Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Now, let's get to one company that I gotta say.
Speaker 2: Tim was already on track to be the news this week.
Speaker 3: We knew that, yeah, but for good stuff.
Speaker 4: Yeah, we're talking about Macy's. It's usually a big week
Speaker 4: for Macon's ahead of their Thanksgiving Day parade and Black Friday.
Speaker 4: It kicks off the all important holiday shopping season for
Speaker 4: it and the rest of the nation's retailers. Yet it's
Speaker 4: kind of been a rough start to it all. Macy
Speaker 4: said it would delay its third quarter earnings release after
Speaker 4: an investigation revealed an employee hit more than one hundred
Speaker 4: million dollars of expenses. Macy's shares down about two point
Speaker 4: six percent as we speak, with some insight into really
Speaker 4: what the heck is going on? We got Bloomberg Television's
Speaker 4: remained bostic here in our studio. He's the cost of
Speaker 4: the clothes coming up in a little less than an
Speaker 4: hour on a Bloomberg TV. So you spoke with the
Speaker 4: folks over at Macy's today, what's going on here?
Speaker 5: I did, and unfortunately I can't really tell you what's
Speaker 5: going on because there was only so much they would share.
Speaker 5: I mean, this is a pretty big deal.
Speaker 6: Now.
Speaker 5: Obviously in terms of the actual dollar amount, this is
Speaker 5: a drop in the bucket when you consider their overall revenue.
Speaker 5: But you're talking about an employee who was effectively in
Speaker 5: charge of certain things when it came to their delivery operations.
Speaker 5: One hundred and thirty to roughly one hundred and fifty
Speaker 5: four million dollars over a three year period, apparently unaccounted for. Now.
Speaker 5: I asked macy specifically, was this money stolen? Was this
Speaker 5: just expenses that were miscategorized? They could not say. They
Speaker 5: said that the investigation is still in the early stage,
Speaker 5: and they weren't able to actually share publicly exactly what happened,
Speaker 5: other than to say that the employee is no longer there.
Speaker 2: I mean, I don't want to read too much and
Speaker 2: do it right, because we've got to get more details
Speaker 2: and we want to be careful here. But it does
Speaker 2: make you wonder about like oversight or something, or what
Speaker 2: was going on.
Speaker 5: Well, that's the big question because they're basically this on
Speaker 5: one single employee. Now, you know, not to be too
Speaker 5: clib about it, but you know, you know, one employee
Speaker 5: making off with a few thousand dollars sounds plausible. One
Speaker 5: employee potentially making off or at least obscuring over one
Speaker 5: hundred million dollars, that's a lot for one person. I mean,
Speaker 5: I know there are a lot of overachievers out there,
Speaker 5: but I think I would need a little bit of help.
Speaker 5: But they but they said right now that they think
Speaker 5: that this has been nipped in the blood. They did
Speaker 5: make it clear that this actually came about while they
Speaker 5: were preparing their earnings report, and they just noticed some
Speaker 5: discrepancies and then they did a deeper dive, and then
Speaker 5: they made the decision that it was better to hold
Speaker 5: off on issuing that report until they got a fuller
Speaker 5: investigation of what was happening.
Speaker 4: But this is also a time when Macy's is trying
Speaker 4: to do a huge turnaround right now. Yeah, got a
Speaker 4: relatively new CEO, someone you've spoken with quite a bit
Speaker 4: over the last few months. Explain the backdrop that this
Speaker 4: is happening against well.
Speaker 5: The backdrop is basically a slowdown in sales growth for
Speaker 5: the company overall, Macy's Inc. That's the large umbrella company.
Speaker 5: Of course. The major properties are Macy's the store, Bloomingdale's
Speaker 5: the store, and Blue Mercury, which focuses on cosmetics. Blue
Speaker 5: Mercury is doing great. Yeah, Bloomingdale's, believe it or not,
Speaker 5: is doing great. Macy's stores themselves not so great on
Speaker 5: a comp sales basis. They were down three percent. That's
Speaker 5: just that the Macy's branded stores, but that drags down
Speaker 5: the ink the umbrella. Comp sales down as a whole
Speaker 5: also lower. Of course, the company will focus on Bloomingdale's.
Speaker 5: The current CEO of Macy's Inc. Tony Spring, used to
Speaker 5: run Bloomingdale's, so there's a big reason why he became
Speaker 5: CEO of the overall company because he did a lot
Speaker 5: to turn that around. And Blue Mercury is doing better
Speaker 5: as well, as a lot of people are still willing
Speaker 5: to buy cosmetics and skincare.
Speaker 2: Guilty as charged, but no, like listen, whether it's a
Speaker 2: four or right or all of those, they've really done well.
Speaker 2: But I feel like blooming Dale's is different from Macy's
Speaker 2: in terms of their customer in a big way. And
Speaker 2: I do wonder whether you know Tony Spring, you know,
Speaker 2: can make those adjustments.
Speaker 5: Well, that's a big part of the problem. And I've
Speaker 5: asked in this in past calls. Now they wouldn't want.
Speaker 5: They didn't want to talk about this today. They're saying
Speaker 5: that when they released their earnings, which they say will
Speaker 5: be done well, they said by December eleventh, so it
Speaker 5: could come before that, but they expect to have the
Speaker 5: earnings release and the conference called by December eleventh. But
Speaker 5: to your point, Bloomingdale's had much more of a I
Speaker 5: guess niche customer if you will. It was much more
Speaker 5: definable than Macy's. Macy's was kind of everything to all people,
Speaker 5: and as you know, that's the big challenge for department
Speaker 5: stores right now is how do you beat everything to
Speaker 5: all people in a world where I think a lot
Speaker 5: of shoppers want something that's a little bit more personalized,
Speaker 5: a little bit more niche. And I think Tony Spring
Speaker 5: did a good job with that with Bloomingdale's, but he
Speaker 5: was dealing with the customer base that was kind of
Speaker 5: right for them.
Speaker 2: How much digital are they doing over on the Macy's side.
Speaker 2: Is that productive for that.
Speaker 5: I think the last quarter they said roughly it's still
Speaker 5: it's sort of tracking around the thirty percent range. So
Speaker 5: that varies pretty wildly depending on which brand you're talking about. Again,
Speaker 5: it's doing relatively well for Bloomingdale's, relatively well for Blue Mercury.
Speaker 5: Macy's is still kind of that nut that they have
Speaker 5: to crack. And they have tried something, and I want
Speaker 5: to point out they had this thing they called these
Speaker 5: are smaller stores, called the First Fifth that Donny Spring
Speaker 5: set up said, let's do smaller concepts. We don't necessarily
Speaker 5: need these gigantic you know, tens of thousands of square feet,
Speaker 5: hundreds of thousands square feet at some of these stores.
Speaker 5: We need smaller versions of these that will do better.
Speaker 5: They identified fifty stores that they did that, and if
Speaker 5: you break out just those fifty stores away from the
Speaker 5: other Macy's, they're actually doing pretty well. Three consecutive quarters
Speaker 5: of COMM sales growth. In the most recent quarter it
Speaker 5: was up two percent, so down on Macy's as a whole,
Speaker 5: but those first fifty macy stores and when they've redesigned
Speaker 5: the smaller format up almost two percent.
Speaker 4: Okay, so in this case, smaller could be better. We'll
Speaker 4: have to wait and see maybe a few more quarters
Speaker 4: to make that determination.
Speaker 5: Sport coat you're wearing about ue, where'd you get that from?
Speaker 3: Thank you? I don't actually know.
Speaker 4: Okay, this might be a j crew about of Macy's
Speaker 4: ling tales.
Speaker 2: But I asked the question, guys shares.
Speaker 4: Down as much as five percent earlier in the Yeah,
Speaker 4: down a little more than two percent. Right now, What
Speaker 4: do you think it is that analysts are reacting to here?
Speaker 4: I think it's just a one off charge here. Well,
Speaker 4: but there's a million dollars one hundred million.
Speaker 5: But there's also the issue of how deep does it go?
Speaker 3: Right?
Speaker 2: And what else did they miss right?
Speaker 5: Any potential something like this big question is if there's smoke,
Speaker 5: is there a fire? Now? Again, the company line right now,
Speaker 5: both both of what they told me on the call
Speaker 5: as well as in the press release, is that this
Speaker 5: is an isolated incident and that it has been contained.
Speaker 5: But they could not give me any details right now,
Speaker 5: reassuring me of that, and they said they will have
Speaker 5: more deals another criminals.
Speaker 2: We don't know how like, we don't know, so all
Speaker 2: right for someone like you who knows this company. Well,
Speaker 2: I just got about thirty seconds left here. I mean,
Speaker 2: the worst case scenario would be what the best case
Speaker 2: scenario is?
Speaker 3: What?
Speaker 5: Well, the best case scenario it is just one hundred
Speaker 5: million dollars, as they said, one hundred and fifty four
Speaker 5: million dollars as they say. When you look at their
Speaker 5: total expenses that they were logging, that was four point
Speaker 5: six billion dollars. So a small fraction of what their
Speaker 5: expenses were. That's the upside. Now the potential downside. If
Speaker 5: there's more to this, or this was more widespread, then
Speaker 5: that potentially becomes an issue.
Speaker 2: All right, So next vocal points when we finally get
Speaker 2: their earnings.
Speaker 5: Right, yeah, hopefully before December.
Speaker 2: A black right when you're shopping because you want that
Speaker 2: coat that Tim's got.
Speaker 5: I had some nice coate. I know, I know, I'm
Speaker 5: just saying.
Speaker 2: Great stuff. As always. Romain bost At, co host of
Speaker 2: The Clothes on Bloomberg TV. It's coming your way at
Speaker 2: the top of the hour, so be sure to check
Speaker 2: it out.
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Speaker 2: I'm just looking at treasuries right now. To your note,
Speaker 2: We've seen yields definitely back off now four twenty seven
Speaker 2: on that two year note, and I'm looking at a
Speaker 2: tenure at four twenty six. Talk about a flattening, certainly
Speaker 2: of the curve that we've seen. I want to talk
Speaker 2: a little bit more about the treasury trade. We mentioned
Speaker 2: this earlier. We have seen treasuries added to some of
Speaker 2: the gains from that late Friday announcement of Scott Besson,
Speaker 2: a Wall Street veteran who investors expect will take this
Speaker 2: thing out of the administration's more aggressive trade and economic
Speaker 2: policy proposals. Of course, he was nominated to be presidentle
Speaker 2: like Donald Trump's Treasury secretary choice.
Speaker 4: With some thoughts on that in the market outlook post election.
Speaker 4: We go now to Aaron kenn And he's co founder
Speaker 4: and CEO over at Clear Harbor Asset Management. They've got
Speaker 4: about one hundred one point five billion dollars in assets
Speaker 4: under management. Aaron joining us once again from Stanford, Connecticut. Aaron,
Speaker 4: good to have you back with us. We haven't spoken
Speaker 4: to you since the election result earlier this month. I'm
Speaker 4: just wondering, big picture, how your views have shifted now
Speaker 4: that we know who is going to be the next
Speaker 4: president and the more we're learning about the president elect's
Speaker 4: cabinet choices.
Speaker 6: Yeah, thanks for having me back, Tam and Carroll. It
Speaker 6: certainly has been interesting.
Speaker 7: We started to see these trends just before the election,
Speaker 7: as the markets, the betting markets that is, priced in
Speaker 7: or starting to price in a Trump victory. But certainly
Speaker 7: on the equity side we've seen much more of a
Speaker 7: convergence of performance. So not just the MAC seven, not
Speaker 7: just the tech sector, not just the communications sector, but
Speaker 7: rather financials and industrials and utilities and in other areas
Speaker 7: of the markets such as energy and materials.
Speaker 6: So I think that's one.
Speaker 7: Theme that may actually continue into twenty and twenty five.
Speaker 6: And then you mentioned interest rates.
Speaker 7: I mean, clearly with the selection of Scott Bessett, and
Speaker 7: we've seen rates decline notably today.
Speaker 6: There's a sense that.
Speaker 7: Perhaps the deficit spending concern that the market had regardless
Speaker 7: of who won, frankly, could be quelled on the margin
Speaker 7: because we have someone who is quite experienced at the
Speaker 7: US Treasury, and perhaps will have a little more discipline
Speaker 7: on that front, and so I think there's a sense
Speaker 7: there that it'll allow the FED to worry less about inflation,
Speaker 7: to think a little more about the employment and growth picture,
Speaker 7: and perhaps the lower fifty percent of the economic stratum,
Speaker 7: which has still been under a lot of pressure over
Speaker 7: the last couple of years.
Speaker 2: Erin how do you game this out? I am just
Speaker 2: curious some of the conversations you might be having with
Speaker 2: some of your investors or clients, the money that you
Speaker 2: guys have under management, about what really happens. Right there's
Speaker 2: the campaign, and I think it's fair to say that
Speaker 2: ahead of the outcome that folks came on and said, listen,
Speaker 2: either way, it's going to be good for the markets
Speaker 2: because you have candidates that promise everything right to kind
Speaker 2: of get people to vote on it. But I do
Speaker 2: wonder what the reality is of now that we know
Speaker 2: it will be a second term for Donald Trump and
Speaker 2: his team. What will be the reality of policies that
Speaker 2: ultimately take place. Will it be the extremes that everybody
Speaker 2: is talking about, or will it be more likely know
Speaker 2: or something in the middle.
Speaker 7: I don't want to sound too cute, Carol, but I
Speaker 7: think this is the difference between trading and investing to
Speaker 7: a great extent. There are certain trends that clearly coming
Speaker 7: out of the Trump administration we think on day one
Speaker 7: will impact asset prices across fixed income equities, even private equity.
Speaker 7: So one trend, for example, as we gain this out
Speaker 7: and think about medium and long term trends for our clients,
Speaker 7: is how lower regulatory environment, lesser regulatory impact could could
Speaker 7: potentially provide a tailwind.
Speaker 6: To mergers and acquisitions.
Speaker 7: What does that mean for small cap and mid cap companies,
Speaker 7: But what does it also mean for certain sectors within
Speaker 7: the economy that over the last four or five years
Speaker 7: have underperformed the sort of tech trends or financials or
Speaker 7: even mid cap smaller cap financial companies that are sort
Speaker 7: of consulting within M and A. And also, you know,
Speaker 7: what does it mean for the democratization that we've seen
Speaker 7: of private equity in the growth in that landscape and
Speaker 7: the publicly traded asset managers that are really seeing revenues
Speaker 7: accelerate on the heels of them continuing to attract capital
Speaker 7: frankly from clients at firms like Clear Harbor Asset Management,
Speaker 7: who we believe in some cases may be deserving their
Speaker 7: portfolios and their risk tolerance may require them to have.
Speaker 6: Some of that exposure. So we're thinking very much long term.
Speaker 7: Even artificial intelligence very hot topic, but how is it
Speaker 7: really impacting other segments of the economy outside of technology?
Speaker 6: And so we think about how is.
Speaker 7: It impacting biotechnology and healthcare and maybe the acceleration of
Speaker 7: some of the phase one, two and three work that's
Speaker 7: being done, and you know, sort of molecule research and development,
Speaker 7: and how is it even impacting utilities artificial intelligence in
Speaker 7: the smart grid. So we're trying to think longer term
Speaker 7: about these trends, and we're trying to not make any
Speaker 7: you know, one huge bet as it pertains to this.
Speaker 3: Hey, Eron, I.
Speaker 4: Want to talk a little bit about about doge no,
Speaker 4: not doge coins, that of government efficiency, Elon musk vek Ramaswami.
Speaker 4: They've avowed to cut two trillion dollars in spending from
Speaker 4: the federal budget. We're talking, you know, twenty percent goes
Speaker 4: to social security, eighteen percent to national defense, fifteen percent
Speaker 4: of health, about fourteen percent just goes to interest. Do
Speaker 4: you think they can pull it off? And if they do,
Speaker 4: how do you look at it from an investment perspective.
Speaker 6: Well, in some ways.
Speaker 7: In the long term, I hope they can pull it off,
Speaker 7: because I think we need to get our sort of
Speaker 7: fiscal house in order and start balancing our revenue collection
Speaker 7: with our expenses. And that may require some significant pain
Speaker 7: in certain aspects of society, and that's unfortunate, but we
Speaker 7: do need to bring ourselves back to that north star.
Speaker 7: But you bring up a good point to him, and
Speaker 7: that is to the extent that DOGE is successful. And
Speaker 7: Elon Musk mentioned, well, maybe he could cut two trillion
Speaker 7: dollars out of an annual budget. I don't know if
Speaker 7: he was thinking over a five year period or a
Speaker 7: ten year period, but he seemed to intimate it was one.
Speaker 7: It was over an annualized period. If that's the case,
Speaker 7: which would still not bring ourselves into balance. I think
Speaker 7: we would have to ask ourselves. The GDP trends that
Speaker 7: we've seen over the last several years have heavily been
Speaker 7: impacted by the deficit spending, the unsustainable deficit spending. We've
Speaker 7: all applied GDP, We've always sort of had consternation around
Speaker 7: the deficit spending, but this could be a reverse where
Speaker 7: we have less deficit spending and we have lower GDP.
Speaker 7: Now that the positive silver lining and all this which
Speaker 7: we have to analyze as productivity and whether or not
Speaker 7: we can achieve productivity gains.
Speaker 6: To offset that. But that's something I think investors are.
Speaker 7: Not yet totally sort of grappling with, and to be
Speaker 7: fair to them, it's not clear exactly how this Doge
Speaker 7: process will work. Ultimately, Congress has to decide on some
Speaker 7: of these spending initiatives.
Speaker 2: Are you anticipating the next four years or at least
Speaker 2: a couple of years where markets trade on posts that
Speaker 2: come off of truth social.
Speaker 6: I don't think of it that way.
Speaker 7: I mean, I think there are some very qualified people that.
Speaker 6: Incoming President Trump has selected. There are certainly some people.
Speaker 2: But there were a lot of qualified people the first
Speaker 2: time around, and then yet there was still a lot
Speaker 2: of social media posts.
Speaker 7: That's right, And there's a lot of there's a lot
Speaker 7: of turnover as well, and I think that's that's something.
Speaker 6: That I'm keeping my eye on.
Speaker 7: You know, we have some interesting picks, some are I
Speaker 7: think highly qualified. Will they stick around for a year
Speaker 7: or two or three or four, and that'll that'll I
Speaker 7: think be important to invest sort of ponder.
Speaker 2: Well, So glad we got some time with you. We've
Speaker 2: been wanting to get your view now that the election
Speaker 2: is over. Aaron Kennon, co founder CEO Clear Harbor Asset Management.
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Speaker 5: Bloomberg scoop Today.
Speaker 4: Also most Bread story our colleague Todd Gillespie reporting that
Speaker 4: city is using retention bonuses alongside management changes and tech
Speaker 4: upgrades to remake the banks offering for ultra rich customers.
Speaker 2: Stay. Yeah, so doing more, doing less.
Speaker 4: Trying to keep these employees on by enticing them. And
Speaker 4: also the new or new ish head of Wealth Management
Speaker 4: has been doing a lot of traveling to many parts
Speaker 4: of the world to meet with clients.
Speaker 2: I got to say the Wealth business, right, that's something
Speaker 2: that I feel like whoever we talked to came up
Speaker 2: with the folks over at Schwab on the West Coast.
Speaker 3: I mean right.
Speaker 2: It's the wealth management business just continues to grow. If
Speaker 2: you didn't notice, we are approaching bonus season. Mereth Dennis
Speaker 2: has a great view on how that could look for
Speaker 2: Wall Street. She is managing partner the financial search firm
Speaker 2: Prospect Rock Partners. The company does placement in finance, also
Speaker 2: operations for private equity firms, investment banks, and the like.
Speaker 2: She joins us right here in our Bloomberg Interactive Broker studio. Welcome, Welcome,
Speaker 2: How are you. I'm doing great? Thank you well. Tell
Speaker 2: us about your world and what you are seeing in
Speaker 2: terms of placement demand, who's hiring, what kind of hiring,
Speaker 2: what's going on.
Speaker 8: So there's a lot going on, and a lot has
Speaker 8: happened since the presidential election. I think we're seeing definitely
Speaker 8: an uptick in hiring over the past two weeks. We're
Speaker 8: seeing firms really start to close on their pipeline, and
Speaker 8: as they get the deals across the finish line, there's
Speaker 8: more certainty in terms of fee income. More certainty in
Speaker 8: terms of the income means more money for the bonus
Speaker 8: pool and also more money for deepening that bench.
Speaker 2: So Meredith was just just a case of deals waiting
Speaker 2: for the election. Outcome, or like, help me understand, because
Speaker 2: deals actually are in the pipeline. They're working, and they're working,
Speaker 2: and so I don't know if there's really a cause
Speaker 2: and effect.
Speaker 8: Here or tell me, well, I think I think there
Speaker 8: was a couple of things that happened. Number One, I
Speaker 8: think interest the interest rate market started to stabilize. I
Speaker 8: think given the rate cuts along with the certainty from
Speaker 8: the presidential election, deals really started to move across the
Speaker 8: finish line. I think prior to second you know, even
Speaker 8: second quarter, you know, there was a lot of discussion
Speaker 8: of pipeline, but a lot of those deals just didn't close.
Speaker 8: A lot of hung deals, and that caused a lot
Speaker 8: of uncertainty in terms of hiring and also what could
Speaker 8: potentially impact bonuses. Now we're seeing deals come across the
Speaker 8: finish line. Fee income is coming in, so bonuses are
Speaker 8: much more certain than.
Speaker 2: They had been.
Speaker 8: Bonuses for who though bonuses I would say for deck
Speaker 8: capital markets, I would say that would be up, you know,
Speaker 8: twenty percent, twenty to twenty five percent. You're seeing the
Speaker 8: equity capital markets open up again, m and A. You're
Speaker 8: seeing deals come across the finish line there, and so
Speaker 8: I would expect, you know, a five to ten percent
Speaker 8: bump and bonus for them. We're not talking twenty twenty
Speaker 8: one levels, but definitely a much rosier picture than it
Speaker 8: has been over the past eighteen to twenty four months.
Speaker 2: You know, your team shared with us some notes. So
Speaker 2: the most significant compensation rebounds since the record breaking twenty
Speaker 2: twenty one one? Is that fair?
Speaker 3: Yes?
Speaker 2: That is interesting? Okay, So do you expect it to continue?
Speaker 2: Does twenty twenty five even look more promising?
Speaker 3: Well?
Speaker 8: I think twenty twenty five if you consider the fact
Speaker 8: that the pipelines are really robust, and there's a you know,
Speaker 8: a genuine feeling of momentum, and the interest rate environment
Speaker 8: is stabilized, and that you know, we now are moved
Speaker 8: past some of the presidential uncertainty. So yes, I do
Speaker 8: think twenty twenty five is going to be a lot
Speaker 8: rosier given the certainty of the markets.
Speaker 4: Carol and I talk a lot about The first Milken
Speaker 4: Institute Global conference that we went to post pandemic was
Speaker 4: help me Out, Carol, October.
Speaker 5: Of twenty twenty one.
Speaker 4: Oh yeah, and then we went to another one a
Speaker 4: few months later, because that's when they the spring spring
Speaker 4: is when I'm normally doing it. Private credit has been
Speaker 4: just the talk of that conference the entire time. I
Speaker 4: see you nodding your head, Meredith, what are you s
Speaker 4: in your world? When it comes to private credit.
Speaker 8: Explosive, still explosive, absolutely. I think private credit is much
Speaker 8: more nimble, obviously than than the public debt markets. And
Speaker 8: I think you know it's it's become kind of the
Speaker 8: sweetheart of private equity in a lot of ways. And
Speaker 8: so I think you're going to see continued explosive growth
Speaker 8: in private.
Speaker 4: Credit even if rates go down.
Speaker 8: I think it will take a while for rates to
Speaker 8: go down. And the flexibility of private credit is extremely
Speaker 8: attractive and the innovation behind it. It's really a creative,
Speaker 8: a creative debt product.
Speaker 2: So when it comes to jobs and people looking for jobs,
Speaker 2: is a lot of it private credit. Like, what what
Speaker 2: is going on that you're seeing?
Speaker 6: Right?
Speaker 2: You're involved in placement, right, I'm just curious.
Speaker 8: So there's private credit is really hot right now. But
Speaker 8: investment banking is starting to really pick up. Before or
Speaker 8: in the last eighteen months. I was seeing a lot
Speaker 8: on biotech, biopharma, life sciences, m and A. I'm seeing
Speaker 8: a lot obviously, I was seeing a lot in terms
Speaker 8: of software, fintech, investment, banking. Now we're seeing it expand
Speaker 8: to fig You're seeing some consumer, some industrials. So it's
Speaker 8: really kind of an exciting time. It used to just.
Speaker 4: Yeah, well do you do you do placement for roles
Speaker 4: that are in technology too?
Speaker 8: On the corporate side, corporate development, so not on the
Speaker 8: more on the strategic M and A side than on technology.
Speaker 4: The reason I asked is, Carol did this panel last
Speaker 4: week at the Schwab Impact Conference about all about AI,
Speaker 4: and one question that you said kept coming up was,
Speaker 4: you know, when are these banks going to Well some
Speaker 4: of them are doing it, Schwab is doing it, Jippy
Speaker 4: Morgan is doing it, But do their own versions of
Speaker 4: these chatbots, these oms? And I'm wondering the hiring that's
Speaker 4: happening around there.
Speaker 8: That's interesting, you know. I imagine as they come out,
Speaker 8: the hiring needs will will increase. I haven't seen it,
Speaker 8: but that doesn't mean it's it's not there and happening.
Speaker 8: It just means maybe I'm not privy to that side
Speaker 8: of the market right now.
Speaker 2: Hey, I am curious to within your world, like how
Speaker 2: closely people are watching president like Donald Trump as we
Speaker 2: are like obsessed with the nominees and as he's really
Speaker 2: kind of very quickly laid out what his administration could
Speaker 2: potentially look like if everybody gets confirmed and if it
Speaker 2: all settles in. But how closely in terms of some
Speaker 2: of the things you're laying out is contingent on kind
Speaker 2: of who is in those top spots, whether it's sec
Speaker 2: whether it's you know, the various financial regulatory bottles. We've
Speaker 2: been bodies. I should say, we've been talking a lot
Speaker 2: about Scott Bessett right for Treasury Secretary, and the market
Speaker 2: seem to like that. Help me out here in terms
Speaker 2: of what you are hearing on that front.
Speaker 8: I think a lot of it has to do with
Speaker 8: the regulatory environment and how stringent the regulatory environment is
Speaker 8: going to be going forward, and so anybody the market
Speaker 8: likes anybody who is a little bit less stringent, And
Speaker 8: so I believe that this, you know, I think what
Speaker 8: we're seeing in terms of nominees are people that are
Speaker 8: going to be relatively hands off, Yeah, and the market
Speaker 8: likes that.
Speaker 2: Yeah.
Speaker 8: And so that I'm not saying that, you know, it's
Speaker 8: a wave on through for every merger deal, but definitely
Speaker 8: maybe a little bit easier than it has been in
Speaker 8: the past, or even just with the certainty of of
Speaker 8: who it's going to be. Is giving some solace to
Speaker 8: what's going on.
Speaker 2: In terms of m and A.
Speaker 4: Right, So are you are you hearing a sigh of
Speaker 4: relief from your clients right now or the sense that hey,
Speaker 4: we're going to be able to do a lot more
Speaker 4: over the next four years than we were able to do.
Speaker 8: So I am hearing a lot of you know, we
Speaker 8: right size, you know, the market, the recruiting market was
Speaker 8: kind of a little sluggish obviously, as as banks right
Speaker 8: size their their employee base. And now I'm hearing, hey,
Speaker 8: maybe we should deepen that bench. It's time to kind
Speaker 8: of build the reserves back a little bit because it
Speaker 8: will be busy. So I don't know if it's a
Speaker 8: cyber relief or just a genuine feeling of optimism that
Speaker 8: things are going to be busy. So I get in
Speaker 8: terms of mood and sentiment, I mean love, I feel
Speaker 8: like you have a really good vantage point right in
Speaker 8: terms of the people that you talk with, probably small firms,
Speaker 8: big firms, lots of different firms across the different types
Speaker 8: of you know, financial firms, as we said investment banking
Speaker 8: or whether you're dealing with pe or private credit.
Speaker 5: So is there been like.
Speaker 2: A noticeable shift in kind of mood post election and
Speaker 2: is it is it just the election's over? Is it
Speaker 2: just or is it something more than that?
Speaker 8: I think it's more than that. I what I'm seeing
Speaker 8: is that the bulge racket is coming back into the market.
Speaker 8: As the bulge racket comes back in, and the elite
Speaker 8: boutique starts to pick up a little bit more aggressively
Speaker 8: than just opportunistic hires. Yeah, uh, the middle market starts
Speaker 8: to shake in their boots a little because that's where
Speaker 8: those opportunistic hires and aggressive hires come from. Those middle
Speaker 8: market employees who have really solid close deal experience maybe
Speaker 8: A to A promotes and so all of it is
Speaker 8: just pushing upward a little bit. So this is one
Speaker 8: of the first times that we're seeing people really up
Speaker 8: tier in brand.
Speaker 2: I hadn't.
Speaker 7: I haven't.
Speaker 2: So people moving from like a middle market firm up.
Speaker 8: To uh, yes, or like a tier you know, a
Speaker 8: tier two to a tier one. That's happening a little
Speaker 8: bit more. All the riffs that happened, they've they've kind
Speaker 8: of been cycled through. A lot of those people who
Speaker 8: were really quality qualified people have found jobs, which is
Speaker 8: wonderful news. So if you think you're going to be
Speaker 8: picking up you know, somebody from a bull rock at
Speaker 8: a leap boutique who's been riffed due to kind of
Speaker 8: a sluggish environment, that's not going to happen anymore.
Speaker 4: Geographically where the hire's happening.
Speaker 8: New York, San Francisco, Chicago. I would say Chicago's really
Speaker 8: interesting because of industrials. You'll see in the interest rate.
Speaker 8: Environment going down means that industrial business will go up.
Speaker 2: Charlotte and probably energy.
Speaker 8: A little bit of Houston, Miami Love, Miami Love, Palm Beach,
Speaker 8: a lot of healthcare down there, a lot of healthcare
Speaker 8: hiring down there.
Speaker 2: Okay, no offense, but rift versus layoff. I don't know
Speaker 2: that I reduction in what is it? Reduction in force?
Speaker 2: Is that what it means? Reduction force?
Speaker 8: So you know, I think reduction in forced is typically
Speaker 8: kind of a larger group of people, and it could
Speaker 8: have been enough from wide performance, or it could have
Speaker 8: been a market impact or something like that. Whereas you know.
Speaker 2: I've never liked have you very cool stuff? Very cool stuff?
Speaker 2: Great perspective. Thank you, thanks for coming in. Meredith Dennis
Speaker 2: h She is managing partner at Prospect Rock Partners. Right
Speaker 2: here on Bluebird, I'm brother Marc, a journal How about
Speaker 2: you let me drive?
Speaker 5: No, no, no, no, who's going to drive?
Speaker 9: Honey?
Speaker 1: Please?
Speaker 3: I'll do the riding gravel.
Speaker 2: Let's wat I want to try it.
Speaker 1: It's good question. This is the drive to the globe.
Speaker 6: Think we'll buy a rock?
Speaker 1: Found it? Don on Bluebird Radio.
Speaker 2: All right, everybody, just about eighteen minutes left in today's
Speaker 2: trading session, getting ready to wrap up the Monday trade.
Speaker 2: A shortened holiday schedule this week because of thanksgaming the horse,
Speaker 2: and it just feels like it's a little bit mill up.
Speaker 4: It's gonna be quiet, Yes on Wednesday, I would say so.
Speaker 7: Yeah.
Speaker 4: Friday at the New York Stock Exchange is a fun
Speaker 4: day because everyone brings their kids in. Do you think, yeah,
Speaker 4: Santa shows up. It's like a holiday tradition. It's pretty
Speaker 4: cool because the kids are office school. But the traders
Speaker 4: have to do a half day and there's.
Speaker 5: Plenty of room on the floor.
Speaker 2: There's no traders on the floor anymore.
Speaker 1: That is so true.
Speaker 2: Let's see what our next guest has to say about
Speaker 2: the market environment. Jim Schmiguel is chief investment officer at SEI.
Speaker 2: They've got about one point six trillion in assets under
Speaker 2: manager based in suburban Philly, joining us right here in
Speaker 2: our Bloomberg Interactive Brokers studio in New York City. Hello, Hello, welcome, Welcome,
Speaker 2: How are you.
Speaker 3: I'm doing well, Thanks for having me.
Speaker 8: Great to have you here.
Speaker 2: One point six trillion, that's a lot a lot of
Speaker 2: institutional investors.
Speaker 9: A lot of institutional, a lot of retail. There's a
Speaker 9: lot of AUA in there as well as AUM. So
Speaker 9: we are a bit of a diverse fied financial services firm.
Speaker 9: We do three legs of our school. We do back
Speaker 9: office outsourcing, particularly in the alternative space. Yeah, we have
Speaker 9: a technology platform which does really really well with banks,
Speaker 9: large banks, money center banks, regional banks, and then we
Speaker 9: have our asset management platform as well, which is not
Speaker 9: surprisingly where I find myself the housed nowadays. So in
Speaker 9: an O CIO context, we're dealing with institutional investors dB, D, C,
Speaker 9: E and F but on the retail side as well,
Speaker 9: so delivering model portfolios to registered investment advisors, to regional banks,
Speaker 9: things along.
Speaker 2: Those lines, all right, so what's changed since the election
Speaker 2: for you?
Speaker 9: Well, you know what's what's changed? I guess, you know,
Speaker 9: first and foremost, we're risk on. We're feeling really good
Speaker 9: about that, Our investors are feeling really good about that.
Speaker 2: So what does that mean. Did you guys start moving
Speaker 2: stuff more aggressively into certain areas as a result or
Speaker 2: not yet?
Speaker 6: Not?
Speaker 9: Well, I wouldn't say we've been moving anything post election.
Speaker 9: You know, as as a fiduciary providing advice, you have
Speaker 9: to look past the election. Of course, that's what we did,
Speaker 9: and you know, we looked at the commonalities between all
Speaker 9: the potential outcomes. It was it was pretty obvious early
Speaker 9: on that the tales were kind of being taken out
Speaker 9: of the distribution, particularly from like a democratic sweep perspective.
Speaker 9: So that was one that was pretty unlikely, just given
Speaker 9: the numbers, particularly in the Senate were really kind.
Speaker 3: Of stacked against the Democrats.
Speaker 9: So we knew that there were some outcomes that were
Speaker 9: very very unlikely, focusing on those that were more likely.
Speaker 9: That there was going to be divided government typiclarly, markets
Speaker 9: love divide a government keeps government kind of all, you know,
Speaker 9: kind of busy with itself and kind of not.
Speaker 3: Focused on everything else government.
Speaker 9: Well, that's that's the outcome that you know obviously came
Speaker 9: to bears, not that at all. But the market is
Speaker 9: pretty is pretty happy about it.
Speaker 2: So does it make you nervous that policies will happen
Speaker 2: maybe too quickly without the checks and balances that we've
Speaker 2: had in the past.
Speaker 9: I don't think so, because it's not you know, within
Speaker 9: within the House, within the Senate, you're looking at fairly
Speaker 9: slim majorities, and you know the cabinet that is being
Speaker 9: put together, particularly Friday's news with Becent, I mean, pretty
Speaker 9: pretty favorable result from that kind of you know debate
Speaker 9: over who's going to be the next Treasury sector.
Speaker 4: What does that signal to you about whether Trump makes
Speaker 4: good on the tariff promises that he made during the
Speaker 4: campaign and also on other economic promises, including reducing the
Speaker 4: workforce here in the US by deporting a lot of people.
Speaker 9: Yeah, I think it adds and you're seeing it today.
Speaker 9: I mean, with a ten year training below four point
Speaker 9: three percent four two seven before I walked in here,
Speaker 9: that's a big, big move. So you know, what the
Speaker 9: market is assuming is that you know some of the
Speaker 9: things that that's got has articulated before about the Trump policy,
Speaker 9: really putting it into the context of look, this is
Speaker 9: an opening salvo. You're talking about a big real estate
Speaker 9: investor here who's used to negotiating the market likes that message.
Speaker 9: So in this, in this idea that we're taking kind
Speaker 9: of some of the tales out of the distribution what
Speaker 9: the market feels like to me today, the tale that
Speaker 9: that's being taken out is sixty percent on China and
Speaker 9: ten percent on everything else. That's kind of off the table,
Speaker 9: and it's going to be a little bit more strategic,
Speaker 9: probably not going to be as big as what most
Speaker 9: people think probably will be phased in. And therefore that
Speaker 9: kind of knee jerk kind of view that this is
Speaker 9: going to be this huge inflationary impulse that we're going
Speaker 9: to see in twenty twenty five. I think a lot
Speaker 9: of investors are reassessing that.
Speaker 2: How would you think about history? We were talking with
Speaker 2: our Alexandra Semenova earlier, because the Wall Street strategists are
Speaker 2: putting out, you know, their targets for the S and
Speaker 2: P five hundred. FYI didn't do so well last year?
Speaker 3: Yeah, no recession last year that was the big called
Speaker 3: come back.
Speaker 2: So we're in the third year of a bull market, right.
Speaker 2: It's pretty phenomenal the returns that we've seen, very bullish
Speaker 2: gains this year, last year. The third year historically, at
Speaker 2: least over the past fifty years, has historically been the weakest,
Speaker 2: with single digit average gains and a much larger percentage
Speaker 2: of stock suffering declines. This is some data from BMO.
Speaker 2: I don't know what what do you think will really
Speaker 2: be the catalyst for the market. Will it be historically
Speaker 2: we've had two big years, so maybe it's time for
Speaker 2: a down year. Will it be a new president who, yes,
Speaker 2: he's been in the White House before, but who knows
Speaker 2: what we might get this time around? Will it be
Speaker 2: ultimately the US economy and earnings?
Speaker 1: Like, what is it?
Speaker 9: I think it's rates. I think that's what everyone should
Speaker 9: be kind of focused on. We have a robust economy.
Speaker 9: We're going to get a first view of GDP later
Speaker 9: on this week, we'll get PCE. But look, the reality
Speaker 9: is we're close to three percent on GDP, we're still
Speaker 9: above three percent on inflation, and the Fed's in easy.
Speaker 2: Mode, so we don't need those cuts.
Speaker 3: I don't think we need these cuts now.
Speaker 9: A lot of cuts have already been priced out right,
Speaker 9: so the Fed put themselves in a little bit of
Speaker 9: a bind when they came out of the gate with
Speaker 9: fifty totally unnecessary.
Speaker 3: I think they're locked in for December.
Speaker 9: I think it would be odd from an optical perspective
Speaker 9: to come out with a fifty basis point cut, do
Speaker 9: a twenty five after the election, and then pause. So
Speaker 9: we'll probably get another twenty five basis point reduction in
Speaker 9: December and then start talking about skipping meetings and pausing
Speaker 9: in early December. But the reality is, we're lowering rates,
Speaker 9: were stimulating an already fairly robust economy. We're going to
Speaker 9: get less regulation for sure. We're going to get tariffs
Speaker 9: in some way, shape or form, hopefully not as big
Speaker 9: as what everyone expected. That's the thought, that's what we're
Speaker 9: trading off today. But that doesn't tell me for in
Speaker 9: a quarter in the tenure. That tells me four and
Speaker 9: three quarters on the tenure, And that's what we're looking at.
Speaker 4: We know what the Federal Reserve tells us, and we
Speaker 4: know what Jerome Powell tells us during press conferences. But
Speaker 4: do you buy that they aren't making decisions based on
Speaker 4: potential policies.
Speaker 9: You know, they're they're human. It's a very very tough job.
Speaker 9: I hate to be the critic out there kind of
Speaker 9: throwing stones. It's very very hard to kind of look through.
Speaker 9: I mean, think back to where we were prior to
Speaker 9: that September meeting, people calling for emergency rate cuts. I
Speaker 9: mean crazy, the data can turn so so quickly, which
Speaker 9: in our mind, or my mind, I should say, I
Speaker 9: mean that that almost begs to go slow. That's what
Speaker 9: they should be doing. The fifty was something that just
Speaker 9: did kept me a bit off guard.
Speaker 3: It was it was the last one foreign election.
Speaker 9: You don't want, Yeah, you don't want to appear political
Speaker 9: in any way, shape or form. Do they have it
Speaker 9: in the back of their minds? Now, what might be
Speaker 9: on the horizon given given the red sweep? How could they?
Speaker 9: How can they not? I mean they're they're unfortunately like
Speaker 9: all of us in this business. I mean, they're designed
Speaker 9: to predict the future.
Speaker 4: It's a horrible They also look at the bond market,
Speaker 4: and the bond market is making its own reactions.
Speaker 9: Absolutely, yes, well it's very well behaved today. Yes, so,
Speaker 9: uh you know, and this is look, this is going
Speaker 9: to be the volume is going to be down this week.
Speaker 9: We're going to see some kind of big moves, so
Speaker 9: you have you're going to have to look past this week.
Speaker 2: Obviously, we all start talking about that fiscal deficit that well,
Speaker 2: you know, that's.
Speaker 9: A great thing to talk about, because you know what,
Speaker 9: one of the things that I would always say to
Speaker 9: investors is that doesn't matter who wins, deficits are going higher. Hey,
Speaker 9: I don't know, we're actually we're talking about it. It's
Speaker 9: in the conversation though.
Speaker 2: Jim, thank you so much. I really appreciate it. You're
Speaker 2: listening to Bloomberg.
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