Vince Cignarella, macro strategist with Bloomberg News, joins to discuss markets and eco outlook post 3Q GDP. Keith Naughton, reporter with Bloomberg News in Detroit, joins to discuss the latest on the UAW Strike. Bloomberg's Sonali Basak interviews Morgan Stanley CEO James Gorman and CEO-to-be Ted Pick. Jen Flitton, Head of US Government Affairs at Invesco, joins to discuss the latest on Mike Johnson being elected House Speaker and a potential government shutdown. Lee Klaskow, Senior Transportation and Logistics Analyst with Bloomberg Intelligence, breaks down UPS earnings. Max Chafkin, columnist with Bloomberg Businessweek, discusses Sam Bankman-Fried testifying in the FTX fraud trial. Hosted by Paul Sweeney and Matt Miller.

Full Transcript:
Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller. Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news. Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. I'm going to get to these markets here. The store's been. It feels to this simple investor over here that the interest rates out there in the marketplace have really been impacting stocks. And that's my take. Vince Signorella, he joins us. He's a pro global macro strategist for Bloomberg News. New knee or just a repaired knee replacement replace harsh, replacing the He's walking just fine. He found his way into the Bloomberg and Director Broker studio. We left from crumbs out for him. Vince, what do you make of these markets here? Uh? You know, the equity market's looking really sick. I mean if you look at longer term charts, sick as in bed like the kids say, look ill, not like beastie boys ill, but like unwell unwell. Yes, there's a level to watch it around forty one to fifty. It's a TD sequential level. If that breaks, it actually opens up a major move down of four thousand. We're looking at a potential major move lower inequity markets if these levels don't hold, and we're gonna need to see some help from probably Amazon and the like going forward to lift this higher, because it's not going to come from interest rights. I look, Abigail, do little yesterday it showed me. Oh y no, no, not rs high. That is back. That is awesome. Look at the rs I for SPX. We are right there. You buy him right here, unless, as you say, it breaks through that little green lines colors and everything. Get me a break. I'll tell you what, though it did. It did move below the two hundred the SMP move below the two hundred day moving average, and the last time we've seen it that blow you know, in that in those terms, was March, and it's well below the two hundred day, which is around forty two to thirty five, so we're well below that. So forty one seventy interestingly enough, is the average closing price for the last year, So between this forty one fifty forty one seventy level. I'd love to see it hold and maybe catch a bid, but so far it's looking a little bit of a dead cat bounce here. If I see rates up, as Paul said, you know, rates have been a huge driver. I feel like if I see rates up, if I see dollar strength, if I see oil up, that's all bad for equities, right yeah, yeah, And you know what rates aren't really there's not much of an infinite impetus for rates to go substantially lower. You know, we need to see really super low inflation numbers to turn rates at the moment. You know, we're saying a little bit of a reprieve in the treasury market. You know, Acman's trade helped a little bit. It got some Americans want to buy treasures, but who else? Pretty much there is Japanese foreign buyers. They don't want to hold this paper. No, no, what else are you gonna buy? Well, yeah, that's actually a good point though, But the upside for it, you know, you're just buying if you're yield, you're not looking at for a capital. Well, it's the first time in almost a generation you could get yield. Oh no, I mean a lot of people loving and you're looking at see these at five and a half percent. I mean, that's these are great rates, especially for fixed income or or seniors on a on a fixed income. A lot of folks out there doing that. I mean I've done a little bit myself. I'm kind of a senior actually these days. But you know, I mean I could see rates staying here. You know, I'm not really going down a lot, not really going up a lot. But that's not going to help the equity market. It's going to need it from somewhere else. So when a guy like Bill Ackman says I closed my short in the treasury markets, a does that mean anything to pros out there? Is not just a name, And if you think about it, the size of his fund it was like a one percent game. So he was long too, right, wasn't he talking about a thirty year Yeah? Yeah, yeah, but he had a one percent gain on the assets under management. I mean he wasn't the only bill. You know Bill Gross also what is he long or short? Going long treasuries? Now? Well, so's Warren Buffet closing short at least? Yeah? Okay, yeah, you know they put a position on a Monday and tell you on Wednesday what they did. So you'll goin in and money do those names. The other day, our producer Eric Molo, he had a mask on and I said, hey, dude, where's Tonto. He had no idea what I was talking about, and I was I said, you know what, like the Lone Ranger? And he was like, no, sorry, don't get it. He did not know who the Lone Ranger was. And do these kids today do they know Bill Gross? Do they know Warren Buffett? Like in a real way? I mean, you know the program the the Algo programmers do because they take those names and they program it into their into their trading venues. But you know, actually, the only iconic name from from that era that is actually incredibly well known Lassie. Everyone knows who Lassie is. This is not in the markets, yeah, well, in the world in general, yeah, markets I mean, but yeah, I mean in the all the years I trade. Do you think Eric Molo knows who Lassie was? I think so we'll have to test him on the way out, check him out. All right, what's the most interesting trade for you out there? Just in the markets? I know, you look at currency, stocks, bonds, all kinds of stuff out there. What are you looking at it to me? You know, going back to interest rates, I still like the short term. I still like two year treasuries. I mean, that's the one that's really going to catch a bid when the FED decides to turn or the FED says I stopped because you could, you would more likely than not see the yield curve steepend if inflation expectations remain, that's not going to affect the short end as much. So if you see steepening, it's going to be a sell off in the back end. I think the short end is the place to be because inevitably that's got to come your way the FED. You know, Matt's been telling me not to crowd into that two year because I gonna have an interest rate risk reinvestment reinvestments. Now the thirty year five point zero seven, you were right negative by I'm not saying, first of all, I don't give investment advice. I loaded up on them, and if I do, you should run the other direction. But no, I'm not saying you want duration right now. I'm just I just look at the interest as sorry, the reinvestment risk as something that is better dealt with by you know, you have like very sophisticated advisors. I just look at an ETF. I would rather T bill and chill. You know, T build chill. I get Yankee tickets, and you do T bill and chill. All right, So what are we doing here, Vince? I mean, is the next move for this Federal Reserve to just stay or to still talk tough? We hear Christine Lagard to ECB today, still talking tough. You know, I take that with a grain of salt. They're saying what they have to say. I mean, the guard's been You know, if you go back ten years when inflation in the Eurozone was below one percent, well you heard from the ECB central bankers was HRCP inflation is moving towards target. It didn't move for five years, but they said that at every meeting. So now at every meeting they're going to say we can still raise, but they have no real intention of raising. Neither does the Fed. I think, I mean, the Federal talk a tough book potentially raising one more. I have absolutely no idea why there's really no reason to raise at this point. Isn't moving down quickly enough? Well, what's counter fiscal spending? I mean, it needs to be two like last week, you know. But I would argue this, the idea of getting inflation to two percent goal is ridiculous. The two percent goal was at a time when there was a balance sheet of what a trillion now we have Now we have a federal deficit of thirty three trillion. The balance sheet at the Fed is off the charts. You're not going to see two percent inflation. You're going to see two percent inflation if you have a disaster. You don't think they're going to get there. No, I think that if they're lucky, they get to three three and a half and they should be happy if they do. So I'm in that camp. I don't know what's so special about two percent. They made it up? Yeah, they would all be made up. But the point is inflation is just thievery right. You're just robbing from savers. So it's their duty to get it down to near as damn it to zero. I would say, well, I mean, you're robbing savers if you don't have real interest rates higher. But we now have real interest rates starting to come to the positive. If you get inflation down to three three and a half percent, you're not going to see a ten ure yield of three percent, so you're still going to have a positive, positive carry and people are going to be earning. I mean the other side of the corner is you get inflation into three three and a half percent. Where does that put the SMP? Probably around forty five forty eight hundred, So you're gonna have a positive return somewhere. It's just a matter of where you go. All right, what do we do? I mean, all right, I think my fed's gonna stay put next time. I think so too. And I think I look at tech and I'm always the one where I joke with people. So you're not going to get your next iPhone from Campbell's soup. So you know, whatever they're selling whenever they sell tech disaggressively, to me, it looks like an opportunity to buy the big tech. I would buy the big tag. But you know, just get my feet wet here and there my toes buying the iPhone fifteen my daughter. I just looked at it yesterday. It's got a new plug. You got to replace all your plugs. I thought, my plug is strategically located everywhere. None is more than an arm length away. Dude, I feel now I got to replace everything. I feel you that you explain the European sect because they made Apple bye by their Yeah, a regulation move, but I'm happy they finally got to it. But you're right, we have to buy all new cables and it's all right. Vincey Garell. Thank you so much. We appreciate it. You're listening to the teenth Ken's Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcast. I want to get to the end of the strike. I mean I want to get to it. I'm sure the union members want to get to it. I know the car makers want to get to it. Let's talk on the telephone on Zoom actually with Keith Noughton. He covered on Zoom. Look at him going on Ford in the Big three for US at a motor city, and it looks like at least Ford has got a tentative agreement with the UAW. Keith walk us through it. Yeah, so it's an agreement that includes a twenty five percent raise and the restoration of cost of living allowances. Those two combined mean that the actual pay increase for the top way journers is actually thirty three percent and means they'll be making over forty dollars an hour. There's improvements especially for new workers. They're getting even larger raises. Temp workers are being converted to full time, they're doing increasing the multiplier on pensions and four one ks. So there's a whole bunch of of good economic enhancements that are in the agreement. Now you have you used the murder pensions Keith, I imagine you're talking about people who already had pensions, who what have been working there since pre two thousand and seven. Because I know that Sean Fain, you know he wanted a pay increase. He also wanted pensions for all the union workers to find benefit pensions. And he wanted a four day work week or a thirty two hour work week. So did he get two out of three? Yeah, I just if you want to talk about this stuff, he didn't. He didn't get Matt, He did not get at the thirty two hour work week of the four day work week. He did not get a return to traditional pensions. What he got instead is a larger contribution from the company to your four h one k or to your pension. All those before, as you said two thousand and seven, do have traditional pension, so it's the it's the workers hired in the last fifteen years that don't. So they instead are going to have a greater contribution, greater multiplier. All right, So I'm guessing this puts the pressure really on GM and Stalantis. What's the how does this playoff from here? Yeah? I mean, you know, so the analysts are already crunching the numbers, and the Emmanuel Rosner over at Dolja Bank is saying that this would cost Ford six point two billion over the life of the contract, but it actually would cost GM and Stillantis more GM and be over seven billion, Stalantis higher in the six billions because they have more temporary workers, so there's more temps to give raises to, there's more tempts to convert to full time. So you know, by going first, Ford was able to tailor the agreement to their specific situation. They only have two to three percent of the workforce that is temps, whereas GM and Stlantis are gms close to closer to ten and Stilantis's origin. Interesting, so does this mean, I mean Ford workers are going to go back to the Kentucky plant. They're going to start building the bronco again. In Michion and Dearborn. They're gonna, they're gonna, they're gonna put the pressure, in that sense, further pressure on GM and Stilantis. Do you expect agreements from the other two by the end of the day. I don't, actually, I think there's still work to be done. And that's an important point that you just made. That because back in twenty nineteen when the UAW struck GM, when they reached a tentative agreement, the workers did not go back to the plants. They didn't open the plants again until after that agreement had been ratified by the full membership, which took weeks. But in this case, the OW is sending the workers forward back to the plants immediately. The plants are cranking up today because they want to do put pressure on GM and Stillantis. You know, the losses for each of those companies just from this strike are approaching a billion dollars. So and just this week the two of them, GM and Stillants had their most profitable plants go out on strike. So the costs are going to escalate more rapidly. Now, Oh, so catch us up, Keith, catch us up on who's so the Bronco is made of the truck assembly plant right in Wayne, Michigan. Actually, yeah, so what's coming back online? Is that what you're asking you at? And what's still off? Because I know on Tuesday they struck the GM plant that makes like the Escalade and the Tahoe, right at least one of them, right, yep, yeah at GM. The big plant struck this week as the Arlington, Texas plant that makes all the big SUVs, Suburban Tahoe, Yukon and Escalade, and that at Stalantis. This week it was the RAM pickup truck plant in Sterling Heights, Michigan, and that is their most profitable plant for Ford. The ones coming back are the Bronco and the Ranger plant. That was the one that went down immediately. The one that was more recently taken down on October eleventh is Kentucky Truck that makes the biggest F series trucks and the biggest SUVs, the Lincoln Navigator and the Ford Expedition super Duties. You know, twenty five percent seems like a lot to me, even though it's over a number of years. What are the auto companies getting here, Well, they're getting labor peace, which you know costs something, but they're getting richer contracts and they already had the highest labor costs, you know, in the industry. So what GM said, Mary Barrow, the CEO of GM said during their earnings call this week, is they're going to try and find offset. They're going to try and do cost cuts to you know, make up for this. But you know it's, uh, these are expensive deals and and you know they're going to have to find a way. So what's their costs competitive? That makes me worry about the vehicles? Ouch, you're going to start So what putting in like lower quality parts? Is that? That's what I worry about. That's what everyone who's buying these cars and trucks. Keith I spend a lot of time on the forums right of many different brands and they're all like, oh, stay away from that company because they're going to strike. And even if they didn't strike, maybe they will and workers are going to be unhappy and not do it as screw it up. Yeah, but if they cut cost, does that mean we're going to have lower quality components. Uh, not necessarily. I mean in companies as large as these, there's all kinds of waste and redundancy that you can work on. I mean they cut by the billions when they're cutting costs, and obviously people is one of the ways they cut costs. Let's not forget Jim Farley said just a year ago that Ford had twenty five percent more engineers than its competitors. He's been cutting salaried staff by the thousands, so you know there's still probably people that he will cut as they continue to move into their ev future from their internal combustion engine present. So I know, Keith for the unions, you know, one of the ass or demands was something nebulous to me at least, which is, hey, can you guarantee you we're going to still have the same number of positions in an evy world that we have in an ice world. Did they get any language to that effect? There is some job security in this and Ford had told them that they would not lay off anyone during the term of this contract, which is four years and eight months. In fact, would add to workers, but it's not an idle concern by the union. It takes forty percent less labor to assemble the power rain of an electric vehicle. Then it does an internal combustion engine vehicle, which has thousands of parts versus about twenty in an electric vehicle. So you know that is coming and they got to figure out how that's all going to work out. What do you think this deal looks like to non union shops, Keith? Yeah, I think of you know, the the BMW plant in Spartanburg or the Tesla plants. My X ray was made, your X three was made in Spartan Work. Yes, okay, in fact it was very good, very cool plant and cool truck. I like it a lot. But what do you think about those shops? Are they going to look at this deal and say, you know, we should have a union too, We should be in the UAW. That is what the UAW is counting on. So it depends on when you say what does it mean for those plants? It depends on who you're talking about. If you're talking about the companies themselves, the CEOs, I think what it means to them is the price of poker just went up, and the way they've kept unions out of their plants is they've offered you know, equivalent wages and benefits. So if the CEOs want to keep the unions out of their plans, they're going to have to give everybody a raise of those non union plants. If they don't, the UAW has a big opening to go in and organize them. All right, Very good, Keith Anton, thanks so much. We appreciate that. Keithnton. He is a reporter for Bloomberg News in Detroit. He is our go to voice there, and again we get a deal from Ford and presumably Matt That means Stalantis and GM a little pressure on them to get something done because Ford is back out cranking out the trucks. Here, you're listening to the tape. Catch a our live program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty dans. Welcome to our Bloomberg television and radio audiences. I'm standing by now with Morgan Stanley, CEO and Chairman James Gorman and incoming CEO Ted pick big moment for morgan Stown. Only fourteen years at the home. How does it feel to be passing on the baton? Feels great, you know, for several reasons. One, it's time organizations grow because you have change. I mean, you're not going to grow by doing the same thing again and again. And I feel like we set this up several years ago with the board. We've had a very very intentional process and we ended up with a phenomenal outcome, which is Ted. And we've got other unbelievably good executives who are taking leadership roles as co presidents Andy Sapsin and Dan Sancret. So it's sort of what you hope for. I mean, you try and drive strategy, you try and put together a team, You try and deal with the inevitable knocks that you get from the market and the disappointments that come in times in any complex business. But at the end of the day, you're also trying to hand it off for the next next generation. So it feels great and it feels right. You've been rumored to be a CEO contender for oh so long, Ted, How does it finally feel to step into the next year Shinali. Morgan Stanley was the first place that I worked out of college, and thirty three years later, I'm sitting next to mister James Gorman. It's the thrill of a lifetime. I'm so excited. Now you've really inherited a gift here, a massive transformation over fourteen years, one of the best valuations here in global banking. But there are investors who are worried this is as good as it gets. What do you tell them? There's more to come. There's more to come. We look at the five year chart, the ten year chart, the fifteen year chart. The wealth and ASCID management businesses have these remarkable, durable earnings. The Global Investment Bank has lots of miles to go. So we're thrilled about the business strategy we have in place and it's going to continue to deliver a long term value for Sheerald. Now for both of you, we've been in such a prolongedble market that has hit such volatile times as of late. Do you expect the next couple of years from Morgan Stanley to be a little more choppy? You know, I don't know. It's I thought this year would be tough than it was a lot of what's going in the market conspires against our particular business mix. Some of the more commercial retail banks mortgage banks very different business model. But our term will come. I think, you know, I personally think the US has dodged a recession. I think the FED is very close to being final within probably twenty five bases points. We're starting to see activity. Look at the Chevron deal we just announced the other day. I'm in phenomenal, so we're seeing activity in different sectors. It's coming alive now. So no, I think the next couple of years will be great. But what I care about is over the really long run. When we set about on this journey, we weren't focused on a quarter, and if the stock takes a dip in a quarter, I say, that's kind of good news because we're buying back stock and every share you buy back, you're retiring a dividend. So shareholders who hang tough at getting a four and a half percent yield and we're buying back stock and the stock's cheap, so it's it's kind of a good situation being But medium term, no, I think we're I think the film is going to do great. Ted, what are the biggest challenges for you as you navigate this environment. There's just so much opportunity. We're definitely a new paradigm. Interest rates are going to be higher for longer, and the world's gotten smaller, which means the clients need advice. They need in the wealth and ask and management space, they need in the institutional space our corporate clients, and we're going to have lots of activity around those clients. So I just want to make sure that we are completely aligned in the business s rategy we have in place. It's something that James is painstakingly put together for fourteen years. The market knows we want to do, so I'm incredibly optimistic over the next couple of years. Now. A lot of lessons have been learned in this building over the last several decades. Really what to do, what not to do? What is the Morgan Stanley playbook of what not to do in twenty twenty four as you navigate this new environment, Well, I think it's to continue to do what we've been doing, which is to treat each other with respect. This process that James and the board ran was intentional, it was respectful. I couldn't be more thrilled to be working with Andy Sappersin and Dan Simkowitz, two of my closest friends. They are extraordinary leaders. They're going to drive these businesses. The fact that we've worked so collegially, this is the kind of Morgan Stanley that we've known and loved, the blue Morgan Stanley of respect and focusing on clients. And during this painstaking process, there's been no loss of focus when focused on our shareholders, on our clients. And the fact that today we had a celebration with our partners and it was really quite a wonderful experience shows that we are on the ball and sticking with the future. I'm glad you mentioned Andy and Dan because a lot of questions here around. You know, they were two CEO candidates. Now they're going to be the co president's. How do you keep them around? Are you holding them to any lock up periods? No, They've got phenomenal job opportunities. Andy's co president. He's now running not just wealth management which included d Trade, but asset management, which includes Seaton Vance. So he's overseen the biggest wealth and asset manager in the world at what I believe is the most prestigious and best investment bank in the world. Dan came out of capital markets and is now going back there after a great stint running asset management, and he's going to be running all of global trading banking, capital markets his old home turf research, and most importantly, the two of them are going to work with Ted and helping to manage a firm. So now, these are phenomenal opportunities. They're high quality people. These are some of the best jobs on the planet, and you know, we delighted to have them. Now, I'm glad you brought up the institutional securities business that is your old home as you move to the new spot. But you know what's interesting. You've long been the number one in equities trading. Lately Goldman has to pass Morgan Stanly in a couple of quarters, while JP Morgan and Goldman have been fearing better in various forms of M and A and underwriting. Do you have a plan to be number one again? Listen, we have some great competitors, as you know, in the global investment bank in equities and fixed income and then across investment banking. We're focused on being number one. We want to have the right people in place We've been investing for the next cycle. That next cycle is going to be investment banking led, and it means that inequities. You want to be one or two every quarter as we have in for the last decade. We have fixed income business, we were structured, it's now top five business and investment banking is going to lead the next cycle. There's going to be a lot of m and a consolidation. It's going to be across industry groups. The world's gotten smaller, there's a new cost of capital. We want to be a leader, a global leader in all those spaces. Now, James has hinted before to the possibility of more murders and acquisitions for Morgan Stanley moving forward. You've already done some very transformative ones. Do you feel said that it's a matter of time in the CEO seat before you can do a significant deal or do you feel like you can jump right in. Well, I think we now have done three major acquisitions over the last fifteen years, all of which were in James's vision. Smith Barney shortly after the financial crisis, e Trade at the dawn of the pandemic, and they eat in advance. Those are three major integrations we like what we have, the business strategies in places. Let's execute on what we have, keep the strategy in place. We always talk about acquisition candidates, but that's that's often to the future. Now. The other thing, James has said that there are a few things you'd rather get out of the way before stepping down, including the US investigation into Morgan Stanley's role into the block trading market. Is this something that can be resolved before you step down. Well, I'm going to stay, as you know, Shnali as executive chairman for a period of time. We'll see how long. You know. Frankly, I shouldn't stay too long because it's Ted's job to run the firm now, so I'm going to be there just to help him in whatever way, and obviously meet with regulators around the globe. I've got to know over the last decade plus and key clients, and also in that period there are a few things I want to still clean up. I want to hand I said, as clean a plate as possible. These are monster jobs and enormously complex. You travel a lot, there's a lot that comes out, so I think it's nice to start with a clean plate. We wouldn't have announced I was stepping down if we didn't think whatever we still have left isn't manageable. I mean, I wanted to see seeka through. We came out of that actually with a better capital ration than we went into it. Twelve point nine CT one requirement, we're at fifteen to five. I want to see the initial BUZZLE proposal. We've seen that. I don't think it will end up where it is, and we're working very closely with regulators. I want to see the sort of summer months, obviously difficult quarter. We knew that was coming, so I wanted to just see the firm through that and then through this transitional leadership. So no, we're very comfortable with where we are in the process, and I'll do everything I can to help help Ted and help Dan and Andy. Now, one large issue that has been plaguing Wall Street is the lack of gender and ethnic diversity at the top ranks, and when the CEO search had come to its final steps, there were no women or people of color that were considered for the CEO ranks. What is your plan to increase representation in the top ranks of Morgan Stanley? The next generation has lots of representation of all types. It's a priority. It'll continue to be a priority. Do you have specific goals over the next few years to make sure that's you know, Well, we in Oceanize it's a good question. We run a meritocracy and diversity comes in all types, and we have fantastic women and men from all backgrounds in senior positions on operating committees throughout the firm. And I couldn't be more excited about the look of the firm in the next five ten years. Now. I know you've said also that you know largely the strategies in place, and it will be continued on into the new leadership. There is one thing that is very much in the mind of CEOs lately, and that's technological disruption happening at a rabid clip. How are you thinking about how this could change Morgan Stanley and its positioning in the future. Well, so, you know, Walda Riston said it best the he said the most. I don't think he's totally right on this, but he observed the most important technological evolution for the financial services industry the ATM machine, and each generation if you look at it, has embraced technology into the businesses to make them better. What Ted did with the electronic Trading and Equities so called MSET phenomenal and that basically fed all of our trading apparatus that have supported that business being again number one or two depending on the quarter. But right up there what we've done with each trade. Each trade's a technology company with a brand. What we did with share works and what is now Morgan Santic work the electronic stock plan business and Soling we bought Soluing is a company of programmers in Calgary, Canada, and that became the birth of the stock plan business. So there's always technological revolution. What any Sabastine is now doing in the AA space sort of building off the early machine learning we did to create virtual financial advisors. It's endless. We just had a presentation the board on it. So it's in everything we do. We have nearly twenty thousand employees, direct or consultants working for us in technology. Now, before I let you guys go, what is the one biggest piece of advice that you have to Ted as you pass over the rank. Enjoy it. It's an incredible privilege to be able to make the call, to make decisions. Sometimes you'll be wrong, the only way to be right is not to make any So I took the approach of I was looking for I don't know what the analogy is something at bad So I'm not really a baseball player, but I wanted to make enough decisions where we got a lot of things right and along the way a few things mightn't go away, but that's okay. Just enjoy the journey, embrace the good bits and the bad bits. As you know, Kipling said, an if and those imposts of success and failure, and you know, keep yourself focused on the long term. You're going to have great quarters and you're gonna have disappointing quarters. You're going to think the stock should be up when it's down and down when it's up. None of that matters. What matters is the long term health of the franchise, the values, and your own stability in that role. And part of that is building a team. He's off to a phenomenal start in twenty four hours. We got a standing ovation from the board. Last night, we had a wonderful dinner with directors. We had all partners live in this building today and broadcast around to our eighty three thousand employees. So you know, enjoy the moment. It's an incredible privilege, Ted James, it was a pleasure to spend time with you on such a landmark day. From Morgan Stanley and hope to see you at the turn of the year when you take your new job. Thank you so much. Thanks to note. You're listening to the team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business app, or listening on demand wherever you get your podcasts. Stuner heads to Washington, DC. Why because we kind of have to Jen Flinton, she is head of US Government Affairs at Invesco joins US. So Jess we I'm sorry, Jen, I'm sorry, Jen. Jen. We actually have a Speaker of the House now. I guess that's a good thing. What are you taking away from I know you're based down in Washington. What are you taking away from the last couple of days of what we've seen in the House. Yeah, well, it's been particularly difficult for House Republicans. It's been a rather embarrassing twenty two days, and so I think a series of frustrations and blood letting in the family meetings finally resulted in complete exhaustion, and Mike Johnson, who is a fairly well liked member of Congress, although relatively unknown outside of Washington, there was unanimous, unanimous can support. So I think he came in at the right time, and I think a lot is going to be said for his ability to move forward. Hopefully he'll be able to take that unanimous support and move it into the legislature. So does this mean that Donald Trump is now back to holding the most sway of the Republican Party, Because what we do know Mike Johnson for is leading the way on that amicus brief to overturn the election results. Mike Johnson is an election denier. He doesn't believe that American democracy worked in twenty twenty. He doesn't believe that President Biden fairly won the election, and all of the people in his party supported a person like that for Speaker of the House. Does that mean, well, either none of them believe in the US democracy or they're all sort of heeding the Trumpian call. Well, first, I'll say Donald Trump is the de facto leader of the Republican Party. There is no doubt about that. He is the former president. He's running for re election, right, and he is the leaning candidate in the primary. So you know, there's little doubt that Donald Trump is the leader of the Republican Party. That being said, he did have some sort of force within the last twenty two days putting in his support first for Jordan, who failed quite frankly, then opposition to Tom Emmer, who had already had about twenty six votes against him already. So whether that Sankum or whether that sort of sealed the deal, I think is sort of an open question. But moving forward, I into twenty twenty four, into an election year, I have no doubt that this Republican Conference will be united behind whoever is the Republican primary candidate, and right now Donald Trump is taking a heavy lead there. All right, So where does the Republican Party go? Now? Where does the House go? Now? From a legislative perspective, Well, two things, right, So first, they have to get appropriations bills across the House floor, and they need their appropriations bills because they are marking to f y twenty two levels. The Senate is marking to f y twenty three levels. That is a big disagreement, right, So over the next several weeks, you're going to see the House Republicans moving their House Appropriations bills across the table. That will be quite a feat on some of these bills which are rather controversial to keep that Republican majority united because they only have a four vote margin, they can only lose four or five votes depending on the day, depending on how many members are in town, and so that will put them in the negotiating position that they'll need to have in order to negotiate with the Senate on government funding going forward. And then of course there is the Defense supplemental that the White House sent to the Senate last week. It's currently being debated, discussed through hearings, through regular process in the Senate. I expect the same to happen in the House, but that's going to take a little bit of time. And that's funding Israel, Ukraine, Indo Pacific, the border, and there are going to be a lot of disagreements, a lot of controversies around the policy that surrounds that money in terms of cutting spending. Is there any hope that these Republicans, Republicans are going to be able to rein it in after we've seen you know, basically deficits. Since Bill Clinton, say what you will about the flandering of William Jefferson, Clinton, at least he balanced the budget, right, Is there any hope that something like that happens ever again in our lifetimes? Jen, that's right. And Bill Clinton came together with House Republicans with Nuke Gingrich and was able to do that really in a bipartisan way. I don't necessarily see that sort of work being done between the White House and this Republican conference in the House. I do think, though, we will see it's going to naturally happen because of the debt ceiling deal. The parameter set forth. Either there was a one percent cut across the board starting January first, or they are able to come to some sort of agreement on appropriations that is going to lower the life levels of spending. Because you're right, we're facing a thirty three trillion dollar national debt, over one billion dollars a day in interest payments. The numbers came in on our deficit this year, it's about two trillion dollars. That's more than we are two trillion more than we're bringing in, right, We're spending that's a real problem. Much more than reticipated overs Yes, exactly, wow into a five percent gdp Q three exactly. It's not like we're trying to spend ourselves out of a recession here. I mean, this economy is on Faija in Feego, so jen, is there any reason to believe that this new speaker will have any more success than the prior speaker in terms of dealing with the extreme right in the party, whether it's those you know, six seven people whoever there are. He's just dealing with himself. Yeah, Yeah, that's a sixty four thousand dollars question, right. I mean, this member has only ever had to speak for himself and for his constituencies in Louisiana. He has held a leadership position in the sense he was vice chair prior to the speakership. So he's been at the leadership table, He's heard the strategy, he's been part of that discussion. So he's coming in with some context, some awareness, and he certainly had to understand the factions and what he needed to do in order to bring together the members of this conference in order to get to the speakership. I think going forward, he has suggested in his run for speakership earlier this week with the conference, he has suggested that he wants to pass a CR into January or April April fifteenth, which is another magic deadline as regards to budget, in order to get that leverage for Republicans in the House to really negotiate with the Senate. This is going to be his first test. This will be key to show whether or not he can bring this conference together. All right, Jen, thank you so much for joining us. Really appreciate getting your insight. Jenny for Flinton, head of US Government Affairs for Invesco. Before joining Invesco, she spent a lot of time in Congress as working for actually a Congressman Patrick McHenry in his office, so lots of experience there. You're listening to the tape catch are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty. All right, here's some economics for you. We had the GDP print today. Matt Right, four point nine percent thinks great, But then you go look ahead and you see a company like United Parcel Service. These folks, they see the economy every single day on the ground, they put up disappointing numbers. Cut the forecast again. To me, that's the number to before. I mean, you don't even have to look ahead. Right. They did cut their outlook for the second time in less than three months, but even backward looking, it was horrible. Annual EPs came in at a dollar fifty seven, down forty seven percent from a year ago. Well, they got to pay their pilots more now, right, didn't they have that new contract? I don't think let's bring it. So many of those about this, like Lee Clasical, he covers all the transportation stuff. We blamed him for the supply chain thing back a couple of years ago. Now he got to fix that. He's with Bloomberg Intelligence, joining us live here in our Bloomberg Interactive Broker's studio a lead. What did you really hear from UPS and their earnings and kind of their outlook? Well, I mean, at the end of the day, they had a tough slog with their labor negotiation. They lost a lot of business to FedEx and another carriers. They're in the process of winning that business back. You know, they've won probably around six hundred thousand packages per day back of what they lost and it's going to take some time for them to get it all back. The good news is that some of the sequential changes that they saw from August to October, which August was the hardest hit from that labor even in terms of volumes going away, you know, they're seeing seasonal trends well above what they normal normally see. They said that that volume during that time period sequentially was up round two point seven million packages a day. In last year that was around one point five million packages a day. So it's definitely they're they're definitely turning in the right direction. But you know, the streets got to readjust their models. Fourth quarter expectations are definitely going to have to come in. You know, they provide full year guidance, which, as you mentioned, they had to lower it again. But when you look at the imply what that means for the fourth quarter earnings expectations and the EPs bases are going to have to come down anywhere between twenty five and thirty cents. Well we care about I mean you care about UPS for the sake of UPS and their competition. We care about it mostly, I would say, for their view on the economy, right, because if things are going well, we're going to be shipping packages back and forth. If they're losing out to competitors, that's one thing. But if they have a dour outlook because they expect the economy to slow, that's another. Which is it? Yeah? I think you know, UPS is obviously about weather for the global economy. They have businesses everywhere around the world. They ship everything you can imagine, and probably things you can imagine. But I think I would love to hear the like top ten craziest things UPS shipped? Yeah, why don't we do a top ten list? Ever, Paul, Yeah, hasn't been done before. Yeah. Well, I mean, anyhow, I think the weakness that you're seeing in the fourth quarter, about a third of it is probably macro driven and two thirds of it is UPS specific. Excellent, That's exactly what I was wondering. So two thirds of it is company specific or industry specific, and a third of it is the economy. Yeah. Yeah, because I mean they're really dealing with the loss share that they had. I mean, you have these huge networks. There's a huge there's a dally averaging effect, right, So the less density you have, the more expensive it is per package. So how do you win back business just on price price service? You know, the company during their call was very adamant about the fact that they are not using price to entice people back. Maybe they're giving a slight discount, but they're not going into a deep discount because the end of the day, they have to pay for that new labor agreement. It's a five year deal. A lot of it is it's front loaded, something like forty five forty eight percent of it is in the first year, so you know they need to really offset that cost and that's going to be a headwind for them going through the first half of next year. How how does their labor costs look compared to others? And the reason I'm asking is you mentioned service, right, They're going to deliver better service if their employees are better paid. And you know, in less stressful working conditions, have air conditioning in their trucks or heating in the winter, are they in a good setup in that way? You know, when you look at ups and you look at FedEx, there are two different models. FedEx as the independent contractor model. Even if you look at Amazon, Amazon has an independent contract model. You know what it benefits UPS is they have stability in their workforce. They have a place where people probably want to come because they're making more and now and maybe they're not making so much more from a dollar standpoint, but when it's all said and done and benefits pension all that stuff, it's a place where people not only want to work, but they probably want to work their whole careers. Versus a FedEx or an Amazon where the employees are really it's really a track transaction, if you will. They're just there for the paycheck and if they find something better, they're off to the highest bidder. To me, that would I mean as a customer, I would rather than use UPS, you know. Yeah, you get a relationship with your delivery guy exactly. Yeah. And they have a cool uniform. Yeah, I like the brown So are we going to put air conditioning in the trucks now? They're putting the fans air conditioning all that sort of stuff. Why didn't they in the past. They just you see them on the road. They just to open the doors, you know, and and you know. Listen, it's at the end of the discuys are down in Texas where it's like three hundred degrees out. I mean, I don't care changing it. They're changing. I mean, they expect global warming to happen like this. Nobody told them it was going to happen like that. Who knew exactly? All right, let's let's step back a little bit from ups just kind of your space in general. You do you know, the big ocean shipping container, the railroads, the trucks, everything in between. Talk to us about just how is it out there in the transportation space. Are you guys, are your companies seeing a slow down? And if so, how pronounced? Well, we've been in a freight recession for for over a year now. Now, that was just tough comps. Tough comps. You know, there were certain aspects of the market that were down a lot more. You know, what we're seeing now is that, you know, the freight recovery will probably lead the economic recovery, and the freight recession should probably come nearer to an end in the first quarter because of easier comps, assuming we have some sort of GDP growth. You know, it doesn't have to be stellar growth. It could be low single digit growth. You know, assuming that's the case, we should come out of this funk. And what's this done. What this is done is really of depressed rates across the board. So if you're looking at trucking rates, liner rates there are, they are very very very very low. And it's you know, for some of these markets, especially trucking and the container liner market, it's really hard to figure out what's going to bring rates up because there's a lot of downward pressure because there's just so much supply out there. Why is there supplying I mean, well on the ocean liner on everybody wanted capacity, right everybody. People are buying capacity. You know, capacity growth is expected to outpace demand growth by something like five hundred to six hundred basis points this year and next year. And then you know you have rates that were you know, they're down like seventy percent. If you wanted to ship your car now now is no problem now, Yeah, but I had to sell it. Yes, it's a horrible it's and if you wait, you'll probably if you want to wait, you probably get even a better rate because because liner rates, there's really no net for liner rates right now, trucking is a different story of supply is coming out of the market, which should go well for truck rates. All right, Lee, great stuff. As always Lee clasical. He is a senior transportation analyst logistics all that could stuff for Bloomberg Intelligence based on in Prince University, been making his way here to New York. We appreciate that you're listening to the tape. Cans are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, play Bloomberg eleven thirty. A lot of I'd say you, here's the story that's got my attention of the past couple of days. This is going to be fascinating. Sam bankmin Freed, He's going to testify in his trial on on behalf to try to, I guess, counteract some of the negative testimony from some of his former colleagues and friends and girlfriends. I don't know what's going on there, but Max Chaffckin he knows. He's a calmnist for Bloomberg Business Week, Max, this sounds really risky from my perspective. What do you make of it? Well, so, you know, as you say, and as you're hinting at, criminal defense attorneys generally do not advise their clients to testify in their own defense, especially in a case like this. Sam Bankminfried, though, is not a traditional client, and as we know, anyone who's followed this story knows that he spent a lot of the weeks after the fall of FTX and even after his own arrest, giving interviews talking to pretty much anyone under the sun, saying all kinds of sort of half cocked, probably legally ill advised things, including that he you know, fed up and I'm quoting there and so. So again, this is not a traditional client, and we're probably not going to see a traditional defense or traditional testimony from him. What have we seen so far? I mean, has the testimony been so damning that putting himself on the stand, or that a lawyer putting him on the stand is the best the defense team can do? I mean, I think again, I'm not on the jury, and so it's always hard to speculate, but it has seemed from the outside to be pretty damning. I mean, we've seen basically his closest friends and senior executive team all get up there on the stand and talk not just in detail, saying that yes, the crimes that the you know, that the state is charging did occur, Sam Banganfreed did them, but producing essentially mountains of evidence showing Bankman Fried's direct involvement. So we've seen messages, we've seen Google docs, we've seen these very specific accounts, particularly from Caroline Ellison, who was the CEO of Allimeter Research that was Bankman Freed's hedge fund and his ex girlfriend. You know that they produced this kind of chain of balance sheets that Sam Bankwetfried was was very active in. So yeah, yeah, it has not looked good for what has been his I guess defense in this what's he claiming or what's I don't know? Well already told us up there. There are aspects of the defense that look like a traditional white collar defense. You know a lot of times in white collar defense is what the person who's accused will try to do is present is very complicated. There's a lot of ins, a lot of outs. You know, this is you know, complicated stuff. And I was doing my best, didn't mean to commit fraud. There is some of that here, but there's also been an effort to essentially blame everybody other than him, And that's the part that I'd say is probably legally, you know, less well advised. He spent a lot of time in interviews ahead of this, and we've seen some of this come out during the trial, essentially blaming Carolyn Ellison for for the for the fraud, or blaming his lawyers, or blaming you know, outside counsel and so on, and again it hasn't seemed especially credible because the prosecutors have been able to produce you know, emails and so on showing that he was very involved. And also, you know, it's not exactly a good look when the CEO is saying, oh no, this is just my underling's fault, especially the CEO who at one time you know, had personally enriched himself to the extent that Sam bankman Fried had done. So he you know, we've learned of a billion dollars in personal loans, you know, three hundred million dollars in luxury real estate, and the list kind of goes on and on. Is there any chance and I don't know that this matters in terms of this current court decision, But is there is there a chance that people who lost money in FTX or made whole because of you know, moonshot investments that they made that now look like they may pay off. Yeah, I mean, I think it's it's definitely too soon to say made whole. I think it's looking increasingly likely that some money at least will be recovered. You're I think you're alluding to Anthropic, which was this kind of moonshot AI investment is now you know, there are rumors valuations being tossed around in the in the tens of billions of dollars. The issue is that there's a lot of these assets are not highly traded, so it's it's sort of hard to know, like if they started selling them, what would happen to the price? Where were they go? And even even with a case of anthropic, right, you can't just go and sell that stake on the open market. A lot of this stuff will take a long time to unwind, the economy can change and so on. The other thing is the question of whether or not investors can be made whole isn't really relevant to Sam bankman Free, it's not relevant. But yeah, I mean Matt Levine has written about if you defraud somebody and that person never gets her money back, you know you're gonna be in trouble. But if you defraud someone and she does get her money back, it's gonna be less bad. Yeah. Yeah, And and perhaps you know that will impact how Sam bankman Free's legacy, you know, is perceived and so on. I don't think it's gonna have an impact on this case because again, the jury isn't hearing this stuff. And again the charges are did Sam bankman Free take customer money and gamble it? The fact that you gambled it, and maybe one doesn't necessarily you know, address the central allegation. And again there are allegations here. You know, we're going to have a second trial around campaign finance violations that stuff. Can you know, he could go to jail for a long time. There's the Chinese bribery allegation. So there's a bunch of these are separate trials. There are two separate trials. Yes, so what's the timeline look like for this one? Yeah, So we're gonna see Bank and Freed likely start testifying today, that'll go into tomorrow, probably early next week. I mean, we the jury could begin deliberating next week. We could have a verdict as as early as next week, although it seems possible it could go onto our reporters allowed in the courtroom, Yes, okay, public is allowed in the courtroom. We have we have a team of people down there there. They've been reporting on this, you know, relentlessly. You can read it on on Bloomergeck Tom at the terminal. General Public's also in there. So we've seen kind of a weird rotating list of kind of crypto figures and influencers. I think Martin Screlly was was there early on. You know, it's it's it's sort of been a you know, a of weird reality. I mean, this is really to a certain then I wonder, you know, crypto is this in a to what extent? Is this an indictment or of the crypto space? I mean, is it seen that way by people? Well? I think it's you know, it depends what you talk to. You So you talk to people in the industry, right, they have been very keen and you've seen the industry really like they have been some of the most aggressive people in calling out Sam Bankman free because because they want to make an effort to say, hey, look, this was a bad actor, you know, bad apple, He's making us look bad. I think in the minds of normal investors, in the minds of the public, right that arguments a little harder because Sam Bankman freed. His whole thing was that he was the most law abiding, least sketchy. I mean, this is a world that has operated kind of on the edges of various laws in all over the world. So so again it's I think it's really too early to know how the what the impact is going to be on crypto broadly, and I think some of that has to do with, frankly, the verdict and and and depending on what the jury says, I think will will affect how people probably, I mean, can he dude, you got to think that, you know, just because Bernie Madoff committed a big sixty five billion dollar fraud with an investment Ponzi scheme, that's not an indictment of the US stock market and certainly not of the US dollar, right right, right exactly, although I could see that because crypto is so difficult to understand, because it's not clear yet whether much or even any of these coins are gonna be worth something in five or ten years. People might very easily conflate the two. Yeah, absolutely, I mean it was an indictment of Ponzi schemes, right, And and the UH and the crypto critics are gonna are gonna essentially say that there there are businesses out there that are operating in ways that aren't necessarily that different from UH from the way ftx's offer. And this guy's facing real jail time, right, what it's I mean, it's he faces a potential life sentence. Wow, the I mean effective life sentence. It's gonna be so many years that it would be, you know, he'd be old or deceased by the time he got out. We don't really know, you know. Of course, there's there's a wide potential range of potential sentences. You're talking about anywhere from years to decades. And of course he could be acquitted. Whatever happens with this case, I think they're definitely gonna be appeals. And there is this second trial, the second criminal trial, which also carries significant jail tourn all right, man, great stuff, Max, Thanks for joining us here. Max Chaffick he's a columnist for Bloomberg BusinessWeek. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three and on ball Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.

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