- 1 day ago
Category
🗞
NewsTranscript
00:00We begin this out with stocks slightly lower following the biggest slide in three months as investors search for direction. The Morgan Stanley chairman and CEO Ted Pick has seen it all and he joins us now for more. Ted, good to see you. Guys, thanks for having me. Electric moment. You must be feeling good. I'm feeling pretty good. You're not going to be in the speech in about 28 minutes time. Can I avoid that? Yeah, I'll be with you guys. Let's talk about how things are set up for 26. We've drawn a big distinction between the energy that's coming from European officials and the emotion they have about a place like Greenland and the
00:29optimism that people have for the broader U.S. economy, particularly from bankers regarding the pipeline and the amount of debt issuance we've seen over the past few months, the debt underwriting that you've really benefited from that's going to fund a lot of the transition. How amped up are you about the year ahead? Well, thanks for having me, guys. Great to see you. I'm pretty amped up. You know, we had we had several years where the imminent activity was going to get going and then COVID happened and then rates roofed and it's taken a while for it to unglue. But this kind of, in this case, literal
00:59noise speaks to C-suite need to act, whether it's to re-globalize or reorient where your operations are, who you want to do business with. And as long as there's activity, we're busy. So cross-border M&A, large cap M&A, going to be important. AI acts as an accelerant to that, too. If you want to actually get after their productivity gains and embed it in AI, you have to have the wherewithal to do it. And if your market cap is 30 or 40 billion, that's tough. You know, how do you take a couple points off your income statement to do that year after year?
01:29Two or three hundred billion. Maybe you got a shot. So people are thinking bigger. And then the sponsors, as you know, a couple thousand companies that have been sitting there that have billion-dollar market caps implied. They need to come.
01:40And then very importantly, have these great companies that have been private. And over the last 15 years, we've seen companies go public to defease options or effectively be secondaries.
01:48You may actually see great companies that are growth companies, some of them in the AI ecosystem that want to go tap capital. So for the investment bank, a great period. And for our wealth manager, leading wealth manager in the U.S. and the world,
01:59you want to allocate your capital efficiently. So very exciting.
02:02Let's unpack some of those business lines. So let's just pick up on the IPO pipeline, the activity we could see later this year.
02:07SpaceX, OpenAI, we're talking about some absolute monsters. You and the team have been historically quite dominant in the tech sector.
02:14What are you doing right now to prepare for that moment that might be in our future?
02:17Well, these companies, you know, you bank them for a whole bunch of years and you get to know them.
02:24So there's a process, obviously, the formal bake-off process and then the go or no-go decision.
02:29But typically, the company has a pretty good idea of what it wants to do ahead of time because it's selected its group.
02:35And the stakes are really high this round because, as you say, the implied market caps, these companies are enormous.
02:42But also they are, paradoxically, they are very large but also mega growers.
02:47You know, some of them have a little bit of a change-the-world feel to them.
02:50So they could become must-own.
02:52I mean, one of the things that you guys have talked a lot about is so much of the equity base has become either beta
02:56or it's become kind of the seven or eight names.
02:59Well, what if there's some additional companies at $300, $400, $500 billion market caps, trillion, trillion-and-and-a-half-dollar market cap?
03:06The active management community says, I want to own that.
03:08I want to own that from the time of the IPO.
03:10So I think it's not just Wall Street getting to know these companies.
03:12It's a whole bunch of investors who have either backed into early rounds or want to be there when the IPO comes.
03:17When we were speaking with you a year ago in these seats, you were talking about how it was going to be a great year for IPOs and M&A.
03:24And it was for your bottom line.
03:26You had an incredible year.
03:27There was, though, a lot of IPOs and a lot of deals that got stymied by Liberation Day and policy uncertainty.
03:34What has to go right for some of these deals to come to fruition, OpenAI, Anthropic, SpaceX?
03:40Well, I think part of the reason these companies are so interesting to investors is they are not rushed to go public.
03:48So there has to be an element of being patient if you're in and around the ecosystem.
03:53They don't have to come in the first half of 2016.
03:55They can come in the second half of 2016.
03:56They could even come in 27.
03:58But they are drawing a whole bunch of interest to names like them, derivative plays in the ecosystem as you sort of disaggregate the entire AI daisy chain.
04:07Where do you want to play?
04:08So the anticipation of the company going public almost is as important as the company itself coming.
04:13But whether they come, Lisa, in 26 or 27, they're going to come.
04:18They're going to come.
04:19It's sort of a dissonance right now when you talk to business leaders about how much enthusiasm there is for deals and for energy in the U.S. economy.
04:27And then when you hear the policymakers and you hear uncertainty and you hear sell America, how do you square those two narratives at a time where you do hear a growing number of investors say they are diversifying away from U.S.
04:37assets?
04:38I hear you guys talking about this a lot.
04:41I think there are two separate phenomena, but they're not exclusive.
04:45One is we got the arc of history.
04:47You know, I've gone on about the end of the end of history and that things would get going again.
04:51And the nation states would be battling for hegemony and kind of trying to, you know, win out on the rise and fall nations.
04:58That's just a historical fact that kind of got there was an interregnum between Berlin Wall and COVID.
05:04We're actually back to the balance of human history, as we've all studied.
05:07And that means there's going to be the kind of stuff that we are living through right now.
05:12It's just been a while.
05:13And I and I don't know necessarily that that is something we should expect to go away anytime soon.
05:19There's going to be renationalizing, nationalizing.
05:22And that means in some cases will be higher country risk.
05:24There'll be maybe pockets of illiquidity.
05:26There may be opportunistic transactions or allocations that happen.
05:31But after 20 years of financial repression, we're back to live markets and live nation states.
05:36That's here.
05:37But at the same time, you have U.S. capital markets, which are more than half the capital stock.
05:41And the reality is very basically, as we know, corporate health is excellent.
05:46Consumer health at the top end is excellent.
05:49And obviously the administration is getting after housing for the for the bottom half of the K.
05:54Earnings, as you know, grew eight percent this year.
05:57They could grow in the mid teams next next year.
05:59That's double the long term average.
06:01That's pretty good.
06:02So good corporate, good consumer, excellent capital markets and easier Fed to lower by 75.
06:09Maybe there's more to go.
06:10Maybe it's a demand driven 2026, in which case the Fed doesn't have to move.
06:15We have good inflation.
06:16We keep on powering forward growth.
06:18Or maybe it's supply side where there is spending, but there isn't the same kind of job creation.
06:23Then the Fed will help out.
06:25So there are downside cases.
06:26But just in the main.
06:28Oh, and the tailwinds of deregulation in the bill are kicking in.
06:32It kind of is hard to argue against the 26 U.S.-led growth case.
06:37Now, we could get in a debate about where asset prices should be.
06:40But in terms of just two years ago, we're talking about recession.
06:43Last year, we weren't sure because the administration's come in.
06:45We're not talking about that today.
06:47So for our business, very simply, we write tickets to kind of two times GDP nominal.
06:52And so if you think about our wealth and investment bank, if we're going to grow, you know, five,
06:5610 percent on a two times basis nominally, that should be pretty good for our business for doing our job.
07:01Corporate health is very good.
07:03It's excellent.
07:04Software in health is questionable.
07:06Right.
07:06Can we talk about that?
07:07Right.
07:07The move in the last 24 hours, the live market stuff, let's get into that.
07:10The move in Japan at the long end of the curve, is that a warning shot?
07:14Is that the start of something bigger?
07:16Well, I mean, this Japan trade has been talked about forever.
07:19And I would expect that in a lot of, you know, highly indebted countries, you know, off the LizTrust moment where the demographics are poor
07:33and you don't have the wherewithal or fiat to kind of work your way through that, there could be some vulnerability.
07:39So what does that mean?
07:40That means if we're sort of do our economics meets, you know, poli sci thing, I think that means you want to get closer to places where you can act in your joint economic interest.
07:50And I think the Japanese example is one that we should continue to pay attention to.
07:56I wouldn't be surprised if we see pockets of that now and then when, you know, there's a little talk of the balance sheet looks lousy,
08:04but we're going to inject a little stimulus and let's see if anyone notices.
08:07Yeah, they noticed.
08:08So, you know, you sort of have to, you know, then you adjust.
08:11It's, you know, it's a trial balloon.
08:12It gets pulled back and that's probably healthy for markets.
08:15You know, you see a lot of that's been bought back today.
08:17But that's different than the U.S. Treasury phenomenon.
08:19You know, that's been hugely overblown.
08:22The reality is that when we did this a year ago, the Treasury Secretary, as you know better than anyone,
08:28was talking about the 10-year being so important to keep an eye on.
08:31I think the 10-year is around 457, 455, 460.
08:34Now it's at 425, 430.
08:36So the 10-year is doing its job.
08:38There's some steepening.
08:38Yes, it's probably healthy.
08:40So I do think there's a conflation between kind of U.S. Treasury phenomenon and the world.
08:46And I think there's a difference.
08:47And, you know, we just have to continue to highlight the difference.
08:50Very quickly, Ted.
08:51Yes.
08:51You spend time, you grew up in Venezuela.
08:53New world now.
08:54Are you planning to maybe help facilitate companies go back in?
08:58I'm not prepped for that question.
09:00Well, you lived it.
09:02Thank you so much.
09:03That's why I'm interested.
09:04Because you have a different take probably than every other CEO walking around this forum.
09:08Well, Venezuela is an extraordinary place.
09:11Has a proud, but now in recent decades, very troubled history.
09:16But is, you know, if you know your Monroe doctrine, critical and has, albeit, as you've talked about at length, it's more sulfuric.
09:26But very high, vast quantities of oil beneath the ground.
09:32So do I think Venezuela is going to be relevant?
09:34I think Latin America is going to be relevant.
09:35I think the hemisphere is going to be relevant in its sort of thinking around how it wants to get closer while maintaining its own, you know, political and social independence from the U.S.
09:47But I think a coming together of some places may make some sense and may be in the broader economic interest back to the previous question.
09:54That was a fantastic answer.
09:55Thank you so much.
09:56I've got one more.
09:57I hope it's not a landmine.
09:58There was some news earlier about Deutsche Bank, and I just want to breathe some life into that story.
10:03And essentially, the Treasury Secretary came out.
10:05There was some research that he didn't like.
10:07And according to him, the Deutsche Bank CEO has turned around and said, I don't stand by that research.
10:13That's basically the point.
10:15Is it difficult for the research department of Morgan Stanley to say what they think in an environment like this one?
10:21And I ask this question because I know some tremendous individuals at Morgan Stanley in research.
10:27And they are all highly intelligent, capable, and have their own thoughts about where they think we are in this moment right now.
10:33But is it difficult in the C-suite to allow them just to go out there full-throttle, full-blooded, and just say what they really think about this moment?
10:41Absolutely not.
10:43I've not had a piece of research at my desk for a yellow light or a no-go.
10:47I think what gets a little tricky is these institutions also have desk analysts.
10:52So I don't know if this one came out of the research department or maybe a desk analyst sitting in one of the divisions.
10:58But to answer your question directly, we celebrate broad opinion.
11:02I do think – but to give not kind of the standard answer, part of the reason you like our research is because it's not just regurgitation because we all have a Bloomberg terminal, okay?
11:15So it has to have some kind of value add.
11:18But it doesn't have to just be provocation for its own sake.
11:22So we have industry leaders.
11:24We have sector leaders.
11:25We have Seth Carpenter, who you pointed out.
11:28I was watching you talk to him, and I was, and that was quite a moment.
11:32So when I look down the bottom of the camera, you're actually there.
11:35Starbucks all over my suit.
11:36So thanks for that.
11:38That was excellent.
11:39You had at least one viewer that day, and that was me.
11:41So – and Seth.
11:43But the answer is the independence of research is important.
11:48We've invested in it for all these years.
11:50That having been said, sort of writing research to just sort of provoke and kind of get your Warhol moment, I mean, that is not really fair to the institution either.
12:02And it puts – it puts the particular government or whomever in an awkward spot because they read the research.
12:07So I think there's got to be a balance between independent integrity and what you're writing, and writing something that actually is meant to add value and bring intellectual capital to the fore.
12:16Send me the dry cleaning bill.
12:17I sort that out for you.
12:19I didn't actually spit it up.
12:20I just swallowed it and smiled.
Comments