Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. We begin with the
Speaker 2: big issue markets on hold ahead of Nvidio. Then as
Speaker 2: that one hundred under pressure as traders await tomorrow's results
Speaker 2: from the AI giant that's become a critical market driver
Speaker 2: for Camporadi of JP morgan Stein bullish with this to say,
Speaker 2: the concentration of stocks driving the market higher makes sense
Speaker 2: to us. Given the ability for those companies to manage
Speaker 2: the current levels of raids as well as the earnings
Speaker 2: supporting valuations, we believe the momentum inequacies can continue, So
Speaker 2: joined us some moth folkemonitory.
Speaker 3: Good morning, Let's get to some.
Speaker 2: Of your cos I've a white US stocks, EM Japan
Speaker 2: high yield credit. What aren't you. I've a white right
Speaker 2: now in this mile kid.
Speaker 3: Yeah, so we're not overweight cash. And I love your
Speaker 3: I love your quote that I saw on your on
Speaker 3: one of the monitors that said t bill and chill.
Speaker 3: That's like nails on a try I'll probably date myself
Speaker 3: with this reference, but that's like nails on a truck
Speaker 3: board for me. John, I'll tell you we still run
Speaker 3: into that problem. And I'm not talking about should you
Speaker 3: be in equies or should you be in cash? Okay,
Speaker 3: I'm a multi asset portfolio manager. I believe in diversification
Speaker 3: and a diverse fied portfolio. Last year, when the FED
Speaker 3: wasn't cutting rates, was up sixteen cash was up five
Speaker 3: on the year. This year, this diverse five portfolio of
Speaker 3: sixty forty is up about eleven and cash is up
Speaker 3: about three and a half. So we're tripling the return
Speaker 3: on cash for folks that should probably be in diverse,
Speaker 3: fied portfolios. And I loved last Friday morning at ten
Speaker 3: am the time has come for policy to adjust. I
Speaker 3: mean that's like music to the ears of investors after
Speaker 3: two very long years. Twenty twenty two was the economy
Speaker 3: is going to have to go through some pain in
Speaker 3: order for us to achieve our a dual mandate. I
Speaker 3: still remember pain. And then last year it was basically
Speaker 3: the message was we're either going to be high for
Speaker 3: longer or even higher for longer. So I think what
Speaker 3: we're looking at when we believe the momentum equities can
Speaker 3: continue is that these cuts I think are going to
Speaker 3: grease the wheels for the soft landing and you know,
Speaker 3: the FED cutting without a recession and what we believe
Speaker 3: between four and five percent nominal GDP growth. Every investor
Speaker 3: should be raising their hand for that.
Speaker 2: For a while. The sales team I imagine at JPLGAM,
Speaker 2: mccolon clents and saying, you ready should get out of cash,
Speaker 2: We've got this bond fund, allocate some long dated depth,
Speaker 2: go into credit, all sorts of things with Bob, Michael
Speaker 2: and co. Have some fun. Are they calling you now
Speaker 2: after Friday to make that move? How resistant have they been?
Speaker 4: Yeah?
Speaker 3: The credit story is still loud and clear, because the
Speaker 3: credit story for us is we'd rather play offense in
Speaker 3: fix income in defense. So the high yield story, while
Speaker 3: spreads aren't super wide and we're not going to get
Speaker 3: this crazy total return. We'll get the total return in equity, John,
Speaker 3: but we're going to out yield what we believe treasuries
Speaker 3: and just the core bond funds can do over time,
Speaker 3: which is a form of alpha. Less glamorous than Nvidia,
Speaker 3: but it is a It is a form of alpha.
Speaker 3: But importantly, like this diversification story, what we've seen is
Speaker 3: that as soon as inflation hits three or below and
Speaker 3: we're a two point nine on CPI, you get the
Speaker 3: right way correlation back with bonds. So you can get
Speaker 3: a day like August fifth, the highest intra day volatility
Speaker 3: in the history of the equity market, my first day
Speaker 3: of vacation, Thank you very much. And we can hold
Speaker 3: on to our overweight to stocks and credit in that
Speaker 3: environment because we believe that finally bonds are going to
Speaker 3: be the diversifier that we that we expect.
Speaker 5: Them to be.
Speaker 6: If that's the case, why I underweight US government bonds.
Speaker 3: Because recession is not the base case. We're neutral or
Speaker 3: our benchmark okay in terms of duration, but we'd much
Speaker 3: rather play the high yield story, so spending the ash
Speaker 3: and high yield versus the egg.
Speaker 4: But we don't want to be underweight.
Speaker 3: We don't want to be underweight in an environment where
Speaker 3: bonds can protect us.
Speaker 6: We were talking to Sebastian Page of tiro Price earlier
Speaker 6: and he was talking about how it's important to sort
Speaker 6: of hedge against the multitude of risks, including owning government
Speaker 6: bonds in case there is a bigger downturn and holding
Speaker 6: hard assets in case the inflation picks up more considerably.
Speaker 6: Why in your asset allocation are you overweighting so significantly
Speaker 6: the idea of a soft landing and a positive economic backjob.
Speaker 3: So it still goes back to us, Lisa, that this
Speaker 3: is an economy that is interest rate insensitive. So you
Speaker 3: have an effective mortgage rate in the US right now
Speaker 3: at three point nine. The average effective mortgage rate when
Speaker 3: we had a zero interust rate policy from O eight
Speaker 3: to fifteen was four point three. So in effect, US
Speaker 3: homeowner with their biggest expense is paying less in their
Speaker 3: mortgage than they weren't a zero interest.
Speaker 4: Rate policy least.
Speaker 3: So so I think there's still interest rate insensitivity. And this
Speaker 3: we think is a cycle that has been trademarked by
Speaker 3: good behavior, not just a con Schumer who went out
Speaker 3: and refined in twenty twenty twenty one and early twenty two.
Speaker 3: But also the corporate balance sheet looks pretty good going forward,
Speaker 3: So again I don't want to give you the impression
Speaker 3: that it's raw row above trend growth. A necessary consequence
Speaker 3: of a soft landing is a landing, right, so you
Speaker 3: have to slow down some and then that allows the
Speaker 3: FED to bring the easy cycle into focus. One hundred
Speaker 3: basis points by the end of the yearliest. I agree
Speaker 3: with you in your last statement that's a little bit
Speaker 3: too much. I mean, we were when people were coming
Speaker 3: into this year and we had one hundred and fifty
Speaker 3: priced in for the full year. People thought that was crazy.
Speaker 3: Now we have one hundred priced into three meetings. I
Speaker 3: think that gets back to something that looks like one
Speaker 3: or two twenty five bas point cuts.
Speaker 2: But you'll comfortable we can take some of that back
Speaker 2: and this market will hold up well. That means the leadership.
Speaker 3: Yeah, I think we saw a snapshot of that in
Speaker 3: the April trade when you saw that that, you know,
Speaker 3: the repricing of the Federal Fund's futures market, John, I
Speaker 3: think that goes back to megacap tech, right, So you
Speaker 3: have this small cap rally, the MidCap. All this rotation trade,
Speaker 3: I think that gives it up a little bit, and
Speaker 3: our highest conviction view is still cap weighted SMP, although
Speaker 3: our last trade was an equal weighted SMP, just because
Speaker 3: inflation is now at two point nine percent and that
Speaker 3: should expand some breath.
Speaker 6: I just want to finish up with that last point,
Speaker 6: this idea of how leverage this market is to big
Speaker 6: tech and when do you get in video earnings tomorrow.
Speaker 6: How concerned are you that any kind of miss or
Speaker 6: not a significant enough beat could actually cause a bigger
Speaker 6: risk off moment for the market.
Speaker 3: Yeah, I think it's I think that would be somewhat short,
Speaker 3: short dated, Lisa, getting back to the point that we're
Speaker 3: going to, this market is driven by fundamentals and it's
Speaker 3: not a gimmicky rally. Like if you look at the
Speaker 3: earning the returns of these companies, about half of the
Speaker 3: return has come from earnings and about half from multiples.
Speaker 3: If it was all multiples, I'd be right with you, right,
Speaker 3: but it's not that. But we do believe that they
Speaker 3: do have to continue to put up the earnings to
Speaker 3: support the multiple.
Speaker 2: What do you think of the moithe of regional banks
Speaker 2: just to sort of touch on that. What's happening with
Speaker 2: the financials?
Speaker 3: Yeah, a lifeline has now been given.
Speaker 2: You know how he gets a gimmicky rally.
Speaker 3: I don't think it's gimmiy rally because I don't think
Speaker 3: it's a gimmicky easing cycle. I think we're actually going
Speaker 3: to be in the in the in the in the
Speaker 3: in the beginning innings of an easing cycle, just not
Speaker 3: one hundred base points by the end of the year.
Speaker 3: If that's the case, we have the wrong view on equities.
Speaker 2: Got it, Phil? Thank you.
Speaker 6: Basically he's saying they're not trash.
Speaker 2: They're not trash. I've got that.
Speaker 6: Yeah, it basically stopped saying that.
Speaker 2: That was what he says, is that what feels time
Speaker 2: to make Yeah, trying to start fights rather the table
Speaker 2: of something. What's wrong with you?
Speaker 4: We set out back together. I saw that.
Speaker 2: Would you buy tickets? Yes?
Speaker 4: I would? You would beat me to it?
Speaker 2: Okay, would you like to go together? We can do
Speaker 2: the next summle? Might that happen? Phil? All right? Team
Speaker 2: outing Phil Campari a CHP mol Thank you. So here's
Speaker 2: the latest Trainer curtain, weekly jobless claims and next week's
Speaker 2: August jobs report. As key data points ahead of the
Speaker 2: fed's next meeting, as officials warn of potential harm to
Speaker 2: the labor market kitchase of self gen right in the
Speaker 2: following what the labor market is clearly loosening, There's still
Speaker 2: huge uncertainty about how much it will slow. But for
Speaker 2: the FX market, after the dollar climbs so high, the
Speaker 2: mere fact of the slowdown will continue to see long
Speaker 2: dollar positions reduce. KIT joined us now for more KIT.
Speaker 2: So we've got the economy and then we've got your
Speaker 2: call on the central bank and foreign exchange. Can we
Speaker 2: just start with the economy first and ultimately the call
Speaker 2: on the central bank? Market participants were very excited at
Speaker 2: the start of the year about the prospect of a
Speaker 2: lot of rate cuts. They took them all back, and
Speaker 2: now we've priced them all in again. What's different now
Speaker 2: compared to where we were at the start of the year.
Speaker 4: A good question.
Speaker 5: Look, I think the first pieces that even the FED
Speaker 5: is recognizing pretty clearly that the labor market is changing.
Speaker 4: Jobs growth has slowed.
Speaker 5: We've revised away a few jobs as well for the
Speaker 5: last couple of weeks, but it is slowing down. The
Speaker 5: signs of weakness and the having market still. So what
Speaker 5: the Fed has done is beginning to have an impact,
Speaker 5: But labor market is the center of it. That's why
Speaker 5: we've got more men than anything else at Jackson Hole.
Speaker 5: And we've seen one week labor market report, one downward
Speaker 5: revision in the benchmark revisions, and we are waiting for
Speaker 5: more to provide any kind of confirmation. I guess I
Speaker 5: would say, though, that the chances that this is a
Speaker 5: slowdown are pretty strong. Now what kind of slow down?
Speaker 5: Much much much less certain, But there's enough in the
Speaker 5: labor market here to say this is now slowing.
Speaker 4: It's okay.
Speaker 2: With that in mind, are we two dubshly priced or
Speaker 2: two conservatively priced in the rates market at the moment?
Speaker 4: Well, if you have.
Speaker 5: Pushed me against a wall, I say, we're pricing for
Speaker 5: a faster pace of rate cuts than is likely unless
Speaker 5: things go pretty badly wrong. But the destination, which is
Speaker 5: looking at an eventual fall till three percent or somewhere
Speaker 5: near three percent in rates, that's not an excessive fall.
Speaker 5: The last time the trough in rates were three percent
Speaker 5: was in nineteen ninety two, when you know, inflation expectations
Speaker 5: were an awful lot higher than they are our real
Speaker 5: rates were less distractive, and the economic recovery that we
Speaker 5: had when we got to that trough surprised everybody, and
Speaker 5: we called it the Great Moderation.
Speaker 4: So the destination of three percent ish. I think it's fine.
Speaker 5: The idea that we get as many rate cuts between
Speaker 5: now in the beginning of next year as a priced
Speaker 5: in that the data need to be pretty awful.
Speaker 6: Kit I was wondering whether this was going to be
Speaker 6: sort of the dramatic salvos that could be heard across
Speaker 6: Wall Street during the fall, given the fact that so
Speaker 6: many people for most of this year had been so
Speaker 6: overweight the dollar. How offsides will this market be when
Speaker 6: it starts to adapt to the idea of the rate
Speaker 6: cuts that the market is pricing in. If we should
Speaker 6: get the kind of cuts that currently are being represented
Speaker 6: in fed fund's futures, how much dollar weakness could we
Speaker 6: end up seeing?
Speaker 5: Well, a fair bit, I mean, that's my concern. There's
Speaker 5: a piece about the Chinese yuan that was the most
Speaker 5: read story on your Terminal overnight, citing Stephen jen who
Speaker 5: talked about an avalanche of money. But I've been struck
Speaker 5: for years the two big dollar at it's the really
Speaker 5: big one in the eighties that ended in eighty five,
Speaker 5: and then the big one in the nineties that ended
Speaker 5: two thousand and one. Both of them were completely reversed,
Speaker 5: the first without any kind of recession, the second with
Speaker 5: a very mild recession. And there is this sense that
Speaker 5: we've seen, you know, not just carry trades, but foreign
Speaker 5: investors buying US equities, foreign investors buying US bonds, everybody
Speaker 5: buying American everything for years now, and that if people
Speaker 5: start taking those trades off, bringing that money home whatever
Speaker 5: it is they're doing with it, because they're a bit spooked,
Speaker 5: that you can have an outsized correction on the other
Speaker 5: side over the course of the next few years. And
Speaker 5: I know, I for one, definitely never saw either how
Speaker 5: much the dollar was going to go up into eighty
Speaker 5: five or how much it would fall, and was continually
Speaker 5: perplexed by how strong it got and then how much
Speaker 5: it fell between ninety five and two thousand and four.
Speaker 5: So I'll be surprised again if the dollar goes all
Speaker 5: the way back, but I'm beginning.
Speaker 4: To understand how it happens.
Speaker 5: And it's this, if you like it, this avalanche, to
Speaker 5: use the term from the Bloomberg story, but of just
Speaker 5: money going home because it's had a great time being
Speaker 5: in America.
Speaker 4: But the holidays are.
Speaker 6: Over, kid, the holidays are over. But are they really
Speaker 6: beginning at other places? I hear John Pharaoh's voice in
Speaker 6: my head. Where do you want to go? Germany? Where
Speaker 6: do you want to go? China? I mean there is
Speaker 6: this question. I mean, how much confidence is there in
Speaker 6: one of these companies a lot of these investors to
Speaker 6: go home from the holidays.
Speaker 5: And that's the really big challenge in a sense. You know,
Speaker 5: if I look at Japan and say if Dolly en
Speaker 5: purchasing power parity for Dolly yenn is now in the
Speaker 5: mid nineties, how far could that go on no money
Speaker 5: doing anything. That's a big current account surplus economy. If
Speaker 5: it doesn't want to ship money to the States, to
Speaker 5: the yen will appreciate enormous amount. I can't imagine you're
Speaker 5: a dollar going miles. I think, let's put it this
Speaker 5: way that I am almost certain in my mind that
Speaker 5: we're going to see another cyclical lower high for the
Speaker 5: Euro after a series of them since two thousand and eight.
Speaker 5: So we did one six, we did one forty, we
Speaker 5: did one twenty seven, then we did one twenty three.
Speaker 5: I don't think we're getting close to one twenty three
Speaker 5: in the cycle, but I do look at history and say,
Speaker 5: you know, once a stone starts gathering momentum, it goes down.
Speaker 5: Or put another way, what are the conditions for an avalanche?
Speaker 5: A lot of snow at the top of a mountain
Speaker 5: and a catalyst, where does the.
Speaker 4: Snow go down?
Speaker 5: It's not asking how attractive it is at the bottom
Speaker 5: of the valley.
Speaker 4: It's just going. And there's a bit of that in this.
Speaker 2: Okay, before you go, I've only got a few seconds least.
Speaker 2: I've got a note. Did you call Stephen and ask
Speaker 2: him about that call?
Speaker 4: No? I haven't.
Speaker 5: I've only got This is my first day into work.
Speaker 5: I'm as close to his office as I could usefully
Speaker 5: be in your studios in London.
Speaker 4: But I have not spoken to Stephen yet.
Speaker 2: Okay, let me know what your talent cat Jase's self
Speaker 2: gent first stupid A STIFL is looking ahead to twenty
Speaker 2: twenty five delivery expectations as the company built What's up
Speaker 2: inventory but joined us now for more. But I think
Speaker 2: we need to take a giant step back and talk
Speaker 2: about this overall company. The challenges for the incoming CEO.
Speaker 2: We've got commercial planes, Boeing Defense, and then we've got
Speaker 2: the venture into space and that's where the difficulty is
Speaker 2: right now. Given the to do list, how long is
Speaker 2: that to do list for that new CEO.
Speaker 7: Yeah, well thanks for having me on the program. You know,
Speaker 7: it's certainly a long to do list. You know, what
Speaker 7: we've been looking for over the last few months was first,
Speaker 7: you know, to get a successor CEO and the door
Speaker 7: and so sort of check mark on that and from here,
Speaker 7: you know, mister Orberg just started three weeks ago, and
Speaker 7: so he's in the process of you know, meeting with customers,
Speaker 7: trying to understand the problems and.
Speaker 1: Sort of put forth a solution.
Speaker 7: And so unfortunately, you've seen a couple of you know,
Speaker 7: negative headlines over the last two weeks, between the Triple
Speaker 7: seven X having a setback and then Starliner obviously over
Speaker 7: the weekend announcing that SpaceX is going to bring back
Speaker 7: the two astronauts up there. But you know, maybe just
Speaker 7: to contextualize things, because I think it's important as you
Speaker 7: think about the Boeing story, you know, the BDS business
Speaker 7: which houses the space business, makes up about twenty five
Speaker 7: percent of the normalized business called it a thirty three
Speaker 7: percent of the business today, and within that business, fifteen
Speaker 7: percent of it is the fixed price development programs, of
Speaker 7: which starline are is one of them. So this program
Speaker 7: itself is relatively small, which is why you tend to
Speaker 7: see a lot more focus on the BCA side, the
Speaker 7: airplane side, and within that a lot of focus on
Speaker 7: the seven three seven program.
Speaker 6: There's also a lot of questions around why Boeing should
Speaker 6: keep their space program, considering how many losses they've posted
Speaker 6: for this. If Boeing were to announce that it was
Speaker 6: jettison ng it's fleet and it's sort of relationship with NASA,
Speaker 6: how much could this share price rally.
Speaker 1: Yeah, I'm not it's an interesting question.
Speaker 7: I mean the space program itself, you know, I think
Speaker 7: we think of it as the United Launch Alliance, which
Speaker 7: is a joint venture between them and Lockheed, which.
Speaker 1: Has already been rumored to be potentially sold.
Speaker 7: I think the number out there's three billion dollars, so
Speaker 7: they could be monetizing part of that. There's the Space
Speaker 7: Launch System, which is the SLS program. That's what's called
Speaker 7: a cost plus program, and so their risk there is
Speaker 7: much lower. The NASA takes the risk, and then you
Speaker 7: have the Starliner program and obviously engineering and other things
Speaker 7: that go into NASA. Boeing has been working with NASA
Speaker 7: for decades, so I guess the question would be, you know,
Speaker 7: what they see from the space business longer term? Is
Speaker 7: this an area where they want to be exposed down
Speaker 7: the road or do they want to sort of tighten
Speaker 7: their focus, you know, on the commercial airplane business. I
Speaker 7: compare it to Lockheed. You know, they used to compete
Speaker 7: in commercial airplanes. They decided they were much better in
Speaker 7: fighters and satellites and weapons and they went down that
Speaker 7: path and that was very successful for them. So, you know,
Speaker 7: I think if they got out of this business, investors
Speaker 7: would look at it as you know, potentially reducing a
Speaker 7: future cash trag, but perhaps at the expense of sort
Speaker 7: of reducing an opportunity in space down the road. So
Speaker 7: you know, it'd be an interesting decision, this interesting sort
Speaker 7: of thought process on how much worldper goes through this
Speaker 7: as he thinks about, you know, the future of Boeing.
Speaker 6: They're taking a step back. So there's been this question
Speaker 6: of whether Airbus would be able to cape on some
Speaker 6: of the problems that we've seen on Boeing and whether
Speaker 6: they could really take the lead in a more meaningful way.
Speaker 6: I have been surprised that they have not, and one
Speaker 6: of the reasons why is because they're facing off for
Speaker 6: the same kind of supply chain issues that Boeing is
Speaker 6: maybe a little bit less publicized.
Speaker 4: But I'm just.
Speaker 6: Wondering whether we have fully emerged from the sort of
Speaker 6: post pandemic induced supply chain disruptions that's continue to plague
Speaker 6: the aerospace industry.
Speaker 1: Yeah, it's a great point. Look, Airbus, I think everybody.
Speaker 7: Thought after January Airbus is going to be in this
Speaker 7: position to take all this market share, and there's certainly
Speaker 7: been limits to what they've been able to do. But
Speaker 7: for airbuses, you know, a positive for Airbus to people
Speaker 7: I think overlook is you know, they have really high targets.
Speaker 7: So they're talking about getting seventy five on the eight
Speaker 7: three twenty per month. Boeing is talking about getting to
Speaker 7: fifty on the seven three seven, So you know, Airbus
Speaker 7: is already close to fifty on their program, you know,
Speaker 7: maybe even certain months above that number. So they're progressing
Speaker 7: pretty well, but they've seen limits on their ability to
Speaker 7: get to their targets, and they keep extending that and
Speaker 7: part of that has been supply chain driven. You know,
Speaker 7: there are many tiers of the supply chain. There has
Speaker 7: to be an orchestration and how they work together. There's
Speaker 7: been raw material shortages, there's been geopolitical issues, there's been
Speaker 7: labor issues, and so these things have compounded, and surprisingly,
Speaker 7: here we are, you know, four years past the start
Speaker 7: of the pandemic, more than that now, and we're still
Speaker 7: talking about supply chain. But you know, as we go
Speaker 7: into twenty five, I think there's a reason to be
Speaker 7: optimistic about where the supply chain is heading. And that's
Speaker 7: part of why we think, you know, Boeing starts to
Speaker 7: look better. You know, where expectations are today is a
Speaker 7: lot lower where they were a year ago. And as
Speaker 7: the supply chain catches up, as Boeing stabilized, as production,
Speaker 7: they get back into a position where they can sort of,
Speaker 7: you know, stem some of the market share losses they've
Speaker 7: seen to date and then ideally start building more orders
Speaker 7: and sort of take away that potential advantage Airbus.
Speaker 1: Would have had.
Speaker 6: This is a tough question, and I don't know if
Speaker 6: we can actually get a real answer. But how much
Speaker 6: is Boeing in a better or worse position because it
Speaker 6: is the American darling, because it is a US company
Speaker 6: at a time of increasing fissures, especially as the likes
Speaker 6: of Boeing really has a huge presence in defense pending globally.
Speaker 6: How much is this really turning into sort of the
Speaker 6: fiefdoms of who your allies are in terms of who
Speaker 6: decides to do business with, say Boeing versus Airbus.
Speaker 1: Yeah, you're right, that is a tough question.
Speaker 4: You know.
Speaker 7: Look, I think right now there's a third player that's
Speaker 7: emerging very early days, but it's called Comac. It's the
Speaker 7: Chinese backed aircraft producer, and they have a program called
Speaker 7: the C nine one nine which is going to compete
Speaker 7: with the seven three seven and eight three twenty and so,
Speaker 7: like I said, very early days, you know, using a
Speaker 7: lot of the same parts that we go into a
Speaker 7: Boeing and Airbus aircraft, but obviously.
Speaker 1: Early on that journey.
Speaker 7: So you know, the question is Boeing put out some
Speaker 7: sort of refresh numbers on what they think the China
Speaker 7: set up will look like longer term, and that is rising,
Speaker 7: and so.
Speaker 1: The question will be does China.
Speaker 7: Opt to purchase more Airbus aircraft and do they purchase
Speaker 7: more COMAC aircraft as you do down the road, and
Speaker 7: that limits an opportunity for Boeing. Outside of that, I
Speaker 7: don't think there's this major issue between which countries choose
Speaker 7: to do.
Speaker 1: Business with Airbus or Boeing.
Speaker 7: Airbus has certainly been the preferred partner of late, but
Speaker 7: the reality is, if you want a new eight three
Speaker 7: to twenty aircraft, the waiting list is now twenty thirty
Speaker 7: one to twenty thirty two, and so that is not
Speaker 7: an aircraft you're ordering the day to get in twenty
Speaker 7: seven or twenty eight. You know, with Boeing you could
Speaker 7: be getting that aircraft three to four years earlier, and
Speaker 7: so that's an advantage. And so I think airlines continue
Speaker 7: to look at, you know, what aircraft do we need
Speaker 7: for our mission? When can we get those aircraft? What's
Speaker 7: the price of the aircraft, and what's our confidence in
Speaker 7: the company? Probably more so than that, But then there's
Speaker 7: the China question, and so that may be a benefit
Speaker 7: as we think about Airbus versus Boeing.
Speaker 2: But how difficult is it for airlines to make capacity
Speaker 2: decisions when they don't know when they can get planes,
Speaker 2: and if they do want new planes, they've got to
Speaker 2: wait that long for them, and they've got no idea
Speaker 2: whether the economy or the market will be once they arrive.
Speaker 1: Yeah, it's very difficult.
Speaker 7: And what we've seen What typically happens is there's call
Speaker 7: it two to three percent of your aircraft globally get
Speaker 7: retired every year, and so that number has been quite low.
Speaker 1: And what we've seen is the average of.
Speaker 7: The global fleet has been about twenty percent higher than
Speaker 7: it was in twenty eighteen. And what that's meant is
Speaker 7: there's this whole industry called the aftermarket, which has benefited
Speaker 7: from selling parts and services because older aircraft need more
Speaker 7: parts and services.
Speaker 1: And so what airlines have.
Speaker 7: Had to do is take up their off x because
Speaker 7: they've had to use older aircraft. And they've also been
Speaker 7: limited in how much they can grow because they've been
Speaker 7: unable to get their new aircraft. I mean, just for example,
Speaker 7: Southwest was supposed to get something like seventy nine aircraft
Speaker 7: this year and they're going to get closer to twenty
Speaker 7: and so that obviously has a huge change on what
Speaker 7: you're expecting to grow versus what you can actually grow,
Speaker 7: But it's actually probably been a good thing for the
Speaker 7: airline industry because it's sort of mandated more capacity, your
Speaker 7: capacity to stay in check. Imagine had we not been
Speaker 7: in that position and airline's been buying more aircraft, you know,
Speaker 7: what we're seeing from a yield perspective, would be certainly
Speaker 7: a lot worse today if they were.
Speaker 1: Growing fafter So it's been a positive from that perspective.
Speaker 2: This was awesome, just a clinic. I appreciate it, sir.
Speaker 2: Thank you first saving there a Staples. This is the
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