WEBVTT - Markets, Shipping, and Lending 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.600 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market movin news. 0:00:48.720 --> 0:00:51.839 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.880 you listen to podcasts, and at Bloomberg dot Com slash podcast. Again, 0:00:55.920 --> 0:00:59.000 it feels like this market is just really has it 0:00:59.080 --> 0:01:01.600 gotten too far over? That's what it feels like to me, 0:01:01.640 --> 0:01:03.240 at least in the short term. But what do I know. 0:01:03.920 --> 0:01:06.120 I've only been doing this since nineteen eighty six. I 0:01:06.200 --> 0:01:08.720 still don't get it. Robert Teetert, he knows what's going on. 0:01:08.800 --> 0:01:10.720 He's a head of investment policy in a strategy group 0:01:10.720 --> 0:01:13.440 at silver Cress Asset Management. Robert, does it feel like 0:01:13.480 --> 0:01:16.039 we're a little ahead of ourselves here based upon what 0:01:16.040 --> 0:01:17.839 we heard from FED Chairman J Powell last week? 0:01:18.080 --> 0:01:18.440 It does. 0:01:18.480 --> 0:01:20.400 We've gotten a lot of progress in the last six 0:01:20.440 --> 0:01:22.640 weeks as we've seen the yield and the tenure come 0:01:22.640 --> 0:01:24.600 down from five to four. We've added a lot on 0:01:24.640 --> 0:01:27.960 the valuation side. Seems like we're fairly valued here rather 0:01:28.360 --> 0:01:31.240 than undervalued. Need a lot of progress next year on 0:01:31.280 --> 0:01:34.480 inflation and FED talk to keep holding those gains in valuation. 0:01:34.680 --> 0:01:36.319 So I think we're sort of at the end of 0:01:36.360 --> 0:01:38.639 this phase of the of the FED rate cut cycle 0:01:38.760 --> 0:01:40.880 or FRED rate cycle. Exc you get me flipping from 0:01:40.920 --> 0:01:44.360 ice to cuts and there I am getting ahead of myself. 0:01:44.120 --> 0:01:48.320 Right right, So how are you advising your clients to 0:01:48.480 --> 0:01:50.880 position heading into next year? Because you were mentioning to 0:01:50.920 --> 0:01:53.600 me earlier that you felt like what is transpired in 0:01:53.680 --> 0:01:55.800 the past seven weeks you were thinking was going to 0:01:55.800 --> 0:01:57.559 actually take about six months to happen. 0:01:57.800 --> 0:01:59.560 Yes, I do think it makes next year a bit 0:01:59.600 --> 0:02:02.160 more allenging. We've compressed a lot of gains into a 0:02:02.200 --> 0:02:05.000 short period of time. The earnings picture still looks reasonably 0:02:05.120 --> 0:02:07.320 encouraging for next year. So while the streets at plus 0:02:07.320 --> 0:02:09.840 eleven or so, my forecast is for around six percent 0:02:09.880 --> 0:02:12.120 on the earning side, I'm not really looking for any 0:02:12.160 --> 0:02:14.680 valuation progress next year. We've had that in the last 0:02:14.760 --> 0:02:17.280 six weeks and that probably isn't going to happen next 0:02:17.360 --> 0:02:19.440 year now, But that still sets the stage for a 0:02:19.440 --> 0:02:22.840 pretty decent year of midsignal digit returns driven mainly by valuation, 0:02:23.200 --> 0:02:24.720 And maybe when we get to the end of the year, 0:02:24.760 --> 0:02:27.080 we're starting to be into the fed cycle and can 0:02:27.080 --> 0:02:29.000 get a little more clarity on the outlook beyond that. 0:02:29.400 --> 0:02:31.560 Now, Jess, she won't admit to it, but she's owned 0:02:31.560 --> 0:02:34.480 the Magnificent seven. She's belong those stocks, so she says, 0:02:34.560 --> 0:02:36.320 you know, going right to the bank. Me, on the 0:02:36.320 --> 0:02:38.600 other hand, I have not What do I do here? 0:02:38.600 --> 0:02:40.680 Do I chase them into twenty twenty four? Do I 0:02:40.720 --> 0:02:43.840 try to find some of the sectors that have not performed? 0:02:44.160 --> 0:02:45.959 How do you think about where to go in twenty four? 0:02:46.320 --> 0:02:49.120 The likely scenario in my mind is that the seven 0:02:49.200 --> 0:02:52.239 still continue to keep pace, driven mainly by the earning side. 0:02:52.280 --> 0:02:55.800 They've got strong earnings potential that should continue. But small 0:02:55.800 --> 0:02:58.280 caps will catch up. They've been out of favor for 0:02:58.360 --> 0:03:01.400 a long time. There's a lot of valuation pressure that's 0:03:01.400 --> 0:03:03.280 closed the gap a bit in the last six weeks, 0:03:03.280 --> 0:03:05.440 but I think still more room to go. There are 0:03:05.440 --> 0:03:07.200 a lot of segments within small cap two that have 0:03:07.240 --> 0:03:09.280 been pressured a lot by the rate cycle. So as 0:03:09.320 --> 0:03:11.800 you have an easy rate environment, some of the finance 0:03:11.800 --> 0:03:14.040 and concerns are taken off of the table there. That's 0:03:14.080 --> 0:03:16.359 probably beneficial for margins and the small cap side to 0:03:16.480 --> 0:03:18.360 tend to carry a bit more debt. So I'm not 0:03:18.400 --> 0:03:21.360 really afraid of the seven here. They'll continue to carry 0:03:21.360 --> 0:03:23.360 their own on earnings, but the rest of the market 0:03:23.360 --> 0:03:27.880 will catch up a bit more. How do you view financials, Yes, 0:03:27.960 --> 0:03:30.320 that's an interesting and challenging sector, but I think the 0:03:30.360 --> 0:03:31.680 same as the small cap space. 0:03:31.960 --> 0:03:35.240 Well, it's also very broad because you have the bigger banks, 0:03:35.280 --> 0:03:38.040 you have insurers, and then you also had fintech in 0:03:38.080 --> 0:03:41.520 it that was not originally in that sector but got 0:03:41.560 --> 0:03:43.680 moved over because of the GIGS changes in the spring. 0:03:43.800 --> 0:03:46.640 Yeah, I think a lot of that nuance will be 0:03:46.720 --> 0:03:49.600 super interesting next year. We've had this easy knee jerk 0:03:49.680 --> 0:03:53.360 reaction of lower rates good for everybody, especially good for financials, 0:03:53.600 --> 0:03:55.680 And in my mind, the story of twenty twenty four 0:03:55.800 --> 0:03:58.080 is going to be a stock picking story, a nuanced 0:03:58.160 --> 0:04:00.920 story of not just sectors, but industry groups, and not 0:04:00.960 --> 0:04:03.400 even just industry groups, but individual companies and how they're 0:04:03.440 --> 0:04:06.680 navigating the challenges of a slower growth environment, which frankly 0:04:06.760 --> 0:04:08.040 is in front of us, so they have to be 0:04:08.040 --> 0:04:09.440 paying attention to margins. 0:04:09.880 --> 0:04:12.680 How about energy here, we've seen a lot of volatility 0:04:12.880 --> 0:04:16.919 in the price of crude oil across the globe, supply demand, 0:04:17.040 --> 0:04:20.320 all the geopolitical issues here. Is that a space that 0:04:20.520 --> 0:04:23.000 you like into twenty twenty four or is that kind 0:04:23.000 --> 0:04:25.320 of had its run because it's been a sector that 0:04:25.600 --> 0:04:27.680 everybody forgot about for a decade, it seemed like, and 0:04:27.720 --> 0:04:29.880 then it's just been really performing well over the last 0:04:29.880 --> 0:04:30.480 couple of years. 0:04:30.640 --> 0:04:33.479 It has been It's hard to see an environment where 0:04:33.560 --> 0:04:36.599 those prices continue a lot higher, absent more geopolitical risk, 0:04:36.640 --> 0:04:39.640 again just on the basis of a slowing economy. So globally, 0:04:39.680 --> 0:04:41.760 you know, Asia had been a real powerhouse of growth 0:04:41.760 --> 0:04:44.800 that slowed down US. They'd had a massive rebound, of 0:04:44.800 --> 0:04:47.160 course in terms of growth, but next year, with a 0:04:47.200 --> 0:04:50.200 backdrop of probably two percent economic growth, hard to see 0:04:50.200 --> 0:04:52.400 a lot of upside pressure on commodities next year. 0:04:52.480 --> 0:04:54.400 How are your clients feeling right now? 0:04:55.600 --> 0:04:58.320 I think they, like most of the rest of the world, 0:04:58.360 --> 0:05:01.240 are feeling a bit surprised how quickly the last six 0:05:01.279 --> 0:05:03.480 weeks unfolded. You know, it was sort of very easy 0:05:03.600 --> 0:05:05.680 back in October to look at the year and say, 0:05:05.880 --> 0:05:07.560 it's been an okay year, but there are a lot 0:05:07.600 --> 0:05:09.560 of things that have been lagging, and a lot's. 0:05:09.279 --> 0:05:13.560 Happened from the past six seven weeks, I don't think. 0:05:13.680 --> 0:05:15.479 So we've done a pretty good job, I think of 0:05:15.560 --> 0:05:18.520 keeping clients invested, and our view for most of this 0:05:18.680 --> 0:05:21.279 year had been relatively optimistic, so we hadn't been in 0:05:21.279 --> 0:05:23.520 the Barish camp. We had been in the optimistic camp 0:05:23.560 --> 0:05:25.480 on the year on the basis of the progress that's 0:05:25.520 --> 0:05:28.279 been made in inflation and economy. Mainly on the economy. 0:05:28.279 --> 0:05:30.239 You know, a lot of folks had a really strong 0:05:30.520 --> 0:05:33.760 recessionary bias and we have not had that, and so 0:05:33.800 --> 0:05:36.320 I think for the most part, we've kept a pretty steady, 0:05:36.400 --> 0:05:38.720 steady course through the year and not feeling like we're 0:05:38.760 --> 0:05:39.719 missing out on anything. 0:05:39.839 --> 0:05:43.039 How do you view the trajectory of the economy next year. 0:05:43.960 --> 0:05:47.200 Definitely slowing. I'm not in the recession camp mainly on 0:05:47.200 --> 0:05:49.360 the basis that I think we'll I think we'll see 0:05:49.400 --> 0:05:51.640 it coming. And that sounds like very dangerous words, but 0:05:51.960 --> 0:05:54.039 with the availability of real time data that we have 0:05:54.160 --> 0:05:56.600 and the fact that we're still adding jobs in the economy, 0:05:57.160 --> 0:05:59.440 that means economic growth. And we can debate a lot 0:05:59.480 --> 0:06:02.160 whether that's half a percent or two percent, but it 0:06:02.240 --> 0:06:04.200 is still growth. And I think until we start seeing 0:06:04.200 --> 0:06:07.800 some signals that economic activities turning negative, we're in a 0:06:07.839 --> 0:06:08.320 slow growth. 0:06:08.360 --> 0:06:10.320 What are some of your favorite signals that you like 0:06:10.400 --> 0:06:12.200 to gauge, because I feel like there's sort of the 0:06:12.240 --> 0:06:14.479 telltale signs that Wall Street likes to look at. But 0:06:14.520 --> 0:06:16.000 what do you like to use from more of an 0:06:16.040 --> 0:06:19.480 investment perspective, maybe contrarian perspective too, to see if certain 0:06:19.480 --> 0:06:21.520 things are weakening where you start loading up on stocks. 0:06:21.720 --> 0:06:23.520 Yeah, that's a great question. We look a lot at 0:06:23.560 --> 0:06:25.360 We do a lot of factor work. We do a 0:06:25.360 --> 0:06:28.359 lot of work on spreads between sectors and attribution and 0:06:28.400 --> 0:06:30.880 then tying that to where we are in the economic cycle, 0:06:31.000 --> 0:06:33.359 So just looking at rates of change on different indicators 0:06:33.400 --> 0:06:36.000 on the economy, both real time and jobs growth, and 0:06:36.320 --> 0:06:38.800 basically trying to link those two pieces together. So our 0:06:38.839 --> 0:06:42.159 story for twenty twenty three had been avoiding recession and 0:06:42.200 --> 0:06:43.800 we thought that would be good for earnings, and that's 0:06:43.839 --> 0:06:46.120 buying large played out, and the story for next year 0:06:46.200 --> 0:06:47.400 is sort of more of the same but at a 0:06:47.480 --> 0:06:51.080 much smaller level. No recession, very slow earnings growth and 0:06:51.160 --> 0:06:52.840 eking out mid single digit gains and. 0:06:52.800 --> 0:06:56.400 Earnings about outside the US. Any opportunities there for you guys, 0:06:56.880 --> 0:06:58.599 it's been a really tough area. 0:06:58.720 --> 0:07:00.520 You know, every time we and other look at it, 0:07:00.560 --> 0:07:04.440 there's that nice looking valuation gap that never seems to close. 0:07:04.800 --> 0:07:06.680 And the challenge there, I think is growth. You know, 0:07:06.720 --> 0:07:09.680 Asia growth has been slowing. Europe's had a really tough 0:07:09.720 --> 0:07:12.760 time generating growth. The sectors that are that are growth 0:07:12.800 --> 0:07:16.440 oriented in terms of generating organic earnings are really in 0:07:16.480 --> 0:07:18.960 the US, and so it's very hard to get excited 0:07:19.000 --> 0:07:21.480 about those areas. There are, of course, great companies that 0:07:21.560 --> 0:07:24.280 are very undervalued because they're based overseas, So there are 0:07:24.360 --> 0:07:27.560 some selective opportunities but more of a stock picking opportunity 0:07:27.640 --> 0:07:29.760 rather than a broad based international play. 0:07:29.840 --> 0:07:31.440 All right, Robert, thanks so much for joining us. Really 0:07:31.480 --> 0:07:34.679 appreciate it as always, Robert Teeter. He's head of investment 0:07:34.720 --> 0:07:39.480 Policy and a strategy strategy group at Silvercress Asset Management. 0:07:39.880 --> 0:07:42.400 Looking at these markets holding on to some modest gains 0:07:42.440 --> 0:07:44.200 here the S and P five hundreds up about four 0:07:44.240 --> 0:07:46.720 tens a one percent, of Dow up a half a percent, 0:07:47.200 --> 0:07:51.240 Russell up one point five percent. So that's better breadth. Right, 0:07:51.480 --> 0:07:55.520 as the technicians like to say, you're listening to the team. 0:07:55.880 --> 0:07:59.600 Ken's are Live program Bloomberg Markets weekdays at ten am Eastern, 0:08:00.080 --> 0:08:03.840 Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business app, 0:08:04.040 --> 0:08:06.560 or listen on demand wherever you get your podcasts. 0:08:08.360 --> 0:08:11.640 Let's love transports, all right. I'm not a big podcast guy, 0:08:11.920 --> 0:08:15.000 but I actually do subscribe to this thing called Talking Transports. 0:08:15.120 --> 0:08:17.920 Lee Klascal from Bloemberg Intelligence, He's got it because I mean, 0:08:18.600 --> 0:08:21.160 when you got one entitled werner on better trucking conditions 0:08:21.200 --> 0:08:23.360 in twenty twenty four, Boom, I hit that. Yeah, I 0:08:23.440 --> 0:08:25.640 care about the truckers, I care about the railroads, the 0:08:25.680 --> 0:08:28.840 ocean stuff, it's it's a I used to cover those companies, 0:08:28.840 --> 0:08:30.960 but b they give you a great insight into the 0:08:31.800 --> 0:08:34.800 Lee Clasical joins us here in our Bloomberg interactor broker's studio. 0:08:35.559 --> 0:08:37.439 He's been covering the transports for a long time. He 0:08:37.440 --> 0:08:39.800 does that for Bloomberg Intelligence. Now, Lee, I want to 0:08:39.840 --> 0:08:44.040 start with FedEx. Man, that stock is ripping up sixty 0:08:44.040 --> 0:08:46.600 two year to date. They're gonna report numbers after the close. 0:08:47.160 --> 0:08:48.040 What do you expect to hear? 0:08:49.280 --> 0:08:51.440 You know what we expect to hear is share gains. 0:08:51.480 --> 0:08:54.520 So there won some share gains from UPS. As you 0:08:54.559 --> 0:08:57.760 should probably remember UPS at a labor contract negotiation that 0:08:57.800 --> 0:09:01.160 went down to the wire and UH shippers diverted their 0:09:01.200 --> 0:09:03.640 freight away from UPS. And FedEx was a big winner 0:09:03.760 --> 0:09:06.640 in that. They're also one share from Yellow. Yellow is 0:09:07.880 --> 0:09:11.360 back in the day in your transportation today. Yeah, they 0:09:11.400 --> 0:09:15.320 were a large lesson truckload provider. They shipped about fifty 0:09:15.400 --> 0:09:17.640 thousand shipments a day, so they had about. 0:09:17.400 --> 0:09:19.319 Six to seven percent of the market and they poof 0:09:19.400 --> 0:09:19.880 went away. 0:09:20.400 --> 0:09:22.920 So that's a lot of a lot of Paletts that 0:09:23.000 --> 0:09:26.080 went up for grabs and FedEx. FedEx Freight is the 0:09:26.160 --> 0:09:28.920 largest LTL carrier in North America, so they were able 0:09:28.920 --> 0:09:29.360 to benefit. 0:09:29.480 --> 0:09:30.079 I didn't know that. 0:09:30.600 --> 0:09:34.319 So when you're looking at FedEx, LTL means LTL. 0:09:34.400 --> 0:09:39.560 Less than truckload. Yeah, as opposed to Tel, which is 0:09:39.559 --> 0:09:42.000 not team leader. It's truckload team leaders. 0:09:42.120 --> 0:09:43.520 And Paul, if you want to learn more about it, 0:09:43.520 --> 0:09:46.520 we actually we have a new podcast today, you do 0:09:46.640 --> 0:09:48.160 with the CEO from ARC Best. 0:09:48.480 --> 0:09:50.600 ARC Best celebrated centennial. 0:09:50.960 --> 0:09:52.560 They did Happy Birthday arc Best. 0:09:52.600 --> 0:09:54.360 Yeah, very cool. So and so ARC Best are they 0:09:54.360 --> 0:09:56.960 sort of their private trucking company LTL trucking company their 0:09:56.960 --> 0:09:59.440 public The problem a ARC b Oh, I didn't do 0:09:59.440 --> 0:10:01.840 that deal? Did they get public? I took all those 0:10:02.160 --> 0:10:03.600 public back in the day they. 0:10:03.480 --> 0:10:05.960 Were public, and then they a while ago they had 0:10:05.960 --> 0:10:08.439 some activists investor and then they took themselves private and 0:10:08.440 --> 0:10:09.360 they went public again. 0:10:09.800 --> 0:10:12.040 Fort Smith, Arkansas. That's where I went when I was 0:10:12.040 --> 0:10:14.839 doing this truck Really, God, what do we do with 0:10:14.920 --> 0:10:17.520 the heart land? I don't know, des moines I or something. 0:10:17.559 --> 0:10:19.640 Oh yeah, yea yeah, that sounds like it's awesome. Sounds 0:10:19.640 --> 0:10:22.920 about right. Looking at the Dow transports from their October 0:10:22.960 --> 0:10:25.880 low up close to twenty percent, when you're thinking about 0:10:26.360 --> 0:10:28.560 we will hear like you, we're talking about FedEx after 0:10:28.559 --> 0:10:31.240 the bell today, but when it comes to these transport companies, 0:10:31.280 --> 0:10:33.319 what are they telling us about the economy. 0:10:34.240 --> 0:10:35.280 That's that's a good question. 0:10:35.400 --> 0:10:37.640 So we've been in a freight recession for quite some 0:10:37.760 --> 0:10:40.760 time and we're coming out of that freight recession. The 0:10:40.880 --> 0:10:44.200 less than truckload mark is actually negative right now. And 0:10:44.240 --> 0:10:45.559 one of the good things about when we were talking 0:10:45.559 --> 0:10:48.120 about FedEx earlier, why it's a good thing that they 0:10:48.120 --> 0:10:50.280 got all this market share from Yellow and it comes 0:10:50.280 --> 0:10:53.200 at a time when volumes were down because demand has 0:10:53.240 --> 0:10:55.600 been down, so they've been able to mitigate that impact. 0:10:56.320 --> 0:10:58.680 But you know, what we're seeing is from our vantage 0:10:58.720 --> 0:11:01.400 point and conversations that we have in our channel checks, 0:11:01.800 --> 0:11:04.760 is that you know, in the truckload market, we seem 0:11:04.840 --> 0:11:08.240 to be at the bottom, we're bouncing along the bottom, 0:11:08.559 --> 0:11:12.960 and demand is poised to do better next year, not great, 0:11:13.160 --> 0:11:16.160 but better, uh, And we could see some growth. And 0:11:16.240 --> 0:11:19.440 you know, we expect growth from the rails railroads, whether 0:11:19.480 --> 0:11:22.720 it's commodities or intermodal volumes in the mid single digit 0:11:22.800 --> 0:11:27.000 next year. We expect truckload volume growth in the low 0:11:27.040 --> 0:11:28.240 single digits next year. 0:11:28.360 --> 0:11:31.600 So that's not that's not recessionary data from your transportation. 0:11:32.120 --> 0:11:35.000 So I think what we're doing is we're reflecting positively 0:11:35.360 --> 0:11:37.839 on a lot of these industries because like we've been 0:11:37.920 --> 0:11:39.520 down for a while, and some of that has to 0:11:39.520 --> 0:11:41.080 do with the economy and someone has to do with 0:11:41.160 --> 0:11:42.960 really difficult comparisons. 0:11:42.559 --> 0:11:44.920 Right because everybody was stocking up like crazy back. 0:11:44.720 --> 0:11:47.880 In Beta, okay, and the destocking cycle appears to be 0:11:47.960 --> 0:11:50.400 over from a lot of the retailers, which is really 0:11:50.440 --> 0:11:51.679 good for the truckload market. 0:11:52.120 --> 0:11:54.240 So I mean, I look at FedEx again, up sixty 0:11:54.280 --> 0:11:59.319 two percent, but ups down seven percent? Is that reflective 0:11:59.320 --> 0:12:01.320 of just they're operating? 0:12:01.800 --> 0:12:04.080 Also the strikes strikes? 0:12:04.160 --> 0:12:06.560 Yeah, so so what you see there? So you know, 0:12:06.600 --> 0:12:08.960 it's all about, you know, your two points from a 0:12:09.000 --> 0:12:11.800 performance standpoint, and this year it's a little bit about 0:12:12.320 --> 0:12:15.520 you know, ups dealing with their labor contract issues and 0:12:15.559 --> 0:12:20.640 FedEx kind of getting hammered last year and coming off 0:12:20.720 --> 0:12:26.000 their lows, they've initiated a bunch of new strategies. They 0:12:26.000 --> 0:12:28.840 call it Network two point oh, their Drive initiative. It's 0:12:28.880 --> 0:12:33.040 supposed to say about six billion dollars. They're really FedEx 0:12:33.040 --> 0:12:35.760 became a fat company and they're trimming the fat right now, 0:12:35.880 --> 0:12:38.240 and they're also looking at ways that they never really 0:12:38.320 --> 0:12:41.400 looked at before, like combining their ground and express networks. 0:12:41.760 --> 0:12:44.480 It's going to take time, it's gonna be messy, it's 0:12:44.520 --> 0:12:47.840 gonna be lumpy, if you will, But you know, I 0:12:47.840 --> 0:12:51.160 think the market is actually starting to believe that management 0:12:51.200 --> 0:12:52.400 can finally execute. 0:12:52.920 --> 0:12:55.720 How did the what's going on in the Red Sea 0:12:55.880 --> 0:12:58.760 and it comes to shipping, how do you foresee that 0:12:58.920 --> 0:13:00.640 affecting transport companies? 0:13:00.880 --> 0:13:03.520 Yeah, so it's just another kind of shock to the 0:13:03.559 --> 0:13:06.960 supply chain. We've seen container liner rates which are down 0:13:07.000 --> 0:13:08.640 twenty nine percent from last year. 0:13:08.840 --> 0:13:10.920 They're up ten percent over the last two weeks. 0:13:11.360 --> 0:13:14.000 And that's really driven on that because at the end 0:13:14.000 --> 0:13:15.920 of the day, if a ship can't go through the 0:13:15.920 --> 0:13:17.079 Suez Canal, it's got to. 0:13:17.000 --> 0:13:18.880 Go south along Africa. 0:13:19.559 --> 0:13:22.160 It adds about ten to twelve days, and so that 0:13:22.520 --> 0:13:24.880 you know, time is money, So it's going to add 0:13:24.920 --> 0:13:28.400 costs to shippers and listen, it's going to be inflationary. 0:13:29.120 --> 0:13:32.640 But that inflationary pressure I'm not gonna say transitory because 0:13:32.679 --> 0:13:35.120 I think someone will trouble for that, but it's definitely 0:13:35.160 --> 0:13:37.040 going to be short term in nature because the US 0:13:37.160 --> 0:13:39.920 government is and its allies they have. 0:13:39.880 --> 0:13:42.760 A coalition to deal with the houthy rebels. 0:13:43.520 --> 0:13:47.600 And you know, it might not create the most fluid 0:13:47.640 --> 0:13:49.880 supply chains because you know, ships might have to operate 0:13:49.920 --> 0:13:51.320 in a convoy if you will. 0:13:51.400 --> 0:13:51.679 Wow. 0:13:52.280 --> 0:13:53.160 But but it'll be. 0:13:54.120 --> 0:13:58.240 Safer for ships to transverse the traversity of the Red Sea. 0:13:58.400 --> 0:13:59.880 I do even quite frankly, have to be honest, I 0:14:00.080 --> 0:14:02.120 need to know where the Red Sea was a couple 0:14:02.120 --> 0:14:03.040 of days ago, and I had to go. 0:14:03.200 --> 0:14:06.280 Like Google map it and air you thought it was. 0:14:06.559 --> 0:14:10.959 It's Jerry Garcia on it. I thought that until very 0:14:10.960 --> 0:14:14.480 recently in my adult life. So but I mean twelve 0:14:14.520 --> 0:14:16.960 percent of you of global shipping goes through the Red Sea, 0:14:17.120 --> 0:14:19.560 so I mean that's marish. Those are the companies you cover, right, 0:14:19.600 --> 0:14:20.480 the big Yeah. 0:14:20.360 --> 0:14:22.720 So a lot of a lot of the liners like Maris, Capac, Lloyd, 0:14:22.920 --> 0:14:26.400 the two private ones MSc and CMA, they all announced 0:14:26.400 --> 0:14:28.920 that they're not going to go in the Red Sea 0:14:29.480 --> 0:14:32.000 because of the risk not only to their crews but 0:14:32.040 --> 0:14:34.400 to cargo and ship ships are pretty expensive there, around 0:14:34.400 --> 0:14:37.520 seventy to one hundred million dollars each, so you know 0:14:37.880 --> 0:14:41.360 that's very expensive and insurers do not want insurance insurance 0:14:41.400 --> 0:14:43.920 companies don't want the ships that they're ensuring to be 0:14:44.000 --> 0:14:48.280 in those waters because obviously it'll increase their cost. 0:14:48.720 --> 0:14:51.160 Talk to us about the railroads, what's the what's the 0:14:51.160 --> 0:14:54.680 the theme for twenty twenty four for these railroads? Is 0:14:54.720 --> 0:14:57.200 it kind of just riding the economy? I mean, what 0:14:57.320 --> 0:14:59.440 are you thinking about or what are investors thinking about? 0:14:59.720 --> 0:15:01.120 Well, I'm thinking about service. 0:15:01.440 --> 0:15:05.360 So you know, rails talk a big game about service, 0:15:05.400 --> 0:15:06.480 but I really think they. 0:15:06.960 --> 0:15:08.040 Need to deliver on that. 0:15:08.440 --> 0:15:10.840 More and more of the railroads are kind of have 0:15:10.960 --> 0:15:15.360 pivoted to a precision schedule railroading or precision railroading. They 0:15:15.440 --> 0:15:16.880 like to call it different things, but at the end 0:15:16.920 --> 0:15:19.240 of the day, it's six sigma for the rail industry, 0:15:20.240 --> 0:15:23.560 and in order to lower costs, it can't come. 0:15:23.400 --> 0:15:26.080 At the expense of service. And so you know, you'll 0:15:26.120 --> 0:15:28.680 see railroads maybe have. 0:15:28.560 --> 0:15:31.600 More employees during down cycles and they might normally have 0:15:32.040 --> 0:15:35.440 just so they're prepared for when the uptick happens. And also, 0:15:35.520 --> 0:15:38.160 in addition to service, I think it's growth. It's where 0:15:38.160 --> 0:15:39.720 are they going to grow from? Because they're not going 0:15:39.760 --> 0:15:42.440 to grow for major M and A because the. 0:15:42.520 --> 0:15:44.920 Large class ones will just not be able to merge. 0:15:44.920 --> 0:15:46.120 It's just they're just too big. 0:15:46.640 --> 0:15:49.480 So it'll be tucking acquisitions of short lines and kind 0:15:49.520 --> 0:15:52.440 of looking to take advantage of trends like cross border 0:15:53.120 --> 0:15:55.360 near shoring, that kind of stuff. 0:15:55.720 --> 0:15:58.640 We only have about a little maybe like a minute 0:15:58.640 --> 0:16:00.400 and a half left, but I want to get into 0:16:00.440 --> 0:16:02.920 airlines because it is the holiday travel season. I know 0:16:02.960 --> 0:16:05.160 airlines going into the fourth quarter had cut some of 0:16:05.200 --> 0:16:08.480 their outlooks because of they're worried about demand. But what 0:16:08.520 --> 0:16:11.240 are you seeing because it seems like people are still traveling. 0:16:11.400 --> 0:16:13.240 Well, the only thing I know about airlines is that 0:16:13.280 --> 0:16:16.600 I'm on them. That's George Ferguson, my colleague at BI. 0:16:17.200 --> 0:16:18.200 I do not cover. 0:16:18.000 --> 0:16:20.720 Airlines, but I do cover some of the freight, the 0:16:20.760 --> 0:16:24.200 air freight carriers, and what we're seeing there is capacity 0:16:24.280 --> 0:16:26.000 kind of getting back to. 0:16:26.120 --> 0:16:27.360 Pre pandemic levels. 0:16:28.120 --> 0:16:30.640 And it's interesting because you know, I mentioned earlier that 0:16:31.280 --> 0:16:35.480 liner rates are down twenty nine percent. Air freight rates 0:16:35.560 --> 0:16:39.880 are only down like high single digit, low double digits, 0:16:40.160 --> 0:16:43.160 So they've been a lot more resilient since the pandemic. 0:16:43.680 --> 0:16:47.120 And that's really because there hasn't beant while the capacity 0:16:47.240 --> 0:16:50.200 is nearing pre pandemic levels. There's not a lot of 0:16:50.240 --> 0:16:52.080 slack capacity out there, all right. 0:16:52.040 --> 0:16:54.080 Lee Classical, thanks so much for joining us. Lee Clasow, 0:16:54.200 --> 0:16:56.760 he is a senior analyst covering all the transports and 0:16:56.880 --> 0:17:00.240 logistics for Bloomberg Intelligence. He's also got a podcas Us 0:17:00.240 --> 0:17:05.159 out there talking transports. The focus will be on trucking, railroads, 0:17:05.240 --> 0:17:07.800 ocean and air freight markets and everything in between, so 0:17:08.119 --> 0:17:09.760 check that out. He always gets a lot of good 0:17:10.520 --> 0:17:12.800 guests on there. And again this most recent week, our 0:17:12.920 --> 0:17:14.840 best one of the biggest trucking companies out there. We 0:17:14.920 --> 0:17:18.600 got their chairman, president and CEO on to talk about 0:17:18.600 --> 0:17:21.000 the transport business. So good stuff. Check that out. 0:17:21.040 --> 0:17:21.240 S and P. 0:17:21.359 --> 0:17:24.280 Five hundred Here today holding on to the gains up 0:17:24.280 --> 0:17:26.080 about a half a percent, saying for the dall saying 0:17:26.119 --> 0:17:28.719 for the Nasdaq, the small cappers haveing their day up 0:17:28.800 --> 0:17:30.439 one point seven percent. 0:17:30.480 --> 0:17:33.440 Here you're listening to the tape Cat's are live program 0:17:33.480 --> 0:17:37.440 Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 0:17:37.600 --> 0:17:40.320 the tune in app, Bloomberg dot Com, and the Bloomberg 0:17:40.359 --> 0:17:43.440 Business App. You can also listen live on Amazon Alexa 0:17:43.520 --> 0:17:46.800 from our flagship New York station, just say Alexa play 0:17:46.920 --> 0:17:52.120 Bloomberg eleven thirty. 0:17:50.119 --> 0:17:53.320 Jess and paulse wean to hear in the Bloomberg Interactive 0:17:53.400 --> 0:17:56.480 Brokers studio and tiss the season Paul, because we talk 0:17:56.680 --> 0:18:00.359 so much about seasonality heading into year end. And who 0:18:00.440 --> 0:18:03.159 better to bring in than Jeff Hersh CEO at her 0:18:03.200 --> 0:18:06.960 Sholdings and the editor of The Stock Traders Amanac joining 0:18:07.040 --> 0:18:10.560 us on Zoom to discuss his correct market call this year, 0:18:10.640 --> 0:18:13.240