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Speaker 1: And I'm pleased to say here on Bloomberg Surveillance Technic.

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Speaker 1: The CEO of Morgan Stanley joined us. Good afternoon, Ted,

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Speaker 1: thrilled to be here. How are you, sir? I did

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Speaker 1: this week? James Quincy of Coca Cuda. I gave away

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Speaker 1: the first question before the commercial break, and I'm not

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Speaker 1: sure if you heard it. So we're going to go

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Speaker 1: there and maybe you've got times prepped. Okay, what does

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Speaker 1: day one look like? You know you're taking over from

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Speaker 1: James Gorman January one, you kick him out of the

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Speaker 1: office and putting the photos down. How does it work?

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Speaker 2: Well, first of all, Jeans is still the boss. And

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Speaker 2: it's a great question. Do you remember that Robert Red

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Speaker 2: from movie the candidate go on and he gets elected and.

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Speaker 3: He says, now what, there's an element of that. Now

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Speaker 3: it feels like that's a well response. I mean, that's honest.

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Speaker 2: You know, it's like going back to school thirty one

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Speaker 2: years at the firm that I love.

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Speaker 3: They hired me out of college, they took me.

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Speaker 2: Back after business school, and now I get to represent

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Speaker 2: the team. You know, it's a HiT's an inspiring moment.

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Speaker 2: You know, you're carrying the culture of a police that's

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Speaker 2: been around for almost ninety years and did you guys

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Speaker 2: know a place that looked at the abyss six dollars or.

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Speaker 3: Seventy one cents in October?

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Speaker 4: Oh?

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Speaker 3: Wait, and now here we are flourishing.

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Speaker 2: And so my job is to keep going what James

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Speaker 2: has done so brilliantly, and we're spending a ton of

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Speaker 2: time together.

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Speaker 3: It's a blast.

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Speaker 2: I learned something from him literally with every interaction, and

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Speaker 2: so super psyched. We've been doing these dinners together with clients,

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Speaker 2: client meetings together, and it's a real thrill for me.

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Speaker 1: When they talked about two thousand and eight, I think

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Speaker 1: the bank that Gorman took over from mac back in

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Speaker 1: twenty ten, it's a very different one to the one

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Speaker 1: you're inheriting today. If we can fast forward similar time

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Speaker 1: for him another ten years, let's talk about what you

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Speaker 1: want Morgan Standing to look like in the future. I

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Speaker 1: think a lot of people have taken your recent comments

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Speaker 1: as a continuity candidate at the top of the bank.

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Speaker 3: Yep.

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Speaker 1: Do you see any big changes on the horizon over

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Speaker 1: the next decade or so?

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Speaker 3: What James did is he laid the seeds.

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Speaker 2: He not only transformed the place but he reclaimed the

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Speaker 2: best of the culture.

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Speaker 3: So my job is to take.

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Speaker 2: The modes that have been built to transformation in wealth

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Speaker 2: and asset management. Whereas you know, we're about six and

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Speaker 2: naturalllion of assets under management and a world class investment bank,

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Speaker 2: pretty tough to compete as a global investment bank. Now

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Speaker 2: they're only three or four of those wealth managers, only

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Speaker 2: three or four of those globe investment banks. And he

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Speaker 2: would claim that culture and now to press on integrating

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Speaker 2: the two one ecosystem individuals now walking institution. Institution now

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Speaker 2: needs hedging expertise that require certain capabilities that individuals typically

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Speaker 2: wouldn't have, sort of the migration of financial responsors across

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Speaker 2: the pockets. I think it's incredibly exciting, and we'd like

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Speaker 2: to think we're differentiated.

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Speaker 3: From many of our competitors.

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Speaker 2: We have competitors that are great wealth managers, we have

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Speaker 2: competitors of great investment banks. But to bring them both

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Speaker 2: together is something special. And the reason John that I

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Speaker 2: think we can do it is really born of the

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Speaker 2: experience of the financial crisis. When you make it, you

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Speaker 2: either are in prison by that forever or you say,

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Speaker 2: we made it.

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Speaker 3: Let's keep the good stuff and let's be something more.

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Speaker 2: So I'm focused on integrating the firm across those two verticals.

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Speaker 4: You grew up in the investment bank and you're really

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Speaker 4: leading into the wealth management And on the earnings call,

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Speaker 4: you talked about how the wealth managements and your blood,

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Speaker 4: how your father in law and your father, we're both

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Speaker 4: in the business, and you said this will be the

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Speaker 4: engine for further more and Stanley growth kind of underpinning

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Speaker 4: some of your comments. Do you have a place in

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Speaker 4: mind where further acquisitions will transpire in terms of the

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Speaker 4: wealth management units?

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Speaker 2: Well, first, I want you to know that you've made

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Speaker 2: at least one eighty year old man very excited by mention.

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Speaker 3: Joh okay, So this is this actually makes my day

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Speaker 3: entirely name drop.

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Speaker 2: But listen, I think the reality is inorganic opportunities are

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Speaker 2: going to come across the transom. But the danger and

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Speaker 2: James talked about the danger of acquisitions, there's sort of

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Speaker 2: asymmetrically against you, right because first the financial proposition has

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Speaker 2: to work, the business strategy has.

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Speaker 3: To work, and then the integration has to work. And

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Speaker 3: we did it twice right in COVID.

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Speaker 2: We did, we did, we did eat trade, which I

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Speaker 2: loved because it kind of gave us enough size.

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Speaker 3: It was diluted, but that didn't matter. Give us enough

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Speaker 3: size that we're gonna make it.

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Speaker 2: And we saw how things can get in March and

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Speaker 2: then the aftermath in Europe, and then ed Manns gave

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Speaker 2: us solutions.

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Speaker 3: So stuff is gonna come across the transom.

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Speaker 2: I'm not sure we need to be in a rush,

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Speaker 2: because again, we don't have sort of the victory's curse

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Speaker 2: of thinking.

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Speaker 3: We just sort of do these things. I think there's

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Speaker 3: enough organically.

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Speaker 2: But I'm glad you mentioned Lisa because I think when

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Speaker 2: you're talking about five or ten years and you think

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Speaker 2: about the amount of aggregation and transparency of wealth outside

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Speaker 2: the US, particularly in Asia. You know, we're twenty two

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Speaker 2: percent owned by our friends of Mitsubishi, who literally saved

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Speaker 2: us during the financial crisis. I've been going a lot

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Speaker 2: to Japan. I go every quarter. We've doubled down on Japan.

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Speaker 2: Imagine just sort of like a vision thought, imagine wealth

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Speaker 2: in Japan five to ten years from now, when you

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Speaker 2: come off to zero rate, you know, the zero barrier,

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Speaker 2: acid allocation, wealth, opportunity, investment banking. It's one example of

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Speaker 2: the kind of place where we could do extraordinary business.

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Speaker 4: They're de emphasizing the investment bank. That doesn't matter as

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Speaker 4: much to kind of compete head to head with Goldman

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Speaker 4: Sachs in terms of the league tables in the same

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Speaker 4: kind of way as traditionally.

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Speaker 2: Sure, what I love is that we've got a business

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Speaker 2: strategy that you can do in the elevator literally like

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Speaker 2: two floors wealth and asked manager big scale, global investment bank,

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Speaker 2: big scale, And it's not actually a choice because increasingly

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Speaker 2: there's synergies between the two. And I think it is

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Speaker 2: absolutely important that the investment bank is agile enough that

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Speaker 2: when the markets are speaking to forward volumes, early cycle behavior,

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Speaker 2: which is by the way, where I think we are

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Speaker 2: now Crossboard or M and ahead of the US election,

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Speaker 2: folks wanting to deploy capitals, the FED gets going, you

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Speaker 2: want to be in the core investment banking because we

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Speaker 2: have four years of no IPOs, these sponsor assets have

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Speaker 2: gotten big. How many companies or how many other writers

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Speaker 2: are can use to take these companies public?

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Speaker 3: Half a dozen around the world. How many people are

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Speaker 3: going to be.

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Speaker 2: Acting as advisors on Crossboard a large cap M and

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Speaker 2: A two or three that's high arch in business, and

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Speaker 2: the reason it's so important is it's the tip of

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Speaker 2: the sphere, the intellectual capital that the firm has been

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Speaker 2: traditionally known for. And what is informed in part by

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Speaker 2: our history of the ninety seven merger and then our crisis,

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Speaker 2: our human capital christ in five, is that the investment

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Speaker 2: Bank has so embraced wealth and vice versa, because what James,

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Speaker 2: did you know? This is McKinsey at his true best

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Speaker 2: is for these fourteen years he migrated people around the firm.

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Speaker 2: So if people actually understand these businesses. Andy Sapressing, one

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Speaker 2: of our co presidents, worked in the investment bank, now

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Speaker 2: running wealth and asset Dan Simpwis turned around our asset

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Speaker 2: management business. Now he's running the investment bank. So it's

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Speaker 2: not that I'm trying to sell you the story. I've

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Speaker 2: been there kind of thing, and it gets people motivated

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Speaker 2: and we're motivated to twenty percent returns on tangible.

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Speaker 1: You alluded to it. We had a bank CEO earlier

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Speaker 1: this week. You've just said it out loud. Investment Bank

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Speaker 1: has been in recession for the last.

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Speaker 3: Couple of years.

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Speaker 1: It has been really, really tough. Absolutely, I hear you

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Speaker 1: communicating the end of it can that happen. I hates

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Speaker 1: to be the guy who ask about a bit better

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Speaker 1: reserve and right cuts. Can that end without right cuts

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Speaker 1: from the vetter reserve? Can we end that ib recessed

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Speaker 1: and give them what you say on the blockline?

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Speaker 3: I hear you guys talk about this every morning, and

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Speaker 3: once when I said, we don't know who knows? I

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Speaker 3: think the.

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Speaker 2: Path is.

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Speaker 3: Probably that inflation has passed. But you know there's a tail.

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Speaker 2: There's a five or ten percent probably they do fifty

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Speaker 2: in March twenty five, fifty five to ten percent, right,

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Speaker 2: it's forty to sixty percent to twenty five in March.

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Speaker 3: There's also, if you price.

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Speaker 2: An exotic five to ten percent, possibility that we have

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Speaker 2: another hike at us. I kind of did that check

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Speaker 2: thinking of YouTube guys, because it is possible that we either.

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Speaker 2: Because every time the FED talks about it, right as

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Speaker 2: they did in the reverse in the teens, you know,

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Speaker 2: it tightened up and they didn't go. Now it's they

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Speaker 2: talk about it loosens up. It's like, Okay, we don't

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Speaker 2: want to have the inflating, the Arthur Burns bit. We

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Speaker 2: don't want it to get away from us. So we're

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Speaker 2: gonna We're gonna do it when we're ready. I think

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Speaker 2: the big picture, though, is they're going to start lowering

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Speaker 2: at some point when they're ready. They're going to be proof,

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Speaker 2: they're going to be thoughtful, and that kind of predictability

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Speaker 2: is very good for the core investment banking business because

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Speaker 2: you have these financial sponsor portfolios that have been locked

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Speaker 2: up that need to be liberated. Some can go in

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Speaker 2: continuation funds, some can go to other sponsors, but some

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Speaker 2: have to go public or be sold. And then the

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Speaker 2: corporate dynamic was folks are ready to get going. Then

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Speaker 2: with three years of pandemic, there's always to be an election,

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Speaker 2: there's always going to be macro. But I think the

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Speaker 2: core investment banking activity that we have known with real

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Speaker 2: cost to capital, traditional corporate finance like the mid nineties,

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Speaker 2: I think it's going to come back.

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Speaker 4: We've been hearing from bank executive after bank executive it's

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Speaker 4: time to start ramping up hiring. They're going to be

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Speaker 4: going out there and building their teams. You doing the

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Speaker 4: same thing. We have our team, We have our team

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Speaker 4: cinem We're hiring well.

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Speaker 2: I believe I believe that you know, investment banks are

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Speaker 2: notoriously pro cyclical, you know, said we see a trend,

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Speaker 2: and then we'll go hire a bunch of traders, to

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Speaker 2: hire a bunch of bankers.

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Speaker 3: If you really believe in.

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Speaker 2: You know, the kind of what the culture represents, you

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Speaker 2: don't want to be too herky jerky about that, especially

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Speaker 2: in the world. Will hire fixed compensation and longer, longer

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Speaker 2: tenures in this pickiness, Will we hire a specific banker

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Speaker 2: for a specific space who wants to come onto our platform.

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Speaker 2: For example, we've been hiring in Paris, We've been hiring Tokyo,

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Speaker 2: We've been picking up M and A bankers along the way.

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Speaker 2: But I do like the partnership right now. I really

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Speaker 2: like the team, and you know they're fired.

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Speaker 3: Up to go.

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Speaker 1: There's always going to be a range of views on

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Speaker 1: your stock. I'm just bringing up the stock on the

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Speaker 1: terminal right now, can up the ALST recommendation screen. Got

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Speaker 1: ten buys, twenty holds, no seals. Let's talk about one

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Speaker 1: of the hold It's one of the changes in the

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Speaker 1: last couple of days. It came from JP Morgan the

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Speaker 1: good things to say, but they said this we see

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Speaker 1: the excellent acquisition benefits largely discounted see limited stock specific

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Speaker 1: catalysts in the mid term. We've got to deal with

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Speaker 1: a list now. And again some people might be saying

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Speaker 1: stuff you don't like the neutroent is not exactly a

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Speaker 1: sal But what would you say back to that limited

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Speaker 1: stock specific catalysts in the near term.

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Speaker 3: So I've had a big run.

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Speaker 2: It's trading at the midpoint of the seventy hundred range,

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Speaker 2: trading eighty five ish. Reality is that continues to be

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Speaker 2: a a great capital return story. We have a capital buffer,

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Speaker 2: we paid a dividend, We're in two growth businesses.

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Speaker 3: The strategies unchanged.

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Speaker 2: The James Gorman premium, it's been a real premium, and

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Speaker 2: I want to make sure I have credibility with the marketplace.

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Speaker 3: He did for fourteen years. I've been for about fourteen days.

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Speaker 2: So I was heard he's seven hundred and twenty eight

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Speaker 2: weeks and I've done two.

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Speaker 3: So the score is seven twenty eight to two.

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Speaker 2: And then he said, but it's not that bad. It's

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Speaker 2: only three five and twenty eight trading days. So we

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Speaker 2: went back and forth on that. But because he said

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Speaker 2: you'd get vacation, I think the reality is that the

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Speaker 2: reality is that people some people want to know that

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Speaker 2: we get to thirty percent PVT margins and wealth immediately.

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Speaker 2: There's always gonna be that sort of knee jerk, but

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Speaker 2: you know, we were at four to six dem winner eight, twelve, fifteen, twenty.

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Speaker 2: One of the things that James said brilliantly as your

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Speaker 2: team knows, you guys know Schridar knows is he kind

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Speaker 2: of always did the post and beat durably, durably. You know,

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Speaker 2: these these firms have been traditionally marked on price to

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Speaker 2: book and what we want to do, which is differentially.

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Speaker 2: He's get people to look at the p multiple, which

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Speaker 2: means they can run the DCF.

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Speaker 3: So that's important to me that there's predictability and durability

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Speaker 3: you have to go.

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Speaker 4: I know that, but I do want to ask you,

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Speaker 4: is it true that you can multiply any numbers whatsoever

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Speaker 4: in your head in a second.

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Speaker 3: I you know, who knows five hundred and.

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Speaker 4: Sixty three times three hundred.

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Speaker 3: All right, we'll do that.

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Speaker 1: I'm going to run the numbers after the show. Hey, Ted,

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Speaker 1: it's great. We're looking forward to following the jointy with

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Speaker 1: just fantastic. It's good to see it. It's the CEO

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Speaker 1: of Morgan Stanley.

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Speaker 3: He's