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Take a look at the S and P five hundred right now at the sector level, your biggest gainer is those financials. That sector up about two percent as a whole. A lot of those gains, a lot of that strength is coming just from JP Morgan, which is currently up about five point one percent after taking the earning stage this morning. Let's break it all down now with Bloomberg Intelligence Senior Global Banks analyst Alison Williams joining us in
the studio. Allison, it's already been a long day for you, but talk us through, of course, the reaction that we're seeing, because it seems like JP Morgan managed to prize really across the board.
It did, and I mean, I think that the reaction is a little it's surprising to the upside in terms of how strong.
The stocks are reacting.
I definitely think that we got good news from JP Morgan. I think, you know, on the margin, good news from Wells Fargo, But in general, I think the stocks are also reacting to the potential soft landing.
For the banks.
So we know that interest rates are coming down, and that's the best case scenario for the banks. Are interest rates come down, it helps to spur loan growth. That helps that interest income. Credit continues to be solid what we saw in the quarter. First of all, credit does continue to be solid. JP Morgan did take a billion dollar reserve, but we think that's on the conservative side of things.
You know, well, you think they're being too conservative. They should have taken a bigger reserve.
I would know, I would I would say that the billion is conservative. I think you know, the fact is that they're charge offs like the current day losses came in lower than.
Expected, so that's a positive, right yeah.
So I mean basically, you're saying the consumer is in pretty good shape and they were smart about their loans.
Right, correct, correct, And in general, what did most of the provision. Thing we've seen is the fact that card loans are growing, So it's just about the growth. So you know, things are normalizing, as we say, which basically means they're going up to where they should be over time. But things are healthy interest income. I think that's, you know, the big the big news of the day. In fact, you saw jpen Morgan stock bouncing around a little bit because they sort of went back to the beaten raised.
We saw that for several quarters in the row they've beaten an interest income, they raised guidance. We didn't really see that the last couple of quarters.
Did they set it? Set us up for this? I feel like we got set up.
I feel like we've been doing to be honest, I look back at the HCPI function, right. So I'm looking at JP Morgan stock. One month and one day ago, on September tenth, Daniel pinto the all important JP Morgan president came out and said, hey, you guys on the street, your estimate for net interest income is way too strong. We're not going to make that. And he pushed the
stock down on that day five point two percent. Now they come out and beat on net interest income and raised their forecast for this year, and the stock is up five point two percent.
Yeah and so and the two things he said, by the way, because he.
Said net interest income is going to be lower expenses are going to be higher, and so today we were looking for evidence right of you know, estimates have came down for net interest income, so have they come down enough? And so they came out, they beat the current number. They raised guys for the fourth quarter, and then Jamie came out and said, you know, next year it still
looks a little bit too high. And so my guess would be, you know, Bi, we don't do estimates, but my guess is going to be estimates go up for fourth quarter and people wait to adjust their twenty five to see what happens over the next few months, because as Jamie also said, things can change, right, and we are going to want to see what happens in terms of the long growth and the deposits and all of that. But you know, to your point, they talked things down,
they came out and did better. They also similarly on the trading front, right, So trading trading and a best of banking fees be pretty much across the board except for the equity fees maybe a little bit more optimistic. And we think that really sets up well for you know, Goldman and Morgan Stanley, which we're gonna hear from next week.
Right, Well, let's talk a little bit more about Jamie Diamond, because of course you have the numbers, and then you have the call, and then you have of course, what Jamie Diamond says. He sounded kind of doom and gloom a little bit relatively speaking on the economy. He also had some interesting things to say about cash, and I believe we have a clip of that.
I've been quite clear. I think things are the future would be quite turbulent. Cash is a bill guy asset sometimes in a turbulent world. And you see my friend warm buffet, there was dog pine cash right now. I mean people shouldeel a little more thoughtful about how we're try to navigate in this world and grow for the long term for our company. I'd prefer to wait. We will be able to deploy it our share and be very well served by his waiting.
I don't remember.
And so that was Jamie Dimond just talking about how he views cash as a valuable asset class still And I mean you're seeing that in money market funds. Matt and I talk about this all the time, the six points something trillion in money market funds. Yeah, yeah, And it's interesting that I don't know I feel for like for some of the regionals.
That's painful, the fact that you have.
Seen people maybe shift their deposits from banks into money market funds. But I guess that's not a JP Morgan problem.
So I think that you know that that obviously a bad has both deposit offerings and money markets.
That's a positive.
But I think in general his point is where there are are, you know, a lot of potential risks, it's always good to have cash. Keep in mind that, you know, one of the best things Jamie's done throughout his career, right is be ready for the moment. So if you look back at the financial crisis, going into that, investors kept asking him, oh, why aren't you returning capital?
Why do you have so much capital?
And that's where the term fortress balance sheet, I think where it came from. And because he had that balance sheet when a lot of other companies were weak, right, he was able to pick up the deposit franchise of Washington Mutual. He was able to pick up the prime brokerage business of bear Stearns. He's only gone on to build those even stronger again. In them pandemic picked up some assets even last fall, was able to do some things. And this quarter again like that capital ratio, that was
another I think really positive surprise for bank investors. They did a lot of buybacks and that's why again, like I think sometimes a lot of his comments get headlines, but it's really the underlying philosophy that he's talking about in terms of there are a lot of structural risks out there. She only had a great I'm sorry, Lisa had a great interview recently where Jamie said, you know, talked about the structural risk but also said thought that
FED did the right thing. So I think near term things look very strong, but he's just pointing out there's a lot of structural things out there. He focuses a lot on the geopolitical risks, and cash is something very valuable to have when you see that sort of risk planning.
He's just heroic, Jamie Dimon.
I mean, he's like otherworldly. He mentioned in that SoundBite that you played Warren Buffett. I feel like Jamie Diamond is probably Wall Street's, you know, favorite sort of giant since.
Buffet, you know, and he's just always hitting home runs.
Yeah, but I don't know.
I was I was listening to an interview that Charlie Munger did randomly a couple of years ago, and he was talking about like the sleazy products that the banks sell.
He didn't call it.
JP Morgan specifically, but I don't know. And Charlie Munger is an Orton Buffett, but you think of them in the same breath.
This is a tangent. I do want to talk about will Spargo a little bit while we have.
You, Allison, because of course net interest income that was the big headline for JP Morgan was also the big headline for Wells Fargo maybe in the other direction, even though Wells Fargo I think is having a pretty good day but.
More than six percent.
Yeah, but we'll talk to us about that reaction. Because they did miss on net interest income.
So they did miss but I think once you sort of they missed, and they actually their guidance moved to down nine percent for net interest income this year previously is down eight to nine percent. So I think initially when you saw those headline numbers, as I did, thought like, oh, this is negative.
But digging into.
It a little bit, a lot of the downward guidance is really based on the myths that we saw in third quarter, and one of the things that they did was to restructure their investment securities portfolio. So really the fourth quarter estimate looks about stable. So the downward guidance really kind of reflected some of the pain in the quarter, if you will, and the investment banking business and a lot of the fees that they're seeing more than offset that.
So more was they were able to absorb the loss the hit from restructuring their portfolio, able to absorb the weaker than inspected a net interest income and still deliver on the top line.
What's your favorite bank of all? I'm just putting together a comp chart. I'm looking at which I always do, JP Morgan versus Wells Fargo, Bank America, Morgan Stanley, Goldman Sachs City. I feel like that pretty much covers it, right, Morgan Stanley over the last five years, killing everybody else.
So keep in mind, we don't recommend stocks and bi but I can't talk.
I can't talk.
I can't talk fundamentally, you know, I mean, for me, they each have their own great qualities obviously, you know, JP Morgan, best in class, best returns, executing a virtuous cycle of technology spending that has helped the bank you know, ten twenty years.
So continue to execute really well.
Goldman Sachs best in class and that institutional business, and I really like the changes that they've made in the last couple of years. A lot of the diversification strategies, if you will, did not play to their core competitive strengths. I understand why they made those changes, but I think it's it's sort of a vote of confidence in the institutional business that they're kind of getting back to where
they were. Morgan Stanley, to me, still has a little bit to prove, right They Gorman did an excellent job in terms of making acquisitions and shifting the business mix. But now Pick is going to have to deliver on a lot of the promises that Gorman made sort of on his way out the door.
That's pretty much tripled.
But but yes, but but they've changed.
But the move from the institutional business to the fee side, right, so I think that was the better move than perhaps some of the diversification strategies that that Goldman did. So Goldman backtracking, but Morgan Stanley going to press their bet in terms of having that more recurring revenue, et cetera.
So definitely done a good job there.
Bank of America, US Bell Weather and then City Group just really a unique animal. I think that disappointing for a long time in terms of trying to get operating leverage. That's a holy grail for them, and I think Jane Frazier finally making some good decisions.
So you're listening to the Bloomberg Business Week podcast, catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then Brout Auto with a Bloomberg Business app, or watch us live on YouTube.
As a consolation.
The producer said, we could talk about cars all I want, And I think it's kind of helpful that one of the biggest.
Movers on the day is Tesla.
Yes, in terms of percentage losers, it is the biggest one.
On the S and P percentage gainers. The biggest one.
Is Uber's correct and those stories are related. You may not understand exactly how at first, but we're gonna bring Kevin Tyne and to talk about he's the director of research at Presidio Group, joining us from Princeton, New Jersey. How very ivy league of you, Kevin, but not in your garage. I'm usually I'm used to seeing you surrounded by like a wall of guitars and a V twelve.
There's nothing on that wall.
Well, actually, I just finished. I was just out there. We finished a an engine swap and an older mL fifty five AMG truck. So I got a lot of scraped up forearms and knuckles and whatever. But it's running. So I'm a fan of the So the place is as basically, that's why I'm in here.
That's a Mercedes Benz SUV that always reminded me of a hiking boot. It's like the same shape as a hiking boot.
I'm gonna google this after the segment.
Let's talk about Tesla. Though they unveiled Elon Musk. Yesterday, the richest man in the world unveiled his cyber taxi or cyber cab. I guess it's a driverless car. There's no steering wheel, there are no pedals. I thought the form factor was pretty cool. I mean, it's a fastback kind of looks like a Mustang mock e. But investors were super disappointed by a total lack of detail, like when are they going to come out? How much are they really gonna cost? Are the regulators going to allow
them to be sold in large numbers. What do you think about this cyber cab launch?
I mean, and that's typically the standard operating procedure is somewhere down the road there's it's basically to put ideas out there that this is not an automaker, right because that business is worth zero or less depending you know what you're building and how much of it.
You know.
The interesting thing to me about cyber cab or whatever or was granted there's no driver, but it was only two seats? Am I wrong on that?
Or that's so weird? It seems like makes no sense.
Like it would seem like you would right, like you go out as couples or you know, you and a couple of buddies, like it seemed like two seats even though you know, I thought it should have held more people to that, but whatever, But no, that's ultimately the plan is that this is this is a company that is a story stock, obviously, and the narrative is every way that it is not an automaker, and it's about technology and all the non disprovables down the road that
get at the valuation similar to other or even higher than other tech companies.
And I mean he also revealed this robovan concept that could transport as many as twenty people. I think we were showing images of the van, but I agree on the two seats thing. But of course you think about why this is going over so poorly in the stock market, it's because the timelines here are so squishy. I mean, you think back to twenty ninth and Elon Musk said that he was going to have a million robo taxis on the road the following year, and that obviously.
Did not happen. We are in twenty twenty four, but I mean.
Kevin, you point out in your notes that this is sort of, you know, par for the course, for Tesla and for Elon Musk specifically.
Yeah, I mean lucky. There's every excuse of he doesn't make it, but he eventually gets there or whatever. And I think the issue with the stock today versus competitors is that one it proved that he isn't far and away ahead of anybody if at all, or how far behind, because those competitors have come out very recently and said like, hey, besides the science and the regulatory environment, this still has to make money someday, and we're very far away from that.
And I think when you look at the event last night, he didn't answer any of those questions. If those are the three big things, like, hey, is it possible by when? And when does it make money? We didn't, the investors did, really didn't get any of those answers. So so you sell off one and you buy the others that at least, if nothing else, might not be any closer. But they're being more realistic about the goals.
By the way, there already are driverlests like robo taxis in San Francisco and probably other super progressive cities. Why is this such a big deal? Why is it so hard to achieve it? Waimo already does it?
Yeah, well, you know, I thought what was interesting going back away. You know, they talked about, you know, because you'll hear it all the time, especially from the bulls, about how much data they get from full self driving already being on the road. But the question is how much of it is actually usable? How much is actually teaching anything? Right, if nothing's happening, what are you learning
from that data? So you can collect all the all the miles, but until you have a disengagement or an event, it doesn't really learn anything. So, you know, I think it's a little bit of that is that people get distracted by how much data they collect. But my question is like, how much of it is really usable? And how do you prepare or plan for all the things that don't happen all the time, you know, or are very rare. So you know, I don't know that, you know.
The question of the science of it to me is you know, and the safety of it is paramount. And that's before you get into all the other issues, right, the regulatory issues and the profitability issues. So you know, I think investors are looking at it like the Ubers and lifts of the world are, and even Weymos of the world that are being a little bit more conservative on timelines on safety, on profitability are being rewarded, I guess for lack of a better word, in this market.
Yeah, Uber in particular screaming higher on this Friday afternoon.
But Kevin, you made the point that when it comes.
To Tesla, it's a story stock and the story for Tesla has become a little bit murky when you think about I mean, what story do you think that investors would want to latch onto here?
Yeah, I think it's that that it deserves because it has even beyond technology multiples. So this can't be an automaker because then you would be getting four or five, six times and it's getting ten times that, So this
can't be an automaker. So all the issues with supply versus demand, over capacity, price weakness, margins, compressing, all that is discounted and pushed aside, and then you look at it and you say, okay, but what's coming And this is an X I don't know, hundreds of billions trillion
dollar market and they're ahead. And that's the narrative. So you know, to an extent, it almost feels like the product of this company because a lot of things that they show and talk about don't actually exist or aren't marketable,
or aren't revenue generating. The product is the stock at this point, when you're in between these cycles of growth in the auto industry or in the auto division, which isn't really happening, and you don't have these other products that you've promised on your timeline, yet.
I'm still worth this a shocking amount, even though it's down by half since it's high in twenty twenty one, it's a seven hundred billion dollar stock. I mean Ford, the Ford Motor Company is a forty billion dollar stock General Motors, which has been doing better than any of the other carmakers this year. It's only a fifty four billion dollar stock, So I mean, it's pretty insane that Tesla's worth fourteen x General Motors.
Well, look at even a Toyota of the world, right, if they're a better manufacturer or automaker than that company top to bottom, you know, and the and the evaluation dwarfs it, which just tells you that the market isn't thinking of this company as an automaker, because if they were, they would be an also ran or even a not very good company.
Toyota's with two hundred and seventy five billion dollars, so not even half and barely a third. Let me ask about Uber. Why is When I got here in the morning, I didn't quite grasp until I started reading through notes. Why Tesla's failure is Uber's success in this space?
What do you think?
I think It's just it's the removal of uncertainty, Right, there was all this build up to the Tesla event, and then there's the belief and probably isn't a zero sum game, but at least that's the way it's played out today is that oh, okay, Tesla doesn't have it figured out yet and we don't know when they will,
so everybody is sort of still in play. So you know, when you look at the valuations, Tesla's priced for perfection in all of these ancillary businesses, and last night kind of proved that they're not really worthy of that yet, at least not at this moment. And then it it provided a little bit removed some uncertainty about the things that Uber and Lyft had said recently.
I mean, we have a big take story, which we're going to talk about in just a few minutes, about how Uber is saving hundreds of millions of dollars by essentially screwing drivers right, stopping them out of its technology stack so that they can't get customers or can't work. I guess the idea is, if Tesla were successful, it would take the driver out of the equation. You wouldn't need an Uber, but then somebody would have to operate the road taxi fleet, right.
Yeah, you would still need fleet management. And you know, and again how far away is that? I know, you know, in my own mind, like how ready am I to walk out of an airport terminal and get in something without pedals and a steering wheel to go forty five minutes into the city, you know. And that's that's after the that I'm convinced that it's safe, that the regulatoryronment is favorable, that the companies can stay in business because
the technology is profitable. So again, I think that timeline is way longer than is priced in for some of the stocks right now, because I don't think it's around the corner, all right.
Kevin, really great to speak with you, of course, all things cars and what's going on in the world of cars. That is Kevin Tynan. He is director of Research over at the Presidio Group, joining us from Princeton, New Jersey.
Miss you, bro.
You're listening to the Bloomberg Business Week podcast. Listen live each weekdays starting at two pm Eastern on Apple car Play and Android Auto with 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.
We have a real tree. Now we're going to speak to Brett Keller. He is the CEO over at Priceline.
Matt.
We already spoke to Brett today at ten thirty am. That was so good.
We said, please let us anchor radio. We want to talk to Brett again, so we're going to do that right now. Brett, great to speak with you again. We really appreciate you being so generous with your time. Talk to us about the launch of Penny Voice. Of course, Penny it's this Ai chatbot is my understanding that launched in June twenty twenty three.
It helps you book travel.
Penny Voice is the next evolution of Penny. Explain to our listeners exactly what Penny Voice is designed to do.
Sure well, Penny is integrated across all of our user experiences and a consumer can come in and as they're either planning a trip, booking a trip, or looking to service their trip, they can engage with and activate our jen Ai chatbot, and over the last year, our consumers have been chatting back and forth with her to address a number of different needs. Just within the last week,
we announced a new partnership with open Ai. We're one of the first brands in the world to connect to their new real time voice API, which enables conversations in real time, as opposed to talking to a bot, which then translates into text and back and forth, which really slows down the experience. This enables a consumer to have a real conversation. You can interrupt Penny mid flow, you can ask her more challenging questions, and she's able to
help you do a number of things. So trip planning, for example, you need ideas about a trip you want to take to a location you've never been. You're going to Japan. You want to learn some of the things that you want to do in a specific city, or even what cities to visit. She can help you with that. When it comes to booking a hotel, she can answer questions about the specific type of hotel you're looking at or one that you're interested in. And once you've booked
your trip, she can even help you service it. For example, if you want to cancel it or make a reservation change, she can walk you through that flow. And if she can't help you, she can quickly hand you off to a live agent who can deal with the more complex scenarios.
So one of the issues with AI is data gathering. Where do you get your data? Is it all just from the Priceline website all from the resorts and car rental and airline companies with which you work.
Yeah, so it comes from two areas. Primarily. The first is our inherent data pool that we have here at Priceline. That's all of the information that we have about all of the products and services that we sell. That's, for example, descriptions about the hotels, all of their amenities, their price points, their availability, et cetera. But Penny also has access to
outside information. So the same type of information you might find an open AI, we're just able to stitch that all together to make it much more relevant to the trip that you're planning and considering. And so we tie those things together to give you the best view from a traveler's perspective.
Ah, So she could say, like, this hotel is better than that, or I guess Katie, if you have Katie wants.
To go to a hotel for Jissage. Yes, I don't know if they have.
Those hotels, but you know, she can tell you the best Grissage hotel.
That would be really fantastic. So I am curious.
I mean, how comfortable is your user base with AI with using an AI tool? Because Penny the original Penny has been around since June's twenty twenty three. I asked you this at ten thirty, and I'll ask you again.
I mean, what has the uptake looked like so far?
Well, like any new technology, you have your early users and early adopters, and that's what we're seeing now, right those who either really aren't comfortable with everything that we offer in an online environment, that might be one set of consumers, and those who are just early adopters and really want to engage with the technology. I'd say that's another set of consumers. But consumers are asking a broad range of questions everything from you know, can I bring
my dog with me to this hotel? What's the fee associated with that?
Right?
If I cancel tomorrow? Can I do that? And so they're asking lots of different questions about their stay and they're planning trips with this, and so we're getting a pretty good adoption, I would say, you know, and as I mentioned earlier this morning, the adoption rate has literally been doubling each month that we've had this product on the shelf, and right out of the gate, within the first week, more than five percent of our engagements with
Penny are actually now taking place by voice, so that's being adopted relatively quickly as well, since that just really came out.
Do you have any numbers, because one to two is doubling, but that's still not a lot of customers.
How many people are using it?
She's had millions of conversations to date.
Wow, that's more than I've had.
Yeah, what kind of advantage you think this gives you your competitors, I mean, surely they're going to try and catch up or do something similar. Can you take market share right now? Being you know, first to market.
You know it's to be honest, that's probably early to make that kind of a statement in the marketplace. But like all of the technologies that we've seen over the past three decades, right since we've been in the online travel game, those who are first to market with new technologies that really matter will have an edge because they adopt it faster into their booking flows and into their trip planning services. And that gives you a leg up
for a few years. Because there are many of our competitors who are just much bigger, slower, more legacy companies. It just takes them time to adopt this and really apply it in the space and online travel agencies, in particular, Priceline is faster to move with this. We saw the same thing when the iPhone first came out. We were one of the first to market with a travel app. Now everybody's got an app, everybody's UXes have generally caught up.
But in the early days we had a couple of years worth of a lead that lasted for some time because of our speed and innovating with these products and services, and no one's doing it the same way. Right We look at what we're doing and it's different from what some of the other leaders in the travel category are doing.
So we're really excited about where we're going. And we think one of the bigger opportunities, of course, is to also have Penny answer the phone when you call our customer service center, so that you're talking with an agent who really can service you at an extreme pace and with extreme accuracy.
Hopefully we can get a human though if Penny's not deep always he will always give you. I like to talk to humans like you. Brett. Thank you so much for joining us.
It's really a pleasure to have you on Bloomberg Radio on television with us today. Brett Keller, their chief executive officer over at Priceline out of Norwalk, Connecticut.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business ap You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
A great conversation coming up now, Let's welcome in doctor Kelly Monahan. She is a Managing director or with the Upwork Research Institute. Upwork, of course, it's a work marketplace. It connects independent, highly skilled freelance professionals from around the
globe to one another. And it's interesting you take a look at the recent work that the Upwork Research Institute has done and they're out with a key workplace Practices of highly performing Companies report, and doctor Kelly Monahan, let's start there. Talk goes through some of the key practices that you've observed at such workplaces.
Yeah, I think so much, Katie. But let's start before we can talk about the practices, how few leaders are actually doing them today. Our research found that only twenty seven percent of global leaders are actually engaging in what we're calling these high performing work innovator practices, and so they're hard to come by. But those three practices are
those companies that are embracing distributed work. We still know there's so much conversation headlines around our too and where people should be working, but the reality is our leaders have moved beyond that and really focusing on the how of people, how they work and moving on to hybrid work. The second thing is they're embracing generative AI, but not in a way that siloed or chasing a shiny object.
They're incorporating it into their tech stack and making sure they're thinking about their workforce experience as part of that. And then finally, in today's labor markets, you have to think about talent differently, and so these work innovator practices are those that are actually looking beyond their corporate walls, beyond the full time employment model and looking for freelancers and managed services examples to find talent.
So what are the actual practices, Like, I feel a nap room is important, wellness room, Yeah, a lot of places don't have that. Showers would be great, a pool table, like what are we talking about here.
Yeah, so those are all great perks. I would say those are perks as opposed to practices. But what our research is finding, I don't know if you guys feel the same way, but the majority of this comes to how we relate to one another in the workplace and leadership and culture. So you can have a nap room, but if you don't have leaders who actually see you when you show up to work, actually engage you in a way that's helping you become more protective and help
protect your well being. What we're seeing the research, those are all external and those tend to have a short term carrot to them attached to them. But when you come and work with leaders who are engaging you, allowing you to work with the newest technology, trust that you want to work and be there, those are the type of practices that we're seeing help companies get ahead today.
I think wellness rooms are important as long as you use them responsibly.
You know, maybe there's a reservation system.
Your boss is supposed to talk directly to you.
What's that about.
Exactly? And just not that in know how too.
But like what we're finding, so many people are feeling far behind when it comes to a skilling perspective, and what our data and research shows that what people are actually looking for today is they want to stay future employed. They want to make sure that their employment's protected and the best way to do that is through skilling initiatives. And so we do see a lot of that come through in our data as well.
Can we talk about return to office and physical presence in the office, and I'm curious what you observe among these high performing companies. I was at the night Badget Fellowship dinner last night. Ken Griffin was speaking, which was pretty interesting, and he was talking about the importance of having everyone in the office. Of course, Citadel made a point of that during the pandemic, bringing people back pretty early.
What are you.
Seeing when it comes again to the physical presence of such companies.
Yeah, absolutely, It's a great question because it is something that we're still obviously trying to figure out across the board, across industries. That's what we can said, what the data says. So we went out and surveyed over fifteen hundred global leaders, and what we found is that one hundred percent of the companies that are winning and protecting their balance sheet today and they're protecting it by lowering the operating costs
by thirty percent. They're having a year over year cash flow of over eighteen percent higher than their peers, and they're lowering their debt to equity ratio. They are enabling some level of flexible work. Doesn't mean the remote first, doesn't mean in person time still matters, but they're getting that time's right and instead of just saying arbitrarily, you have to come in the office two to three times a week, instead they're saying, one of the moments that
matter where we need to bring people together. Oftentimes that's for training and development. That often means for bringing community together and really reconnecting and relationships. Oftentimes the work is best done individually and in a remote environment, but that in person time matters, and those high performing companies are bringing people together at those critical moments.
The other good thing that Citadel does for his employees, well, at least if you're an intern there, you get twenty thousand dollars a month. I like that, which I think is a pretty good work environment. How much does that matter, actually, doctor.
For it?
What do you mean in what way?
Just in terms of paying somebody a ton of money? Does that have a huge effect on that person's motivation.
Hey, you know what, that's a great question, Like I just want to develop myth because I think that is oftentimes we think, Okay, pay people more and they're going to work harder. Absolutely, you have to pay people a fair adjustable salary and wage. I mean that is like table stakes in today's environment. But what's more important are those intrinsic motivations. Again, that's do you have a sense
of autonomy in the way you're working. Do you feel connected to your coworkers and your colleagues, do you feel respected, do you have dignity in your job? Those intrinsic motivations tend to leave people to do much more productive workforces. Yes, money is important, let's make sure we get that right. But the reality is, again that's going to be short term in terms of the way it's feeling your motivation.
Yeah, I don't know, I really like money.
No, I was, I mean work to some extent. We're kidding, obviously we do like money.
Yeah, but you know, I always think it's interesting to look into the science of how happy money actually makes you. If you're an intern, of course, working there for three months during the summer, it's going to be sweet. You have an end in sight, yes, exactly, But you know, for a regular person, I don't know as a cityadel employee necessarily happier than an employee of.
Going maybe if they work in Miami.
You know, how about that? Does the city matter?
I mean, I feel like I'd be much happier with a company that was headquartered in Miami than one that was headquartered in like New York Chicago, Yeah.
Where they used to be.
Well, listen, I'm an Arlando and we just came through a hurricane. So I do think place matters a lot. You know, in today's environment. What matters to me the most just going through the situation is again managers and colleagues who are checking on me, providing that support. When it comes to place, it's really much more who's your community within that place as opposed to the city itself.
And I think again, so we're in the forefront of this, and I think we're going to continue to see internal mobility and where people choose to work again depending on where their company and how open and flexible they are. But the reality is it again, is so much less about where we work today and so much more about how and what our research continues to point to.
All right, doctor, really appreciate your time, really appreciate you rolling with us too on this Friday afternoon. That is doctor Kelly Monahan, of course, managing director over at the Upwork Research Institute, joining us from Orlando, Florida.
Glad of course that you are safe and well.
Brother mac.
A journal.
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It's the question that try.
This is the Drive to the Globe.
Dot com commuteck Well, brut yield it.
Don on Blueberg Radio.
All right, without question, the greatest st string that has ever been compiled.
This is the Drive to the Clothes.
I'm Matt Miller here in the Interactive Brokers studio with Katie Greifeld. We are filling in for Tim and Carroll, who are on the doss as the British would say.
They're on a travel day.
Back from Los Angeles, and God bless them, yeah, God bless them for those perks that they're able to wrangle.
Somehow, we want.
To talk about the forty fifth record high on the s and p Okay, we're not sure it's going to close at this level.
There are eighteen minutes for things.
To go wrong exactly, But you know, fifty eight eighteen, we're already above almost every strategist's target on the street. We're starting to see strategists raise them up. But last time I checked out of twenty two that we survey, only three think that we're going to go higher by year end. I'm sure the rest do also, but they just haven't put in their new numbers yet.
Let's talk to David Diets about this.
He's managing principal senior investment strategists over at Pea Pack Private Wealth Management. Joins us here in the studio. David, great to have you here in person. What do you think about this record after record after record? I mean I thought the FEDS rates were restrictive, but certainly not in terms of the stock market.
Yeah, absolutely so we're in a bit of a goldilocks situation here. I mean, earnings is always the most important thing as far as I'm concerned for the market, and of course with the banks reporting today, that's the unofficial kickoff of the third quarter earning season and they basically blew it out of the park, beating expectations very handily.
And you know, the banks are important not just because what their numbers are, but as barometers really of the economy, because they're dealing with companies and all sorts of sectors all day long. And so I think that developed a great positive sentiment. Of course, the second most important thing really is interest rates. Every day people are saying should
I buy a bond, should buy a stock? And these these as these interest rates have started to recede from their highs about a year ago, and as the forecast from the Federal Reserve is for lower interest rates, people are shifting money, I believe, from fixed income into stocks. And of course, in the real economy, that makes capex expenditures a little bit more affordable if the price of money to build the factories or whatever it is is less. And of course consumers too, going out to buy a car,
going to look at a mortgage. Mortgage rates are a good one percent lesson they were not too long ago.
I ate on cars are still a little bit too high.
Yeah, Matt actually knows a lot about that.
Only someone would make the interest on car loans.
Tax deductivity, and you know, we talked about that with the other David, though, we have to talk to this David, and we're going to talk about your ranking system because I think it's interesting that you said it's earnings and then it's interest rates, because we talk to a lot of people who take the other side. When you say that earnings are most important. Are you talking at the index level? Are you talking at the single stock level?
Really both?
I mean, at the end of the day, you buy a company for not only their earnings today, but for the growth of earning. Interest rates will fluctuate up and down. But if ultimately a company's not going to increased sales, not going to increase earnings, is not going to go anywhere. So I do think that's most important. Obviously, you like to have both the ind X earnings going up as
well as your particular company's earnings going up. But if you can't have the index at least you can you hire a stock picker.
Were you encouraged by JP Morgan this morning and the slew of you know, wells Fargo who else?
Reported this morning?
The kickoff black Rock exactly eleven and a half trillion dollars in Access Center Management. Were you encouraged by these earnings because they do undergird the entire.
Economy of the United States.
That's the second time I've heard you say undergird.
I actually thought of that word this morning, and I'm gonna keep saying no. I don't even know if it's a real word.
No, it is.
So it was encouraging, I think for a number of reasons. I think a lot of people were looking at their portfolios, particularly their commercial loans. Were they going to see some massive write offs or something like that would should suggest that a lot of borrowers are having trouble paying. We can see any of that. There's a little bit of weakness in the credit card portfolio, but I think most
strategists are saying yes. At the very lowest areas of the of you know, the consumer spending levels, those people, unfortunately are having problems, but you know, the heavy hitters are paying their bills and spending more. Certainly, the net interest margins, that all important gap between what they're paying on their deposits and what they're getting for their loans continues to look much better than expectations. So I thought it looked pretty good.
Look pretty good.
Well, we have a lot more bank earnings coming up, and then we get the regional banks, which should be really interesting. They've been interesting, maybe more interesting than the big banks, of course, since the.
Maybe more important to the economy.
Right exactly, because like if you're if you care, David about the whole economy, do you really care about Golden Sachs trading revenue?
Well, they are major there, it's in the now, it's a major bank. Certainly, there is a difference in their businesses because you've got those major banks have a lot of trading revenue. They're exposed to that m and a market, that IPO market. Those are things that are not really part of the business of the regional bank. So I agree with you that the regional banks get, you know, a better sense as to the you know, how things are going on main street in the middle market areas.
You mentioned the Dow. And unfortunately I don't care about the Dow, which that knows very well. I still care though, yeah, no, and a lot of people.
Do I care about the small caps? We gotten, you know, we talk about it because usually we can throw throw show rather three indexes.
So it's like, do we go with the Dow do we go with.
The small caps.
You should have had the Russell two thousand up for the past three months, I would argue, because they've been a very interesting cohort of this overall equity market.
Yeah.
Absolutely so.
We've actually been a fan, perhaps a little earlier than we should have been, of the small caps, and the reason quite simply is their valuations are much cheaper relative to large cap of course versus the mag seven, and they're also cheaper than they have been trading at typically. Actually they usually trade at a premium to the large caps because they have word growth potential. We have not seen that, so we keep thinking that there will be
a reversion to the mean. I think the main headwind for them has been those high borrowing rates and the potential threat of recession. Because they're smaller, they have less of a cushions that they're going to be more susceptible to the vagaries of the economy, and.
They're more likely to have to go to their local.
Bank, who, by the way, was very sensitive as to how much more credit they wanted to extend. But now with interest rates coming down, with evaluations being really at nosebleed levels for many of the back seven. I think investors are looking to broaden out their portfolios and take advantage of that. And of course today you will notice that the Russell two thousand is beating the pants off of very fine performance of the other indexes.
There you go, Does the election matter to you?
I mean not personally, but as a strategist.
Well so, yes and no. It really depends on your time frame. Now, we urge our investors to take a long term time frame because that gives you the best chance of having success making money. And I always go back to what Warm used to say, Oh, I've been investing through sixteen administration, state Republican eight Democrat. I've done just as well no matter who is in charge in the White House. So we don't think longer term it really affects what's going on in the short term though.
I do think there's some hesitancy we heard from Delta yesterday where people are not even wanting to book travel around the election itself because people I don't know, perhaps are afraid of disruption in terms of the investment, in terms of the election results. So we think that after we get past the election, you could actually have another tailwind to the market.
David It is great to see you. Really appreciate you coming by on this Friday afternoon. That is David Deets. He is managing principle and senior investment strategist over at Peapack Private Wealth Management.
This is the Bloomberg Business Week Podcast, a little lot of Apple, Spotify, and anywhere else you get your podcasts. Listen live weight day afternoons from two to five pm Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and The Bloomberg Business You can also watch us live every weekday on YouTube and always on the Bloomberg terminal