Import rush

Summary

Marketplace: Import Rush Release Date: November 7, 2024

In the "Import Rush" episode of Marketplace, host Kyle Rysdal delves into the economic ramifications of impending tariff changes, the evolving landscape of rideshare commuting, and the state of mergers and acquisitions (M&A) in the current market. The episode features insightful discussions with key industry players and experts, providing listeners with a comprehensive understanding of these pressing economic issues.

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Federal Reserve Insights with Jay Powell

Timestamp: [01:16] – [03:02]

The episode kicks off with an analysis of Federal Reserve Chair Jay Powell's recent press conference following a Federal Open Market Committee (FOMC) meeting. Powell addressed questions surrounding the impact of upcoming elections on Fed policies, emphasizing the central bank's commitment to its dual mandate of ensuring stable prices and maximum employment.

Notable Quotes:

• Jay Powell [02:10]: "The dual mandate of stable prices and maximum employment remains our guiding principle."
• Jay Powell [02:24]: "The economic activity data have been stronger than expected... retail sales stronger."

Powell highlighted a modest quarter-point cut in the federal funds rate, citing strong economic indicators such as robust employment reports and increased retail sales. He indicated that the Fed's next decision would hinge on data forthcoming in December, underscoring the importance of continuous economic monitoring.

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Business Outlook Amid Political Shifts: Interview with Austin Golding

Timestamp: [03:49] – [08:27]

Kyle Rysdal interviews Austin Golding, President and CEO of Golding Barge Line in Vicksburg, Mississippi, to assess business expectations in the face of potential political and economic changes.

Notable Quotes:

• Austin Golding [04:22]: "We're looking for a world that makes us evolve through competition, not through mandate."
• Austin Golding [05:17]: "Our propulsion engines have gone from tier one to tier four, meaning much cleaner emissions and more efficiency."

Golding discusses the positive outlook for his company, anticipating a growth rate of 2-3% over the next year despite a potential slowdown in acceleration. He emphasizes the importance of sustainability in the oil and gas sector, noting advancements in cleaner engine technologies. The conversation also touches on the uncertainty surrounding upcoming tariffs, with Golding expressing hope that global economic dependencies will mitigate the impact of any new import taxes.

---

Rideshare Commutes on the Rise

Timestamp: [09:21] – [11:20]

Matt Levin explores the increasing trend of commuters using rideshare services like Uber and Lyft. With the rise of hybrid work models, daily commutes have shifted, leading to a surge in rideshare usage for specific trips.

Notable Quotes:

• Jeremy Mihalik [09:21]: "Remote work has allowed commuters to reconsider the expense of owning a car versus relying more on rideshare."
• Jason Tan, Lyft [10:35]: "Most rideshare commuters are still heading into the office around 9 and home around 5, but they value the flexibility rideshare offers."

The segment highlights how rideshare companies are adapting by offering subscription models that cater to regular commuters. Additionally, rideshare drivers report increased demand during traditional commuting hours and late-night shifts catering to social activities, balancing passenger needs with their own schedules.

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Warner Brothers Discovery's Streaming Surge

Timestamp: [11:20] – [13:59]

Stephanie Hughes reports on Warner Brothers Discovery’s streaming service, Max, which saw a significant increase of 7.2 million new subscribers in the third quarter—the largest quarterly growth since its inception in 2020.

Notable Quotes:

• David Ardidi [12:13]: "Creating characters like the Penguin drives specific populations to our subscription platform."
• Charles Schrager [12:37]: "International subscribers pay less on average, which aligns with local economic conditions."

Max's international expansion has been a key driver of growth, offering content like Olympic coverage and popular series that attract diverse audiences. The service employs varied pricing strategies to accommodate different markets, contributing to its subscriber surge. Competitors like Netflix are also adjusting their models with ad-supported tiers and stricter password-sharing policies to enhance their subscriber bases.

---

Market Performance Snapshot

Timestamp: [14:05] – [15:12]

Kyle Rysdal provides a brief overview of the stock market's performance on the day, noting movements in major indices and highlighting specific company performances:

• Nasdaq: Increased by 285 points (+1.5%)
• S&P 500: Rose by 44 points (+0.75%)
• Dow Industrial: Slight decline, deemed flat at 43,729

Key company highlights include:

• Lyft: Surged 22.9% post third-quarter earnings beat
• Warner Brothers Discovery (WBD): Rose 11.8% following Max’s subscriber growth
• Other Movers: Uber (-1.7%), Airbnb (+4.6%), Moderna (-2.9%), DraftKings (+1.9%)

---

In-Depth: Federal Reserve’s Fiscal Policy Approach

Timestamp: [18:08] – [20:44]

In a detailed segment, Jay Powell elaborates on how the Federal Reserve navigates fiscal policy changes. Addressing concerns about rising bond yields influenced by potential election outcomes and fiscal policies, Powell explained the Fed's methodical approach to modeling and integrating policy changes into their economic forecasts.

Notable Quotes:

• Jay Powell [18:45]: "We don't comment on fiscal policy. We follow the legislative process and integrate any changes into our models once they are enacted."
• Jay Powell [19:06]: "It's a process that takes time and we go through it regularly with every administration."

Powell reassured listeners that the Fed remains insulated from immediate political pressures, focusing instead on data-driven decisions to maintain economic stability.

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Preparing for Potential Tariffs: The Import Rush

Timestamp: [21:58] – [24:10]

Kristen Schwab discusses the flurry of import activities as businesses anticipate new tariffs on imported goods, particularly from China. Companies are racing to place orders before the tariffs take effect, leading to increased shipping and storage costs and potential overstocking issues.

Notable Quotes:

• Brian Burke, SECO Logistics [23:00]: "Importers pay the tariffs, and they will look to mitigate against rising costs in any way they can."
• Welly Shea, Harvard Professor [23:38]: "You don't want to have six months or a year's worth of inventory of notebook computers."

The segment highlights the challenges businesses face in balancing the urgency to import products ahead of tariffs with the risks of excess inventory and fluctuating demand. The uncertainty surrounding the exact implementation timeline of tariffs adds to the complexity, with experts advising caution and strategic planning.

---

Mergers and Acquisitions Slowdown

Timestamp: [24:10] – [28:24]

Kyle Rysdal explores the declining activity in mergers and acquisitions (M&A), the slowest in over a decade, and examines the underlying economic indicators contributing to this trend.

Notable Quotes:

• Drew Pascarella, Cornell University [25:12]: "Mergers and acquisitions are the ultimate bets companies can make on their future and the economy."
• Christina Sodder, Southern Methodist University [26:11]: "Economic uncertainty and political factors have significantly dampened M&A activity."

Factors such as inflation, rising interest rates, and political uncertainty have made companies hesitant to engage in large-scale M&A deals. However, signs of stabilization in inflation and interest rates are fostering optimism for a potential rebound. The tech industry, particularly sectors focused on artificial intelligence, is identified as a likely area for renewed M&A interest as companies seek to enhance their capabilities and competitiveness.

---

Federal Reserve Independence and Leadership Stability

Timestamp: [28:24] – [29:07]

In the episode's concluding segment, the discussion returns to the Federal Reserve's independence amid political transitions. Jay Powell firmly states his refusal to resign if requested by the incoming administration, underscoring the importance of maintaining the Fed's autonomy from political influence.

Notable Quotes:

• Jay Powell [28:55]: "If he asked you to leave, would you go? No."
• Jay Powell [29:00]: "I'm not legally required to leave."

Powell’s stance reinforces the Federal Reserve’s role as an independent entity dedicated to economic stability, free from direct political interference.

---

Conclusion

The "Import Rush" episode of Marketplace offers a multifaceted exploration of current economic trends and challenges. From the Federal Reserve's cautious approach to policy amidst political uncertainties to businesses maneuvering through potential tariff impacts and the fluctuating landscape of corporate mergers, the episode provides listeners with in-depth analysis and expert perspectives. The discussions underscore the intricate interplay between policy decisions, market dynamics, and business strategies in shaping the economic future.

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This summary aims to encapsulate the key discussions and insights from the "Import Rush" episode, providing a comprehensive overview for those who haven't listened to the full podcast.

Transcript

[Kai Rysdal]

This Marketplace podcast is supported by Justin Vineyards and Winery. Since 1981, Justin has been producing world class Bordeaux style wines from Paso Robles on California's Central Coast. As the pioneer of Paso, Justin wines are what put Paso Robles on the winemaking map. With a rich history of accolades, Justin produces exceptional wines and is proud to be America's number one luxury Cabernet. Whether you're a first time wine drinker or a wine aficionado, Justin has a wine for every celebration and occasion. Looking for special wine to serve at your holiday table? Visit justinwine.com hey, if you're listening to.

[Kyle Rysdal]

This, I will assume you're at least interested in money, understanding the economy and finances as well. And some of us now want to get the next generation interested as well. So check out Million Bazillion, Marketplace's award winning kids podcast that breaks down money to help dollars make more sense. Tune in to Million Bazillion wherever you find your favorite podcast. A whole new season is out now. Million Bazillion is presented in partnership with Greenlight, the debit card and money app for kids and teens. Greenlight helps kids and teens learn to earn, save, spend wisely and invest when you sign up for a Greenlight [e-mail] million in case you were wondering so.

[Jay Powell]

Let me say that in the near term the election will have no effects on our policy decisions.

[Kyle Rysdal]

Happy Fed Day everybody. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Thursday today, the seventh day of November. Good as always to have you along everybody. Question number one for Fed Chair Jay Powell at his post meeting press conference today, right out the gate, was about the election. The short answer you heard up in the open, the slightly longer answer goes like this.

[Jay Powell]

Now, just in principle, it's possible that any administration's policies or policies put in place by Congress could have economic effects over time that would matter for our pursuit of our dual mandate goals.

[Kyle Rysdal]

The dual mandate of course, just as a refresher, stable prices and maximum employment. As to the economic details, an as expected quarter percentage point cut in the federal funds rate. Because as Powell did all but tick.

[Jay Powell]

Off on his fingers, the economic activity data have been stronger than expected. Item number one, the NIPA revision was stronger. Certainly the September employment report was stronger. Item number two, the October report not stronger.

[Kyle Rysdal]

Item three, retail sales stronger. Which gets us to so I think.

[Jay Powell]

Really the question is December.

[Kyle Rysdal]

You know where this is going, right? Long time listeners will recognize the central bank's standby by December.

[Jay Powell]

We'll have, we'll have more data, I guess. One more employment report, 2 more inflation reports and lots of other data. And you know, we'll make a decision as we get to December.

[Kyle Rysdal]

Data, data, more data. The next Fed meeting. 17, 18, December. We'll meet you there. Wall street today, tech moved. Not too much else. We'll have the details when we do. The businesses across this economy are starting to think about what a change in the White House is going to mean for them. So we called one of our regulars, Austin Golding, to talk things over. He's the president and CEO of the family business Golding Barge Line in Vicksburg, Mississippi. Austin, good to talk to you again.

[Austin Golding]

Good to talk to you, Kyle.

[Kyle Rysdal]

So, as you know, the standard question when we chat is how's business? I'm going to amend that and ask you how you expect business to be in the next six months to a year.

[Austin Golding]

Well, Kai, thanks for having me. And we've had a really good year so far. You know, I think we've got a correction back to pre Covid levels and I could see business not accelerating as fast as it has into this correction. But I think we'll, we'll be within a, you know, a 2 to 3% growth rate over the next 6 to 6 to 12 months.

[Kyle Rysdal]

And do you expect the changed politics of this economy to help you out?

[Austin Golding]

I do. I think the energy I can feel within the energy sector is palpable. I think a lot of people see the future being a lot less headwinds. But I can tell you, Kai, the understanding that I get about sustainability and where we have to go, I have to say it's not lost within our customer base. I think the emphasis on sustainability and knowing that a world where we evolve with the changing climate as opposed to bring everything to a halt because of it, I think people would much rather evolve through that process. So the path to sustainability is alive and well, but I do think there'll be less headwinds towards energy production and energy transport.

[Kyle Rysdal]

And we should point out here, just for those who aren't familiar, you carry a lot of oil and gas petroleum products on those barges, right?

[Austin Golding]

That's primarily what we carry. And I will tell you, just through my short career, our propulsion engines have gone from a tier one to a tier four, which for the average listener out there means a much cleaner emission out of the engine and a much more efficient engine. So in moving these carbon products, even the people moving them, we're very aware that sustainability is a near and dear part of our Future, no matter what the political climate may suggest.

[Kyle Rysdal]

Another thing that the president elect has talked a lot about is tariffs. I'd be remiss if I didn't ask you about that and what that might mean for you.

[Austin Golding]

Sure. You know, the oil and gas world, you know, I'm, I don't know. You know, I don't really look at these companies as American companies. I look at them as global entities. And so I don't know, you know, if it's, if it's the source material coming in and out or if it's where the finished product can go or how much we have to charge a tax on where it goes. I mean, we make a lot of the world's energy here and then ship it there. We have the best and most, you know, I would say efficient and environmentally friendly oil and gas kitchen, if you will, within the Gulf coast of the United States. So I don't know. You know, I hope that the global economy continues to rely on the United States and we can, we can play ball with everybody else out there because we are certainly part of that, that supply chain.

[Kyle Rysdal]

Yeah. So the, so the unspoken thing here is retaliatory tariffs, right?

[Austin Golding]

Sure. Yeah, absolutely. You know, I will say, like I mentioned, these oil and gas companies are very. So I watched them navigate the different political climates in my career, and I know this one may present more, more challenges, but they are a global entity. They are not, they are not patriotic in much, in many senses.

[Kyle Rysdal]

You said a minute ago, in your short career, and, you know, I don't know how long we've been talking, it's got to be probably five, seven years at least. So you've been, you've been doing this a while. What's the, what's the one thing that's on your mind as, as this economy evolves with the President elect and what that's going to mean?

[Austin Golding]

Sure. I think it's, you know, the working environment that I've had. My career is coming up on 20 years in the industry, Guy. Wow.

[Kyle Rysdal]

And you're like, barely 40, man. Come on. Right.

[Austin Golding]

Well, you look in the family business.

[Kyle Rysdal]

Yeah, that's true.

[Austin Golding]

You start early. That's right. But I will say, you know, we're looking for stability, we're looking for growth. We're looking for, I think, a world that is competitive and not mandated. And in my world, you know, I think things like EV mandates, they don't just create a bottleneck at the car production level, but people stop investing in everything that supports oil and gas when that happens. And when that happens, it chokes everything down to where it's overpriced and underinvested in. And so, you know, I think we need to, you know, we're looking for a world that makes us evolve through competition, not through mandate. So I think, I think that's where my focus is.

[Kyle Rysdal]

Austin Golding running that family business? Well, he's been in it for 20 years. I don't know. You've been running it for 20 years? No.

[Austin Golding]

Oh, no, no, no, no. I'd earn that step, but not 20 years. Yeah. Been a good, good journey.

[Kyle Rysdal]

Wow. Vicksburg, Mississippi, is where they are. Austin. Austin Golding at Golding Bars Lines. Austin. Thanks a lot. Talk to you soon.

[Austin Golding]

Hey, talk to you. Thank you, guys.

[Kyle Rysdal]

Economic life marches on. This second day after the general election, millions of Americans woke up, poured themselves a cup of coffee or a cup of tea if you like. And if remote work wasn't really an option, set off on that bleary eyed commute to the office. Millions of Americans will do the same thing tomorrow and all the days after. And it turns out a lot of those trips to the office now are happening via rideshare. Lyft said this week nearly half of the company's weekday rides are commuters. That's a bigger share than it was back in 2019. Marketplace's Matt Levin explains the growing appeal of the rideshare commute.

[Matt Levin]

The idea of paying for an Uber or Lyft every day to schlep you to and from work sounds prohibitively expensive, but maybe just two or three schlepps a week because people work hybrid work from home some of the days of the week, that changes the economics. Jeremy Mihalik is a professor at Carnegie Mellon who studies urban transportation. He says remote work has allowed commuters to reconsider the expense of owning a car versus relying more on rideshare, which sounds like great news for carbon emissions. But if you live in San Francisco or New York, you probably weren't driving into the office anyway. Cities that have higher wealth and fewer children are the ones where people seem to shift away from public transit and take an Uber instead. Lyft is capitalized on the rideshare commute trend, offering a popular subscription option that caps the price of repeat routes at the same time of day. Lyft's Jason Tan says most rideshare commuters are still generally heading into the office around 9 and home around 5. But since hybrid work also means days in the office are often more intentionally social. Team dinners, happy hours that type of thing. Rideshare gives you options.

[Jay Powell]

Maybe you want flexibility in the evening so that you can go out and be with your coworkers for a little bit.

[Matt Levin]

Rideshare drivers hope those happy hours extend late into the night. Louisiana. Lyft and Uber driver Sergio Avedian, who writes for the website the Rideshare Guy, says serving the 1am exiting the bar crowd is generally more lucrative than commutes. Not everybody is willing to take that risk and drive at those hours, but the supply is not there and demand.

[Kyle Rysdal]

Is a lot stronger.

[Matt Levin]

That's when surges show up. But he says even if the tips are lighter and the traffic is heavier for commuting trips, there are other perks.

[Kyle Rysdal]

I prefer morning, morning and afternoon rush hours.

[Matt Levin]

People are awake and thus less likely to make a mess in the back seat. I'm Matt Levin for Marketplace.

[Kyle Rysdal]

It was quite a day for ticker symbol wbd. Should that one escape you, It's Warner Brothers Discovery, which has been, shall we say, troubled of late. But some salvation is coming from its streaming service max. It added 7.2 million new subscribers in the third quarter, the biggest quarterly increase since it launched back in 2020, when it was still called HBO Max. If you remember those days, other streamers, Netflix and Peacock among them, have been seeing increases in subscribers as well. Marketplace's Stephanie Hughes has more on that.

[Stephanie Hughes]

Most of Max's new subscribers are located outside of the US And Canada, and one reason they're subscribing now is they couldn't before.

[Matt Levin]

Until the beginning of this year, Max was a US Only service, basically.

[Stephanie Hughes]

Seth Schaefer is a principal analyst at S and P Global, he says another driver, at least for viewers in Europe.

[Matt Levin]

If you wanted to stream kind of Olympics coverage, Max was a place to go to.

[Stephanie Hughes]

It wasn't just super athletes bringing people in, but super villains, too. David Ardidi, author of the book Streaming Culture, points to the success of the Max show the Penguin.

[Jay Powell]

You've got Batman fans, you create the Penguin. That's going to drive a particular population to the subscription platform.

[Stephanie Hughes]

International subscribers don't pay as much on average for Max as viewers in the U.S. charles Schrager, who teaches marketing at NYU and Fordham and used to be an HBO executive, points out that in the third quarter, Max took in about $12 a month on average from domestic users. Internationally, it was about four.

[Kyle Rysdal]

You know, if you're selling a streaming.

[Austin Golding]

Service in a country that has less.

[Kyle Rysdal]

Wealth, you offer it at a much more modest price because that's what the economy will absorb.

[Stephanie Hughes]

Across the industry companies are using different tactics to add more subscribers, says Seth Schaeffer at S and P Global. Netflix has grown by launching a less expensive tier that has ads. Also, it's cracked down on password sharing, and he says that's a way other streaming services could up their subscriber numbers too.

[Matt Levin]

You know, we all have a service or two that we're borrowing a password to access these days too. Like I won't mention the one that.

[Jay Powell]

I'm borrowing at the moment, but it's just really common.

[Stephanie Hughes]

Schaeffer also says Netflix and Amazon are investing heavily in local language programming, which is expensive but a way to keep people around once they're done watching standard Hollywood fare. I'm Stephanie Hughes for Marketplace.

[Kyle Rysdal]

But wait, what's the common password? Okay, coming up, likely the riskiest and.

[Jay Powell]

Most complex transaction a company might ever do.

[Kyle Rysdal]

Mergers and acquisitions gang. But first? Sure, why not? Let's do the numbers. Dow Industrial is down less than a point today. We'll call that flat because it is 43,729. Nasdaq increased 285 points 1 1/2% 19,269 the S&P 500 up 44 points 3/4% 59.73. Matt Levin was talking about the growth of the rideshare commute. Uber slowed one and seven tenths percent today. Lyft, which just reported more than a billion and a half dollars in third quarter revenue and beat estimates to boot, surged 22.9/10% according to Nasdaq's earnings calendar. There are literally hundreds of companies reporting today. Airbnb ascended 4, 6, 10%. Vaccine maker Moderna subtracted 2.9%. The betting giant DraftKings added 1 and 9. 10% today. WBD, which I mentioned up in Stephanie Hughes piece, up 11.8% today. Bonds up yield on the 10 year T note 4.32%. You're listening to Marketplace.

[Kai Rysdal]

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[Kyle Rysdal]

This is Marketplace. I'm Kai Rysdal. You know how on days Jay Powell has a press conference, we only play you short ish snippets of what he said because I mean, monetary policy, right? We are actually going to play you a good long chunk of Powell right now because it's a pretty interesting example of how the Fed goes about deciding what it's going to do. He was asked this morning about bond yields which, as we have been telling you, have been going up, and he was asked whether he's worried about those yields going even higher. With the higher deficits that Congress and the Trump administration might run.

[Jay Powell]

So we don't comment on fiscal policy. And again, I don't have a lot more to say on what's driving bond yields in terms of policy changes, though. Let me give you a sense of how this works. In the ordinary case, let's say Congress is considering a rewrite of the tax laws. Doesn't matter what's in the content. So we would follow that. At a certain point, we think we see the outline. So we'd start to model it. And then we'd wait and we'd wait. And then at a certain point, the staff would brief the FOMC and say, you know, this is, these are the likely effects. There's lots and lots of literature on the effects of tax policy changes on various parts of the economy. So we try to get smart on that. And then, then the law actually passes. And, you know, you'd start to put it, you probably run an alternative simulation before that happens, just, just to keep people trying to understand it. Then you, then when it actually passes, it goes into the model along with a million other things. So, you know, these, we have a very large economy. Many things are affecting it at any given time. And, you know, a law change of some kind would go in there, but it would go in, but it would, you know, it's a process, process that takes some time. Clearly, the legislative process takes a lot of time. And of course, the real question is not the effect of that law. It's all of the policy changes that are happening. What's the net effect and, you know, the overall effect on the economy at a given time. So I think that's a, that's a process that takes a lot of time and that we go through all the time with every administration constantly. And I just, this will be no different. But, you know, right now we're, there's nothing that, there's nothing to model right now. We're, it's such an early stage, we don't know what the policies are. And once we know what they are, we won't, we won't have a sense of, you know, when they'll be implemented or all those sorts of things. So I think I would just say we're not doing that now. And all that will take time and it will be very much regular order when we, when we do do that.

[Kyle Rysdal]

That was a lot. I know, a little bit nerdy, too, but it is a pretty good insight into how the gears of this economy are going to grind over the next couple of years. While the president elect has been pretty clear about his plans for this economy. There still is a certain degree of what if that has to be factored in for us today. The what if of his plans for new tariffs, which to remind are for import taxes of up to 20% on all imported goods, 60%, 600-percent on everything coming from China again. And for the umpteenth time, if that does happen, businesses would pass most, if not all of those costs of those tariffs onto consumers. But businesses don't want to do that, right? Raising prices does not endear a company to its customers, and there is still some time between now and whenever those tariffs are going to be put into place. So what if to beat the clock, those businesses just start ordering ahead? Marketplace's Kristen Schwab is back on the tariff beat today with the rush to import.

[Victoria Guido]

Grant Hennigan, who owns a small chain of outdoor furniture stores in north and South Carolina, is hoping to double his imports from China as soon as possible.

[Kyle Rysdal]

We've been talking to our vendors in the last couple of days, trying to.

[Matt Levin]

Understand what their capacity is and what availability will be.

[Victoria Guido]

It's not looking so hot. Suppliers have already received extra orders ahead of the Lunar New Year in January, when factories shut down for weeks. Plus, lots of US Businesses are rushing to ramp up production, too. Meanwhile, the inauguration is less than three months away.

[Kyle Rysdal]

The tariff is going to affect you.

[Matt Levin]

At the time of customs clearance, which.

[Kyle Rysdal]

May be four to five months from the time you've placed your order. So I think time is against us if we wanted to get more product in the first quarter of next year.

[Victoria Guido]

It's unclear when or even if tariffs are coming, but Brian Burke, CCO at SECO Logistics, says businesses are preparing the way they did when the Trump administration imposed tariffs in 2018.

[Matt Levin]

Never once has a country paid those. The importers pay those, and the importers will look to mitigate against rising costs.

[Victoria Guido]

In any way that they can, even if it's a gamble. Burke says shipping and storage rates will rise with demand, and it means spending money on stuff that might sit for a while or not sell at all.

[Matt Levin]

The whole point of pulling inventory forward is to beat the clock when it comes to tariffs. But then you don't necessarily have a customer quite yet.

[Victoria Guido]

Trends come and go. So do seasons and seasonal goods. Some items even become obsolete. Welly Shea is a professor of management practice at Harvard.

[Matt Levin]

You don't want to have six months or a year's worth of inventory of notebook computers, okay? And when it becomes excess, when the newer models come out and you don't.

[Jay Powell]

Want the old stuff.

[Victoria Guido]

It means some companies can't stock up. I'm Kristen Schwab for Marketplace.

[Kyle Rysdal]

Let's pretend for a second that you're the CEO of a big corporation and you want to make a bet on the future of your company. If you're optimistic, you might want to expand by investing in new hiring or new machinery or new locations. And you might issue new bonds or stock to raise the money you're going to need to do all that expansion. That kind of thing has been booming this year because, in part, borrowing money is starting to get cheaper. But there is a different kind of corporate bet that a CEO could make. You could merge with or acquire one of your competitors. That actually has not been happening very much this year. In fact, on track to be the slowest for mergers and acquisitions in more than a decade. That is data from the research company deallogic. And as Marketplace Justin Ho reports, that slowdown in M and A is kind of an economic indicator.

[Justin Ho]

Companies buy one another for a variety of reasons. It could be to expand geographically, to sell more types of products, to cut costs. But whatever the reason, a merger or an acquisition can be extremely risky and.

[Jay Powell]

Likely the riskiest and most complex transaction a company might ever do.

[Justin Ho]

That's Drew Pascarella. He teaches finance at Cornell University, and He spent about 25 years advising companies on mergers and acquisitions. He says buying a company starts with spending millions upon millions of dollars. Then the buyer will have to combine two corporate cultures, convince employees, shareholders and customers that the purchase is the right move and hope that nothing bad happens in the broader economy.

[Jay Powell]

You know, if you're doing a deal where the whole point is to sell much more product into the market over the next couple of years, and then the economy goes into the tank and people aren't buying product at all, well, now you've doubled down on your ability to sell product, and there's no market market for those products.

[Justin Ho]

That's why, Pascarella says, mergers and acquisitions are the ultimate bets that a company can make on its future, on the success of the combined company and the economy at large. That means if there's a big pickup in M and A activity, executives and.

[Jay Powell]

Boards of directors and ultimately shareholders are feeling comfortable enough with what tomorrow will look like that they're willing to take that big, risky bet.

[Justin Ho]

Over the last few years, companies have not been all that comfortable with what tomorrow will look like, says Christina Sodder, a law professor at Southern Method University. She says a big unknown has been inflation and how it could affect consumer spending. Also, where interest rates will end up because they affect the initial cost of a merger and how much the combined company might need to invest after the deal closes.

[Stephanie Hughes]

It's just hard to plan for financing of their continuing operations to keep the company running as usual.

[Justin Ho]

Sauter says political uncertainty has been a factor, too. The Biden administration's taken a hard line against deals that it says could reduce competition. And up until this week, there was a lot of uncertainty around the election. That said, a lot of the economic uncertainty behind the MA slowdown has started to clear up. Inflation is coming down, so are interest rates. And Afraf Sharipour, a law professor at UC Davis, says some companies have been laying the groundwork for deals, and that.

[Matt Levin]

Might mean that the sellers are really kind of putting their books in order or putting their house in order in order to make themselves attractive to buyers.

[Justin Ho]

Afsharipur says that's most likely to happen in sectors that have been growing quickly. Take the tech industry, for example.

[Matt Levin]

One of the things that buyers are really thinking about is evaluating kind of how AI might impact their business models and sort of a lot of investments and looking into potential purchases of companies.

[Jay Powell]

That are much more focused on AI.

[Justin Ho]

And if MA starts to pick up FSHAH report says there's a lot of research showing that CEOs tend to get a little jealous when competitors start buying other companies.

[Matt Levin]

The executive sees that their competitor has.

[Stephanie Hughes]

Just bought another big company, and now.

[Matt Levin]

The CEO is the CEO of a much larger company than that person might think, well, I want to be the CEO of a much larger company.

[Justin Ho]

As a result, FSHARIPUR says a series of deals in a particular industry can cause M and A activity to snowball as long as companies feel confident about the broader economy. I'm Justin Ho for Marketplace.

[Kyle Rysdal]

This final note on the way out today, which I'll set up by noting that a week and a half ago we devoted the entire show to the political independence of the Federal Reserve. Should the election turn out the way the election turned out? One key slice of that is could President Trump fire or otherwise force Chair Jay Powell out? Powell was asked about that today. Hi, Victoria Guido with Politico. Some of the president's elect's advisers have suggested that you should resign.

[Victoria Guido]

If he asked you to leave, would you go?

[Jay Powell]

No.

[Kyle Rysdal]

Can you follow up on do you think that legally you're not required to leave?

[Jay Powell]

No.

[Kyle Rysdal]

We are, however, going to leave. John Buckley, John Gordon, Noia Carr, Diantha Parker, Amanda Peacher and Stephanie Seek are the Marketplace editing staff. Amir Bibawe is the managing editor. I'm Kai Rysdal. We will see you tomorrow. Everybody. This is 8:00pm.

[Janeli Espinal]

Understanding Personal Finance can feel like an impossible task, but it.

[Kyle Rysdal]

Doesn'T have to be that way. I'm Janeli Espinal and on Financially Inclined.

[Janeli Espinal]

I'll guide you through simple money lessons.

[Kyle Rysdal]

That will change your financial future.

[Janeli Espinal]

Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind.

[Kyle Rysdal]

FOMO and what you can do to.

[Janeli Espinal]

Make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts.