WEBVTT - The Death Bell Is Tolling For Small Private Colleges 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul Swinge. You 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.439 at Bloomberg dot com. Well, small colleges in the United 0:00:22.480 --> 0:00:25.880 States are really facing a tough time. Dwindling enrollment is 0:00:25.920 --> 0:00:28.040 really putting a pressure on the finances, and now it's 0:00:28.080 --> 0:00:31.280 actually spilling over into the credit markets. To get the latest, 0:00:31.320 --> 0:00:34.319 we welcome Amanda Albright, municipal bond reporter for Bloomberg News. 0:00:34.360 --> 0:00:37.280 She joins us here on a Bloomberg Interactive broker studio. So, Amanda, 0:00:37.360 --> 0:00:41.440 really interesting story on the Bloomberg terminal today. Give us 0:00:41.440 --> 0:00:43.760 a sense of what is happening with some of these 0:00:44.080 --> 0:00:48.960 smaller private colleges and how it's impacting the credit markets. Yeah, 0:00:49.000 --> 0:00:51.800 so in the muni market. Um, the troubles of small 0:00:51.800 --> 0:00:54.720 private colleges have kind of been talked about for years, UM, 0:00:54.720 --> 0:00:56.760 but lately we're really seeing that kind of come to 0:00:56.800 --> 0:00:58.880 a head. Um, there is a bankruptcy by the College 0:00:58.880 --> 0:01:00.960 of New Rochelle Um that a lot of people were 0:01:01.000 --> 0:01:04.160 watching just to kind of see how the recoveries would fare. Um. 0:01:04.240 --> 0:01:07.360 You know, it's still kind of not for for certain yet, 0:01:07.400 --> 0:01:09.840 but it doesn't look too good for bond holders, even 0:01:09.840 --> 0:01:13.200 though the college was sitting on some really valuable real estate. Aman, 0:01:13.360 --> 0:01:15.600 can you just set this scene for us why private 0:01:15.600 --> 0:01:18.800 colleges are struggling so much right now? Sure, so there's 0:01:18.840 --> 0:01:20.800 a lot of different factors going on, but I think 0:01:20.920 --> 0:01:23.840 enrollment and demographics are what people point to. So basically, 0:01:24.160 --> 0:01:26.240 the number of high school graduates is kind of in 0:01:26.319 --> 0:01:29.240 this flatlining mode UM, and there are forecasts that you know, 0:01:30.360 --> 0:01:33.000 after that, UM, it will actually start declining. So in 0:01:33.080 --> 0:01:35.560 regions in the Northeast and the Midwest where there are 0:01:35.560 --> 0:01:38.600 a lot of um, small liberal arts liberal arts schools, 0:01:38.840 --> 0:01:41.200 um that bills have to start competing for students, and 0:01:41.200 --> 0:01:43.760 that could actually cause more enrollment. This isn't just a 0:01:44.200 --> 0:01:46.760 this is not just a demographics issue. This is also 0:01:46.920 --> 0:01:49.920 a people realizing that paying you know, two hundred thousand 0:01:49.920 --> 0:01:52.920 dollars for four years in college doesn't always pay off 0:01:52.960 --> 0:01:55.200 and ends up leedingly like leaving you with a ton 0:01:55.240 --> 0:01:57.000 of debt. I mean, isn't that a big part of 0:01:57.000 --> 0:01:59.320 it too? And people just choosing not to do it? Absolutely. 0:01:59.360 --> 0:02:01.080 I think a lot of students. You know, there's a 0:02:01.080 --> 0:02:03.760 lot of headlines about the student loan debt crisis that 0:02:03.800 --> 0:02:06.160 we're in UM, and you know, people are kind of 0:02:06.200 --> 0:02:09.800 rethinking the value of a small private school UM. And 0:02:09.840 --> 0:02:11.400 you know, the other part of it is that, you know, 0:02:11.480 --> 0:02:14.440 these small colleges, in order to kind of have the 0:02:14.480 --> 0:02:17.200 really nice liberal arts environment, you have to spend a 0:02:17.200 --> 0:02:19.959 lot to give that, you know, small classroom sizes, stuff 0:02:20.000 --> 0:02:22.960 like that. So expenses are really becoming a problem for 0:02:23.000 --> 0:02:26.160 these institutions too. So how typical is it for a 0:02:26.440 --> 0:02:29.639 U S college or university to actually tap the bond market? 0:02:29.680 --> 0:02:33.840 Is that part of most you know, colleges, university's capital structure, 0:02:33.840 --> 0:02:36.560 balance sheet. It's incredibly common. And I think that's what's 0:02:36.560 --> 0:02:38.720 so interesting about this is, you know, a decade ago, 0:02:38.760 --> 0:02:40.760 maybe it would be unthinkable that we would be in 0:02:40.760 --> 0:02:42.960 the situation that we're in because you know, the number 0:02:42.960 --> 0:02:45.600 of high school graduates was increasing so much. UM, so 0:02:45.800 --> 0:02:51.160 private colleges, you know, took on debt for dorms, athletic buildings, classrooms, um. 0:02:51.200 --> 0:02:53.000 And now you know they're kind of dealing with these 0:02:53.040 --> 0:02:56.799 emptier dorm rooms, emptier classrooms and so um, it's kind 0:02:56.800 --> 0:02:58.880 of coming back to bite them. How much is this 0:02:59.000 --> 0:03:02.919 because of immigration or how much US colleges are attracting 0:03:03.360 --> 0:03:06.280 foreign students. That's definitely part of it. And I think 0:03:06.320 --> 0:03:11.160 that's something that's affecting even public institutions, even really elite colleges. 0:03:11.240 --> 0:03:13.400 That's something that is really really interesting to keep an 0:03:13.440 --> 0:03:15.640 eye on, you know, the next few years because you know, 0:03:15.720 --> 0:03:17.920 ratings companies. Have you even been talking about, you know, 0:03:18.000 --> 0:03:21.760 the the immigration issue and just kind of how international 0:03:21.800 --> 0:03:25.360 students are being deterred. What's the So the New Rochelle 0:03:25.400 --> 0:03:28.079 they filed for bankruptcy. Okay, so do we have any 0:03:28.080 --> 0:03:31.320 senses or any history as to the kind of recovery 0:03:31.440 --> 0:03:34.440 rates that you typically get in these types of bankruptcies. Yeah, 0:03:34.480 --> 0:03:36.800 So the College of New Rochelle bonds, Um, they're trading 0:03:36.800 --> 0:03:39.800 around forty cents on the dollar. Um. There was a 0:03:39.840 --> 0:03:43.680 bankruptcy by Dowling College in Long Island, UM, and bond 0:03:43.680 --> 0:03:46.320 holders recovered an average of about seventeen percent. So that 0:03:46.400 --> 0:03:49.000 kind of gives you an idea UM. You know, these 0:03:49.000 --> 0:03:52.000 situations there's not a ton of debt at play. But 0:03:52.480 --> 0:03:55.800 you know, when you have a seventeen hundred private colleges 0:03:55.840 --> 0:03:57.720 in the US, and you know a lot of them 0:03:57.720 --> 0:04:00.000 took on bonds, that's something that I think is very 0:04:00.120 --> 0:04:02.720 concerning to bond holders. Are there any estimates how many 0:04:02.760 --> 0:04:05.840 of these colleges will have to merge or close entirely? Uh, 0:04:05.960 --> 0:04:08.760 just sort of make this make sense in terms of 0:04:08.800 --> 0:04:11.920 how many colleges there are. It's it's been interesting because 0:04:11.960 --> 0:04:15.320 there's been forecasts all over the place about closures and 0:04:15.400 --> 0:04:19.120 mergers UM. And what's interesting is that in both cases 0:04:19.160 --> 0:04:22.600 there are impediments to both. So for closures, alums will 0:04:22.640 --> 0:04:25.279 often step in and do fundraising so that can that 0:04:25.360 --> 0:04:27.960 has prevented some closures from actually happening. And that's why 0:04:28.000 --> 0:04:30.040 closures are still so rare, is that, you know, it's 0:04:30.040 --> 0:04:32.320 really painful for colleges to close. And when it comes 0:04:32.320 --> 0:04:34.440 to mergers UM, you know, it's kind of like a 0:04:34.440 --> 0:04:37.480 company merger, only there's even more emotions at play because 0:04:37.720 --> 0:04:39.599 you know, you have alums who are worried about, you know, 0:04:39.640 --> 0:04:42.320 losing the identity of their school. UM. You also have 0:04:42.440 --> 0:04:45.120 the financials of colleges. You know, can to colleges make 0:04:45.160 --> 0:04:47.120 it work if both of them are dealing with the same, 0:04:47.200 --> 0:04:50.119 you know, poor financial outlook. So that's kind of why 0:04:50.160 --> 0:04:53.039 both are very rare. But everyone is kind of saying, 0:04:53.080 --> 0:04:56.599 you know that they expected to continue and increase. Amanda 0:04:56.600 --> 0:04:59.560 al right, thank you so much, really interesting story. Amanda 0:04:59.600 --> 0:05:16.479 al Right. Munismal bona reporter for Bloomberg News. It is 0:05:16.520 --> 0:05:19.760 a historic day in Washington, d C. Is the House 0:05:19.800 --> 0:05:25.040 debates uh the Trump impeachment guidelines currently and is poised 0:05:25.080 --> 0:05:29.040 for a vote on the impeachment proceedings. A lot of 0:05:29.080 --> 0:05:33.360 people are perhaps shrugging this off as feeling sort of inevitable, 0:05:33.360 --> 0:05:35.920 but here with us, I'm so pleased to say. Who 0:05:35.920 --> 0:05:40.080 has the historical reference of twenty years in public service, 0:05:40.120 --> 0:05:42.839 including working in all three branches of the federal government 0:05:43.000 --> 0:05:45.560 is Chris Lew, Senior fellow at the University of Virginia 0:05:45.560 --> 0:05:48.839 Miller Center, which studies the presidency. He's also a former 0:05:48.920 --> 0:05:52.880 senior White House aid to President Obama. Chris, so good 0:05:53.200 --> 0:05:56.480 to have you. Can you paint today in a historic 0:05:56.720 --> 0:06:00.240 sort of picture to understand the importance even if people 0:06:00.240 --> 0:06:02.320 sort of shrug it off, as somewhat inevitable it will 0:06:02.320 --> 0:06:05.919 be passed by the House and shot down by the Senate. Yeah. No, 0:06:06.040 --> 0:06:08.039 I mean it's exactly right. Whether you think this is 0:06:08.040 --> 0:06:09.560 a good idea or not a good idea, it's a 0:06:09.640 --> 0:06:12.680 historic moment. Uh. The President Trump is set to be 0:06:12.720 --> 0:06:15.800 only the third president ever impeached. There was a fourth, 0:06:16.279 --> 0:06:18.600 Richard Nixon, who didn't quite even make it to this 0:06:18.640 --> 0:06:21.839 point before he resigned. And so, you know what what 0:06:22.040 --> 0:06:26.119 is being discussed today, and inevitably, how the Senate trial goes, 0:06:26.200 --> 0:06:29.680 we'll we'll be setting guardrails for future presidencies and good 0:06:29.760 --> 0:06:33.200 or a bad way. And so look, um, you know, politics, 0:06:33.440 --> 0:06:35.600 Um is what this is all about. I mean, I 0:06:35.600 --> 0:06:37.599 don't mean that in a bad way, but we always 0:06:37.640 --> 0:06:39.720 think about this in political terms. But this is a 0:06:39.760 --> 0:06:42.760 really historical thing that will be studied for many years 0:06:42.839 --> 0:06:45.320 after this. So Chris, let's fast forward a little bit. 0:06:45.360 --> 0:06:47.480 Let's I'm kind of making the assumption that the House 0:06:47.520 --> 0:06:49.520 will vote to impeach today. We get to the Senate 0:06:49.960 --> 0:06:54.760 and it appears like the Republicans are the leaded leadership. 0:06:54.920 --> 0:06:58.280 Mitch McConnell, Lindsay Graham and so on are coordinating with 0:06:58.320 --> 0:07:00.400 the White House and and maybe not going to call 0:07:00.440 --> 0:07:05.760 any witnesses. How right common or unusual is that? Well, look, 0:07:05.800 --> 0:07:09.720 I don't think the coordination is uncommon. I think the 0:07:10.120 --> 0:07:13.560 you know, openly bragging about the coordination, which is what 0:07:13.600 --> 0:07:17.000 the Mitch McConnell is saying, as well as Lindsey Graham saying, look, 0:07:17.000 --> 0:07:19.440 I'm not even gonna try to be fair. Um. You 0:07:19.440 --> 0:07:23.720 know a lot of people have analogized the senators to jurors. 0:07:23.760 --> 0:07:25.560 They're kind of like jurors, but they're kind of like 0:07:25.680 --> 0:07:27.720 judges as well. And I think what you've seen in 0:07:27.800 --> 0:07:31.320 previous impeachments um is at least senators kind of at 0:07:31.360 --> 0:07:33.640 least saying, uh, you know, we're going to try to 0:07:33.640 --> 0:07:36.240 objectively look at the facts. And I think what's less 0:07:36.280 --> 0:07:38.200 clear here is how that senator trial is going to 0:07:38.240 --> 0:07:41.080 go down, because ultimately it's it's up to a majority 0:07:41.080 --> 0:07:43.960 of senators as to whether they want to call additional 0:07:43.960 --> 0:07:47.239 witnesses or simply rest on the record that was developed 0:07:47.280 --> 0:07:49.960 in the House. So, given what you were talking about, 0:07:50.000 --> 0:07:54.200 that this impeachment proceeding will set guardrails in a way 0:07:54.560 --> 0:07:58.120 and guidelines for future presidencies, what are you watching in 0:07:58.240 --> 0:08:00.840 terms of the developments today and future ones that are 0:08:00.840 --> 0:08:03.559 expected in the Senate that will give us a sense 0:08:03.760 --> 0:08:07.800 of how this is going. Well. You know, it is interesting. 0:08:08.520 --> 0:08:11.160 The most recent example we have is obviously the Clinton impeachment, 0:08:11.320 --> 0:08:14.600 which dealt with both perjury and obstruction of justice, and 0:08:14.680 --> 0:08:18.200 so a majority of the House impeach President Clinton on that. Again, 0:08:18.240 --> 0:08:20.840 it was largely a partisan vote. So if that's sort 0:08:20.840 --> 0:08:24.960 of the floor of what qualifies as an impeachable offense. Uh, 0:08:25.000 --> 0:08:27.200 And then you go back to the Watergate impeachment, where 0:08:27.200 --> 0:08:31.239 again it was abuse of abuse of process, abuse of power, 0:08:31.240 --> 0:08:33.920 I'm sorry, obstruction of justice, obstruction of Congress. That was 0:08:33.960 --> 0:08:36.600 sort of at a different level. You know, you probably 0:08:36.720 --> 0:08:41.760 put the Trump impeachment probably closer to Watergate than to Clinton. 0:08:42.520 --> 0:08:45.240 But the fact that, um, you know, many of the 0:08:45.240 --> 0:08:47.720 same people who voted for the Clinton impeachment will now 0:08:47.800 --> 0:08:50.400 vote against the Trump impeachment does leave you sort of 0:08:50.440 --> 0:08:53.800 scratching your head as to how you can rationalize these 0:08:53.840 --> 0:08:57.520 things intellectually. So, Chris, there's been some reporting that, you know, 0:08:57.600 --> 0:09:00.880 behind closed doors, many Republicans say, you know, we're not 0:09:00.920 --> 0:09:04.080 really supportive at President Trump, his administration, many of his 0:09:04.120 --> 0:09:07.160 policies but you know, we're you know, we've got to 0:09:07.160 --> 0:09:09.520 support him here. Are you surprised that we haven't had 0:09:09.559 --> 0:09:13.640 any Republicans? Are any meaningful number of Republicans come out 0:09:13.679 --> 0:09:15.760 against Trump? And will we see it in maybe today's 0:09:15.800 --> 0:09:18.440 vote or in the Senate? Well, it is sort of interesting. 0:09:18.440 --> 0:09:21.959 I mean, I think we will expect to see, uh today, 0:09:22.440 --> 0:09:26.559 essentially three members of Congress break from their parties. UM. 0:09:26.600 --> 0:09:30.080 Justin Amash, formerly a Republican, has already switched to an independent. 0:09:30.559 --> 0:09:33.400 Jeff Andrew, a Democrat, will vote against impeachment and then 0:09:33.480 --> 0:09:36.079 leave his party. So essentially of the three people who 0:09:36.080 --> 0:09:38.840 will vote against impeachment to have had to leave their party. Uh. 0:09:38.920 --> 0:09:41.640 Contrast that with Clinton, there was probably you know, a 0:09:41.720 --> 0:09:44.280 half dozen to a dozen members on either side who 0:09:44.360 --> 0:09:46.800 sort of flipped votes. And I think in large measure 0:09:47.280 --> 0:09:50.319 reflects the partisanship um that we have in this country 0:09:50.440 --> 0:09:54.319 right now. Um. You know, people famously remember the Watergate 0:09:54.400 --> 0:09:57.920 moment when UM, both House and Senate Republican leaders went 0:09:57.960 --> 0:10:00.920 to Richard Nixon and said, look, we we don't um, 0:10:01.320 --> 0:10:03.439 we can't condone your behavior. We don't have the support 0:10:03.640 --> 0:10:05.920 if you don't resign, we're going to impeach you you know, 0:10:06.000 --> 0:10:08.800 that was forty five years ago. You can't really imagine 0:10:08.840 --> 0:10:12.920 that kind of a conduct or by by Republican leaders 0:10:12.920 --> 0:10:15.320 in this current climate. I'm trying to understand that. You know, 0:10:15.400 --> 0:10:17.760 it's really important that you mentioned that this is a 0:10:17.800 --> 0:10:20.880 really partisan issue and as part of the reason why, Uh, 0:10:21.040 --> 0:10:23.840 sort of there's this image being painted that there's an 0:10:23.880 --> 0:10:26.839 apathy about the proceedings is just sort of political theater. 0:10:27.520 --> 0:10:31.079 But can you sort of paint this also in terms 0:10:31.120 --> 0:10:34.360 of how unusual it is or is this common? I mean, 0:10:34.480 --> 0:10:38.280 was the Nixon impeachment also viewed as very much of 0:10:38.320 --> 0:10:41.360 just a partisan issue? Yeah, And you know, there's a 0:10:41.360 --> 0:10:42.800 couple of ways to look at it. What is based 0:10:42.800 --> 0:10:45.440 on public opinion polls, you know right now, you know, 0:10:45.480 --> 0:10:48.280 it's depending on which poll you look at. About forty 0:10:48.400 --> 0:10:51.480 six to fifty percent of the American public believes that 0:10:51.559 --> 0:10:55.960 President Trump should be impeached. That's significantly higher than any 0:10:55.960 --> 0:10:58.800 that than what was the case in Clinton, where um 0:10:58.880 --> 0:11:03.600 support frompeachment early across and really in the Nixon impeachment 0:11:04.200 --> 0:11:07.160 it only crossed that mark at the very end, about 0:11:07.200 --> 0:11:09.880 the month before he finally resigned. Uh, The support for 0:11:09.880 --> 0:11:13.000 impeachment cross, so you know, and and I think in 0:11:13.120 --> 0:11:16.600 some measure reflects that these charges against President Trump are 0:11:16.679 --> 0:11:19.560 easy to understand and people can sort of make their 0:11:19.600 --> 0:11:22.240 assessment one way or another whether it's improper. But I 0:11:22.240 --> 0:11:25.280 think it also reflects the partisan nature of our country 0:11:25.360 --> 0:11:27.960 right now. We are a fifty fifty country. And what's 0:11:28.040 --> 0:11:30.480 unfortunate here is that this is a historic moment. This 0:11:30.559 --> 0:11:33.560 is one of the most solemn responsibilities that a member 0:11:33.600 --> 0:11:36.439 of Congress can undergo, and for many of these members 0:11:36.480 --> 0:11:39.120 of Congress, this will be the most consequential vote that 0:11:39.160 --> 0:11:41.680 they will take in Congress. And yet everything is sort 0:11:41.679 --> 0:11:45.199 of being seen through a partisan political lens instead of 0:11:45.360 --> 0:11:48.720 an impartial examination of the facts and law, which is 0:11:49.559 --> 0:11:51.079 I don't expect to see much of that on the 0:11:51.080 --> 0:11:52.760 House floor today. I'm hoping when we get to the 0:11:52.760 --> 0:11:55.360 Senate we're able to do a little bit of that. Hey, Chris, 0:11:55.360 --> 0:11:57.680 thanks so much for joining us. We really appreciate your 0:11:57.800 --> 0:12:00.079 insight here into what is again as you suggest it 0:12:00.520 --> 0:12:03.280 and characterizes a historic day. Chris lewis a senior fellow 0:12:03.320 --> 0:12:06.680 at the University of Virginia Miller Center, which studies the presidency. 0:12:06.679 --> 0:12:09.559 He's also a former senior White House aide to President 0:12:09.559 --> 0:12:13.400 of AMAS. So interesting getting Chris is well informed comments 0:12:13.440 --> 0:12:16.360 about the process, about the likelihood of how this will 0:12:16.400 --> 0:12:19.520 proceed as we make the vote today through UH the 0:12:19.679 --> 0:12:22.920 House and then we get to the Senate. So we 0:12:22.960 --> 0:12:40.360 will have all of that for you. Coming up. FedEx 0:12:40.440 --> 0:12:43.120 shares not having a particularly boring day, but not having 0:12:43.160 --> 0:12:45.199 a good day by any means. Shares down more than 0:12:45.280 --> 0:12:50.839 ten percent after giving guidance that was absolutely slaughtered by 0:12:50.920 --> 0:12:53.240 Wall Street analysts. Joining us out to talk about what 0:12:53.480 --> 0:12:56.760 actually went wrong here, as Satisha Jindal, he's president of 0:12:56.960 --> 0:12:59.800 s J Consulting. Satisha, I just want to start with 0:13:00.000 --> 0:13:02.040 at the sort of elephant in the room. How much 0:13:02.080 --> 0:13:05.680 does this stem from Amazon dot Com telling some of 0:13:05.720 --> 0:13:09.760 its third party businesses and clients that they cannot ship 0:13:09.920 --> 0:13:16.520 with that ax practically none? Okay, great, I'm glad that 0:13:16.559 --> 0:13:18.920 we've established that. So what was the main driver here? 0:13:19.559 --> 0:13:23.480 The main drivers that are two structural issues taking place 0:13:24.160 --> 0:13:29.240 and in both the express business domestically in the US 0:13:29.280 --> 0:13:32.200 and in the ground business, which are the two major 0:13:32.360 --> 0:13:36.640 drivers of revenue and profitability for the company. And in 0:13:36.720 --> 0:13:42.120 the express business, the market has been declining practically it's 0:13:42.160 --> 0:13:46.720 flat over last fourteen years because not too many people 0:13:46.760 --> 0:13:50.760 are shipping packages across the country. They don't need express, 0:13:50.960 --> 0:13:54.520 so they've got, in my view, too many aircraft. They 0:13:54.520 --> 0:13:57.240 could bring more of them down and as a reference 0:13:57.280 --> 0:14:01.960 to UPS, handles as many parcels in express network as 0:14:02.320 --> 0:14:06.160 fed X while doing it with fewer aircraft because they 0:14:06.200 --> 0:14:10.200 have integrated network. And during the same last fifteen years, 0:14:10.200 --> 0:14:14.040 why express volume has been practically flat one percent increased, 0:14:14.320 --> 0:14:21.000 grounds increased, and yet fed X is not adjusted structurally 0:14:21.520 --> 0:14:26.120 to handling it in that manner? What what? Why are 0:14:26.160 --> 0:14:28.440 they not you know, making that change. When I think of, 0:14:29.040 --> 0:14:31.280 you know, moving packages around, I think of fed X. 0:14:31.360 --> 0:14:34.240 I mean they kind of created this whole industry, this 0:14:34.360 --> 0:14:38.080 whole business. What are they missing here? Why? You're correct, 0:14:38.120 --> 0:14:42.320 they created the express industry, and absolutely fred Smith is 0:14:42.440 --> 0:14:45.920 a legend and art industry, but that was for the 0:14:46.080 --> 0:14:50.320 express service that started for two years ago. The parcel 0:14:50.560 --> 0:14:56.080 and the industry for express documents also is absolutely degrees 0:14:56.400 --> 0:14:59.560 turned around over these years. Now everything is moving a 0:14:59.640 --> 0:15:02.920 short distance and in ground and then it is not 0:15:03.160 --> 0:15:07.000 business to business. The business to consumer is growing at 0:15:07.320 --> 0:15:09.720 two or three times the rate of business to business 0:15:10.120 --> 0:15:14.880 and they failed to recognize the changes driven by e 0:15:15.000 --> 0:15:20.200 commerce that was resulting lower yal due to lighter weight 0:15:20.400 --> 0:15:23.520 and short of zones, and they don't comment about being 0:15:23.520 --> 0:15:28.280 attention to it until March of this is you make 0:15:28.320 --> 0:15:31.280 a really important point, which is perhaps they should be 0:15:31.360 --> 0:15:35.520 reducing assets and reducing investment rather than increasing it. Am 0:15:35.560 --> 0:15:37.400 I reading that correctly? Because it comes at a time 0:15:37.760 --> 0:15:40.800 of them increasing investment across the whole host of different areas. 0:15:41.680 --> 0:15:44.720 You are absolutely spot on. You should be a financial 0:15:44.760 --> 0:15:50.280 analyst because they talk about I mean, they talk about 0:15:50.360 --> 0:15:53.640 having a capex of five pot nine billion dollars in 0:15:53.760 --> 0:15:56.640 this fiscal leer, next fiscal leer and the one after that, 0:15:57.400 --> 0:15:59.720 and they're buying a lot of aircraft. They should be 0:16:00.040 --> 0:16:02.960 rinking their capacs. They should not be buying new aircraft. 0:16:03.400 --> 0:16:06.680 Existing aircraft don't have to be retired because they don't 0:16:06.720 --> 0:16:09.360 need so many aircraft, and they could retire them and 0:16:09.560 --> 0:16:12.160 put it on the ground and do it at the 0:16:12.240 --> 0:16:16.160 lower cost and invest in the ground network. And here's 0:16:16.160 --> 0:16:21.280 another thing that has been overlooked. The ground business quartered 0:16:21.360 --> 0:16:25.280 over quarter compared to last year, increased revenue by hundred 0:16:25.280 --> 0:16:30.320 and seventy three million, but the purchase. Transportation cost went 0:16:30.480 --> 0:16:34.760 up by two salary and wages went up by eighty, 0:16:35.080 --> 0:16:37.960 so they went up by three millions in costs to 0:16:38.160 --> 0:16:41.800 get extra hundred and seventy million revenue. That that is 0:16:41.880 --> 0:16:45.560 a structural issue that will get corrected, but it won't 0:16:45.600 --> 0:16:49.200 happen in one quarter. It will be at least three 0:16:49.320 --> 0:16:52.560 quarters to a year before they get that. But they 0:16:52.640 --> 0:16:55.720 needed to do it real quickly. Was that a good 0:16:55.800 --> 0:16:58.360 move to kind of severe business with Amazon? It just 0:16:58.400 --> 0:17:04.639 seems odd to me. My view is that it's they 0:17:04.720 --> 0:17:07.280 should have been able to make money handling the business, 0:17:07.359 --> 0:17:10.160 and if they chose not to, it should have never 0:17:10.320 --> 0:17:14.520 become an element to be shared in the public, should 0:17:14.560 --> 0:17:18.720 have never gotten any ink in the media, and now 0:17:19.400 --> 0:17:22.000 they did that. So Amazon did what they did last 0:17:22.560 --> 0:17:26.440 couple of days, and it will be back and forth 0:17:26.680 --> 0:17:31.040 and that isn't healthy for either party. Satista Jindel, thank 0:17:31.040 --> 0:17:33.200 you so much for joining us. Satista Ganel, as the 0:17:33.240 --> 0:17:36.240 president of s J Consulting, joining us here to talk 0:17:36.280 --> 0:17:40.119 about fed X again. The stock down about ten on 0:17:40.440 --> 0:17:44.359 weaker than expected guidance going forward, setting weaker global trade 0:17:44.440 --> 0:17:47.159 and also probably some of the issues with Amazon dot 0:17:47.160 --> 0:18:04.040 Com walking away from that business. All right, let's take 0:18:04.080 --> 0:18:08.840 stock of nineteen s and p up about seven investment 0:18:08.920 --> 0:18:13.000 grade bonds up about fourteen percent. Even municipal bonds had 0:18:13.040 --> 0:18:15.760 a stellar year, up over seven percent. Let's talk about 0:18:15.960 --> 0:18:18.840 the municipal bond market. We welcome Jeff Berger, senior portfolio 0:18:18.920 --> 0:18:22.880 manager for US municipal bond Strategies at Melon Investments based 0:18:22.920 --> 0:18:26.040 on Boston, but joining us here in our Bloomberg Bloomberg 0:18:26.040 --> 0:18:29.159 Interactive Broker studio. So, Jeff, give us a sense about 0:18:29.280 --> 0:18:33.960 the muni performance in nineteen What drove it? Thanks for 0:18:34.040 --> 0:18:37.400 having me. The performance in municipals really across the curve 0:18:37.560 --> 0:18:40.480 was stellar in two thousand nineteen, and precisely to answer 0:18:40.480 --> 0:18:43.560 your question what drove it? If you look at technical 0:18:43.680 --> 0:18:47.080 fundamental evaluation factors in our market, the one that really 0:18:47.119 --> 0:18:50.800 stands out our technical factors technical factors meaning really supply 0:18:50.880 --> 0:18:54.399 and demand in our market. And the demand really was 0:18:54.520 --> 0:18:59.639 unprecedented in two thousand nineteen, particularly from US retail investors. 0:19:00.160 --> 0:19:03.960 In fact, the highest on records since really records of 0:19:04.080 --> 0:19:08.200 municipal mutual fund inflows began in In no year have 0:19:08.320 --> 0:19:10.280 we seen more interest in the SASSA class than we 0:19:10.320 --> 0:19:14.080 saw in two thousand nineteen, so technical factors drove the gains. 0:19:14.240 --> 0:19:16.680 I'm wondering about the potential risks because I tend to 0:19:16.760 --> 0:19:19.280 be a kill joy, but also because we were just 0:19:19.359 --> 0:19:21.520 talking to Amanda all Right from Bloomberg News about the 0:19:21.560 --> 0:19:24.040 fact that private colleges are are going to be devaulting 0:19:24.080 --> 0:19:27.680 on their debt. Do you view this market as riskier 0:19:28.080 --> 0:19:30.359 or do you view it as a place to just 0:19:30.600 --> 0:19:33.119 keep on plowing in because the technicals are going to 0:19:33.160 --> 0:19:35.720 continue being good. Yes. Now that's that's a really on 0:19:35.840 --> 0:19:38.800 point question, the sense that anytime you see a market 0:19:38.880 --> 0:19:41.119 with the type of stellar demand that you've seen in 0:19:41.160 --> 0:19:44.399 two thousand nineteen, I think as prudent investment managers like 0:19:44.480 --> 0:19:47.399 we are at Melon, looking at what's driven this, you 0:19:47.440 --> 0:19:49.560 always have to ask the question what could go wrong? 0:19:49.680 --> 0:19:53.919 What could change? And and it's really a probabilistic type analysis. 0:19:54.000 --> 0:19:56.680 And so if you look at the of what could 0:19:56.760 --> 0:19:59.360 change and what's the probability of that changing, I would 0:19:59.400 --> 0:20:01.320 say the probably ability of it is low, and what 0:20:01.520 --> 0:20:04.200 that change could be would be a reversal of of 0:20:04.320 --> 0:20:06.959 all these flows. It's really, in my opinion and our 0:20:07.000 --> 0:20:09.600 the team's opinion, not not so much a credit issue 0:20:09.600 --> 0:20:12.600 per se, it's whether the retail demand for this asset 0:20:12.680 --> 0:20:15.680 class were to change for for any number of reasons. 0:20:16.080 --> 0:20:18.560 We don't think those reasons are in place right now. 0:20:18.840 --> 0:20:22.240 Um again, really looking at what's driven that retail inflow 0:20:22.280 --> 0:20:24.560 in our market, it has a lot to do with 0:20:24.760 --> 0:20:26.760 the Tax Cutting Job Act. It has to do with 0:20:26.840 --> 0:20:29.760 the fact that state and local taxes being kept at 0:20:29.800 --> 0:20:32.639 ten thousand dollars as the maximum you could deduct from 0:20:32.680 --> 0:20:37.080 your federal tax liability. About it has driven a lot 0:20:37.080 --> 0:20:42.359 of people in and so it's our opinion that that 0:20:42.600 --> 0:20:44.520 that demand and the reason for that demand is not 0:20:44.640 --> 0:20:48.320 likely to abate anytime soon. So an election year, how 0:20:48.359 --> 0:20:49.920 do you be there's gonna be a lot of talk 0:20:49.960 --> 0:20:52.080 about tax policy and lots of other things. How do 0:20:52.119 --> 0:20:54.600 you mean this will is typically perform in a in 0:20:54.680 --> 0:20:57.679 an election year. Sure, So, when we think about elections 0:20:57.720 --> 0:21:00.320 in the impact on the municipal bond market, there are 0:21:00.320 --> 0:21:03.200 a number of factors that we consider. The first is, well, 0:21:03.280 --> 0:21:07.560 typically uh, come come elections season, A number of ballots 0:21:07.720 --> 0:21:10.760 on on the referendum or initiative process to say do 0:21:10.920 --> 0:21:12.920 we want to issue more debt as a local community. 0:21:12.960 --> 0:21:15.680 So we're gonna be paying attention to how much debt 0:21:15.840 --> 0:21:17.880 is on the ballot and how much of it gets 0:21:17.880 --> 0:21:21.359 approved this November. By and large, though, this market is 0:21:21.440 --> 0:21:24.960 well capable of absorbing more supplies, so that in terms 0:21:25.000 --> 0:21:27.879 of hierarchies not the number one concern. What we also 0:21:28.000 --> 0:21:31.000 are paying attention to are the implications from tax policy, 0:21:31.080 --> 0:21:33.399 whether it's the re election of the president or a 0:21:33.440 --> 0:21:37.000 Democrat coming into power. Under both scenarios where of the 0:21:37.080 --> 0:21:40.679 mindset currently that the tax policy You've seen Donald Trump's 0:21:40.680 --> 0:21:43.159 tax policy with a salt cap, and most of the 0:21:43.200 --> 0:21:48.080 Democrats are proposing some uh tax policy change, meaning tax increase. 0:21:48.480 --> 0:21:51.240 Both of those generally are good for for the market. 0:21:51.560 --> 0:21:53.840 And the final piece we're paying attention to is whether 0:21:53.960 --> 0:21:57.320 there's an increased probability of a federal infrastructure bill um 0:21:57.480 --> 0:22:00.919 post election. There's arguments that you really, you really think 0:22:00.960 --> 0:22:05.800 there's any chance of that post election, we're talking talking 0:22:05.880 --> 0:22:09.160 next year, We're gonna be doing infrastructure next year. Well, 0:22:09.359 --> 0:22:13.880 we certainly desperately need it, so it's maybe it's aspirational 0:22:14.160 --> 0:22:18.200