WEBVTT - Morgan Stanley Agreeing to Buy E*Trade for $13B 0:00:00.440 --> 0:00:02.960 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.040 --> 0:00:05.480 Jason Kelly. We're here every day bringing you the latest 0:00:05.519 --> 0:00:09.800 news from the world's of business and finance, plus technology, politics, economics, 0:00:09.880 --> 0:00:13.480 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.480 --> 0:00:16.639 not to mention our hundred journalists and analysts more than 0:00:16.680 --> 0:00:19.280 a hundred and twenty countries. You can download Bloomberg Business 0:00:19.320 --> 0:00:22.200 Week on iTunes, SoundCloud, or Bloomberg dot Com. You can 0:00:22.200 --> 0:00:24.520 also listen to our radio show weekdays at two pm 0:00:24.520 --> 0:00:28.400 Eastern only on Bloomberg Radio. You are listening to Bloomberg 0:00:28.400 --> 0:00:32.400 Business Week Live at n j I T here in Newark, 0:00:32.400 --> 0:00:34.960 New Jersey. Much more to come from here, but also 0:00:35.280 --> 0:00:37.960 a big, big deal that we've got to talk about. Man. 0:00:37.960 --> 0:00:39.839 I saw this, and I wasn't surprised because there's been 0:00:39.880 --> 0:00:43.919 so much consolidation, certainly in the money management area that 0:00:44.600 --> 0:00:47.159 you know, move to be bigger, right, and we keep 0:00:47.200 --> 0:00:50.240 seeing it. So Morgan Stanley diving deeper, specifically into retail 0:00:50.240 --> 0:00:52.600 buying each rade. It was a thirteen billion dollar deal, 0:00:52.680 --> 0:00:55.480 So uh yeah, this certainly got our our attention, right. 0:00:55.520 --> 0:00:58.360 Channali Bossa caught up with James Gorman, cy of Morgan 0:00:58.480 --> 0:01:01.760 Stanley to get his We're gonna hear from her and 0:01:01.880 --> 0:01:03.840 from him later on, and we're also gonna hear about 0:01:04.000 --> 0:01:06.840 um the aftermath of last night's Democratic debate heated. You 0:01:06.840 --> 0:01:09.200 could use a lot of words, sparks flying. Uh, So 0:01:09.319 --> 0:01:11.960 we're gonna get into that. It's a blood bath. I 0:01:12.000 --> 0:01:14.360 think it's one way I've heard it described. We're gonna 0:01:14.400 --> 0:01:17.479 do that, and then back here, we're gonna have the president, 0:01:17.560 --> 0:01:20.520 our host join us talk about what's going on in 0:01:20.560 --> 0:01:22.720 the world of higher education, also the future of work. 0:01:22.760 --> 0:01:24.200 That's sort of the theme that we're going to be 0:01:24.640 --> 0:01:26.880 going forward today. President of n j I t CEO 0:01:26.959 --> 0:01:29.240 of top Coder, and also the key executives are some 0:01:29.360 --> 0:01:32.240 key executives I should say at Nokia, Siemens and Mark 0:01:32.319 --> 0:01:35.240 and yes, you're right, Jason. It's all about focusing on science, innovation, 0:01:35.360 --> 0:01:38.600 entrepreneurship when it comes to startups, industry, and then what 0:01:38.640 --> 0:01:40.880 does it mean for workers out there? So looking forward 0:01:40.880 --> 0:01:43.119 to that. All right, let's set the Business week agenda. 0:01:43.280 --> 0:01:45.240 In the meantime, a lot to talk about in the 0:01:45.319 --> 0:01:47.680 markets today. We talked about the deals and you also 0:01:47.760 --> 0:01:50.440 heard the numbers from Charlie Pellett on the Trade Gina 0:01:50.480 --> 0:01:53.920 Martin Adams there in our Bloomberg Interactor broker studio. She 0:01:54.000 --> 0:01:57.600 of course is the chief equity strategist for Bloomberg Intelligence, 0:01:57.840 --> 0:01:59.760 and she's there with Dave Wilson, our Stocks editor of 0:01:59.800 --> 0:02:02.720 the throw the chart in Stock of the Day, Gina, 0:02:02.760 --> 0:02:05.120 I want to start with you, what's the one thing 0:02:05.120 --> 0:02:08.960 investors are thinking most about today as they try and 0:02:09.000 --> 0:02:11.280 assess what's going on in the market. You know, I 0:02:11.320 --> 0:02:13.160 think a couple of issues have really come up over 0:02:13.200 --> 0:02:15.360 the last couple of weeks that are still weighing on 0:02:15.400 --> 0:02:19.919 investors minds. The first is is tech overbought the market? 0:02:19.960 --> 0:02:22.160 So much on the markets concentrated and gains have been 0:02:22.160 --> 0:02:25.119 concentrated in the tech sector. In particular, the biggest stocks 0:02:25.240 --> 0:02:28.560 in the tech sector, you know, Microsoft and Apple now 0:02:28.600 --> 0:02:31.560 together worth more than the entire Russell two thousand combined. 0:02:31.680 --> 0:02:33.679 Has some investors kind of running for the hills and 0:02:33.680 --> 0:02:36.280 a little scared of tech. The second thing I'm hearing 0:02:36.320 --> 0:02:40.679 about is kind of this underlying market condition where low 0:02:40.760 --> 0:02:43.960 volatility stocks are actually still outperforming. You know why is 0:02:44.080 --> 0:02:47.800 utility is the only sector that's outperforming with tech in 0:02:47.840 --> 0:02:50.080 such a strong manner over the course of this year. 0:02:50.160 --> 0:02:52.520 And then lastly is when are we going to buy 0:02:52.520 --> 0:02:54.280 the dip and energy? And this is what we focused 0:02:54.280 --> 0:02:56.079 a lot of our research on this week is kind 0:02:56.120 --> 0:03:00.280 of you know, is the energy sector actually cheap? Is 0:03:00.280 --> 0:03:02.400 it all about E? S G? Where what do the 0:03:02.440 --> 0:03:05.240 multiples say about energy? And can you dip into this 0:03:05.400 --> 0:03:09.839 extremely underloved space. Well, and I love what you said 0:03:09.880 --> 0:03:12.320 about energy. I saw that research, Gina, and you're kind 0:03:12.400 --> 0:03:14.160 enough to share it with us. But you know, maybe 0:03:14.200 --> 0:03:17.080 that the energy sector isn't as cheap as valuation suggest right, 0:03:17.120 --> 0:03:20.040 just because something is cheap, maybe there's some really strong 0:03:20.120 --> 0:03:23.959 fundamental reasons behind it, which maybe means it isn't still 0:03:24.000 --> 0:03:26.520 a buy. Yeah, it's I mean, it's kind of fascinating, right, 0:03:26.520 --> 0:03:30.800 because investors have pointed to valuation ratios being now nearly 0:03:30.840 --> 0:03:33.760 a standard deviation below five year average as one of 0:03:33.760 --> 0:03:35.280 the reasons why you want to look at the space 0:03:35.320 --> 0:03:37.400 as potentially deep value. But when you look at the 0:03:37.760 --> 0:03:42.400 the energy sector's history, the counter cyclicality of the pe 0:03:42.520 --> 0:03:45.480 ratio for energy actually suggests that it's not cheap. And 0:03:45.480 --> 0:03:47.640 where you want to buy energy is when it's supposedly 0:03:47.680 --> 0:03:51.640 expensive based upon valuation multiples, So that argument just doesn't 0:03:51.640 --> 0:03:54.080 work as a catalyst. I think the other thing you 0:03:54.120 --> 0:03:57.200 want to watch is, you know, frankly, even though energy 0:03:57.360 --> 0:03:59.840 looks relatively cheap in comparison to the rest of the end, 0:04:00.160 --> 0:04:02.120 it should be cheap with such a low r o E. 0:04:02.280 --> 0:04:04.440 So even if you exclude the counter cyclicality in the 0:04:04.480 --> 0:04:06.840 earning stream and you think about things like what's the 0:04:06.880 --> 0:04:09.280 price to book for the energy space, Well, it's at 0:04:09.280 --> 0:04:12.320 about one and a half times earnings. Okay, that seems 0:04:12.360 --> 0:04:14.680 cheap relative to the SMP, which trades at a price 0:04:14.760 --> 0:04:18.039 to book closer to three and a half. But considering 0:04:18.040 --> 0:04:20.400 the low return on equity you get out of energy stocks, 0:04:20.839 --> 0:04:23.919 price the book should be one. So you know, I 0:04:23.960 --> 0:04:25.880 just think you really want to dig into the data 0:04:25.920 --> 0:04:28.080 a little bit more carefully. Yeah, it's only three and 0:04:28.120 --> 0:04:30.120 a half percent of the SMP five DRED. It's been 0:04:30.120 --> 0:04:33.919 on the slope of hope, just constant negative price performance, 0:04:33.960 --> 0:04:37.000 eventually at may bottom. But just saying the stocks are 0:04:37.080 --> 0:04:41.560 cheap probably isn't the catalyst you need. Alright, slope of hope. 0:04:41.560 --> 0:04:44.920 I feel like that's a band that Dave Wilson probably 0:04:44.920 --> 0:04:47.200 has some vinyl from that he's gonna play this weekend. 0:04:47.480 --> 0:04:49.560 Dave Wilson, come on in here. What are you seeing 0:04:49.560 --> 0:04:51.479 in the trade that you feel like should be top 0:04:51.480 --> 0:04:54.560 of mind? Well, really, it's kind of a takeover Thursday, 0:04:54.800 --> 0:04:56.839 you can put it that way. I mean each trade 0:04:57.080 --> 0:04:59.119 very much front and center as far as that goes. 0:04:59.760 --> 0:05:02.119 You got the requisite decline and the shares in Morgan 0:05:02.240 --> 0:05:04.640 Stanley in response to their deal, and then you look 0:05:04.680 --> 0:05:07.440 beyond that, I mean you see Marathon Petroleum up four percent. 0:05:08.000 --> 0:05:09.960 We have people familiar with the matter telling us that 0:05:09.960 --> 0:05:12.159 there are now exclusive talks with the owner of the 0:05:12.200 --> 0:05:16.359 convenience store chain seven eleven about the potential sale of 0:05:16.480 --> 0:05:20.000 the gas stations under the Speedway name for about twenty 0:05:20.000 --> 0:05:22.640 two billion dollars. So that's definitely proven to be a 0:05:22.680 --> 0:05:25.160 plus for that stock. And then there's l Brands, I mean, 0:05:25.200 --> 0:05:28.960 which is a fascinating content himself. Yeah, I mean, selling 0:05:29.040 --> 0:05:32.640 Victoria's secret at stake to the private equity firm Sycamore 0:05:32.720 --> 0:05:35.840 Partners in value at just one point one billion dollars, 0:05:35.839 --> 0:05:39.120 and it's a company that even today has about six 0:05:39.160 --> 0:05:41.400 and a half billion dollars in value, which just tells 0:05:41.440 --> 0:05:45.120 you how much things are kind of eroded a Victoria's secret, 0:05:45.120 --> 0:05:47.120 at least in the minds of l brands. So they 0:05:47.120 --> 0:05:49.360 make the deal in the stock falls, you know, which 0:05:49.440 --> 0:05:52.120 is really telling as well. So you know, we've got 0:05:52.160 --> 0:05:54.240 the good and the bed and then you can throw in, 0:05:54.480 --> 0:05:57.080 you know, the first Starney's report out of Viacoms CBS 0:05:57.120 --> 0:05:59.359 since their deal got done in December, and the shares 0:05:59.360 --> 0:06:07.200 are down those numbers from the fourth quarter worst performing. Yeah, hey, Gina, 0:06:07.240 --> 0:06:08.880 what does it mean when you're seeing still, you know, 0:06:08.960 --> 0:06:11.559 deal flow happening right M and A activity. I always 0:06:11.560 --> 0:06:13.880 trying to, you know, balance that out with what we're 0:06:13.880 --> 0:06:15.920 seeing in kind of market activity. Does it say where 0:06:15.960 --> 0:06:17.599 we are in this market cycle? Does it tell us 0:06:17.640 --> 0:06:20.120 about the health of the market it side to you, 0:06:20.120 --> 0:06:22.640 you know, I think that uh M and A continuing 0:06:22.720 --> 0:06:26.040 is a combination of very very low rates which allow 0:06:26.120 --> 0:06:29.080 access to capital, plenty of cash still sitting on corporate 0:06:29.080 --> 0:06:33.400 balance sheets, and an intensely competitive environment where companies are 0:06:34.000 --> 0:06:37.159 finding it more difficult to grow organically and looking for 0:06:37.200 --> 0:06:39.839 an opportunity to buy growth, to tack on growth, to 0:06:39.960 --> 0:06:43.520 find some higher growth areas of business. Simply because the 0:06:43.560 --> 0:06:48.680 economic environment is very slow. It's not indicative necessarily of 0:06:48.200 --> 0:06:51.280 what where equity prices are going to head. It usually 0:06:51.320 --> 0:06:53.479 tends em and it usually tends to improve as the 0:06:53.520 --> 0:06:56.080 cycle progresses and peak at the peak of the cycle. 0:06:56.680 --> 0:06:58.640 But you know, as we all know, predicting when the 0:06:58.680 --> 0:07:01.960 peak of that equity mark its cycle is is notoriously difficult. 0:07:02.040 --> 0:07:04.920 So I'd just say it's a reflection of the competitive landscape, 0:07:04.960 --> 0:07:07.800 slow growth and very very easy access to capital more 0:07:07.839 --> 0:07:12.000 than anything else. Alright, Our thanks to both of you. 0:07:12.120 --> 0:07:14.920 Dave Wilson, stocks editor for Bloomberg, you'll be back with 0:07:15.040 --> 0:07:17.440 us at the bottom of the three o'clock hour to 0:07:17.440 --> 0:07:19.720 talk about your chart of the day. Our thanks to 0:07:19.720 --> 0:07:23.240 to Gina Martin Adams, chief equity strategist for Bloomberg Intelligence, 0:07:24.400 --> 0:07:29.280 writ down among presentians, coffee beans grow by, So that 0:07:29.480 --> 0:07:32.240 we are going to talk about coffee probably taking for granted, 0:07:32.320 --> 0:07:34.400 just assume it's going to be there, But there's a 0:07:34.400 --> 0:07:37.000 lot that goes into it. And this story that's in 0:07:37.040 --> 0:07:41.119 Bloomberg Business Week is about crop software that's actually behind 0:07:41.200 --> 0:07:43.160 that daily cup of coffee. Let's get into the story. 0:07:43.240 --> 0:07:46.320 Jillian Goodman is an editor at Bloomberg Green. She joins 0:07:46.440 --> 0:07:49.360 us along with Jim Allie, whose deputy editor of Bloomberg 0:07:49.360 --> 0:07:51.960 Business Week. Both of them back in our Bloomberg Interactive 0:07:51.960 --> 0:07:57.080 Broker studio in New York. Love this story. Fascinating story. Um, Jim, 0:07:57.160 --> 0:07:59.640 let's start with you. I don't know how did the 0:07:59.640 --> 0:08:03.280 story come to you? I think it was came directly 0:08:03.320 --> 0:08:06.800 from Amanda. Amanda Little, the writer of the piece. She 0:08:07.520 --> 0:08:10.280 published a book last year called The Fate of Food, 0:08:10.320 --> 0:08:12.080 I think, the Future of Food, and so she's done 0:08:12.080 --> 0:08:15.480 a lot of yes, So she's done a lot of 0:08:15.880 --> 0:08:18.560 reporting and writing about these things that are trying to 0:08:18.680 --> 0:08:21.200 envision in Okay, you know all of the variables that 0:08:21.240 --> 0:08:24.120 are affecting our global food supply, be it you know, 0:08:24.200 --> 0:08:26.720 climate change or trade pressures and whatnot. You know, how 0:08:26.760 --> 0:08:29.920 is that going to change the way we eat or drink? 0:08:30.080 --> 0:08:34.640 And so, why why is coffee so interesting to you guys, Jillian? So, 0:08:34.720 --> 0:08:37.600 coffee is actually a really finicky crop, or at least 0:08:37.600 --> 0:08:40.600 the kind of coffee that that goes for a higher 0:08:40.640 --> 0:08:44.160 price that producers need to sell to make a living. Um, 0:08:44.200 --> 0:08:46.880 it grows only in a very particular region and requires 0:08:46.960 --> 0:08:49.840 very particular conditions, and it's not the kind of thing 0:08:49.920 --> 0:08:53.040 where you know, if that regions suddenly becomes inhospitable, they 0:08:53.040 --> 0:08:55.920 can just move. Really, the only place they can move 0:08:56.000 --> 0:08:58.520 is higher up these mountains with that that have the 0:08:58.559 --> 0:09:01.000 soil that these things grow in, and so eventually they 0:09:01.000 --> 0:09:05.079 will just run out of dirt. These are the kind 0:09:05.080 --> 0:09:06.880 of stories I love that Business Week does, right because 0:09:06.880 --> 0:09:09.320 who knew this was going on? Jim, come on in 0:09:09.320 --> 0:09:11.760 on this because it's actually a software company, right that 0:09:11.880 --> 0:09:14.199 is helping out some of these growers. Yeah, I mean 0:09:14.760 --> 0:09:16.840 one of the you asked what was so appealing about 0:09:16.840 --> 0:09:18.640 the story, one of the things that really attracted me 0:09:18.679 --> 0:09:23.320 about it was the it's a it's an incredibly complicated system. 0:09:23.360 --> 0:09:26.480 I mean, it's a simple outcome having a cup of coffee, 0:09:26.520 --> 0:09:31.040 but it's it's just uh, what was it coffee being 0:09:31.120 --> 0:09:35.360 changed his hands like six times? Preposterous. Yeah, it's really 0:09:35.400 --> 0:09:39.920 really complicated. And I love stories that that show that 0:09:39.920 --> 0:09:42.360 that basically provides some clarity and a little bit of 0:09:42.360 --> 0:09:46.719 simplicity and on something that's complicated. Well, and Jim, it's 0:09:46.720 --> 0:09:49.120 funny you know reading this, like even just reading sort 0:09:49.160 --> 0:09:51.360 of the top of it, it takes me back to 0:09:51.640 --> 0:09:53.559 like the days when you and I first worked together 0:09:53.600 --> 0:09:55.960 at eat company now right, it's like, oh, there's this 0:09:56.040 --> 0:09:59.960 cool company called Cropster, and like back in those days, 0:10:00.120 --> 0:10:02.520 is it would have been this like overly simple thing 0:10:02.559 --> 0:10:05.640 where you're like, okay, yeah, like cool name. But this is, 0:10:05.760 --> 0:10:09.320 as you say, like really complicated. This feels like a 0:10:09.480 --> 0:10:13.520 really good use of software because it does, to your point, 0:10:13.760 --> 0:10:18.319 sort of break down this very complex thing. How does 0:10:18.400 --> 0:10:21.000 this fit into the sort of broader tech landscape that 0:10:21.040 --> 0:10:23.000 I feel like, you know, really well, it's coffee as 0:10:23.000 --> 0:10:28.480 a platform, you know, it's uh, I think I think 0:10:30.720 --> 0:10:34.160 it's taking They're basically doing the full stack, you know, 0:10:34.240 --> 0:10:37.480 from the from the from the beans themselves, the plants themselves, 0:10:37.520 --> 0:10:39.240 all the way up to the roasters. Well that's one 0:10:39.280 --> 0:10:41.520 of the other really interesting things about this company is 0:10:41.559 --> 0:10:43.800 that it started on the coffee producer side to try 0:10:43.800 --> 0:10:46.480 and help them, you know, make money from their beans, 0:10:46.480 --> 0:10:49.040 but where they've really found their revenue is on the 0:10:49.120 --> 0:10:53.120 roaster side. They've also developed the software that helps roasters 0:10:53.160 --> 0:10:57.040 really on a granular level, control the roast of their beans, 0:10:57.040 --> 0:10:59.600 which is why suddenly your neighborhood coffee shop is roasting 0:10:59.640 --> 0:11:01.720 their own means where you know, it used to be 0:11:01.760 --> 0:11:04.480 that they couldn't have the capability. Also in this case, 0:11:04.520 --> 0:11:09.400 I think it's but it's not a oh I was 0:11:09.440 --> 0:11:12.959 going to say. The the technology also in some ways 0:11:13.080 --> 0:11:15.680 is could end up as a kind of an equalizer, 0:11:16.040 --> 0:11:18.920 basically shift some of the power back to the growers themselves, 0:11:18.920 --> 0:11:23.840 which which I think is interesting and important. Well, and 0:11:23.960 --> 0:11:26.320 you know, really important too is global food supplies. Right, 0:11:26.360 --> 0:11:30.280 And it's not just maybe perhaps with cropster. You know, um, 0:11:30.320 --> 0:11:33.560 it's not just about coffee guys, right, Jim or or Jillian, 0:11:33.600 --> 0:11:35.120 either of you can take this. I mean it should 0:11:36.520 --> 0:11:42.400 chocolate eventually. Staples, right, he really has a global vision 0:11:42.520 --> 0:11:45.040 for this because you know what's happening in the coffee 0:11:45.040 --> 0:11:49.000 belt where the climate is a little more finicky, It's 0:11:49.080 --> 0:11:51.319 not just there, It's happening all over the world. And 0:11:51.400 --> 0:11:56.000 so eventually, you know, producers will need to adapt and 0:11:56.040 --> 0:11:58.599 will need to find new markets for their product, and 0:11:59.160 --> 0:12:00.920 and on the other side, people will need to find 0:12:00.920 --> 0:12:03.480 new growers. You know. One other thing that another thing 0:12:03.480 --> 0:12:06.800 that really fascinated me about this is it's kind of 0:12:06.800 --> 0:12:09.080 the software has sort of become a secret ingredient for 0:12:09.120 --> 0:12:11.280 pretty much everybody at a certain level of the industry. 0:12:11.360 --> 0:12:14.800 I mean, every roaster uses this. I had no idea, 0:12:14.960 --> 0:12:17.439 and I love pieces that reveal something about how the 0:12:17.480 --> 0:12:20.960 world really works. So what does the software actually do, like, 0:12:21.040 --> 0:12:23.040 how does it operate? What does it do for for 0:12:23.080 --> 0:12:26.920 a grower? So for a grower it allows them to well, 0:12:26.960 --> 0:12:31.480 it also encourages them to track certain data points about 0:12:31.520 --> 0:12:34.960 their crop that roasters are going to be looking for. 0:12:35.040 --> 0:12:38.320 So historically this has all been very low tech. I 0:12:38.320 --> 0:12:40.520 think we have a quote in the piece someone talking 0:12:40.520 --> 0:12:44.120 about how people didn't even measure the moisture content of 0:12:44.160 --> 0:12:46.360 the beans when they were deciding okay, are these ready 0:12:46.360 --> 0:12:48.560 to be shipped out? They just took a bite, you know, 0:12:48.679 --> 0:12:51.440 there were no sensors involved. And that's the kind of 0:12:51.480 --> 0:12:54.720 thing that will that allows you to charge more for 0:12:54.800 --> 0:12:57.600 your product. And so it's everything from you know, the 0:12:57.640 --> 0:12:59.920 moisture content to the beans, to the content of the soil, 0:13:00.000 --> 0:13:03.480 will to how long have they dried before they go 0:13:03.520 --> 0:13:06.520 out to roasters and all of that just allows them 0:13:06.559 --> 0:13:10.280 to make a better sales pitch. Well, the other thing 0:13:10.280 --> 0:13:12.520 we point out, which I feel like anyone who's listening 0:13:12.559 --> 0:13:16.120 and watching will will really recognize, is this notion of 0:13:16.400 --> 0:13:19.000 sort of the waves of coffee and and Amanda do 0:13:19.000 --> 0:13:21.520 Iss a great job of describing first wave of big 0:13:21.559 --> 0:13:24.280 brand that's the Maxwell House and Folders, the second wave 0:13:24.360 --> 0:13:27.480 Starbucks and Pete, and then you know this third wave 0:13:27.559 --> 0:13:29.959 that we're really in the midst of, and it it 0:13:30.000 --> 0:13:33.839 plays much broader. And Jim, I know, you uh and 0:13:33.920 --> 0:13:36.400 Jillian both see this. You know, this idea of a 0:13:36.720 --> 0:13:40.640 boutique uh sort of culture where we really care about 0:13:40.640 --> 0:13:43.560 where it's coming from. We want to know a lot 0:13:43.559 --> 0:13:48.520 more transparently about what we're eating and wearing and all 0:13:48.559 --> 0:13:50.320 of those different things. Right. It's also coming out of 0:13:50.320 --> 0:13:53.000 time right where climate change is threatening. You know, so 0:13:53.040 --> 0:13:57.160 many different crops around the world, right, and so you know, potentially, Jillian, 0:13:57.200 --> 0:13:59.800 this could be something that could help with that. Absolutely. 0:14:00.080 --> 0:14:03.360 Well into Jim's point, a lot of the really expensive coffee, 0:14:04.280 --> 0:14:06.280 those proceeds don't go back to the growers, they go 0:14:06.320 --> 0:14:10.800 back to all of those six people and supply. Yeah. Yeah, 0:14:10.840 --> 0:14:12.480 it's a really good point. Well, it's a great story. 0:14:12.480 --> 0:14:15.280 Thank you both for joining us. Jillian Goodman is an 0:14:15.360 --> 0:14:17.760 editor over at Bloomberg Green. She was in her Bloomberg 0:14:17.800 --> 0:14:21.520 Interactor Broker studio alongside the great Jim Ailey, Deputy editor 0:14:21.680 --> 0:14:25.880 of Bloomberg Business Week. Who I know. Love the fact 0:14:25.920 --> 0:14:27.840 that I referenced back to E Company. Now that's where 0:14:27.840 --> 0:14:30.080 he and I first met as a startup magazine back 0:14:30.120 --> 0:14:34.360 in the day. Best will back me up on this 0:14:34.560 --> 0:14:38.120 best startup party ever pack Bell Park, the Bear Naked 0:14:38.200 --> 0:14:41.480 Ladies play. Come on, it was the best. Yeah, you 0:14:42.200 --> 0:14:45.240 still have the hat? You still have that. I still 0:14:45.280 --> 0:14:48.160 have the I don't have the free palm pilots that 0:14:48.200 --> 0:14:54.200 we handed out, but I do have the pilots. Yeah. 0:14:54.360 --> 0:14:56.560 It was quite I still have a picture of me 0:14:56.640 --> 0:15:00.640 at home plate anyway. All Right, all right, appreciate it, 0:15:00.920 --> 0:15:05.080 Jamally and Jillian goodmanute. This is Bloomberg Business Week with 0:15:05.160 --> 0:15:09.400 Carol Masser and Jason Kelly on Bloomberg Radio. Some deal 0:15:09.480 --> 0:15:12.440 news though. Today Morgan Stanley agreed to buy a discount brokerage, 0:15:12.440 --> 0:15:16.160 E Trade Financial, a thirteen billion dollar deal really pushing 0:15:16.240 --> 0:15:20.080 further into the retail market. It's biggest acquisition for Morgan 0:15:20.160 --> 0:15:24.160 Stanley since the financial crisis. Earlier are Schnelli Bossa caught 0:15:24.240 --> 0:15:28.360 up with Jim Gorman, of Chairman and CEO of Morgan Stanley. 0:15:28.360 --> 0:15:30.440 Here's what he had to say. I've always felt that 0:15:30.520 --> 0:15:33.920 the trade was an incredible brand and incredible company, had 0:15:34.000 --> 0:15:37.320 great technology. We're clearly doing stuff on the digital side 0:15:37.680 --> 0:15:39.760 at a pace that was ahead of where we were. 0:15:40.080 --> 0:15:42.200 So we had that constant debate of sort of build 0:15:42.320 --> 0:15:45.040 verses by, and you know, we felt we're in the 0:15:45.080 --> 0:15:47.040 condition to make a bold move and we went for it. 0:15:48.960 --> 0:15:51.600 James Gorman, of course, the chairman and CEO of sometimes 0:15:51.640 --> 0:15:54.400 you call him Jim Jim. I didn't know where that 0:15:54.480 --> 0:15:57.160 came from. Jay Dog. Yeah, we've talked with him, spent 0:15:57.240 --> 0:16:00.320 some time with him. Also spent some time with him. 0:16:00.320 --> 0:16:02.240 Of course she did the interview this morning. I'm calling 0:16:02.320 --> 0:16:04.080 him Jim. I don't know where it came from. Shinnally, 0:16:04.400 --> 0:16:06.440 she's Wall Street reporter at Bloomberg News. She's back in 0:16:06.440 --> 0:16:10.360 her interactive broker studio. I'm blaming the cold medicine today. Um, 0:16:10.400 --> 0:16:13.240 so this was a big deal. We're seeing, we continue 0:16:13.240 --> 0:16:17.120 to see consolidation within this industry. Huge, huge, huge. You know, 0:16:17.200 --> 0:16:19.320 I asked him was the biggest deal? It was just 0:16:19.360 --> 0:16:21.600 the biggest day of his life. He said, you know, 0:16:21.680 --> 0:16:25.120 it was this and Smith Barney back in two thousand 0:16:25.200 --> 0:16:29.160 and nine, and we have not seen a US bank 0:16:29.360 --> 0:16:31.600 make a deal like this as you know, since the 0:16:31.640 --> 0:16:35.440 financial crisis, everyone on Wall Street of scratching their heads. 0:16:35.600 --> 0:16:37.920 Some of them see the rationale immediately, and some of 0:16:37.960 --> 0:16:41.960 them are still wondering whether this is the right thing. Yeah, 0:16:41.960 --> 0:16:45.000 so laid that out for us. Shinali like, why does 0:16:45.000 --> 0:16:47.640 it make sense? And why are people For those who 0:16:47.640 --> 0:16:49.280 say yeah, a good deal, what are they saying? And 0:16:49.320 --> 0:16:51.160 for those who are like what what do they saying? 0:16:51.280 --> 0:16:54.000 So on one hand, he wants to build a full 0:16:54.040 --> 0:16:57.880 scale digital bank. For many years now Morgan's they only 0:16:57.880 --> 0:17:02.720 had a wealth manager with many trilli of dollars under management. However, 0:17:03.120 --> 0:17:06.000 what they weren't doing was making that into a full 0:17:06.000 --> 0:17:09.240 scale bank. They weren't doing checkings and savings and a 0:17:09.320 --> 0:17:11.480 whole lot of lending. They wanted to do more lending. 0:17:11.560 --> 0:17:14.639 But now they have that opportunity. Now they're also going 0:17:14.720 --> 0:17:18.080 more downstream in terms of what their clientele looks like. 0:17:18.359 --> 0:17:21.720 They used to only manage wealthy and very very very 0:17:21.760 --> 0:17:27.000 wealthy individuals money, and now they are really trying to 0:17:27.080 --> 0:17:31.960 become Bank of America. But for the people who are 0:17:31.800 --> 0:17:35.119 more and that and that, Oh sorry, well I was 0:17:35.160 --> 0:17:36.960 just gonna say, let's let's let's go down that road. 0:17:37.000 --> 0:17:39.560 For a second. I mean that that really struck me too, 0:17:39.640 --> 0:17:42.239 is that, like this is trying to be more like 0:17:42.320 --> 0:17:46.040 B of A than say Goldman, Right, So this is 0:17:46.160 --> 0:17:48.359 that that is the one thing. Is this an offensive 0:17:48.560 --> 0:17:50.959 or is it a defensive deal? Because you do have 0:17:51.000 --> 0:17:55.320 Golden Facts that also wants to be a big wealth manager, 0:17:55.400 --> 0:17:58.119 a big consumer bank. So you can do that yourself 0:17:58.280 --> 0:18:02.040 by doing a partnership with Apple, for example, or you 0:18:02.040 --> 0:18:06.720 can market fifteen billion dollar deal. So Mike Mayo Wells 0:18:06.720 --> 0:18:10.920 Fargo called the deal value destroying, saying that with an 0:18:11.080 --> 0:18:14.360 estimated three point one billion dollar stock premium, you're only 0:18:14.359 --> 0:18:16.240 going to get one point six billion dollars of savings. 0:18:16.680 --> 0:18:20.320 So financially doesn't make sense. It's just wrote a lot 0:18:20.320 --> 0:18:22.320 of value when you look at Morgan Stanley stock today 0:18:22.320 --> 0:18:24.200 because investors, I mean, I know it's been a lower 0:18:24.240 --> 0:18:27.240 market overall, but investors certainly weighing in and they're not happy. 0:18:27.320 --> 0:18:28.960 So what is it going to be? Key? I always 0:18:28.960 --> 0:18:31.080 thinking a deal like this when there's so much skepticism 0:18:31.080 --> 0:18:33.920 out there, shinale, what will be kind of I don't know. 0:18:33.920 --> 0:18:36.399 If Mike laid out some metrics that he wants to 0:18:36.480 --> 0:18:38.880 see as a result of this combination in six months 0:18:38.960 --> 0:18:40.679 or a year. What do we have to see to 0:18:40.720 --> 0:18:42.840 know that it's working well? This is the thing. Morgan 0:18:42.920 --> 0:18:44.880 Stanley even told you it's going to take some time. 0:18:44.920 --> 0:18:47.399 Morgan Stanley said it will take three years before this 0:18:47.400 --> 0:18:49.960 deal is a creative which is why on the face 0:18:50.000 --> 0:18:53.399 of it, immediately it's really hard to say, hey, I 0:18:53.440 --> 0:18:56.280 love this deal. And also they said they were wanting 0:18:56.280 --> 0:18:58.320 to stick to their buy backs. But this is a 0:18:58.400 --> 0:19:01.159 very expensive deal. So over the longer term, over the 0:19:01.160 --> 0:19:03.440 next couple of years, how much money can they return 0:19:03.520 --> 0:19:05.919 to shareholders even if this deal makes a lot of sense. 0:19:07.880 --> 0:19:12.600 I love Shrine Natarajans our colleague. That's trending so high 0:19:12.680 --> 0:19:17.200 on the most red list right now, Shinali where uh 0:19:17.200 --> 0:19:19.520 he talks about you know, Morgan Stanley betting E trade 0:19:19.520 --> 0:19:23.760 will dodge the Dean Witter jokes um and and I'm 0:19:23.760 --> 0:19:25.800 just gonna read the lead. Morgan Stanley's murder of quarter 0:19:25.840 --> 0:19:28.240 century ago with a brokerage that had branches and sears 0:19:28.600 --> 0:19:31.199 was met with sneers. Wall Streeter's joked it was a 0:19:31.200 --> 0:19:35.280 deal combining white shoes with white socks. I mean, that's 0:19:35.400 --> 0:19:38.159 kind of amazing in a way. Right. Do you remember 0:19:38.200 --> 0:19:40.280 they used to call it stocks and socks because they 0:19:40.280 --> 0:19:44.560 would try to sell stocks and sears branches. Uh. Yeah, 0:19:44.560 --> 0:19:46.440 it didn't really work that well, did it? And so 0:19:46.600 --> 0:19:49.359 will it work this time around? I remember, just a 0:19:49.359 --> 0:19:51.639 couple of months ago, I was sitting at a lunch 0:19:51.760 --> 0:19:53.879 with the former Morgan Stanley in Weston banker, one of 0:19:53.880 --> 0:19:56.879 the top bankers in the world, and he started joking 0:19:56.880 --> 0:19:59.320 because you know what makes Morgan Stanley so successful? And 0:19:59.359 --> 0:20:02.080 I say what? And he goes the stock brokers, he 0:20:02.119 --> 0:20:05.240 goes all those people around America that are pedaling with stocks, 0:20:05.720 --> 0:20:08.720 and you know that that is a tough one because 0:20:08.840 --> 0:20:11.040 you remember when Morgan Stanley, if you think about it, 0:20:11.040 --> 0:20:14.360 it's also one of the world's top investment banks. Gorman 0:20:14.440 --> 0:20:16.800 said he owns a pair of jeans. He's not worried 0:20:16.840 --> 0:20:20.240