The Transcripts

The Transcript 11.05.18

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post that contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The story this week:: Many are concerned that growth will slow but current US economic fundamentals are strong with high business and consumer confidence. Inflation pressures have mounted and some of those price increases are making their way to consumer goods. There’s more anxiety in the global economy, especially in emerging markets.

The Macro Outlook:

Many are concerned that growth will slow

“I think the economy is slowing from the very strong growth what we had earlier. It’s still an above trend growth rate” – Cleveland Fed President Loretta Mester

“a bit more subdued, a bit more subdued” –  Sotheby’s (BID) CEO Tad Smith

“we are seeing some clients transacting less, deleveraging and generally adopting a slightly risk-off attitude” – HSBC Holdings PLC (HSBC) CEO John Flint

But fundamentals have not yet weakened

“the macro backdrop is not showing signs of material fundamental weakening”- Goldman Sachs BDC (GSBD) COO Jon Yoder

“a lot of the leading indicators on a macro basis that you see and I see, we see them together, would suggest that things are still healthy.” – Wesco International (WCC) CEO John Engel

” In the U.S., economic growth remains positive. Low unemployment, healthy consumer confidence helped…retail sales remained strong…businesses are investing, ” – Mastercard (MA)  CEO Ajaypal S. Banga

“Conditions in the U.S. industrial market remain strong. While sentiment indices, such as the MBI have moderated a bit in recent months, they remain at high levels.” – MSC Industrial Direct (MSM)   CEO Erik David Gershwind

“So we can all see the robustness of the U.S economy, the strong GDP trend for this quarter. So the real underlying demand indicators are very positive.” – ArcelorMittal SA (MT) VP Daniel Fairclough

Business confidence is high in middle markets

“During the third quarter, we saw very strong deal activity in the middle markets…We believe the deal flow continues to be driven by significant fundraising activity in the private equity sector in recent years combined with high levels of business confident by U.S.-based companies. The fundamentals appear to justify this confidence as job creation and unemployment trends are favorable while growth in gross domestic product is near multi-year highs. These factors tend to resonate more strongly in the middle market segment of the U.S. economy where businesses are generally more focused on domestic customers.” – Goldman Sachs BDC (GSBD) CEO, Brendan McGovern

The economic expansion is now in its 10th year

“The U.S. economic expansion, now in its 10th year, is marked by strong growth in the gross domestic product (GDP) and a job market that has been surprising on the upside for nearly two years.” – Fed Vice Chairman Richard H. Clarida

Still, inflation stress is rising

“We are seeing some more inflation stress than perhaps one or two years ago….we’re going to have to work harder to offset that inflation – Royal Dutch Shell Plc (RDS.A)  CFO Jessica Uhl

A strong economy makes markets more receptive to increasing prices

“the market has been receptive to increased pricing as an offset to higher input costs.” – SPX Corporation (SPXC) CEO Gene Lowe

Price increases are hitting consumer goods

we’ve taken some price increases this year in the U.S. marketplace, whether that be in the juice category by changes in the packaging, in soft drinks, in the number of channels – The Coca-Cola (KO) CEO James Quincey

And tariffs would likely stimulate inflation across the broader economy

“tariffs would likely stimulate inflation across the broader economy” – MSC Industrial Direct (MSM) CEO Erik David Gershwind

Interest rates are rising

“with the reversal of quantitative easing and the gentle, some would say not quite as gentle, but it seems fairly gentle to me, rising interest rates. By the way, those rising interest rates are coming because the growth is so strong and the picture is very strong”  – Sotheby’s (BID) CEO Tad Smith


The global economy is experiencing more anxiety than the US

“there’s a growing anxiety about slowing down of the economy globally, when the credit cycle in the United States will come to an end. That is of course of anxiety. And so far, geopolitical risks are affecting the market sentiment and what will happen with the Brexit deal.”  – Nomura Holdings (NMR)  CFO Takumi Kitamura

“global macroeconomic conditions have become more uncertain. People wonder about potential reverberations from the global economic slowdown, the threat of rising interest rates and political and debt turmoil in Europe. In the case of China, we see reports of decelerating GDP growth” – Alibaba Group Holding (BABA) VC Joseph C. Tsai

“customers are a little bit more aware, strong anxious of the issues, so it’s top of the conversations…Geopolitical concerns have softened the customer confidence slightly-. – HSBC Holdings PLC (HSBC) CEO John Flint

Emerging markets are the most pressured

“the rising interest rates do put a little touch of pressure on some emerging markets.” – Sotheby’s (BID) CEO Tad Smith

“there was a outflow – significant outflow of funds from emerging countries and emerging currencies declined sharply and interest rose sharply” – Nomura Holdings (NMR) CFO Takumi Kitamura

“The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia. These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see” – Apple (AAPL)  CEO Tim Cook.

“In some of the emerging and developing markets like Turkey and the Middle East, the macroeconomic environment is tough” – The Coca-Cola (KO) CEO James Quincey

“We’ve seen a genuine economic slowdown in many of our African markets and across the Middle East displayed higher commodity prices….that has an affected sentiment across emerging markets to some degree. And of course, this translated through to currency weakness in a number of our markets and a broader sense of malaise in emerging markets.” – Standard Chartered PLC (SCBFF) CEO William Winters

Chinese consumers are cutting back on durable goods purchases

“The NBS data shows weakness in large-ticket items, such as home appliances and autos, which is consistent with the view that consumers see uncertainty in the future and are cutting back on durable goods purchases. However, on Alibaba’s China retail marketplaces, we see continued robust growth in consumer staples, cosmetics, and apparels.”  – Alibaba Group Holding (BABA)  VC Joseph C. Tsai


Steel prices have come down some

“what happened during the third quarter is obviously steel pricing started to come down and when steel pricing comes down in the U.S market, where possible, buy as well sit on their hands, step to the side and allow the price to drop and reduce their inventories and look to come in at a lower price point and replenish their inventories then.” – ArcelorMittal SA (MT) VP Daniel Fairclough

Shipping lines have never really recovered from recession

“the shipping lines are under a lot of financial stress. The business has been characterized by excess vessel capacity and freight rates that aren’t providing a real return on their invested capital and that has been true for a long time.” –Triton International Limited (TRTN) VP John O’Callaghan

Airline fundamentals are solid

“The industry fundamentals remain solid. You see it in the traffic numbers that they remain overall good, airline profitability remains healthy. And in terms of financing, there’s a high level of liquidity available to support the financing of commercial aircraft. I mean, the backlog is at around 7,400 aircraft. You know it’s solid.” – Airbus SE ADR (EADSY) CFO Harald Wilhelm

Materials, Energy:

Energy and mining CEOs are becoming more optimistic

“I think there’s a longer tail on this cycle for both mining and oil and gas. So I’m pretty bullish about mining over the longer term and these projects are three, four, five years” – Fluor (FLR)  CEO, David T. Seaton

Oil inventory levels have normalized

“given oil price stock levels have now drifted down towards below the five-year average, oil is now more prone to oil price movements and potential oil price major movements in either direction…We expect the oil market to remain volatile in the near term, characterized by lower stock levels and ongoing geopolitical factors” – BP (BP) CFO Brian Gilvary

Demand remains strong. Supply-side dynamics may set the marginal price.

“Demand continues to be strong and I think the volatility is probably more a factor of supply and geopolitics than one around demand, so we expect demand to continue.. it’s more the supply side and how that might play out that is less certain and can lead to different outcomes from an oil price perspective.” – Royal Dutch Shell Plc (RDS.A) CFO Jessica Uhl

Full transcripts can be found at