The Newsletter

The Transcript 09.30.19

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Succinct Summary:  The global economy appears sluggish with pockets of bright spots like consumer spending. Some are worried that Europe might be headed for a recession and others are concerned that we are near the top of the cycle. All in all, the economy keeps trudging forward at a slackening pace.   

Macro Outlook:

We’re closer to the top than to the bottom of the cycle

“We’re getting pretty toppy. The prices of things have gotten high in large part because interest rates have gone down so much but that props up the value of a dollar of earnings, or cash-flow. It’s a bigger yield. That’s driven prices up. There’s quite good liquidity in terms of credit. It’s led to markets that have gone up almost continually for about 10 years. So that doesn’t mean it can’t go on for a while longer, but you’re closer to the top than the middle or the bottom” –  Blackstone (BX) CEO Steve Schwarzman:

Global growth has weakened

“the global growth outlook has weakened, notably in Europe and China.” – Federal Reserve Chair Jerome Powell

“we see obviously markets slowing down. We see mixed pictures in Europe and China quite clearly, you are still going reasonably ok, but also starting to show signs of slowing down.” – ABB (ABB) CEO Peter Voser:

“certainly growth has slowed globally not going negative in terms of recessionary worries but we’re not seeing the sort of optimism and forward leaning behavior that we saw in our CEOs just a few years ago” – TPG Capital Co-CEO James Coulter.

The industrial and auto sectors are particularly affected

“And the manufacturing sector [and] the automotive sector also. There seems to slowdown.” – ABB CEO Peter Voser:

“the industrial sector remains sluggish due to an inventory build-up and increased geopolitical trade tensions…US manufacturing PMI has been very weak this year. Given that our industrial production outlook is down 70 basis points from June currently at 0.9%.” – FedEx (FDX) CEO Fred Smith

US business investment sees a moderate decline

“we see a slowdown in taking decisions to run or sanction bigger projects and that has the knock on effect over time. ” – ABB CEO Peter Voser:

“Business fixed investment posted a modest decline in the second quarter and recent indicators point to continued softness.” – Federal Reserve Chair Jerome Powell

The economy keeps growing but at a slower rate

“we’ll continue growing for the next year or two but at a lower rate than we were because manufacturing’s off, global trade is off, and we’re facing some lack of confidence around issues like Brexit, European growth, and China’s real growth rate. All these issues contribute to less optimism, but I don’t see us falling off some kind of cliff. – Blackstone (BX) CEO Steve Schwarzman:

“The U.S. economy has continued to perform well. We are into the 11th year of this economic expansion, and the baseline outlook remains favorable. The economy grew at a 2½ percent pace in the first half of the year. Household spending—supported by a strong job market, rising incomes, and solid consumer confidence—has been the key driver of growth.” –Federal Reserve Chair Jerome Powell

“I think we see the U.S. economy continue to grow above potential. And, you know, it’s the longest period of growth in the history of the country. The unemployment– numbers are at rock bottom. Unemployment rate is at rock bottom. So, it’s– it’s in a very good place.” – Incoming ECB President Christine Lagarde

Driven by strong and healthy consumers

“the U.S. economy itself, the largest part of it, the consumer part of it, is in strong shape.  ” – Federal Reserve Chair Jerome Powell

who are, however, increasingly worried about  trade war

“Trade policies have had the greatest negative impact on consumers, with a near record one-third of all consumers negatively mentioning trade policies in September when asked to explain in their own words the factors underlying their economic expectations” – Surveys of Consumers Chief Economist Richard Curtin


Mapping opportunities in Latin America

“In Latin America, you have 650 million people living, so it’s around 8%, 9% of the global population with – I think three key features. The first one, it’s a very young population, 30% of the people in Latin America are millennials, and secondly they are financially still excluded, you have 50% of the adults in Latin America that don’t have a current account. And finally, you have 80% of the people that lives in cities. So, it’s a very highly urbanized population” – Mastercard (MA) President of Latin America Carlo Enrico

Eurozone outlook is not so good

” as far as the outlook is concerned it is not that good. We are close to a recession. Manufacturing is already in a recession. Consumption still holds. There are still some governments still stimulate the economy as well, so we’re not in a recession yet. I don’t expect we’re going to experience a deep recession, but it could very well become a recession” – ING Group (INGA) Chairman Hans Wijers,


A record number of municipal bonds being issued

“Lower interest rates also encouraging municipals to get out there and walk in and we’ve seen a large issuance of municipal bonds and we’ve been hitting some record numbers there.” – IHS Markit (INFO) CEO Lance Uggla


The furniture industry has a good outlook

“we feel good about overall demand in the commercial furniture industry.” – Steelcase (SCS) CEO Jim Keane

“Furniture industry growth through July of calendar 2019 in the Americas, as reported by BIFMA, appears to be stronger than the slowing growth of capital spending over the same period, whether derived from macroeconomic data or from looking at capital expenditures across the S&P 500 or Fortune 800. This suggested our industry share of capital spending maybe gaining resiliency, as organizations continue to invest in their workspaces to help drive productivity and compete in the war for talent.” – Steelcase (SCS) DCFO Dave Sylvester

The auto industry has some issues

” I think the automotive have two issues: consumption is slowing down on combustion engine type of cars and they are not yet ready on the electric side.” – ABB (ABB) CEO Peter Voser

E-commerce the key driver to parcel growth going forward

“In the U.S. more than 90% of incremental domestic parcel volume from 2018 to 2026 is expected to come from e-commerce”- FedEx (FDX) CEO Fred Smith

Fedex adjusting well to the lost Amazon business

“While the Amazon contract represented only a small proportion of our revenues, the nature of our business is such that near-term profits will be adversely affected since the last bit of volume has significant flow through to the bottom line. However, we have closed additional business to replace this traffic, which is being onboarded and we are taking out significant costs which were unique to Amazon’s requirements.” –  FedEx (FDX) CEO Fred Smith


Consumer electronics is not a cyclical industry

“over more than two decades consumer electronics continues a very steady line of growth. This runs counter to what may be the conventional but inaccurate wisdom that we work in a volatile and cyclical industry. ” –
Best Buy (BBY) CEO Corie Barry

The portion of the budget consumers spend on electronics is constant

“surprisingly, people spend a similar portion of their wallet on CE year-in and year-out pointing to the real opportunity that can exist when you can unlock what’s possible” – Best Buy (BBY) CEO Corie Barry

Miscellaneous Nuggets of Wisdom:

Relying on hard work

“I never viewed myself as exceptional…and so whenever I got a job, I was relying on hard work more than anything and a level of enthusiasm and optimism.” – Disney (DIS) CEO Bob Iger:

Full transcripts can be found at Seeking Alpha, the Motley Fool and CNBC.