Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you.
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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Speaker 1: at Bloomberg dot com. Well, we saw from today's data
Speaker 1: that more people are working, they are getting higher wages,
Speaker 1: and presumably they are spending more. That is good for
Speaker 1: the retail business and deep global payments business. To give
Speaker 1: us a sense of how that's playing out in the
Speaker 1: retail space, we welcome Jeff Sloan, CEO of Global Payments. Jeff,
Speaker 1: thanks so much for joining us here on our Bloomberg
Speaker 1: Interactive Brooker Studio. So again, we had a really strong
Speaker 1: job numbers today. I would think for your business, which
Speaker 1: traffics in the payments business, that's got to be good
Speaker 1: backdrop for your business. Absolutely it is. We actually reported
Speaker 1: very good third quarter numbers yesterday with revenues up, margin
Speaker 1: up eight basis points, earnings up eighteen percent year over year.
Speaker 1: That follow down the heels of Massacre and Visa essentially
Speaker 1: reporting the same thing. So we already saw a very
Speaker 1: good same store sales left here in the United States,
Speaker 1: about three and a half percent same store sales growth
Speaker 1: in the third quarter for US, which is towards the
Speaker 1: high end. I think our record was about four, so
Speaker 1: right near the high end high end of that. And
Speaker 1: I think our numbers, as well as the unemployment numbers,
Speaker 1: mimic that. So I was looking at some of the
Speaker 1: earnings and some of your comments afterwards, in particular as
Speaker 1: it related to new partnerships with City Group and the
Speaker 1: Canadian Cooperative as Jarden's Group, and I'm wondering you said
Speaker 1: that the City relationship in particular is the first of
Speaker 1: many that I foresee us doing among money center banks.
Speaker 1: Can you talk a little bit about that relationship and
Speaker 1: which banks you're you're looking to partner with. So one
Speaker 1: of the fastest growing things in our business is what
Speaker 1: we call omni channel you speak called e commerce. Now
Speaker 1: there's really no difference, which means you can buy something
Speaker 1: from Lulu Lemon, for example, on your phone saying at
Speaker 1: a pool of Christmas, pay with your face and your thumb,
Speaker 1: have a delivered to your house. You don't like the size,
Speaker 1: you go return, you order another one. So that kind
Speaker 1: of friction less commerce for the consumer and ease of
Speaker 1: use is where the market is going. This partnership with
Speaker 1: City partners us with one of the largest money center
Speaker 1: banks in the world to provide those kinds of services
Speaker 1: to multinational corporates cross border and both the physical and
Speaker 1: virtual world, to allow their customers, their multinational customers to
Speaker 1: provide those services to their consumers on a seamless basis.
Speaker 1: So the reason I said I think we'll see more
Speaker 1: of those is that's where the world is going. That's
Speaker 1: where the trend is. Zero friction for consumer commerce, and
Speaker 1: even the most the largest, most complicated fis in the world,
Speaker 1: like City, I think, have come to the realization that
Speaker 1: they can't do it on their own, that they need
Speaker 1: a payments technology partner, and we're pleased to be that
Speaker 1: partner for City. So I know you've recently closed a
Speaker 1: big acquisition pieces twenty one billion dollars. Tell us about
Speaker 1: that deal and what's the strategy behind that deal. So
Speaker 1: in our business, it's really all about scale. So processing
Speaker 1: the next transaction should be cheaper than the last transaction.
Speaker 1: The transaction after that even less expensive than the current one.
Speaker 1: So our partnership with Tiesis takes our scale to fifty
Speaker 1: billion plus transactions a year. It doubles the size of
Speaker 1: the company to about fifty billion dollars stay a little
Speaker 1: bit over that uh in market cap. It extends our
Speaker 1: geographic presence from sixty countries today to a hundred. A
Speaker 1: hundred countries is part of Tisis, and it gives us
Speaker 1: the largest e commerce and omni channel business in the
Speaker 1: world that a billion of revenue, the largest owned software
Speaker 1: business in the world, that a billion of revenue in
Speaker 1: payments um, and the largest integrated partnered software business the
Speaker 1: world also a billion dollars in payments. So we couldn't
Speaker 1: be more excited about our partnership with Teessis and where
Speaker 1: it's taking that company. I think you saw that reflected
Speaker 1: and yesterday's trading and our outlook for the rest of
Speaker 1: nineteen and twenty. So when you came in this morning,
Speaker 1: I said, you know, thank you for being here. You said,
Speaker 1: I'm excited to be here, and I don't doubt it.
Speaker 1: I'm looking right now at your share price. It is up.
Speaker 1: The total return on your shares are up. At sixty
Speaker 1: six percent year to date, up more than one percent today,
Speaker 1: two point two percent yesterday. Go through the days it's green.
Speaker 1: I'm trying to figure out who you're biggest competitor is
Speaker 1: and what it will take to sustain this kind of growth. Sure, well,
Speaker 1: it varies by geography, because our business is really geographic centric.
Speaker 1: I think we have the far, by far the broadest
Speaker 1: breath geographically multinationally of anybody. But here in the United
Speaker 1: States of Fidelity Post Information Systems POST our purchase of
Speaker 1: World Pay five serve Post their purchase first data. Some
Speaker 1: of the domestic banks here in the United States JP Morgan,
Speaker 1: who I think does a fantastic job and what they
Speaker 1: do Bank of America which announced recently that they were
Speaker 1: recreating their own payments business away from one of our competitors.
Speaker 1: Those are our partners, but those are also our competitors.
Speaker 1: And then outside the United States, it really varies by geography.
Speaker 1: So in the UK, for example, Barclay's Royal Bank of
Speaker 1: Scotland both have big payment businesses are partner. There is
Speaker 1: HSBC in the United Kingdom, so seemed to be a
Speaker 1: lot of M and A in your business. Give us
Speaker 1: a sense of how your business, your industry structure right now,
Speaker 1: do you think you're gonna see more M and A
Speaker 1: and beyond and specifically for your company, do you feel
Speaker 1: like you have the scale that you need? The answer
Speaker 1: I think is absolutely to all those things. So the
Speaker 1: first thing I'd say is it's always been in consolidating business.
Speaker 1: Anytime you're in a scale economics business, more scale is better,
Speaker 1: less scale is worse. So that's what tends to drive
Speaker 1: the transactions number one. Number two I would say is
Speaker 1: we're not done yet at Global Payments. Our balance sheet
Speaker 1: is in a very healthy position. We're only about two
Speaker 1: and a half times levered today as we announced yesterday
Speaker 1: coming out of the deal, so firmly investment grade. Once
Speaker 1: we have our sea legs under us, call it the
Speaker 1: spring of twenty. As a managerial matter, In terms of
Speaker 1: the integration with Tjesis, I think we feel very good
Speaker 1: about re engaging on the murger side. Uh And certainly
Speaker 1: our door is open today for additional transactions. There's no
Speaker 1: reason we can't double yet again as we did post
Speaker 1: the murder with Heartland about four years ago. Just real
Speaker 1: quick here, I'm wondering what the barrier of entry is
Speaker 1: for some of these big financial institutions to create their
Speaker 1: own payments system rather than partnering with you. Well, I
Speaker 1: think you saw yesterday in the context of Desjardin in
Speaker 1: Canada and to here in the United States, even the largest,
Speaker 1: most complicated financial institutions in the world need the right
Speaker 1: access to market leading technology. And what it's all about
Speaker 1: is technology UM and related software in the in the
Speaker 1: payments business that couple with distribution. Distinctive distribution or sales
Speaker 1: is really what we sell. So the largest guys out
Speaker 1: there have concluded they don't yet have the scale or
Speaker 1: the time UM to get to market the way we
Speaker 1: are from a technology point of view. So there are
Speaker 1: there are great barriers in what we do now everyone
Speaker 1: takes payments today, So I'm not suggesting that going to
Speaker 1: the dry cleaner um that there's a lot of barriers
Speaker 1: necessarily for all the small merchants, But in what we do,
Speaker 1: which is distinctive, which is what city in de Jardin
Speaker 1: h noted yesterday, than certainly I think those things are
Speaker 1: do with high barriers. Jeff Sloan, thank you so much
Speaker 1: for paying with us and for correcting my pronunciation. Pronunciation
Speaker 1: of de Jardine, which I absolutely butcher Jeff Sloan, chief
Speaker 1: executive Officer of Global Payments, joining us here in our
Speaker 1: Bloomberg Interactive Brokers Studios. Well, you gotta like the numbers
Speaker 1: out today, much better than expected jobs numbers, suggesting that
Speaker 1: the consumer remains very very strong. Indeed, and that kind
Speaker 1: of devetails with what we heard from the Federal Reserve yesterday.
Speaker 1: Let's get a sense of kind of where this all
Speaker 1: plays out, of how this all plays out with Steven Blitz,
Speaker 1: chief US economist at T. S. Lombard. He joins us
Speaker 1: here in our Bloomberg Interactive Broker Studios. So, Steven, thanks
Speaker 1: so much for joining us. Let's first just get your
Speaker 1: thoughts on kind of what you took away from the
Speaker 1: jobs number today. Well, I think in terms of the
Speaker 1: Fed's perspective that the economy is in a good place
Speaker 1: is certainly underscores their point of view. I think you
Speaker 1: can still look through and see the same problems, which
Speaker 1: is that the economy just continues to create these low
Speaker 1: wage service sector uh jobs like in hospitals and healthcare
Speaker 1: and restaurants, which really doesn't move the needle very much
Speaker 1: in terms of earning. So and then when you look
Speaker 1: at average real averagereally earnings are nominal versus where the
Speaker 1: unemployment rate is. This the disconnect that the FED is
Speaker 1: really trying to push. Why they can't seem to get
Speaker 1: a higher wage growth for the given very low level
Speaker 1: of unemployment. There's also a disconnect when it comes to
Speaker 1: the manufacturing sector and when it comes to consumers. There's
Speaker 1: consumer strength manufacturing weakness. We saw that today. Yet again,
Speaker 1: the sectors where there were job gains were the more
Speaker 1: service sectors UH and manufacturing took a hit. We saw
Speaker 1: that with the I s M number coming in weaker
Speaker 1: than expected, a recession in that particular sector. How long
Speaker 1: can these two industries totally diverge before one pulls the
Speaker 1: other in a in a direction. Well, if one's gonna
Speaker 1: pull any in any which way direction, it's gonna be
Speaker 1: manufacturing will pull the service sector. Um. But the when
Speaker 1: you get back to the employment number itself, remember that
Speaker 1: that decline in manufacturing is the most part the general
Speaker 1: motors and the strike. So that so that forty thousand
Speaker 1: is gonna come back next month. The job So that's
Speaker 1: why I'm focused on service sector, not even thinking about
Speaker 1: the good side of the employment numbers today, because we
Speaker 1: know that's gonna flip back some way, shape or form.
Speaker 1: Now to your other point, manufacturing matters, Okay, it is
Speaker 1: still the largest single industry in the United States in
Speaker 1: terms of its real value add to real GDP, it's
Speaker 1: around four now. The service sector as a whole is
Speaker 1: larger than manufacturing. But the service sectors made up a
Speaker 1: lot of different industries. The one we're sitting in right now,
Speaker 1: the one I work in healthcare. I mean, there's a
Speaker 1: lot of different restaurants. There's a lot of different industries
Speaker 1: there that have different sensitivities to the business cycle. So
Speaker 1: the spending thrown off by manufacturing does matter now going forward,
Speaker 1: which is really what we're thinking about the FEDS actions,
Speaker 1: in particular what it did on the balance sheet and
Speaker 1: finally getting the funds right below the two year and
Speaker 1: today the markets realizing maybe the Fed's not wrong. So
Speaker 1: we're seeing a re steepening of the curve again. The
Speaker 1: low funding rates, the steepening of the curve, a little
Speaker 1: bit of a weaker dollar should aid manufacturing going forward,
Speaker 1: to should aid the emerging markets, and that also should
Speaker 1: in turn aid manufacturing as well as export exporters in
Speaker 1: the United States. So, um, when you look at that
Speaker 1: in terms of the good place, that's a forward dynamic
Speaker 1: that's positive as opposed to the one that's weighed on
Speaker 1: manufacturing looking backward. Are you of the opinion, based upon
Speaker 1: what you heard yesterday from Chairman Pal that there's one
Speaker 1: more rate cutting and that might not not even come
Speaker 1: to maybe mid next year. Yeah, I don't think there's
Speaker 1: any more rate cuts coming. I think I think he
Speaker 1: told you there has to be a material change in
Speaker 1: their view. So that means that uh, and and then
Speaker 1: and the risk and danger in that, okay, is that
Speaker 1: what we're obviously we're thinking about cuts instead of increases. Right,
Speaker 1: So the material change change and the risk in that
Speaker 1: phrase is that, oh, employment now is falling, which means
Speaker 1: by definition, they're going to be too late to cut.
Speaker 1: So this year you could argue they were preemptive. In fact,
Speaker 1: that's how I characterized it last December, that they would
Speaker 1: be preemptive this year and they were. Now it's less
Speaker 1: a chance of than being quote unquote preemptive because they
Speaker 1: didn't want a material change, and that's really the risk
Speaker 1: in terms of their phrasing, what's a chance of procession
Speaker 1: in the next twelve months. I think you have to
Speaker 1: put it in fifty fifty. WHOA, that's much higher than
Speaker 1: the consensus. Well, okay, that doesn't bother me. You know,
Speaker 1: It's just that you're you're you're dancing so close to
Speaker 1: the edge here, right, you have weak manufacturing. How how
Speaker 1: can we say that we're danding close to the edge?
Speaker 1: We're talking about how great the employment number is, the
Speaker 1: strength that you're seeing in services, and we're close to
Speaker 1: the edge. Well, we're close to the edge because the
Speaker 1: economy is only growing around one and a half two percent,
Speaker 1: so it's growing below trend, right, And let's face it,
Speaker 1: the multiple in the equity market is reflecting not just
Speaker 1: earnings or anying expectations, but the liquidity that the FED
Speaker 1: is putting into the system. And so the risk is
Speaker 1: that there's some unforeseen accident, which is obviously you know,
Speaker 1: I'm all accidents are unforeseen, right, But it's an unforeseen
Speaker 1: accident that hits the equity market that the FED can't
Speaker 1: get the equity market to bounce back up. Consumers, households
Speaker 1: are overinvested in equities. It's a whole long story, which
Speaker 1: I know we don't have time for here. But because
Speaker 1: of that, that will feed directly into consumption, directly into
Speaker 1: slowing the economy. And that's that's the risk. So we
Speaker 1: need a period of six to twelve months of earnings,
Speaker 1: of the earnings supporting the multiples in the equity market
Speaker 1: more so than the FED, and then things are on
Speaker 1: a more solid ground than that. Fifty fifty drops way
Speaker 1: back down on the number. Today we had wage growth
Speaker 1: of three. That seems to be the range that this
Speaker 1: economy is in. And is that is that just as
Speaker 1: because of the types of jobs that are being added
Speaker 1: you mentioned earlier, kind of you know, service jobs, whether
Speaker 1: it's healthcare, fast food. Is that just kind of it
Speaker 1: for this economy? Uh? It is for now? Sure, I
Speaker 1: think that the idea was that at some point here
Speaker 1: and then all this trade stuff between the US and
Speaker 1: China put the kabash on it, is that at some
Speaker 1: point here you need to get a growth in capital
Speaker 1: spending a right, So we we have an old cycle
Speaker 1: in terms of age, but not in terms of the
Speaker 1: cycle itself, right in terms of having that leverage spending
Speaker 1: to build capital. Once that gets going, wage growth will
Speaker 1: accelerate because you'll begin to increase employment in what are
Speaker 1: traditionally higher wage jobs. But at the moment, this is
Speaker 1: what the economy is going to deliver. Look of the
Speaker 1: odd thousands of service sector jobs that were created, fifty thousand,
Speaker 1: I'm just talking top of my head around numbers. Fifty
Speaker 1: thousand was healthcare and in restaurants. So that's not going
Speaker 1: to move the needle on on wage growth. Steven Blitz,
Speaker 1: thank you so much for being with us. Thank you
Speaker 1: for having me. Stephen Blitz at Chief US Economist at T. S. Lombard,
Speaker 1: Thank you for for being here in the studios. Lots
Speaker 1: of economic data day today, better than expected jobs numbers. Uh.
Speaker 1: The I s M came out with their manufacturing numbers.
Speaker 1: To get the latest on that, we welcome Tim Fury,
Speaker 1: chairman of the Manufacturing Business Survey at the Institute for
Speaker 1: Supply Management. Uh. Tim, thanks so much for joining us.
Speaker 1: Give us. What are your key takeaways from this I
Speaker 1: s M manufacturing data today? Yeah? Thanks Paul. So the
Speaker 1: report for the month of October was more positive than
Speaker 1: it was in September. I think although we were selling
Speaker 1: a contraction mode, the contraction rate has slow and maybe
Speaker 1: more importantly, the new order number which kind of sets
Speaker 1: the drum beat. UH improved pretty substantially from the prior month,
Speaker 1: up one point eight point still in a minor contraction mode,
Speaker 1: but with indications in the right direction, supported by the
Speaker 1: fact that new export orders they go into an expansion
Speaker 1: mode again, almost a nine actually nine point four point
Speaker 1: change from the prior month. So those are the positives
Speaker 1: on the NAZI positive on demand, our backlog continued to
Speaker 1: contract at faster rates than it did last month, which
Speaker 1: is a little bit concerning, and the customer inventory account
Speaker 1: grew closer to the about right, which is not a
Speaker 1: positive thing for future output. So but overall the report
Speaker 1: was much better than September. Still contracting, but we seem
Speaker 1: to have stabilized, supported by the fact that the new
Speaker 1: order number is close to fifty. How much of a
Speaker 1: lagging number is this? And I see this in the
Speaker 1: context of the headline that we just got the w
Speaker 1: t O proving three point six billion dollars in China
Speaker 1: trade sanctions on the US. That should, all things being equal,
Speaker 1: slow at some of the exports from the United States.
Speaker 1: How long would it take for that to get into
Speaker 1: the data? Yeah, that could impact our new export orders.
Speaker 1: The orders come in. They could be for immediate delivery,
Speaker 1: or they could be for delivery three or four months out.
Speaker 1: So it's going to depend. Uh, you know that. I
Speaker 1: don't know that that's a really big number anyway. So
Speaker 1: you know, I would think that our new expert or
Speaker 1: at least in the short term here, is going to
Speaker 1: stay about where it is. I don't know why it
Speaker 1: would drop unless there's an escalation in the trade issues,
Speaker 1: you know. I think the other the other story here
Speaker 1: is that we had a little bit of a shift
Speaker 1: in our industry sectors that were contributing to the p
Speaker 1: m I. There's no surprise that the transtation equipment sector
Speaker 1: actually contracted faster than had the prior month, primarily because
Speaker 1: of the you know, the GM strike and you know,
Speaker 1: we have some uncertainties there on the MAX. But we
Speaker 1: actually had the chemical industry go into a contraction mode too,
Speaker 1: from a moderate expansion in the prior month. And we
Speaker 1: had the computer electronics industry sector go from a minor
Speaker 1: contraction in the prior month to an expansion. So we've
Speaker 1: got some shifting going going on here in our top
Speaker 1: three industry sectors. The three of those together make up
Speaker 1: somewhere around manufacturing GDP. I would expect transportation equipment to
Speaker 1: get better next month because we no longer have to
Speaker 1: strike U. And I would hope that the chemical industry sector,
Speaker 1: where we're bound a bit. There's a lot of factors
Speaker 1: probably a play there. We have an advantaged cost base,
Speaker 1: we probably have a disadvantage here on counter tariffs as
Speaker 1: well as the currency issues. So, Tim, this marks the
Speaker 1: third consecutive month of the print below fifty. When does
Speaker 1: this become a trend that might be worsomed to you
Speaker 1: and your economists? Well, I mean this, this is in
Speaker 1: no way isn't look at anything like ten years ago.
Speaker 1: And the reason is that although we are contracting, you know,
Speaker 1: the fifty is the number, we're not contracted really strongly.
Speaker 1: You know, if we were in the low forties, high thirties,
Speaker 1: and it would be very concerning. But you know, I
Speaker 1: think you know you're talking. Remember this is month a month.
Speaker 1: We start every month at a fifty point, So we're
Speaker 1: slightly off of last month. Uh not heavily off, slightly
Speaker 1: off meaning you know, even less than five percent. So
Speaker 1: and I think now that we've kind of bounced a bit,
Speaker 1: we went to forty nine point one in August, forty
Speaker 1: seven point in September, now at forty eight point three.
Speaker 1: Although we're up a half a point, there's no reason
Speaker 1: to believe that we can't get back to fifty in
Speaker 1: the short term. Here, Timothy Fury, thank you so much
Speaker 1: for being with us. To Furious, chairman of the Manufacturing
Speaker 1: Business Survey at the I s M. Thanks for listening
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
Speaker 1: platform you prefer. I'm Paul Sweeney. I'm on Twitter at
Speaker 1: pt Sweeney and Lisa bram Woyds. I'm on Twitter at
Speaker 1: Lisa bram Woit's one before the podcast. You can always
Speaker 1: catch us worldwide. I'm Bloomberg Radio.