1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,880 Speaker 2: Terminal and the Bloomberg Business app. We begin with the 10 00:00:36,920 --> 00:00:39,879 Speaker 2: big issue markets on hold ahead of Nvidio. Then as 11 00:00:39,880 --> 00:00:42,760 Speaker 2: that one hundred under pressure as traders await tomorrow's results 12 00:00:42,760 --> 00:00:46,000 Speaker 2: from the AI giant that's become a critical market driver 13 00:00:46,240 --> 00:00:48,880 Speaker 2: for Camporadi of JP morgan Stein bullish with this to say, 14 00:00:49,200 --> 00:00:52,400 Speaker 2: the concentration of stocks driving the market higher makes sense 15 00:00:52,440 --> 00:00:54,920 Speaker 2: to us. Given the ability for those companies to manage 16 00:00:54,960 --> 00:00:57,320 Speaker 2: the current levels of raids as well as the earnings 17 00:00:57,320 --> 00:01:02,160 Speaker 2: supporting valuations, we believe the momentum inequacies can continue, So 18 00:01:02,360 --> 00:01:03,680 Speaker 2: joined us some moth folkemonitory. 19 00:01:03,680 --> 00:01:04,800 Speaker 3: Good morning, Let's get to some. 20 00:01:04,760 --> 00:01:07,720 Speaker 2: Of your cos I've a white US stocks, EM Japan 21 00:01:07,959 --> 00:01:10,720 Speaker 2: high yield credit. What aren't you. I've a white right 22 00:01:10,720 --> 00:01:11,640 Speaker 2: now in this mile kid. 23 00:01:11,920 --> 00:01:14,720 Speaker 3: Yeah, so we're not overweight cash. And I love your 24 00:01:14,920 --> 00:01:16,560 Speaker 3: I love your quote that I saw on your on 25 00:01:16,720 --> 00:01:18,959 Speaker 3: one of the monitors that said t bill and chill. 26 00:01:19,480 --> 00:01:21,319 Speaker 3: That's like nails on a try I'll probably date myself 27 00:01:21,360 --> 00:01:23,000 Speaker 3: with this reference, but that's like nails on a truck 28 00:01:23,040 --> 00:01:26,399 Speaker 3: board for me. John, I'll tell you we still run 29 00:01:26,400 --> 00:01:28,560 Speaker 3: into that problem. And I'm not talking about should you 30 00:01:28,600 --> 00:01:30,399 Speaker 3: be in equies or should you be in cash? Okay, 31 00:01:31,000 --> 00:01:34,200 Speaker 3: I'm a multi asset portfolio manager. I believe in diversification 32 00:01:34,840 --> 00:01:38,280 Speaker 3: and a diverse fied portfolio. Last year, when the FED 33 00:01:38,360 --> 00:01:40,880 Speaker 3: wasn't cutting rates, was up sixteen cash was up five 34 00:01:40,959 --> 00:01:44,240 Speaker 3: on the year. This year, this diverse five portfolio of 35 00:01:44,319 --> 00:01:46,800 Speaker 3: sixty forty is up about eleven and cash is up 36 00:01:46,800 --> 00:01:49,800 Speaker 3: about three and a half. So we're tripling the return 37 00:01:50,000 --> 00:01:52,240 Speaker 3: on cash for folks that should probably be in diverse, 38 00:01:52,280 --> 00:01:55,640 Speaker 3: fied portfolios. And I loved last Friday morning at ten 39 00:01:55,720 --> 00:01:59,120 Speaker 3: am the time has come for policy to adjust. I 40 00:01:59,160 --> 00:02:03,040 Speaker 3: mean that's like music to the ears of investors after 41 00:02:03,120 --> 00:02:06,360 Speaker 3: two very long years. Twenty twenty two was the economy 42 00:02:06,400 --> 00:02:08,360 Speaker 3: is going to have to go through some pain in 43 00:02:08,480 --> 00:02:10,080 Speaker 3: order for us to achieve our a dual mandate. I 44 00:02:10,080 --> 00:02:12,840 Speaker 3: still remember pain. And then last year it was basically 45 00:02:12,880 --> 00:02:14,440 Speaker 3: the message was we're either going to be high for 46 00:02:14,480 --> 00:02:17,000 Speaker 3: longer or even higher for longer. So I think what 47 00:02:17,320 --> 00:02:19,720 Speaker 3: we're looking at when we believe the momentum equities can 48 00:02:19,760 --> 00:02:23,079 Speaker 3: continue is that these cuts I think are going to 49 00:02:23,160 --> 00:02:26,720 Speaker 3: grease the wheels for the soft landing and you know, 50 00:02:26,919 --> 00:02:30,160 Speaker 3: the FED cutting without a recession and what we believe 51 00:02:30,280 --> 00:02:33,560 Speaker 3: between four and five percent nominal GDP growth. Every investor 52 00:02:33,639 --> 00:02:34,840 Speaker 3: should be raising their hand for that. 53 00:02:35,040 --> 00:02:37,480 Speaker 2: For a while. The sales team I imagine at JPLGAM, 54 00:02:37,520 --> 00:02:40,040 Speaker 2: mccolon clents and saying, you ready should get out of cash, 55 00:02:40,200 --> 00:02:43,680 Speaker 2: We've got this bond fund, allocate some long dated depth, 56 00:02:44,000 --> 00:02:46,280 Speaker 2: go into credit, all sorts of things with Bob, Michael 57 00:02:46,320 --> 00:02:49,440 Speaker 2: and co. Have some fun. Are they calling you now 58 00:02:49,760 --> 00:02:53,119 Speaker 2: after Friday to make that move? How resistant have they been? 59 00:02:53,480 --> 00:02:53,679 Speaker 4: Yeah? 60 00:02:53,680 --> 00:02:56,440 Speaker 3: The credit story is still loud and clear, because the 61 00:02:56,440 --> 00:02:59,720 Speaker 3: credit story for us is we'd rather play offense in 62 00:02:59,720 --> 00:03:03,520 Speaker 3: fix income in defense. So the high yield story, while 63 00:03:03,560 --> 00:03:05,600 Speaker 3: spreads aren't super wide and we're not going to get 64 00:03:05,600 --> 00:03:08,119 Speaker 3: this crazy total return. We'll get the total return in equity, John, 65 00:03:08,480 --> 00:03:12,079 Speaker 3: but we're going to out yield what we believe treasuries 66 00:03:12,280 --> 00:03:15,640 Speaker 3: and just the core bond funds can do over time, 67 00:03:15,680 --> 00:03:18,160 Speaker 3: which is a form of alpha. Less glamorous than Nvidia, 68 00:03:18,440 --> 00:03:20,320 Speaker 3: but it is a It is a form of alpha. 69 00:03:20,320 --> 00:03:24,040 Speaker 3: But importantly, like this diversification story, what we've seen is 70 00:03:24,040 --> 00:03:26,880 Speaker 3: that as soon as inflation hits three or below and 71 00:03:26,880 --> 00:03:29,840 Speaker 3: we're a two point nine on CPI, you get the 72 00:03:29,919 --> 00:03:32,359 Speaker 3: right way correlation back with bonds. So you can get 73 00:03:32,360 --> 00:03:36,320 Speaker 3: a day like August fifth, the highest intra day volatility 74 00:03:36,320 --> 00:03:38,240 Speaker 3: in the history of the equity market, my first day 75 00:03:38,240 --> 00:03:40,920 Speaker 3: of vacation, Thank you very much. And we can hold 76 00:03:40,960 --> 00:03:44,000 Speaker 3: on to our overweight to stocks and credit in that 77 00:03:44,120 --> 00:03:47,440 Speaker 3: environment because we believe that finally bonds are going to 78 00:03:47,440 --> 00:03:49,880 Speaker 3: be the diversifier that we that we expect. 79 00:03:49,600 --> 00:03:49,920 Speaker 5: Them to be. 80 00:03:50,000 --> 00:03:52,840 Speaker 6: If that's the case, why I underweight US government bonds. 81 00:03:52,520 --> 00:03:54,600 Speaker 3: Because recession is not the base case. We're neutral or 82 00:03:54,640 --> 00:03:57,480 Speaker 3: our benchmark okay in terms of duration, but we'd much 83 00:03:57,560 --> 00:04:00,240 Speaker 3: rather play the high yield story, so spending the ash 84 00:04:00,320 --> 00:04:01,840 Speaker 3: and high yield versus the egg. 85 00:04:01,960 --> 00:04:02,960 Speaker 4: But we don't want to be underweight. 86 00:04:03,000 --> 00:04:05,360 Speaker 3: We don't want to be underweight in an environment where 87 00:04:05,400 --> 00:04:06,320 Speaker 3: bonds can protect us. 88 00:04:06,360 --> 00:04:08,720 Speaker 6: We were talking to Sebastian Page of tiro Price earlier 89 00:04:08,760 --> 00:04:10,640 Speaker 6: and he was talking about how it's important to sort 90 00:04:10,640 --> 00:04:13,240 Speaker 6: of hedge against the multitude of risks, including owning government 91 00:04:13,280 --> 00:04:15,840 Speaker 6: bonds in case there is a bigger downturn and holding 92 00:04:16,279 --> 00:04:19,919 Speaker 6: hard assets in case the inflation picks up more considerably. 93 00:04:20,360 --> 00:04:24,920 Speaker 6: Why in your asset allocation are you overweighting so significantly 94 00:04:25,160 --> 00:04:28,480 Speaker 6: the idea of a soft landing and a positive economic backjob. 95 00:04:28,600 --> 00:04:30,920 Speaker 3: So it still goes back to us, Lisa, that this 96 00:04:31,040 --> 00:04:34,520 Speaker 3: is an economy that is interest rate insensitive. So you 97 00:04:34,600 --> 00:04:37,640 Speaker 3: have an effective mortgage rate in the US right now 98 00:04:37,720 --> 00:04:42,520 Speaker 3: at three point nine. The average effective mortgage rate when 99 00:04:42,600 --> 00:04:44,440 Speaker 3: we had a zero interust rate policy from O eight 100 00:04:44,480 --> 00:04:47,000 Speaker 3: to fifteen was four point three. So in effect, US 101 00:04:47,000 --> 00:04:50,360 Speaker 3: homeowner with their biggest expense is paying less in their 102 00:04:50,360 --> 00:04:52,000 Speaker 3: mortgage than they weren't a zero interest. 103 00:04:51,800 --> 00:04:52,560 Speaker 4: Rate policy least. 104 00:04:52,560 --> 00:04:55,480 Speaker 3: So so I think there's still interest rate insensitivity. And this 105 00:04:55,680 --> 00:04:58,360 Speaker 3: we think is a cycle that has been trademarked by 106 00:04:58,400 --> 00:05:00,760 Speaker 3: good behavior, not just a con Schumer who went out 107 00:05:00,800 --> 00:05:03,479 Speaker 3: and refined in twenty twenty twenty one and early twenty two. 108 00:05:03,640 --> 00:05:07,680 Speaker 3: But also the corporate balance sheet looks pretty good going forward, 109 00:05:07,839 --> 00:05:09,400 Speaker 3: So again I don't want to give you the impression 110 00:05:09,480 --> 00:05:13,039 Speaker 3: that it's raw row above trend growth. A necessary consequence 111 00:05:13,080 --> 00:05:16,039 Speaker 3: of a soft landing is a landing, right, so you 112 00:05:16,120 --> 00:05:18,719 Speaker 3: have to slow down some and then that allows the 113 00:05:18,800 --> 00:05:21,640 Speaker 3: FED to bring the easy cycle into focus. One hundred 114 00:05:21,640 --> 00:05:23,400 Speaker 3: basis points by the end of the yearliest. I agree 115 00:05:23,440 --> 00:05:25,680 Speaker 3: with you in your last statement that's a little bit 116 00:05:25,720 --> 00:05:28,440 Speaker 3: too much. I mean, we were when people were coming 117 00:05:28,440 --> 00:05:30,000 Speaker 3: into this year and we had one hundred and fifty 118 00:05:30,000 --> 00:05:32,360 Speaker 3: priced in for the full year. People thought that was crazy. 119 00:05:32,480 --> 00:05:34,719 Speaker 3: Now we have one hundred priced into three meetings. I 120 00:05:34,760 --> 00:05:36,720 Speaker 3: think that gets back to something that looks like one 121 00:05:36,800 --> 00:05:38,240 Speaker 3: or two twenty five bas point cuts. 122 00:05:38,240 --> 00:05:40,160 Speaker 2: But you'll comfortable we can take some of that back 123 00:05:40,400 --> 00:05:43,040 Speaker 2: and this market will hold up well. That means the leadership. 124 00:05:43,120 --> 00:05:45,240 Speaker 3: Yeah, I think we saw a snapshot of that in 125 00:05:45,480 --> 00:05:49,320 Speaker 3: the April trade when you saw that that, you know, 126 00:05:49,839 --> 00:05:53,159 Speaker 3: the repricing of the Federal Fund's futures market, John, I 127 00:05:53,200 --> 00:05:56,000 Speaker 3: think that goes back to megacap tech, right, So you 128 00:05:56,080 --> 00:05:59,599 Speaker 3: have this small cap rally, the MidCap. All this rotation trade, 129 00:05:59,640 --> 00:06:01,440 Speaker 3: I think that gives it up a little bit, and 130 00:06:01,440 --> 00:06:06,480 Speaker 3: our highest conviction view is still cap weighted SMP, although 131 00:06:06,520 --> 00:06:10,160 Speaker 3: our last trade was an equal weighted SMP, just because 132 00:06:10,279 --> 00:06:12,279 Speaker 3: inflation is now at two point nine percent and that 133 00:06:12,320 --> 00:06:13,680 Speaker 3: should expand some breath. 134 00:06:13,760 --> 00:06:15,560 Speaker 6: I just want to finish up with that last point, 135 00:06:15,640 --> 00:06:17,560 Speaker 6: this idea of how leverage this market is to big 136 00:06:17,600 --> 00:06:20,120 Speaker 6: tech and when do you get in video earnings tomorrow. 137 00:06:20,360 --> 00:06:23,000 Speaker 6: How concerned are you that any kind of miss or 138 00:06:23,040 --> 00:06:26,039 Speaker 6: not a significant enough beat could actually cause a bigger 139 00:06:26,160 --> 00:06:27,680 Speaker 6: risk off moment for the market. 140 00:06:27,920 --> 00:06:30,480 Speaker 3: Yeah, I think it's I think that would be somewhat short, 141 00:06:30,640 --> 00:06:32,920 Speaker 3: short dated, Lisa, getting back to the point that we're 142 00:06:32,920 --> 00:06:36,159 Speaker 3: going to, this market is driven by fundamentals and it's 143 00:06:36,160 --> 00:06:38,280 Speaker 3: not a gimmicky rally. Like if you look at the 144 00:06:38,320 --> 00:06:42,520 Speaker 3: earning the returns of these companies, about half of the 145 00:06:42,560 --> 00:06:45,040 Speaker 3: return has come from earnings and about half from multiples. 146 00:06:45,120 --> 00:06:47,840 Speaker 3: If it was all multiples, I'd be right with you, right, 147 00:06:48,080 --> 00:06:51,000 Speaker 3: but it's not that. But we do believe that they 148 00:06:51,040 --> 00:06:52,919 Speaker 3: do have to continue to put up the earnings to 149 00:06:52,920 --> 00:06:53,799 Speaker 3: support the multiple. 150 00:06:53,800 --> 00:06:55,480 Speaker 2: What do you think of the moithe of regional banks 151 00:06:55,520 --> 00:06:56,880 Speaker 2: just to sort of touch on that. What's happening with 152 00:06:56,920 --> 00:06:57,680 Speaker 2: the financials? 153 00:06:57,760 --> 00:06:59,960 Speaker 3: Yeah, a lifeline has now been given. 154 00:07:00,400 --> 00:07:01,800 Speaker 2: You know how he gets a gimmicky rally. 155 00:07:01,839 --> 00:07:03,600 Speaker 3: I don't think it's gimmiy rally because I don't think 156 00:07:03,640 --> 00:07:05,960 Speaker 3: it's a gimmicky easing cycle. I think we're actually going 157 00:07:06,040 --> 00:07:07,560 Speaker 3: to be in the in the in the in the 158 00:07:07,640 --> 00:07:09,680 Speaker 3: in the beginning innings of an easing cycle, just not 159 00:07:09,720 --> 00:07:11,160 Speaker 3: one hundred base points by the end of the year. 160 00:07:11,160 --> 00:07:13,800 Speaker 3: If that's the case, we have the wrong view on equities. 161 00:07:13,600 --> 00:07:15,320 Speaker 2: Got it, Phil? Thank you. 162 00:07:15,360 --> 00:07:17,120 Speaker 6: Basically he's saying they're not trash. 163 00:07:17,160 --> 00:07:18,160 Speaker 2: They're not trash. I've got that. 164 00:07:18,320 --> 00:07:20,080 Speaker 6: Yeah, it basically stopped saying that. 165 00:07:20,080 --> 00:07:21,520 Speaker 2: That was what he says, is that what feels time 166 00:07:21,520 --> 00:07:25,080 Speaker 2: to make Yeah, trying to start fights rather the table 167 00:07:25,160 --> 00:07:26,120 Speaker 2: of something. What's wrong with you? 168 00:07:26,880 --> 00:07:28,480 Speaker 4: We set out back together. I saw that. 169 00:07:28,480 --> 00:07:29,600 Speaker 2: Would you buy tickets? Yes? 170 00:07:29,640 --> 00:07:31,000 Speaker 4: I would? You would beat me to it? 171 00:07:31,040 --> 00:07:33,000 Speaker 2: Okay, would you like to go together? We can do 172 00:07:33,000 --> 00:07:35,360 Speaker 2: the next summle? Might that happen? Phil? All right? Team 173 00:07:35,360 --> 00:07:47,720 Speaker 2: outing Phil Campari a CHP mol Thank you. So here's 174 00:07:47,720 --> 00:07:51,120 Speaker 2: the latest Trainer curtain, weekly jobless claims and next week's 175 00:07:51,120 --> 00:07:53,800 Speaker 2: August jobs report. As key data points ahead of the 176 00:07:53,880 --> 00:07:56,720 Speaker 2: fed's next meeting, as officials warn of potential harm to 177 00:07:56,760 --> 00:07:59,160 Speaker 2: the labor market kitchase of self gen right in the 178 00:07:59,200 --> 00:08:02,040 Speaker 2: following what the labor market is clearly loosening, There's still 179 00:08:02,160 --> 00:08:04,840 Speaker 2: huge uncertainty about how much it will slow. But for 180 00:08:04,920 --> 00:08:07,840 Speaker 2: the FX market, after the dollar climbs so high, the 181 00:08:07,880 --> 00:08:10,280 Speaker 2: mere fact of the slowdown will continue to see long 182 00:08:10,320 --> 00:08:13,920 Speaker 2: dollar positions reduce. KIT joined us now for more KIT. 183 00:08:14,040 --> 00:08:15,760 Speaker 2: So we've got the economy and then we've got your 184 00:08:15,760 --> 00:08:17,840 Speaker 2: call on the central bank and foreign exchange. Can we 185 00:08:17,920 --> 00:08:20,440 Speaker 2: just start with the economy first and ultimately the call 186 00:08:20,480 --> 00:08:23,680 Speaker 2: on the central bank? Market participants were very excited at 187 00:08:23,720 --> 00:08:25,440 Speaker 2: the start of the year about the prospect of a 188 00:08:25,480 --> 00:08:27,720 Speaker 2: lot of rate cuts. They took them all back, and 189 00:08:27,760 --> 00:08:30,320 Speaker 2: now we've priced them all in again. What's different now 190 00:08:30,320 --> 00:08:32,840 Speaker 2: compared to where we were at the start of the year. 191 00:08:34,160 --> 00:08:35,200 Speaker 4: A good question. 192 00:08:35,480 --> 00:08:38,240 Speaker 5: Look, I think the first pieces that even the FED 193 00:08:38,360 --> 00:08:41,960 Speaker 5: is recognizing pretty clearly that the labor market is changing. 194 00:08:42,280 --> 00:08:43,480 Speaker 4: Jobs growth has slowed. 195 00:08:43,480 --> 00:08:46,600 Speaker 5: We've revised away a few jobs as well for the 196 00:08:46,640 --> 00:08:48,959 Speaker 5: last couple of weeks, but it is slowing down. The 197 00:08:49,120 --> 00:08:52,880 Speaker 5: signs of weakness and the having market still. So what 198 00:08:52,920 --> 00:08:55,679 Speaker 5: the Fed has done is beginning to have an impact, 199 00:08:56,120 --> 00:08:59,160 Speaker 5: But labor market is the center of it. That's why 200 00:08:59,360 --> 00:09:01,760 Speaker 5: we've got more men than anything else at Jackson Hole. 201 00:09:02,440 --> 00:09:05,960 Speaker 5: And we've seen one week labor market report, one downward 202 00:09:06,040 --> 00:09:08,960 Speaker 5: revision in the benchmark revisions, and we are waiting for 203 00:09:09,240 --> 00:09:12,480 Speaker 5: more to provide any kind of confirmation. I guess I 204 00:09:12,480 --> 00:09:14,200 Speaker 5: would say, though, that the chances that this is a 205 00:09:14,240 --> 00:09:18,360 Speaker 5: slowdown are pretty strong. Now what kind of slow down? 206 00:09:18,920 --> 00:09:21,280 Speaker 5: Much much much less certain, But there's enough in the 207 00:09:21,320 --> 00:09:24,000 Speaker 5: labor market here to say this is now slowing. 208 00:09:24,080 --> 00:09:24,520 Speaker 4: It's okay. 209 00:09:24,559 --> 00:09:26,760 Speaker 2: With that in mind, are we two dubshly priced or 210 00:09:26,760 --> 00:09:29,480 Speaker 2: two conservatively priced in the rates market at the moment? 211 00:09:30,800 --> 00:09:31,640 Speaker 4: Well, if you have. 212 00:09:31,640 --> 00:09:33,880 Speaker 5: Pushed me against a wall, I say, we're pricing for 213 00:09:34,360 --> 00:09:38,840 Speaker 5: a faster pace of rate cuts than is likely unless 214 00:09:38,960 --> 00:09:42,120 Speaker 5: things go pretty badly wrong. But the destination, which is 215 00:09:42,120 --> 00:09:46,400 Speaker 5: looking at an eventual fall till three percent or somewhere 216 00:09:46,400 --> 00:09:49,640 Speaker 5: near three percent in rates, that's not an excessive fall. 217 00:09:49,920 --> 00:09:52,840 Speaker 5: The last time the trough in rates were three percent 218 00:09:53,240 --> 00:09:56,840 Speaker 5: was in nineteen ninety two, when you know, inflation expectations 219 00:09:56,840 --> 00:09:59,360 Speaker 5: were an awful lot higher than they are our real 220 00:09:59,440 --> 00:10:02,080 Speaker 5: rates were less distractive, and the economic recovery that we 221 00:10:02,120 --> 00:10:04,760 Speaker 5: had when we got to that trough surprised everybody, and 222 00:10:04,800 --> 00:10:06,000 Speaker 5: we called it the Great Moderation. 223 00:10:06,120 --> 00:10:09,960 Speaker 4: So the destination of three percent ish. I think it's fine. 224 00:10:10,520 --> 00:10:12,520 Speaker 5: The idea that we get as many rate cuts between 225 00:10:12,520 --> 00:10:14,160 Speaker 5: now in the beginning of next year as a priced 226 00:10:14,160 --> 00:10:17,079 Speaker 5: in that the data need to be pretty awful. 227 00:10:17,600 --> 00:10:19,680 Speaker 6: Kit I was wondering whether this was going to be 228 00:10:19,679 --> 00:10:22,800 Speaker 6: sort of the dramatic salvos that could be heard across 229 00:10:22,840 --> 00:10:24,920 Speaker 6: Wall Street during the fall, given the fact that so 230 00:10:24,960 --> 00:10:26,880 Speaker 6: many people for most of this year had been so 231 00:10:26,960 --> 00:10:30,640 Speaker 6: overweight the dollar. How offsides will this market be when 232 00:10:30,679 --> 00:10:33,160 Speaker 6: it starts to adapt to the idea of the rate 233 00:10:33,200 --> 00:10:35,480 Speaker 6: cuts that the market is pricing in. If we should 234 00:10:35,480 --> 00:10:39,000 Speaker 6: get the kind of cuts that currently are being represented 235 00:10:39,000 --> 00:10:42,040 Speaker 6: in fed fund's futures, how much dollar weakness could we 236 00:10:42,120 --> 00:10:42,679 Speaker 6: end up seeing? 237 00:10:44,000 --> 00:10:47,560 Speaker 5: Well, a fair bit, I mean, that's my concern. There's 238 00:10:47,600 --> 00:10:50,320 Speaker 5: a piece about the Chinese yuan that was the most 239 00:10:50,360 --> 00:10:55,320 Speaker 5: read story on your Terminal overnight, citing Stephen jen who 240 00:10:55,400 --> 00:10:58,400 Speaker 5: talked about an avalanche of money. But I've been struck 241 00:10:58,520 --> 00:11:01,400 Speaker 5: for years the two big dollar at it's the really 242 00:11:01,400 --> 00:11:03,240 Speaker 5: big one in the eighties that ended in eighty five, 243 00:11:03,559 --> 00:11:05,280 Speaker 5: and then the big one in the nineties that ended 244 00:11:05,320 --> 00:11:09,079 Speaker 5: two thousand and one. Both of them were completely reversed, 245 00:11:09,440 --> 00:11:12,160 Speaker 5: the first without any kind of recession, the second with 246 00:11:12,200 --> 00:11:14,920 Speaker 5: a very mild recession. And there is this sense that 247 00:11:15,640 --> 00:11:18,120 Speaker 5: we've seen, you know, not just carry trades, but foreign 248 00:11:18,120 --> 00:11:21,960 Speaker 5: investors buying US equities, foreign investors buying US bonds, everybody 249 00:11:22,000 --> 00:11:26,400 Speaker 5: buying American everything for years now, and that if people 250 00:11:26,480 --> 00:11:30,120 Speaker 5: start taking those trades off, bringing that money home whatever 251 00:11:30,160 --> 00:11:32,240 Speaker 5: it is they're doing with it, because they're a bit spooked, 252 00:11:32,679 --> 00:11:36,640 Speaker 5: that you can have an outsized correction on the other 253 00:11:36,679 --> 00:11:38,760 Speaker 5: side over the course of the next few years. And 254 00:11:38,800 --> 00:11:41,800 Speaker 5: I know, I for one, definitely never saw either how 255 00:11:41,880 --> 00:11:43,560 Speaker 5: much the dollar was going to go up into eighty 256 00:11:43,600 --> 00:11:46,800 Speaker 5: five or how much it would fall, and was continually 257 00:11:46,840 --> 00:11:49,560 Speaker 5: perplexed by how strong it got and then how much 258 00:11:49,640 --> 00:11:52,439 Speaker 5: it fell between ninety five and two thousand and four. 259 00:11:52,520 --> 00:11:55,439 Speaker 5: So I'll be surprised again if the dollar goes all 260 00:11:55,440 --> 00:11:57,760 Speaker 5: the way back, but I'm beginning. 261 00:11:57,480 --> 00:11:58,640 Speaker 4: To understand how it happens. 262 00:11:58,640 --> 00:12:00,880 Speaker 5: And it's this, if you like it, this avalanche, to 263 00:12:01,720 --> 00:12:04,440 Speaker 5: use the term from the Bloomberg story, but of just 264 00:12:04,640 --> 00:12:08,160 Speaker 5: money going home because it's had a great time being 265 00:12:08,160 --> 00:12:08,720 Speaker 5: in America. 266 00:12:08,760 --> 00:12:09,600 Speaker 4: But the holidays are. 267 00:12:09,520 --> 00:12:12,640 Speaker 6: Over, kid, the holidays are over. But are they really 268 00:12:12,679 --> 00:12:15,320 Speaker 6: beginning at other places? I hear John Pharaoh's voice in 269 00:12:15,320 --> 00:12:17,760 Speaker 6: my head. Where do you want to go? Germany? Where 270 00:12:17,760 --> 00:12:19,679 Speaker 6: do you want to go? China? I mean there is 271 00:12:19,720 --> 00:12:22,560 Speaker 6: this question. I mean, how much confidence is there in 272 00:12:22,679 --> 00:12:24,840 Speaker 6: one of these companies a lot of these investors to 273 00:12:24,960 --> 00:12:26,480 Speaker 6: go home from the holidays. 274 00:12:28,000 --> 00:12:31,240 Speaker 5: And that's the really big challenge in a sense. You know, 275 00:12:31,280 --> 00:12:33,040 Speaker 5: if I look at Japan and say if Dolly en 276 00:12:34,080 --> 00:12:36,040 Speaker 5: purchasing power parity for Dolly yenn is now in the 277 00:12:36,080 --> 00:12:38,720 Speaker 5: mid nineties, how far could that go on no money 278 00:12:38,720 --> 00:12:41,360 Speaker 5: doing anything. That's a big current account surplus economy. If 279 00:12:41,360 --> 00:12:43,400 Speaker 5: it doesn't want to ship money to the States, to 280 00:12:43,480 --> 00:12:46,520 Speaker 5: the yen will appreciate enormous amount. I can't imagine you're 281 00:12:46,559 --> 00:12:48,840 Speaker 5: a dollar going miles. I think, let's put it this 282 00:12:48,880 --> 00:12:52,160 Speaker 5: way that I am almost certain in my mind that 283 00:12:52,240 --> 00:12:56,040 Speaker 5: we're going to see another cyclical lower high for the 284 00:12:56,080 --> 00:12:59,040 Speaker 5: Euro after a series of them since two thousand and eight. 285 00:12:59,200 --> 00:13:01,080 Speaker 5: So we did one six, we did one forty, we 286 00:13:01,120 --> 00:13:04,480 Speaker 5: did one twenty seven, then we did one twenty three. 287 00:13:04,760 --> 00:13:06,520 Speaker 5: I don't think we're getting close to one twenty three 288 00:13:06,520 --> 00:13:09,840 Speaker 5: in the cycle, but I do look at history and say, 289 00:13:10,440 --> 00:13:13,680 Speaker 5: you know, once a stone starts gathering momentum, it goes down. 290 00:13:13,760 --> 00:13:16,400 Speaker 5: Or put another way, what are the conditions for an avalanche? 291 00:13:16,520 --> 00:13:18,400 Speaker 5: A lot of snow at the top of a mountain 292 00:13:18,520 --> 00:13:20,120 Speaker 5: and a catalyst, where does the. 293 00:13:20,040 --> 00:13:20,920 Speaker 4: Snow go down? 294 00:13:21,000 --> 00:13:23,600 Speaker 5: It's not asking how attractive it is at the bottom 295 00:13:23,640 --> 00:13:24,160 Speaker 5: of the valley. 296 00:13:24,240 --> 00:13:26,880 Speaker 4: It's just going. And there's a bit of that in this. 297 00:13:27,000 --> 00:13:28,880 Speaker 2: Okay, before you go, I've only got a few seconds least. 298 00:13:28,960 --> 00:13:31,000 Speaker 2: I've got a note. Did you call Stephen and ask 299 00:13:31,040 --> 00:13:31,800 Speaker 2: him about that call? 300 00:13:33,240 --> 00:13:33,800 Speaker 4: No? I haven't. 301 00:13:34,720 --> 00:13:36,720 Speaker 5: I've only got This is my first day into work. 302 00:13:37,080 --> 00:13:39,040 Speaker 5: I'm as close to his office as I could usefully 303 00:13:39,080 --> 00:13:40,840 Speaker 5: be in your studios in London. 304 00:13:40,840 --> 00:13:42,520 Speaker 4: But I have not spoken to Stephen yet. 305 00:13:42,559 --> 00:13:44,720 Speaker 2: Okay, let me know what your talent cat Jase's self 306 00:13:44,760 --> 00:13:57,199 Speaker 2: gent first stupid A STIFL is looking ahead to twenty 307 00:13:57,200 --> 00:14:00,439 Speaker 2: twenty five delivery expectations as the company built What's up 308 00:14:00,520 --> 00:14:03,640 Speaker 2: inventory but joined us now for more. But I think 309 00:14:03,640 --> 00:14:05,160 Speaker 2: we need to take a giant step back and talk 310 00:14:05,200 --> 00:14:08,240 Speaker 2: about this overall company. The challenges for the incoming CEO. 311 00:14:08,720 --> 00:14:12,240 Speaker 2: We've got commercial planes, Boeing Defense, and then we've got 312 00:14:12,280 --> 00:14:14,640 Speaker 2: the venture into space and that's where the difficulty is 313 00:14:14,720 --> 00:14:17,360 Speaker 2: right now. Given the to do list, how long is 314 00:14:17,400 --> 00:14:18,960 Speaker 2: that to do list for that new CEO. 315 00:14:20,440 --> 00:14:22,760 Speaker 7: Yeah, well thanks for having me on the program. You know, 316 00:14:22,800 --> 00:14:24,920 Speaker 7: it's certainly a long to do list. You know, what 317 00:14:24,960 --> 00:14:27,680 Speaker 7: we've been looking for over the last few months was first, 318 00:14:28,120 --> 00:14:30,040 Speaker 7: you know, to get a successor CEO and the door 319 00:14:30,080 --> 00:14:33,000 Speaker 7: and so sort of check mark on that and from here, 320 00:14:33,160 --> 00:14:35,320 Speaker 7: you know, mister Orberg just started three weeks ago, and 321 00:14:35,360 --> 00:14:38,120 Speaker 7: so he's in the process of you know, meeting with customers, 322 00:14:38,160 --> 00:14:40,160 Speaker 7: trying to understand the problems and. 323 00:14:40,520 --> 00:14:41,720 Speaker 1: Sort of put forth a solution. 324 00:14:41,840 --> 00:14:45,040 Speaker 7: And so unfortunately, you've seen a couple of you know, 325 00:14:45,120 --> 00:14:47,960 Speaker 7: negative headlines over the last two weeks, between the Triple 326 00:14:48,000 --> 00:14:51,160 Speaker 7: seven X having a setback and then Starliner obviously over 327 00:14:51,200 --> 00:14:54,360 Speaker 7: the weekend announcing that SpaceX is going to bring back 328 00:14:54,400 --> 00:14:57,440 Speaker 7: the two astronauts up there. But you know, maybe just 329 00:14:57,480 --> 00:14:59,840 Speaker 7: to contextualize things, because I think it's important as you 330 00:14:59,840 --> 00:15:03,240 Speaker 7: think about the Boeing story, you know, the BDS business 331 00:15:03,240 --> 00:15:06,600 Speaker 7: which houses the space business, makes up about twenty five 332 00:15:06,640 --> 00:15:09,080 Speaker 7: percent of the normalized business called it a thirty three 333 00:15:09,120 --> 00:15:12,960 Speaker 7: percent of the business today, and within that business, fifteen 334 00:15:13,000 --> 00:15:15,840 Speaker 7: percent of it is the fixed price development programs, of 335 00:15:15,880 --> 00:15:18,920 Speaker 7: which starline are is one of them. So this program 336 00:15:19,000 --> 00:15:22,280 Speaker 7: itself is relatively small, which is why you tend to 337 00:15:22,320 --> 00:15:24,480 Speaker 7: see a lot more focus on the BCA side, the 338 00:15:24,480 --> 00:15:27,160 Speaker 7: airplane side, and within that a lot of focus on 339 00:15:27,200 --> 00:15:28,520 Speaker 7: the seven three seven program. 340 00:15:28,560 --> 00:15:30,960 Speaker 6: There's also a lot of questions around why Boeing should 341 00:15:31,040 --> 00:15:35,720 Speaker 6: keep their space program, considering how many losses they've posted 342 00:15:35,760 --> 00:15:38,040 Speaker 6: for this. If Boeing were to announce that it was 343 00:15:38,120 --> 00:15:42,640 Speaker 6: jettison ng it's fleet and it's sort of relationship with NASA, 344 00:15:42,880 --> 00:15:45,720 Speaker 6: how much could this share price rally. 345 00:15:45,800 --> 00:15:47,960 Speaker 1: Yeah, I'm not it's an interesting question. 346 00:15:48,000 --> 00:15:49,840 Speaker 7: I mean the space program itself, you know, I think 347 00:15:49,880 --> 00:15:51,920 Speaker 7: we think of it as the United Launch Alliance, which 348 00:15:52,080 --> 00:15:54,200 Speaker 7: is a joint venture between them and Lockheed, which. 349 00:15:54,040 --> 00:15:56,200 Speaker 1: Has already been rumored to be potentially sold. 350 00:15:56,200 --> 00:15:58,080 Speaker 7: I think the number out there's three billion dollars, so 351 00:15:58,080 --> 00:16:00,840 Speaker 7: they could be monetizing part of that. There's the Space 352 00:16:00,920 --> 00:16:03,480 Speaker 7: Launch System, which is the SLS program. That's what's called 353 00:16:03,480 --> 00:16:06,280 Speaker 7: a cost plus program, and so their risk there is 354 00:16:06,720 --> 00:16:09,400 Speaker 7: much lower. The NASA takes the risk, and then you 355 00:16:09,400 --> 00:16:12,200 Speaker 7: have the Starliner program and obviously engineering and other things 356 00:16:12,200 --> 00:16:14,840 Speaker 7: that go into NASA. Boeing has been working with NASA 357 00:16:14,880 --> 00:16:17,360 Speaker 7: for decades, so I guess the question would be, you know, 358 00:16:17,400 --> 00:16:20,200 Speaker 7: what they see from the space business longer term? Is 359 00:16:20,200 --> 00:16:22,040 Speaker 7: this an area where they want to be exposed down 360 00:16:22,080 --> 00:16:24,120 Speaker 7: the road or do they want to sort of tighten 361 00:16:24,160 --> 00:16:27,040 Speaker 7: their focus, you know, on the commercial airplane business. I 362 00:16:27,040 --> 00:16:29,320 Speaker 7: compare it to Lockheed. You know, they used to compete 363 00:16:29,320 --> 00:16:31,560 Speaker 7: in commercial airplanes. They decided they were much better in 364 00:16:31,640 --> 00:16:34,320 Speaker 7: fighters and satellites and weapons and they went down that 365 00:16:34,320 --> 00:16:37,040 Speaker 7: path and that was very successful for them. So, you know, 366 00:16:37,080 --> 00:16:39,120 Speaker 7: I think if they got out of this business, investors 367 00:16:39,160 --> 00:16:41,840 Speaker 7: would look at it as you know, potentially reducing a 368 00:16:41,840 --> 00:16:45,760 Speaker 7: future cash trag, but perhaps at the expense of sort 369 00:16:45,760 --> 00:16:48,960 Speaker 7: of reducing an opportunity in space down the road. So 370 00:16:49,040 --> 00:16:51,520 Speaker 7: you know, it'd be an interesting decision, this interesting sort 371 00:16:51,520 --> 00:16:53,720 Speaker 7: of thought process on how much worldper goes through this 372 00:16:54,120 --> 00:16:56,280 Speaker 7: as he thinks about, you know, the future of Boeing. 373 00:16:56,200 --> 00:16:58,120 Speaker 6: They're taking a step back. So there's been this question 374 00:16:58,400 --> 00:17:00,960 Speaker 6: of whether Airbus would be able to cape on some 375 00:17:01,000 --> 00:17:03,840 Speaker 6: of the problems that we've seen on Boeing and whether 376 00:17:04,080 --> 00:17:06,240 Speaker 6: they could really take the lead in a more meaningful way. 377 00:17:06,440 --> 00:17:08,320 Speaker 6: I have been surprised that they have not, and one 378 00:17:08,320 --> 00:17:10,080 Speaker 6: of the reasons why is because they're facing off for 379 00:17:10,119 --> 00:17:12,399 Speaker 6: the same kind of supply chain issues that Boeing is 380 00:17:12,400 --> 00:17:13,879 Speaker 6: maybe a little bit less publicized. 381 00:17:13,880 --> 00:17:14,440 Speaker 4: But I'm just. 382 00:17:14,400 --> 00:17:17,280 Speaker 6: Wondering whether we have fully emerged from the sort of 383 00:17:17,280 --> 00:17:21,680 Speaker 6: post pandemic induced supply chain disruptions that's continue to plague 384 00:17:21,760 --> 00:17:22,880 Speaker 6: the aerospace industry. 385 00:17:23,880 --> 00:17:27,320 Speaker 1: Yeah, it's a great point. Look, Airbus, I think everybody. 386 00:17:27,040 --> 00:17:29,280 Speaker 7: Thought after January Airbus is going to be in this 387 00:17:29,320 --> 00:17:31,679 Speaker 7: position to take all this market share, and there's certainly 388 00:17:31,720 --> 00:17:34,159 Speaker 7: been limits to what they've been able to do. But 389 00:17:34,320 --> 00:17:36,880 Speaker 7: for airbuses, you know, a positive for Airbus to people 390 00:17:36,880 --> 00:17:39,560 Speaker 7: I think overlook is you know, they have really high targets. 391 00:17:39,560 --> 00:17:41,479 Speaker 7: So they're talking about getting seventy five on the eight 392 00:17:41,480 --> 00:17:43,919 Speaker 7: three twenty per month. Boeing is talking about getting to 393 00:17:43,960 --> 00:17:47,159 Speaker 7: fifty on the seven three seven, So you know, Airbus 394 00:17:47,320 --> 00:17:49,840 Speaker 7: is already close to fifty on their program, you know, 395 00:17:49,880 --> 00:17:52,520 Speaker 7: maybe even certain months above that number. So they're progressing 396 00:17:52,520 --> 00:17:55,399 Speaker 7: pretty well, but they've seen limits on their ability to 397 00:17:55,400 --> 00:17:57,919 Speaker 7: get to their targets, and they keep extending that and 398 00:17:58,000 --> 00:17:59,879 Speaker 7: part of that has been supply chain driven. You know, 399 00:18:00,200 --> 00:18:02,600 Speaker 7: there are many tiers of the supply chain. There has 400 00:18:02,600 --> 00:18:05,440 Speaker 7: to be an orchestration and how they work together. There's 401 00:18:05,440 --> 00:18:08,439 Speaker 7: been raw material shortages, there's been geopolitical issues, there's been 402 00:18:08,480 --> 00:18:11,960 Speaker 7: labor issues, and so these things have compounded, and surprisingly, 403 00:18:12,000 --> 00:18:14,520 Speaker 7: here we are, you know, four years past the start 404 00:18:14,520 --> 00:18:17,000 Speaker 7: of the pandemic, more than that now, and we're still 405 00:18:17,000 --> 00:18:18,960 Speaker 7: talking about supply chain. But you know, as we go 406 00:18:18,960 --> 00:18:20,480 Speaker 7: into twenty five, I think there's a reason to be 407 00:18:20,520 --> 00:18:23,080 Speaker 7: optimistic about where the supply chain is heading. And that's 408 00:18:23,119 --> 00:18:25,000 Speaker 7: part of why we think, you know, Boeing starts to 409 00:18:25,000 --> 00:18:27,560 Speaker 7: look better. You know, where expectations are today is a 410 00:18:27,560 --> 00:18:29,920 Speaker 7: lot lower where they were a year ago. And as 411 00:18:29,960 --> 00:18:32,960 Speaker 7: the supply chain catches up, as Boeing stabilized, as production, 412 00:18:33,359 --> 00:18:35,399 Speaker 7: they get back into a position where they can sort of, 413 00:18:35,600 --> 00:18:37,760 Speaker 7: you know, stem some of the market share losses they've 414 00:18:37,760 --> 00:18:40,679 Speaker 7: seen to date and then ideally start building more orders 415 00:18:40,720 --> 00:18:43,280 Speaker 7: and sort of take away that potential advantage Airbus. 416 00:18:43,080 --> 00:18:43,560 Speaker 1: Would have had. 417 00:18:43,720 --> 00:18:46,000 Speaker 6: This is a tough question, and I don't know if 418 00:18:46,040 --> 00:18:48,120 Speaker 6: we can actually get a real answer. But how much 419 00:18:48,200 --> 00:18:51,320 Speaker 6: is Boeing in a better or worse position because it 420 00:18:51,440 --> 00:18:54,840 Speaker 6: is the American darling, because it is a US company 421 00:18:54,840 --> 00:18:58,360 Speaker 6: at a time of increasing fissures, especially as the likes 422 00:18:58,400 --> 00:19:03,560 Speaker 6: of Boeing really has a huge presence in defense pending globally. 423 00:19:03,640 --> 00:19:05,960 Speaker 6: How much is this really turning into sort of the 424 00:19:06,000 --> 00:19:09,680 Speaker 6: fiefdoms of who your allies are in terms of who 425 00:19:09,720 --> 00:19:12,760 Speaker 6: decides to do business with, say Boeing versus Airbus. 426 00:19:13,680 --> 00:19:15,240 Speaker 1: Yeah, you're right, that is a tough question. 427 00:19:16,240 --> 00:19:16,399 Speaker 4: You know. 428 00:19:16,480 --> 00:19:19,080 Speaker 7: Look, I think right now there's a third player that's 429 00:19:19,119 --> 00:19:22,320 Speaker 7: emerging very early days, but it's called Comac. It's the 430 00:19:22,760 --> 00:19:27,199 Speaker 7: Chinese backed aircraft producer, and they have a program called 431 00:19:27,240 --> 00:19:29,240 Speaker 7: the C nine one nine which is going to compete 432 00:19:29,280 --> 00:19:31,119 Speaker 7: with the seven three seven and eight three twenty and so, 433 00:19:31,720 --> 00:19:33,520 Speaker 7: like I said, very early days, you know, using a 434 00:19:33,520 --> 00:19:35,080 Speaker 7: lot of the same parts that we go into a 435 00:19:35,160 --> 00:19:37,480 Speaker 7: Boeing and Airbus aircraft, but obviously. 436 00:19:37,200 --> 00:19:38,119 Speaker 1: Early on that journey. 437 00:19:38,160 --> 00:19:40,800 Speaker 7: So you know, the question is Boeing put out some 438 00:19:40,800 --> 00:19:42,800 Speaker 7: sort of refresh numbers on what they think the China 439 00:19:42,840 --> 00:19:45,520 Speaker 7: set up will look like longer term, and that is rising, 440 00:19:45,880 --> 00:19:46,160 Speaker 7: and so. 441 00:19:46,160 --> 00:19:48,400 Speaker 1: The question will be does China. 442 00:19:48,160 --> 00:19:50,880 Speaker 7: Opt to purchase more Airbus aircraft and do they purchase 443 00:19:50,920 --> 00:19:53,359 Speaker 7: more COMAC aircraft as you do down the road, and 444 00:19:53,400 --> 00:19:56,240 Speaker 7: that limits an opportunity for Boeing. Outside of that, I 445 00:19:56,280 --> 00:19:59,960 Speaker 7: don't think there's this major issue between which countries choose 446 00:20:00,040 --> 00:20:00,320 Speaker 7: to do. 447 00:20:00,320 --> 00:20:01,760 Speaker 1: Business with Airbus or Boeing. 448 00:20:02,400 --> 00:20:05,160 Speaker 7: Airbus has certainly been the preferred partner of late, but 449 00:20:05,200 --> 00:20:06,960 Speaker 7: the reality is, if you want a new eight three 450 00:20:07,000 --> 00:20:09,960 Speaker 7: to twenty aircraft, the waiting list is now twenty thirty 451 00:20:09,960 --> 00:20:12,320 Speaker 7: one to twenty thirty two, and so that is not 452 00:20:12,359 --> 00:20:14,160 Speaker 7: an aircraft you're ordering the day to get in twenty 453 00:20:14,160 --> 00:20:16,680 Speaker 7: seven or twenty eight. You know, with Boeing you could 454 00:20:16,720 --> 00:20:18,720 Speaker 7: be getting that aircraft three to four years earlier, and 455 00:20:18,760 --> 00:20:21,360 Speaker 7: so that's an advantage. And so I think airlines continue 456 00:20:21,400 --> 00:20:23,560 Speaker 7: to look at, you know, what aircraft do we need 457 00:20:23,600 --> 00:20:25,720 Speaker 7: for our mission? When can we get those aircraft? What's 458 00:20:25,760 --> 00:20:27,680 Speaker 7: the price of the aircraft, and what's our confidence in 459 00:20:27,720 --> 00:20:30,400 Speaker 7: the company? Probably more so than that, But then there's 460 00:20:30,400 --> 00:20:33,000 Speaker 7: the China question, and so that may be a benefit 461 00:20:33,000 --> 00:20:35,120 Speaker 7: as we think about Airbus versus Boeing. 462 00:20:35,000 --> 00:20:37,639 Speaker 2: But how difficult is it for airlines to make capacity 463 00:20:37,680 --> 00:20:40,200 Speaker 2: decisions when they don't know when they can get planes, 464 00:20:40,560 --> 00:20:42,159 Speaker 2: and if they do want new planes, they've got to 465 00:20:42,200 --> 00:20:44,399 Speaker 2: wait that long for them, and they've got no idea 466 00:20:44,480 --> 00:20:47,040 Speaker 2: whether the economy or the market will be once they arrive. 467 00:20:48,119 --> 00:20:49,080 Speaker 1: Yeah, it's very difficult. 468 00:20:49,119 --> 00:20:51,600 Speaker 7: And what we've seen What typically happens is there's call 469 00:20:51,680 --> 00:20:54,120 Speaker 7: it two to three percent of your aircraft globally get 470 00:20:54,200 --> 00:20:57,280 Speaker 7: retired every year, and so that number has been quite low. 471 00:20:57,520 --> 00:20:58,879 Speaker 1: And what we've seen is the average of. 472 00:20:59,040 --> 00:21:01,760 Speaker 7: The global fleet has been about twenty percent higher than 473 00:21:01,800 --> 00:21:03,960 Speaker 7: it was in twenty eighteen. And what that's meant is 474 00:21:04,000 --> 00:21:06,640 Speaker 7: there's this whole industry called the aftermarket, which has benefited 475 00:21:06,640 --> 00:21:09,600 Speaker 7: from selling parts and services because older aircraft need more 476 00:21:09,640 --> 00:21:10,440 Speaker 7: parts and services. 477 00:21:10,560 --> 00:21:11,480 Speaker 1: And so what airlines have. 478 00:21:11,440 --> 00:21:13,240 Speaker 7: Had to do is take up their off x because 479 00:21:13,240 --> 00:21:16,000 Speaker 7: they've had to use older aircraft. And they've also been 480 00:21:16,000 --> 00:21:18,560 Speaker 7: limited in how much they can grow because they've been 481 00:21:18,680 --> 00:21:21,280 Speaker 7: unable to get their new aircraft. I mean, just for example, 482 00:21:21,640 --> 00:21:23,959 Speaker 7: Southwest was supposed to get something like seventy nine aircraft 483 00:21:24,000 --> 00:21:25,639 Speaker 7: this year and they're going to get closer to twenty 484 00:21:25,920 --> 00:21:28,080 Speaker 7: and so that obviously has a huge change on what 485 00:21:28,119 --> 00:21:30,240 Speaker 7: you're expecting to grow versus what you can actually grow, 486 00:21:30,480 --> 00:21:32,000 Speaker 7: But it's actually probably been a good thing for the 487 00:21:32,040 --> 00:21:36,239 Speaker 7: airline industry because it's sort of mandated more capacity, your 488 00:21:36,280 --> 00:21:39,480 Speaker 7: capacity to stay in check. Imagine had we not been 489 00:21:39,480 --> 00:21:42,879 Speaker 7: in that position and airline's been buying more aircraft, you know, 490 00:21:42,920 --> 00:21:45,440 Speaker 7: what we're seeing from a yield perspective, would be certainly 491 00:21:45,440 --> 00:21:46,960 Speaker 7: a lot worse today if they were. 492 00:21:46,880 --> 00:21:49,280 Speaker 1: Growing fafter So it's been a positive from that perspective. 493 00:21:49,600 --> 00:21:51,920 Speaker 2: This was awesome, just a clinic. I appreciate it, sir. 494 00:21:52,000 --> 00:21:55,320 Speaker 2: Thank you first saving there a Staples. This is the 495 00:21:55,359 --> 00:21:59,600 Speaker 2: Bloomberg Sevenans podcast, bringing you the best in markets, economics, 496 00:21:59,600 --> 00:22:02,600 Speaker 2: and politics. You can watch the show live on Bloomberg 497 00:22:02,640 --> 00:22:05,760 Speaker 2: TV weekday mornings from six am to nine am Eastern. 498 00:22:06,080 --> 00:22:09,440 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 499 00:22:09,440 --> 00:22:12,080 Speaker 2: you listen, and as always on the Bloomberg Terminal and 500 00:22:12,200 --> 00:22:13,400 Speaker 2: the Bloomberg Business app.