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- [00:02]
Kai Rysdal
In case you were wondering.
- [00:04]
Jay Powell
So let me say that in the near term the election will have no effects on our policy decisions.
- [00:11]
Kai 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. 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.
- [00:46]
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.
- [00:59]
Kai 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 off on his fingers.
- [01:14]
Jay Powell
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.
- [01:28]
Kai Rysdal
Item three, retail sales stronger. Which gets us to, so I think.
- [01:34]
Jay Powell
Really the question is, is December.
- [01:36]
Kai Rysdal
You know where this is going, right? Longtime listeners will recognize the central bank's standby.
- [01:41]
Jay Powell
By December 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.
- [01:51]
Kai 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.
- [02:38]
Austin Golding
Good to talk to you, Kyle.
- [02:40]
Kai 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.
- [02:50]
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 be within a, you know, a 2 to 3% growth rate over the next 6 to 6 to 12 months.
- [03:11]
Kai Rysdal
And do you expect the changed politics of this economy to help you out?
- [03:16]
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 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, the path to sustainability is alive and well, but I do think there'll be less headwinds towards energy production and energy transport.
- [04:00]
Kai 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?
- [04:06]
Austin Golding
That's primarily what we carry. And I will tell you just through my short career, we have, 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, you know, in moving these carbon products, even, you know, even the people moving them are, you know, we're very aware that sustainability is a near and dear part of our future, no matter what the political climate may suggest.
- [04:33]
Kai 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.
- [04:41]
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, 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 out there because we are certainly part of that, that supply chain.
- [05:22]
Kai Rysdal
Yeah. So the, so the, the unspoken thing here is retaliatory tariffs, right?
- [05:27]
Austin Golding
Sure. Yeah, absolutely. You know, I will say, like, I like I mentioned these, these oil and gas companies are very international. So I watched them navigate the different political climates in my career. And I know this one may present more challenges, but they are a global entity. They are not patriotic in many senses.
- [05:50]
Kai Rysdal
You said a minute ago, in your short career, and I don't know how long we've been talking, it's gotta be probably five, seven years at least. So you've been doing this a while. What's the one thing that's on your mind as this economy evolves with the President elect and what that's gonna mean?
- [06:07]
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, Kai. Wow.
- [06:15]
Kai Rysdal
And you're like barely 40, man. Come on.
- [06:18]
Austin Golding
Right, well, look, it's a family business.
- [06:20]
Kai Rysdal
Yeah, that's true.
- [06:21]
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 under invested 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.
- [07:00]
Kai 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.
- [07:05]
Austin Golding
Oh, no, no, no, no. I had to earn. I had to earn that step, but no. 20 years. Yeah. Been a good journey.
- [07:11]
Kai Rysdal
Wow. Vicksburg, Mississippi is where they are. Austin Golding at Golding Barge Lines. Austin, thanks a lot. Talk to you soon.
- [07:16]
Austin Golding
Hey, talk to you. Thank you.
- [07:33]
Kai 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.
- [08:10]
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 schleps a week because people work hybrid work from home some of the days of the week, that changes the economics. Jeremy Michalik 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.
- [08:52]
Kai Rysdal
To shift away from public transit and.
- [08:55]
Matt Levin
Take an Uber instead. Lyft has 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.
- [09:24]
Jay Powell
Maybe you want flexibility in the evening so that you can go out and be with your co workers for a little bit.
- [09:29]
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 is a lot stronger. 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. I prefer morning, morning and afternoon rush hours. People are awake and thus less likely to make a mess in the backseat. I'm Matt Levin for Marketplace.
- [10:09]
Kai Rysdal
It was quite a day for ticker symbol wbd. Should that one escape you, it's Warner Bros. 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.
- [10:43]
Matt Levin
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. Until the beginning of this year, Max was a US Only service, basically. Seth Schaefer is a principal analyst at S and P Global, he says, another driver, at least for viewers in Europe. If you wanted to stream kind of Olympics coverage, Max was the place to go, too. It wasn't just super athletes bringing people in, but supervillains, too. David R. Diddy, author of the book Streaming Culture, points to the success of the Max show, the Penguin.
- [11:17]
Jay Powell
You've got Batman fans. You create the Penguin. That's going to drive a particular population to the subscription platform.
- [11:26]
Matt Levin
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.
- [11:44]
Austin Golding
You know, if you're selling a streaming service in a country that has less.
- [11:47]
Matt Levin
Wealth, you offer it at a much more modest price because that's what the economy will absorb. Across the industry, companies are using different tactics to add more subscribers, says Seth Schaffer 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. You know, we all have a service or two that we're borrowing a password.
- [12:14]
Jay Powell
To access these days.
- [12:15]
Matt Levin
Still, like, I won't mention the one.
- [12:17]
Jay Powell
That I'm borrowing at the moment, but it's just really common.
- [12:22]
Matt Levin
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 from Archipliss.
- [12:48]
Kai Rysdal
But wait, what's the common password? Okay, coming up, likely the riskiest and.
- [12:54]
Jay Powell
Most complex transaction a company might ever do.
- [12:57]
Kai Rysdal
Mergers and acquisitions, gang. But first? Sure, why not? Let's do the numbers. Dow Industrials 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%. Matt Levin was talking about the growth of the ride share commute. Uber slowed 1 and 7 10% 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%, according to Nasdaq's earnings calendar. There are literally hundreds of companies reporting today. Airbnb ascended 4 and 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's piece, up 11.8% today. Bonds up yield on the 10 year T Note 4.32% you're listening to Marketplace.
- [14:01]
Matt Levin
Heads up folks. Interest rates are falling, but you can still lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds on public.com youm might want to act fast because your yield isn't locked in until the time of purchase. Lock in a 6% or higher yield with a bond account only at public.com marketplace, brought to you by Public Investing member FINRA and SIPC. As of September 26, 2024, the average annualized yield to worst across the bond account is greater than 6%. Yield to worst is not guaranteed. Not an investment recommendation. All investing involves risk. Visit public.com disclosures Bond account for more info.
- [14:37]
Kai Rysdal
This is Marketplace. I'm Kai Rysdal. You know how on days Jay Powell has a press conference, we only play you shortish 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.
- [15:14]
Jay Powell
So we no 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'd 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, 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 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 any 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 to. There's nothing to model right now. We're at 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. 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 do do that.
- [17:13]
Kai 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. 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%, 6 0% 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.
- [18:27]
Matt Levin
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.
- [18:37]
Kai Rysdal
We've been talking to our vendors in.
- [18:39]
Matt Levin
The last couple of days, trying to.
- [18:41]
Jay Powell
Understand what their capacity is and what availability will be.
- [18:45]
Matt Levin
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. The tariff is going to affect you.
- [19:04]
Jay Powell
At the time of customs clearance, which.
- [19:06]
Kai 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.
- [19:14]
Matt Levin
In the first quarter of next year. 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. Never once has a country paid those.
- [19:31]
Austin Golding
The importers pay those, and the importers.
- [19:34]
Matt Levin
Will look to mitigate against rising costs 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. 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. Trends come and go. So do seasons and seasonal goods. Some items even become obsolete. Welly Shih is a professor of management practice at Harvard. 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 want the old stuff, it means some companies can't stock up. I'm Kristen Schwab for Marketplace.
- [20:38]
Kai 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 Dealogic and AS Marketplace Justin Ho reports. That slowdown in M and A is kind of an economic indicator.
- [21:28]
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.
- [21:41]
Jay Powell
Likely the riskiest and most complex transaction a company might ever do.
- [21:45]
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.
- [22:09]
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 for those products.
- [22:26]
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.
- [22:39]
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.
- [22:50]
Justin Ho
Over the last few years, companies have not been all that comfortable with what tomorrow will look like, says Christina Sauter, a law professor at Southern Methodist 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.
- [23:10]
Matt Levin
It's just hard to plan for financing of their continuing operations to keep the company running as usual, Sauter says political.
- [23:19]
Justin Ho
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 M and A slowdown has started to clear up. Inflation is coming down. So are interest rates. And Afra F. Sharipour, a law professor at UC Davis, says some companies have been laying the groundwork for deals and.
- [23:45]
Matt Levin
That 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.
- [23:53]
Justin Ho
Afsharipur says that's most likely to happen in sectors that have been growing quickly. Take the tech industry, for example.
- [23:59]
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 that are much more focused on AI.
- [24:13]
Justin Ho
And if M and A starts to pick up, F Sharipour says there's a lot of research showing that CEOs tend to get a little jealous when competitors start buying other companies.
- [24:21]
Matt Levin
The executive sees that their competitor has just bought another big company and now the CEO is a CEO of a much larger company, then that person might think, well, I want to be the CEO of a much larger company.
- [24:33]
Justin Ho
As a result, F Sharipour 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.
- [24:53]
Kai 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.
- [25:16]
Matt Levin
Hi. Victoria Guido with Politico. Some of the President's Elect advisors have suggested that you should resign. If he asked you to leave, would you go?
- [25:27]
Jay Powell
No.
- [25:28]
Kai Rysdal
Can you follow up on do you.
- [25:31]
Matt Levin
Think that legally you're not required to leave?
- [25:34]
Jay Powell
No.
- [25:36]
Kai Rysdal
We are, however, going to leave. John Buckley, John Gordon, Noria Carr, Diantha Parker, Amanda Petra 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 8pm.