WEBVTT - UPS Cutting Costs and Amazon Cutting Jobs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>One of the stock stories in the news, folks, is

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<v Speaker 2>it is Amazon cutting fourteen thousand jobs. I was doing

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<v Speaker 2>from reading a Bloomberg news and they had like almost

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<v Speaker 2>doubled their.

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<v Speaker 3>Headcount pre pandemic.

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<v Speaker 2>So we're coming out of the pandemic, and so it

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<v Speaker 2>makes sense that they can should be shedding some jobs.

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<v Speaker 3>Perhaps let's check it.

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<v Speaker 2>With put them Boil, senior US e commerce and retail

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<v Speaker 2>analysts for Bloomberg Intelligence. Put them talk to us about

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<v Speaker 2>Amazon here at fourteen thousand jobs, It seems like a

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<v Speaker 2>big number, but I do know and for those effect

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<v Speaker 2>that it is a big number. But they have, you know,

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<v Speaker 2>over a million employees. So what's happening at Amazon?

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<v Speaker 4>Yeah, it sounds like a big number in the grand

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<v Speaker 4>scheme of things, than for Amazon, it's not needle moving right.

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<v Speaker 4>It's fourteen thousand is about four percent of its corporate workforce,

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<v Speaker 4>and even smaller when you look at it on a

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<v Speaker 4>base of one point five to five million employees worldwide,

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<v Speaker 4>so still very small. But they're cutting, right, and that's

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<v Speaker 4>the thing They've been cutting since after the pandemic, as

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<v Speaker 4>you mentioned, and we think this is just the beginning.

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<v Speaker 4>We're just scratching the surface. There will be more cuts

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<v Speaker 4>with Amazon, especially as automation and AI continue to fuel

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<v Speaker 4>efficiencies across the organization. We haven't even got to warehouses

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<v Speaker 4>yet right where there's a lot of automation going on.

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<v Speaker 5>So is AI the main reason behind the lanes I mean,

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<v Speaker 5>is the company's run to offset that rising AI capex.

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<v Speaker 4>I mean it helps right because they're continuing to invest

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<v Speaker 4>in AI and capex through AWS. But how do they

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<v Speaker 4>drive margin efficiencies. It's through using some of those efficiencies

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<v Speaker 4>and pairing back on the employee headcount. That and automation,

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<v Speaker 4>those are the I think two biggest things that are

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<v Speaker 4>going to drive the need for more efficient and then

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<v Speaker 4>give back to the company through fewer headcounts.

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<v Speaker 2>I don't know, Lisa, call me Seneco, but I believe

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<v Speaker 2>this is my opinion that AI is can be a

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<v Speaker 2>net job taker.

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<v Speaker 3>And I think in size too, for a lot of industries.

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<v Speaker 3>I think this is going to be a really We're

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<v Speaker 3>continuing to see it in die stories.

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<v Speaker 2>I think so when you know, some CEOs are trying

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<v Speaker 2>to paint a different picture. So all right, let's take

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<v Speaker 2>a look. You're you're the boss of all things retail?

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<v Speaker 2>How's this holiday season going to be?

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<v Speaker 3>Here? Is this is gonna be a good year?

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<v Speaker 4>I think so. I think the consumer has been holding

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<v Speaker 4>up relatively well. Spending is higher, and we think Amazon's

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<v Speaker 4>continuing to take share. They're going to be reporting this Thursday,

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<v Speaker 4>and we're expecting solid retail sales numbers high single digits,

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<v Speaker 4>and we do think that they're going to take share

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<v Speaker 4>once again this holiday season. Overall, I think the consumer

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<v Speaker 4>will show up.

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<v Speaker 5>Can you dig into go back to Amazon Andy Jase's

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<v Speaker 5>kind of role in the company. It seems to be

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<v Speaker 5>filled with job cuts, changing different. What's his focus right now?

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<v Speaker 4>I mean, he clearly said that he's going to be

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<v Speaker 4>cutting back on jobs earlier this year in the summer,

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<v Speaker 4>so we do see that rolling out. I think the

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<v Speaker 4>focus is to invest in long term growth. I mean,

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<v Speaker 4>he was very clear in his statements that you know,

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<v Speaker 4>we can't worry about the intra quarter the quarter to

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<v Speaker 4>quarter trends, and we really need to stay focused on

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<v Speaker 4>the longer run. How does Amazon continue to to remain

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<v Speaker 4>the leader that it has been, because, as you know,

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<v Speaker 4>it's very easy to now operate an online business, whether

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<v Speaker 4>it's through Shopify, everyone almost has the same playing ground

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<v Speaker 4>to compete in. So how does Amazon differentiate? And the

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<v Speaker 4>only way to do it is continue to invest in

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<v Speaker 4>the future, and right now that's Ai, whether it's jen Ai,

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<v Speaker 4>agentic Ai, wherever it may lead us, it is AI.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast live weekdays at

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<v Speaker 2>Through ups is. In the news today, I've poorted some numbers,

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<v Speaker 2>cutting some headcount. The street likes it. The stocks up

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<v Speaker 2>seven and a half percent. It's down twenty four percent

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<v Speaker 2>year to date, but a good day for United Parcel Service.

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<v Speaker 3>Let's break it down with Lee Clasgow.

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<v Speaker 2>He's our senior logistics analyst for Bloomberg Intelligence. He covers

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<v Speaker 2>the rails the trucks, the shipping, the air fready covers

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<v Speaker 2>it all.

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<v Speaker 3>We didn't really talk.

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<v Speaker 2>To LEAD too much until the pandemic and then the logistics.

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<v Speaker 2>We all became experts on logistics and we're like, Lee,

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<v Speaker 2>help us out.

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<v Speaker 3>We don't know what's going on. So Lee, thanks for

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<v Speaker 3>joining us here talk to us about UPS. What's going

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<v Speaker 3>on there?

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<v Speaker 6>Yeah? Trust me, I enjoyableieve being a flavor of the month.

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<v Speaker 6>So I'm glad to be here and talk about transports.

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<v Speaker 6>You know, what's going on the UPS is they are

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<v Speaker 6>making progress and they're executing on their plan. And their

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<v Speaker 6>plan really is to create in a network that can

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<v Speaker 6>not only handle, but thrive in an ever changing environment.

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<v Speaker 6>And that change is being driven by e commerce. It's

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<v Speaker 6>being driven by the uncertainty around tariffs. And what they've

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<v Speaker 6>been able to do is increase productivity through technology, whether

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<v Speaker 6>it's automation or AI. And that also they were stepping

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<v Speaker 6>away from business from Amazon. You know, they noted an

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<v Speaker 6>on the morning call that there are three quarters into

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<v Speaker 6>a six quarter glide down of Amazon business and the

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<v Speaker 6>reason why they want to move away from Amazon business

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<v Speaker 6>that tends to be lower margin, lower yielding packages. But

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<v Speaker 6>that's not to say that they don't want to totally

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<v Speaker 6>walk away from Amazon, because their return business is a

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<v Speaker 6>good business for them, and we're seeing you know, the

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<v Speaker 6>success in the numbers, and you know, going into the quarter,

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<v Speaker 6>I think investors were cautious or had low expectations, and

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<v Speaker 6>management kind of exceeded those with the results. And their

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<v Speaker 6>outlook really shows us that, you know, expectations for the

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<v Speaker 6>fourth quarter in twenty twenty six, at least as it

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<v Speaker 6>relates to you know, sell side analyst consensus is probably

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<v Speaker 6>a bit low and it needs to move higher.

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<v Speaker 5>Welle, can you get more into the cuts that we

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<v Speaker 5>were talking about, thirty four thousand job cuts, Where were

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<v Speaker 5>they seen and what kind of let's say, year over

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<v Speaker 5>year cost savings does it expect in twenty twenty five

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<v Speaker 5>from all of this.

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<v Speaker 6>Yeah, so, you know, what they're trying to do their

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<v Speaker 6>overall cost savings, which includes you know, the headcount reductions.

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<v Speaker 6>You know, they're looking to get three point five billion

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<v Speaker 6>dollars in cost savings this year. They've done around two

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<v Speaker 6>point two billion of that so far, and some of

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<v Speaker 6>the reductions are driven by you know, they offered early

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<v Speaker 6>retirement for some of their drivers. They said they've had

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<v Speaker 6>pretty good pick up with that, and that payoff should

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<v Speaker 6>be about a year from what it costs costs something

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<v Speaker 6>one hundred and seventy five hundred and eighty million dollars,

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<v Speaker 6>and they mentioned on the call that it will take

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<v Speaker 6>about a year to get to make those costs back up,

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<v Speaker 6>so you know, it really should be paying for itself.

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<v Speaker 6>And they're closing a lot of facilities. So they've they've

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<v Speaker 6>closed you know, something like ninety ninety five facilities so far,

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<v Speaker 6>and that's being driven by they don't need the network

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<v Speaker 6>they had when they were, you know, really handling a

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<v Speaker 6>lot of Amazon business and now that you know, like

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<v Speaker 6>I mentioned earlier, they're walking away from that business. They're

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<v Speaker 6>kind of reconfiguring their network. And they're also you know,

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<v Speaker 6>as I mentioned, they're increasing overall automation. You know, they know,

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<v Speaker 6>they're on their call that they've added automations around thirty

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<v Speaker 6>five more facilities and about sixty six percent of their

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<v Speaker 6>packages of touch these automated facilities, which is around three

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<v Speaker 6>hundred basis points more than was last year, and that

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<v Speaker 6>that numbers is going to continue as management makes more

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<v Speaker 6>inroads at modernizing their facilities.

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<v Speaker 3>Lee, what is the ups and maybe effed extra that matter.

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<v Speaker 2>How are they kind of talking to you guys about

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<v Speaker 2>tariffs and how it might be impacting their business just

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<v Speaker 2>as a big, big part of supply chain.

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<v Speaker 6>Yeah, you know, it's interesting. So for like a UPS,

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<v Speaker 6>you know, there's good and bad when it comes to

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<v Speaker 6>the tariffs and the more protectionist policies in the US.

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<v Speaker 6>You know, we've ended the dominamus exemptions, which you know

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<v Speaker 6>stated that if a shipment came into the United States

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<v Speaker 6>and it was worth eight hundred dollars or less, it

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<v Speaker 6>didn't have to pay a duty or a tariff. You know,

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<v Speaker 6>the Biden administration was working towards getting rid of that.

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<v Speaker 6>That Trump brought that Trump administration brought that to the

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<v Speaker 6>finish line. You know, first it was it was just

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<v Speaker 6>packages that were coming in from China and Hong Kong.

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<v Speaker 6>And now that's been you know, all packages coming to

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<v Speaker 6>the United States and that's hurting volumes. They noted their

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<v Speaker 6>US or their China to US volumes were down around

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<v Speaker 6>twenty percent and that's having a negative impact. Now you

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<v Speaker 6>look at their forwarding business, you know, because of all

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<v Speaker 6>these packages are now if they are going to be

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<v Speaker 6>coming in a lower value packages have to pay duty,

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<v Speaker 6>they need to lean more heavily on their customs business.

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<v Speaker 6>So you've seen their supply chain business outperform this quarter,

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<v Speaker 6>and I suspect a lot of that had to do

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<v Speaker 6>with the additional fees that they generate from helping shippers

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<v Speaker 6>clear packages through customs.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple Coarcklay and Android

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<v Speaker 1>Auto with the Bloomberg Business app. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 2>Polish Manteo sitting in for Scarlet Fu and Paul Sweeney.

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<v Speaker 2>We're live at BAM Mutual headquarters down in Lower Manhattan.

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<v Speaker 3>This is what I call the Oppenheimer Building.

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<v Speaker 2>I call it World Financial Center, but the kids call

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<v Speaker 2>it Brookfield Place.

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<v Speaker 3>I don't know what's going on down here, but it

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<v Speaker 3>is a.

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<v Speaker 2>Great part of town. I worked down here pre nine

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<v Speaker 2>to eleven. And what they've done down here, Folks, if

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<v Speaker 2>you're not from New York area, if you to the city,

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<v Speaker 2>you have to come down to Lower Manhattan see what

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<v Speaker 2>they've done down here. It's just extraordinary. It's just really

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<v Speaker 2>really vibrant down here. We're joining right now by Sean McCarthy.

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<v Speaker 2>He's the CEO of BAM Mutual. Sean, thanks for having

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<v Speaker 2>us back to your offices. We appreciate it, sir, you.

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<v Speaker 7>Know, thank you Paul Lisa for coming. It's this is

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<v Speaker 7>an annual tradition and we really appreciate it absolutely.

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<v Speaker 2>I think when I was here last year at this time,

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<v Speaker 2>you said twenty twenty four was going to be a

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<v Speaker 2>record year in municipal bond issuance.

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<v Speaker 3>That was what happened. How about this year, this year.

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<v Speaker 7>Is going to be, in all probability another record.

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<v Speaker 3>Wow.

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<v Speaker 7>The growth of the business has been really robust. A

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<v Speaker 7>number of factors that make that happen. First, the state

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<v Speaker 7>and local government's the responsibility is being pushed down on

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<v Speaker 7>them to issue more infrastructure debt. So if you think

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<v Speaker 7>about infrastructure, eighty percent of what you think about is

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<v Speaker 7>just infrastructure is financed at the state and local government level,

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<v Speaker 7>not at the level. So this has been a year

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<v Speaker 7>where many many issuers have come to market and we

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<v Speaker 7>and that's a result of a lack of you know,

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<v Speaker 7>a change in the federal support from healthcare to other programs,

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<v Speaker 7>and so we think the stand local government is going

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<v Speaker 7>to pick up where the federal government is stepping back.

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<v Speaker 7>And so I think it's going to be a record

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<v Speaker 7>year this year and probably pretty robust next year.

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<v Speaker 5>Now, are there certain areas of many that have performed

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<v Speaker 5>better than others?

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<v Speaker 7>So well, I think from an activity standpoint, it's been

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<v Speaker 7>across the board. Okay, so you see a lot of

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<v Speaker 7>healthcare general obligations which are full faith from stan local

0:11:38.040 --> 0:11:41.640
<v Speaker 7>governments themselves, lots and lots of projects across the country.

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<v Speaker 7>I think that one of the areas that's going to

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<v Speaker 7>be most dynamic going forward is power. You know, if

0:11:48.920 --> 0:11:53.360
<v Speaker 7>you think about AI, the amount of power and data

0:11:53.440 --> 0:11:56.920
<v Speaker 7>centers that are in their demands. I was speaking to

0:11:56.960 --> 0:12:00.439
<v Speaker 7>one of the heads of one of the largest municipal

0:12:00.440 --> 0:12:03.320
<v Speaker 7>power agencies and he said that the demand that they're

0:12:03.360 --> 0:12:05.400
<v Speaker 7>being asked for now, let's assume that some of its

0:12:05.520 --> 0:12:08.760
<v Speaker 7>double counting is going to be four to ten times

0:12:08.800 --> 0:12:11.000
<v Speaker 7>with the produce right now, So.

0:12:10.880 --> 0:12:13.000
<v Speaker 2>Sean, just for the folks that don't know what you

0:12:13.000 --> 0:12:17.959
<v Speaker 2>guys do, BAM insures municipal bonds, giving another level of

0:12:18.040 --> 0:12:19.199
<v Speaker 2>certainty for investors.

0:12:19.360 --> 0:12:23.079
<v Speaker 7>That's correct. So we are a double A rated insurance

0:12:23.120 --> 0:12:26.680
<v Speaker 7>company by Standard and Poors. And really what we do

0:12:26.880 --> 0:12:30.320
<v Speaker 7>is guarantee different than other kinds of insurance. We guarantee

0:12:30.440 --> 0:12:33.280
<v Speaker 7>timely payment of principle and interest when due. So that

0:12:33.440 --> 0:12:37.000
<v Speaker 7>means if there is a credit event that would cause

0:12:37.800 --> 0:12:42.000
<v Speaker 7>a default, we pay first and then mitigate later. But

0:12:42.080 --> 0:12:44.600
<v Speaker 7>one of the unique things that we do and the

0:12:44.640 --> 0:12:48.840
<v Speaker 7>reason why at this point we've through our inception, which

0:12:48.880 --> 0:12:52.880
<v Speaker 7>is thirteen years, we've guaranteed one hundred and seventy billion

0:12:52.920 --> 0:12:57.680
<v Speaker 7>dollars worth of transactions and we have had no defaults

0:12:58.240 --> 0:13:02.720
<v Speaker 7>on these transactions. That's really because we focus on municipal

0:13:03.280 --> 0:13:09.640
<v Speaker 7>essential infrastructure, state local government obligations, and we work with municipalities.

0:13:09.720 --> 0:13:12.520
<v Speaker 7>If there are bumps in the road like what happened

0:13:12.679 --> 0:13:16.560
<v Speaker 7>during COVID, we're proactive and working with the municipalities to

0:13:16.559 --> 0:13:19.880
<v Speaker 7>make sure that they're in the best financial health that

0:13:19.920 --> 0:13:20.280
<v Speaker 7>could be.

0:13:20.640 --> 0:13:23.360
<v Speaker 5>And how have MUNI has been performing compared to treasuries?

0:13:24.600 --> 0:13:27.320
<v Speaker 7>You know, well, I mean I think that the way

0:13:27.360 --> 0:13:30.760
<v Speaker 7>we look at it, it's when issuers are coming to

0:13:30.800 --> 0:13:33.640
<v Speaker 7>market and what the performance of municipal bonds are, we're

0:13:33.679 --> 0:13:35.400
<v Speaker 7>going to have an investor come speak a little bit

0:13:35.480 --> 0:13:40.040
<v Speaker 7>later today, I think, and the relative performance has been

0:13:40.040 --> 0:13:42.800
<v Speaker 7>really quite quite robust, and I think that's going to

0:13:42.960 --> 0:13:45.840
<v Speaker 7>sort of all going into the next year.

0:13:46.000 --> 0:13:48.079
<v Speaker 2>Talk to us about this credit quality of the municipal

0:13:48.080 --> 0:13:51.680
<v Speaker 2>bond market. I haven't really heard or seen or read

0:13:51.720 --> 0:13:54.800
<v Speaker 2>about major blow ups, whether it was years ago Puerto

0:13:54.880 --> 0:13:58.000
<v Speaker 2>Rico or Chicago or just Illinois in general. Quite frankly,

0:13:58.440 --> 0:14:00.359
<v Speaker 2>we haven't really seen that too much.

0:14:00.760 --> 0:14:07.800
<v Speaker 7>So I think massive individual credit problems is not what's

0:14:07.840 --> 0:14:09.760
<v Speaker 7>happening at the moment. I think what you're going to

0:14:09.800 --> 0:14:13.240
<v Speaker 7>see happening, what we feel is happening, is a greater

0:14:13.400 --> 0:14:18.280
<v Speaker 7>differentiation among credits. So, for example, if you take healthcare,

0:14:20.160 --> 0:14:25.080
<v Speaker 7>there are lots of very big financial hospital systems, large

0:14:25.480 --> 0:14:29.280
<v Speaker 7>single hospital institutions, and a lot of small rural hospitals.

0:14:29.800 --> 0:14:31.960
<v Speaker 7>How they're going to be affected by what happens to

0:14:32.040 --> 0:14:37.160
<v Speaker 7>Medicare and Medicaid payments and how technology changes the way

0:14:37.200 --> 0:14:40.960
<v Speaker 7>healthcare is delivered is going to create a different sense

0:14:41.040 --> 0:14:43.240
<v Speaker 7>of who the winners are and who the losers are

0:14:43.280 --> 0:14:44.360
<v Speaker 7>would be a good example of that.

0:14:44.840 --> 0:14:47.560
<v Speaker 5>Are you expecting a slowdown by the end of the year,

0:14:47.600 --> 0:14:49.800
<v Speaker 5>maybe November? Do things tend to I think the end

0:14:49.840 --> 0:14:50.360
<v Speaker 5>of the year.

0:14:50.280 --> 0:14:53.240
<v Speaker 7>I think you're right. I think a volume will tail

0:14:53.280 --> 0:14:56.880
<v Speaker 7>off in the fourth quarter. Usually does unless there's a

0:14:56.960 --> 0:14:58.880
<v Speaker 7>change in the tax law. But one of the important

0:14:58.880 --> 0:15:01.880
<v Speaker 7>things that happened earlier this year was that when the

0:15:01.960 --> 0:15:06.040
<v Speaker 7>Big beautiful bill was passed, tax exemption I meannessial bonds

0:15:06.160 --> 0:15:09.920
<v Speaker 7>really was not affected. So that enabled at the beginning

0:15:09.960 --> 0:15:11.920
<v Speaker 7>of the year, if you think issuers were trying to

0:15:11.960 --> 0:15:14.360
<v Speaker 7>come to market, to try to because they weren't sure

0:15:14.360 --> 0:15:16.480
<v Speaker 7>what the outcome is going to be, and then later

0:15:16.560 --> 0:15:19.000
<v Speaker 7>the market environment was so favorable that they continued to

0:15:19.360 --> 0:15:23.320
<v Speaker 7>participate in the market to bring their new issues to market.

0:15:23.600 --> 0:15:27.920
<v Speaker 7>We'd see going forward if interest rates continue to decline,

0:15:28.200 --> 0:15:29.560
<v Speaker 7>you probably have a better idea of what's going to

0:15:29.640 --> 0:15:34.440
<v Speaker 7>happen tomorrow than I do. But if you think about

0:15:34.600 --> 0:15:37.920
<v Speaker 7>that effect, there'll be a greater number of refinancings as well.

0:15:38.320 --> 0:15:43.040
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