Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: I'm going to get to these markets here. The store's been.
Speaker 1: It feels to this simple investor over here that the
Speaker 1: interest rates out there in the marketplace have really been
Speaker 1: impacting stocks. And that's my take. Vince Signorella, he joins us.
Speaker 1: He's a pro global macro strategist for Bloomberg News. New
Speaker 1: knee or just a repaired knee replacement replace harsh, replacing
Speaker 1: the He's walking just fine. He found his way into
Speaker 1: the Bloomberg and Director Broker studio. We left from crumbs
Speaker 1: out for him. Vince, what do you make of these
Speaker 1: markets here?
Speaker 3: Uh?
Speaker 4: You know, the equity market's looking really sick. I mean
Speaker 4: if you look at longer term charts.
Speaker 2: Sick as in bed like the kids say, look ill,
Speaker 2: not like beastie boys ill, but like unwell unwell.
Speaker 4: Yes, there's a level to watch it around forty one
Speaker 4: to fifty. It's a TD sequential level. If that breaks,
Speaker 4: it actually opens up a major move down of four thousand.
Speaker 4: We're looking at a potential major move lower inequity markets
Speaker 4: if these levels don't hold, and we're gonna need to
Speaker 4: see some help from probably Amazon and the like going
Speaker 4: forward to lift this higher, because it's not going to
Speaker 4: come from interest rights.
Speaker 2: I look, Abigail, do little yesterday it showed me. Oh
Speaker 2: y no, no, not rs high.
Speaker 1: That is back. That is awesome. Look at the rs
Speaker 1: I for SPX. We are right there. You buy him
Speaker 1: right here, unless, as you say, it breaks through that
Speaker 1: little green lines colors and everything. Get me a break.
Speaker 2: I'll tell you what, though it did. It did move
Speaker 2: below the two hundred the SMP move below the two
Speaker 2: hundred day moving average, and the last time we've seen
Speaker 2: it that blow you know, in that in those terms,
Speaker 2: was March, and.
Speaker 4: It's well below the two hundred day, which is around
Speaker 4: forty two to thirty five, so we're well below that.
Speaker 4: So forty one seventy interestingly enough, is the average closing
Speaker 4: price for the last year, So between this forty one
Speaker 4: fifty forty one seventy level. I'd love to see it
Speaker 4: hold and maybe catch a bid, but so far it's
Speaker 4: looking a little bit of a dead cat bounce here.
Speaker 2: If I see rates up, as Paul said, you know,
Speaker 2: rates have been a huge driver. I feel like if
Speaker 2: I see rates up, if I see dollar strength, if
Speaker 2: I see oil up, that's all bad for equities, right yeah.
Speaker 4: Yeah, And you know what rates aren't really there's not
Speaker 4: much of an infinite impetus for rates to go substantially lower.
Speaker 4: You know, we need to see really super low inflation
Speaker 4: numbers to turn rates at the moment. You know, we're
Speaker 4: saying a little bit of a reprieve in the treasury market.
Speaker 4: You know, Acman's trade helped a little bit.
Speaker 2: It got some Americans want to buy treasures, but who else?
Speaker 4: Pretty much there.
Speaker 2: Is Japanese foreign buyers. They don't want to hold this paper.
Speaker 4: No, no, what else.
Speaker 1: Are you gonna buy?
Speaker 4: Well, yeah, that's actually a good point though, But the
Speaker 4: upside for it, you know, you're just buying if you're yield,
Speaker 4: you're not looking at for a capital.
Speaker 1: Well, it's the first time in almost a generation you
Speaker 1: could get yield.
Speaker 4: Oh no, I mean a lot of people loving and
Speaker 4: you're looking at see these at five and a half percent.
Speaker 4: I mean, that's these are great rates, especially for fixed
Speaker 4: income or or seniors on a on a fixed income.
Speaker 4: A lot of folks out there doing that. I mean
Speaker 4: I've done a little bit myself. I'm kind of a
Speaker 4: senior actually these days. But you know, I mean I
Speaker 4: could see rates staying here. You know, I'm not really
Speaker 4: going down a lot, not really going up a lot.
Speaker 4: But that's not going to help the equity market. It's
Speaker 4: going to need it from somewhere else.
Speaker 1: So when a guy like Bill Ackman says I closed
Speaker 1: my short in the treasury markets, a does that mean
Speaker 1: anything to pros out there?
Speaker 4: Is not just a name, And if you think about it,
Speaker 4: the size of his fund it was like a one
Speaker 4: percent game.
Speaker 2: So he was long too, right, wasn't he talking about.
Speaker 4: A thirty year Yeah? Yeah, yeah, but he had a
Speaker 4: one percent gain on the assets under management.
Speaker 2: I mean he wasn't the only bill. You know Bill
Speaker 2: Gross also what is he long or short? Going long treasuries?
Speaker 1: Now?
Speaker 2: Well, so's Warren Buffet closing short at least?
Speaker 5: Yeah?
Speaker 4: Okay, yeah, you know they put a position on a
Speaker 4: Monday and tell you on Wednesday what they did. So
Speaker 4: you'll goin in and money.
Speaker 2: Do those names. The other day, our producer Eric Molo,
Speaker 2: he had a mask on and I said, hey, dude,
Speaker 2: where's Tonto. He had no idea what I was talking about,
Speaker 2: and I was I said, you know what, like the
Speaker 2: Lone Ranger? And he was like, no, sorry, don't get it.
Speaker 2: He did not know who the Lone Ranger was. And
Speaker 2: do these kids today do they know Bill Gross? Do
Speaker 2: they know Warren Buffett? Like in a real way?
Speaker 4: I mean, you know the program the the Algo programmers
Speaker 4: do because they take those names and they program it
Speaker 4: into their into their trading venues. But you know, actually,
Speaker 4: the only iconic name from from that era that is
Speaker 4: actually incredibly well known Lassie. Everyone knows who Lassie is.
Speaker 4: This is not in the markets, yeah, well, in the
Speaker 4: world in general, yeah, markets I mean, but yeah, I
Speaker 4: mean in the all the years I trade.
Speaker 2: Do you think Eric Molo knows who Lassie was?
Speaker 4: I think so we'll have to test him on the
Speaker 4: way out, check him out.
Speaker 1: All right, what's the most interesting trade for you out there?
Speaker 1: Just in the markets? I know, you look at currency, stocks, bonds,
Speaker 1: all kinds of stuff out there. What are you looking
Speaker 1: at it to me?
Speaker 4: You know, going back to interest rates, I still like
Speaker 4: the short term. I still like two year treasuries. I mean,
Speaker 4: that's the one that's really going to catch a bid
Speaker 4: when the FED decides to turn or the FED says
Speaker 4: I stopped because you could, you would more likely than
Speaker 4: not see the yield curve steepend if inflation expectations remain,
Speaker 4: that's not going to affect the short end as much.
Speaker 4: So if you see steepening, it's going to be a
Speaker 4: sell off in the back end. I think the short
Speaker 4: end is the place to be because inevitably that's got
Speaker 4: to come your way the FED.
Speaker 1: You know, Matt's been telling me not to crowd into
Speaker 1: that two year because I gonna have an interest rate
Speaker 1: risk reinvestment reinvestments. Now the thirty year five point zero seven,
Speaker 1: you were right negative by.
Speaker 2: I'm not saying, first of all, I don't give investment advice.
Speaker 2: I loaded up on them, and if I do, you
Speaker 2: should run the other direction. But no, I'm not saying
Speaker 2: you want duration right now. I'm just I just look
Speaker 2: at the interest as sorry, the reinvestment risk as something
Speaker 2: that is better dealt with by you know, you have
Speaker 2: like very sophisticated advisors. I just look at an ETF.
Speaker 2: I would rather T bill and chill.
Speaker 1: You know, T build chill. I get Yankee tickets, and
Speaker 1: you do T bill and chill. All right, So what
Speaker 1: are we doing here, Vince? I mean, is the next
Speaker 1: move for this Federal Reserve to just stay or to
Speaker 1: still talk tough? We hear Christine Lagard to ECB today,
Speaker 1: still talking tough.
Speaker 4: You know, I take that with a grain of salt.
Speaker 4: They're saying what they have to say. I mean, the
Speaker 4: guard's been You know, if you go back ten years
Speaker 4: when inflation in the Eurozone was below one percent, well
Speaker 4: you heard from the ECB central bankers was HRCP inflation
Speaker 4: is moving towards target. It didn't move for five years,
Speaker 4: but they said that at every meeting. So now at
Speaker 4: every meeting they're going to say we can still raise,
Speaker 4: but they have no real intention of raising. Neither does
Speaker 4: the Fed. I think, I mean, the Federal talk a
Speaker 4: tough book potentially raising one more. I have absolutely no
Speaker 4: idea why there's really no reason to raise at this point.
Speaker 2: Isn't moving down quickly enough? Well, what's counter fiscal spending?
Speaker 2: I mean, it needs to be two like last week.
Speaker 3: You know.
Speaker 4: But I would argue this, the idea of getting inflation
Speaker 4: to two percent goal is ridiculous. The two percent goal
Speaker 4: was at a time when there was a balance sheet
Speaker 4: of what a trillion now we have Now we have
Speaker 4: a federal deficit of thirty three trillion. The balance sheet
Speaker 4: at the Fed is off the charts. You're not going
Speaker 4: to see two percent inflation. You're going to see two
Speaker 4: percent inflation if you have a disaster.
Speaker 2: You don't think they're going to get there.
Speaker 4: No, I think that if they're lucky, they get to
Speaker 4: three three and a half and they should be happy
Speaker 4: if they do.
Speaker 1: So I'm in that camp. I don't know what's so
Speaker 1: special about two percent. They made it up?
Speaker 2: Yeah, they would all be made up. But the point
Speaker 2: is inflation is just thievery right. You're just robbing from savers.
Speaker 2: So it's their duty to get it down to near
Speaker 2: as damn it to zero.
Speaker 1: I would say, well, I mean.
Speaker 4: You're robbing savers if you don't have real interest rates higher.
Speaker 4: But we now have real interest rates starting to come
Speaker 4: to the positive. If you get inflation down to three
Speaker 4: three and a half percent, you're not going to see
Speaker 4: a ten ure yield of three percent, so you're still
Speaker 4: going to have a positive, positive carry and people are
Speaker 4: going to be earning. I mean the other side of
Speaker 4: the corner is you get inflation into three three and
Speaker 4: a half percent. Where does that put the SMP? Probably
Speaker 4: around forty five forty eight hundred, So you're gonna have
Speaker 4: a positive return somewhere. It's just a matter of where
Speaker 4: you go.
Speaker 1: All right, what do we do? I mean, all right,
Speaker 1: I think my fed's gonna stay put next time.
Speaker 4: I think so too. And I think I look at
Speaker 4: tech and I'm always the one where I joke with people.
Speaker 4: So you're not going to get your next iPhone from
Speaker 4: Campbell's soup. So you know, whatever they're selling whenever they
Speaker 4: sell tech disaggressively, to me, it looks like an opportunity.
Speaker 1: To buy the big tech.
Speaker 4: I would buy the big tag. But you know, just
Speaker 4: get my feet wet here and there my toes.
Speaker 1: Buying the iPhone fifteen my daughter. I just looked at
Speaker 1: it yesterday. It's got a new plug. You got to
Speaker 1: replace all your plugs. I thought, my plug is strategically
Speaker 1: located everywhere. None is more than an arm length away. Dude,
Speaker 1: I feel now I got to replace everything. I feel
Speaker 1: you that you explain the European sect.
Speaker 4: Because they made Apple bye by their.
Speaker 2: Yeah, a regulation move, but I'm happy they finally got
Speaker 2: to it.
Speaker 1: But you're right, we have to.
Speaker 2: Buy all new cables and it's all right.
Speaker 1: Vincey Garell. Thank you so much. We appreciate it.
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Speaker 2: I want to get to the end of the strike.
Speaker 2: I mean I want to get to it. I'm sure
Speaker 2: the union members want to get to it. I know
Speaker 2: the car makers want to get to it. Let's talk
Speaker 2: on the telephone on Zoom actually with Keith Noughton.
Speaker 1: He covered on Zoom.
Speaker 2: Look at him going on Ford in the Big three
Speaker 2: for US at a motor city, and it looks like
Speaker 2: at least Ford has got a tentative agreement with the UAW.
Speaker 2: Keith walk us through it.
Speaker 6: Yeah, so it's an agreement that includes a twenty five
Speaker 6: percent raise and the restoration of cost of living allowances.
Speaker 6: Those two combined mean that the actual pay increase for
Speaker 6: the top way journers is actually thirty three percent and
Speaker 6: means they'll be making over forty dollars an hour. There's
Speaker 6: improvements especially.
Speaker 3: For new workers.
Speaker 6: They're getting even larger raises. Temp workers are being converted
Speaker 6: to full time, they're doing increasing the multiplier on pensions
Speaker 6: and four one ks. So there's a whole bunch of
Speaker 6: of good economic enhancements that are in the agreement.
Speaker 3: Now you have you used the murder.
Speaker 2: Pensions Keith, I imagine you're talking about people who already had pensions,
Speaker 2: who what have been working there since pre two thousand
Speaker 2: and seven. Because I know that Sean Fain, you know
Speaker 2: he wanted a pay increase. He also wanted pensions for
Speaker 2: all the union workers to find benefit pensions.
Speaker 1: And he wanted.
Speaker 2: A four day work week or a thirty two hour
Speaker 2: work week.
Speaker 1: So did he get two out of three?
Speaker 6: Yeah, I just if you want to talk about this stuff,
Speaker 6: he didn't. He didn't get Matt, He did not get
Speaker 6: at the thirty two hour work week of the four
Speaker 6: day work week. He did not get a return to
Speaker 6: traditional pensions. What he got instead is a larger contribution
Speaker 6: from the company to your four h one k or
Speaker 6: to your pension. All those before, as you said two
Speaker 6: thousand and seven, do have traditional pension, so it's the
Speaker 6: it's the workers hired in the last fifteen years that don't.
Speaker 6: So they instead are going to have a greater contribution,
Speaker 6: greater multiplier.
Speaker 1: All right, So I'm guessing this puts the pressure really
Speaker 1: on GM and Stalantis. What's the how does this playoff
Speaker 1: from here?
Speaker 5: Yeah?
Speaker 6: I mean, you know, so the analysts are already crunching
Speaker 6: the numbers, and the Emmanuel Rosner over at Dolja Bank
Speaker 6: is saying that this would cost Ford six point two
Speaker 6: billion over the life of the contract, but it actually
Speaker 6: would cost GM and Stillantis more GM and be over
Speaker 6: seven billion, Stalantis higher in the six billions because they
Speaker 6: have more temporary workers, so there's more temps to give
Speaker 6: raises to, there's more tempts to convert to full time.
Speaker 6: So you know, by going first, Ford was able to
Speaker 6: tailor the agreement to their specific situation. They only have
Speaker 6: two to three percent of the workforce that is temps,
Speaker 6: whereas GM and Stlantis are gms close to closer to
Speaker 6: ten and Stilantis's origin.
Speaker 2: Interesting, so does this mean, I mean Ford workers are
Speaker 2: going to go back to the Kentucky plant. They're going
Speaker 2: to start building the bronco again. In Michion and Dearborn.
Speaker 2: They're gonna, they're gonna, they're gonna put the pressure, in
Speaker 2: that sense, further pressure on GM and Stilantis.
Speaker 1: Do you expect agreements from the other two by the
Speaker 1: end of the day.
Speaker 6: I don't, actually, I think there's still work to be done.
Speaker 6: And that's an important point that you just made. That
Speaker 6: because back in twenty nineteen when the UAW struck GM,
Speaker 6: when they reached a tentative agreement, the workers did not
Speaker 6: go back to the plants. They didn't open the plants
Speaker 6: again until after that agreement had been ratified by the
Speaker 6: full membership, which took weeks. But in this case, the
Speaker 6: OW is sending the workers forward back to the plants immediately.
Speaker 6: The plants are cranking up today because they want to
Speaker 6: do put pressure on GM and Stillantis. You know, the
Speaker 6: losses for each of those companies just from this strike
Speaker 6: are approaching a billion dollars. So and just this week
Speaker 6: the two of them, GM and Stillants had their most
Speaker 6: profitable plants go out on strike. So the costs are
Speaker 6: going to escalate more rapidly.
Speaker 2: Now, Oh, so catch us up, Keith, catch us up
Speaker 2: on who's so the Bronco is made of the truck
Speaker 2: assembly plant right in Wayne, Michigan.
Speaker 6: Actually, yeah, so what's coming back online? Is that what
Speaker 6: you're asking you at?
Speaker 2: And what's still off? Because I know on Tuesday they
Speaker 2: struck the GM plant that makes like the Escalade and
Speaker 2: the Tahoe, right at least one of them, right.
Speaker 6: Yep, yeah at GM. The big plant struck this week
Speaker 6: as the Arlington, Texas plant that makes all the big SUVs,
Speaker 6: Suburban Tahoe, Yukon and Escalade, and that at Stalantis. This
Speaker 6: week it was the RAM pickup truck plant in Sterling Heights, Michigan,
Speaker 6: and that is their most profitable plant for Ford. The
Speaker 6: ones coming back are the Bronco and the Ranger plant.
Speaker 6: That was the one that went down immediately. The one
Speaker 6: that was more recently taken down on October eleventh is
Speaker 6: Kentucky Truck that makes the biggest F series trucks and
Speaker 6: the biggest SUVs, the Lincoln Navigator and the Ford Expedition
Speaker 6: super Duties.
Speaker 1: You know, twenty five percent seems like a lot to me,
Speaker 1: even though it's over a number of years. What are
Speaker 1: the auto companies getting here.
Speaker 6: Well, they're getting labor peace, which you know costs something,
Speaker 6: but they're getting richer contracts and they already had the
Speaker 6: highest labor costs, you know, in the industry. So what
Speaker 6: GM said, Mary Barrow, the CEO of GM said during
Speaker 6: their earnings call this week, is they're going to try
Speaker 6: and find offset. They're going to try and do cost
Speaker 6: cuts to you know, make up for this. But you
Speaker 6: know it's, uh, these are expensive deals and and you
Speaker 6: know they're going to have to find a way. So
Speaker 6: what's their costs competitive?
Speaker 3: That makes me.
Speaker 1: Worry about the vehicles?
Speaker 2: Ouch, you're going to start So what putting in like
Speaker 2: lower quality parts?
Speaker 1: Is that? That's what I worry about.
Speaker 2: That's what everyone who's buying these cars and trucks. Keith
Speaker 2: I spend a lot of time on the forums right
Speaker 2: of many different brands and they're all like, oh, stay
Speaker 2: away from that.
Speaker 1: Company because they're going to strike.
Speaker 2: And even if they didn't strike, maybe they will and
Speaker 2: workers are going to be unhappy and not do it
Speaker 2: as screw it up. Yeah, but if they cut cost,
Speaker 2: does that mean we're going to have lower quality components.
Speaker 6: Uh, not necessarily. I mean in companies as large as these,
Speaker 6: there's all kinds of waste and redundancy that you can
Speaker 6: work on. I mean they cut by the billions when
Speaker 6: they're cutting costs, and obviously people is one of the
Speaker 6: ways they cut costs. Let's not forget Jim Farley said
Speaker 6: just a year ago that Ford had twenty five percent
Speaker 6: more engineers than its competitors. He's been cutting salaried staff
Speaker 6: by the thousands, so you know there's still probably people
Speaker 6: that he will cut as they continue to move into
Speaker 6: their ev future from their internal combustion engine present.
Speaker 1: So I know, Keith for the unions, you know, one
Speaker 1: of the ass or demands was something nebulous to me
Speaker 1: at least, which is, hey, can you guarantee you we're
Speaker 1: going to still have the same number of positions in
Speaker 1: an evy world that we have in an ice world.
Speaker 1: Did they get any language to that effect?
Speaker 6: There is some job security in this and Ford had
Speaker 6: told them that they would not lay off anyone during
Speaker 6: the term of this contract, which is four years and
Speaker 6: eight months. In fact, would add to workers, but it's
Speaker 6: not an idle concern by the union. It takes forty
Speaker 6: percent less labor to assemble the power rain of an
Speaker 6: electric vehicle. Then it does an internal combustion engine vehicle,
Speaker 6: which has thousands of parts versus about twenty in an
Speaker 6: electric vehicle. So you know that is coming and they
Speaker 6: got to figure out how that's all going to work out.
Speaker 2: What do you think this deal looks like to non
Speaker 2: union shops, Keith? Yeah, I think of you know, the
Speaker 2: the BMW plant in Spartanburg or the Tesla plants. My
Speaker 2: X ray was made, your X three was made in
Speaker 2: Spartan Work. Yes, okay, in fact it was very good,
Speaker 2: very cool plant and cool truck.
Speaker 1: I like it a lot.
Speaker 2: But what do you think about those shops? Are they
Speaker 2: going to look at this deal and say, you know,
Speaker 2: we should have a union too, We should be in
Speaker 2: the UAW.
Speaker 6: That is what the UAW is counting on. So it
Speaker 6: depends on when you say what does it mean for
Speaker 6: those plants? It depends on who you're talking about. If
Speaker 6: you're talking about the companies themselves, the CEOs, I think
Speaker 6: what it means to them is the price of poker
Speaker 6: just went up, and the way they've kept unions out
Speaker 6: of their plants is they've offered you know, equivalent wages
Speaker 6: and benefits. So if the CEOs want to keep the
Speaker 6: unions out of their plans, they're going to have to
Speaker 6: give everybody a raise of those non union plants. If
Speaker 6: they don't, the UAW has a big opening to go
Speaker 6: in and organize them.
Speaker 1: All right, Very good, Keith Anton, thanks so much. We
Speaker 1: appreciate that. Keithnton. He is a reporter for Bloomberg News
Speaker 1: in Detroit. He is our go to voice there, and
Speaker 1: again we get a deal from Ford and presumably Matt
Speaker 1: That means Stalantis and GM a little pressure on them
Speaker 1: to get something done because Ford is back out cranking
Speaker 1: out the trucks.
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Speaker 5: Bloomberg eleven thirty dans.
Speaker 7: Welcome to our Bloomberg television and radio audiences. I'm standing
Speaker 7: by now with Morgan Stanley, CEO and Chairman James Gorman
Speaker 7: and incoming CEO Ted pick big moment for morgan Stown.
Speaker 7: Only fourteen years at the home. How does it feel
Speaker 7: to be passing.
Speaker 3: On the baton? Feels great, you know, for several reasons. One,
Speaker 3: it's time organizations grow because you have change. I mean,
Speaker 3: you're not going to grow by doing the same thing
Speaker 3: again and again. And I feel like we set this
Speaker 3: up several years ago with the board. We've had a
Speaker 3: very very intentional process and we ended up with a
Speaker 3: phenomenal outcome, which is Ted. And we've got other unbelievably
Speaker 3: good executives who are taking leadership roles as co presidents
Speaker 3: Andy Sapsin and Dan Sancret. So it's sort of what
Speaker 3: you hope for. I mean, you try and drive strategy,
Speaker 3: you try and put together a team, You try and
Speaker 3: deal with the inevitable knocks that you get from the
Speaker 3: market and the disappointments that come in times in any
Speaker 3: complex business. But at the end of the day, you're
Speaker 3: also trying to hand it off for the next next generation.
Speaker 3: So it feels great and it feels right.
Speaker 7: You've been rumored to be a CEO contender for oh
Speaker 7: so long, Ted, How does it finally feel to step
Speaker 7: into the.
Speaker 8: Next year Shinali. Morgan Stanley was the first place that
Speaker 8: I worked out of college, and thirty three years later,
Speaker 8: I'm sitting next to mister James Gorman.
Speaker 3: It's the thrill of a lifetime. I'm so excited.
Speaker 7: Now you've really inherited a gift here, a massive transformation
Speaker 7: over fourteen years, one of the best valuations here in
Speaker 7: global banking. But there are investors who are worried this
Speaker 7: is as good as it gets.
Speaker 1: What do you tell them?
Speaker 3: There's more to come.
Speaker 8: There's more to come. We look at the five year chart,
Speaker 8: the ten year chart, the fifteen year chart. The wealth
Speaker 8: and ASCID management businesses have these remarkable, durable earnings. The
Speaker 8: Global Investment Bank has lots of miles to go. So
Speaker 8: we're thrilled about the business strategy we have in place
Speaker 8: and it's going to continue to deliver a long term
Speaker 8: value for Sheerald.
Speaker 7: Now for both of you, we've been in such a
Speaker 7: prolongedble market that has hit such volatile times as of late.
Speaker 7: Do you expect the next couple of years from Morgan
Speaker 7: Stanley to be a little more choppy?
Speaker 3: You know, I don't know. It's I thought this year
Speaker 3: would be tough than it was a lot of what's
Speaker 3: going in the market conspires against our particular business mix.
Speaker 3: Some of the more commercial retail banks mortgage banks very
Speaker 3: different business model. But our term will come. I think,
Speaker 3: you know, I personally think the US has dodged a recession.
Speaker 3: I think the FED is very close to being final
Speaker 3: within probably twenty five bases points. We're starting to see activity.
Speaker 3: Look at the Chevron deal we just announced the other day.
Speaker 3: I'm in phenomenal, so we're seeing activity in different sectors.
Speaker 3: It's coming alive now. So no, I think the next
Speaker 3: couple of years will be great. But what I care
Speaker 3: about is over the really long run. When we set
Speaker 3: about on this journey, we weren't focused on a quarter,
Speaker 3: and if the stock takes a dip in a quarter,
Speaker 3: I say, that's kind of good news because we're buying
Speaker 3: back stock and every share you buy back, you're retiring
Speaker 3: a dividend. So shareholders who hang tough at getting a
Speaker 3: four and a half percent yield and we're buying back
Speaker 3: stock and the stock's cheap, so it's it's kind of
Speaker 3: a good situation being But medium term, no, I think
Speaker 3: we're I think the film is going to do great.
Speaker 7: Ted, what are the biggest challenges for you as you
Speaker 7: navigate this environment.
Speaker 8: There's just so much opportunity. We're definitely a new paradigm.
Speaker 8: Interest rates are going to be higher for longer, and
Speaker 8: the world's gotten smaller, which means the clients need advice.
Speaker 8: They need in the wealth and ask and management space,
Speaker 8: they need in the institutional space our corporate clients, and
Speaker 8: we're going to have lots of activity around those clients.
Speaker 8: So I just want to make sure that we are
Speaker 8: completely aligned in the business s rategy we have in place.
Speaker 8: It's something that James is painstakingly put together for fourteen years.
Speaker 8: The market knows we want to do, so I'm incredibly
Speaker 8: optimistic over the next couple of years.
Speaker 3: Now.
Speaker 7: A lot of lessons have been learned in this building
Speaker 7: over the last several decades. Really what to do, what
Speaker 7: not to do? What is the Morgan Stanley playbook of
Speaker 7: what not to do in twenty twenty four as you
Speaker 7: navigate this new environment, Well, I.
Speaker 8: Think it's to continue to do what we've been doing,
Speaker 8: which is to treat each other with respect. This process
Speaker 8: that James and the board ran was intentional, it was respectful.
Speaker 8: I couldn't be more thrilled to be working with Andy
Speaker 8: Sappersin and Dan Simkowitz, two of my closest friends. They
Speaker 8: are extraordinary leaders. They're going to drive these businesses. The
Speaker 8: fact that we've worked so collegially, this is the kind
Speaker 8: of Morgan Stanley that we've known and loved, the blue
Speaker 8: Morgan Stanley of respect and focusing on clients. And during
Speaker 8: this painstaking process, there's been no loss of focus when
Speaker 8: focused on our shareholders, on our clients. And the fact
Speaker 8: that today we had a celebration with our partners and
Speaker 8: it was really quite a wonderful experience shows that we
Speaker 8: are on the ball and sticking with the future.
Speaker 7: I'm glad you mentioned Andy and Dan because a lot
Speaker 7: of questions here around. You know, they were two CEO candidates.
Speaker 7: Now they're going to be the co president's. How do
Speaker 7: you keep them around? Are you holding them to any
Speaker 7: lock up periods?
Speaker 3: No, They've got phenomenal job opportunities. Andy's co president. He's
Speaker 3: now running not just wealth management which included d Trade,
Speaker 3: but asset management, which includes Seaton Vance. So he's overseen
Speaker 3: the biggest wealth and asset manager in the world at
Speaker 3: what I believe is the most prestigious and best investment
Speaker 3: bank in the world. Dan came out of capital markets
Speaker 3: and is now going back there after a great stint
Speaker 3: running asset management, and he's going to be running all
Speaker 3: of global trading banking, capital markets his old home turf research,
Speaker 3: and most importantly, the two of them are going to
Speaker 3: work with Ted and helping to manage a firm. So now,
Speaker 3: these are phenomenal opportunities. They're high quality people. These are
Speaker 3: some of the best jobs on the planet, and you know,
Speaker 3: we delighted to have them.
Speaker 7: Now, I'm glad you brought up the institutional securities business
Speaker 7: that is your old home as you move to the
Speaker 7: new spot. But you know what's interesting. You've long been
Speaker 7: the number one in equities trading. Lately Goldman has to
Speaker 7: pass Morgan Stanly in a couple of quarters, while JP
Speaker 7: Morgan and Goldman have been fearing better in various forms
Speaker 7: of M and A and underwriting. Do you have a
Speaker 7: plan to be number one again?
Speaker 8: Listen, we have some great competitors, as you know, in
Speaker 8: the global investment bank in equities and fixed income and
Speaker 8: then across investment banking. We're focused on being number one.
Speaker 8: We want to have the right people in place We've
Speaker 8: been investing for the next cycle. That next cycle is
Speaker 8: going to be investment banking led, and it means that inequities.
Speaker 8: You want to be one or two every quarter as
Speaker 8: we have in for the last decade. We have fixed
Speaker 8: income business, we were structured, it's now top five business
Speaker 8: and investment banking is going to lead the next cycle.
Speaker 8: There's going to be a lot of m and a consolidation.
Speaker 8: It's going to be across industry groups. The world's gotten smaller,
Speaker 8: there's a new cost of capital. We want to be
Speaker 8: a leader, a global leader in all those spaces.
Speaker 7: Now, James has hinted before to the possibility of more
Speaker 7: murders and acquisitions for Morgan Stanley moving forward. You've already
Speaker 7: done some very transformative ones. Do you feel said that
Speaker 7: it's a matter of time in the CEO seat before
Speaker 7: you can do a significant deal or do you feel
Speaker 7: like you can jump right in.
Speaker 8: Well, I think we now have done three major acquisitions
Speaker 8: over the last fifteen years, all of which were in
Speaker 8: James's vision. Smith Barney shortly after the financial crisis, e
Speaker 8: Trade at the dawn of the pandemic, and they eat
Speaker 8: in advance. Those are three major integrations we like what
Speaker 8: we have, the business strategies in places. Let's execute on
Speaker 8: what we have, keep the strategy in place. We always
Speaker 8: talk about acquisition candidates, but that's that's often to the future.
Speaker 3: Now.
Speaker 7: The other thing, James has said that there are a
Speaker 7: few things you'd rather get out of the way before
Speaker 7: stepping down, including the US investigation into Morgan Stanley's role
Speaker 7: into the block trading market. Is this something that can
Speaker 7: be resolved before you step down.
Speaker 3: Well, I'm going to stay, as you know, Shnali as
Speaker 3: executive chairman for a period of time. We'll see how long.
Speaker 3: You know. Frankly, I shouldn't stay too long because it's
Speaker 3: Ted's job to run the firm now, so I'm going
Speaker 3: to be there just to help him in whatever way,
Speaker 3: and obviously meet with regulators around the globe. I've got
Speaker 3: to know over the last decade plus and key clients,
Speaker 3: and also in that period there are a few things
Speaker 3: I want to still clean up. I want to hand
Speaker 3: I said, as clean a plate as possible. These are
Speaker 3: monster jobs and enormously complex. You travel a lot, there's
Speaker 3: a lot that comes out, so I think it's nice
Speaker 3: to start with a clean plate. We wouldn't have announced
Speaker 3: I was stepping down if we didn't think whatever we
Speaker 3: still have left isn't manageable. I mean, I wanted to
Speaker 3: see seeka through. We came out of that actually with
Speaker 3: a better capital ration than we went into it. Twelve
Speaker 3: point nine CT one requirement, we're at fifteen to five.
Speaker 3: I want to see the initial BUZZLE proposal. We've seen that.
Speaker 3: I don't think it will end up where it is,
Speaker 3: and we're working very closely with regulators. I want to
Speaker 3: see the sort of summer months, obviously difficult quarter. We
Speaker 3: knew that was coming, so I wanted to just see
Speaker 3: the firm through that and then through this transitional leadership.
Speaker 3: So no, we're very comfortable with where we are in
Speaker 3: the process, and I'll do everything I can to help
Speaker 3: help Ted and help Dan and Andy.
Speaker 7: Now, one large issue that has been plaguing Wall Street
Speaker 7: is the lack of gender and ethnic diversity at the
Speaker 7: top ranks, and when the CEO search had come to
Speaker 7: its final steps, there were no women or people of
Speaker 7: color that were considered for the CEO ranks. What is
Speaker 7: your plan to increase representation in the top ranks of
Speaker 7: Morgan Stanley?
Speaker 8: The next generation has lots of representation of all types.
Speaker 3: It's a priority. It'll continue to be a priority.
Speaker 7: Do you have specific goals over the next few years
Speaker 7: to make sure that's.
Speaker 8: You know, Well, we in Oceanize it's a good question.
Speaker 8: We run a meritocracy and diversity comes in all types,
Speaker 8: and we have fantastic women and men from all backgrounds
Speaker 8: in senior positions on operating committees throughout the firm. And
Speaker 8: I couldn't be more excited about the look of the
Speaker 8: firm in the next five ten years.
Speaker 3: Now.
Speaker 7: I know you've said also that you know largely the
Speaker 7: strategies in place, and it will be continued on into
Speaker 7: the new leadership. There is one thing that is very
Speaker 7: much in the mind of CEOs lately, and that's technological
Speaker 7: disruption happening at a rabid clip. How are you thinking
Speaker 7: about how this could change Morgan Stanley and its positioning
Speaker 7: in the future.
Speaker 3: Well, so, you know, Walda Riston said it best the
Speaker 3: he said the most. I don't think he's totally right
Speaker 3: on this, but he observed the most important technological evolution
Speaker 3: for the financial services industry the ATM machine, and each
Speaker 3: generation if you look at it, has embraced technology into
Speaker 3: the businesses to make them better. What Ted did with
Speaker 3: the electronic Trading and Equities so called MSET phenomenal and
Speaker 3: that basically fed all of our trading apparatus that have
Speaker 3: supported that business being again number one or two depending
Speaker 3: on the quarter. But right up there what we've done
Speaker 3: with each trade. Each trade's a technology company with a brand.
Speaker 3: What we did with share works and what is now
Speaker 3: Morgan Santic work the electronic stock plan business and Soling
Speaker 3: we bought Soluing is a company of programmers in Calgary, Canada,
Speaker 3: and that became the birth of the stock plan business.
Speaker 3: So there's always technological revolution. What any Sabastine is now
Speaker 3: doing in the AA space sort of building off the
Speaker 3: early machine learning we did to create virtual financial advisors.
Speaker 3: It's endless. We just had a presentation the board on it.
Speaker 3: So it's in everything we do. We have nearly twenty
Speaker 3: thousand employees, direct or consultants working for us in technology.
Speaker 7: Now, before I let you guys go, what is the
Speaker 7: one biggest piece of advice that you have to Ted
Speaker 7: as you pass over the rank.
Speaker 3: Enjoy it. It's an incredible privilege to be able to
Speaker 3: make the call, to make decisions. Sometimes you'll be wrong,
Speaker 3: the only way to be right is not to make
Speaker 3: any So I took the approach of I was looking
Speaker 3: for I don't know what the analogy is something at
Speaker 3: bad So I'm not really a baseball player, but I
Speaker 3: wanted to make enough decisions where we got a lot
Speaker 3: of things right and along the way a few things
Speaker 3: mightn't go away, but that's okay. Just enjoy the journey,
Speaker 3: embrace the good bits and the bad bits. As you know,
Speaker 3: Kipling said, an if and those imposts of success and failure,
Speaker 3: and you know, keep yourself focused on the long term.
Speaker 3: You're going to have great quarters and you're gonna have
Speaker 3: disappointing quarters. You're going to think the stock should be
Speaker 3: up when it's down and down when it's up. None
Speaker 3: of that matters. What matters is the long term health
Speaker 3: of the franchise, the values, and your own stability in
Speaker 3: that role. And part of that is building a team.
Speaker 3: He's off to a phenomenal start in twenty four hours.
Speaker 3: We got a standing ovation from the board. Last night,
Speaker 3: we had a wonderful dinner with directors. We had all
Speaker 3: partners live in this building today and broadcast around to
Speaker 3: our eighty three thousand employees. So you know, enjoy the moment.
Speaker 3: It's an incredible privilege.
Speaker 7: Ted James, it was a pleasure to spend time with
Speaker 7: you on such a landmark day. From Morgan Stanley and
Speaker 7: hope to see you at the turn of the year
Speaker 7: when you take your new job.
Speaker 3: Thank you so much. Thanks to note.
Speaker 5: You're listening to the team Ken's are Live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 5: the iHeartRadio app and the Bloomberg Business app, or listening
Speaker 5: on demand wherever you get your podcasts.
Speaker 1: Stuner heads to Washington, DC. Why because we kind of
Speaker 1: have to Jen Flinton, she is head of US Government
Speaker 1: Affairs at Invesco joins US. So Jess we I'm sorry, Jen,
Speaker 1: I'm sorry, Jen.
Speaker 2: Jen.
Speaker 1: We actually have a Speaker of the House now. I
Speaker 1: guess that's a good thing. What are you taking away
Speaker 1: from I know you're based down in Washington. What are
Speaker 1: you taking away from the last couple of days of
Speaker 1: what we've seen in the House.
Speaker 9: Yeah, well, it's been particularly difficult for House Republicans. It's
Speaker 9: been a rather embarrassing twenty two days, and so I
Speaker 9: think a series of frustrations and blood letting in the
Speaker 9: family meetings finally resulted in complete exhaustion, and Mike Johnson,
Speaker 9: who is a fairly well liked member of Congress, although
Speaker 9: relatively unknown outside of Washington, there was unanimous, unanimous can support.
Speaker 9: So I think he came in at the right time,
Speaker 9: and I think a lot is going to be said
Speaker 9: for his ability to move forward. Hopefully he'll be able
Speaker 9: to take that unanimous support and move it into the legislature.
Speaker 2: So does this mean that Donald Trump is now back
Speaker 2: to holding the most sway of the Republican Party, Because
Speaker 2: what we do know Mike Johnson for is leading the
Speaker 2: way on that amicus brief to overturn the election results.
Speaker 2: Mike Johnson is an election denier. He doesn't believe that
Speaker 2: American democracy worked in twenty twenty.
Speaker 1: He doesn't believe that President.
Speaker 2: Biden fairly won the election, and all of the people
Speaker 2: in his party supported a person like that for Speaker
Speaker 2: of the House. Does that mean, well, either none of
Speaker 2: them believe in the US democracy or they're all sort
Speaker 2: of heeding the Trumpian call. Well, first, I'll.
Speaker 9: Say Donald Trump is the de facto leader of the
Speaker 9: Republican Party. There is no doubt about that. He is
Speaker 9: the former president. He's running for re election, right, and
Speaker 9: he is the leaning candidate in the primary. So you know,
Speaker 9: there's little doubt that Donald Trump is the leader of
Speaker 9: the Republican Party. That being said, he did have some
Speaker 9: sort of force within the last twenty two days putting
Speaker 9: in his support first for Jordan, who failed quite frankly,
Speaker 9: then opposition to Tom Emmer, who had already had about
Speaker 9: twenty six votes against him already. So whether that Sankum
Speaker 9: or whether that sort of sealed the deal, I think
Speaker 9: is sort of an open question. But moving forward, I
Speaker 9: into twenty twenty four, into an election year, I have
Speaker 9: no doubt that this Republican Conference will be united behind
Speaker 9: whoever is the Republican primary candidate, and right now Donald
Speaker 9: Trump is taking a heavy lead there.
Speaker 1: All right, So where does the Republican Party go?
Speaker 3: Now?
Speaker 1: Where does the House go? Now? From a legislative perspective, Well, two.
Speaker 9: Things, right, So first, they have to get appropriations bills
Speaker 9: across the House floor, and they need their appropriations bills
Speaker 9: because they are marking to f y twenty two levels.
Speaker 9: The Senate is marking to f y twenty three levels.
Speaker 9: That is a big disagreement, right, So over the next
Speaker 9: several weeks, you're going to see the House Republicans moving
Speaker 9: their House Appropriations bills across the table. That will be
Speaker 9: quite a feat on some of these bills which are
Speaker 9: rather controversial to keep that Republican majority united because they
Speaker 9: only have a four vote margin, they can only lose
Speaker 9: four or five votes depending on the day, depending on
Speaker 9: how many members are in town, and so that will
Speaker 9: put them in the negotiating position that they'll need to
Speaker 9: have in order to negotiate with the Senate on government
Speaker 9: funding going forward. And then of course there is the
Speaker 9: Defense supplemental that the White House sent to the Senate
Speaker 9: last week. It's currently being debated, discussed through hearings, through
Speaker 9: regular process in the Senate. I expect the same to
Speaker 9: happen in the House, but that's going to take a
Speaker 9: little bit of time. And that's funding Israel, Ukraine, Indo Pacific,
Speaker 9: the border, and there are going to be a lot
Speaker 9: of disagreements, a lot of controversies around the policy that
Speaker 9: surrounds that.
Speaker 1: Money in terms of cutting spending. Is there any hope that.
Speaker 2: These Republicans, Republicans are going to be able to rein
Speaker 2: it in after we've seen you know, basically deficits. Since
Speaker 2: Bill Clinton, say what you will about the flandering of
Speaker 2: William Jefferson, Clinton, at least he balanced the budget, right,
Speaker 2: Is there any hope that something like that happens ever
Speaker 2: again in our lifetimes? Jen, that's right.
Speaker 9: And Bill Clinton came together with House Republicans with Nuke
Speaker 9: Gingrich and was able to do that really in a
Speaker 9: bipartisan way. I don't necessarily see that sort of work
Speaker 9: being done between the White House and this Republican conference
Speaker 9: in the House. I do think, though, we will see
Speaker 9: it's going to naturally happen because of the debt ceiling deal.
Speaker 9: The parameter set forth. Either there was a one percent
Speaker 9: cut across the board starting January first, or they are
Speaker 9: able to come to some sort of agreement on appropriations
Speaker 9: that is going to lower the life levels of spending.
Speaker 9: Because you're right, we're facing a thirty three trillion dollar
Speaker 9: national debt, over one billion dollars a day in interest payments.
Speaker 9: The numbers came in on our deficit this year, it's
Speaker 9: about two trillion dollars. That's more than we are two
Speaker 9: trillion more than we're bringing in, right, We're spending that's
Speaker 9: a real problem.
Speaker 2: Much more than reticipated overs Yes, exactly, wow into a
Speaker 2: five percent gdp Q three exactly. It's not like we're
Speaker 2: trying to spend ourselves out of a recession here. I mean,
Speaker 2: this economy is on Faija in.
Speaker 1: Feego, so jen, is there any reason to believe that
Speaker 1: this new speaker will have any more success than the
Speaker 1: prior speaker in terms of dealing with the extreme right
Speaker 1: in the party, whether it's those you know, six seven
Speaker 1: people whoever there are. He's just dealing with himself.
Speaker 2: Yeah, Yeah, that's a.
Speaker 9: Sixty four thousand dollars question, right. I mean, this member
Speaker 9: has only ever had to speak for himself and for
Speaker 9: his constituencies in Louisiana. He has held a leadership position
Speaker 9: in the sense he was vice chair prior to the speakership.
Speaker 9: So he's been at the leadership table, He's heard the strategy,
Speaker 9: he's been part of that discussion. So he's coming in
Speaker 9: with some context, some awareness, and he certainly had to
Speaker 9: understand the factions and what he needed to do in
Speaker 9: order to bring together the members of this conference in
Speaker 9: order to get to the speakership. I think going forward,
Speaker 9: he has suggested in his run for speakership earlier this
Speaker 9: week with the conference, he has suggested that he wants
Speaker 9: to pass a CR into January or April April fifteenth,
Speaker 9: which is another magic deadline as regards to budget, in
Speaker 9: order to get that leverage for Republicans in the House
Speaker 9: to really negotiate with the Senate. This is going to
Speaker 9: be his first test. This will be key to show
Speaker 9: whether or not he can bring this conference together.
Speaker 1: All right, Jen, thank you so much for joining us.
Speaker 1: Really appreciate getting your insight. Jenny for Flinton, head of
Speaker 1: US Government Affairs for Invesco. Before joining Invesco, she spent
Speaker 1: a lot of time in Congress as working for actually
Speaker 1: a Congressman Patrick McHenry in his office, so lots of
Speaker 1: experience there.
Speaker 5: You're listening to the tape catch are live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 1: All right, here's some economics for you. We had the
Speaker 1: GDP print today. Matt Right, four point nine percent thinks great,
Speaker 1: But then you go look ahead and you see a
Speaker 1: company like United Parcel Service. These folks, they see the
Speaker 1: economy every single day on the ground, they put up
Speaker 1: disappointing numbers. Cut the forecast again. To me, that's the
Speaker 1: number to before. I mean, you don't even have to
Speaker 1: look ahead.
Speaker 5: Right.
Speaker 2: They did cut their outlook for the second time in
Speaker 2: less than three months, but even backward looking, it was horrible.
Speaker 2: Annual EPs came in at a dollar fifty seven, down
Speaker 2: forty seven percent from a year ago.
Speaker 1: Well, they got to pay their pilots more now, right,
Speaker 1: didn't they have that new contract? I don't think let's
Speaker 1: bring it. So many of those about this, like Lee Clasical,
Speaker 1: he covers all the transportation stuff. We blamed him for
Speaker 1: the supply chain thing back a couple of years ago.
Speaker 1: Now he got to fix that. He's with Bloomberg Intelligence,
Speaker 1: joining us live here in our Bloomberg Interactive Broker's studio
Speaker 1: a lead. What did you really hear from UPS and
Speaker 1: their earnings and kind of their outlook?
Speaker 10: Well, I mean, at the end of the day, they
Speaker 10: had a tough slog with their labor negotiation. They lost
Speaker 10: a lot of business to FedEx and another carriers. They're
Speaker 10: in the process of winning that business back. You know,
Speaker 10: they've won probably around six hundred thousand packages per day
Speaker 10: back of what they lost and it's going to take
Speaker 10: some time for them to get it all back. The
Speaker 10: good news is that some of the sequential changes that
Speaker 10: they saw from August to October, which August was the
Speaker 10: hardest hit from that labor even in terms of volumes
Speaker 10: going away, you know, they're seeing seasonal trends well above
Speaker 10: what they normal normally see. They said that that volume
Speaker 10: during that time period sequentially was up round two point
Speaker 10: seven million packages a day. In last year that was
Speaker 10: around one point five million packages a day. So it's
Speaker 10: definitely they're they're definitely turning in the right direction. But
Speaker 10: you know, the streets got to readjust their models. Fourth
Speaker 10: quarter expectations are definitely going to have to come in.
Speaker 10: You know, they provide full year guidance, which, as you mentioned, they.
Speaker 1: Had to lower it again.
Speaker 10: But when you look at the imply what that means
Speaker 10: for the fourth quarter earnings expectations and the EPs bases
Speaker 10: are going to have to come down anywhere between twenty five.
Speaker 1: And thirty cents.
Speaker 2: Well we care about I mean you care about UPS
Speaker 2: for the sake of UPS and their competition. We care
Speaker 2: about it mostly, I would say, for their view on
Speaker 2: the economy, right, because if things are going well, we're
Speaker 2: going to be shipping packages back and forth. If they're
Speaker 2: losing out to competitors, that's one thing. But if they
Speaker 2: have a dour outlook because they expect the economy to slow,
Speaker 2: that's another.
Speaker 1: Which is it? Yeah?
Speaker 10: I think you know, UPS is obviously about weather for
Speaker 10: the global economy. They have businesses everywhere around the world.
Speaker 10: They ship everything you can imagine, and probably things you
Speaker 10: can imagine.
Speaker 2: But I think I would love to hear the like
Speaker 2: top ten craziest things UPS shipped?
Speaker 1: Yeah, why don't we do a top ten list? Ever, Paul, Yeah,
Speaker 1: hasn't been done before. Yeah.
Speaker 2: Well, I mean, anyhow, I.
Speaker 10: Think the weakness that you're seeing in the fourth quarter,
Speaker 10: about a third of it is probably macro driven and
Speaker 10: two thirds of it is UPS specific.
Speaker 2: Excellent, That's exactly what I was wondering. So two thirds
Speaker 2: of it is company specific or industry specific, and a
Speaker 2: third of it is the economy.
Speaker 8: Yeah.
Speaker 10: Yeah, because I mean they're really dealing with the loss
Speaker 10: share that they had. I mean, you have these huge networks.
Speaker 10: There's a huge there's a dally averaging effect, right, So
Speaker 10: the less density you have, the more expensive it is
Speaker 10: per package.
Speaker 1: So how do you win back business just on price
Speaker 1: price service?
Speaker 10: You know, the company during their call was very adamant
Speaker 10: about the fact that they are not using price to
Speaker 10: entice people back. Maybe they're giving a slight discount, but
Speaker 10: they're not going into a deep discount because the end
Speaker 10: of the day, they have to pay for that new
Speaker 10: labor agreement. It's a five year deal. A lot of
Speaker 10: it is it's front loaded, something like forty five forty
Speaker 10: eight percent of it is in the first year, so
Speaker 10: you know they need to really offset that cost and
Speaker 10: that's going to be a headwind for them going through
Speaker 10: the first half of next year.
Speaker 2: How how does their labor costs look compared to others?
Speaker 2: And the reason I'm asking is you mentioned service, right,
Speaker 2: They're going to deliver better service if their employees are
Speaker 2: better paid. And you know, in less stressful working conditions,
Speaker 2: have air conditioning in their trucks or heating in the winter,
Speaker 2: are they in a good setup in that way?
Speaker 10: You know, when you look at ups and you look
Speaker 10: at FedEx, there are two different models. FedEx as the
Speaker 10: independent contractor model. Even if you look at Amazon, Amazon
Speaker 10: has an independent contract model. You know what it benefits
Speaker 10: UPS is they have stability in their workforce. They have
Speaker 10: a place where people probably want to come because they're
Speaker 10: making more and now and maybe they're not making so
Speaker 10: much more from a dollar standpoint, but when it's all
Speaker 10: said and done and benefits pension all that stuff, it's
Speaker 10: a place where people not only want to work, but
Speaker 10: they probably want to work their whole careers. Versus a
Speaker 10: FedEx or an Amazon where the employees are really it's
Speaker 10: really a track transaction, if you will. They're just there
Speaker 10: for the paycheck and if they find something better, they're
Speaker 10: off to the highest bidder.
Speaker 2: To me, that would I mean as a customer, I
Speaker 2: would rather than use UPS, you know.
Speaker 1: Yeah, you get a relationship with your delivery guy exactly. Yeah.
Speaker 1: And they have a cool uniform. Yeah, I like the
Speaker 1: brown So are we going to put air conditioning in
Speaker 1: the trucks now?
Speaker 10: They're putting the fans air conditioning all that sort of stuff.
Speaker 1: Why didn't they in the past.
Speaker 10: They just you see them on the road. They just
Speaker 10: to open the doors, you know, and and you know.
Speaker 1: Listen, it's at the end of the discuys are down
Speaker 1: in Texas where it's like three hundred degrees out. I mean,
Speaker 1: I don't care changing it. They're changing.
Speaker 2: I mean, they expect global warming to happen like this.
Speaker 2: Nobody told them it was going to happen like that.
Speaker 2: Who knew exactly?
Speaker 1: All right, let's let's step back a little bit from
Speaker 1: ups just kind of your space in general. You do
Speaker 1: you know, the big ocean shipping container, the railroads, the trucks,
Speaker 1: everything in between. Talk to us about just how is
Speaker 1: it out there in the transportation space. Are you guys,
Speaker 1: are your companies seeing a slow down? And if so,
Speaker 1: how pronounced?
Speaker 10: Well, we've been in a freight recession for for over
Speaker 10: a year now.
Speaker 1: Now, that was just tough comps. Tough comps.
Speaker 10: You know, there were certain aspects of the market that
Speaker 10: were down a lot more. You know, what we're seeing
Speaker 10: now is that, you know, the freight recovery will probably
Speaker 10: lead the economic recovery, and the freight recession should probably
Speaker 10: come nearer to an end in the first quarter because
Speaker 10: of easier comps, assuming we have some sort of GDP growth.
Speaker 10: You know, it doesn't have to be stellar growth. It
Speaker 10: could be low single digit growth. You know, assuming that's
Speaker 10: the case, we should come out of this funk. And
Speaker 10: what's this done. What this is done is really of
Speaker 10: depressed rates across the board. So if you're looking at
Speaker 10: trucking rates, liner rates there are, they are very very
Speaker 10: very very low. And it's you know, for some of
Speaker 10: these markets, especially trucking and the container liner market, it's
Speaker 10: really hard to figure out what's going to bring rates
Speaker 10: up because there's a lot of downward pressure because there's
Speaker 10: just so much supply out there. Why is there supplying
Speaker 10: I mean, well on the ocean liner.
Speaker 1: On everybody wanted capacity, right everybody.
Speaker 10: People are buying capacity. You know, capacity growth is expected
Speaker 10: to outpace demand growth by something like five hundred to
Speaker 10: six hundred basis points this year and next year. And
Speaker 10: then you know you have rates that were you know,
Speaker 10: they're down like seventy percent.
Speaker 1: If you wanted to ship.
Speaker 2: Your car now now is no problem now, Yeah, but
Speaker 2: I had to sell it. Yes, it's a horrible it's
Speaker 2: and if you wait.
Speaker 10: You'll probably if you want to wait, you probably get
Speaker 10: even a better rate because because liner rates, there's really
Speaker 10: no net for liner rates right now, trucking is a
Speaker 10: different story of supply is coming out of the market,
Speaker 10: which should go well for truck rates.
Speaker 1: All right, Lee, great stuff. As always Lee clasical. He
Speaker 1: is a senior transportation analyst logistics all that could stuff
Speaker 1: for Bloomberg Intelligence based on in Prince University, been making
Speaker 1: his way here to New York. We appreciate that.
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Speaker 1: A lot of I'd say you, here's the story that's
Speaker 1: got my attention of the past couple of days. This
Speaker 1: is going to be fascinating. Sam bankmin Freed, He's going
Speaker 1: to testify in his trial on on behalf to try to,
Speaker 1: I guess, counteract some of the negative testimony from some
Speaker 1: of his former colleagues and friends and girlfriends. I don't
Speaker 1: know what's going on there, but Max Chaffckin he knows.
Speaker 1: He's a calmnist for Bloomberg Business Week, Max, this sounds
Speaker 1: really risky from my perspective. What do you make of it?
Speaker 11: Well, so, you know, as you say, and as you're
Speaker 11: hinting at, criminal defense attorneys generally do not advise their
Speaker 11: clients to testify in their own defense, especially in a
Speaker 11: case like this. Sam Bankminfried, though, is not a traditional client,
Speaker 11: and as we know, anyone who's followed this story knows
Speaker 11: that he spent a lot of the weeks after the
Speaker 11: fall of FTX and even after his own arrest, giving
Speaker 11: interviews talking to pretty much anyone under the sun, saying
Speaker 11: all kinds of sort of half cocked, probably legally ill
Speaker 11: advised things, including that he you know, fed up and
Speaker 11: I'm quoting there and so. So again, this is not
Speaker 11: a traditional client, and we're probably not going to see
Speaker 11: a traditional defense or traditional testimony from him.
Speaker 2: What have we seen so far? I mean, has the
Speaker 2: testimony been so damning that putting himself on the stand,
Speaker 2: or that a lawyer putting him on the stand is
Speaker 2: the best the defense team can do?
Speaker 11: I mean, I think again, I'm not on the jury,
Speaker 11: and so it's always hard to speculate, but it has
Speaker 11: seemed from the outside to be pretty damning. I mean,
Speaker 11: we've seen basically his closest friends and senior executive team
Speaker 11: all get up there on the stand and talk not
Speaker 11: just in detail, saying that yes, the crimes that the
Speaker 11: you know, that the state is charging did occur, Sam
Speaker 11: Banganfreed did them, but producing essentially mountains of evidence showing
Speaker 11: Bankman Fried's direct involvement. So we've seen messages, we've seen
Speaker 11: Google docs, we've seen these very specific accounts, particularly from
Speaker 11: Caroline Ellison, who was the CEO of Allimeter Research that
Speaker 11: was Bankman Freed's hedge fund and his ex girlfriend. You
Speaker 11: know that they produced this kind of chain of balance
Speaker 11: sheets that Sam Bankwetfried was was very active in. So yeah, yeah,
Speaker 11: it has not looked good for what.
Speaker 1: Has been his I guess defense in this what's he
Speaker 1: claiming or what's I don't know?
Speaker 2: Well already told us up there.
Speaker 11: There are aspects of the defense that look like a
Speaker 11: traditional white collar defense. You know a lot of times
Speaker 11: in white collar defense is what the person who's accused
Speaker 11: will try to do is present is very complicated. There's
Speaker 11: a lot of ins, a lot of outs. You know,
Speaker 11: this is you know, complicated stuff. And I was doing
Speaker 11: my best, didn't mean to commit fraud. There is some
Speaker 11: of that here, but there's also been an effort to
Speaker 11: essentially blame everybody other than him, And that's the part
Speaker 11: that I'd say is probably legally, you.
Speaker 1: Know, less well advised.
Speaker 11: He spent a lot of time in interviews ahead of this,
Speaker 11: and we've seen some of this come out during the trial,
Speaker 11: essentially blaming Carolyn Ellison.
Speaker 1: For for the for the fraud.
Speaker 11: Or blaming his lawyers, or blaming you know, outside counsel
Speaker 11: and so on, and again it hasn't seemed especially credible
Speaker 11: because the prosecutors have been able to produce you know,
Speaker 11: emails and so on showing that he was very involved.
Speaker 11: And also, you know, it's not exactly a good look
Speaker 11: when the CEO is saying, oh no, this is just
Speaker 11: my underling's fault, especially the CEO who at one time
Speaker 11: you know, had personally enriched himself to the extent that
Speaker 11: Sam bankman Fried had done. So he you know, we've
Speaker 11: learned of a billion dollars in personal loans, you know,
Speaker 11: three hundred million dollars in luxury real estate, and the
Speaker 11: list kind of goes on and on.
Speaker 2: Is there any chance and I don't know that this
Speaker 2: matters in terms of this current court decision, But is
Speaker 2: there is there a chance that people who lost money
Speaker 2: in FTX or made whole because of you know, moonshot
Speaker 2: investments that they made that now look like they may
Speaker 2: pay off.
Speaker 11: Yeah, I mean, I think it's it's definitely too soon
Speaker 11: to say made whole. I think it's looking increasingly likely
Speaker 11: that some money at least will be recovered. You're I
Speaker 11: think you're alluding to Anthropic, which was this kind of
Speaker 11: moonshot AI investment is now you know, there are rumors
Speaker 11: valuations being tossed around in the in the tens of
Speaker 11: billions of dollars. The issue is that there's a lot
Speaker 11: of these assets are not highly traded, so it's it's
Speaker 11: sort of hard to know, like if they started selling them,
Speaker 11: what would happen to the price?
Speaker 1: Where were they go?
Speaker 11: And even even with a case of anthropic, right, you
Speaker 11: can't just go and sell that stake on the open market.
Speaker 11: A lot of this stuff will take a long time
Speaker 11: to unwind, the economy can change and so on.
Speaker 1: The other thing is the question.
Speaker 11: Of whether or not investors can be made whole isn't
Speaker 11: really relevant to Sam bankman.
Speaker 2: Free, it's not relevant. But yeah, I mean Matt Levine
Speaker 2: has written about if you defraud somebody and that person
Speaker 2: never gets her money back, you know you're gonna be
Speaker 2: in trouble. But if you defraud someone and she does
Speaker 2: get her money back, it's gonna be less bad. Yeah.
Speaker 11: Yeah, And and perhaps you know that will impact how
Speaker 11: Sam bankman Free's legacy, you know, is perceived and so on.
Speaker 11: I don't think it's gonna have an impact on this
Speaker 11: case because again, the jury isn't hearing this stuff. And
Speaker 11: again the charges are did Sam bankman Free take customer
Speaker 11: money and gamble it?
Speaker 1: The fact that you gambled it, and maybe.
Speaker 11: One doesn't necessarily you know, address the central allegation. And
Speaker 11: again there are allegations here. You know, we're going to
Speaker 11: have a second trial around campaign finance violations that stuff.
Speaker 1: Can you know, he could go to jail for a
Speaker 1: long time.
Speaker 11: There's the Chinese bribery allegation.
Speaker 2: So there's a bunch of these are separate trials.
Speaker 1: There are two separate trials.
Speaker 2: Yes, so what's the timeline look like for this one?
Speaker 11: Yeah, So we're gonna see Bank and Freed likely start
Speaker 11: testifying today, that'll go into tomorrow, probably early next week.
Speaker 11: I mean, we the jury could begin deliberating next week.
Speaker 11: We could have a verdict as as early as next week,
Speaker 11: although it seems possible it could go onto our reporters
Speaker 11: allowed in the courtroom, Yes, okay, public is allowed in
Speaker 11: the courtroom. We have we have a team of people
Speaker 11: down there there. They've been reporting on this, you know, relentlessly.
Speaker 11: You can read it on on Bloomergeck Tom at the terminal.
Speaker 11: General Public's also in there. So we've seen kind of
Speaker 11: a weird rotating list of kind of crypto figures and influencers.
Speaker 1: I think Martin Screlly was was there early on.
Speaker 11: You know, it's it's it's sort of been a you know,
Speaker 11: a of weird reality.
Speaker 1: I mean, this is really to a certain then I wonder,
Speaker 1: you know, crypto is this in a to what extent?
Speaker 1: Is this an indictment or of the crypto space? I mean,
Speaker 1: is it seen that way by people?
Speaker 3: Well?
Speaker 1: I think it's you know, it depends what you talk to.
Speaker 11: You So you talk to people in the industry, right,
Speaker 11: they have been very keen and you've seen the industry
Speaker 11: really like they have been some of the most aggressive
Speaker 11: people in calling out Sam Bankman free because because they
Speaker 11: want to make an effort to say, hey, look, this
Speaker 11: was a bad actor, you know, bad apple, He's making
Speaker 11: us look bad.
Speaker 2: I think in the minds.
Speaker 11: Of normal investors, in the minds of the public, right
Speaker 11: that arguments a little harder because.
Speaker 1: Sam Bankman freed.
Speaker 11: His whole thing was that he was the most law abiding,
Speaker 11: least sketchy. I mean, this is a world that has
Speaker 11: operated kind of on the edges of various laws in
Speaker 11: all over the world. So so again it's I think
Speaker 11: it's really too early to know how the what the
Speaker 11: impact is going to be on crypto broadly, and I
Speaker 11: think some of that has to do with, frankly, the
Speaker 11: verdict and and and depending on what the jury says,
Speaker 11: I think will will affect how people probably, I mean, can.
Speaker 2: He dude, you got to think that, you know, just
Speaker 2: because Bernie Madoff committed a big sixty five billion dollar
Speaker 2: fraud with an investment Ponzi scheme, that's not an indictment
Speaker 2: of the US stock market and certainly not of the
Speaker 2: US dollar, right right, right exactly, although I could see
Speaker 2: that because crypto is so difficult to understand, because it's
Speaker 2: not clear yet whether much or even any of these
Speaker 2: coins are gonna be worth something in five or ten years.
Speaker 2: People might very easily conflate the two.
Speaker 11: Yeah, absolutely, I mean it was an indictment of Ponzi schemes, right,
Speaker 11: And and the UH and the crypto critics are gonna
Speaker 11: are gonna essentially say that there there are businesses out
Speaker 11: there that are operating in ways that aren't necessarily that
Speaker 11: different from UH from the way ftx's offer.
Speaker 1: And this guy's facing real jail time, right, what it's.
Speaker 11: I mean, it's he faces a potential life sentence. Wow,
Speaker 11: the I mean effective life sentence. It's gonna be so
Speaker 11: many years that it would be, you know, he'd be
Speaker 11: old or deceased by the time he got out.
Speaker 1: We don't really know, you know.
Speaker 11: Of course, there's there's a wide potential range of potential sentences.
Speaker 11: You're talking about anywhere from years to decades. And of
Speaker 11: course he could be acquitted. Whatever happens with this case,
Speaker 11: I think they're definitely gonna be appeals. And there is
Speaker 11: this second trial, the second criminal trial, which also carries
Speaker 11: significant jail.
Speaker 1: Tourn all right, man, great stuff, Max, Thanks for joining
Speaker 1: us here. Max Chaffick he's a columnist for Bloomberg BusinessWeek.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
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