The Transcripts

The Transcript 11.11.19

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Succinct Summary:  The US consumer is alive and well.  The return of low rates has helped give the economy a boost, especially housing.  It’s not a boom but an extension of the long bull market.

Macro Outlook:

The consumer is alive and well

“…strong demand environment that once again proved that the consumer, especially the North American consumer, is alive and well…The consumer is alive and well, and they are not afraid to spend money.” – Norwegian Cruise Line (NCLH) President & CEO Frank Del Rio

Labor markets are tight

“…the low unemployment rate and the numerous alternate employment opportunities makes the job of recruitment and retention more difficult than it has been in the past, limiting our ability to fully utilize our fleet and capture additional incremental market” – US Concrete (USCR) Chairman & CEO William J. Sandbrook

There’s strong demand for medium-duty trucks

“A growing U.S. economy, coupled with high levels of consumer spending, low unemployment and low interest rates continues to drive demand for medium-duty trucks.” – Cummins (CMI) Chairman & CEO Thomas Linebarger

Commercial Real Estate fundamentals remain favorable

“Commercial real estate and macroeconomic fundamentals remain favorable, particularly in the Americas” – CBRE  (CBRE) CEO Robert E. Sulentic

The US housing market is healthier than the overall economy

“…the US housing market…is now probably healthier than the economy overall.” – Redfin (RDFN) CEO Glenn Kelman

Thanks to low rates–It’s not a boom but an extension of the long bull run

“Overall low rates have strengthened home buying demand at least marginally over the course of the year…we may see broader price gains in the first half of 2020 and the return of bidding wars. It’s not a boom, but it extends the markets long Bull Run.” – Redfin (RDFN) CEO Glenn Kelman


The global economy is slower than the US economy

“…multiple headwinds: A slowing global economy; A technical recession in Germany; And an even tougher interest rate environment.” – Deutsche Bank (DB) CEO & Chairman of Management Board Christian Sewing

“…we continue to face headwinds from the ongoing competitive banking environment in Germany and the wider effect of the slower European and world economy. In addition, we are facing even lower rates due to the ECB actions.” – Commerzbank (CRZBF) CEO Stephan Engels

Challenges in Latin American markets persist

“And then Latin America, I guess broadly speaking, things aren’t very strong. We thought Brazil would be better than it is. And the big issue has been export markets. The domestic demand is about where we thought, it’s up a few percent in GDP. I mean, and then underlying demands up. But the export market, because Argentina is a big wreck.” – Cummins (CMI) Executive Director of Investor Relations James Hopkins

A slowdown in Asian M&A activity

“we have seen a slowdown in Asia primary and M&A activity, primarily in Greater China with one of the lowest-activity quarters in the last five years in terms of market fee pool.” – Credit Suisse (CS) CEO Tidjane Thiam


Virtu welcomes the Zero commission environment

“The benefits that have been brought to a retail investor to think that in 2019, you can go on a terminal or a handheld and literally for zero dollar get a price in a large-cap or medium-cap or small-cap name that’s better than you could get on any exchange is just an incredible endorsement for the ecosystem that we’ve all created.” – Virtu Financial (VIRT) CEO Douglas Cifu

Landlords believe in co-working and want to own the upside themselves

“Our hypothesis is that over time landlords are going to want a co-working space in their buildings because they believe their tenants are going to want it. They’re likely going to want to control it because they want to control the tenancy. They view themselves as owning a lot of the downside. So they want to own the upside and we are positioning Hana to move in that direction if that’s the direction the market moves.” – CBRE  (CBRE) CEO Robert E. Sulentic

The adoption of IFRS 16 on leases has had a minimal impact on Sysco

“…we adopted a new lease accounting standard that changes the way we recognize operating leases by including the related right of use assets and leased liabilities on our consolidated balance sheet, as of fiscal 2020. The changes are also reflected in the consolidated results of operations and consolidated statement of cash flows. However, there is only minimal net impact.” – Sysco (SYY) Executive Vice President & CFO Joel Grade


The Simpsons have been on air for 30 years

“At launch, Disney Plus users will have immediate access to more than 500 movies including all of our beloved titles and more than 7,500 episodes of library television content, including 30 seasons of Simpsons.” – Walt Disney (DIS) Chairman & CEO Robert A. Iger

Papa Johns expects most consumers to order through aggregators over time

“In regards to data sharing, the reality is that about 85% of our customers have an aggregator app on their phone already…You look out two years three years from now almost everybody will have an aggregator app on their phone.” – Papa John’s (PZZA) CEO Rob Lynch


The 5G revolution is gathering pace

“Notably, multiple OEMs are now shipping or have announced their second or third 5G device models …In Korea, the migration to 5G continues at a strong pace…In the United States, Verizon has committed to deploy 5G Ultra Wideband millimeter wave in 30 markets by year-end and T-Mobile separately announced plans to cover 200 million people with 5G on 600 megahertz before the end of this year. And in Europe, there are multiple 5G launches across Switzerland, Italy, the United Kingdom, and Germany.” – Qualcomm (QCOM) CEO Steve Mollenkopf

And the pace of adoption is faster than 4G

“…the two things that are different with 5G versus transition from 3G to 4G is China is adopting 5G at the same time as the other geographies versus in 4G they were a couple of years late. And then also within 5G, we are seeing multiple tiers of products being launched simultaneously, which we did not have for 4G. So that’s why we think the intensity of the 5G rollout is actually faster and you have China as a big portion of it happening early in the lifecycle.” – Qualcomm (QCOM) CFO Akash Palkhiwala


Construction markets are soft

“…some softness in North American and European construction markets as well..the global construction markets in APAC have been softer much of the year, and this continued in the third quarter, but may start leveling off as the market adapts to the trade issues. ..we see signs of weakness in the European and North American construction markets. Some customers are experiencing inventory reductions in the retail chain, impacting build rates.” – Commercial Vehicle Group (CVGI) President & CEO Patrick Miller

Miscellaneous Nuggets of Wisdom:

What did Softbank learn from Wework? 

“(The) second lesson is governance. Founder, Mr. Adam Neumann, had quite a large rights and powers, for example, voting rights for 1 to 10. ..We just had one Board seat in WeWork. And in the Board meeting, we couldn’t stop such progress. So after the investment, actually, the governance issue had been worsened, and we couldn’t stop that… 4 out of 9 Board seats were actually held by Adam’s appointments. So his personal or transaction with the company was quite excessive, which the Board couldn’t stop.” – SoftBank (SFTBY) CEO Masayoshi Son.

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