WEBVTT - Morgan Stanley CEO Ted Pick Talks M&A

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>We begin this out with stocks slightly lower following the

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<v Speaker 2>biggest slid in three months as investors search for direction.

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<v Speaker 2>The Morgan Stanley, chairman and CEO of Ted Pig has

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<v Speaker 2>seen it. Oh and he joined us now for more Ted.

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<v Speaker 2>Good to see you, guys. Thanks for having me. I'd

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<v Speaker 2>like to feel like to be feeling good, feeling pretty good.

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<v Speaker 2>You're not going to be in the speech in about

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<v Speaker 2>twenty eight minutes time, You're going to avoid that.

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<v Speaker 3>Yeah, I'll be with you, guys.

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<v Speaker 2>Let's talk about how things are set up for twenty six.

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<v Speaker 2>We've drawn a big distinction between the energy that's coming

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<v Speaker 2>from European officials and the emotion they have about a

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<v Speaker 2>place like Greenland, and the optimism that people have for

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<v Speaker 2>the broader US economy, particularly from bankers regarding the pipeline

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<v Speaker 2>and the amount of debt issues we've seen over the

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<v Speaker 2>past few months. The dead end of writing that you've

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<v Speaker 2>really benefited from, that's going to fund a lot of

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<v Speaker 2>the transition. How ammed up are you about the year ahead?

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<v Speaker 3>Well, thanks for having me, guys. Great to see you.

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<v Speaker 4>I'm pretty amped up. You know, we had we had

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<v Speaker 4>several years where the emine actor is going to get

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<v Speaker 4>going and then COVID happen and then rates roofed and

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<v Speaker 4>it's taken a while for a ton glue.

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<v Speaker 3>But this kind of in this case.

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<v Speaker 4>Literal noise speaks to c suite need to act, whether

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<v Speaker 4>it's to reglobalize or reorient where your operations are, who

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<v Speaker 4>you want to do business with, and as long as

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<v Speaker 4>there's activity, we're busy. So crossboard or M and a

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<v Speaker 4>large cap M and A going to be important. AI

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<v Speaker 4>access an accelerant to that too. If you want to

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<v Speaker 4>actually get after their productivity gains and embedded in AI,

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<v Speaker 4>you have to have the wherewithal to do it. And

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<v Speaker 4>if your market cap is thirty or forty billion, that's tough.

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<v Speaker 4>You know, how do you take a couple of points

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<v Speaker 4>off your income statement to do that year after year?

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<v Speaker 4>But if you're two three hundred billion, maybe got a shot.

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<v Speaker 4>So people are thinking bigger. And then the sponsors, as

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<v Speaker 4>you know, a couple thousand companies that have been sitting

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<v Speaker 4>there that have a billion dollar market caps implied they

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<v Speaker 4>need to come. And then very importantly have these great

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<v Speaker 4>companies that have been private and over the last fifteen years,

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<v Speaker 4>we've seen companies go public to defase options or effectively

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<v Speaker 4>be secondaries. You can actually see great companies that are

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<v Speaker 4>growth companies, some of them in the AI ecosystem.

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<v Speaker 3>They want to go tap capital.

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<v Speaker 4>So for the investment bank, a great period and for

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<v Speaker 4>a wealth manager, leading wealth manager in the US and

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<v Speaker 4>the world, you want to allocate your capital efficiently.

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<v Speaker 3>So very exciting.

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<v Speaker 2>Some pank some of those business lines. So let's just

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<v Speaker 2>pick up on the IPO pipeline the activity we could

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<v Speaker 2>see later this year SpaceX, open AI. We're talking about

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<v Speaker 2>some absolute monsters. Even the team have been historically quite

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<v Speaker 2>dominant in the tech sector. What are you doing right

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<v Speaker 2>now to prepare for that moment that might be in

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<v Speaker 2>our future.

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<v Speaker 4>Well, these companies, you know, you bank them for a

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<v Speaker 4>whole bunch of years and you get to know them.

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<v Speaker 4>So there's a process, obviously the formal bag off process

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<v Speaker 4>and then the go or no go decision.

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<v Speaker 3>But typically the.

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<v Speaker 4>Company has a pretty good idea of what it wants

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<v Speaker 4>to do ahead of time because it's selected its group.

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<v Speaker 4>And the stakes are really high this round because as

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<v Speaker 4>you say, these the implied market caps these companies are enormous,

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<v Speaker 4>but also they are paradoxically they are very large but

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<v Speaker 4>also mega growers. They have, you know, some of them

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<v Speaker 4>have a little bit of a change the world feel

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<v Speaker 4>to them, so they could become must on.

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<v Speaker 3>I mean, one of the things that you.

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<v Speaker 4>Guys have talked a lot about is so much of

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<v Speaker 4>the equity base has become either beta or it's become

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<v Speaker 4>kind of the seven or eight names. What if there's

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<v Speaker 4>some additional companies that three, four or five hundred billion

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<v Speaker 4>dollar market caps and trillion and a half dollars market

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<v Speaker 4>cap the active management community is I want to own that.

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<v Speaker 4>I want to own that from the time of the IPO.

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<v Speaker 4>So I think it's not just Wall Street getting to

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<v Speaker 4>know these companies. It's a whole bunch of investors who

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<v Speaker 4>have either backed into early rounds or want to be

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<v Speaker 4>there when the IPO comes.

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<v Speaker 1>When we were speaking with you a year ago in

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<v Speaker 1>these seats, you were talking about how it is going

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<v Speaker 1>to be a great year for IPOs and M and A,

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<v Speaker 1>and it was for your bottom line.

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<v Speaker 3>You had an incredible year.

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<v Speaker 1>There was, though, a lot of IPOs and a lot

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<v Speaker 1>of deals that got stymied by Liberation Day and policy uncertainty.

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<v Speaker 1>What has to go right for some of these deals

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<v Speaker 1>to come to fruish and open AI anthropic SpaceX Well.

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<v Speaker 4>I think part of the reason that these companies are

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<v Speaker 4>so interesting to investors is they are not rushed to

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<v Speaker 4>go public, So there has to be an element of

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<v Speaker 4>being patient if you're in an around the ecosystem. They

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<v Speaker 4>don't have to come in the first half of twenty six,

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<v Speaker 4>they come in the second half of twenty sixth they

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<v Speaker 4>could even come in twenty seven. But they are drawing

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<v Speaker 4>a whole bunch of interest to names like them derivative plays,

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<v Speaker 4>and the ecosystem is you sort of disaggregate the entire

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<v Speaker 4>AI daisy chain where you want to play. So the

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<v Speaker 4>anticipation of the company going public almost as important as

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<v Speaker 4>the company itself coming. But whether they come least in

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<v Speaker 4>twenty six or twenty seven, they're going to come.

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<v Speaker 3>They're going to come.

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<v Speaker 1>It's sort of a dissonance right now. When you talk

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<v Speaker 1>to business leaders about how much enthusiasm there is for

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<v Speaker 1>deals and for energy in the US economy, and then

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<v Speaker 1>when you hear the policy makers, you hear uncertainty and

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<v Speaker 1>you hear sell America.

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<v Speaker 3>How do you square those.

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<v Speaker 1>Two narratives at a time where you do hear a

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<v Speaker 1>growing number of investors say they are diversifying away from

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<v Speaker 1>US assets.

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<v Speaker 3>I hear you guys talking about this a lot.

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<v Speaker 4>I think there are two separate phenomena, but they're not exclusive.

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<v Speaker 4>One is we got the arca history. You know, I've

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<v Speaker 4>gone on about the end of the end of history

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<v Speaker 4>and that things would get going again. Nation States would

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<v Speaker 4>be battling for a Gemini and kind of trying to

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<v Speaker 4>win out on the rise and fall nations. That's just

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<v Speaker 4>a historical fact that kind of got there was an

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<v Speaker 4>interregment between Berlin Wall and COVID. We're actually back to

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<v Speaker 4>the balance of human history as we've all studied, and

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<v Speaker 4>that means there's going to be the kind of stuff

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<v Speaker 4>that we are living through right now. It's just been

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<v Speaker 4>a while, and I don't know necessarily that that is

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<v Speaker 4>something we should expect to go away anytime soon. There's

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<v Speaker 4>going to be renationalizing nationalizing, and that means in some

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<v Speaker 4>case they'll be higher country risk, They'll be maybe pockets

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<v Speaker 4>of iniquity, there may be opportunistic transactions or allocations that happened.

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<v Speaker 4>But after twenty years of financial oppression, we're back to

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<v Speaker 4>live markets and.

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<v Speaker 3>Live nation states. That's here.

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<v Speaker 4>But at the same time you have US capital markets

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<v Speaker 4>which are more than half the capital stock. And the

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<v Speaker 4>reality is very basically as we know, corporate health is excellent,

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<v Speaker 4>consumer health at the top end is excellent, and obviously

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<v Speaker 4>the administration is getting after how for the bottom half

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<v Speaker 4>of the k earnings as you.

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<v Speaker 3>Know, grew eight percent this year. They could grow in.

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<v Speaker 4>The mid teams next year. That's double the long term average.

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<v Speaker 4>That's pretty good. So good corporate, good, consumer, excellent capital

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<v Speaker 4>markets and easier fed the lowered by seventy five.

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<v Speaker 3>Maybe there's more to go.

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<v Speaker 4>Maybe it's a demand driven twenty twenty six, in which

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<v Speaker 4>case the Fed doesn't have to move. We have good inflation,

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<v Speaker 4>we keep on powering forward growth. Or maybe it's supply

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<v Speaker 4>side where they're spending but there isn't the same kind

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<v Speaker 4>of job creation. Then the federal help out. So they're

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<v Speaker 4>downside cases. But just in the main, oh, and the

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<v Speaker 4>tailwinds of deregulation and the bill are kicking in. It

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<v Speaker 4>kind of is hard to argue against the twenty six

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<v Speaker 4>US led growth case.

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<v Speaker 3>Now we can get a.

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<v Speaker 4>Debate about where ASID prices should be, but in terms

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<v Speaker 4>of just two years ago were talking about recession.

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<v Speaker 3>Last year we weren't sure.

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<v Speaker 4>Because the administrations come in, we're not talking about that today.

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<v Speaker 4>So for our business, very simply, we write tickets to

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<v Speaker 4>kind of two times GDP nominal and so if you

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<v Speaker 4>think about our Wealth and Investment Bank, if we're going

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<v Speaker 4>to grow you know, five ten percent on a two

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<v Speaker 4>times basis nominally, that should be pretty good for our

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<v Speaker 4>business for doing our job.

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<v Speaker 2>Corporate health is very good, it's excellent. Software and health

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<v Speaker 2>is questionable. Can we talk about that right? The move

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<v Speaker 2>in the last twenty four hours, the life market stuff,

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<v Speaker 2>let's get into that. The move in Japan at the

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<v Speaker 2>long end of the curve, is that a warning shot?

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<v Speaker 2>Is that the start of something bigger?

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<v Speaker 4>Well, I mean this Japan trade has been talked about forever,

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<v Speaker 4>and I would expect that in a lot of you know,

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<v Speaker 4>highly indebted countries, you know, off the Liz Trust moment

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<v Speaker 4>where the demographics are poor and you don't have the

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<v Speaker 4>wherewithal our FIAT to kind of work your way through that,

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<v Speaker 4>there could be some vulnerability.

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<v Speaker 3>So what does that mean?

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<v Speaker 4>That means if we're sort of do our economics meets

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<v Speaker 4>you know, poly side thing I think that means you

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<v Speaker 4>want to get closer to places where you can act

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<v Speaker 4>in your joint economic interest, and I think the Japanese

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<v Speaker 4>examples one that we should continue to pay attention to.

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<v Speaker 4>I wouldn't be surprised if we see pockets of that

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<v Speaker 4>now and then when you know, there's a little talk

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<v Speaker 4>of the bouncyet looks lousy, but we're going to inject

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<v Speaker 4>a little stimulus, and let's see if anyone notices, Yeah,

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<v Speaker 4>they noticed, so you know, you sort of have to

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<v Speaker 4>you know, then you just it's you know, it's a

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<v Speaker 4>trial balloon. It gets pulled back, and that's probably healthy

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<v Speaker 4>for markets. You know, you see a lot of that's

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<v Speaker 4>been bought back today. But that's different than the US

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<v Speaker 4>Treasury phenomenon. Yeah, that that that's been that's been hugely overblown.

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<v Speaker 4>The reality is that when we did this a year ago,

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<v Speaker 4>the Treasury secretary is you know of anyone was talking

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<v Speaker 4>about the ten year being so important to keep an

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<v Speaker 4>eye on. I think the ten years around four fifty seven,

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<v Speaker 4>four fifty five, four sixty. Now it's a four twenty five,

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<v Speaker 4>four to thirty, so the ten years doing his job,

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<v Speaker 4>there's some steepening.

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<v Speaker 3>Yes, it's probably healthy. So I do think there's a.

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<v Speaker 4>Conflation between kind of US Treasury phenomenon and the world,

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<v Speaker 4>and I think there's a difference, and you know, we

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<v Speaker 4>just have to continue to highlight the difference very quickly.

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<v Speaker 5>Ted because you spend time you grew up in Venezuela,

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<v Speaker 5>New world. Now are you planning to maybe help facilitate

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<v Speaker 5>companies go back in?

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<v Speaker 3>I'd not prep for that question. Uh, you lived in

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<v Speaker 3>Thank you so much.

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<v Speaker 5>Interested because you have a different take, probably than every

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<v Speaker 5>other CEO walking around this forum.

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<v Speaker 4>Well, ven as well as an extraordinary place, has a

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<v Speaker 4>proud but now in recent decades, very troubled history.

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<v Speaker 3>But is uh you know, uh, if you know your.

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<v Speaker 4>Monroe doctrine critical and has albeit as you've talked about

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<v Speaker 4>at length.

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<v Speaker 3>Uh, it's it's it's more sulphuric, but very.

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<v Speaker 4>High, uh vast quantities of of oil beneath the ground.

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<v Speaker 4>So do I think Venezuela is going to be relevant?

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<v Speaker 4>I think Latin America is going to be relevant. I

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<v Speaker 4>think the hemisphere is going to be relevant, and its

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<v Speaker 4>sort of thinking around how wants to get closer while

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<v Speaker 4>maintaining its own uh, you know, political and social independence

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<v Speaker 4>from the US, but I think coming together of some

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<v Speaker 4>places may make some sense and maybe in the broader

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<v Speaker 4>economic interest.

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<v Speaker 3>Back to the previous question.

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<v Speaker 2>That it was a fantastic conswer, thank you. I've got

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<v Speaker 2>one more that's just not a landmine. There was some

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<v Speaker 2>news earlier about Deutschebank, and I just want to breathe

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<v Speaker 2>some life into that story. And essentially the Treasury Secretary

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<v Speaker 2>came out there was some research that he didn't like,

0:10:15.559 --> 0:10:18.760
<v Speaker 2>and according to him, the Deutsche Bank CEO has turned

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<v Speaker 2>around and said, I don't stand by that research. That's

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<v Speaker 2>basically the point. Is it difficult for the research department

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<v Speaker 2>of Morgan Stanley to say what they think in an

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<v Speaker 2>environment like this one? And I asked this question because

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<v Speaker 2>I know some tremendous individuals at Morgan Stanley in research

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<v Speaker 2>and they are all highly intelligent, capable and have their

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<v Speaker 2>own thoughts about where they think we are in this

0:10:40.480 --> 0:10:42.599
<v Speaker 2>moment right now. But is it difficult in the C

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<v Speaker 2>suite to allow them just to go out their full throat,

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<v Speaker 2>full thrott or full blooded and just say what they

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<v Speaker 2>really think about this moment?

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<v Speaker 3>Absolutely not.

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<v Speaker 4>I'm not at a piece of research at my desk

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<v Speaker 4>for a yellow light or a no go. I think

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<v Speaker 4>what gets a little tricky is these institutions also had

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<v Speaker 4>desk analysts. I don't know if this one came out

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<v Speaker 4>of the research department or maybe a desk analyst sitting

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<v Speaker 4>in one of the divisions. But to answer your question directly,

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<v Speaker 4>we want we celebrate broad opinion, I do think, but

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<v Speaker 4>to give to give not kind of the standard answer.

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<v Speaker 4>Part of the reason you like our research is because

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<v Speaker 4>it's not just regurgitation.

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<v Speaker 3>Because we all have a bloomer terminal.

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<v Speaker 4>Okay, so it has to have some kind of value

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<v Speaker 4>add but it doesn't have to just be provocation for

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<v Speaker 4>its own sake. So we have industry leaders, we have

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<v Speaker 4>sector leaders. We have Seth Carpenter, who you pointed out.

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<v Speaker 4>I was watching you talk to him, and I was

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<v Speaker 4>and that was quite a moment when I looked Starbucks

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<v Speaker 4>all over my suit. So thanks for that.

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<v Speaker 3>That was excellent.

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<v Speaker 4>You had at least one viewer that day, and that

0:11:48.520 --> 0:11:53.640
<v Speaker 4>was me, so and Seth. But the answer is the

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<v Speaker 4>independence of research is important. We've invested in it for

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<v Speaker 4>all these years that haven't been said sort of writing

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<v Speaker 4>research to just sort of provoke and kind of get

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<v Speaker 4>your warhol moment. I mean that is not really fair

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<v Speaker 4>to the institution either, and it puts the particular government

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<v Speaker 4>or whomever in an awkward spot.

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<v Speaker 3>Because they read the research.

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<v Speaker 4>So I think there's got to be a balance between

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<v Speaker 4>independent integrity and what you're writing and writing something that

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<v Speaker 4>actually is meant to add value and bring intellectual capital

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<v Speaker 4>to the fore some of.

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<v Speaker 2>The Joan cleanand Bill.

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<v Speaker 3>I didn't actually split it up. I just swallowed and smiled.

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<v Speaker 2>Thank you, sir, thank you very much.

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<v Speaker 3>Thank you Ted Pick.

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<v Speaker 2>There the moment Stanley Chairman and c e out