WEBVTT - Morgan Stanley's Ted Pick Talks Trump, M&A Picking Up, Risk

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>By from Davos, Switzerland to the World Economic Forum, The

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<v Speaker 2>Big Event, Ted Pick the Morgan Stanley Chairman.

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<v Speaker 3>And fantastic good. One year in the.

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<v Speaker 4>Seat, Yes, one year and three weeks. How does it

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<v Speaker 4>feel amazing?

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<v Speaker 3>Yeah?

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<v Speaker 4>You know, you come into this job and you you

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<v Speaker 4>want to do good. What you discover is the quality

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<v Speaker 4>of underlying franchise and the people, and it's a wonderful franchise.

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<v Speaker 3>I got the keys to.

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<v Speaker 4>A great car and the partnership is alive and well.

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<v Speaker 2>Now you've got to hit the ground running.

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<v Speaker 3>Yeah.

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<v Speaker 2>American bankers running around CEO very very very happy here

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<v Speaker 2>in Davas, Switzerland, the CEOs and American bankers and you

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<v Speaker 2>one of them. Are you optimistic about this year ahead?

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<v Speaker 2>And what is it about the incoming administration that gives

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<v Speaker 2>you that confidence?

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<v Speaker 3>Jonathan?

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<v Speaker 4>I am positive because it is definitely a change in tone.

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<v Speaker 3>It just feels like the overall.

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<v Speaker 4>Framework is one where's more interaction between the public and

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<v Speaker 4>the private sectors.

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<v Speaker 3>Where you guys are talking.

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<v Speaker 4>About last couple of minutes, it can't be state actors

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<v Speaker 4>alone and it can't be private companies alone.

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<v Speaker 3>So the fact that.

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<v Speaker 4>There's real dialogue building. I think that's a huge plus.

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<v Speaker 4>And on the European question, sort of interesting comment too,

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<v Speaker 4>because I think there may be some catalysts to some

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<v Speaker 4>now reflection. You know, there were the droggy papers and

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<v Speaker 4>people read it, they kind of read it, but there

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<v Speaker 4>was nothing capital markets, union, banking union, kind of European

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<v Speaker 4>sort of self strength. Maybe this is a catalyst some

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<v Speaker 4>real conversations.

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<v Speaker 3>So in that sense, I think it's positive too.

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<v Speaker 1>Are you hearing about actual business activities stemming from that

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<v Speaker 1>change in tone in Europe or is it just sort

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<v Speaker 1>of a conversation at this point.

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<v Speaker 4>Well, I mean we're like, what twenty five basis points

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<v Speaker 4>into the new administration, right, We're just getting going. But yeah,

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<v Speaker 4>hell of a lot more than you would expected two

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<v Speaker 4>or three weeks ago.

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<v Speaker 3>One thing, it's you know, it's constructive.

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<v Speaker 1>One thing in your earnings that really stood out as

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<v Speaker 1>a stock trading revenues that really boomed. And I'm wondering

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<v Speaker 1>this has been a discussion about how risk on things

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<v Speaker 1>have been feeling, certainly at Davos, But through the last

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<v Speaker 1>couple of months, do you see that waning at all

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<v Speaker 1>or is it just continuing to amp up? In terms

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<v Speaker 1>of risk taking.

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<v Speaker 4>Well, you know, when you become a CEO, one thing

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<v Speaker 4>is for sure, all of your children are equally beautiful.

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<v Speaker 3>But our equities business is.

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<v Speaker 4>One of our more beautiful children that I adore. And yes,

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<v Speaker 4>they put up some great numbers, and I think that

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<v Speaker 4>is a reflection on just the quality the underlying franchise,

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<v Speaker 4>but also a sense that people want to allocate to

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<v Speaker 4>a little more risk, but importantly they kind of want to.

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<v Speaker 3>Get beyond the index level.

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<v Speaker 4>You guys talk about this a lot, right, sort of

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<v Speaker 4>index level equity risk premium relative to sectors. And I

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<v Speaker 4>think one of the positives here is we're talking about

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<v Speaker 4>the regulation the energy space and energy transition. We're talking

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<v Speaker 4>about the financial services space, and yes, you need to

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<v Speaker 4>own the six because they are money machines and great companies,

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<v Speaker 4>But how about the rest of the four hundred and

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<v Speaker 4>ninety three four hundred ninety four. And I think some

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<v Speaker 4>of that dispersion getting kind of allocated across teams and

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<v Speaker 4>sectors and around the world. I think that's a multi

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<v Speaker 4>year trend. I think we're early on.

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<v Speaker 2>That concentration is certainly a risk factor that a lot

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<v Speaker 2>of people are considering. Another one is the deficit and

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<v Speaker 2>the cost of interest payments for the US government, for you,

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<v Speaker 2>for the capital market business. Is that a risk more

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<v Speaker 2>generally that you've take even the team of focused on.

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<v Speaker 4>Yeah, you've been talking about that a lot, and I'm

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<v Speaker 4>certain and I think it's important because if you don't

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<v Speaker 4>talk about it, it sort of says, you know, there's

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<v Speaker 4>no canary in the coal mine, right. But I do

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<v Speaker 4>think there is the fact that there has been so

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<v Speaker 4>much attention given to this, and you have folks like

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<v Speaker 4>fest and coming in who know the bond market, that

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<v Speaker 4>it has a sort of reaffirmation that we got to

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<v Speaker 4>look out on that Simpson bowls.

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<v Speaker 3>You know, here we are these years later that.

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<v Speaker 4>Hasn't even said, you know, term premium is still pretty narrow,

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<v Speaker 4>so like we haven't seen the long bond really move.

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<v Speaker 3>So there's an underlying confidence. I think the question is

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<v Speaker 3>what kind of growth can we generate.

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<v Speaker 4>I think so the conversation that one would have is

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<v Speaker 4>which comes first, sort of the potential inflationary effect of

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<v Speaker 4>tars or the positive deregulatory effect. And I think that's

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<v Speaker 4>going to be one of the things we know is

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<v Speaker 4>that there's going to be an ongoing dialectic you know

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<v Speaker 4>which policy function can be transmitted more quickly than the other.

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<v Speaker 4>And I think that pivoting and transitioning and important.

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<v Speaker 2>Do you think it holds back activity that degree of

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<v Speaker 2>uncertainty given how confident everyone is, and Lisa especially me too,

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<v Speaker 2>we get nervous when everyone in Davos gets ready.

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<v Speaker 3>Yes, contraindicator.

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<v Speaker 2>Does it hold back activity without having the clarity on

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<v Speaker 2>what these changes are going to look like?

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<v Speaker 4>I think part of the dilemma is that the vernacular

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<v Speaker 4>of whether we're really moving with animal spirits as whether

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<v Speaker 4>we see a bunch of M and A prints like

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<v Speaker 4>where are those M and announcements?

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<v Speaker 3>And the reality is.

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<v Speaker 4>Over the last number of years, we've had I think

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<v Speaker 4>two major uncertainties, right the end of financial oppressions zero

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<v Speaker 4>and zero.

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<v Speaker 3>Is that finally passes?

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<v Speaker 4>And do we kind of know where rates are going

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<v Speaker 4>to be and we can focus on the detail of

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<v Speaker 4>whether they'll be you know, one or two moves or

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<v Speaker 4>none at all, But at least we generally know that

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<v Speaker 4>for the next period of time, the US restory rate

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<v Speaker 4>is somewhere in the mid forest, and then you can

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<v Speaker 4>apply discount rates for risk and the company and the

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<v Speaker 4>rest of it, so.

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<v Speaker 3>That's kind of pass us. So that's an uncertainty that's.

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<v Speaker 4>Taken off the table if you're a CFO and you're

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<v Speaker 4>a board room. The second set of uncertainty has been

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<v Speaker 4>around sort of the end of the end of history,

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<v Speaker 4>which is the resumption of nation states and the like.

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<v Speaker 4>And one could argue, well, there's a lot of uncertainty

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<v Speaker 4>in the world. I would argue the combination of having

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<v Speaker 4>some sense of a rate framework and having some sense

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<v Speaker 4>that things are going to happen in the US, in Europe,

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<v Speaker 4>around the world. I think it galvanizes the corporate community.

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<v Speaker 4>And so the question is how much does the market

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<v Speaker 4>discount of that? How fast will that be? And I

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<v Speaker 4>do think important catalysts to this will be there are

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<v Speaker 4>the better part of nineteen hundred companies in the private

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<v Speaker 4>equity space that have a billion of aggregate value five

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<v Speaker 4>years of life on average.

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<v Speaker 3>Those companies need to move so at some.

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<v Speaker 4>Level, I couldn't tell you exactly the pacing of that activity,

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<v Speaker 4>but we've been below trend line in the M and

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<v Speaker 4>A market. We talked a couple of years from now.

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<v Speaker 4>I think we'll be a trend line or higher. I'm

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<v Speaker 4>pretty confident.

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<v Speaker 1>I think it's going to be M and A. I

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<v Speaker 1>think it's going to be IPOs and everything.

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<v Speaker 3>I think we've been talking about.

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<v Speaker 4>You've talked about so much of the surf paucity of

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<v Speaker 4>investable names, especially when you get past the Big seven

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<v Speaker 4>companies and they're sort of small cap orphans without research.

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<v Speaker 3>I think there's a Yes, it.

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<v Speaker 4>Can be painful starbox for a young company to be public,

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<v Speaker 4>but you get enduring long term value from shareholders that

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<v Speaker 4>actually can also add some value, and you can use

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<v Speaker 4>that currency to make other acquisitions. I think the IPO

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<v Speaker 4>product is alive well. And I think importantly what's happened

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<v Speaker 4>is a sort of financialization of the markets. Is the

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<v Speaker 4>intersection of private and public that's come of age. So

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<v Speaker 4>maybe you don't go public in the classic Nasdaq and

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<v Speaker 4>New York IPO at the first. Maybe you do some

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<v Speaker 4>hybrid capital for a while, and then you go public

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<v Speaker 4>alla over with a full capital structure.

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<v Speaker 1>One area that you've brought in one of your babies

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<v Speaker 1>that's very beautiful that I'm sure you talk about is

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<v Speaker 1>your wealth management unit and SIS a big baby.

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<v Speaker 3>It's a big baby, big beautiful baby.

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<v Speaker 1>One of the drivers of revenues for a very long time.

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<v Speaker 1>What's been the challenge in accumulating assets and the wealth

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<v Speaker 1>management growing assets to degree that you really have wanted to?

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<v Speaker 4>Well, you have a massive denominator, right, and I think

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<v Speaker 4>what's happened is we're now the better part of a

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<v Speaker 4>trillion of aum between wealth and investment manager. And if

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<v Speaker 4>you look at sort of point to point, what if

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<v Speaker 4>assets done and obviously markets higher markets health, the assets.

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<v Speaker 3>In one year went up by a trillion three.

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<v Speaker 4>So people say, okay, you raise two fifty, Well that's

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<v Speaker 4>a huge number. And for me at LEASTA, what's really

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<v Speaker 4>important is how is our funnel working? Like think about

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<v Speaker 4>our wealth business is sort of having three parts self

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<v Speaker 4>directed E.

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<v Speaker 3>Trade.

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<v Speaker 4>We're seeing transaction activity really kicking up. That's clearly a

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<v Speaker 4>positive signal part of what you're asking about. In the

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<v Speaker 4>sort of pure equity space, we have this workplace business.

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<v Speaker 4>I want your stock plan business because then I can

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<v Speaker 4>do factory floor to CEO and then the fee based

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<v Speaker 4>advisor fifty based points per annum, and the fee based

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<v Speaker 4>advisory growth is quite impressive, quite impressive, and it's going

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<v Speaker 4>to continue for years to come, especially if clients need

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<v Speaker 4>to allocate across sectors.

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<v Speaker 1>You've made a lot of acquisitions in the past, any

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<v Speaker 1>in the pipeline planning any further types of tie ups yourself.

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<v Speaker 4>You know, it's interesting we see stuff, but I really

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<v Speaker 4>love the durable growth organically that we have the two

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<v Speaker 4>majors major business in the investment bank and the wealth

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<v Speaker 4>and investment manager. But over time we'll continue to look

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<v Speaker 4>at stuff as we a Cree Capital.

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<v Speaker 2>You've got one minute left on this place this in

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<v Speaker 2>Have you spoke into the president? I have not, not recently, right,

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<v Speaker 2>if you have the opportunity too, and Dabas will today

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<v Speaker 2>to throw a question at the incoming president, the current president,

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<v Speaker 2>Donald Trump? What would you ask him?

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<v Speaker 4>I like the I like the quality of the questioners

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<v Speaker 4>you have I do.

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<v Speaker 3>I like the quality of the question was.

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<v Speaker 2>In the mix and you had one, what would that

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<v Speaker 2>question think?

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<v Speaker 4>I think the question I would ask is one where

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<v Speaker 4>it would give him the opportunity to sort of speak

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<v Speaker 4>to the possibility that he's thinking about a lot of

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<v Speaker 4>different possibilities on a lot of different issues, something along

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<v Speaker 4>the lines of are you open to taking idea flow

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<v Speaker 4>around a whole.

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<v Speaker 3>Bunch of different spaces and give examples?

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<v Speaker 4>And I think my guess is the answer that he

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<v Speaker 4>would give is yes, and I'll give you examples of that.

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<v Speaker 4>And the reason that's important is because I think we're

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<v Speaker 4>so early in this administration, people are trying to sort

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<v Speaker 4>of weigh how much is tactical versus how much is baked.

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<v Speaker 4>I think there's a lot of discussion and people it

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<v Speaker 4>wouldn't be so much for him, but people understanding this

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<v Speaker 4>is a real conversation taking place on a whole bunch

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<v Speaker 4>of important issues and we're only five days in.

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<v Speaker 3>I think people hearing that will give confidence.

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<v Speaker 4>That we are in the early stages of the dialectic and.

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<v Speaker 3>There's more to come.

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<v Speaker 2>I appreciate your time. Thank you so much for having me. Guys,

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<v Speaker 2>thank you sir. Safe travels back to.

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<v Speaker 3>Neo an avid listener and watcher, and.

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<v Speaker 1>We appreciate that you got to come on again soon.

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<v Speaker 2>NICs, I'd pick the channel to see of Mop and

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<v Speaker 2>Standing