1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,800 Speaker 1: at Bloomberg dot com. Well, we saw from today's data 8 00:00:21,880 --> 00:00:25,440 Speaker 1: that more people are working, they are getting higher wages, 9 00:00:25,600 --> 00:00:28,280 Speaker 1: and presumably they are spending more. That is good for 10 00:00:28,400 --> 00:00:32,479 Speaker 1: the retail business and deep global payments business. To give 11 00:00:32,560 --> 00:00:34,640 Speaker 1: us a sense of how that's playing out in the 12 00:00:34,680 --> 00:00:38,280 Speaker 1: retail space, we welcome Jeff Sloan, CEO of Global Payments. Jeff, 13 00:00:38,280 --> 00:00:39,800 Speaker 1: thanks so much for joining us here on our Bloomberg 14 00:00:39,800 --> 00:00:42,320 Speaker 1: Interactive Brooker Studio. So again, we had a really strong 15 00:00:42,400 --> 00:00:45,600 Speaker 1: job numbers today. I would think for your business, which 16 00:00:45,680 --> 00:00:48,560 Speaker 1: traffics in the payments business, that's got to be good 17 00:00:48,560 --> 00:00:51,519 Speaker 1: backdrop for your business. Absolutely it is. We actually reported 18 00:00:51,640 --> 00:00:55,480 Speaker 1: very good third quarter numbers yesterday with revenues up, margin 19 00:00:55,600 --> 00:00:59,160 Speaker 1: up eight basis points, earnings up eighteen percent year over year. 20 00:00:59,480 --> 00:01:02,040 Speaker 1: That follow down the heels of Massacre and Visa essentially 21 00:01:02,080 --> 00:01:05,120 Speaker 1: reporting the same thing. So we already saw a very 22 00:01:05,120 --> 00:01:07,119 Speaker 1: good same store sales left here in the United States, 23 00:01:07,160 --> 00:01:09,839 Speaker 1: about three and a half percent same store sales growth 24 00:01:09,840 --> 00:01:11,480 Speaker 1: in the third quarter for US, which is towards the 25 00:01:11,560 --> 00:01:14,039 Speaker 1: high end. I think our record was about four, so 26 00:01:14,240 --> 00:01:15,840 Speaker 1: right near the high end high end of that. And 27 00:01:15,840 --> 00:01:18,520 Speaker 1: I think our numbers, as well as the unemployment numbers, 28 00:01:18,560 --> 00:01:21,479 Speaker 1: mimic that. So I was looking at some of the 29 00:01:21,600 --> 00:01:25,280 Speaker 1: earnings and some of your comments afterwards, in particular as 30 00:01:25,319 --> 00:01:28,960 Speaker 1: it related to new partnerships with City Group and the 31 00:01:29,000 --> 00:01:32,679 Speaker 1: Canadian Cooperative as Jarden's Group, and I'm wondering you said 32 00:01:32,720 --> 00:01:35,280 Speaker 1: that the City relationship in particular is the first of 33 00:01:35,360 --> 00:01:38,399 Speaker 1: many that I foresee us doing among money center banks. 34 00:01:38,400 --> 00:01:40,800 Speaker 1: Can you talk a little bit about that relationship and 35 00:01:41,240 --> 00:01:43,520 Speaker 1: which banks you're you're looking to partner with. So one 36 00:01:43,520 --> 00:01:45,760 Speaker 1: of the fastest growing things in our business is what 37 00:01:45,840 --> 00:01:48,280 Speaker 1: we call omni channel you speak called e commerce. Now 38 00:01:48,320 --> 00:01:50,920 Speaker 1: there's really no difference, which means you can buy something 39 00:01:50,960 --> 00:01:53,120 Speaker 1: from Lulu Lemon, for example, on your phone saying at 40 00:01:53,120 --> 00:01:55,720 Speaker 1: a pool of Christmas, pay with your face and your thumb, 41 00:01:56,040 --> 00:01:57,960 Speaker 1: have a delivered to your house. You don't like the size, 42 00:01:57,960 --> 00:02:00,560 Speaker 1: you go return, you order another one. So that kind 43 00:02:00,600 --> 00:02:04,000 Speaker 1: of friction less commerce for the consumer and ease of 44 00:02:04,120 --> 00:02:06,640 Speaker 1: use is where the market is going. This partnership with 45 00:02:06,720 --> 00:02:09,600 Speaker 1: City partners us with one of the largest money center 46 00:02:09,639 --> 00:02:12,680 Speaker 1: banks in the world to provide those kinds of services 47 00:02:12,720 --> 00:02:16,400 Speaker 1: to multinational corporates cross border and both the physical and 48 00:02:16,520 --> 00:02:20,440 Speaker 1: virtual world, to allow their customers, their multinational customers to 49 00:02:20,520 --> 00:02:24,160 Speaker 1: provide those services to their consumers on a seamless basis. 50 00:02:24,440 --> 00:02:25,880 Speaker 1: So the reason I said I think we'll see more 51 00:02:25,919 --> 00:02:27,720 Speaker 1: of those is that's where the world is going. That's 52 00:02:27,720 --> 00:02:31,520 Speaker 1: where the trend is. Zero friction for consumer commerce, and 53 00:02:31,600 --> 00:02:34,880 Speaker 1: even the most the largest, most complicated fis in the world, 54 00:02:34,919 --> 00:02:37,200 Speaker 1: like City, I think, have come to the realization that 55 00:02:37,200 --> 00:02:38,640 Speaker 1: they can't do it on their own, that they need 56 00:02:38,720 --> 00:02:41,840 Speaker 1: a payments technology partner, and we're pleased to be that 57 00:02:41,880 --> 00:02:44,920 Speaker 1: partner for City. So I know you've recently closed a 58 00:02:45,000 --> 00:02:48,000 Speaker 1: big acquisition pieces twenty one billion dollars. Tell us about 59 00:02:48,040 --> 00:02:51,200 Speaker 1: that deal and what's the strategy behind that deal. So 60 00:02:51,240 --> 00:02:53,840 Speaker 1: in our business, it's really all about scale. So processing 61 00:02:53,880 --> 00:02:56,920 Speaker 1: the next transaction should be cheaper than the last transaction. 62 00:02:56,960 --> 00:02:59,720 Speaker 1: The transaction after that even less expensive than the current one. 63 00:02:59,760 --> 00:03:03,120 Speaker 1: So our partnership with Tiesis takes our scale to fifty 64 00:03:03,160 --> 00:03:06,880 Speaker 1: billion plus transactions a year. It doubles the size of 65 00:03:06,919 --> 00:03:09,079 Speaker 1: the company to about fifty billion dollars stay a little 66 00:03:09,080 --> 00:03:11,600 Speaker 1: bit over that uh in market cap. It extends our 67 00:03:11,639 --> 00:03:15,679 Speaker 1: geographic presence from sixty countries today to a hundred. A 68 00:03:15,760 --> 00:03:18,520 Speaker 1: hundred countries is part of Tisis, and it gives us 69 00:03:18,560 --> 00:03:20,960 Speaker 1: the largest e commerce and omni channel business in the 70 00:03:20,960 --> 00:03:23,640 Speaker 1: world that a billion of revenue, the largest owned software 71 00:03:23,639 --> 00:03:25,359 Speaker 1: business in the world, that a billion of revenue in 72 00:03:25,440 --> 00:03:28,680 Speaker 1: payments um, and the largest integrated partnered software business the 73 00:03:28,680 --> 00:03:31,560 Speaker 1: world also a billion dollars in payments. So we couldn't 74 00:03:31,560 --> 00:03:34,440 Speaker 1: be more excited about our partnership with Teessis and where 75 00:03:34,480 --> 00:03:36,560 Speaker 1: it's taking that company. I think you saw that reflected 76 00:03:36,920 --> 00:03:39,520 Speaker 1: and yesterday's trading and our outlook for the rest of 77 00:03:39,600 --> 00:03:42,160 Speaker 1: nineteen and twenty. So when you came in this morning, 78 00:03:42,240 --> 00:03:43,800 Speaker 1: I said, you know, thank you for being here. You said, 79 00:03:43,800 --> 00:03:45,640 Speaker 1: I'm excited to be here, and I don't doubt it. 80 00:03:45,680 --> 00:03:48,400 Speaker 1: I'm looking right now at your share price. It is up. 81 00:03:48,520 --> 00:03:50,920 Speaker 1: The total return on your shares are up. At sixty 82 00:03:51,000 --> 00:03:54,160 Speaker 1: six percent year to date, up more than one percent today, 83 00:03:54,440 --> 00:03:57,880 Speaker 1: two point two percent yesterday. Go through the days it's green. 84 00:03:58,120 --> 00:04:01,080 Speaker 1: I'm trying to figure out who you're biggest competitor is 85 00:04:01,360 --> 00:04:04,400 Speaker 1: and what it will take to sustain this kind of growth. Sure, well, 86 00:04:04,480 --> 00:04:07,640 Speaker 1: it varies by geography, because our business is really geographic centric. 87 00:04:07,680 --> 00:04:09,640 Speaker 1: I think we have the far, by far the broadest 88 00:04:09,640 --> 00:04:13,160 Speaker 1: breath geographically multinationally of anybody. But here in the United 89 00:04:13,160 --> 00:04:16,880 Speaker 1: States of Fidelity Post Information Systems POST our purchase of 90 00:04:16,880 --> 00:04:21,000 Speaker 1: World Pay five serve Post their purchase first data. Some 91 00:04:21,080 --> 00:04:23,560 Speaker 1: of the domestic banks here in the United States JP Morgan, 92 00:04:23,640 --> 00:04:25,840 Speaker 1: who I think does a fantastic job and what they 93 00:04:25,880 --> 00:04:28,960 Speaker 1: do Bank of America which announced recently that they were 94 00:04:29,000 --> 00:04:32,840 Speaker 1: recreating their own payments business away from one of our competitors. 95 00:04:32,880 --> 00:04:34,960 Speaker 1: Those are our partners, but those are also our competitors. 96 00:04:34,960 --> 00:04:38,360 Speaker 1: And then outside the United States, it really varies by geography. 97 00:04:38,440 --> 00:04:41,880 Speaker 1: So in the UK, for example, Barclay's Royal Bank of 98 00:04:41,920 --> 00:04:45,440 Speaker 1: Scotland both have big payment businesses are partner. There is 99 00:04:45,560 --> 00:04:49,520 Speaker 1: HSBC in the United Kingdom, so seemed to be a 100 00:04:49,560 --> 00:04:52,719 Speaker 1: lot of M and A in your business. Give us 101 00:04:52,720 --> 00:04:55,599 Speaker 1: a sense of how your business, your industry structure right now, 102 00:04:55,600 --> 00:04:56,960 Speaker 1: do you think you're gonna see more M and A 103 00:04:58,360 --> 00:05:00,680 Speaker 1: and beyond and specifically for your company, do you feel 104 00:05:00,680 --> 00:05:02,720 Speaker 1: like you have the scale that you need? The answer 105 00:05:02,720 --> 00:05:04,920 Speaker 1: I think is absolutely to all those things. So the 106 00:05:04,920 --> 00:05:07,320 Speaker 1: first thing I'd say is it's always been in consolidating business. 107 00:05:07,640 --> 00:05:10,960 Speaker 1: Anytime you're in a scale economics business, more scale is better, 108 00:05:11,640 --> 00:05:13,720 Speaker 1: less scale is worse. So that's what tends to drive 109 00:05:13,760 --> 00:05:16,680 Speaker 1: the transactions number one. Number two I would say is 110 00:05:16,720 --> 00:05:19,000 Speaker 1: we're not done yet at Global Payments. Our balance sheet 111 00:05:19,040 --> 00:05:20,960 Speaker 1: is in a very healthy position. We're only about two 112 00:05:20,960 --> 00:05:23,960 Speaker 1: and a half times levered today as we announced yesterday 113 00:05:23,960 --> 00:05:26,880 Speaker 1: coming out of the deal, so firmly investment grade. Once 114 00:05:26,960 --> 00:05:28,839 Speaker 1: we have our sea legs under us, call it the 115 00:05:28,880 --> 00:05:31,880 Speaker 1: spring of twenty. As a managerial matter, In terms of 116 00:05:31,880 --> 00:05:34,440 Speaker 1: the integration with Tjesis, I think we feel very good 117 00:05:34,480 --> 00:05:39,200 Speaker 1: about re engaging on the murger side. Uh And certainly 118 00:05:39,520 --> 00:05:42,800 Speaker 1: our door is open today for additional transactions. There's no 119 00:05:42,839 --> 00:05:45,599 Speaker 1: reason we can't double yet again as we did post 120 00:05:45,600 --> 00:05:47,960 Speaker 1: the murder with Heartland about four years ago. Just real 121 00:05:48,040 --> 00:05:50,400 Speaker 1: quick here, I'm wondering what the barrier of entry is 122 00:05:50,480 --> 00:05:53,520 Speaker 1: for some of these big financial institutions to create their 123 00:05:53,520 --> 00:05:56,600 Speaker 1: own payments system rather than partnering with you. Well, I 124 00:05:56,640 --> 00:05:59,039 Speaker 1: think you saw yesterday in the context of Desjardin in 125 00:05:59,120 --> 00:06:02,040 Speaker 1: Canada and to here in the United States, even the largest, 126 00:06:02,080 --> 00:06:05,280 Speaker 1: most complicated financial institutions in the world need the right 127 00:06:05,360 --> 00:06:08,360 Speaker 1: access to market leading technology. And what it's all about 128 00:06:09,160 --> 00:06:12,039 Speaker 1: is technology UM and related software in the in the 129 00:06:12,040 --> 00:06:16,280 Speaker 1: payments business that couple with distribution. Distinctive distribution or sales 130 00:06:16,360 --> 00:06:18,680 Speaker 1: is really what we sell. So the largest guys out 131 00:06:18,680 --> 00:06:21,159 Speaker 1: there have concluded they don't yet have the scale or 132 00:06:21,160 --> 00:06:24,320 Speaker 1: the time UM to get to market the way we 133 00:06:24,400 --> 00:06:26,560 Speaker 1: are from a technology point of view. So there are 134 00:06:26,560 --> 00:06:29,520 Speaker 1: there are great barriers in what we do now everyone 135 00:06:29,560 --> 00:06:31,760 Speaker 1: takes payments today, So I'm not suggesting that going to 136 00:06:31,800 --> 00:06:34,000 Speaker 1: the dry cleaner um that there's a lot of barriers 137 00:06:34,080 --> 00:06:37,120 Speaker 1: necessarily for all the small merchants, But in what we do, 138 00:06:37,160 --> 00:06:39,520 Speaker 1: which is distinctive, which is what city in de Jardin 139 00:06:40,160 --> 00:06:42,599 Speaker 1: h noted yesterday, than certainly I think those things are 140 00:06:43,200 --> 00:06:45,560 Speaker 1: do with high barriers. Jeff Sloan, thank you so much 141 00:06:45,560 --> 00:06:48,760 Speaker 1: for paying with us and for correcting my pronunciation. Pronunciation 142 00:06:48,880 --> 00:06:51,760 Speaker 1: of de Jardine, which I absolutely butcher Jeff Sloan, chief 143 00:06:51,760 --> 00:06:54,720 Speaker 1: executive Officer of Global Payments, joining us here in our 144 00:06:54,760 --> 00:07:12,080 Speaker 1: Bloomberg Interactive Brokers Studios. Well, you gotta like the numbers 145 00:07:12,080 --> 00:07:16,480 Speaker 1: out today, much better than expected jobs numbers, suggesting that 146 00:07:16,520 --> 00:07:19,520 Speaker 1: the consumer remains very very strong. Indeed, and that kind 147 00:07:19,560 --> 00:07:22,480 Speaker 1: of devetails with what we heard from the Federal Reserve yesterday. 148 00:07:22,800 --> 00:07:24,840 Speaker 1: Let's get a sense of kind of where this all 149 00:07:24,920 --> 00:07:27,080 Speaker 1: plays out, of how this all plays out with Steven Blitz, 150 00:07:27,160 --> 00:07:30,040 Speaker 1: chief US economist at T. S. Lombard. He joins us 151 00:07:30,080 --> 00:07:32,840 Speaker 1: here in our Bloomberg Interactive Broker Studios. So, Steven, thanks 152 00:07:32,880 --> 00:07:35,520 Speaker 1: so much for joining us. Let's first just get your 153 00:07:35,560 --> 00:07:37,720 Speaker 1: thoughts on kind of what you took away from the 154 00:07:37,800 --> 00:07:41,080 Speaker 1: jobs number today. Well, I think in terms of the 155 00:07:41,080 --> 00:07:43,600 Speaker 1: Fed's perspective that the economy is in a good place 156 00:07:43,640 --> 00:07:46,400 Speaker 1: is certainly underscores their point of view. I think you 157 00:07:46,400 --> 00:07:49,080 Speaker 1: can still look through and see the same problems, which 158 00:07:49,120 --> 00:07:53,240 Speaker 1: is that the economy just continues to create these low 159 00:07:53,280 --> 00:07:58,520 Speaker 1: wage service sector uh jobs like in hospitals and healthcare 160 00:07:58,640 --> 00:08:02,200 Speaker 1: and restaurants, which really doesn't move the needle very much 161 00:08:02,200 --> 00:08:04,400 Speaker 1: in terms of earning. So and then when you look 162 00:08:04,440 --> 00:08:08,480 Speaker 1: at average real averagereally earnings are nominal versus where the 163 00:08:08,520 --> 00:08:11,720 Speaker 1: unemployment rate is. This the disconnect that the FED is 164 00:08:12,160 --> 00:08:14,720 Speaker 1: really trying to push. Why they can't seem to get 165 00:08:14,720 --> 00:08:17,560 Speaker 1: a higher wage growth for the given very low level 166 00:08:17,560 --> 00:08:19,960 Speaker 1: of unemployment. There's also a disconnect when it comes to 167 00:08:19,960 --> 00:08:23,200 Speaker 1: the manufacturing sector and when it comes to consumers. There's 168 00:08:23,200 --> 00:08:27,400 Speaker 1: consumer strength manufacturing weakness. We saw that today. Yet again, 169 00:08:27,600 --> 00:08:30,000 Speaker 1: the sectors where there were job gains were the more 170 00:08:30,080 --> 00:08:33,360 Speaker 1: service sectors UH and manufacturing took a hit. We saw 171 00:08:33,360 --> 00:08:35,120 Speaker 1: that with the I s M number coming in weaker 172 00:08:35,120 --> 00:08:40,040 Speaker 1: than expected, a recession in that particular sector. How long 173 00:08:40,280 --> 00:08:45,200 Speaker 1: can these two industries totally diverge before one pulls the 174 00:08:45,200 --> 00:08:48,079 Speaker 1: other in a in a direction. Well, if one's gonna 175 00:08:48,080 --> 00:08:50,599 Speaker 1: pull any in any which way direction, it's gonna be 176 00:08:50,640 --> 00:08:55,880 Speaker 1: manufacturing will pull the service sector. Um. But the when 177 00:08:55,960 --> 00:08:58,800 Speaker 1: you get back to the employment number itself, remember that 178 00:08:58,800 --> 00:09:03,120 Speaker 1: that decline in manufacturing is the most part the general 179 00:09:03,160 --> 00:09:06,640 Speaker 1: motors and the strike. So that so that forty thousand 180 00:09:06,720 --> 00:09:10,880 Speaker 1: is gonna come back next month. The job So that's 181 00:09:10,880 --> 00:09:13,520 Speaker 1: why I'm focused on service sector, not even thinking about 182 00:09:13,559 --> 00:09:16,080 Speaker 1: the good side of the employment numbers today, because we 183 00:09:16,080 --> 00:09:18,800 Speaker 1: know that's gonna flip back some way, shape or form. 184 00:09:18,960 --> 00:09:22,800 Speaker 1: Now to your other point, manufacturing matters, Okay, it is 185 00:09:22,840 --> 00:09:25,679 Speaker 1: still the largest single industry in the United States in 186 00:09:25,800 --> 00:09:28,439 Speaker 1: terms of its real value add to real GDP, it's 187 00:09:28,520 --> 00:09:31,840 Speaker 1: around four now. The service sector as a whole is 188 00:09:31,920 --> 00:09:35,120 Speaker 1: larger than manufacturing. But the service sectors made up a 189 00:09:35,200 --> 00:09:37,800 Speaker 1: lot of different industries. The one we're sitting in right now, 190 00:09:37,840 --> 00:09:40,600 Speaker 1: the one I work in healthcare. I mean, there's a 191 00:09:40,640 --> 00:09:43,559 Speaker 1: lot of different restaurants. There's a lot of different industries 192 00:09:43,600 --> 00:09:47,400 Speaker 1: there that have different sensitivities to the business cycle. So 193 00:09:47,640 --> 00:09:51,960 Speaker 1: the spending thrown off by manufacturing does matter now going forward, 194 00:09:52,080 --> 00:09:55,280 Speaker 1: which is really what we're thinking about the FEDS actions, 195 00:09:55,280 --> 00:09:57,680 Speaker 1: in particular what it did on the balance sheet and 196 00:09:57,760 --> 00:10:00,599 Speaker 1: finally getting the funds right below the two year and 197 00:10:00,720 --> 00:10:03,640 Speaker 1: today the markets realizing maybe the Fed's not wrong. So 198 00:10:04,000 --> 00:10:06,800 Speaker 1: we're seeing a re steepening of the curve again. The 199 00:10:06,960 --> 00:10:09,920 Speaker 1: low funding rates, the steepening of the curve, a little 200 00:10:09,920 --> 00:10:13,360 Speaker 1: bit of a weaker dollar should aid manufacturing going forward, 201 00:10:13,400 --> 00:10:16,560 Speaker 1: to should aid the emerging markets, and that also should 202 00:10:16,559 --> 00:10:21,319 Speaker 1: in turn aid manufacturing as well as export exporters in 203 00:10:21,360 --> 00:10:24,280 Speaker 1: the United States. So, um, when you look at that 204 00:10:24,320 --> 00:10:27,400 Speaker 1: in terms of the good place, that's a forward dynamic 205 00:10:27,440 --> 00:10:29,760 Speaker 1: that's positive as opposed to the one that's weighed on 206 00:10:29,800 --> 00:10:33,720 Speaker 1: manufacturing looking backward. Are you of the opinion, based upon 207 00:10:33,760 --> 00:10:38,280 Speaker 1: what you heard yesterday from Chairman Pal that there's one 208 00:10:38,280 --> 00:10:40,960 Speaker 1: more rate cutting and that might not not even come 209 00:10:40,960 --> 00:10:43,640 Speaker 1: to maybe mid next year. Yeah, I don't think there's 210 00:10:43,640 --> 00:10:46,000 Speaker 1: any more rate cuts coming. I think I think he 211 00:10:46,440 --> 00:10:49,080 Speaker 1: told you there has to be a material change in 212 00:10:49,120 --> 00:10:52,440 Speaker 1: their view. So that means that uh, and and then 213 00:10:52,520 --> 00:10:55,160 Speaker 1: and the risk and danger in that, okay, is that 214 00:10:55,200 --> 00:10:58,120 Speaker 1: what we're obviously we're thinking about cuts instead of increases. Right, 215 00:10:58,520 --> 00:11:01,680 Speaker 1: So the material change change and the risk in that 216 00:11:01,920 --> 00:11:07,079 Speaker 1: phrase is that, oh, employment now is falling, which means 217 00:11:07,160 --> 00:11:09,560 Speaker 1: by definition, they're going to be too late to cut. 218 00:11:09,960 --> 00:11:12,720 Speaker 1: So this year you could argue they were preemptive. In fact, 219 00:11:12,880 --> 00:11:15,600 Speaker 1: that's how I characterized it last December, that they would 220 00:11:15,640 --> 00:11:19,360 Speaker 1: be preemptive this year and they were. Now it's less 221 00:11:19,360 --> 00:11:22,360 Speaker 1: a chance of than being quote unquote preemptive because they 222 00:11:22,360 --> 00:11:25,240 Speaker 1: didn't want a material change, and that's really the risk 223 00:11:25,280 --> 00:11:28,599 Speaker 1: in terms of their phrasing, what's a chance of procession 224 00:11:28,720 --> 00:11:31,600 Speaker 1: in the next twelve months. I think you have to 225 00:11:31,640 --> 00:11:34,719 Speaker 1: put it in fifty fifty. WHOA, that's much higher than 226 00:11:34,760 --> 00:11:39,280 Speaker 1: the consensus. Well, okay, that doesn't bother me. You know, 227 00:11:39,520 --> 00:11:41,960 Speaker 1: It's just that you're you're you're dancing so close to 228 00:11:42,000 --> 00:11:45,600 Speaker 1: the edge here, right, you have weak manufacturing. How how 229 00:11:45,600 --> 00:11:47,240 Speaker 1: can we say that we're danding close to the edge? 230 00:11:47,240 --> 00:11:49,480 Speaker 1: We're talking about how great the employment number is, the 231 00:11:49,520 --> 00:11:51,760 Speaker 1: strength that you're seeing in services, and we're close to 232 00:11:51,800 --> 00:11:54,600 Speaker 1: the edge. Well, we're close to the edge because the 233 00:11:54,640 --> 00:11:57,400 Speaker 1: economy is only growing around one and a half two percent, 234 00:11:57,520 --> 00:12:00,480 Speaker 1: so it's growing below trend, right, And let's face it, 235 00:12:00,559 --> 00:12:03,520 Speaker 1: the multiple in the equity market is reflecting not just 236 00:12:03,679 --> 00:12:06,600 Speaker 1: earnings or anying expectations, but the liquidity that the FED 237 00:12:06,720 --> 00:12:09,720 Speaker 1: is putting into the system. And so the risk is 238 00:12:10,120 --> 00:12:14,320 Speaker 1: that there's some unforeseen accident, which is obviously you know, 239 00:12:14,360 --> 00:12:19,120 Speaker 1: I'm all accidents are unforeseen, right, But it's an unforeseen 240 00:12:19,200 --> 00:12:22,120 Speaker 1: accident that hits the equity market that the FED can't 241 00:12:22,120 --> 00:12:26,200 Speaker 1: get the equity market to bounce back up. Consumers, households 242 00:12:26,200 --> 00:12:29,520 Speaker 1: are overinvested in equities. It's a whole long story, which 243 00:12:29,520 --> 00:12:31,880 Speaker 1: I know we don't have time for here. But because 244 00:12:31,920 --> 00:12:36,080 Speaker 1: of that, that will feed directly into consumption, directly into 245 00:12:36,080 --> 00:12:39,080 Speaker 1: slowing the economy. And that's that's the risk. So we 246 00:12:39,160 --> 00:12:43,120 Speaker 1: need a period of six to twelve months of earnings, 247 00:12:44,000 --> 00:12:47,440 Speaker 1: of the earnings supporting the multiples in the equity market 248 00:12:47,520 --> 00:12:50,120 Speaker 1: more so than the FED, and then things are on 249 00:12:50,120 --> 00:12:52,920 Speaker 1: a more solid ground than that. Fifty fifty drops way 250 00:12:52,920 --> 00:12:55,280 Speaker 1: back down on the number. Today we had wage growth 251 00:12:55,360 --> 00:12:58,480 Speaker 1: of three. That seems to be the range that this 252 00:12:58,559 --> 00:13:01,520 Speaker 1: economy is in. And is that is that just as 253 00:13:01,679 --> 00:13:04,160 Speaker 1: because of the types of jobs that are being added 254 00:13:04,160 --> 00:13:06,960 Speaker 1: you mentioned earlier, kind of you know, service jobs, whether 255 00:13:07,000 --> 00:13:10,120 Speaker 1: it's healthcare, fast food. Is that just kind of it 256 00:13:10,320 --> 00:13:13,920 Speaker 1: for this economy? Uh? It is for now? Sure, I 257 00:13:13,960 --> 00:13:17,480 Speaker 1: think that the idea was that at some point here 258 00:13:17,520 --> 00:13:20,880 Speaker 1: and then all this trade stuff between the US and 259 00:13:20,960 --> 00:13:23,959 Speaker 1: China put the kabash on it, is that at some 260 00:13:24,000 --> 00:13:27,120 Speaker 1: point here you need to get a growth in capital 261 00:13:27,160 --> 00:13:29,800 Speaker 1: spending a right, So we we have an old cycle 262 00:13:29,840 --> 00:13:32,560 Speaker 1: in terms of age, but not in terms of the 263 00:13:32,600 --> 00:13:37,160 Speaker 1: cycle itself, right in terms of having that leverage spending 264 00:13:37,640 --> 00:13:42,160 Speaker 1: to build capital. Once that gets going, wage growth will 265 00:13:42,160 --> 00:13:45,439 Speaker 1: accelerate because you'll begin to increase employment in what are 266 00:13:45,480 --> 00:13:48,840 Speaker 1: traditionally higher wage jobs. But at the moment, this is 267 00:13:48,880 --> 00:13:52,079 Speaker 1: what the economy is going to deliver. Look of the 268 00:13:52,600 --> 00:13:57,240 Speaker 1: odd thousands of service sector jobs that were created, fifty thousand, 269 00:13:57,280 --> 00:13:59,400 Speaker 1: I'm just talking top of my head around numbers. Fifty 270 00:13:59,400 --> 00:14:04,360 Speaker 1: thousand was healthcare and in restaurants. So that's not going 271 00:14:04,400 --> 00:14:07,240 Speaker 1: to move the needle on on wage growth. Steven Blitz, 272 00:14:07,240 --> 00:14:08,880 Speaker 1: thank you so much for being with us. Thank you 273 00:14:08,920 --> 00:14:12,880 Speaker 1: for having me. Stephen Blitz at Chief US Economist at T. S. Lombard, 274 00:14:13,320 --> 00:14:31,120 Speaker 1: Thank you for for being here in the studios. Lots 275 00:14:31,120 --> 00:14:35,080 Speaker 1: of economic data day today, better than expected jobs numbers. Uh. 276 00:14:35,120 --> 00:14:37,160 Speaker 1: The I s M came out with their manufacturing numbers. 277 00:14:37,160 --> 00:14:39,280 Speaker 1: To get the latest on that, we welcome Tim Fury, 278 00:14:39,560 --> 00:14:42,480 Speaker 1: chairman of the Manufacturing Business Survey at the Institute for 279 00:14:42,560 --> 00:14:45,400 Speaker 1: Supply Management. Uh. Tim, thanks so much for joining us. 280 00:14:45,400 --> 00:14:47,600 Speaker 1: Give us. What are your key takeaways from this I 281 00:14:47,840 --> 00:14:51,440 Speaker 1: s M manufacturing data today? Yeah? Thanks Paul. So the 282 00:14:51,480 --> 00:14:54,800 Speaker 1: report for the month of October was more positive than 283 00:14:54,840 --> 00:14:57,000 Speaker 1: it was in September. I think although we were selling 284 00:14:57,040 --> 00:15:00,960 Speaker 1: a contraction mode, the contraction rate has slow and maybe 285 00:15:00,960 --> 00:15:04,560 Speaker 1: more importantly, the new order number which kind of sets 286 00:15:04,560 --> 00:15:08,960 Speaker 1: the drum beat. UH improved pretty substantially from the prior month, 287 00:15:09,120 --> 00:15:12,320 Speaker 1: up one point eight point still in a minor contraction mode, 288 00:15:12,400 --> 00:15:16,200 Speaker 1: but with indications in the right direction, supported by the 289 00:15:16,240 --> 00:15:18,800 Speaker 1: fact that new export orders they go into an expansion 290 00:15:18,800 --> 00:15:22,360 Speaker 1: mode again, almost a nine actually nine point four point 291 00:15:22,480 --> 00:15:25,640 Speaker 1: change from the prior month. So those are the positives 292 00:15:25,680 --> 00:15:29,120 Speaker 1: on the NAZI positive on demand, our backlog continued to 293 00:15:29,120 --> 00:15:32,320 Speaker 1: contract at faster rates than it did last month, which 294 00:15:32,360 --> 00:15:35,360 Speaker 1: is a little bit concerning, and the customer inventory account 295 00:15:35,440 --> 00:15:38,760 Speaker 1: grew closer to the about right, which is not a 296 00:15:38,760 --> 00:15:42,080 Speaker 1: positive thing for future output. So but overall the report 297 00:15:42,160 --> 00:15:46,120 Speaker 1: was much better than September. Still contracting, but we seem 298 00:15:46,160 --> 00:15:48,240 Speaker 1: to have stabilized, supported by the fact that the new 299 00:15:48,320 --> 00:15:52,120 Speaker 1: order number is close to fifty. How much of a 300 00:15:52,240 --> 00:15:54,600 Speaker 1: lagging number is this? And I see this in the 301 00:15:54,640 --> 00:15:57,000 Speaker 1: context of the headline that we just got the w 302 00:15:57,120 --> 00:15:59,960 Speaker 1: t O proving three point six billion dollars in China 303 00:16:00,160 --> 00:16:04,640 Speaker 1: trade sanctions on the US. That should, all things being equal, 304 00:16:05,200 --> 00:16:08,840 Speaker 1: slow at some of the exports from the United States. 305 00:16:08,880 --> 00:16:11,680 Speaker 1: How long would it take for that to get into 306 00:16:11,680 --> 00:16:14,760 Speaker 1: the data? Yeah, that could impact our new export orders. 307 00:16:14,920 --> 00:16:17,080 Speaker 1: The orders come in. They could be for immediate delivery, 308 00:16:17,120 --> 00:16:19,280 Speaker 1: or they could be for delivery three or four months out. 309 00:16:19,360 --> 00:16:22,080 Speaker 1: So it's going to depend. Uh, you know that. I 310 00:16:22,120 --> 00:16:24,680 Speaker 1: don't know that that's a really big number anyway. So 311 00:16:25,520 --> 00:16:27,160 Speaker 1: you know, I would think that our new expert or 312 00:16:27,200 --> 00:16:28,640 Speaker 1: at least in the short term here, is going to 313 00:16:28,760 --> 00:16:31,120 Speaker 1: stay about where it is. I don't know why it 314 00:16:31,120 --> 00:16:33,920 Speaker 1: would drop unless there's an escalation in the trade issues, 315 00:16:34,680 --> 00:16:36,600 Speaker 1: you know. I think the other the other story here 316 00:16:36,840 --> 00:16:38,920 Speaker 1: is that we had a little bit of a shift 317 00:16:39,120 --> 00:16:41,440 Speaker 1: in our industry sectors that were contributing to the p 318 00:16:41,600 --> 00:16:44,640 Speaker 1: m I. There's no surprise that the transtation equipment sector 319 00:16:44,720 --> 00:16:48,520 Speaker 1: actually contracted faster than had the prior month, primarily because 320 00:16:48,520 --> 00:16:51,240 Speaker 1: of the you know, the GM strike and you know, 321 00:16:51,280 --> 00:16:53,600 Speaker 1: we have some uncertainties there on the MAX. But we 322 00:16:53,680 --> 00:16:57,240 Speaker 1: actually had the chemical industry go into a contraction mode too, 323 00:16:57,360 --> 00:17:00,760 Speaker 1: from a moderate expansion in the prior month. And we 324 00:17:00,840 --> 00:17:04,119 Speaker 1: had the computer electronics industry sector go from a minor 325 00:17:04,600 --> 00:17:07,600 Speaker 1: contraction in the prior month to an expansion. So we've 326 00:17:07,600 --> 00:17:10,040 Speaker 1: got some shifting going going on here in our top 327 00:17:10,080 --> 00:17:13,119 Speaker 1: three industry sectors. The three of those together make up 328 00:17:13,160 --> 00:17:18,480 Speaker 1: somewhere around manufacturing GDP. I would expect transportation equipment to 329 00:17:18,520 --> 00:17:20,440 Speaker 1: get better next month because we no longer have to 330 00:17:20,480 --> 00:17:23,560 Speaker 1: strike U. And I would hope that the chemical industry sector, 331 00:17:23,600 --> 00:17:26,040 Speaker 1: where we're bound a bit. There's a lot of factors 332 00:17:26,080 --> 00:17:28,400 Speaker 1: probably a play there. We have an advantaged cost base, 333 00:17:29,000 --> 00:17:31,560 Speaker 1: we probably have a disadvantage here on counter tariffs as 334 00:17:31,560 --> 00:17:35,000 Speaker 1: well as the currency issues. So, Tim, this marks the 335 00:17:35,040 --> 00:17:39,080 Speaker 1: third consecutive month of the print below fifty. When does 336 00:17:39,160 --> 00:17:42,199 Speaker 1: this become a trend that might be worsomed to you 337 00:17:42,200 --> 00:17:45,159 Speaker 1: and your economists? Well, I mean this, this is in 338 00:17:45,240 --> 00:17:47,200 Speaker 1: no way isn't look at anything like ten years ago. 339 00:17:47,240 --> 00:17:50,040 Speaker 1: And the reason is that although we are contracting, you know, 340 00:17:50,080 --> 00:17:52,960 Speaker 1: the fifty is the number, we're not contracted really strongly. 341 00:17:53,359 --> 00:17:56,000 Speaker 1: You know, if we were in the low forties, high thirties, 342 00:17:56,119 --> 00:17:59,359 Speaker 1: and it would be very concerning. But you know, I 343 00:17:59,359 --> 00:18:02,000 Speaker 1: think you know you're talking. Remember this is month a month. 344 00:18:02,080 --> 00:18:04,440 Speaker 1: We start every month at a fifty point, So we're 345 00:18:04,440 --> 00:18:08,680 Speaker 1: slightly off of last month. Uh not heavily off, slightly 346 00:18:08,760 --> 00:18:11,440 Speaker 1: off meaning you know, even less than five percent. So 347 00:18:11,920 --> 00:18:14,040 Speaker 1: and I think now that we've kind of bounced a bit, 348 00:18:14,080 --> 00:18:16,800 Speaker 1: we went to forty nine point one in August, forty 349 00:18:16,840 --> 00:18:19,720 Speaker 1: seven point in September, now at forty eight point three. 350 00:18:19,800 --> 00:18:22,280 Speaker 1: Although we're up a half a point, there's no reason 351 00:18:22,359 --> 00:18:25,000 Speaker 1: to believe that we can't get back to fifty in 352 00:18:25,000 --> 00:18:28,040 Speaker 1: the short term. Here, Timothy Fury, thank you so much 353 00:18:28,080 --> 00:18:30,880 Speaker 1: for being with us. To Furious, chairman of the Manufacturing 354 00:18:30,920 --> 00:18:33,359 Speaker 1: Business Survey at the I s M. Thanks for listening 355 00:18:33,440 --> 00:18:35,840 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 356 00:18:35,840 --> 00:18:38,600 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 357 00:18:38,640 --> 00:18:41,439 Speaker 1: platform you prefer. I'm Paul Sweeney. I'm on Twitter at 358 00:18:41,440 --> 00:18:44,119 Speaker 1: pt Sweeney and Lisa bram Woyds. I'm on Twitter at 359 00:18:44,160 --> 00:18:46,960 Speaker 1: Lisa bram Woit's one before the podcast. You can always 360 00:18:46,960 --> 00:18:49,040 Speaker 1: catch us worldwide. I'm Bloomberg Radio.