WEBVTT - Consumer Confidence Falls, Elf On The Shelf Tradition Lives On 0:00:02.920 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.520 --> 0:00:12.880 This is Bloomberg Business Wait inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.840 global business, finance and tech news. The Bloomberg Business Week 0:00:20.880 --> 0:00:26.000 podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:28.040 --> 0:00:30.760 We learned today as well, alex let US consumer confidence 0:00:30.880 --> 0:00:33.360 dropped to a five month low in December, driven by 0:00:33.360 --> 0:00:36.400 concerns over the economy and potential Trump policies. In a 0:00:36.440 --> 0:00:39.000 survey by the Conference Board, forty six percent of respondents 0:00:39.040 --> 0:00:42.440 expected tariffs to raise their cost of living. Joining us 0:00:42.440 --> 0:00:45.560 now to discuss is the researcher behind the report, Dana Peterson, 0:00:45.600 --> 0:00:48.360 chief economist at the Conference Board. So, Dana, I mentioned 0:00:48.479 --> 0:00:51.839 those numbers. Present situation was fine, came in at one 0:00:51.920 --> 0:00:53.720 forty point two, just a little bit down from one 0:00:53.800 --> 0:00:57.120 forty point nine the previous month, but expectations were down 0:00:57.240 --> 0:01:00.680 almost eleven points, down from ninety two point three to 0:01:00.720 --> 0:01:03.280 eighty one point one. How concern should we be? 0:01:04.640 --> 0:01:07.800 Well, certainly, the present situation, as you said, was only 0:01:07.880 --> 0:01:11.559 a tick downward, but the expectations really fell backward after 0:01:11.640 --> 0:01:14.600 several months of improvement and it was across all three 0:01:14.680 --> 0:01:17.840 components of that, that's business conditions on what they think 0:01:17.840 --> 0:01:20.400 about employment six months ahead and also incomes. 0:01:22.319 --> 0:01:25.920 Was that shown on party lines at all? I'm just 0:01:25.959 --> 0:01:28.080 wondering because a lot of it was led by the 0:01:28.160 --> 0:01:30.240 tariff increase expectation. 0:01:30.480 --> 0:01:34.480 Right, Well, we did ask a special question about what 0:01:34.560 --> 0:01:38.080 consumers are thinking about in terms of policy for next year, 0:01:38.160 --> 0:01:41.240 and certainly many of them are concerned about tariffs and 0:01:41.280 --> 0:01:44.319 whether or not tariffs are going to be inflationary or not. 0:01:44.400 --> 0:01:47.200 And indeed, in the write ends where we ask consumers, 0:01:47.240 --> 0:01:49.600 what's the most important thing that you think will impact 0:01:49.600 --> 0:01:55.240 the economy good or bad, certainly prices leapt up, inflation 0:01:55.360 --> 0:01:57.640 to the top, but also not long out, not far 0:01:57.760 --> 0:02:02.160 after that, we're certainly elections residents. And also the word 0:02:02.240 --> 0:02:06.400 tariff actually searched from zero to something notably positive. So 0:02:06.520 --> 0:02:09.560 consumers are paying attention to what's going on in politics, 0:02:09.880 --> 0:02:12.040 and they're starting at least they're curious to know what 0:02:12.080 --> 0:02:13.760 that's going to mean for their bottom lines. 0:02:14.160 --> 0:02:16.240 Yeah, I mean, it's more fodder for the Federal Reserve 0:02:16.360 --> 0:02:20.280 right to continue to focus on inflation, or to refocus 0:02:20.280 --> 0:02:23.560 on inflation again as opposed to the unemployment part of 0:02:23.560 --> 0:02:26.240 the manday, which it looked like they had been at 0:02:26.320 --> 0:02:27.680 least swerving towards. 0:02:28.840 --> 0:02:28.960 Well. 0:02:29.000 --> 0:02:31.960 It seems like it is something that FOMC participants, at 0:02:32.040 --> 0:02:35.120 least some of them, according to Chair Powell, are looking 0:02:35.120 --> 0:02:38.960 at and did fold in their expectations of what policy 0:02:39.080 --> 0:02:42.240 might look like next year and the impacts on the consumers. Certainly, 0:02:42.240 --> 0:02:45.440 we have the debt ceiling rolling around, we have the 0:02:45.480 --> 0:02:47.760 tax cliff of twenty twenty six that's going to need 0:02:47.800 --> 0:02:50.400 to be dealt with, and certainly there are the threats 0:02:50.440 --> 0:02:56.120 of renewed or at least intensified trading wars. Trade wars 0:02:56.160 --> 0:02:59.239 because certainly the TARISA put in place years ago or 0:02:59.280 --> 0:03:02.360 never lifted, we could see more that again will impact 0:03:02.480 --> 0:03:05.800 consumers because companies that have to pay those tariffs here 0:03:05.840 --> 0:03:07.639 in the US are just going to pass on those 0:03:07.680 --> 0:03:09.160 costs to the consumer. 0:03:10.160 --> 0:03:12.680 That's sort of also My question on that is that 0:03:13.240 --> 0:03:16.800 this data was very different from the rest of the 0:03:16.840 --> 0:03:19.280 surveys that we've gotten on the consumer, and I'm wondering 0:03:19.280 --> 0:03:22.480 why you think that's different and why the feeling then 0:03:22.520 --> 0:03:24.800 that maybe the teriffs will get passed on to the consumers. 0:03:24.840 --> 0:03:27.400 I'm thinking about you mish for example, there was some 0:03:27.440 --> 0:03:30.280 stockpiling and sort of buying now and not later because 0:03:30.280 --> 0:03:32.240 of tariffs. But what did you make of the negativity 0:03:32.240 --> 0:03:33.799 in your report versus other surveys. 0:03:35.320 --> 0:03:38.040 Well, I mean, again, just looking at the headline, it's 0:03:38.040 --> 0:03:42.240 made up of five different indicators. Two are about business, 0:03:42.400 --> 0:03:46.280 two are about the employment situation now in the future, and 0:03:46.320 --> 0:03:48.600 the other ones about income. So when you put all 0:03:48.640 --> 0:03:52.240 those things together, as I mentioned, business, employment and income 0:03:52.280 --> 0:03:56.480 were down. But the index itself does not reflect anything 0:03:56.520 --> 0:04:01.000 about politics. So we're understanding the thoughts that consumers are 0:04:01.040 --> 0:04:03.960 interested or and some of them are concerned from our 0:04:04.000 --> 0:04:06.320 special question that we asked and also from the right 0:04:06.400 --> 0:04:10.200 ins which we usually do report on. So you know, 0:04:10.400 --> 0:04:13.000 all the writings were pretty mixed. Some said that they 0:04:13.000 --> 0:04:16.080 were excited about what's going to happen next year, others weren't. 0:04:16.440 --> 0:04:20.200 But certainly, I think consumers who've just experienced a lot 0:04:20.240 --> 0:04:23.560 of inflation and prices are certainly much higher now than 0:04:23.600 --> 0:04:27.360 they were before the pandemic, are focused on inflation, and 0:04:27.480 --> 0:04:31.240 certainly the risks around that come from things that are 0:04:31.279 --> 0:04:36.280 already putting up pressure on inflation, including insurance, labor costs 0:04:36.279 --> 0:04:40.600 from labor shortages. Also, housing costs aren't following as fast 0:04:40.600 --> 0:04:43.160 as we want. But there's also potential for some things 0:04:43.160 --> 0:04:45.960 that might be inflationary in twenty twenty five, and they're 0:04:46.000 --> 0:04:47.400 all focused on that right now. 0:04:47.600 --> 0:04:49.000 Just briefly, Danna, what did you make of the rest 0:04:49.000 --> 0:04:49.880 of the data out today? 0:04:49.880 --> 0:04:52.159 We had new home sales for November, not as good 0:04:52.160 --> 0:04:53.640 as anticipated, but still higher. 0:04:54.880 --> 0:04:55.120 Yeah. 0:04:55.160 --> 0:04:57.840 So, actually, when we ask consumers about whether or not 0:04:57.880 --> 0:05:00.479 they're going to purchase homes, we've seen a little bit 0:05:00.560 --> 0:05:02.919 of an improvement over the last six months, but. 0:05:02.920 --> 0:05:03.880 It's still pretty low. 0:05:04.240 --> 0:05:06.839 But the good news is that despite the fact that 0:05:06.880 --> 0:05:10.560 consumers are concerned or worried or thinking about the next year, 0:05:10.640 --> 0:05:13.560 they still plan to buy. They're still planning on buying cars, 0:05:13.680 --> 0:05:17.359 especially use cars, but also new cars. They're planning on 0:05:17.440 --> 0:05:20.080 going on vacation a little bit less, but if they 0:05:20.120 --> 0:05:23.279 go on vacation, they're looking to go on international vacations. 0:05:23.560 --> 0:05:25.680 And when it comes to services, they're still looking at 0:05:25.720 --> 0:05:30.560 experiential services like going to the movies or streaming, or 0:05:30.640 --> 0:05:33.760 going to hotels and restaurants and that sort of thing. So, 0:05:33.920 --> 0:05:37.240 despite whatever they're worried about, consumers still think that right 0:05:37.279 --> 0:05:39.640 now it's easy to find a job, and as long 0:05:39.680 --> 0:05:41.359 as they are working, we think that they're going to 0:05:41.360 --> 0:05:45.719 continue to spend, and potentially that spending will lean against 0:05:45.920 --> 0:05:48.760 some of the downside risks that we see for next year. 0:05:48.880 --> 0:05:51.440 Yes, all right, Dana, thanks a lot, really appreciate Dana Peterson, 0:05:51.520 --> 0:05:53.599 Chief Economists at the Conference Board. 0:05:56.520 --> 0:06:00.799 You're listening to the Bloomberg Business Week Podcast live weekday 0:06:00.839 --> 0:06:03.800 afternoons from two to five pm Eastern. Listen on Apple 0:06:03.839 --> 0:06:06.440 car Play and ed Bright Auto with a Bloomberg Business 0:06:06.480 --> 0:06:09.680 app or on just Live on YouTube. 0:06:11.480 --> 0:06:14.080 Well, let's continue the conversation now with Andrew Graham, who 0:06:14.120 --> 0:06:17.520 is managing partner at Jackson Square Capital. Andrew, we've been 0:06:17.520 --> 0:06:19.479 talking about targets on the S and B five hundred 0:06:19.480 --> 0:06:22.520 and how really, except for maybe Stiefel and maybe one 0:06:22.600 --> 0:06:24.600 or two other houses, they're pretty much all higher from 0:06:24.600 --> 0:06:27.120 here for next year. What are you looking for out 0:06:27.120 --> 0:06:29.640 of this SMP, which, let me just remind everybody is 0:06:29.720 --> 0:06:32.000 up like fifty percent over the last two years. 0:06:32.320 --> 0:06:34.920 Yeah, and fully valued, you know, sort of a multiple 0:06:34.960 --> 0:06:38.719 basis forward multiple. Now we're going on twenty six numbers 0:06:38.760 --> 0:06:41.599 and you're still at twenty times forward estimates in twenty 0:06:41.600 --> 0:06:44.279 twenty six. So what we're trying to do is just 0:06:44.320 --> 0:06:47.320 apply you know, sort of a conservative earnings growth figure 0:06:47.760 --> 0:06:51.680 above nine percent, which is conservative, it's it's less than consensus, 0:06:51.720 --> 0:06:54.279 which is in the low whatever, eleven and twelve percent. 0:06:54.520 --> 0:06:56.440 So put nine percent on top of that, maybe sixty 0:06:56.440 --> 0:07:00.479 five hundred is a conservative target for US at least 0:07:00.680 --> 0:07:02.120 for at least US anywhere I am. 0:07:02.720 --> 0:07:04.520 Well, yeah, and then considering that, you know, we have 0:07:04.560 --> 0:07:07.120 sixty seven hundred, there's some seven thousand dollars calls, so 0:07:07.160 --> 0:07:10.240 I could argue that that would be conservative. What's going 0:07:10.280 --> 0:07:12.400 to be the biggest mover do you think for that 0:07:12.440 --> 0:07:15.520 sixty five hundred call? Is it going to be policy 0:07:15.560 --> 0:07:17.360 from DC? Is it going to be fed or is 0:07:17.360 --> 0:07:18.480 it going to be bottoms up? 0:07:19.520 --> 0:07:22.560 I expect it to be policy from DC. 0:07:22.960 --> 0:07:25.080 You know, generally speaking, I think we're going to go 0:07:25.120 --> 0:07:29.920 with the US economic resilience Beme. Still, there's no reason 0:07:29.920 --> 0:07:32.840 to doubt that we see that, you know, happening in 0:07:32.880 --> 0:07:36.600 a higher for longer rate environment, you know, reinforced by 0:07:37.120 --> 0:07:41.480 supportive domestic policy, more expansion of the business cycle, solid 0:07:41.600 --> 0:07:44.800 labor market, still in a broadening AI cycle, which I 0:07:44.840 --> 0:07:47.600 think is really important I think for for viewers and 0:07:47.680 --> 0:07:48.280 listeners to. 0:07:48.760 --> 0:07:49.560 Pay attention to. 0:07:49.800 --> 0:07:54.280 So the pro business policies also may be lower energy prices, 0:07:54.600 --> 0:07:58.440 stronger capital markets, more deal activity. But the path I 0:07:58.440 --> 0:08:01.120 think to the policy change gonna be bumpier than most 0:08:01.160 --> 0:08:03.680 people expect, and the markets are vulnerable because a lot 0:08:03.760 --> 0:08:05.520 of that good news is priced in. 0:08:05.920 --> 0:08:07.800 You know, Andrew, many of our guests today talked about 0:08:07.840 --> 0:08:10.240 AI again being a theme next year, and you know, 0:08:10.280 --> 0:08:11.840 to look at the market today, there was no reason 0:08:11.880 --> 0:08:14.360 to suspect that it won't be a theme next year 0:08:14.360 --> 0:08:16.440 and a positive theme for the market. At the same time, 0:08:16.480 --> 0:08:18.560 you have to wonder if something else won't come along 0:08:18.600 --> 0:08:21.000 and oust it out of its prime position. I think 0:08:21.040 --> 0:08:22.880 you maybe quantum computing. We saw a little taste of 0:08:22.880 --> 0:08:23.320 that today. 0:08:24.040 --> 0:08:24.200 Yeah. 0:08:24.240 --> 0:08:26.640 I'm trying not to get distracted by the quantum computing 0:08:26.640 --> 0:08:29.840 thing because I think it's probably further out. But getting 0:08:29.880 --> 0:08:32.360 back to the yeah, betting back to the AI cycle, 0:08:32.360 --> 0:08:36.000 which I think everybody's looking for monetization in places other 0:08:36.040 --> 0:08:39.360 than semiconductors and you know, equipment that. 0:08:39.280 --> 0:08:40.439 Goes into data centers. 0:08:40.720 --> 0:08:42.680 There's been a lot of emphasis I think in the 0:08:42.720 --> 0:08:45.520 media on AI scaling laws, breaking down. 0:08:45.920 --> 0:08:49.559 I think that's wrong. I wouldn't buy into that at all. 0:08:49.679 --> 0:08:54.760 And I see these agentic models getting faster and they're 0:08:54.840 --> 0:08:57.480 being signs of monetization all over the place. There were 0:08:57.520 --> 0:09:01.560 certainly signs in service Now recent earnings report, and I 0:09:01.559 --> 0:09:04.640 expect to see the same thing prop crop up in 0:09:05.160 --> 0:09:13.040 sales in CRM Salesforce when they report earnings, maybe. 0:09:13.000 --> 0:09:14.080 In the summer. 0:09:14.559 --> 0:09:18.719 So we see this growing and not slowing down, and 0:09:19.400 --> 0:09:22.280 we expect software to be the primary beneficiary. What kind 0:09:22.280 --> 0:09:27.199 of names do you like, Well, we would mention service Now, Salesforce, 0:09:27.280 --> 0:09:31.640 and then maybe as honorable mentions HubSpot and Workday at 0:09:31.640 --> 0:09:34.200 some point going forward those that are among the bigger names. 0:09:34.480 --> 0:09:38.679 Cybersecurity is also going to be a consistent theme, and 0:09:38.720 --> 0:09:43.160 we see cyber arc as a beneficiary with their Ventify 0:09:43.360 --> 0:09:49.000 acquisition kind of getting into a positive agendic solution cycle. 0:09:49.559 --> 0:09:53.840 They have machine access access management at the core of 0:09:53.880 --> 0:09:56.840 their business, and we see that as a potential winner 0:09:56.880 --> 0:09:59.840 going forward. So we're trying to emphasize software over semking. 0:10:00.280 --> 0:10:02.160 We own a lot of semiconductors. We think that sort 0:10:02.160 --> 0:10:05.640 of you know phase one of the of the AI cycle. 0:10:05.720 --> 0:10:09.040 Phase two goes into software and We saw that show up, 0:10:09.080 --> 0:10:12.360 like I said, in service now, and we see that 0:10:12.679 --> 0:10:14.600 happening more and more in the coming year. 0:10:14.840 --> 0:10:16.960 Presumably, if you did all that work, you also looked 0:10:17.000 --> 0:10:20.920 at energy and energy to power AI and all of that, 0:10:21.040 --> 0:10:23.920 and obviously you came away with the notion that perhaps 0:10:23.920 --> 0:10:25.960 there wasn't any value to be had there. 0:10:27.160 --> 0:10:28.119 No, absolutely. 0:10:28.200 --> 0:10:31.600 I mean, that's an area that we're invested in Vistra 0:10:31.679 --> 0:10:34.400 as a stock that we own, independent power producer, but 0:10:34.480 --> 0:10:37.720 also vertive in you know, sort of the leader in 0:10:37.920 --> 0:10:41.640 data center cooling, a leader I think in liquid cooling. 0:10:41.720 --> 0:10:45.120 They have an opportunity to double their offerings in twenty 0:10:45.160 --> 0:10:47.920 twenty five, and that's a stock that we like a lot, 0:10:48.080 --> 0:10:52.520 So we're there. We just think that the dispersion or 0:10:52.520 --> 0:10:56.880 the difference between the performance between semiconductors and software is 0:10:56.920 --> 0:10:59.920 so wide right now, and we think the cycle trends 0:11:00.040 --> 0:11:03.559 that way, and so we're trying to get more exposure 0:11:03.559 --> 0:11:05.600 into software specifically. 0:11:06.080 --> 0:11:08.800 What dends this on a macro level? What makes you 0:11:08.840 --> 0:11:09.920 worried for these kind of calls? 0:11:11.640 --> 0:11:13.280 You know, I think you know the big change at 0:11:13.320 --> 0:11:16.720 the margin last week was the FED meeting. It was 0:11:16.800 --> 0:11:21.640 the updated median twenty twenty five dot. I thought consensus, 0:11:21.679 --> 0:11:23.760 you know, I was looking for two or three rate 0:11:23.840 --> 0:11:27.000 cuts suggested by the dots, and it was an unambiguous 0:11:27.120 --> 0:11:29.800 two rate cuts, you know, sort of the dot. The 0:11:29.880 --> 0:11:33.280 pattern was centered right there in the middle. And I 0:11:33.320 --> 0:11:36.719 think that was the thing that markets were most disappointed with, 0:11:36.840 --> 0:11:39.679 and maybe a hawkish tilt. And so if the FED 0:11:40.440 --> 0:11:44.240 is maybe less inclined to cut rates, and I think 0:11:44.280 --> 0:11:47.080 they'll pause in January, they might again unless there's some 0:11:47.559 --> 0:11:51.440 disinflation progress, they'll pause again in March. On the next 0:11:51.520 --> 0:11:55.560 right rate cut on paper here is June. But that 0:11:55.600 --> 0:11:58.680 would that sets you up for some some growth disappointments. 0:11:58.720 --> 0:12:01.959 So if if growth data disappoints or something along those lines, 0:12:02.000 --> 0:12:04.800 I expect markets to be more sensitive thinking to the FED, 0:12:05.400 --> 0:12:09.160 you know, is not maybe as eager to cut interest rates. 0:12:09.360 --> 0:12:10.920 I don't want to take away from the fact that 0:12:11.000 --> 0:12:14.280 FED put is clearly in place. You know, from our opinion, 0:12:14.679 --> 0:12:16.880 it's in place. But I don't think it's a tailwind. 0:12:16.880 --> 0:12:18.000 I think it's more of a floor. 0:12:18.720 --> 0:12:20.680 Got it all right, Andrew, thanks a lot, Really appreciate 0:12:20.720 --> 0:12:23.880 good stuff. Andrew Graham, managing partner at Jackson Square Capital, 0:12:24.080 --> 0:12:25.640 joining us on the markets. 0:12:26.840 --> 0:12:30.680 You're listening to the Bloomberg Business Week podcast. Listen live 0:12:30.800 --> 0:12:33.600 each weekday. He's starting at two pm Eastern on applecar 0:12:33.720 --> 0:12:36.680 Play and Android Auto with the Bloomberg Business Ad. You 0:12:36.720 --> 0:12:40.000 can also listen live on Amazon Alexa from our flagship 0:12:40.040 --> 0:12:43.839 New York station, Just say Alexa Play Bloomberg eleven thirty. 0:12:45.360 --> 0:12:47.720 Certain logistics and shipping companies are going to have a 0:12:47.720 --> 0:12:50.840 really good view into what that actually winds up looking like. 0:12:50.880 --> 0:12:52.320 So we wanted to get the take on that with 0:12:52.360 --> 0:12:56.240 the CEO of rx SO, Drew Wilkerson. He joins us now. 0:12:56.280 --> 0:12:57.960 So there's a lot going on with you, Drew. You 0:12:57.960 --> 0:13:02.040 guys have been really busy lately. In September, you finally 0:13:02.080 --> 0:13:05.480 absorbed Coyote Logistics, so that was quite a hurdle. You 0:13:05.559 --> 0:13:08.120 also are looking forward to twenty twenty five in terms 0:13:08.120 --> 0:13:10.920 of demand growth and tariff questions. You're start those down 0:13:10.960 --> 0:13:15.280 from late November by like twenty five percent. What's going 0:13:15.320 --> 0:13:16.960 on with you guys? What are some of the highlights? 0:13:18.400 --> 0:13:21.200 As you mentioned, we closed the acquisition of Coyote. We 0:13:21.240 --> 0:13:24.000 actually closed it fairly fast when you look at it 0:13:24.160 --> 0:13:26.240 from time of announcement to when we close. We close 0:13:26.320 --> 0:13:28.080 it within just a couple of months, and this is 0:13:28.600 --> 0:13:32.319 a transformational acquisition for US. It more than doubles our 0:13:32.360 --> 0:13:35.560 truck brokerage, making us the third largest truck brokerage in 0:13:35.600 --> 0:13:36.400 North America. 0:13:36.800 --> 0:13:37.640 Sets us up. 0:13:37.559 --> 0:13:40.040 Really good for growth because when we were doing due diligence, 0:13:40.080 --> 0:13:42.520 one of the things we looked at was the customer overlap, 0:13:42.559 --> 0:13:45.040 and there was not a lot of customer overlap. And 0:13:45.080 --> 0:13:47.680 we're going to get more exposure into some verticals that 0:13:47.720 --> 0:13:49.640 we weren't as strong as in like food and beverage 0:13:49.640 --> 0:13:52.920 from the acquisition. So really excited. We're in the early days, 0:13:52.920 --> 0:13:57.000 but so far as far out seeding, far exceeding our expectations. 0:13:57.520 --> 0:14:00.160 So you look at the likes of these Amazon on 0:14:00.160 --> 0:14:02.880 strikes very closely, I'm sure, And what do you see 0:14:03.080 --> 0:14:06.280 for the future of labor calls and the potential for 0:14:06.320 --> 0:14:08.080 any disruptions like that down the pike? 0:14:09.080 --> 0:14:13.000 Yeah, and transportation, anytime that there's a disruption or volatility, 0:14:13.040 --> 0:14:15.840 it actually creates a good thing on the transportation industry 0:14:15.880 --> 0:14:19.080 as you start to see tender rejections rise, and from 0:14:19.120 --> 0:14:21.600 that standpoint, you set yourself up in a position to 0:14:21.680 --> 0:14:24.680 be able to get spot loads and projects as others 0:14:24.720 --> 0:14:27.360 are falling off of it, so as things like that 0:14:27.400 --> 0:14:29.880 and cause disruption in the market. For us, that's actually 0:14:30.080 --> 0:14:32.200 the volatility is a good thing for our business. 0:14:33.280 --> 0:14:36.960 Volatility may be good, but questions and visibility on tariffs 0:14:37.040 --> 0:14:40.360 may not be. How are you guys preparing for next year? 0:14:41.520 --> 0:14:44.560 We're watching it extremely closely on what's going to happen 0:14:44.880 --> 0:14:48.640 from a teariff perspective, and overall long term, you know 0:14:48.680 --> 0:14:51.760 what it will do is it will drive more domestic transportation, 0:14:52.000 --> 0:14:54.480 and for us that's a good thing. We're the majority 0:14:54.520 --> 0:14:56.720 of our business, over ninety percent of our business is 0:14:56.760 --> 0:15:00.800 done entra US, So for us, the more that you 0:15:00.840 --> 0:15:03.680 see on souring into the US, it creates more transportation 0:15:03.760 --> 0:15:05.840 opportunities for us to be able to capitalize on. 0:15:06.680 --> 0:15:09.040 What are your margins like and how can you expand them? 0:15:09.080 --> 0:15:11.800 We saw obviously, you know, FedEx and the likes of 0:15:12.160 --> 0:15:14.880 USPS and so on trying to do the very same. 0:15:15.240 --> 0:15:17.520 I'm just curious that you know, particularly to the design 0:15:17.520 --> 0:15:20.200 when you're trying to make acquisitions, are there ways that 0:15:20.240 --> 0:15:21.120 you can cut costs? 0:15:22.200 --> 0:15:24.200 Yeah, And when you look at one of the things 0:15:24.200 --> 0:15:26.560 that we've been doing, we've been an early adopter in 0:15:27.000 --> 0:15:29.560 technology and the transportation industry, and if you go back 0:15:29.600 --> 0:15:32.400 and you look over the last decade, our margins have 0:15:32.440 --> 0:15:34.920 been some of the strongest in the industry. It's because 0:15:34.960 --> 0:15:38.960 we've invested so much into these pricing algorithms that allow 0:15:39.080 --> 0:15:42.240 us to have optimal pricing to both the customer and 0:15:42.320 --> 0:15:45.600 to the carrier. So we're going to continue to focus 0:15:45.640 --> 0:15:48.200 on technology and use it as ways to expand our 0:15:48.240 --> 0:15:52.240 margins but also increase our employee productivity. If you look 0:15:52.400 --> 0:15:55.560 over the last twelve months, our employee productivity is up 0:15:55.720 --> 0:15:58.600 fifteen percent. And so for us, if we're able to 0:15:58.600 --> 0:16:00.360 be able to do it, and we're able to increase 0:16:00.480 --> 0:16:04.600 our loads per person per day, then ultimately that will 0:16:04.600 --> 0:16:05.960 increase our overall margins. 0:16:06.440 --> 0:16:08.960 But when you look at, say the tariff situation, and 0:16:09.000 --> 0:16:11.800 you add that into your goals, like who pays for 0:16:11.880 --> 0:16:14.160 those tariffs? I mean, do you guys do it? Does 0:16:14.200 --> 0:16:16.440 the end consumer do it? And it's the end consumer, 0:16:16.520 --> 0:16:18.440 I would think that hurts demand. If it's you guys, 0:16:18.480 --> 0:16:20.040 I would think that hurts your margins. 0:16:20.880 --> 0:16:24.520 Yeah, I think that that's still unknown. Ultimately, I think 0:16:24.560 --> 0:16:26.360 it would be hard for it not to be passed 0:16:26.400 --> 0:16:28.720 down to the end consumer. If there was a rise 0:16:28.760 --> 0:16:31.520 in price that ultimately that would go back to the 0:16:31.600 --> 0:16:34.880 end consumer. But again something that we're watching very closely. 0:16:35.200 --> 0:16:38.360 Yeah, but you do have presidents, right, there were twists 0:16:38.400 --> 0:16:40.360 put on last time around, and some of those terriffs 0:16:40.400 --> 0:16:42.000 didn't come off during the Biden administration. 0:16:42.080 --> 0:16:44.240 So how has it impacted your business already? 0:16:45.040 --> 0:16:47.840 Yeah, so if you go back to the last Trump administration, 0:16:48.320 --> 0:16:52.000 it was actually a robust transportation cycle for US, and 0:16:52.080 --> 0:16:54.240 you know, there were there were highs and lows throughout 0:16:54.280 --> 0:16:57.440 the four years, but overall it was it was a 0:16:57.480 --> 0:17:01.480 strong transportation market. And some of the tariffs that you 0:17:01.520 --> 0:17:06.480 saw put on with China led to more domestic and 0:17:06.600 --> 0:17:09.560 more US Mexico trade. So our Mexico business has been 0:17:09.680 --> 0:17:13.400 up roughly thirty percent whenever we saw businesses shift from 0:17:13.560 --> 0:17:14.640 China into Mexico. 0:17:15.359 --> 0:17:17.200 So, but are you worried if we get tariffs on 0:17:17.280 --> 0:17:19.040 Mexico that's going to mess you guys up. 0:17:20.040 --> 0:17:21.399 We're watching it very closely. 0:17:21.480 --> 0:17:24.720 But again, you know, if there's more domestic loads and 0:17:24.800 --> 0:17:27.240 more domestic volume that goes out there, that's a good 0:17:27.240 --> 0:17:31.000 thing for US overall. But obviously if we're hurt for 0:17:31.200 --> 0:17:33.560 our trade partners to the north or to the south, 0:17:33.760 --> 0:17:36.320 is something that could have an impact on that volume 0:17:36.359 --> 0:17:38.159 and shift it to more domestic volume. 0:17:38.560 --> 0:17:41.560 You're the broker, right, but I'm sure gas prices impact 0:17:41.800 --> 0:17:44.720 you and how much your services are needed. So how 0:17:44.840 --> 0:17:47.600 important is it for the likes of r so that 0:17:47.680 --> 0:17:48.840 gas prices stay low. 0:17:50.359 --> 0:17:53.960 We watch fuel prices very very closely, but ultimately, for US, 0:17:54.000 --> 0:17:55.960 fuel prices are more of a pass through from the 0:17:56.000 --> 0:17:57.119 customer to the carrier. 0:17:57.160 --> 0:17:59.440 As a broker, can we talk about your stock for 0:17:59.440 --> 0:18:01.160 a second? And I appreciate your the CEO, so you're 0:18:01.160 --> 0:18:02.560 going to be like, I don't know why the stock 0:18:02.640 --> 0:18:05.119 is down twenty five percent in the last month. We're fantastic, 0:18:05.240 --> 0:18:07.280 I get that, but why is your stock down twenty 0:18:07.280 --> 0:18:08.280 five percent in last month? 0:18:09.359 --> 0:18:11.200 I think overall, if you go back and you listen 0:18:11.200 --> 0:18:13.119 to our earnings call, we said that this was going 0:18:13.160 --> 0:18:15.000 to be a muted peak season, and we were one 0:18:15.040 --> 0:18:16.720 of the first to say that this was going to 0:18:16.760 --> 0:18:19.080 be a muted peak season, and I think people are 0:18:19.119 --> 0:18:21.879 starting to see that play out now. The way that 0:18:21.920 --> 0:18:24.000 we've measured the stock is what it does over the 0:18:24.040 --> 0:18:26.560 long term, and if you look over the last twenty 0:18:26.640 --> 0:18:29.200 four months, it's up over twenty percent, and you know, 0:18:29.520 --> 0:18:32.080 for a cyclical market that's at the bottom of the 0:18:32.080 --> 0:18:33.880 cycle and been there for over two and a half years, 0:18:33.880 --> 0:18:37.480 we've got happy investors with how we've performed throughout the market, 0:18:37.800 --> 0:18:40.160 and we're not watching the stock price on a day 0:18:40.160 --> 0:18:42.160 to day basis. We're really watching to see what it's 0:18:42.200 --> 0:18:44.520 able to do on a one, two, three year basis. 0:18:45.359 --> 0:18:47.640 You know, we've been through a year where we've seen 0:18:47.720 --> 0:18:51.120 continuing wars, we've seen any number of elections, we've seen 0:18:51.440 --> 0:18:55.800 huge geopolitical turmoil and changes and so on. And you 0:18:55.800 --> 0:18:58.439 compete with the global companies, you compete with Chinese companies, 0:18:58.440 --> 0:19:01.479 you compete with Middle Eastern shippers, and so on. I'm sure, 0:19:01.760 --> 0:19:05.399 how does the prospects of maybe a commer twenty twenty 0:19:05.400 --> 0:19:10.400 five help your business as a tailwind? 0:19:11.720 --> 0:19:14.720 Well, first, I would say, remember, we're largely a North 0:19:14.760 --> 0:19:18.919 American based company, So what we're doing is transportation that 0:19:19.080 --> 0:19:22.560 is largely driven by truckload and LTL across North America. 0:19:22.640 --> 0:19:24.720 So a lot of the companies that you're referencing aren't 0:19:24.720 --> 0:19:28.280 necessarily who we're competing with on a day to day basis. 0:19:28.640 --> 0:19:30.240 But when you look at What it does is it 0:19:30.280 --> 0:19:33.840 would bring stability to overall forecasting and it will allow 0:19:33.960 --> 0:19:35.600 us to be able to forecast because if you go 0:19:35.680 --> 0:19:39.600 over the last three years, forecasting has been off when 0:19:39.640 --> 0:19:42.320 you look at where people have projected volumes to come 0:19:42.359 --> 0:19:44.320 in for the industry overall. 0:19:44.560 --> 0:19:45.560 Drews, thank you so much. 0:19:45.640 --> 0:19:48.439 A fascinating conversation, and do please keep a touch because 0:19:48.800 --> 0:19:53.000 I imagine it to be quite the quite the year 0:19:53.080 --> 0:19:56.160 guys next year and for a freight brokerages and shippers 0:19:56.200 --> 0:19:59.400 in general as well. Drew Wilkerson, CEO of RXO, thank 0:19:59.440 --> 0:19:59.960 you so much. 0:20:02.000 --> 0:20:05.879 You're listening to the Bloomberg Business Week podcast. Listen live 0:20:05.960 --> 0:20:08.880 each weekday starting at two pm Easter on Apple car 0:20:08.920 --> 0:20:11.879