WEBVTT - U.S Existing Home Sales Fall, Alaska Air Profit Forecast 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Affo Car Playing and Broun Auto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.000 or watch us live on YouTube. 0:00:25.000 --> 0:00:29.600 Let's go back to the housing market. Here. Drew Redding 0:00:29.640 --> 0:00:31.080 joins us. This is his job. 0:00:31.120 --> 0:00:32.960 We hired him to be like the housing analysts. We 0:00:33.040 --> 0:00:36.000 had an housing analyst like the very early first days 0:00:36.000 --> 0:00:36.600 of Bloomberg. 0:00:36.720 --> 0:00:39.120 He's not very good, so we had to upgrade. So 0:00:39.159 --> 0:00:39.960 we got Drew reading. 0:00:40.000 --> 0:00:43.960 You brought Drew in and he's been a great homebuilders analyst. 0:00:44.520 --> 0:00:45.879 Drew, thanks so much for joining us here. 0:00:46.520 --> 0:00:48.200 Give us kind of a snapshot of what you're seeing 0:00:48.280 --> 0:00:50.520 out there in the US housing market. 0:00:51.840 --> 0:00:55.240 Sure, so the US housing market continues to be a 0:00:55.320 --> 0:00:57.520 tail two markets. We had some data on the existing 0:00:58.120 --> 0:01:01.080 home sales front this morning. We saw which were roughly 0:01:01.120 --> 0:01:03.840 in line with expectations at about four point one nine 0:01:03.840 --> 0:01:07.679 million on an analyzed basis. Keep in mind, we're still 0:01:07.800 --> 0:01:11.200 down about thirty five percent from you know, the peak 0:01:11.280 --> 0:01:13.240 back in twenty twenty one, So this is a market 0:01:13.240 --> 0:01:16.000 that is still extremely depressed. The other thing you have 0:01:16.040 --> 0:01:18.200 to remember with the numbers we saw today is that 0:01:18.240 --> 0:01:21.880 they represent closings. So these are contracts that were signed, 0:01:22.040 --> 0:01:24.679 you know, thirty sixty days ago when rates were more 0:01:24.720 --> 0:01:27.240 in the six and a half to seven percent range. 0:01:27.240 --> 0:01:29.360 So we think that going forward, you're going to continue 0:01:29.360 --> 0:01:31.959 to see a little bit of weakness on the existing 0:01:32.000 --> 0:01:33.440 home side of things. 0:01:33.640 --> 0:01:36.600 On existing homes, are we seeing it a buyer's market 0:01:36.720 --> 0:01:39.520 or a seller's market? It basically, are the sellers willing 0:01:39.520 --> 0:01:40.679 to finally come down in price. 0:01:41.959 --> 0:01:46.399 Well, you know, surprisingly we haven't seen all that many 0:01:46.440 --> 0:01:51.160 price corrections. We're still seeing medium prices rise. You're actually 0:01:51.200 --> 0:01:53.240 seeing prices in the new home market come down a 0:01:53.280 --> 0:01:56.840 little bit because builders are adjusting square footage and they're 0:01:56.880 --> 0:01:59.160 also you know, trying to meet the market in order 0:01:59.200 --> 0:02:01.600 to move their image, but not so much on the 0:02:01.640 --> 0:02:03.840 existing home front. And you know, at the same time, 0:02:04.360 --> 0:02:06.400 you know, one of the key stories on the existing 0:02:06.440 --> 0:02:08.160 side has been that there's just not a lot of 0:02:08.160 --> 0:02:11.320 inventory out there in the market. We are starting to 0:02:11.360 --> 0:02:14.200 see that flip a little bit more recently, so that'll 0:02:14.240 --> 0:02:15.600 be something to watch if we start to get a 0:02:15.639 --> 0:02:18.200 lot of inventory coming to the market, you could see 0:02:18.240 --> 0:02:20.400 more price adjustments from sellers, but. 0:02:20.960 --> 0:02:22.239 I guess the reality is drew. 0:02:22.400 --> 0:02:24.800 I mean, everybody thinks they're an expert on the homebuilding business, 0:02:24.840 --> 0:02:26.680 so it must be frustrating for you because you actually 0:02:26.760 --> 0:02:30.000 are an expert. But I mean the reality is house 0:02:30.040 --> 0:02:32.280 comes on the market, boom, it's it sells in like 0:02:32.320 --> 0:02:36.080 fifteen minutes. I mean, because there's nothing out there and 0:02:36.200 --> 0:02:38.239 it doesn't really matter where the mortgage market is. 0:02:38.280 --> 0:02:38.840 It seems like. 0:02:38.880 --> 0:02:42.320 But you know, is that in fact the case where 0:02:42.320 --> 0:02:44.240 you're seeing across the country or is it regional? 0:02:45.120 --> 0:02:47.520 Yeah, it's a good question. I mean, the market is regional. 0:02:47.560 --> 0:02:49.720 We had, you know, when we started to come out 0:02:49.760 --> 0:02:53.400 of that initial interest rate spike in the back half 0:02:53.440 --> 0:02:55.560 of twenty two, we saw that markets in the East, 0:02:55.600 --> 0:02:57.799 which didn't rise as much during the boom time, we're 0:02:57.800 --> 0:03:00.400 a little bit more stable, and markets on the west 0:03:00.400 --> 0:03:06.520 coast California, Washington, the Southwest were comparatively harder hit. What 0:03:06.560 --> 0:03:09.680 we've seen now is that the increase in themand has 0:03:09.720 --> 0:03:12.720 started to be more broad based as buyers have kind 0:03:12.760 --> 0:03:15.640 of started to get more accustomed to higher rates. I think, 0:03:16.000 --> 0:03:17.799 you know, to some extent, if you need to move. 0:03:17.800 --> 0:03:20.120 There's not a whole lot you could do. You start to, 0:03:20.840 --> 0:03:23.560 you know, fine tune, you know, maybe what you can afford. 0:03:23.600 --> 0:03:24.960 But at the same time, if you have to move, 0:03:25.000 --> 0:03:26.720 you're gonna find a way to make it work. Now, 0:03:27.080 --> 0:03:29.919 it's interesting that you said, you know, despite high rates, 0:03:30.040 --> 0:03:32.960 homes are flying off the shelves. We had earnings results 0:03:32.960 --> 0:03:35.640 this morning from d R Horton and they actually said 0:03:35.640 --> 0:03:38.320 that despite the higher rates, they're still seeing a pretty 0:03:38.360 --> 0:03:42.520 solid demand environment in early spring, which is encouraging. 0:03:43.280 --> 0:03:45.080 What do you mean, I'm not a home building expert 0:03:45.080 --> 0:03:46.760 because I look at Zillow and Street Easy all the 0:03:46.760 --> 0:03:50.200 time in Brooklyn, exactly. Okay, that's just rude. That's just rude. 0:03:50.200 --> 0:03:50.400 Paul. 0:03:50.840 --> 0:03:52.400 Hey, Drew, I'm glad you brought up d R Horton 0:03:52.400 --> 0:03:54.760 because you've also mentioned concessions that we've been seeing with 0:03:54.800 --> 0:03:56.840 some of the new homes. What did R Horton say 0:03:56.840 --> 0:03:57.240 about that? 0:03:59.000 --> 0:04:01.080 Yeah, so their commentary was pretty much in line with 0:04:01.120 --> 0:04:03.640 what it was last quarter, and that's that sales incentives 0:04:04.040 --> 0:04:07.520 are going to remain at elevated levels over the near term. 0:04:07.640 --> 0:04:09.880 And you have to keep in mind, you know, when 0:04:09.880 --> 0:04:13.000 they started this quarter back in January rates for six 0:04:13.040 --> 0:04:14.960 and a half. We're almost seven and a half now, 0:04:15.480 --> 0:04:18.800 so their goal and builders as a whole are generally 0:04:18.920 --> 0:04:22.039 trying to maintain a spread in mortgage rates versus you know, 0:04:22.080 --> 0:04:24.520 what you see out there as a headline. So if 0:04:24.520 --> 0:04:26.359 we're looking at seven and a half, they're trying to 0:04:26.360 --> 0:04:29.160 offer their buyers something one hundred to one hundred and 0:04:29.160 --> 0:04:31.760 fifty basis points below what you would get in the 0:04:31.800 --> 0:04:34.880 resale market. So they do expect rates to remain elevate it. 0:04:35.960 --> 0:04:37.400 You know, that was one of the main things coming 0:04:37.440 --> 0:04:40.680 into the quarter is how would these elevated rates impact 0:04:40.720 --> 0:04:44.839 the use of incentives and ultimately their gross margins, you know, 0:04:44.880 --> 0:04:47.919 and encouragingly, their gross margins. Looking out into the third quarter, 0:04:48.000 --> 0:04:50.599 we're only a touch below what consensus was looking for, 0:04:51.320 --> 0:04:53.800 you know. And I think the fact that the bar 0:04:54.000 --> 0:04:55.520 has been lowered, I mean, if you look at what 0:04:55.520 --> 0:04:57.400 the stocks have done over the last month, the bar 0:04:58.080 --> 0:05:00.760 was lowered coming into the print. So I think investors 0:05:00.760 --> 0:05:03.200 were comfortable with the commentary they heard today. 0:05:03.480 --> 0:05:03.640 Drew. 0:05:03.720 --> 0:05:05.640 I have a super dumb question, but if the housing 0:05:05.720 --> 0:05:08.480 market is still so tight and there is so much demand, 0:05:08.640 --> 0:05:10.040 why do they need to offer incentives. 0:05:12.120 --> 0:05:14.480 Well, there's not a lot of inventory in the resale market, 0:05:14.480 --> 0:05:16.640 and they're trying to make their product more attractive. So 0:05:16.880 --> 0:05:19.200 part of the business of a home builder is that 0:05:19.200 --> 0:05:21.760 you need to turn your inventory over to make your 0:05:21.800 --> 0:05:24.400 business work. So they're seeing a lot of demand for 0:05:24.480 --> 0:05:26.800 spec homes. They want to move those speck hones because 0:05:26.839 --> 0:05:29.760 the longer they say in inventory, the more likely they 0:05:29.760 --> 0:05:31.480 are to come down in price or come down even 0:05:31.560 --> 0:05:35.480 more significantly in margin. You know, just because there is 0:05:35.560 --> 0:05:37.760 demand out there, it doesn't mean that affordability is not bad. 0:05:37.800 --> 0:05:40.120 Affordability is still the you know, at some of the 0:05:40.160 --> 0:05:42.960 worst levels in history, and a lot of buyers are 0:05:43.000 --> 0:05:45.080 struggling out there, and they need these incentives to kind 0:05:45.080 --> 0:05:46.760 of get buyers through the door and make the math 0:05:46.800 --> 0:05:48.000 work for them. 0:05:48.160 --> 0:05:52.800 Any markets showing signs of kind of peaking, and I'm 0:05:52.839 --> 0:05:54.560 trying to I'm thinking of the Miami's of the world, 0:05:54.560 --> 0:05:57.840 the Austin's of the world, of those markets peaked. 0:05:58.680 --> 0:06:01.360 Yeah, those are two good names that you point out. 0:06:02.320 --> 0:06:05.280 Florida has been one of the strongest markets. But interestingly, 0:06:05.320 --> 0:06:09.120 what we're starting to see now is that inventory, particularly 0:06:09.200 --> 0:06:12.719 in some of those Southwestern and you know, Western markets 0:06:12.760 --> 0:06:15.240 like Tampa all down the coast, we're starting to see 0:06:15.279 --> 0:06:19.359 pretty significant increases in inventories now by and large. You know, 0:06:19.400 --> 0:06:22.839 across the US, inventories for the most part, are still 0:06:22.880 --> 0:06:25.440 below where they were in twenty nineteen. But I think, 0:06:25.600 --> 0:06:28.880 you know, as a builder, that's really been your advantage. 0:06:28.880 --> 0:06:31.559 So every time inventories increased five ten percent, you're starting 0:06:31.600 --> 0:06:34.600 to lose a little bit of that advantage. So one 0:06:34.640 --> 0:06:36.880 of the main places we're seeing it is Florida. We're 0:06:36.880 --> 0:06:40.279 also seeing it in Austin, as you mentioned. And you 0:06:40.320 --> 0:06:43.920 know what's interesting with the Florida market is it's an 0:06:43.960 --> 0:06:46.599 area where you've had a lot of single family housing 0:06:46.720 --> 0:06:49.640 converted to short term rentals, so you're starting to see 0:06:49.680 --> 0:06:51.919 maybe some of those come back to the market. But 0:06:51.960 --> 0:06:54.360 you're also seeing a market that's suffering from high insurance 0:06:54.400 --> 0:06:56.760 costs with you know, the storms and things like that. 0:06:57.920 --> 0:07:01.440 HOA fees are going up, so it's becoming more unaffordable market. 0:07:02.520 --> 0:07:04.560 Yeah, I mean, I don't know, It just seems like 0:07:04.600 --> 0:07:06.920 some of those markets have to peak, if not now, 0:07:07.000 --> 0:07:08.520 and we're gonna go down in June. We're gonna go 0:07:08.520 --> 0:07:11.239 down to another hot market in Nashville, Tennessee. So Alex 0:07:11.280 --> 0:07:14.000 and I will do some on the ground reporting home 0:07:14.000 --> 0:07:17.400 builder analyst, Yes, exactly, how hard can it be? And 0:07:17.440 --> 0:07:19.800 you just predict her into interest rates are going. Drew 0:07:19.840 --> 0:07:23.080 Reading he is our top notch home building analyst at 0:07:23.080 --> 0:07:26.240 Bloomberg Intelligence. Again, a significant upgrade from the first guy 0:07:26.240 --> 0:07:28.960 we had in there, So very good for Drew Reading there. 0:07:29.040 --> 0:07:32.240 Talking about the hazard market again, d R. Horton had 0:07:32.280 --> 0:07:34.720 some some good numbers out this morning. 0:07:35.600 --> 0:07:39.520 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:07:39.560 --> 0:07:42.640 weekdays at ten am Eastern on Apple card Play and 0:07:42.640 --> 0:07:45.560 Android Auto with the Bloomberg Business App. You can also 0:07:45.640 --> 0:07:48.800 listen live on Amazon Alexa from our flagship New York 0:07:48.840 --> 0:07:53.200 station just say Alexa playing Bloomberg eleven thirty. 0:07:53.600 --> 0:07:56.200 We did have some data coming out. We had housing data, 0:07:56.240 --> 0:07:59.760 but also we had the conference board US leading in. 0:08:00.600 --> 0:08:02.480 I'm not one hundred percent sure I know what that 0:08:02.520 --> 0:08:04.840 even is. It came it was down by about three 0:08:04.880 --> 0:08:07.920 tenths of one percent. That was worse than estimated. The 0:08:07.960 --> 0:08:11.000 prior month was revised up to two tenths of one percent, 0:08:11.040 --> 0:08:13.400 So it feels like that's a really big dip. Luckily, 0:08:13.600 --> 0:08:16.200 we have Dana Peterson. She joins us now from the 0:08:16.240 --> 0:08:18.480 conference board. This is her data. She can talk us 0:08:18.520 --> 0:08:22.360 through it. Dano, what is this? How do I read 0:08:22.440 --> 0:08:23.160 this information? 0:08:24.520 --> 0:08:24.680 Sure? 0:08:24.680 --> 0:08:25.360 Absolutely so. 0:08:25.520 --> 0:08:28.720 The US Leading Economic Indicator is a measure that's been 0:08:28.760 --> 0:08:31.120 out for a long time, and lots of people look 0:08:31.120 --> 0:08:33.600 at it and see it as a gauge for where 0:08:33.640 --> 0:08:36.240 the economy's going, whether there's a recession that's going to 0:08:36.280 --> 0:08:38.200 happen over the next six to twelve months or not. 0:08:38.720 --> 0:08:42.040 And basically, this measure did dip in the month, and 0:08:42.080 --> 0:08:44.120 when we looked at what was actually good, it was 0:08:44.240 --> 0:08:48.800 very little, just Leading Credit Index and also the stock index. 0:08:48.960 --> 0:08:52.040 Everything else was either negative or flat. And indeed, when 0:08:52.040 --> 0:08:54.120 we look at this gauge over the long run, it 0:08:55.320 --> 0:08:58.720 has signaled recession. But the thing is that it's signaling 0:08:58.800 --> 0:09:01.800 weakness in some parts of the US economy, but it 0:09:01.800 --> 0:09:03.560 doesn't capture all parts. 0:09:04.280 --> 0:09:06.560 All right, So talks about what we're seeing here again, 0:09:06.600 --> 0:09:08.880 The Leading Index came in at negative zero point three 0:09:08.920 --> 0:09:12.520 percent today. Consensus was a negative zero point one, so 0:09:12.520 --> 0:09:14.800 weaker than expected. What's driving it? 0:09:16.160 --> 0:09:16.679 Sure well? 0:09:16.760 --> 0:09:19.360 Things that were down in the month were job as claims. 0:09:19.360 --> 0:09:22.480 This is for March, not for April. So job as 0:09:22.520 --> 0:09:28.079 claims were down, consumers expectations for business conditions was down. Also, 0:09:28.120 --> 0:09:30.720 the yield curve was more negative, so you had a 0:09:30.720 --> 0:09:32.880 lot of things that just weren't really working well, and 0:09:32.920 --> 0:09:36.079 also permits weren't doing well. And certainly we know that 0:09:36.120 --> 0:09:39.440 the housing sector remains weak, as mortgage rates have actually 0:09:39.440 --> 0:09:42.440 ticked back up and are quite high relative to what 0:09:42.480 --> 0:09:45.760 people experienced during the pandemic. And of course that's because 0:09:45.760 --> 0:09:48.520 the Fed has raised interest rates and is keeping them 0:09:48.679 --> 0:09:50.160 pretty elevated for some time. 0:09:50.720 --> 0:09:53.600 Danny, before we let you go, can you overlay a 0:09:53.720 --> 0:09:56.520 five percent two year and a talk of a five 0:09:56.559 --> 0:09:59.400 percent ten year onto this kind of data. 0:10:00.880 --> 0:10:03.120 Well, the thing is that we know that the two 0:10:03.160 --> 0:10:06.360 year yield is probably you know, it's reflecting what's going 0:10:06.400 --> 0:10:08.720 on more so in the FED funds rate. Meanwhile, you 0:10:08.840 --> 0:10:12.440 still have an outsized balance sheet and uncertainty kind of 0:10:12.480 --> 0:10:14.200 weighing on the ten year and so that's why the 0:10:14.240 --> 0:10:17.560 yeal curve is still negative. And for some folks that 0:10:17.600 --> 0:10:20.840 signals recession, but it's not the only measure. And certainly 0:10:20.920 --> 0:10:22.760 we don't think a recession is going to happen in 0:10:22.800 --> 0:10:26.080 the US, but certainly we could see some moderation and 0:10:26.160 --> 0:10:29.760 growth as consumers kind of pull back after spending tons 0:10:29.760 --> 0:10:32.200 of money and pulling up a lot of debt. But 0:10:32.280 --> 0:10:34.160 we don't think that the labor market's going to crash. 0:10:34.200 --> 0:10:36.679 It's probably still going to do well, and the Fed 0:10:36.880 --> 0:10:38.920 is still going to be looking at inflation gauges to 0:10:38.920 --> 0:10:41.600 see can they get back to two percent and can 0:10:41.640 --> 0:10:43.440 the Fed start cutting interest rates this year? 0:10:44.200 --> 0:10:46.240 All right, Dana Peterson, thank you so much for joining us. 0:10:46.280 --> 0:10:49.160 Data Peterson chief economists at the conference board, breaking down 0:10:49.160 --> 0:10:51.360 some of the data coming out of the board. The 0:10:51.480 --> 0:10:54.240 leading Economic Innator indicator came in a little bit weaker 0:10:54.240 --> 0:10:54.920 than expected. 0:10:55.120 --> 0:11:01.440 Today, you're listening to the Bloomberg Intelligence Podcast. Catch us 0:11:01.480 --> 0:11:04.439 live weekdays at ten am Eastern on Apple car Playing 0:11:04.480 --> 0:11:07.079 and broud Otto with the Bloomberg Business app. Listen on 0:11:07.200 --> 0:11:10.439 demand wherever you get your podcasts, or watch us live 0:11:10.559 --> 0:11:11.240 on YouTube. 0:11:12.480 --> 0:11:14.640 Alex Steele, Paul Sweeney, we're live here in our Bloomberg 0:11:14.720 --> 0:11:15.800 Interactive Brokers studio. 0:11:15.840 --> 0:11:16.920 We're also streaming. 0:11:16.600 --> 0:11:18.560 Live on YouTube, so you can head over to YouTube 0:11:18.600 --> 0:11:21.600 dot com search Bloomberg Podcast and that's where you'll find us. 0:11:21.840 --> 0:11:23.280 Let's talk a little airlines to air. 0:11:23.160 --> 0:11:26.280 Alaska Airlines had some good earning stock US up four 0:11:26.400 --> 0:11:31.880 percent today. You know, for the longest time, until just recently, 0:11:32.320 --> 0:11:34.400 when I looked at an Alaska Airlines plane in the 0:11:34.640 --> 0:11:39.000 tail the tail fin have the image of an individual. 0:11:38.720 --> 0:11:40.560 You know who I thought that was, until just recently, 0:11:41.200 --> 0:11:41.920 Jerry Garcia. 0:11:42.880 --> 0:11:44.400 Who is it? Well? 0:11:44.480 --> 0:11:47.960 I was sitting Okay, so Alaska Airlines on the tailfin, 0:11:48.040 --> 0:11:50.320 go google it. There's an image of an Eskimo. Up 0:11:50.440 --> 0:11:52.480 until just recently, I thought that was Jerry Garcia. And 0:11:52.480 --> 0:11:54.959 I was sitting in a Seattle airport talking to a 0:11:55.040 --> 0:11:57.480 pilot from Alaska Airlines. I said, boy, you guys are 0:11:57.640 --> 0:12:01.319 so cool. You have image of Gerry Garcia on every plane. 0:12:01.320 --> 0:12:04.320 He says, no, numb nuts, it's not Jerry Garcia. It's 0:12:04.320 --> 0:12:06.360 an Eskimo or a Lesque Airlines. 0:12:06.480 --> 0:12:09.079 How stupid can you be? So that's something My bubble 0:12:09.160 --> 0:12:11.959 was bopped. Pop. George Ferguson, he covers all the airlines 0:12:12.000 --> 0:12:14.320 and airspace companies. So I guess, George, we. 0:12:14.320 --> 0:12:18.760 Look at Alaska Airlines, the Jerry Garcia airline, what's happening? 0:12:18.800 --> 0:12:19.679 And they have some good numbers? 0:12:20.760 --> 0:12:24.120 Yeah, so pretty nice, you know, very nice numbers. Actually 0:12:24.200 --> 0:12:27.720 pretty surprised. It's all about strength and revenue right now. 0:12:27.840 --> 0:12:31.320 The surprises we're seeing, like United in Alaska, if your 0:12:31.360 --> 0:12:35.559 revenue line, you know, has coming better than expected, yields 0:12:35.600 --> 0:12:38.679 are doing better at these airlines, and again we expected 0:12:38.760 --> 0:12:41.720 going in, then you're getting a nice beat on earnings. 0:12:41.840 --> 0:12:48.200 And Alaska cited return of corporate travel, continued, strong leisure trends, 0:12:49.160 --> 0:12:52.040 and you know, we were kind of looking for a 0:12:52.120 --> 0:12:55.599 slightly down yield number, and you know, they had a 0:12:56.040 --> 0:12:59.160 definitely with the adjustment for the panel blowout from Boeing, 0:12:59.800 --> 0:13:03.160 they would have had five percent unit revenue increase, so 0:13:04.040 --> 0:13:05.280 very strong, very impressive. 0:13:05.440 --> 0:13:07.720 So I'm confused. I thought that the business airlines were 0:13:07.840 --> 0:13:11.080 like United, An American, and Delta, not Alaska air. 0:13:12.520 --> 0:13:15.760 So Alaska does have premium you know, premium seats in 0:13:15.800 --> 0:13:19.080 the front of the airplane, so they are business airline. 0:13:19.720 --> 0:13:21.600 I don't see them as sort of a big corporate 0:13:21.640 --> 0:13:25.720 airline because they're they're pretty regional right there, very West 0:13:25.800 --> 0:13:29.280 coast focus, very Alaska focused, as it seems like Paul's 0:13:29.280 --> 0:13:32.440 become more aware of recently. Then they do a bit 0:13:32.520 --> 0:13:34.880 of transcon right into the East coast. You've got to 0:13:34.880 --> 0:13:38.079 be able to provide your customer service into the other 0:13:38.160 --> 0:13:41.400 important population center of the US, but they lack a 0:13:41.480 --> 0:13:45.200 lot of i would say, the middle of the country routes, 0:13:45.240 --> 0:13:48.160 and they don't have any international. They partner up or 0:13:48.200 --> 0:13:50.040 they have a little bit of international. They go into 0:13:50.120 --> 0:13:53.200 Mexico and some of those leisure markets, but they partner 0:13:53.320 --> 0:13:56.240 up with the other airlines to provide that international. And 0:13:56.320 --> 0:13:59.040 it's hard to be a big business airline if you 0:13:59.080 --> 0:14:00.920 can't get your customers all the way around the world, 0:14:01.040 --> 0:14:03.080 So that kind of keeps them to smaller businesses. 0:14:03.679 --> 0:14:06.640 Hey, George, John Tucker was just telling me that gasoline 0:14:06.679 --> 0:14:09.360 prices to fill up his hummer. They're up almost seventy 0:14:09.400 --> 0:14:12.920 percent off of those lows three cfty at the wall 0:14:12.960 --> 0:14:13.920 wall exactly. 0:14:14.160 --> 0:14:16.319 How about jet fuel prices? Is that an issue for 0:14:16.520 --> 0:14:17.280 the airlines here? 0:14:18.640 --> 0:14:20.240 It is, It's going to be an issue in two 0:14:20.320 --> 0:14:23.480 Q So in one queue it was a tailwind compared 0:14:23.480 --> 0:14:26.680 to the one queue last year. But if it stays 0:14:26.760 --> 0:14:29.360 on this trajectory or just stays up these levels, it's 0:14:29.400 --> 0:14:31.480 going to be a bit of a headwind. Question will 0:14:31.520 --> 0:14:34.800 be you know, if demand is so strong, i'd expect 0:14:34.840 --> 0:14:37.160 the airlines to be able to push it through in 0:14:37.280 --> 0:14:39.720 pricing to the customers, and we're going to see that. 0:14:40.200 --> 0:14:42.760 I think the other big question here too is, you know, 0:14:42.800 --> 0:14:45.200 we're kind of into earning season. We've seen Delta, we've 0:14:45.240 --> 0:14:49.240 seen United, we've seen Alaska, We've seen airlines with again 0:14:49.360 --> 0:14:52.600 premium product in the front of the airplane. We still 0:14:52.680 --> 0:14:56.160 have to see the low cost carriers come through, because 0:14:56.160 --> 0:14:58.360 I'm not convinced that this strength is in the back 0:14:58.360 --> 0:14:59.000 of the airplane. 0:14:59.480 --> 0:15:00.560 But we're going to see right. 0:15:00.480 --> 0:15:02.880 As we start to see the real sort of low 0:15:03.000 --> 0:15:06.040 cost leisure carriers report, then we're going to know how 0:15:06.160 --> 0:15:07.480 broad based this strength is. 0:15:07.920 --> 0:15:10.920 I mean, having to be buyerpurcated would make sense because 0:15:10.960 --> 0:15:12.640 that's what we're seeing in the broader economy. 0:15:12.760 --> 0:15:12.880 Right. 0:15:13.360 --> 0:15:15.080 One part of the economy is doing well and the 0:15:15.160 --> 0:15:17.560 other this is not. Delinquency's are rising for credit cards. 0:15:17.560 --> 0:15:19.920 You're seeing more money being spent on credit cards, et cetera. 0:15:20.000 --> 0:15:22.200 We heard that from banks in terms of charge offs, 0:15:22.560 --> 0:15:25.160 So that were the case. Where are we in terms 0:15:25.200 --> 0:15:28.480 of valuation for say the front of the plane back 0:15:28.520 --> 0:15:29.720 of the plane carriers. 0:15:31.760 --> 0:15:35.640 Well, I mean, first of all, airlines are always sort 0:15:35.680 --> 0:15:37.960 of valued lowly, right, They're not there if you go 0:15:38.080 --> 0:15:41.760 for a pe multiple, you're in the mid single digits. So, 0:15:41.960 --> 0:15:45.440 I mean airlines are kind of perennially a pretty cheap, 0:15:45.800 --> 0:15:49.000 pretty cheap stock. But I mean what we saw with 0:15:49.160 --> 0:15:51.720 United the other day, that big jump. Part of that 0:15:51.880 --> 0:15:54.960 is them starting to close that gap with Delta, which 0:15:55.040 --> 0:15:58.760 is an upper single digits, you know, kee valued airline. 0:15:59.720 --> 0:16:02.840 So but again they're always kind of they're always kind 0:16:02.880 --> 0:16:05.440 of cheap because when things go bump in the night, 0:16:05.560 --> 0:16:09.280 airlines have a hard time with demand. Right, if we 0:16:09.400 --> 0:16:14.120 had a geopolitical problem, like the war really raged up 0:16:14.120 --> 0:16:16.560 in the Middle East, you probably start to see less 0:16:16.560 --> 0:16:19.240 demand going internationally all of a sudden. You can't feel 0:16:19.280 --> 0:16:22.600 airplanes a lot of operating leverage in this business, and 0:16:22.680 --> 0:16:24.280 so when that demand falls off hard. 0:16:24.160 --> 0:16:24.760 It really hurts. 0:16:25.000 --> 0:16:25.640 All right, George. 0:16:25.720 --> 0:16:27.520 On the YouTube feed, I can see that you are 0:16:27.640 --> 0:16:30.920 in yet again another hotel room, which reminds me you're 0:16:31.000 --> 0:16:35.400 at another boondoggle that we are financing here. You're at 0:16:35.400 --> 0:16:39.000 the corporate I guess aircraft kind of thing out there 0:16:39.040 --> 0:16:40.840 in Arizona. If I want to go out there and 0:16:40.920 --> 0:16:44.320 get the latest golf stream, I don't know, six. 0:16:44.560 --> 0:16:46.560 What's that going to set me back? Is a competition 0:16:46.680 --> 0:16:47.880 out there. How is that market? 0:16:48.760 --> 0:16:50.640 So the latest is going to be the seven hundred 0:16:50.680 --> 0:16:52.760 and the eight hundred pace and you're going to be 0:16:52.880 --> 0:16:55.000 up in the seventy millions. 0:16:54.680 --> 0:16:58.400 Range to own one of those. They're very long range. 0:16:59.040 --> 0:17:01.200 You sorry, seventy five million US. 0:17:01.320 --> 0:17:01.520 Yes. 0:17:03.280 --> 0:17:07.480 And what we're hearing out here from these folks is, look, 0:17:07.760 --> 0:17:11.239 private aviation was very, very strong in the pandemic. Right 0:17:11.359 --> 0:17:13.960 as the very well healed. Some of them were flying 0:17:14.000 --> 0:17:16.919 in the front of the airplane for Delta and United. 0:17:17.440 --> 0:17:20.200 They moved to private aviation. And what we're starting to 0:17:20.280 --> 0:17:23.200 see is some of those you know, those people that 0:17:23.680 --> 0:17:26.879 were flying private, unfortunately, they're moving back to the airlines. 0:17:26.880 --> 0:17:29.320 And that's part of the trend. Those poor folks have 0:17:29.440 --> 0:17:31.399 to get back on a tube for the rest of 0:17:31.480 --> 0:17:34.200 us other people in the world. So that's part of 0:17:34.240 --> 0:17:36.200 the trend too. That's helping the airlines, especially in the 0:17:36.280 --> 0:17:39.240 premium seats. They're seeing a little bit of an ebbing 0:17:39.280 --> 0:17:42.200 of demand of some of that really that those high 0:17:42.280 --> 0:17:46.159 end travelers. But this business is still pretty strong. Backlogs 0:17:46.200 --> 0:17:49.959 are two years for most of the manufacturers, better than 0:17:50.000 --> 0:17:52.400 they've been in a long time. Pricing was pretty good 0:17:52.400 --> 0:17:55.120 in the pandemic. It's softening a little bit. So maybe 0:17:55.160 --> 0:17:57.200 you're getting that golf stream now for I don't know, 0:17:57.359 --> 0:17:57.880 seventy two. 0:17:58.680 --> 0:18:00.800 Hey no, So I mean he's gotten excited. 0:18:00.800 --> 0:18:03.360 Bloomberg televisions are putting up there on our YouTube feed, 0:18:03.720 --> 0:18:06.040 isn't that, Jerry Garcia? If you look at Alaska Airlines, 0:18:06.520 --> 0:18:06.960 I mean. 0:18:07.320 --> 0:18:10.520 It's got to be we don't call them. 0:18:13.280 --> 0:18:15.080 Yeah, all right, Paul still focused on that. 0:18:15.880 --> 0:18:17.680 I just feel bad, Jerry Garcia. 0:18:19.600 --> 0:18:22.919 I just feel bad that those people who fly private 0:18:23.040 --> 0:18:24.840 now have to come back. I mean, that's that's a 0:18:24.920 --> 0:18:28.560 tough stuff. That's a tough rating on that. George. I 0:18:28.600 --> 0:18:30.360 couldn't help, but notice that your backdrop is the same 0:18:30.400 --> 0:18:32.800 as yesterday, which means you've clearly been working really hard 0:18:32.840 --> 0:18:34.760 in and out of that hotel room. What else are 0:18:34.800 --> 0:18:35.919 people talking about right now? 0:18:37.920 --> 0:18:40.359 Well, I mean there's always talk in the marketplace about Boeing. 0:18:40.440 --> 0:18:44.440 Right we've had this whistle blower go through DC. I'm 0:18:44.520 --> 0:18:47.440 not sure you know what we're learning there yet, but 0:18:47.480 --> 0:18:50.080 we're still kind of waiting on the Boeing report on 0:18:50.119 --> 0:18:53.119