1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,600 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. Just download 9 00:00:27,800 --> 00:00:30,560 Speaker 1: the app, connect your phone to your car and get started. 10 00:00:30,960 --> 00:00:34,400 Speaker 1: And it's all presented by our sponsor, Interactive Brokers. 11 00:00:35,400 --> 00:00:38,600 Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,279 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market moven News. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:55,080 Speaker 2: you listen to podcasts, and at Bloomberg dot com slash podcast. 17 00:00:55,800 --> 00:00:59,600 Speaker 2: Let's look at in. I'm mix here, soft landing, hard landing. 18 00:01:00,000 --> 00:01:01,440 Speaker 2: I don't it looks like the Fed's trying to help 19 00:01:01,520 --> 00:01:03,760 Speaker 2: us out Here? We welcome Francis Donald here. She is 20 00:01:03,760 --> 00:01:06,680 Speaker 2: the chief economist at Manual Life Investment Management. She joins 21 00:01:06,760 --> 00:01:08,720 Speaker 2: us Life here in our Bloomberg Interactive Broker studio. We 22 00:01:08,760 --> 00:01:11,399 Speaker 2: appreciate you coming into the office. So, Francis, what are 23 00:01:11,440 --> 00:01:14,160 Speaker 2: you guys over at Manu Life thinking about this economy? 24 00:01:14,200 --> 00:01:16,840 Speaker 2: The markets just un last five or six weeks just 25 00:01:16,880 --> 00:01:19,200 Speaker 2: said this thing's rippen here. I mean, we have the 26 00:01:19,240 --> 00:01:21,480 Speaker 2: yields on ten year treasury we go from five percent 27 00:01:21,920 --> 00:01:24,160 Speaker 2: to now less than three point nine percent. I mean, 28 00:01:24,800 --> 00:01:28,240 Speaker 2: what's your call on economy for twenty four. 29 00:01:27,720 --> 00:01:30,200 Speaker 3: Well, there's a lot of questions in there, because if 30 00:01:30,200 --> 00:01:31,760 Speaker 3: you ask me what do I think happens in the 31 00:01:31,800 --> 00:01:35,280 Speaker 3: next month, we couldn't possibly have a better economic setup. 32 00:01:35,360 --> 00:01:35,520 Speaker 2: Right. 33 00:01:35,560 --> 00:01:38,640 Speaker 3: You've got growth holding in there, the consumer hasn't given 34 00:01:38,720 --> 00:01:42,800 Speaker 3: up just yet. Inflation data globally just coming in downside 35 00:01:42,800 --> 00:01:45,400 Speaker 3: surprises every morning when we wake up, and a FED 36 00:01:45,440 --> 00:01:47,520 Speaker 3: that said, you know what, we don't even need a 37 00:01:47,560 --> 00:01:50,400 Speaker 3: recession to cut. We're ready to cut even into this 38 00:01:50,520 --> 00:01:54,000 Speaker 3: soft landing. You get support for equities, you get support 39 00:01:54,040 --> 00:01:56,320 Speaker 3: for bonds. Just about every asset class does well there. 40 00:01:56,520 --> 00:02:00,400 Speaker 3: But remember your investment horizon, because we are still looking 41 00:02:00,400 --> 00:02:02,880 Speaker 3: at a material slow down in the middle of twenty 42 00:02:02,960 --> 00:02:06,920 Speaker 3: twenty four, recession risk is still elevated. And even let's 43 00:02:06,920 --> 00:02:09,799 Speaker 3: just throw out that term recession stop thinking about is 44 00:02:09,840 --> 00:02:12,200 Speaker 3: a two quarters of negative GDP one quarter of negative 45 00:02:12,480 --> 00:02:15,800 Speaker 3: Markets don't care as much as headlines do. We're going 46 00:02:15,840 --> 00:02:18,680 Speaker 3: into a growth slow down middle year. So this is 47 00:02:18,720 --> 00:02:22,120 Speaker 3: a tactical goldilocks, a nice air pocket that you can trade. 48 00:02:22,400 --> 00:02:24,840 Speaker 3: You can also still believe there's a recession on the horizon. 49 00:02:24,840 --> 00:02:26,440 Speaker 3: Two things can be true at the same time. 50 00:02:27,200 --> 00:02:29,840 Speaker 4: The people who are calling for a soft landing right now, 51 00:02:29,880 --> 00:02:32,160 Speaker 4: what do you think they're missing? What are they not 52 00:02:32,320 --> 00:02:35,119 Speaker 4: seeing in the data that maybe you are noticing? 53 00:02:35,560 --> 00:02:39,440 Speaker 3: Right Well, there's a whole difference of opinion is too 54 00:02:39,480 --> 00:02:43,400 Speaker 3: And this is the core question. Is this time really different? 55 00:02:43,639 --> 00:02:46,440 Speaker 3: Because if you look at the wealth of leading indicators 56 00:02:46,480 --> 00:02:51,000 Speaker 3: that have traditionally helped you forecast a recession, every economist 57 00:02:51,040 --> 00:02:55,320 Speaker 3: knows those are flashing red. The difference between those calling 58 00:02:55,320 --> 00:02:57,040 Speaker 3: for a soft landing and those calling for a hard 59 00:02:57,080 --> 00:02:59,320 Speaker 3: landing is really how much of a factor do you 60 00:02:59,360 --> 00:03:02,120 Speaker 3: apply to saying there are things at play that are 61 00:03:02,120 --> 00:03:06,360 Speaker 3: different than past cycles that will mute or mitigate And frankly, 62 00:03:06,440 --> 00:03:09,320 Speaker 3: even those shops that are calling for mild recessions, And 63 00:03:09,600 --> 00:03:11,600 Speaker 3: if you look at a list of consensus calls, it's 64 00:03:11,639 --> 00:03:14,160 Speaker 3: either soft landing or mild recession. You don't have very 65 00:03:14,200 --> 00:03:17,000 Speaker 3: many who are actually calling for a traditional deepercession, and 66 00:03:17,080 --> 00:03:18,800 Speaker 3: you don't have very many that are calling for this 67 00:03:19,160 --> 00:03:22,919 Speaker 3: reacceleration in twenty twenty four. But if you look at that, 68 00:03:23,000 --> 00:03:26,320 Speaker 3: what they are effectively calling for is that the feed 69 00:03:26,480 --> 00:03:29,399 Speaker 3: is easing a little bit. This time is different. It's 70 00:03:29,440 --> 00:03:32,400 Speaker 3: going to be very mild. So this is really a 71 00:03:32,400 --> 00:03:35,200 Speaker 3: difference of opinion, not a difference of data sets. 72 00:03:36,120 --> 00:03:38,360 Speaker 2: How important is the labor market here, because the labor 73 00:03:38,360 --> 00:03:41,680 Speaker 2: market has just been incredibly resilient here. I even had 74 00:03:41,680 --> 00:03:44,800 Speaker 2: a tick down in the unemployment rate last month, which 75 00:03:44,800 --> 00:03:47,080 Speaker 2: I don't think many people were forecasting. It's kind of 76 00:03:47,080 --> 00:03:49,120 Speaker 2: tough to have a slow down in the economy if 77 00:03:49,120 --> 00:03:51,800 Speaker 2: everybody's got a job and wages are going up. 78 00:03:51,920 --> 00:03:56,040 Speaker 3: A job full recession. Have we had the jobless recoveries 79 00:03:56,040 --> 00:03:58,560 Speaker 3: coming out of the GFC. Now this concept of job 80 00:03:58,640 --> 00:04:01,520 Speaker 3: full recession, but there's a few things going on there, 81 00:04:01,760 --> 00:04:03,760 Speaker 3: one of which is you don't actually need the consumer 82 00:04:03,840 --> 00:04:06,000 Speaker 3: to be in a recession for the US economy to 83 00:04:06,160 --> 00:04:09,200 Speaker 3: have two quarters of negative GDP that can come from 84 00:04:09,480 --> 00:04:14,760 Speaker 3: housing capex. Let's not forget manufacturing is in a recession globally. 85 00:04:14,840 --> 00:04:17,520 Speaker 3: We've actually had the longest manufacturing recession, one of the 86 00:04:17,560 --> 00:04:21,159 Speaker 3: longest ever. So there are sectors and pockets of this economy. 87 00:04:21,360 --> 00:04:24,040 Speaker 2: Existing home sees, rotation companies will tell you they've been 88 00:04:24,040 --> 00:04:25,279 Speaker 2: in a good recession. 89 00:04:25,320 --> 00:04:27,360 Speaker 3: I don't have to convince anyone who's on the good 90 00:04:27,520 --> 00:04:29,839 Speaker 3: side of the business. I don't have to convince small 91 00:04:29,920 --> 00:04:33,080 Speaker 3: cap portfolio managers that we're in a recession. They believe me. 92 00:04:33,160 --> 00:04:35,640 Speaker 3: And frankly, I don't have to convince anyone in Germany, 93 00:04:35,760 --> 00:04:38,839 Speaker 3: Canada and Japan or outside the United States that we're 94 00:04:38,839 --> 00:04:42,320 Speaker 3: in a hard landing. This is a US story very specifically, 95 00:04:42,360 --> 00:04:45,800 Speaker 3: and it's about services holding on. How much do jobs 96 00:04:45,839 --> 00:04:48,440 Speaker 3: matter here? Well, one of the big challenges is jobs 97 00:04:48,480 --> 00:04:51,640 Speaker 3: always break last, and they don't break in a linear fashion. 98 00:04:51,800 --> 00:04:55,200 Speaker 3: It's a hockey stick, forgive my Canadian reference. It goes 99 00:04:55,400 --> 00:04:58,160 Speaker 3: hard and fast upwards. And if you take a look 100 00:04:58,200 --> 00:05:01,960 Speaker 3: at some of this underlying data, life continuing claims, if 101 00:05:02,000 --> 00:05:04,960 Speaker 3: you look at that big drop down in vacancies, the 102 00:05:05,080 --> 00:05:08,320 Speaker 3: risk is that the unemployment rate rises. Now when you're 103 00:05:08,360 --> 00:05:10,799 Speaker 3: an economist working for a bank or the cell side, 104 00:05:10,880 --> 00:05:12,640 Speaker 3: You've got to come out with a forecast. You've got 105 00:05:12,640 --> 00:05:14,560 Speaker 3: to come out with conviction. When you're in a role 106 00:05:14,680 --> 00:05:16,840 Speaker 3: like mine, you work with portfolio managers every day. They 107 00:05:16,839 --> 00:05:19,279 Speaker 3: don't really care what my point forecast is. They want 108 00:05:19,279 --> 00:05:21,800 Speaker 3: to know what is the balance of risks. And the 109 00:05:21,920 --> 00:05:25,240 Speaker 3: risk is not that the unemployment rate declines and the 110 00:05:25,320 --> 00:05:28,440 Speaker 3: job market strengthens from this point, it's that the job 111 00:05:28,480 --> 00:05:32,359 Speaker 3: market weakens, and it's really asymmetric risk going into twenty 112 00:05:32,400 --> 00:05:36,240 Speaker 3: twenty four. Does it matter for the economy, absolutely, But 113 00:05:36,360 --> 00:05:38,200 Speaker 3: here I would say this is the difference between that 114 00:05:38,279 --> 00:05:41,840 Speaker 3: mild recession soft landing and a worse recession. It's not 115 00:05:41,880 --> 00:05:44,919 Speaker 3: about upside, it's about what downsides are not being recognized. 116 00:05:45,200 --> 00:05:48,040 Speaker 4: So then against that, what do you make of all 117 00:05:48,080 --> 00:05:50,960 Speaker 4: of the Fed speak that we've seen recently. I mean, 118 00:05:51,000 --> 00:05:53,760 Speaker 4: first Powell kind of not pushing back on that idea 119 00:05:53,800 --> 00:05:56,800 Speaker 4: that financial conditions have loosened, and then in the wake 120 00:05:56,880 --> 00:05:59,440 Speaker 4: of that, a few officials coming out and maybe trying 121 00:05:59,480 --> 00:06:02,440 Speaker 4: to walk back those expectations just a little bit. 122 00:06:02,520 --> 00:06:04,360 Speaker 3: Yeah, you know, we're always trying to get a sense 123 00:06:04,360 --> 00:06:06,599 Speaker 3: of what exactly is the FED watching as if they 124 00:06:06,640 --> 00:06:08,919 Speaker 3: sit in a secret room. Well, I guess they do 125 00:06:09,040 --> 00:06:11,000 Speaker 3: have a little bit of a secret room, and they 126 00:06:11,040 --> 00:06:12,960 Speaker 3: have this magic formula, and we're all just trying to 127 00:06:13,000 --> 00:06:15,800 Speaker 3: guess exactly what that magic formula is. I don't think 128 00:06:15,839 --> 00:06:18,040 Speaker 3: it's that at all. I think, just like economists and 129 00:06:18,040 --> 00:06:21,000 Speaker 3: strategists and portfolio managers, the weight that they put on 130 00:06:21,040 --> 00:06:24,320 Speaker 3: different factors changes. But again, if I'm sitting at the FED, 131 00:06:24,400 --> 00:06:26,680 Speaker 3: what is the balance of risks? Here's a risk that 132 00:06:26,760 --> 00:06:31,120 Speaker 3: I haven't heard anybody talk about downshooting on inflation sub 133 00:06:31,200 --> 00:06:34,279 Speaker 3: two percent inflation. Why are we not talking about that 134 00:06:34,480 --> 00:06:37,920 Speaker 3: risk when we see this material decline in inflation expectations, 135 00:06:38,120 --> 00:06:41,320 Speaker 3: energy costs, there's a wide range of goods prices that 136 00:06:41,360 --> 00:06:44,320 Speaker 3: are dropping really quickly. That's not my point forecast, but 137 00:06:44,360 --> 00:06:46,360 Speaker 3: it's a risk that need to be assessed and has 138 00:06:46,400 --> 00:06:48,440 Speaker 3: to be taken into account by the FED. At the 139 00:06:48,480 --> 00:06:50,320 Speaker 3: end of the day, I don't know how much it 140 00:06:50,400 --> 00:06:53,800 Speaker 3: matters why they pivoted. It just matters that, as I've 141 00:06:53,839 --> 00:06:56,040 Speaker 3: been saying, the toothpaste is out of the tube. It's 142 00:06:56,160 --> 00:06:59,120 Speaker 3: real hard to walk it back. And I hear every day, Oh, 143 00:06:59,160 --> 00:07:01,559 Speaker 3: but they're pushing back. They're saying they're not talking about 144 00:07:01,680 --> 00:07:04,080 Speaker 3: rate cuts. Well, how come every day I turn on 145 00:07:04,600 --> 00:07:06,560 Speaker 3: my news, my Bloomberg terminal and I see all the 146 00:07:06,600 --> 00:07:09,680 Speaker 3: talk about how we're not talking about not talking about 147 00:07:09,760 --> 00:07:13,400 Speaker 3: rate cuts. It's too late. And even you know, the 148 00:07:13,400 --> 00:07:15,920 Speaker 3: ECB and the Bank of England they try to push 149 00:07:16,000 --> 00:07:18,960 Speaker 3: back as well. The market says, we don't believe you. 150 00:07:19,080 --> 00:07:22,200 Speaker 3: We don't believe you because you get UK inflation this morning. 151 00:07:22,320 --> 00:07:25,080 Speaker 3: That just says you can walk that talk as much 152 00:07:25,120 --> 00:07:27,760 Speaker 3: as you want, but the data is not supporting that. 153 00:07:27,800 --> 00:07:30,320 Speaker 3: We are not in a disinflation and growth slow down 154 00:07:30,400 --> 00:07:31,240 Speaker 3: type of environment. 155 00:07:31,760 --> 00:07:33,880 Speaker 2: Stepping back a little bit from a global perspective, how 156 00:07:33,920 --> 00:07:36,800 Speaker 2: concerned are you about China? Because it's just been a 157 00:07:36,840 --> 00:07:38,800 Speaker 2: lot of soft the data coming out of China. The 158 00:07:38,840 --> 00:07:42,120 Speaker 2: reopening wasn't what I think a lot of investors anticipated 159 00:07:42,120 --> 00:07:45,120 Speaker 2: at the beginning of twenty twenty three. As you look 160 00:07:45,160 --> 00:07:47,320 Speaker 2: forward to twenty twenty four, how do you feel like 161 00:07:47,400 --> 00:07:50,400 Speaker 2: China is can impact maybe the global economy the US economy. 162 00:07:50,640 --> 00:07:53,680 Speaker 3: Yeah, So we think about China in terms of fat tails, 163 00:07:54,560 --> 00:07:57,640 Speaker 3: and by that I mean that the distribution of risks 164 00:07:58,040 --> 00:08:01,120 Speaker 3: on both the downside and the upside are quite large. 165 00:08:01,360 --> 00:08:04,400 Speaker 3: So on one hand, we you know, as I said earlier, 166 00:08:04,440 --> 00:08:06,600 Speaker 3: we're talking so much about soft landing hardlining in the 167 00:08:06,680 --> 00:08:09,000 Speaker 3: United States. The rest of the world is already in 168 00:08:09,040 --> 00:08:13,280 Speaker 3: hard landing territory. Emerging markets lad interest rates higher coming 169 00:08:13,280 --> 00:08:16,320 Speaker 3: out of COVID, and they are now actively cutting. China 170 00:08:16,440 --> 00:08:19,880 Speaker 3: is in a very significant fiscal and monetary easing cycle. 171 00:08:20,160 --> 00:08:22,880 Speaker 3: We've got a range of emerging markets that are already 172 00:08:22,960 --> 00:08:25,640 Speaker 3: in easing. The FED and the rest of the developed 173 00:08:25,680 --> 00:08:28,840 Speaker 3: market central banks are laggarts. When it comes, they will 174 00:08:28,880 --> 00:08:32,000 Speaker 3: be the last ones to go. So following China through 175 00:08:32,040 --> 00:08:34,880 Speaker 3: this disinflation, I think is really clutch. And let's also 176 00:08:34,920 --> 00:08:38,760 Speaker 3: remember China is in deflation. They have negative CPI right now, 177 00:08:39,080 --> 00:08:41,640 Speaker 3: so they are a really important leading story. What I 178 00:08:41,640 --> 00:08:44,080 Speaker 3: think is telling about China is that they've put the 179 00:08:44,200 --> 00:08:47,960 Speaker 3: pressure on the fiscal side to ramp up support. That's 180 00:08:48,000 --> 00:08:51,040 Speaker 3: an upside risk to the global economy, But fiscal doesn't 181 00:08:51,040 --> 00:08:53,800 Speaker 3: impact your economy overnight, so that's more of an upside 182 00:08:53,840 --> 00:08:56,520 Speaker 3: risk to later twenty twenty four into twenty twenty five. 183 00:08:56,800 --> 00:08:59,960 Speaker 3: When you look at the lags between Chinese economic activity 184 00:09:00,040 --> 00:09:03,599 Speaker 3: and US economic activity, China's slow down becomes very impactful 185 00:09:03,600 --> 00:09:06,520 Speaker 3: to the United States in the first the next six months. 186 00:09:06,760 --> 00:09:08,719 Speaker 2: Right interesting and just we had some you know, some 187 00:09:08,840 --> 00:09:10,840 Speaker 2: data that just came out at ten o'clock today. The consumer, 188 00:09:11,400 --> 00:09:13,960 Speaker 2: the Conference Board consumer confidence came in much better than expected. 189 00:09:14,040 --> 00:09:15,839 Speaker 2: So the consumer still hanging in there. 190 00:09:15,840 --> 00:09:16,040 Speaker 5: Good. 191 00:09:16,080 --> 00:09:19,840 Speaker 3: You know what, the consumer loves lower gas prices. How 192 00:09:19,880 --> 00:09:23,320 Speaker 3: interesting is it that we are always talking about, you know, 193 00:09:23,360 --> 00:09:26,920 Speaker 3: the central banks they have to contain infleetion expectations. You know, 194 00:09:28,080 --> 00:09:30,439 Speaker 3: I worked at a central bank and when I did, 195 00:09:30,640 --> 00:09:33,079 Speaker 3: I told some friends and they said, oh, you must 196 00:09:33,120 --> 00:09:35,880 Speaker 3: be a bank teller. And I tend to think about 197 00:09:35,920 --> 00:09:38,880 Speaker 3: that because the perception is that what a central banker 198 00:09:38,880 --> 00:09:43,080 Speaker 3: does meaningfully moves infleetion expectations. And that's true in some components. 199 00:09:43,280 --> 00:09:46,040 Speaker 3: But if you track where consumer expectations are for inflation, 200 00:09:46,120 --> 00:09:48,319 Speaker 3: they just track on top of gas prices. That's what 201 00:09:48,320 --> 00:09:49,360 Speaker 3: people see over time. 202 00:09:49,520 --> 00:09:51,319 Speaker 2: And I can tell you it's three dollars at the 203 00:09:51,679 --> 00:09:54,640 Speaker 2: huahwah and Wall township. Francis Donald, thanks so much. We 204 00:09:54,679 --> 00:09:58,400 Speaker 2: appreciate it. Chief econmis Menu Life Investment Management joining us 205 00:09:58,440 --> 00:10:01,559 Speaker 2: Live Instituto even after being lin on television earlier today. 206 00:10:01,679 --> 00:10:03,040 Speaker 2: So we appreciate that commitment. 207 00:10:04,679 --> 00:10:08,079 Speaker 5: You're listening to the team. Ken's our live program Bloomberg 208 00:10:08,160 --> 00:10:11,559 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com, 209 00:10:11,600 --> 00:10:14,720 Speaker 5: the iHeartRadio app, and the Bloomberg Business App, or listen 210 00:10:14,800 --> 00:10:16,920 Speaker 5: on demand wherever you get your podcasts. 211 00:10:18,559 --> 00:10:21,439 Speaker 2: I want to get to the latest on former President 212 00:10:21,480 --> 00:10:25,400 Speaker 2: Donald Trump. We welcome Caroline Frederickson, Distinguished Visiting Professor at 213 00:10:25,400 --> 00:10:29,360 Speaker 2: Georgetown Law. Caroline, can you encapsulate for us, summarize for 214 00:10:29,440 --> 00:10:32,520 Speaker 2: us what you think the risk is here to former 215 00:10:32,559 --> 00:10:35,520 Speaker 2: President Trump from this ruling from the Colorado Supreme Court 216 00:10:35,760 --> 00:10:38,160 Speaker 2: taking mister Trump off the ballot. 217 00:10:39,679 --> 00:10:42,200 Speaker 6: You know, the risk obviously is not so great for 218 00:10:42,280 --> 00:10:45,000 Speaker 6: him in terms of winning Colorado in the general election, 219 00:10:45,120 --> 00:10:48,080 Speaker 6: because that wasn't really destined to happen in any case, 220 00:10:48,200 --> 00:10:50,280 Speaker 6: there has been a Republican who won that. 221 00:10:50,280 --> 00:10:51,600 Speaker 7: State since two thousand and four. 222 00:10:52,120 --> 00:10:54,640 Speaker 6: But nonetheless, it's such a precedent for the other states 223 00:10:54,640 --> 00:10:56,720 Speaker 6: and there will be, no doubt a number of other 224 00:10:58,120 --> 00:11:02,560 Speaker 6: states deciding this same issue about whether or not Trump 225 00:11:02,640 --> 00:11:05,000 Speaker 6: can appear on the ballot. And for those in those 226 00:11:05,000 --> 00:11:09,120 Speaker 6: states where there's actually a viable race, which is most 227 00:11:09,120 --> 00:11:11,800 Speaker 6: states in the country, you will actually have a significant 228 00:11:11,840 --> 00:11:14,640 Speaker 6: effect because if other states are going to rule that 229 00:11:14,640 --> 00:11:17,160 Speaker 6: Trump can't be on the ballot, and we have a 230 00:11:17,240 --> 00:11:20,760 Speaker 6: situation where it's obviously very closely divided electorate, it could 231 00:11:20,840 --> 00:11:23,480 Speaker 6: be the difference whether he wins or loses. 232 00:11:24,120 --> 00:11:26,640 Speaker 4: How do you see this situation faring out in the 233 00:11:26,679 --> 00:11:27,400 Speaker 4: Supreme Court? 234 00:11:28,760 --> 00:11:31,160 Speaker 7: Well, that's really hard to say. This is a completely 235 00:11:31,200 --> 00:11:31,920 Speaker 7: novel question. 236 00:11:32,760 --> 00:11:36,520 Speaker 6: This has never gotten to the Supreme Court, even involving 237 00:11:36,720 --> 00:11:41,200 Speaker 6: someone of a lower level, let alone a president, presidential 238 00:11:41,200 --> 00:11:45,199 Speaker 6: candidate and former president. So I think it's quite complex 239 00:11:45,400 --> 00:11:49,280 Speaker 6: because the issues have never been addressed. There have been 240 00:11:49,320 --> 00:11:54,200 Speaker 6: some lengthy dueling larvae articles trying to explain the meaning 241 00:11:54,240 --> 00:11:57,400 Speaker 6: of the provision. It's the insurrectionist clause in the Fourteenth Amendment, 242 00:11:57,480 --> 00:12:01,520 Speaker 6: section three, by the ball The bast bulk of scholarly 243 00:12:01,600 --> 00:12:06,000 Speaker 6: opinion is that President Trump is squarely within the sights 244 00:12:06,280 --> 00:12:11,520 Speaker 6: of that provision. But you know, there are those questions 245 00:12:11,559 --> 00:12:13,480 Speaker 6: are open, and we you know, we can only think 246 00:12:13,520 --> 00:12:16,520 Speaker 6: that the Supreme Court is going to have to approach them. 247 00:12:16,640 --> 00:12:20,280 Speaker 2: Anew, are there other states that you're aware of that 248 00:12:20,480 --> 00:12:23,120 Speaker 2: are maybe in advanced stages of doing something similar to 249 00:12:23,120 --> 00:12:23,920 Speaker 2: what Colorado did? 250 00:12:24,800 --> 00:12:29,199 Speaker 6: Well, there is an appeal from a ruling that kept 251 00:12:29,400 --> 00:12:32,679 Speaker 6: Donald Trump on the ballot that is going up, I 252 00:12:32,679 --> 00:12:35,560 Speaker 6: believe in Michigan to their Supreme Court, so that one 253 00:12:36,160 --> 00:12:39,719 Speaker 6: could pose a problem for him. Michigan is a you know, 254 00:12:39,840 --> 00:12:44,880 Speaker 6: fierce battleground state. So and I think the advocates and 255 00:12:45,080 --> 00:12:47,839 Speaker 6: the voters who've been bringing these cases are surely looking 256 00:12:47,880 --> 00:12:53,040 Speaker 6: at every opportunity now to make to use the Colorado 257 00:12:53,120 --> 00:12:55,600 Speaker 6: ruling as a president because it was very thorough, it 258 00:12:55,640 --> 00:12:59,520 Speaker 6: was very thoughtful, so it will be weighed very carefully. 259 00:12:59,640 --> 00:13:01,160 Speaker 7: Ya other or other state courts. 260 00:13:02,040 --> 00:13:04,720 Speaker 4: Can we backtrack for a second, What does it actually 261 00:13:04,760 --> 00:13:07,600 Speaker 4: mean that Trump is not on the ballot? 262 00:13:09,880 --> 00:13:13,240 Speaker 6: Well, I just it will be an empty line, I suppose. 263 00:13:13,280 --> 00:13:15,120 Speaker 6: I mean they haven't printed the ballots. This is still 264 00:13:15,160 --> 00:13:20,679 Speaker 6: for the primary in Colorado, and it will mean that 265 00:13:20,720 --> 00:13:23,920 Speaker 6: the other Republican candidates will be listed and Donald Trump 266 00:13:23,920 --> 00:13:24,240 Speaker 6: will not. 267 00:13:24,559 --> 00:13:26,800 Speaker 4: This is only for the primary, or he can't appear 268 00:13:26,800 --> 00:13:29,000 Speaker 4: in any election for public office. 269 00:13:29,040 --> 00:13:31,480 Speaker 6: It will be any election right now, it's just the 270 00:13:31,480 --> 00:13:35,280 Speaker 6: primary and the court itself. The Colorado Supreme Court has 271 00:13:36,200 --> 00:13:43,680 Speaker 6: held its opinion until early January because it's very possible 272 00:13:43,720 --> 00:13:46,640 Speaker 6: the Supreme Court might be able to we'll decide whether 273 00:13:46,720 --> 00:13:50,960 Speaker 6: to take an appeal and will rule very quickly, but 274 00:13:51,080 --> 00:13:53,240 Speaker 6: after January four it will go forward. 275 00:13:53,920 --> 00:13:57,480 Speaker 2: So you know, is Caroline, what is the kind of 276 00:13:57,520 --> 00:13:59,280 Speaker 2: the real legal argument that if it gets to the 277 00:13:59,320 --> 00:14:03,040 Speaker 2: Supreme Court or maybe put to simply, what did the 278 00:14:03,080 --> 00:14:07,920 Speaker 2: State of Cholrador court find that A he was an insurrectionist? 279 00:14:08,000 --> 00:14:12,120 Speaker 2: And be the Constitution says insurrectionists can't be elected to office. 280 00:14:12,160 --> 00:14:13,920 Speaker 2: I'm a little unclear as to the legal issue. 281 00:14:14,440 --> 00:14:17,640 Speaker 6: So there are two elements here, and it's basically that 282 00:14:18,080 --> 00:14:21,400 Speaker 6: for someone who has taken an oath to the Constitution, 283 00:14:21,520 --> 00:14:26,320 Speaker 6: they cannot be an officer of the United States. So 284 00:14:26,480 --> 00:14:28,840 Speaker 6: that is Donald Trump took an oath to the Constitution 285 00:14:28,880 --> 00:14:32,479 Speaker 6: when he was president, and then under the factual analysis 286 00:14:32,480 --> 00:14:35,680 Speaker 6: of the trial court, he engaged an insurrection, and that 287 00:14:35,760 --> 00:14:39,640 Speaker 6: judge used the January sixth report and its extensive evidence 288 00:14:39,680 --> 00:14:44,400 Speaker 6: of the ways in which former President Trump had been 289 00:14:44,520 --> 00:14:48,560 Speaker 6: fanning the flames of the insurrection to find that he 290 00:14:48,600 --> 00:14:51,800 Speaker 6: had engaged an insurrection. But that judge on the legal question, 291 00:14:51,880 --> 00:14:56,960 Speaker 6: which is is Donald Trump is the president one of 292 00:14:57,000 --> 00:15:03,000 Speaker 6: those officers that is barred from being a candidate, And 293 00:15:04,040 --> 00:15:06,280 Speaker 6: it seems pretty clear I think to most people that 294 00:15:06,400 --> 00:15:08,920 Speaker 6: the president is an officer of the United States. 295 00:15:09,280 --> 00:15:11,240 Speaker 7: But that's the legal question, all right. 296 00:15:11,280 --> 00:15:15,200 Speaker 2: If we step out kind of and look at former 297 00:15:15,240 --> 00:15:21,680 Speaker 2: President Donald Trump's legal issues in mass I have, where 298 00:15:21,720 --> 00:15:23,800 Speaker 2: is the greatest risk do you think to him? I 299 00:15:23,800 --> 00:15:26,960 Speaker 2: guess as it relates to the election. Not personally, I guess, 300 00:15:27,000 --> 00:15:30,720 Speaker 2: but just in terms of his ability to run and 301 00:15:30,840 --> 00:15:32,360 Speaker 2: potentially you know, be elected. 302 00:15:33,360 --> 00:15:35,720 Speaker 6: Well, I really think the actually biggest risks to him 303 00:15:35,720 --> 00:15:39,680 Speaker 6: are the other cases. I mean, you know, it's a 304 00:15:39,800 --> 00:15:44,120 Speaker 6: you know, certainly an important finding that he engaged in insurrection, 305 00:15:45,400 --> 00:15:47,720 Speaker 6: you know, really just taking up what the January sixth 306 00:15:47,760 --> 00:15:50,000 Speaker 6: Commission had already had already done. 307 00:15:50,800 --> 00:15:52,360 Speaker 7: But I think the other. 308 00:15:52,280 --> 00:16:00,600 Speaker 6: Cases, the Georgia case involving election interference and the the 309 00:16:01,200 --> 00:16:05,960 Speaker 6: case in DC involving January sixth then an election interference, 310 00:16:05,960 --> 00:16:08,320 Speaker 6: I think those are the ones that really could well 311 00:16:08,320 --> 00:16:12,480 Speaker 6: bite him, because even you know, the kind of the 312 00:16:12,520 --> 00:16:17,320 Speaker 6: most hardcore MAGA voters may start to question their candidate 313 00:16:17,520 --> 00:16:20,960 Speaker 6: if there's a rock solid criminal case against him and 314 00:16:21,000 --> 00:16:22,680 Speaker 6: it's moving forward and he's losing. 315 00:16:23,600 --> 00:16:27,200 Speaker 2: And just one final question here, Caroline, does he get 316 00:16:27,200 --> 00:16:29,640 Speaker 2: good representation? I Mean, it just seems like I don't 317 00:16:29,720 --> 00:16:32,040 Speaker 2: know any of the firms that he hires these various things. 318 00:16:32,040 --> 00:16:34,040 Speaker 2: They're not firms I've ever heard of. And do you 319 00:16:34,040 --> 00:16:35,479 Speaker 2: think he gets quality representation? 320 00:16:36,280 --> 00:16:39,560 Speaker 6: Well, you know, I think just ask Rudy Giuliani how 321 00:16:39,560 --> 00:16:42,560 Speaker 6: he's doing. I think he's got some big bills right 322 00:16:42,600 --> 00:16:44,000 Speaker 6: now and I don't see Donald. 323 00:16:43,800 --> 00:16:45,240 Speaker 7: Trump stepping in to pay them. 324 00:16:45,280 --> 00:16:47,240 Speaker 6: So, you know, I think, you know, one of the 325 00:16:47,320 --> 00:16:50,120 Speaker 6: problems is the kind of relationships he's had with lawyers 326 00:16:50,120 --> 00:16:52,600 Speaker 6: over the years haven't really meant that those lawyers have 327 00:16:53,040 --> 00:16:57,120 Speaker 6: been able to succeed in their businesses. So I think 328 00:16:57,160 --> 00:17:01,720 Speaker 6: a lot of very more serious, US reputable lawyers have 329 00:17:01,800 --> 00:17:02,440 Speaker 6: stepped away. 330 00:17:02,520 --> 00:17:04,120 Speaker 7: It's it's a dangerous place to go. 331 00:17:04,520 --> 00:17:06,880 Speaker 2: Interesting, all right, Well, there's a lot to follow there. 332 00:17:07,080 --> 00:17:09,720 Speaker 2: Caroline Frederickson, thank you so much for joining us. Caroline Frederickson, 333 00:17:09,840 --> 00:17:12,879 Speaker 2: she's a distinguished visiting professor at Georgetown Law. Kind of 334 00:17:12,880 --> 00:17:16,640 Speaker 2: breaking down some of the legal issues surrounding former President 335 00:17:16,640 --> 00:17:19,920 Speaker 2: Donald Trump in Colorado, where they had the state has 336 00:17:19,960 --> 00:17:23,399 Speaker 2: removed him, at least at this stage from the ballot 337 00:17:23,400 --> 00:17:27,120 Speaker 2: for the upcoming primary. So another issue for the former 338 00:17:27,160 --> 00:17:29,960 Speaker 2: president deal with from a legal perspective, and it's tough 339 00:17:30,000 --> 00:17:33,320 Speaker 2: to keep tracking. You need you need like a you know, 340 00:17:33,359 --> 00:17:35,560 Speaker 2: Bingo card to kind of keep track of everything. 341 00:17:35,359 --> 00:17:38,440 Speaker 5: You're listening to the tape. Can's are live program Bloomberg 342 00:17:38,560 --> 00:17:42,159 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 343 00:17:42,200 --> 00:17:45,440 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 344 00:17:45,480 --> 00:17:48,280 Speaker 5: You can also listen live on Amazon Alexa from our 345 00:17:48,320 --> 00:17:54,400 Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 346 00:17:54,200 --> 00:17:57,520 Speaker 2: Bed X, f d X stocks down eleven percent. It 347 00:17:57,560 --> 00:18:01,440 Speaker 2: was up like fifty percent yesterday day on year to date, 348 00:18:01,680 --> 00:18:04,840 Speaker 2: So a big surprise here company before to earnings disappointed 349 00:18:05,560 --> 00:18:08,320 Speaker 2: with their financial results. Here at lead Lascow, he covers 350 00:18:08,359 --> 00:18:11,359 Speaker 2: all the transports and logistic stuffs for Bloomberg Intelligence. Second 351 00:18:11,400 --> 00:18:13,520 Speaker 2: day in a row in studio. How about that man, 352 00:18:14,480 --> 00:18:15,600 Speaker 2: what's going on in FedEx? 353 00:18:15,720 --> 00:18:18,800 Speaker 8: Lucky me? Lucky? Yes, how you doing? Yeah? 354 00:18:18,880 --> 00:18:20,800 Speaker 9: So FedEx, it's really the express business. 355 00:18:21,040 --> 00:18:22,479 Speaker 8: If you think about their air freight business. 356 00:18:22,520 --> 00:18:24,840 Speaker 2: So they have air freight ground and express is that 357 00:18:24,880 --> 00:18:26,560 Speaker 2: how expresses. 358 00:18:26,600 --> 00:18:28,879 Speaker 9: The air freight ground is the stuff that comes to 359 00:18:28,920 --> 00:18:32,600 Speaker 9: your house, and then freight is the less than truckload business. 360 00:18:32,600 --> 00:18:36,320 Speaker 2: Okay, and the express business that most of us think about. 361 00:18:36,720 --> 00:18:38,399 Speaker 8: Yeah, kind of the planes, because that's what they were 362 00:18:38,400 --> 00:18:38,760 Speaker 8: built on. 363 00:18:38,800 --> 00:18:41,080 Speaker 9: They were first an express company that built out a 364 00:18:41,080 --> 00:18:43,600 Speaker 9: ground network, where UPS was a ground network that built 365 00:18:43,600 --> 00:18:46,879 Speaker 9: out an air network. See because fred Smith kind of 366 00:18:46,920 --> 00:18:48,680 Speaker 9: invented that air network. 367 00:18:49,119 --> 00:18:51,000 Speaker 2: So what's going wrong with that network? 368 00:18:51,520 --> 00:18:55,280 Speaker 9: It's just gotten too big. So they're trying to do 369 00:18:55,320 --> 00:18:57,480 Speaker 9: a lot of cost savings, but the cost savings aren't 370 00:18:57,480 --> 00:19:00,879 Speaker 9: coming up to the I guess they're servicing in the 371 00:19:00,920 --> 00:19:04,639 Speaker 9: ebit line because they're facing some headwinds, whether it's demand 372 00:19:04,680 --> 00:19:08,760 Speaker 9: headwinds from just consumers not buying as much. The US 373 00:19:08,880 --> 00:19:12,560 Speaker 9: Postal Service was a big customer. They're actually using less 374 00:19:12,600 --> 00:19:15,480 Speaker 9: air more ground and so that's not great for FedEx. 375 00:19:16,440 --> 00:19:19,480 Speaker 9: So there's a lot of headwinds that they're facing and 376 00:19:20,000 --> 00:19:23,480 Speaker 9: it's really impacting their overall margins. And their margins were 377 00:19:23,600 --> 00:19:26,600 Speaker 9: you know, below two percent wow, which is not great, 378 00:19:26,600 --> 00:19:28,399 Speaker 9: and it was about two hundred and twenty basis points 379 00:19:28,480 --> 00:19:30,880 Speaker 9: less than what analysts were expecting. 380 00:19:30,440 --> 00:19:31,000 Speaker 8: For the quarter. 381 00:19:32,000 --> 00:19:34,920 Speaker 4: What did we learn about the health of the US 382 00:19:35,000 --> 00:19:38,280 Speaker 4: economy and the US consumer from these FedEx earnings. 383 00:19:38,400 --> 00:19:39,280 Speaker 8: It's a great question. 384 00:19:39,440 --> 00:19:42,160 Speaker 9: I didn't learn much because I was more or less 385 00:19:42,200 --> 00:19:45,760 Speaker 9: focused on you know, their businesses, you know what we 386 00:19:46,000 --> 00:19:47,760 Speaker 9: But what I would say is that. 387 00:19:47,720 --> 00:19:49,920 Speaker 8: You know, we are recalibrating demand. 388 00:19:50,440 --> 00:19:54,280 Speaker 9: We're still coming off of those creamy highs in the pandemic, 389 00:19:54,359 --> 00:19:57,600 Speaker 9: so we're still normalizing and that's going to continue to 390 00:19:57,640 --> 00:20:00,919 Speaker 9: take time. But you know, the consumer seems to be 391 00:20:01,080 --> 00:20:03,800 Speaker 9: in a pretty good spot. They mentioned that their peak 392 00:20:03,880 --> 00:20:08,240 Speaker 9: season was running relatively well, but it's also worth noting 393 00:20:08,280 --> 00:20:11,800 Speaker 9: that they were expecting probably more volumes in their express 394 00:20:11,880 --> 00:20:16,040 Speaker 9: business and that kind of misaligned costs and kind of 395 00:20:16,560 --> 00:20:19,160 Speaker 9: added to the margin pressure that they faced in their 396 00:20:19,359 --> 00:20:20,320 Speaker 9: physical second quarter. 397 00:20:20,560 --> 00:20:23,960 Speaker 2: So during the pandemic, everybody started shopping more and a 398 00:20:24,040 --> 00:20:27,120 Speaker 2: lot more packages were going through the FedEx system. Did 399 00:20:27,119 --> 00:20:30,480 Speaker 2: they add a bunch of fixed costs to service that 400 00:20:30,600 --> 00:20:33,040 Speaker 2: demand and now we're at a point of, oh, now 401 00:20:33,040 --> 00:20:35,160 Speaker 2: we've got to take someone's fixed costs out of the system. 402 00:20:35,560 --> 00:20:37,200 Speaker 8: No, it really wasn't that for them. 403 00:20:37,280 --> 00:20:41,040 Speaker 9: It was really about getting people and technology in the 404 00:20:41,080 --> 00:20:44,600 Speaker 9: right places. Because I mean they had the sorting facilities, 405 00:20:44,640 --> 00:20:48,040 Speaker 9: they had the planes, they had the trucks. You know, 406 00:20:48,080 --> 00:20:49,920 Speaker 9: what they needed to do is just be a lot 407 00:20:49,960 --> 00:20:53,760 Speaker 9: more productive in terms of the throughput of their overall system. 408 00:20:54,000 --> 00:20:56,440 Speaker 9: And it's a very tough business because you know they 409 00:20:56,440 --> 00:20:59,160 Speaker 9: do they try to predict as best as they can 410 00:20:59,280 --> 00:21:01,920 Speaker 9: a couple of weeks out, but you know, things happen. 411 00:21:02,640 --> 00:21:06,440 Speaker 9: Demand happens, and supply chains shocks happen, like we're seeing 412 00:21:06,440 --> 00:21:07,480 Speaker 9: in the Red Sea right now. 413 00:21:08,400 --> 00:21:12,000 Speaker 4: I hear the term shipping recession a lot, and we're 414 00:21:12,040 --> 00:21:15,199 Speaker 4: in a shipping recession. I'm a little confused. I mean, 415 00:21:15,280 --> 00:21:19,280 Speaker 4: everyone in my apartment complex is getting about ten packages 416 00:21:19,320 --> 00:21:22,439 Speaker 4: a day. My doorman is completely overwhelmed with all of 417 00:21:22,440 --> 00:21:24,879 Speaker 4: the packages. But can you talk a little bit like 418 00:21:25,040 --> 00:21:26,879 Speaker 4: what does that mean and how we've seen them? 419 00:21:27,080 --> 00:21:30,080 Speaker 9: So we've been in a freight recession for quite some time. 420 00:21:30,520 --> 00:21:32,399 Speaker 9: If you think about it, you know twenty twenty two 421 00:21:32,680 --> 00:21:35,080 Speaker 9: was the peak. If you look at any earnings of 422 00:21:35,080 --> 00:21:37,600 Speaker 9: any companies that I cover, whether it's a railroad, a 423 00:21:37,640 --> 00:21:41,680 Speaker 9: trucking company, a parcel provider, a marine shipping provider, you're 424 00:21:41,720 --> 00:21:43,720 Speaker 9: going to see peak ear earnings for most of them 425 00:21:43,720 --> 00:21:47,320 Speaker 9: in twenty twenty two, and fantastic earnings in twenty twenty one. 426 00:21:47,560 --> 00:21:50,160 Speaker 9: And that is really was just purely driven by the pandemic. 427 00:21:50,200 --> 00:21:54,080 Speaker 9: And again we're normalizing right so you know, Paul All, 428 00:21:54,080 --> 00:21:55,960 Speaker 9: I'm sure you're going on vacation soon, so instead of 429 00:21:56,080 --> 00:22:01,280 Speaker 9: maybe buying new furniture, you're going away. And so people 430 00:22:01,280 --> 00:22:03,960 Speaker 9: are doing more the services aspect, and then all of 431 00:22:04,000 --> 00:22:06,400 Speaker 9: a sudden, interest rates are higher, so people are buying 432 00:22:06,520 --> 00:22:09,080 Speaker 9: less houses and so you're you're filling the house with 433 00:22:09,200 --> 00:22:12,080 Speaker 9: less stuff because when you buy a house, usually buy 434 00:22:12,080 --> 00:22:13,639 Speaker 9: a lot of stuff that goes along with it. So 435 00:22:13,800 --> 00:22:18,040 Speaker 9: just people are just maybe still on the services side 436 00:22:18,080 --> 00:22:21,520 Speaker 9: more and less on the product side more. The good 437 00:22:21,520 --> 00:22:24,000 Speaker 9: news is that the d stocking that we saw over 438 00:22:24,000 --> 00:22:26,000 Speaker 9: the last twelve months seems to be coming to an end, 439 00:22:26,680 --> 00:22:29,880 Speaker 9: and so that would mean to us that normal seasonaley 440 00:22:30,080 --> 00:22:32,360 Speaker 9: are going to go back into forest in twenty twenty four, 441 00:22:32,640 --> 00:22:35,440 Speaker 9: and we should see more normal seasonal patterns next year. 442 00:22:35,680 --> 00:22:37,720 Speaker 9: And you know, for most of the companies that we cover, 443 00:22:38,000 --> 00:22:40,800 Speaker 9: in the markets that we cover, we are expecting growth 444 00:22:41,760 --> 00:22:44,280 Speaker 9: north of where GDP expectations are for. 445 00:22:44,720 --> 00:22:48,200 Speaker 2: So for FedEx, the stock was up fifty percent as 446 00:22:48,240 --> 00:22:50,800 Speaker 2: of yesterday's closed now down ten percent today. What was 447 00:22:50,800 --> 00:22:52,639 Speaker 2: the market if we are in Ober session is a 448 00:22:52,640 --> 00:22:55,880 Speaker 2: market looking forward to saying, hey, twenty four and twenty 449 00:22:55,880 --> 00:22:58,000 Speaker 2: five are going to be more better years relative to 450 00:22:58,480 --> 00:22:59,520 Speaker 2: twenty three. I guess yeah. 451 00:22:59,520 --> 00:23:01,760 Speaker 9: So the reality all the Aesthetex was a poor performer 452 00:23:01,800 --> 00:23:03,440 Speaker 9: before twenty three. 453 00:23:03,920 --> 00:23:05,200 Speaker 8: They did a lot of. 454 00:23:07,040 --> 00:23:10,320 Speaker 9: Let's call it, they didn't execute on a lot of 455 00:23:10,359 --> 00:23:15,480 Speaker 9: their plans. They disappointed consistently. That has kind of changed. 456 00:23:15,800 --> 00:23:19,440 Speaker 9: Management has you know, I would say they are making 457 00:23:19,520 --> 00:23:21,399 Speaker 9: progress and showing the street that they. 458 00:23:21,280 --> 00:23:22,720 Speaker 8: Can execute on their plane. 459 00:23:22,800 --> 00:23:26,760 Speaker 9: I think there was some confusion over the express network. 460 00:23:27,040 --> 00:23:30,399 Speaker 9: They talked about, you know, changing their their air fleet 461 00:23:30,440 --> 00:23:34,439 Speaker 9: into three different networks their color coding it. One's an 462 00:23:34,480 --> 00:23:37,560 Speaker 9: express network, one is more of a deferred network, and 463 00:23:37,600 --> 00:23:39,439 Speaker 9: one is a network that they're going to rely on 464 00:23:39,520 --> 00:23:40,200 Speaker 9: third parties. 465 00:23:40,320 --> 00:23:41,280 Speaker 8: I think people are trying to. 466 00:23:41,240 --> 00:23:43,640 Speaker 9: Wrap their heads around how that's going to actually benefit 467 00:23:43,760 --> 00:23:46,200 Speaker 9: costs and how quickly those costs can come out. 468 00:23:46,480 --> 00:23:49,240 Speaker 2: All right, let's talk about I think the transport logistics 469 00:23:49,400 --> 00:23:52,120 Speaker 2: topic of de du jour, which is really the red 470 00:23:52,160 --> 00:23:55,280 Speaker 2: sea global shipping. I had to actually go to Google Maps, 471 00:23:55,320 --> 00:23:56,879 Speaker 2: you know, a week or so ago and figure out 472 00:23:56,880 --> 00:23:59,040 Speaker 2: where the heck this thing is. And it's right smack 473 00:23:59,080 --> 00:24:00,399 Speaker 2: in the middle of a lot of stuff. I mean, 474 00:24:00,440 --> 00:24:02,240 Speaker 2: it's there in the Suez Canal, that kind of it 475 00:24:02,280 --> 00:24:03,040 Speaker 2: all came back to me. 476 00:24:03,240 --> 00:24:04,600 Speaker 8: I hope that's not where you're going on vacation. 477 00:24:04,720 --> 00:24:07,439 Speaker 2: No, that is not where I'm going on vacation. But 478 00:24:09,960 --> 00:24:12,320 Speaker 2: if you're merishk how much of a hassle is it? 479 00:24:12,400 --> 00:24:13,879 Speaker 2: Do you like to say, I'm not going to go 480 00:24:13,920 --> 00:24:16,280 Speaker 2: through the Red Sea in the Suez Canal. Now I 481 00:24:16,359 --> 00:24:19,320 Speaker 2: got to go around all the way down the Cape 482 00:24:19,320 --> 00:24:22,679 Speaker 2: of Africa. I mean, economically, that's going to be just 483 00:24:22,720 --> 00:24:24,000 Speaker 2: a real negative. 484 00:24:24,119 --> 00:24:28,399 Speaker 9: Well, adds ten to twelve days of voyage times and 485 00:24:28,480 --> 00:24:32,120 Speaker 9: so that adds costs. Time is money, and so you're 486 00:24:32,119 --> 00:24:36,000 Speaker 9: going to see shipping rates increase. We've seen an increase 487 00:24:36,040 --> 00:24:36,600 Speaker 9: in rates. 488 00:24:37,800 --> 00:24:39,640 Speaker 8: So it's going to impact Europe more. 489 00:24:39,640 --> 00:24:42,080 Speaker 9: It's going to impact the United States because the Suez Canal, 490 00:24:42,200 --> 00:24:46,199 Speaker 9: a lot of the goods are going into Europe. Because 491 00:24:46,480 --> 00:24:50,639 Speaker 9: still the best way to send freight from China or 492 00:24:50,680 --> 00:24:53,399 Speaker 9: Southeast Asia to the United States is the West Coast 493 00:24:53,440 --> 00:24:56,640 Speaker 9: ports or some of the Western Canadian ports like Port 494 00:24:56,720 --> 00:24:59,160 Speaker 9: Prince Rupert So that's still the best way to get 495 00:24:59,160 --> 00:25:02,639 Speaker 9: stuff into the States. During the pandemic, there was some 496 00:25:02,760 --> 00:25:05,359 Speaker 9: share shift. We're seeing that coming back to the West Coast. 497 00:25:05,480 --> 00:25:08,639 Speaker 9: But anyway, so it's going to impact Europe more and 498 00:25:09,119 --> 00:25:10,560 Speaker 9: so that's going to add to. 499 00:25:10,600 --> 00:25:12,880 Speaker 8: Costs and what we've seen since I think it's the end. 500 00:25:12,760 --> 00:25:16,639 Speaker 9: Of October, costs up around like thirty percent to ship 501 00:25:16,760 --> 00:25:20,040 Speaker 9: a forty foot box from Asia to Europe. 502 00:25:20,200 --> 00:25:22,960 Speaker 4: But this is good for the shipping stocks. I remember 503 00:25:22,960 --> 00:25:25,840 Speaker 4: back when that boat got stuck in the Suez Canal, 504 00:25:26,240 --> 00:25:28,560 Speaker 4: I wrote an article about I don't remember the name, 505 00:25:28,600 --> 00:25:31,760 Speaker 4: but the carrier of the boat. The stock went up 506 00:25:31,840 --> 00:25:34,679 Speaker 4: like two hundred percent in just a matter of weeks 507 00:25:35,160 --> 00:25:36,480 Speaker 4: after the blockage. 508 00:25:36,600 --> 00:25:38,720 Speaker 9: Yes, it was fantastic for memes as well. 509 00:25:39,240 --> 00:25:41,800 Speaker 8: And you know, yes, it's good. 510 00:25:42,480 --> 00:25:46,000 Speaker 9: The container liner industry is facing a difficult next couple 511 00:25:46,000 --> 00:25:48,399 Speaker 9: of years, probably through twenty twenty five. They're probably not 512 00:25:48,400 --> 00:25:51,200 Speaker 9: going to make any money because rates are depressed right. 513 00:25:51,040 --> 00:25:54,000 Speaker 2: Now and depressed because demand is lower. 514 00:25:54,280 --> 00:25:57,680 Speaker 9: It's just so again I use this word a lot, 515 00:25:57,760 --> 00:25:58,480 Speaker 9: creamy highs. 516 00:25:58,520 --> 00:26:01,200 Speaker 8: We were like, okay, we were ridiculous highs. 517 00:26:01,440 --> 00:26:03,800 Speaker 9: You know, rates are down eighty percent off their peaks 518 00:26:04,160 --> 00:26:06,479 Speaker 9: for the liner industry, and they're down around twenty nine 519 00:26:06,480 --> 00:26:11,480 Speaker 9: to thirty percent versus last year, so they're nearing break 520 00:26:11,480 --> 00:26:14,000 Speaker 9: even below break even, so their EBIT levels are gonna 521 00:26:14,000 --> 00:26:16,719 Speaker 9: probably be pretty negative for most of these companies throughout 522 00:26:16,760 --> 00:26:20,720 Speaker 9: most of this next year in twenty twenty five, assuming 523 00:26:20,760 --> 00:26:22,800 Speaker 9: that there's not a huge shock that we saw during 524 00:26:22,840 --> 00:26:25,240 Speaker 9: the pandemic, which you know, knock on wood, that's not 525 00:26:25,280 --> 00:26:25,800 Speaker 9: gonna happen. 526 00:26:26,080 --> 00:26:31,600 Speaker 2: Wow. All right, So I guess for twenty twenty four, 527 00:26:32,119 --> 00:26:34,760 Speaker 2: the railroad's my favorite topic. What's kind of your outlook 528 00:26:34,800 --> 00:26:37,760 Speaker 2: for kind of you know, demand there for the railroads 529 00:26:37,800 --> 00:26:39,480 Speaker 2: because I don't know if we're going to recession or not, 530 00:26:39,560 --> 00:26:41,359 Speaker 2: but your companies really have a feel for it. 531 00:26:41,400 --> 00:26:41,520 Speaker 5: Well. 532 00:26:41,520 --> 00:26:44,120 Speaker 9: As we talked about earlier, we have an inter freight recession. Yeah, 533 00:26:44,560 --> 00:26:47,680 Speaker 9: so intermodal has been negative. Intermodal has been trending down 534 00:26:48,000 --> 00:26:51,000 Speaker 9: around mid single digits on the negative side. 535 00:26:51,040 --> 00:26:53,920 Speaker 2: And that's where they put trailers and containers on flat cars, right. 536 00:26:53,800 --> 00:26:56,120 Speaker 9: And they come in from they come in from the ports, 537 00:26:56,200 --> 00:26:59,040 Speaker 9: and those are called international intermodal, okay, And when they 538 00:26:59,080 --> 00:27:01,560 Speaker 9: come from a to the rail to a truck, that's 539 00:27:01,560 --> 00:27:02,520 Speaker 9: domestic intermodal. 540 00:27:02,640 --> 00:27:02,840 Speaker 2: Yep. 541 00:27:02,880 --> 00:27:04,440 Speaker 8: So I'll be on the test later yep. 542 00:27:05,040 --> 00:27:09,200 Speaker 9: And so we'll we're expecting this mid single digit growth again, 543 00:27:09,400 --> 00:27:12,480 Speaker 9: probably more than GDP. You have easier comps you have 544 00:27:12,520 --> 00:27:16,320 Speaker 9: better rail service again, knock on wood, and that should 545 00:27:16,440 --> 00:27:22,000 Speaker 9: drive more conversions of truck traffic onto the rails, because 546 00:27:22,320 --> 00:27:24,239 Speaker 9: if you're a shipper and you're thinking about, why do 547 00:27:24,280 --> 00:27:26,240 Speaker 9: I want to do truck or rail like? You know, yes, 548 00:27:26,359 --> 00:27:29,840 Speaker 9: rail is the emissions are less, it's better for the environment. 549 00:27:30,000 --> 00:27:32,479 Speaker 9: But you know, trucking, I know it's exactly when it's 550 00:27:32,520 --> 00:27:35,000 Speaker 9: going to get to the dock within a couple hours. 551 00:27:35,240 --> 00:27:37,400 Speaker 9: Rail there's a little more variability. So there's a trade 552 00:27:37,400 --> 00:27:39,479 Speaker 9: offf you have to make. And so if rails are 553 00:27:39,520 --> 00:27:42,080 Speaker 9: able to improve their service get as truck like as 554 00:27:42,080 --> 00:27:44,320 Speaker 9: they possibly can, They'll never be as good as trucking, 555 00:27:44,880 --> 00:27:46,720 Speaker 9: but they can get pretty closer. If that trade off 556 00:27:46,760 --> 00:27:48,280 Speaker 9: makes sense that a ship is going to go that. 557 00:27:48,240 --> 00:27:49,520 Speaker 2: Way, you know what you should do. You should do 558 00:27:49,520 --> 00:27:50,040 Speaker 2: a podcast. 559 00:27:50,960 --> 00:27:51,919 Speaker 8: That's funny, you should say that. 560 00:27:51,960 --> 00:27:54,600 Speaker 2: Ball You've got a podcast talking transports, just tell us 561 00:27:54,600 --> 00:27:55,560 Speaker 2: about that. Already trying to. 562 00:27:55,560 --> 00:27:58,480 Speaker 4: Get I feel like retail investors, people on financial Twitter 563 00:27:58,520 --> 00:27:59,720 Speaker 4: actually really like this subject. 564 00:27:59,800 --> 00:28:00,560 Speaker 8: Yeah. 565 00:28:00,840 --> 00:28:04,320 Speaker 9: I launched it in October talking to great CEOs of 566 00:28:04,359 --> 00:28:05,800 Speaker 9: public and private companies. 567 00:28:06,600 --> 00:28:08,120 Speaker 8: My latest episode was Tuesday. 568 00:28:08,160 --> 00:28:10,159 Speaker 9: It was with the CEO of arc Best, which is 569 00:28:10,200 --> 00:28:14,239 Speaker 9: a large LTL carrier. Judy mcrenolds, she's fantastic. She's one 570 00:28:14,240 --> 00:28:18,800 Speaker 9: of the first female female shows in trucking. Before that, 571 00:28:18,960 --> 00:28:23,080 Speaker 9: Derek Leathers a great character. He's the CEO of Werner. 572 00:28:24,040 --> 00:28:28,560 Speaker 9: You know, he's a very insightful person and I love 573 00:28:28,600 --> 00:28:32,040 Speaker 9: spending time with him. I've been able to talk to 574 00:28:33,760 --> 00:28:36,320 Speaker 9: the head of the ATA, the American Trucking Associations. 575 00:28:36,680 --> 00:28:39,000 Speaker 2: The great thing about talking transports is it gives you 576 00:28:39,040 --> 00:28:40,600 Speaker 2: a good sense as to what's going on in the 577 00:28:40,600 --> 00:28:43,200 Speaker 2: economy because the transports certainly know about it. Lee Clasical 578 00:28:43,320 --> 00:28:45,200 Speaker 2: covers all that stuff from Bloomberg Intelligence. 579 00:28:46,120 --> 00:28:49,720 Speaker 5: You're listening to the tape Canser live program Bloomberg Markets 580 00:28:49,800 --> 00:28:53,160 Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune 581 00:28:53,200 --> 00:28:56,160 Speaker 5: in app, Bloomberg dot Com, and the Bloomberg Business App. 582 00:28:56,240 --> 00:28:59,040 Speaker 5: You can also listen live on Amazon Alexa from our 583 00:28:59,040 --> 00:29:05,240 Speaker 5: flagship New York's Just Say Alexa playing Bloomberg eleven thirty Family. 584 00:29:05,040 --> 00:29:06,000 Speaker 8: Today Paul Sweeney. 585 00:29:06,000 --> 00:29:07,920 Speaker 2: We are live here in at Bloomberg Interactive Broker Studio, 586 00:29:08,040 --> 00:29:10,080 Speaker 2: or also streaming live on Youtubes. Ahead over to YouTube 587 00:29:10,080 --> 00:29:13,400 Speaker 2: dot com and search Bloomberg Radio. A nice trade in 588 00:29:13,480 --> 00:29:16,480 Speaker 2: the insurance space today m and a trade here a 589 00:29:16,640 --> 00:29:20,160 Speaker 2: On agrees to buy NFP for about thirteen point four 590 00:29:20,200 --> 00:29:23,080 Speaker 2: billion dollars in cash and stuck. Let's break down this 591 00:29:23,160 --> 00:29:25,960 Speaker 2: deal with Matthew Palozola. He's a senior analyst Property and 592 00:29:26,000 --> 00:29:29,280 Speaker 2: Casualty insurance for Bloomberg Intelligency joins us here in a 593 00:29:29,280 --> 00:29:32,040 Speaker 2: Bloomberg Interactive broker studio. It looks like he forgot to 594 00:29:32,080 --> 00:29:35,640 Speaker 2: shave today, but that's okay. He's a player, Matt. I 595 00:29:35,720 --> 00:29:38,160 Speaker 2: see the stock is down five and a half percent today, 596 00:29:39,200 --> 00:29:41,200 Speaker 2: so I'm not sure what's going on there. What's Aon 597 00:29:41,360 --> 00:29:43,480 Speaker 2: trying to do here with this acquisition of NFP. 598 00:29:43,840 --> 00:29:46,160 Speaker 10: Sure, so it probably bears taking the step back. So 599 00:29:46,240 --> 00:29:49,800 Speaker 10: these companies are insurance brokerages, right, Okay? They a On, 600 00:29:50,000 --> 00:29:54,320 Speaker 10: particularly their art rival Marsha mcclennan. I know that they 601 00:29:54,400 --> 00:29:58,520 Speaker 10: are intermediaries for large businesses that need insurance. Okay, okay, 602 00:29:58,560 --> 00:30:01,600 Speaker 10: So Bloomberg even buy insurance and they would help you 603 00:30:01,680 --> 00:30:01,920 Speaker 10: do it. 604 00:30:02,000 --> 00:30:02,320 Speaker 8: Okay. 605 00:30:02,840 --> 00:30:06,320 Speaker 10: One of the more particularly attractive parts of the market 606 00:30:06,360 --> 00:30:09,480 Speaker 10: is the middle market, so smaller companies actually, okay. Marshall 607 00:30:09,520 --> 00:30:12,320 Speaker 10: mcclennan has been building a business in that space for 608 00:30:12,360 --> 00:30:14,960 Speaker 10: a long time. Now a kind of let it go 609 00:30:15,040 --> 00:30:19,000 Speaker 10: and ignored it. Aon now suddenly feels the need for 610 00:30:19,360 --> 00:30:21,760 Speaker 10: a lot of scale. So they're buying NFP, which is 611 00:30:21,760 --> 00:30:23,560 Speaker 10: a big player in that mintal market space. 612 00:30:24,280 --> 00:30:26,920 Speaker 4: Are they getting a good deal? Thirteen point four billion 613 00:30:26,960 --> 00:30:28,440 Speaker 4: dollars for NFP Corp. 614 00:30:28,760 --> 00:30:31,160 Speaker 10: So if you look at the it's funny. When Aon 615 00:30:31,200 --> 00:30:34,960 Speaker 10: announced the deal, they talked about it on forward earnings, 616 00:30:35,040 --> 00:30:37,040 Speaker 10: the forward ebada basis, and they said, oh yeah, it's 617 00:30:37,040 --> 00:30:39,520 Speaker 10: a really attractive price on a forward ebada basis. They're 618 00:30:39,520 --> 00:30:43,840 Speaker 10: building in a nice jump in that ebada as well. 619 00:30:44,240 --> 00:30:46,640 Speaker 10: If you look at the estimated twenty twenty three, it's 620 00:30:46,640 --> 00:30:49,920 Speaker 10: about twenty two times, which is more expensive than what 621 00:30:50,120 --> 00:30:53,080 Speaker 10: other the deals of this size, but what smaller deals 622 00:30:53,080 --> 00:30:53,680 Speaker 10: are going for. 623 00:30:54,200 --> 00:30:57,360 Speaker 2: But there's earnings dilution here. I don't like earnings dilution. 624 00:30:57,480 --> 00:30:58,120 Speaker 2: What's going on here? 625 00:30:58,160 --> 00:30:59,479 Speaker 10: So it's earnings solution upfront. 626 00:31:00,120 --> 00:31:02,560 Speaker 2: Is that typical for an insurance deal upfront? 627 00:31:02,600 --> 00:31:02,840 Speaker 5: Yeah? 628 00:31:02,880 --> 00:31:04,760 Speaker 10: I mean it probably takes like two years or something. 629 00:31:05,200 --> 00:31:07,640 Speaker 2: They're not talking about. Like I was looking for the 630 00:31:07,680 --> 00:31:09,920 Speaker 2: synergy sentence. I didn't see these synergies. I saw the 631 00:31:10,480 --> 00:31:13,120 Speaker 2: expects about four million dollars in one time transaction and 632 00:31:13,160 --> 00:31:17,080 Speaker 2: integration costs. Your industry is different than my media industry. 633 00:31:16,680 --> 00:31:20,280 Speaker 10: So there's some there's some synergies. Always weary of revenue 634 00:31:20,280 --> 00:31:22,240 Speaker 10: synergies on the side. They're going to cut a bunch 635 00:31:22,280 --> 00:31:25,800 Speaker 10: of costs out UH and they did identify in the 636 00:31:25,800 --> 00:31:30,560 Speaker 10: back of the the UH investor presentation some revenue synergies. 637 00:31:30,720 --> 00:31:32,120 Speaker 8: I think it might be a. 638 00:31:32,080 --> 00:31:36,280 Speaker 10: Bit high, to be totally honest, And yeah, so it's 639 00:31:36,320 --> 00:31:38,520 Speaker 10: it's diluted in the first couple of years. They're taking 640 00:31:38,520 --> 00:31:41,160 Speaker 10: on some debt for it as well. The margins of 641 00:31:41,160 --> 00:31:43,600 Speaker 10: this business are not as good as their business either, 642 00:31:43,960 --> 00:31:45,920 Speaker 10: So I mean there's a bunch of headwinds. We had 643 00:31:45,960 --> 00:31:48,479 Speaker 10: calculated their free cash FOW yields actually higher if they 644 00:31:48,520 --> 00:31:51,040 Speaker 10: don't do the deal, Okay, which why you see it's 645 00:31:51,040 --> 00:31:51,560 Speaker 10: selling off. 646 00:31:52,000 --> 00:31:54,520 Speaker 2: Are we going to see you know? Another question Being 647 00:31:54,520 --> 00:31:56,760 Speaker 2: a former banker, you know, when I see a deal 648 00:31:56,800 --> 00:31:58,320 Speaker 2: in my space, I start picking them on the phone 649 00:31:58,360 --> 00:32:00,440 Speaker 2: and I call everybody saying, hey, we got to do 650 00:32:00,480 --> 00:32:01,680 Speaker 2: a deal. You saw what a on did? We got 651 00:32:01,720 --> 00:32:03,480 Speaker 2: to do a deal? Trying to write some tickets here. 652 00:32:03,520 --> 00:32:06,760 Speaker 2: Do you think you'll see more. Is the structure of 653 00:32:06,800 --> 00:32:09,000 Speaker 2: that part of the jury ripe for any consolidation. 654 00:32:09,120 --> 00:32:11,120 Speaker 10: Okay, so what's happening in the space, and we wrote 655 00:32:11,120 --> 00:32:14,320 Speaker 10: a note about this in the past, is private equity 656 00:32:14,440 --> 00:32:18,240 Speaker 10: likes these insurance brokers. They're cash cows, right, So there 657 00:32:18,280 --> 00:32:20,920 Speaker 10: are a bunch of them that are owned by private equity. 658 00:32:20,960 --> 00:32:23,960 Speaker 10: The valuations of the deals, a lot of deals take place. 659 00:32:24,280 --> 00:32:27,800 Speaker 10: Valuation is probably peaking a bit this year and maybe 660 00:32:27,800 --> 00:32:30,600 Speaker 10: on the downturn. So we do think it's a nice 661 00:32:30,720 --> 00:32:33,480 Speaker 10: time for them to perhaps get out of this business. 662 00:32:33,680 --> 00:32:36,120 Speaker 10: Truist Owns won. They sold twenty percent of that business, 663 00:32:36,160 --> 00:32:38,640 Speaker 10: so you could see more. AND's been on the hunt though, 664 00:32:38,680 --> 00:32:41,040 Speaker 10: I mean something was going to happen. They tried to 665 00:32:41,040 --> 00:32:44,800 Speaker 10: buy Willis, which was a rival a couple of years ago, 666 00:32:45,120 --> 00:32:47,360 Speaker 10: and that deal fell through due to anti trust concerns. 667 00:32:47,400 --> 00:32:48,920 Speaker 10: I don't think the same thing happens here. This is 668 00:32:48,920 --> 00:32:53,040 Speaker 10: a much smaller deal. But since that Willis deal fell through, 669 00:32:53,320 --> 00:32:56,160 Speaker 10: they've been losing more ground. It was I think inevitable 670 00:32:56,160 --> 00:32:57,080 Speaker 10: that they were going to do something. 671 00:32:57,880 --> 00:33:00,640 Speaker 4: Do lower interest rates a FED pivot. Is that going 672 00:33:00,720 --> 00:33:03,480 Speaker 4: to help spark some more m and a in your industry? 673 00:33:03,520 --> 00:33:04,560 Speaker 4: Specifically anymore. 674 00:33:04,760 --> 00:33:07,880 Speaker 10: I mean for insurance brokers, that might make it again 675 00:33:07,920 --> 00:33:10,040 Speaker 10: more attractive because they can can lever them up. And 676 00:33:10,080 --> 00:33:13,000 Speaker 10: the rise and interest rates probably hurt the valuation of deals. 677 00:33:14,000 --> 00:33:17,360 Speaker 10: For insurance carriers, it probably makes it maybe a little 678 00:33:17,360 --> 00:33:20,440 Speaker 10: bit less likely to be honest, there's still interest rates 679 00:33:20,800 --> 00:33:24,240 Speaker 10: are still higher, insurrates still earning through, so still helping 680 00:33:24,240 --> 00:33:27,880 Speaker 10: earnings probably into next year. Past that then you might 681 00:33:27,920 --> 00:33:30,600 Speaker 10: see them going the other way, so investment income going down, 682 00:33:30,920 --> 00:33:33,560 Speaker 10: maybe less likely to reach on an underwriting deal. 683 00:33:33,920 --> 00:33:38,680 Speaker 2: Aon based in Chicago, fifty thousand employees got to mark 684 00:33:38,720 --> 00:33:42,600 Speaker 2: a cap of about fifty nine billion dollars, so a 685 00:33:41,840 --> 00:33:44,720 Speaker 2: pretty pretty big company. I'm looking at this stock here 686 00:33:44,800 --> 00:33:46,840 Speaker 2: and a year to date it's off about one and 687 00:33:46,840 --> 00:33:49,320 Speaker 2: a half percent. Again, off five point six percent today, 688 00:33:49,880 --> 00:33:53,480 Speaker 2: probably on the dilution would be my guess. All right, 689 00:33:53,560 --> 00:33:55,480 Speaker 2: let's step back here. I know you guys at Bloomberg 690 00:33:55,480 --> 00:33:59,000 Speaker 2: Intelligence you really always have your your year head outlook 691 00:33:59,040 --> 00:34:01,520 Speaker 2: around this time you publish your twenty twenty four outlook. 692 00:34:01,560 --> 00:34:03,560 Speaker 2: What do you think is the best in your coverage 693 00:34:03,600 --> 00:34:06,440 Speaker 2: property and casualty insurance? Where do you think some of 694 00:34:06,480 --> 00:34:08,560 Speaker 2: the best areas of investors should be looking at. 695 00:34:08,800 --> 00:34:12,000 Speaker 10: So maybe there's there's a couple of spaces, right, personal lines, 696 00:34:12,040 --> 00:34:15,600 Speaker 10: commercial lines. Then you've got these insurance brokers and reinsurance. 697 00:34:17,640 --> 00:34:19,680 Speaker 10: Probably one of the more attractive spaces, the more most 698 00:34:19,719 --> 00:34:22,279 Speaker 10: room for improvement is going to be in personal lines 699 00:34:22,320 --> 00:34:25,680 Speaker 10: and insurance. So that's companies like all State and Progressive 700 00:34:26,239 --> 00:34:29,560 Speaker 10: Auto insurance costs have been higher than they've ever been. 701 00:34:29,600 --> 00:34:32,080 Speaker 10: It's been the kind of worst couple of years ever. 702 00:34:31,840 --> 00:34:32,719 Speaker 8: For some of these names. 703 00:34:32,760 --> 00:34:34,759 Speaker 2: Okay, we're starting to see that thaw. 704 00:34:34,680 --> 00:34:35,640 Speaker 8: Towards the end of the year. 705 00:34:35,640 --> 00:34:38,680 Speaker 10: The stocks have responded to that, But all of these 706 00:34:38,719 --> 00:34:42,960 Speaker 10: other spaces, they're at probably peak margins and their valuation 707 00:34:43,000 --> 00:34:46,560 Speaker 10: is probably peaked before there aros do. So you know, 708 00:34:46,600 --> 00:34:49,080 Speaker 10: it's gonna be tougher for the other spaces to improve 709 00:34:49,200 --> 00:34:52,640 Speaker 10: much fundamentally in twenty four. So I think the personal 710 00:34:52,680 --> 00:34:54,440 Speaker 10: line space probably is the place to be, all right. 711 00:34:54,480 --> 00:34:57,920 Speaker 2: To show you my ignorance, do falling interest rates are 712 00:34:57,920 --> 00:34:59,600 Speaker 2: the net positive or net negative. 713 00:34:59,600 --> 00:35:03,040 Speaker 10: For insurance, they're net negative, so they take in premiums, 714 00:35:03,200 --> 00:35:05,640 Speaker 10: they invest them, and they make money on that float. 715 00:35:05,800 --> 00:35:08,360 Speaker 10: So the rise in interest rates has been good. 716 00:35:08,200 --> 00:35:10,239 Speaker 2: So it's a net interest margin kind of story that 717 00:35:10,480 --> 00:35:13,160 Speaker 2: Allison Williams has taught me about for banks a little bit. 718 00:35:13,200 --> 00:35:15,600 Speaker 10: I mean it's it's not a spread business, you know, 719 00:35:15,680 --> 00:35:18,040 Speaker 10: it's just you know, higher or low it can it 720 00:35:18,080 --> 00:35:21,200 Speaker 10: can support underwriting a little bit. But I mean, int net, 721 00:35:21,200 --> 00:35:25,400 Speaker 10: it's just a positive inflation going up. Modest inflation is 722 00:35:25,440 --> 00:35:28,920 Speaker 10: actually good because it increases insured values, maybe increases interest rates. 723 00:35:29,200 --> 00:35:33,440 Speaker 10: Runaway inflation probably bad because you are paying claims from 724 00:35:33,480 --> 00:35:35,160 Speaker 10: stuff you may have wrote a couple of years ago, 725 00:35:35,280 --> 00:35:36,400 Speaker 10: so things are more expensive. 726 00:35:36,760 --> 00:35:39,399 Speaker 2: And just correct me if I'm wrong. Knock on wood. 727 00:35:39,440 --> 00:35:43,000 Speaker 2: We haven't had a ton of like natural disasters kinds 728 00:35:43,040 --> 00:35:46,279 Speaker 2: of things. I mean, I'm thinking Florida, I mean fires 729 00:35:46,320 --> 00:35:48,520 Speaker 2: and things like that. So how's that impacted your business 730 00:35:48,520 --> 00:35:49,360 Speaker 2: in a lift, It's. 731 00:35:49,200 --> 00:35:52,319 Speaker 10: Been good business for particularly reinsurance companies, so they're most 732 00:35:52,440 --> 00:35:53,640 Speaker 10: exposed to these large. 733 00:35:53,400 --> 00:35:56,279 Speaker 2: Insurance companies that ensure the insurance industry. 734 00:35:56,360 --> 00:35:59,600 Speaker 10: Leave Paul, So yeah, it's been good for them. There's 735 00:35:59,640 --> 00:36:03,040 Speaker 10: been weird weather events, but none of them have risen 736 00:36:03,080 --> 00:36:05,480 Speaker 10: to the level of impacting the reinsurance company. So it's 737 00:36:05,520 --> 00:36:09,320 Speaker 10: been an abnormally good year for the reinsurance companies. 738 00:36:09,360 --> 00:36:11,239 Speaker 8: The primary carriers. 739 00:36:12,400 --> 00:36:14,440 Speaker 10: Did see kind of larger cats midway through the year, 740 00:36:14,440 --> 00:36:16,120 Speaker 10: but the fourth quarter actually looks to be shaping up 741 00:36:16,160 --> 00:36:16,600 Speaker 10: even better. 742 00:36:16,680 --> 00:36:18,279 Speaker 2: All right, Matt, thanks so much for joining us at 743 00:36:18,280 --> 00:36:20,920 Speaker 2: Matthew Palozola. He's the senior analyst. He covers the property 744 00:36:20,960 --> 00:36:23,960 Speaker 2: and casualty insurance companies for Bloomberg Intelligence. 745 00:36:25,360 --> 00:36:28,480 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 746 00:36:28,520 --> 00:36:32,280 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 747 00:36:32,360 --> 00:36:36,080 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 748 00:36:36,280 --> 00:36:39,320 Speaker 1: at Matt Miller nineteen seventy three and on fall. 749 00:36:39,239 --> 00:36:42,080 Speaker 2: Sweeney I'm on Twitter at pt Sweeney Before the podcast. 750 00:36:42,120 --> 00:36:45,560 Speaker 2: You can always catch us worldwide at Bloomberg Radio.