Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: We begin this out with stocks slightly lower following the
Speaker 2: biggest slid in three months as investors search for direction.
Speaker 2: The Morgan Stanley, chairman and CEO of Ted Pig has
Speaker 2: seen it. Oh and he joined us now for more Ted.
Speaker 2: Good to see you, guys. Thanks for having me. I'd
Speaker 2: like to feel like to be feeling good, feeling pretty good.
Speaker 2: You're not going to be in the speech in about
Speaker 2: twenty eight minutes time, You're going to avoid that.
Speaker 3: Yeah, I'll be with you, guys.
Speaker 2: Let's talk about how things are set up for twenty six.
Speaker 2: We've drawn a big distinction between the energy that's coming
Speaker 2: from European officials and the emotion they have about a
Speaker 2: place like Greenland, and the optimism that people have for
Speaker 2: the broader US economy, particularly from bankers regarding the pipeline
Speaker 2: and the amount of debt issues we've seen over the
Speaker 2: past few months. The dead end of writing that you've
Speaker 2: really benefited from, that's going to fund a lot of
Speaker 2: the transition. How ammed up are you about the year ahead?
Speaker 3: Well, thanks for having me, guys. Great to see you.
Speaker 4: I'm pretty amped up. You know, we had we had
Speaker 4: several years where the emine actor is going to get
Speaker 4: going and then COVID happen and then rates roofed and
Speaker 4: it's taken a while for a ton glue.
Speaker 3: But this kind of in this case.
Speaker 4: Literal noise speaks to c suite need to act, whether
Speaker 4: it's to reglobalize or reorient where your operations are, who
Speaker 4: you want to do business with, and as long as
Speaker 4: there's activity, we're busy. So crossboard or M and a
Speaker 4: large cap M and A going to be important. AI
Speaker 4: access an accelerant to that too. If you want to
Speaker 4: actually get after their productivity gains and embedded in AI,
Speaker 4: you have to have the wherewithal to do it. And
Speaker 4: if your market cap is thirty or forty billion, that's tough.
Speaker 4: You know, how do you take a couple of points
Speaker 4: off your income statement to do that year after year?
Speaker 4: But if you're two three hundred billion, maybe got a shot.
Speaker 4: So people are thinking bigger. And then the sponsors, as
Speaker 4: you know, a couple thousand companies that have been sitting
Speaker 4: there that have a billion dollar market caps implied they
Speaker 4: need to come. And then very importantly have these great
Speaker 4: companies that have been private and over the last fifteen years,
Speaker 4: we've seen companies go public to defase options or effectively
Speaker 4: be secondaries. You can actually see great companies that are
Speaker 4: growth companies, some of them in the AI ecosystem.
Speaker 3: They want to go tap capital.
Speaker 4: So for the investment bank, a great period and for
Speaker 4: a wealth manager, leading wealth manager in the US and
Speaker 4: the world, you want to allocate your capital efficiently.
Speaker 3: So very exciting.
Speaker 2: Some pank some of those business lines. So let's just
Speaker 2: pick up on the IPO pipeline the activity we could
Speaker 2: see later this year SpaceX, open AI. We're talking about
Speaker 2: some absolute monsters. Even the team have been historically quite
Speaker 2: dominant in the tech sector. What are you doing right
Speaker 2: now to prepare for that moment that might be in
Speaker 2: our future.
Speaker 4: Well, these companies, you know, you bank them for a
Speaker 4: whole bunch of years and you get to know them.
Speaker 4: So there's a process, obviously the formal bag off process
Speaker 4: and then the go or no go decision.
Speaker 3: But typically the.
Speaker 4: Company has a pretty good idea of what it wants
Speaker 4: to do ahead of time because it's selected its group.
Speaker 4: And the stakes are really high this round because as
Speaker 4: you say, these the implied market caps these companies are enormous,
Speaker 4: but also they are paradoxically they are very large but
Speaker 4: also mega growers. They have, you know, some of them
Speaker 4: have a little bit of a change the world feel
Speaker 4: to them, so they could become must on.
Speaker 3: I mean, one of the things that you.
Speaker 4: Guys have talked a lot about is so much of
Speaker 4: the equity base has become either beta or it's become
Speaker 4: kind of the seven or eight names. What if there's
Speaker 4: some additional companies that three, four or five hundred billion
Speaker 4: dollar market caps and trillion and a half dollars market
Speaker 4: cap the active management community is I want to own that.
Speaker 4: I want to own that from the time of the IPO.
Speaker 4: So I think it's not just Wall Street getting to
Speaker 4: know these companies. It's a whole bunch of investors who
Speaker 4: have either backed into early rounds or want to be
Speaker 4: there when the IPO comes.
Speaker 1: When we were speaking with you a year ago in
Speaker 1: these seats, you were talking about how it is going
Speaker 1: to be a great year for IPOs and M and A,
Speaker 1: and it was for your bottom line.
Speaker 3: You had an incredible year.
Speaker 1: There was, though, a lot of IPOs and a lot
Speaker 1: of deals that got stymied by Liberation Day and policy uncertainty.
Speaker 1: What has to go right for some of these deals
Speaker 1: to come to fruish and open AI anthropic SpaceX Well.
Speaker 4: I think part of the reason that these companies are
Speaker 4: so interesting to investors is they are not rushed to
Speaker 4: go public, So there has to be an element of
Speaker 4: being patient if you're in an around the ecosystem. They
Speaker 4: don't have to come in the first half of twenty six,
Speaker 4: they come in the second half of twenty sixth they
Speaker 4: could even come in twenty seven. But they are drawing
Speaker 4: a whole bunch of interest to names like them derivative plays,
Speaker 4: and the ecosystem is you sort of disaggregate the entire
Speaker 4: AI daisy chain where you want to play. So the
Speaker 4: anticipation of the company going public almost as important as
Speaker 4: the company itself coming. But whether they come least in
Speaker 4: twenty six or twenty seven, they're going to come.
Speaker 3: They're going to come.
Speaker 1: It's sort of a dissonance right now. When you talk
Speaker 1: to business leaders about how much enthusiasm there is for
Speaker 1: deals and for energy in the US economy, and then
Speaker 1: when you hear the policy makers, you hear uncertainty and
Speaker 1: you hear sell America.
Speaker 3: How do you square those.
Speaker 1: Two narratives at a time where you do hear a
Speaker 1: growing number of investors say they are diversifying away from
Speaker 1: US assets.
Speaker 3: I hear you guys talking about this a lot.
Speaker 4: I think there are two separate phenomena, but they're not exclusive.
Speaker 4: One is we got the arca history. You know, I've
Speaker 4: gone on about the end of the end of history
Speaker 4: and that things would get going again. Nation States would
Speaker 4: be battling for a Gemini and kind of trying to
Speaker 4: win out on the rise and fall nations. That's just
Speaker 4: a historical fact that kind of got there was an
Speaker 4: interregment between Berlin Wall and COVID. We're actually back to
Speaker 4: the balance of human history as we've all studied, and
Speaker 4: that means there's going to be the kind of stuff
Speaker 4: that we are living through right now. It's just been
Speaker 4: a while, and I don't know necessarily that that is
Speaker 4: something we should expect to go away anytime soon. There's
Speaker 4: going to be renationalizing nationalizing, and that means in some
Speaker 4: case they'll be higher country risk, They'll be maybe pockets
Speaker 4: of iniquity, there may be opportunistic transactions or allocations that happened.
Speaker 4: But after twenty years of financial oppression, we're back to
Speaker 4: live markets and.
Speaker 3: Live nation states. That's here.
Speaker 4: But at the same time you have US capital markets
Speaker 4: which are more than half the capital stock. And the
Speaker 4: reality is very basically as we know, corporate health is excellent,
Speaker 4: consumer health at the top end is excellent, and obviously
Speaker 4: the administration is getting after how for the bottom half
Speaker 4: of the k earnings as you.
Speaker 3: Know, grew eight percent this year. They could grow in.
Speaker 4: The mid teams next year. That's double the long term average.
Speaker 4: That's pretty good. So good corporate, good, consumer, excellent capital
Speaker 4: markets and easier fed the lowered by seventy five.
Speaker 3: Maybe there's more to go.
Speaker 4: Maybe it's a demand driven twenty twenty six, in which
Speaker 4: case the Fed doesn't have to move. We have good inflation,
Speaker 4: we keep on powering forward growth. Or maybe it's supply
Speaker 4: side where they're spending but there isn't the same kind
Speaker 4: of job creation. Then the federal help out. So they're
Speaker 4: downside cases. But just in the main, oh, and the
Speaker 4: tailwinds of deregulation and the bill are kicking in. It
Speaker 4: kind of is hard to argue against the twenty six
Speaker 4: US led growth case.
Speaker 3: Now we can get a.
Speaker 4: Debate about where ASID prices should be, but in terms
Speaker 4: of just two years ago were talking about recession.
Speaker 3: Last year we weren't sure.
Speaker 4: Because the administrations come in, we're not talking about that today.
Speaker 4: So for our business, very simply, we write tickets to
Speaker 4: kind of two times GDP nominal and so if you
Speaker 4: think about our Wealth and Investment Bank, if we're going
Speaker 4: to grow you know, five ten percent on a two
Speaker 4: times basis nominally, that should be pretty good for our
Speaker 4: business for doing our job.
Speaker 2: Corporate health is very good, it's excellent. Software and health
Speaker 2: is questionable. Can we talk about that right? The move
Speaker 2: in the last twenty four hours, the life market stuff,
Speaker 2: let's get into that. The move in Japan at the
Speaker 2: long end of the curve, is that a warning shot?
Speaker 2: Is that the start of something bigger?
Speaker 4: Well, I mean this Japan trade has been talked about forever,
Speaker 4: and I would expect that in a lot of you know,
Speaker 4: highly indebted countries, you know, off the Liz Trust moment
Speaker 4: where the demographics are poor and you don't have the
Speaker 4: wherewithal our FIAT to kind of work your way through that,
Speaker 4: there could be some vulnerability.
Speaker 3: So what does that mean?
Speaker 4: That means if we're sort of do our economics meets
Speaker 4: you know, poly side thing I think that means you
Speaker 4: want to get closer to places where you can act
Speaker 4: in your joint economic interest, and I think the Japanese
Speaker 4: examples one that we should continue to pay attention to.
Speaker 4: I wouldn't be surprised if we see pockets of that
Speaker 4: now and then when you know, there's a little talk
Speaker 4: of the bouncyet looks lousy, but we're going to inject
Speaker 4: a little stimulus, and let's see if anyone notices, Yeah,
Speaker 4: they noticed, so you know, you sort of have to
Speaker 4: you know, then you just it's you know, it's a
Speaker 4: trial balloon. It gets pulled back, and that's probably healthy
Speaker 4: for markets. You know, you see a lot of that's
Speaker 4: been bought back today. But that's different than the US
Speaker 4: Treasury phenomenon. Yeah, that that that's been that's been hugely overblown.
Speaker 4: The reality is that when we did this a year ago,
Speaker 4: the Treasury secretary is you know of anyone was talking
Speaker 4: about the ten year being so important to keep an
Speaker 4: eye on. I think the ten years around four fifty seven,
Speaker 4: four fifty five, four sixty. Now it's a four twenty five,
Speaker 4: four to thirty, so the ten years doing his job,
Speaker 4: there's some steepening.
Speaker 3: Yes, it's probably healthy. So I do think there's a.
Speaker 4: Conflation between kind of US Treasury phenomenon and the world,
Speaker 4: and I think there's a difference, and you know, we
Speaker 4: just have to continue to highlight the difference very quickly.
Speaker 5: Ted because you spend time you grew up in Venezuela,
Speaker 5: New world. Now are you planning to maybe help facilitate
Speaker 5: companies go back in?
Speaker 3: I'd not prep for that question. Uh, you lived in
Speaker 3: Thank you so much.
Speaker 5: Interested because you have a different take, probably than every
Speaker 5: other CEO walking around this forum.
Speaker 4: Well, ven as well as an extraordinary place, has a
Speaker 4: proud but now in recent decades, very troubled history.
Speaker 3: But is uh you know, uh, if you know your.
Speaker 4: Monroe doctrine critical and has albeit as you've talked about
Speaker 4: at length.
Speaker 3: Uh, it's it's it's more sulphuric, but very.
Speaker 4: High, uh vast quantities of of oil beneath the ground.
Speaker 4: So do I think Venezuela is going to be relevant?
Speaker 4: I think Latin America is going to be relevant. I
Speaker 4: think the hemisphere is going to be relevant, and its
Speaker 4: sort of thinking around how wants to get closer while
Speaker 4: maintaining its own uh, you know, political and social independence
Speaker 4: from the US, but I think coming together of some
Speaker 4: places may make some sense and maybe in the broader
Speaker 4: economic interest.
Speaker 3: Back to the previous question.
Speaker 2: That it was a fantastic conswer, thank you. I've got
Speaker 2: one more that's just not a landmine. There was some
Speaker 2: news earlier about Deutschebank, and I just want to breathe
Speaker 2: some life into that story. And essentially the Treasury Secretary
Speaker 2: came out there was some research that he didn't like,
Speaker 2: and according to him, the Deutsche Bank CEO has turned
Speaker 2: around and said, I don't stand by that research. That's
Speaker 2: basically the point. Is it difficult for the research department
Speaker 2: of Morgan Stanley to say what they think in an
Speaker 2: environment like this one? And I asked this question because
Speaker 2: I know some tremendous individuals at Morgan Stanley in research
Speaker 2: and they are all highly intelligent, capable and have their
Speaker 2: own thoughts about where they think we are in this
Speaker 2: moment right now. But is it difficult in the C
Speaker 2: suite to allow them just to go out their full throat,
Speaker 2: full thrott or full blooded and just say what they
Speaker 2: really think about this moment?
Speaker 3: Absolutely not.
Speaker 4: I'm not at a piece of research at my desk
Speaker 4: for a yellow light or a no go. I think
Speaker 4: what gets a little tricky is these institutions also had
Speaker 4: desk analysts. I don't know if this one came out
Speaker 4: of the research department or maybe a desk analyst sitting
Speaker 4: in one of the divisions. But to answer your question directly,
Speaker 4: we want we celebrate broad opinion, I do think, but
Speaker 4: to give to give not kind of the standard answer.
Speaker 4: Part of the reason you like our research is because
Speaker 4: it's not just regurgitation.
Speaker 3: Because we all have a bloomer terminal.
Speaker 4: Okay, so it has to have some kind of value
Speaker 4: add but it doesn't have to just be provocation for
Speaker 4: its own sake. So we have industry leaders, we have
Speaker 4: sector leaders. We have Seth Carpenter, who you pointed out.
Speaker 4: I was watching you talk to him, and I was
Speaker 4: and that was quite a moment when I looked Starbucks
Speaker 4: all over my suit. So thanks for that.
Speaker 3: That was excellent.
Speaker 4: You had at least one viewer that day, and that
Speaker 4: was me, so and Seth. But the answer is the
Speaker 4: independence of research is important. We've invested in it for
Speaker 4: all these years that haven't been said sort of writing
Speaker 4: research to just sort of provoke and kind of get
Speaker 4: your warhol moment. I mean that is not really fair
Speaker 4: to the institution either, and it puts the particular government
Speaker 4: or whomever in an awkward spot.
Speaker 3: Because they read the research.
Speaker 4: So I think there's got to be a balance between
Speaker 4: independent integrity and what you're writing and writing something that
Speaker 4: actually is meant to add value and bring intellectual capital
Speaker 4: to the fore some of.
Speaker 2: The Joan cleanand Bill.
Speaker 3: I didn't actually split it up. I just swallowed and smiled.
Speaker 2: Thank you, sir, thank you very much.
Speaker 3: Thank you Ted Pick.
Speaker 2: There the moment Stanley Chairman and c e out