent market. So let's say that's the sub $1 million client.
You know we might be able to go lower than that and we would define that as probably 750 but other brokerage would might define that as bigger than that, but the reality is that and so that market has been abandoned by that space for the economic reasons and I am not saying that's wrong. I think that is right given the differences between the two business models, so that's where our retail side is very focused and that's a trend that's been going on a long time and it will continue to happen.
The RIA is more upto $500,000 to $750,000 to a $1 million up client and that one we are a disruptor of the producer or the broker and so we've been doing that for a long time, that's really what the RIA channel is all about, that's what the independent broker dealer is all about. I don't think you know I do think the bigger wirehouses are getting better at it because they are getting more targeted, more focused and every once in a while when they need something and they change the grid and the way you get paid, there's going to be activity and when there's that activity we hit hard. So we hit them very hard.
When the crisis hit and the big wirehouse names were in trouble not just and they were cutting back and the advisors didn't know what to do and the companies had their issues, we pushed, everybody else pulled in, we hit, we went after everybody. So I don't see that, but the reality is, is they tend to go from there to an independent broker dealer to the RIA. And so you know it will change and sometimes it's coming out of the big wirehouses and sometime coming out of the independent broker dealers. But most of these people will want to, once they get a decent-sized business, go independent so that they don't have the compliance issues with the big wirehouse, but they also -- because you manage your compliance from the bottom 10% and so a good broker that they don't like that and then when you change the grid they don't like that. And then the other thing that what happens is they look at the world and say, well, what I'm going to do, how do I get value out of what I've built.
And you basically go to the RAA model. You turn it into a fee-based model, and you'll get superior value for it later if you want to sell it and monetize that what you've built over the last 10, 20, 30 years. And so, that trend I don't think will end because basically at the end of the day, the closer you get to retirement, the more you start to think about how am I going to monetize what I've built. Okay?
Alex Kramm - UBS
There's a lot of concern about folks that, one, have built a business for a while and wanted to sell out of it before tax rates go up. Is that maybe something that we might not be thinking about as a potential speed bump over the next year in that regard?
I haven't heard that just yet. I think if there's more, what I hear in the market is roughly increase in the taxation of dividends from 15 to 40 or 39.6. And that's probably a bigger concern for people just from what you do anything different. But I'm not hearing advisors. I hear wanting to sell their business just to get ahead of the tax thing.
At least, I haven't heard that because -- but it tends to be much more driven by how do I make sure I don't get boxed here. Because a lot of these guys will set up businesses with other partners with a model that the partner will buy them out later. And then if you're really successful, then they don't have the capacity to do that and so you wind up in a box. And that's when they start to sell their businesses to someone else. Yes?
Alex Kramm - UBS
What types of upfront guarantees or other economic kinds of variables are you having to discuss in order to attract and retain RIAs and sort of grow your platform versus the alternative? And what is the alternative? What's a typical discussion regarding and RIA to go with TD versus someone else, and who is that competitor?
Well, it depends. I think when you're talking to a breakaway broker, I think the most important thing is to get there first and establish your relationship and have a good sales process. And I think we're pretty good at that.
But if you're going to be compared, you have to keep in mind at all, once the guy has been around, or he or she has been an RIA for a while, if they get any size, they're going to have two custodians, not one, because they just diversify their risk in case something happens they don't like. And they will start to move their flows back and forth at times.
On existing RIAs, we actually don't have to do much. I think just the service and continue relationship. We found that once they get into that zone, they're much more focused on growing their business, and we're much more focused on helping them how they can be more efficient and grow their business, and that's why we call that the consulting side of the -- in the business intelligence.
And so, we do a lot of that and that works well for us. So it just deepens the relationship between the two organizations. On a new breakaway broker -- keep also in mind that any sizeable RIA, you are negotiating what the commission rate and other things are. But we have models that basically price it such that we have to -- we're going to get certain return one way or the other.
So if you want to do certain things that just are not economical for them, then we will look for a custodial fee of some sort. I think what you have to do at times on the front end is we don't -- we never give guarantees. So we're not like a full service broker like who will give you a guarantee on your earnings the next year or two. That's not -- we don't do that and we've never done that.
What we may do is basically and this becomes more prominent in the industry is you may help them with some soft dollars stuff get up through technology and give them some benefits or some waivers on getting themselves up in the first year on certain charges you might apply for certain technologies and things. That’s more where you see the incentives. But it wouldn’t be like re-buying your brokers every year that you might see at a wire house, not every year, sorry, that’s probably an exaggeration, but every once in a while.
Alex Kramm - UBS
We’re running out of time, but maybe just lastly and since nobody has asked about, you talked about, obviously your leverage to interest rate, but can you balance it out as for the room a little bit more in terms of the near term picture and say the long term outlook.
Clearly, when you gave us an update a month ago in terms of how you thought about them, and I know you watch rates very closely everyday, so things have deteriorated a little bit since then.
I don’t think there is a lot of change in your thinking, but maybe just remind us in terms of what this is in terms of your extension strategy or if there are actually some changes that you’re thinking about given what’s happened since a month ago?
First, all of you have to understand, you can’t control interest rates, so while you do watch and it doesn’t mean you can do anything much about it. And we’ve been pretty disciplined, so when we entered this cycle, we would say the same thing today, so trades will go up and down quarter-to-quarter, they tend to average out overtime at roughly at 7% activity rate and they’re going to be within 6.5% activity rate and a 7.5% activity rate. And we take that as just one of the things that happens in this market. We don’t get excited about it. It is what it is and we don’t manage the company around it.
The interest rate environment on extensions; if you’re looking at the institutional book, it’s typically in a two year ladder which is painful right now.
And if you’re talking about the retail side, it’s in a five to seven year ladder and you know, we really don’t -- like in the retail side, we’re pretty disciplined and we’re just going to stay on that ladder and roll if it’s a five year ladder; let’s assume 160 of every month that whatever the rates are and don’t try to bat against interest rates one way or the other, because we know we can’t predict them.
If you look at the institutional side, we do think we could take more duration. We decided to start down that path, but the time to put 40% of that pluck out into the four and five year range and pick up the yield. So we thought we were more comfortable with it.
At the time we started to do that, the spread between two year and five year swap rates was over 100 basis points and so we were willing to make that move, then it dropped to 50, so we stopped. And we didn’t think it was worth locking in money for five years for 50 basis points at the margin.
And so we’ve been pretty consistent all the way through that, we were not managing for short-term earnings, we are managing for building a long term value and keep the asset gathering going. And you just keep building, your balances being disciplined on your extension strategy; don’t be aggressive for the short term. And because of your business model, you could be an aggressive deployer or returner of capital that with you could buy more shares; we’ve done that and basically keep managing for the other side of this environment.
And we started on this path, we certainly didn’t think it was going to -- we thought it was like three years, little did we know it was going to be six to seven years, but I think we’ve had that debate and when you’re saying, we’re going to stay on that strategy; we will tighten up everywhere we can.
And turn over every rock, but we don’t want to do anything that’s sort of we would consider not a prudent thing to do. We’re very much focused on the long term. And as I was meeting with an investor this morning is, he said that the stock will go before (inaudible) and when interest rates rises, so we’re much more about managing that long term value and the stock will look after itself.
Alex Kramm - UBS
Well, the clock is going to start blinking. So we’re going to take it in Louis XVI East; thank you very much for presenting today.
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