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We begin this out with stocks slightly lower following the biggest slid in three months as investors search for direction. The Morgan Stanley, chairman and CEO of Ted Pig has seen it. Oh and he joined us now for more Ted. Good to see you, guys. Thanks for having me. I'd like to feel like to be feeling good, feeling pretty good. You're not going to be in the speech in about twenty eight minutes time, You're going to avoid that.
Yeah, I'll be with you, guys.
Let's talk about how things are set up for twenty six. 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 optimism that people have for the broader US economy, particularly from bankers regarding the pipeline and the amount of debt issues we've seen over the past few months. The dead end of writing that you've really benefited from, that's going to fund a lot of
the transition. How ammed 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 emine actor is going to get going and then COVID happen and then rates roofed and it's taken a while for a ton glue.
But this kind of in this case.
Literal noise speaks to c suite need to act, whether it's to reglobalize or reorient where your operations are, who you want to do business with, and as long as there's activity, we're busy. So crossboard or M and a large cap M and A going to be important. AI access an accelerant to that too. If you want to actually get after their productivity gains and embedded in AI, you have to have the wherewithal to do it. And if your market cap is thirty or forty billion, that's tough.
You know, how do you take a couple of points off your income statement to do that year after year? But if you're two three hundred billion, maybe 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 a billion dollar market caps implied they
need to come. And then very importantly have these great companies that have been private and over the last fifteen years, we've seen companies go public to defase options or effectively be secondaries. You can actually see great companies that are growth companies, some of them in the AI ecosystem.
They want to go tap capital.
So for the investment bank, a great period and for a wealth manager, leading wealth manager in the US and the world, you want to allocate your capital efficiently.
So very exciting.
Some pank some of those business lines. So let's just pick up on the IPO pipeline the activity we could see later this year SpaceX, open AI. We're talking about some absolute monsters. Even the team have been historically quite dominant in the tech sector. What are you doing right now to prepare for that moment that might be in our future.
Well, these companies, you know, you bank them for a whole bunch of years and you get to know them. So there's a process, obviously the formal bag off process and then the go or no go decision.
But typically the.
Company has a pretty good idea of what it wants to do ahead of time because it's selected its group. And the stakes are really high this round because as you say, these the implied market caps these companies are enormous, but also they are paradoxically they are very large but also mega growers. They have, you know, some of them have a little bit of a change the world feel to them, so they could become must on.
I mean, one of the things that you.
Guys have talked a lot about is so much of the equity base has become either beta or it's become kind of the seven or eight names. What if there's some additional companies that three, four or five hundred billion dollar market caps and trillion and a half dollars market cap the active management community is I want to own that. I want to own that from the time of the IPO. So I think it's not just Wall Street getting to
know these companies. It's a whole bunch of investors who have either backed into early rounds or want to be there when the IPO comes.
When we were speaking with you a year ago in these seats, you were talking about how it is going to be a great year for IPOs and M and A, and it was for your bottom line.
You had an incredible year.
There was, though, a lot of IPOs and a lot of deals that got stymied by Liberation Day and policy uncertainty. What has to go right for some of these deals to come to fruish and open AI anthropic SpaceX Well.
I think part of the reason that these companies are so interesting to investors is they are not rushed to go public, So there has to be an element of being patient if you're in an around the ecosystem. They don't have to come in the first half of twenty six, they come in the second half of twenty sixth they could even come in twenty seven. But they are drawing a whole bunch of interest to names like them derivative plays, and the ecosystem is you sort of disaggregate the entire
AI daisy chain where you want to play. So the anticipation of the company going public almost as important as the company itself coming. But whether they come least in twenty six or twenty seven, they're going to come.
They're going to come.
It'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 US economy, and then when you hear the policy makers, 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 US assets.
I hear you guys talking about this a lot.
I think there are two separate phenomena, but they're not exclusive. One is we got the arca history. You know, I've gone on about the end of the end of history and that things would get going again. Nation States would be battling for a Gemini and kind of trying to win out on the rise and fall nations. That's just a historical fact that kind of got there was an
interregment between Berlin Wall and COVID. We're actually back to the balance of human history as we've all studied, and that means there's going to be the kind of stuff that we are living through right now. It's just been a while, and I don't know necessarily that that is
something we should expect to go away anytime soon. There's going to be renationalizing nationalizing, and that means in some case they'll be higher country risk, They'll be maybe pockets of iniquity, there may be opportunistic transactions or allocations that happened. But after twenty years of financial oppression, we're back to live markets and.
Live nation states. That's here.
But at the same time you have US capital markets which are more than half the capital stock. And the reality is very basically as we know, corporate health is excellent, consumer health at the top end is excellent, and obviously the administration is getting after how for the bottom half of the k earnings as you.
Know, grew eight percent this year. They could grow in.
The mid teams next year. That's double the long term average. That's pretty good. So good corporate, good, consumer, excellent capital markets and easier fed the lowered by seventy five.
Maybe there's more to go.
Maybe it's a demand driven twenty twenty six, in which case the Fed doesn't have to move. We have good inflation, we keep on powering forward growth. Or maybe it's supply side where they're spending but there isn't the same kind of job creation. Then the federal help out. So they're downside cases. But just in the main, oh, and the tailwinds of deregulation and the bill are kicking in. It kind of is hard to argue against the twenty six US led growth case.
Now we can get a.
Debate about where ASID prices should be, but in terms of just two years ago were talking about recession.
Last year we weren't sure.
Because the administrations come in, we're not talking about that today. So for our business, very simply, we write tickets to kind of two times GDP nominal and so if you think about our Wealth and Investment Bank, if we're going to grow you know, five ten percent on a two times basis nominally, that should be pretty good for our business for doing our job.
Corporate health is very good, it's excellent. Software and health is questionable. Can we talk about that right? The move in the last twenty four hours, the life market stuff, let's get into that. The move in Japan at the long end of the curve, is that a warning shot? Is that the start of something bigger?
Well, I mean this Japan trade has been talked about forever, and I would expect that in a lot of you know, highly indebted countries, you know, off the Liz Trust moment where the demographics are poor and you don't have the wherewithal our FIAT to kind of work your way through that, there could be some vulnerability.
So what does that mean?
That means if we're sort of do our economics meets you know, poly side thing I think that means you want to get closer to places where you can act in your joint economic interest, and I think the Japanese examples one that we should continue to pay attention to.
I wouldn't be surprised if we see pockets of that now and then when you know, there's a little talk of the bouncyet looks lousy, but we're going to inject a little stimulus, and let's see if anyone notices, Yeah, they noticed, so you know, you sort of have to you know, then you just it's you know, it's a trial balloon. It gets pulled back, and that's probably healthy for markets. You know, you see a lot of that's been bought back today. But that's different than the US
Treasury phenomenon. Yeah, that that that's been that's been hugely overblown. The reality is that when we did this a year ago, the Treasury secretary is you know of anyone was talking about the ten year being so important to keep an eye on. I think the ten years around four fifty seven, four fifty five, four sixty. Now it's a four twenty five, four to thirty, so the ten years doing his job, there's some steepening.
Yes, it's probably healthy. So I do think there's a.
Conflation between kind of US Treasury phenomenon and the world, and I think there's a difference, and you know, we just have to continue to highlight the difference very quickly.
Ted because you spend time you grew up in Venezuela, New world. Now are you planning to maybe help facilitate companies go back in?
I'd not prep for that question. Uh, you lived in Thank you so much.
Interested because you have a different take, probably than every other CEO walking around this forum.
Well, ven as well as an extraordinary place, has a proud but now in recent decades, very troubled history.
But is uh you know, uh, if you know your.
Monroe doctrine critical and has albeit as you've talked about at length.
Uh, it's it's it's more sulphuric, but very.
High, uh vast quantities of of oil beneath the ground. So do I think Venezuela is going to be relevant? I think Latin America is going to be relevant. I think the hemisphere is going to be relevant, and its sort of thinking around how wants to get closer while maintaining its own uh, you know, political and social independence from the US, but I think coming together of some places may make some sense and maybe in the broader economic interest.
Back to the previous question.
That it was a fantastic conswer, thank you. I've got one more that's just not a landmine. There was some news earlier about Deutschebank, and I just want to breathe some life into that story. And essentially the Treasury Secretary came out there was some research that he didn't like, and according to him, the Deutsche Bank CEO has turned around and said, I don't stand by that research. That's
basically the point. Is it difficult for the research department of Morgan Stanley to say what they think in an environment like this one? And I asked this question because I know some tremendous individuals at Morgan Stanley in research and they are all highly intelligent, capable and have their own thoughts about where they think we are in this
moment right now. But is it difficult in the C suite to allow them just to go out their full throat, full thrott or full blooded and just say what they really think about this moment?
Absolutely not.
I'm not at a piece of research at my desk for a yellow light or a no go. I think what gets a little tricky is these institutions also had desk analysts. I don't know if this one came out of the research department or maybe a desk analyst sitting in one of the divisions. But to answer your question directly, we want we celebrate broad opinion, I do think, but to give 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 bloomer terminal.
Okay, so it has to have some kind of value add but it doesn't have to just be provocation for its own sake. So we have industry leaders, we have sector leaders. We have Seth Carpenter, who you pointed out. I was watching you talk to him, and I was and that was quite a moment when I looked Starbucks all over my suit. So thanks for that.
That was excellent.
You had at least one viewer that day, and that was me, so and Seth. But the answer is the independence of research is important. We've invested in it for all these years that haven't 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, and it puts the particular government or whomever in an awkward spot.
Because they read the research.
So 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 some of.
The Joan cleanand Bill.
I didn't actually split it up. I just swallowed and smiled.
Thank you, sir, thank you very much.
Thank you Ted Pick.
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