WEBVTT - Bloomberg Surveillance TV: August 27, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.880 Terminal and the Bloomberg Business app. We begin with the 0:00:36.920 --> 0:00:39.879 big issue markets on hold ahead of Nvidio. Then as 0:00:39.880 --> 0:00:42.760 that one hundred under pressure as traders await tomorrow's results 0:00:42.760 --> 0:00:46.000 from the AI giant that's become a critical market driver 0:00:46.240 --> 0:00:48.880 for Camporadi of JP morgan Stein bullish with this to say, 0:00:49.200 --> 0:00:52.400 the concentration of stocks driving the market higher makes sense 0:00:52.440 --> 0:00:54.920 to us. Given the ability for those companies to manage 0:00:54.960 --> 0:00:57.320 the current levels of raids as well as the earnings 0:00:57.320 --> 0:01:02.160 supporting valuations, we believe the momentum inequacies can continue, So 0:01:02.360 --> 0:01:03.680 joined us some moth folkemonitory. 0:01:03.680 --> 0:01:04.800 Good morning, Let's get to some. 0:01:04.760 --> 0:01:07.720 Of your cos I've a white US stocks, EM Japan 0:01:07.959 --> 0:01:10.720 high yield credit. What aren't you. I've a white right 0:01:10.720 --> 0:01:11.640 now in this mile kid. 0:01:11.920 --> 0:01:14.720 Yeah, so we're not overweight cash. And I love your 0:01:14.920 --> 0:01:16.560 I love your quote that I saw on your on 0:01:16.720 --> 0:01:18.959 one of the monitors that said t bill and chill. 0:01:19.480 --> 0:01:21.319 That's like nails on a try I'll probably date myself 0:01:21.360 --> 0:01:23.000 with this reference, but that's like nails on a truck 0:01:23.040 --> 0:01:26.399 board for me. John, I'll tell you we still run 0:01:26.400 --> 0:01:28.560 into that problem. And I'm not talking about should you 0:01:28.600 --> 0:01:30.399 be in equies or should you be in cash? Okay, 0:01:31.000 --> 0:01:34.200 I'm a multi asset portfolio manager. I believe in diversification 0:01:34.840 --> 0:01:38.280 and a diverse fied portfolio. Last year, when the FED 0:01:38.360 --> 0:01:40.880 wasn't cutting rates, was up sixteen cash was up five 0:01:40.959 --> 0:01:44.240 on the year. This year, this diverse five portfolio of 0:01:44.319 --> 0:01:46.800 sixty forty is up about eleven and cash is up 0:01:46.800 --> 0:01:49.800 about three and a half. So we're tripling the return 0:01:50.000 --> 0:01:52.240 on cash for folks that should probably be in diverse, 0:01:52.280 --> 0:01:55.640 fied portfolios. And I loved last Friday morning at ten 0:01:55.720 --> 0:01:59.120 am the time has come for policy to adjust. I 0:01:59.160 --> 0:02:03.040 mean that's like music to the ears of investors after 0:02:03.120 --> 0:02:06.360 two very long years. Twenty twenty two was the economy 0:02:06.400 --> 0:02:08.360 is going to have to go through some pain in 0:02:08.480 --> 0:02:10.080 order for us to achieve our a dual mandate. I 0:02:10.080 --> 0:02:12.840 still remember pain. And then last year it was basically 0:02:12.880 --> 0:02:14.440 the message was we're either going to be high for 0:02:14.480 --> 0:02:17.000 longer or even higher for longer. So I think what 0:02:17.320 --> 0:02:19.720 we're looking at when we believe the momentum equities can 0:02:19.760 --> 0:02:23.079 continue is that these cuts I think are going to 0:02:23.160 --> 0:02:26.720 grease the wheels for the soft landing and you know, 0:02:26.919 --> 0:02:30.160 the FED cutting without a recession and what we believe 0:02:30.280 --> 0:02:33.560 between four and five percent nominal GDP growth. Every investor 0:02:33.639 --> 0:02:34.840 should be raising their hand for that. 0:02:35.040 --> 0:02:37.480 For a while. The sales team I imagine at JPLGAM, 0:02:37.520 --> 0:02:40.040 mccolon clents and saying, you ready should get out of cash, 0:02:40.200 --> 0:02:43.680 We've got this bond fund, allocate some long dated depth, 0:02:44.000 --> 0:02:46.280 go into credit, all sorts of things with Bob, Michael 0:02:46.320 --> 0:02:49.440 and co. Have some fun. Are they calling you now 0:02:49.760 --> 0:02:53.119 after Friday to make that move? How resistant have they been? 0:02:53.480 --> 0:02:53.679 Yeah? 0:02:53.680 --> 0:02:56.440 The credit story is still loud and clear, because the 0:02:56.440 --> 0:02:59.720 credit story for us is we'd rather play offense in 0:02:59.720 --> 0:03:03.520 fix income in defense. So the high yield story, while 0:03:03.560 --> 0:03:05.600 spreads aren't super wide and we're not going to get 0:03:05.600 --> 0:03:08.119 this crazy total return. We'll get the total return in equity, John, 0:03:08.480 --> 0:03:12.079 but we're going to out yield what we believe treasuries 0:03:12.280 --> 0:03:15.640 and just the core bond funds can do over time, 0:03:15.680 --> 0:03:18.160 which is a form of alpha. Less glamorous than Nvidia, 0:03:18.440 --> 0:03:20.320 but it is a It is a form of alpha. 0:03:20.320 --> 0:03:24.040 But importantly, like this diversification story, what we've seen is 0:03:24.040 --> 0:03:26.880 that as soon as inflation hits three or below and 0:03:26.880 --> 0:03:29.840 we're a two point nine on CPI, you get the 0:03:29.919 --> 0:03:32.359 right way correlation back with bonds. So you can get 0:03:32.360 --> 0:03:36.320 a day like August fifth, the highest intra day volatility 0:03:36.320 --> 0:03:38.240 in the history of the equity market, my first day 0:03:38.240 --> 0:03:40.920 of vacation, Thank you very much. And we can hold 0:03:40.960 --> 0:03:44.000 on to our overweight to stocks and credit in that 0:03:44.120 --> 0:03:47.440 environment because we believe that finally bonds are going to 0:03:47.440 --> 0:03:49.880 be the diversifier that we that we expect. 0:03:49.600 --> 0:03:49.920 Them to be. 0:03:50.000 --> 0:03:52.840 If that's the case, why I underweight US government bonds. 0:03:52.520 --> 0:03:54.600 Because recession is not the base case. We're neutral or 0:03:54.640 --> 0:03:57.480 our benchmark okay in terms of duration, but we'd much 0:03:57.560 --> 0:04:00.240 rather play the high yield story, so spending the ash 0:04:00.320 --> 0:04:01.840 and high yield versus the egg. 0:04:01.960 --> 0:04:02.960 But we don't want to be underweight. 0:04:03.000 --> 0:04:05.360 We don't want to be underweight in an environment where 0:04:05.400 --> 0:04:06.320 bonds can protect us. 0:04:06.360 --> 0:04:08.720 We were talking to Sebastian Page of tiro Price earlier 0:04:08.760 --> 0:04:10.640 and he was talking about how it's important to sort 0:04:10.640 --> 0:04:13.240 of hedge against the multitude of risks, including owning government 0:04:13.280 --> 0:04:15.840 bonds in case there is a bigger downturn and holding 0:04:16.279 --> 0:04:19.919 hard assets in case the inflation picks up more considerably. 0:04:20.360 --> 0:04:24.920 Why in your asset allocation are you overweighting so significantly 0:04:25.160 --> 0:04:28.480 the idea of a soft landing and a positive economic backjob. 0:04:28.600 --> 0:04:30.920 So it still goes back to us, Lisa, that this 0:04:31.040 --> 0:04:34.520 is an economy that is interest rate insensitive. So you 0:04:34.600 --> 0:04:37.640 have an effective mortgage rate in the US right now 0:04:37.720 --> 0:04:42.520 at three point nine. The average effective mortgage rate when 0:04:42.600 --> 0:04:44.440 we had a zero interust rate policy from O eight 0:04:44.480 --> 0:04:47.000 to fifteen was four point three. So in effect, US 0:04:47.000 --> 0:04:50.360 homeowner with their biggest expense is paying less in their 0:04:50.360 --> 0:04:52.000 mortgage than they weren't a zero interest. 0:04:51.800 --> 0:04:52.560 Rate policy least. 0:04:52.560 --> 0:04:55.480 So so I think there's still interest rate insensitivity. And this 0:04:55.680 --> 0:04:58.360 we think is a cycle that has been trademarked by 0:04:58.400 --> 0:05:00.760 good behavior, not just a con Schumer who went out 0:05:00.800 --> 0:05:03.479 and refined in twenty twenty twenty one and early twenty two. 0:05:03.640 --> 0:05:07.680 But also the corporate balance sheet looks pretty good going forward, 0:05:07.839 --> 0:05:09.400 So again I don't want to give you the impression 0:05:09.480 --> 0:05:13.039 that it's raw row above trend growth. A necessary consequence 0:05:13.080 --> 0:05:16.039 of a soft landing is a landing, right, so you 0:05:16.120 --> 0:05:18.719 have to slow down some and then that allows the 0:05:18.800 --> 0:05:21.640 FED to bring the easy cycle into focus. One hundred 0:05:21.640 --> 0:05:23.400 basis points by the end of the yearliest. I agree 0:05:23.440 --> 0:05:25.680 with you in your last statement that's a little bit 0:05:25.720 --> 0:05:28.440 too much. I mean, we were when people were coming 0:05:28.440 --> 0:05:30.000 into this year and we had one hundred and fifty 0:05:30.000 --> 0:05:32.360 priced in for the full year. People thought that was crazy. 0:05:32.480 --> 0:05:34.719 Now we have one hundred priced into three meetings. I 0:05:34.760 --> 0:05:36.720 think that gets back to something that looks like one 0:05:36.800 --> 0:05:38.240 or two twenty five bas point cuts. 0:05:38.240 --> 0:05:40.160 But you'll comfortable we can take some of that back 0:05:40.400 --> 0:05:43.040 and this market will hold up well. That means the leadership. 0:05:43.120 --> 0:05:45.240 Yeah, I think we saw a snapshot of that in 0:05:45.480 --> 0:05:49.320 the April trade when you saw that that, you know, 0:05:49.839 --> 0:05:53.159 the repricing of the Federal Fund's futures market, John, I 0:05:53.200 --> 0:05:56.000 think that goes back to megacap tech, right, So you 0:05:56.080 --> 0:05:59.599 have this small cap rally, the MidCap. All this rotation trade, 0:05:59.640 --> 0:06:01.440 I think that gives it up a little bit, and 0:06:01.440 --> 0:06:06.480 our highest conviction view is still cap weighted SMP, although 0:06:06.520 --> 0:06:10.160 our last trade was an equal weighted SMP, just because 0:06:10.279 --> 0:06:12.279 inflation is now at two point nine percent and that 0:06:12.320 --> 0:06:13.680 should expand some breath. 0:06:13.760 --> 0:06:15.560 I just want to finish up with that last point, 0:06:15.640 --> 0:06:17.560 this idea of how leverage this market is to big 0:06:17.600 --> 0:06:20.120 tech and when do you get in video earnings tomorrow. 0:06:20.360 --> 0:06:23.000 How concerned are you that any kind of miss or 0:06:23.040 --> 0:06:26.039 not a significant enough beat could actually cause a bigger 0:06:26.160 --> 0:06:27.680 risk off moment for the market. 0:06:27.920 --> 0:06:30.480 Yeah, I think it's I think that would be somewhat short, 0:06:30.640 --> 0:06:32.920 short dated, Lisa, getting back to the point that we're 0:06:32.920 --> 0:06:36.159 going to, this market is driven by fundamentals and it's 0:06:36.160 --> 0:06:38.280 not a gimmicky rally. Like if you look at the 0:06:38.320 --> 0:06:42.520 earning the returns of these companies, about half of the 0:06:42.560 --> 0:06:45.040 return has come from earnings and about half from multiples. 0:06:45.120 --> 0:06:47.840 If it was all multiples, I'd be right with you, right, 0:06:48.080 --> 0:06:51.000 but it's not that. But we do believe that they 0:06:51.040 --> 0:06:52.919 do have to continue to put up the earnings to 0:06:52.920 --> 0:06:53.799 support the multiple. 0:06:53.800 --> 0:06:55.480 What do you think of the moithe of regional banks 0:06:55.520 --> 0:06:56.880 just to sort of touch on that. What's happening with 0:06:56.920 --> 0:06:57.680 the financials? 0:06:57.760 --> 0:06:59.960 Yeah, a lifeline has now been given. 0:07:00.400 --> 0:07:01.800 You know how he gets a gimmicky rally. 0:07:01.839 --> 0:07:03.600 I don't think it's gimmiy rally because I don't think 0:07:03.640 --> 0:07:05.960 it's a gimmicky easing cycle. I think we're actually going 0:07:06.040 --> 0:07:07.560 to be in the in the in the in the 0:07:07.640 --> 0:07:09.680 in the beginning innings of an easing cycle, just not 0:07:09.720 --> 0:07:11.160 one hundred base points by the end of the year. 0:07:11.160 --> 0:07:13.800 If that's the case, we have the wrong view on equities. 0:07:13.600 --> 0:07:15.320 Got it, Phil? Thank you. 0:07:15.360 --> 0:07:17.120 Basically he's saying they're not trash. 0:07:17.160 --> 0:07:18.160 They're not trash. I've got that. 0:07:18.320 --> 0:07:20.080 Yeah, it basically stopped saying that. 0:07:20.080 --> 0:07:21.520 That was what he says, is that what feels time 0:07:21.520 --> 0:07:25.080 to make Yeah, trying to start fights rather the table 0:07:25.160 --> 0:07:26.120 of something. What's wrong with you? 0:07:26.880 --> 0:07:28.480 We set out back together. I saw that. 0:07:28.480 --> 0:07:29.600 Would you buy tickets? Yes? 0:07:29.640 --> 0:07:31.000 I would? You would beat me to it? 0:07:31.040 --> 0:07:33.000 Okay, would you like to go together? We can do 0:07:33.000 --> 0:07:35.360 the next summle? Might that happen? Phil? All right? Team 0:07:35.360 --> 0:07:47.720 outing Phil Campari a CHP mol Thank you. So here's 0:07:47.720 --> 0:07:51.120 the latest Trainer curtain, weekly jobless claims and next week's 0:07:51.120 --> 0:07:53.800 August jobs report. As key data points ahead of the 0:07:53.880 --> 0:07:56.720 fed's next meeting, as officials warn of potential harm to 0:07:56.760 --> 0:07:59.160 the labor market kitchase of self gen right in the 0:07:59.200 --> 0:08:02.040 following what the labor market is clearly loosening, There's still 0:08:02.160 --> 0:08:04.840 huge uncertainty about how much it will slow. But for 0:08:04.920 --> 0:08:07.840 the FX market, after the dollar climbs so high, the 0:08:07.880 --> 0:08:10.280 mere fact of the slowdown will continue to see long 0:08:10.320 --> 0:08:13.920 dollar positions reduce. KIT joined us now for more KIT. 0:08:14.040 --> 0:08:15.760 So we've got the economy and then we've got your 0:08:15.760 --> 0:08:17.840 call on the central bank and foreign exchange. Can we 0:08:17.920 --> 0:08:20.440 just start with the economy first and ultimately the call 0:08:20.480 --> 0:08:23.680 on the central bank? Market participants were very excited at 0:08:23.720 --> 0:08:25.440 the start of the year about the prospect of a 0:08:25.480 --> 0:08:27.720 lot of rate cuts. They took them all back, and 0:08:27.760 --> 0:08:30.320 now we've priced them all in again. What's different now 0:08:30.320 --> 0:08:32.840 compared to where we were at the start of the year. 0:08:34.160 --> 0:08:35.200 A good question. 0:08:35.480 --> 0:08:38.240 Look, I think the first pieces that even the FED 0:08:38.360 --> 0:08:41.960 is recognizing pretty clearly that the labor market is changing. 0:08:42.280 --> 0:08:43.480 Jobs growth has slowed. 0:08:43.480 --> 0:08:46.600 We've revised away a few jobs as well for the 0:08:46.640 --> 0:08:48.959 last couple of weeks, but it is slowing down. The 0:08:49.120 --> 0:08:52.880 signs of weakness and the having market still. So what 0:08:52.920 --> 0:08:55.679 the Fed has done is beginning to have an impact, 0:08:56.120 --> 0:08:59.160 But labor market is the center of it. That's why 0:08:59.360 --> 0:09:01.760 we've got more men than anything else at Jackson Hole. 0:09:02.440 --> 0:09:05.960 And we've seen one week labor market report, one downward 0:09:06.040 --> 0:09:08.960 revision in the benchmark revisions, and we are waiting for 0:09:09.240 --> 0:09:12.480 more to provide any kind of confirmation. I guess I 0:09:12.480 --> 0:09:14.200 would say, though, that the chances that this is a 0:09:14.240 --> 0:09:18.360 slowdown are pretty strong. Now what kind of slow down? 0:09:18.920 --> 0:09:21.280 Much much much less certain, But there's enough in the 0:09:21.320 --> 0:09:24.000 labor market here to say this is now slowing. 0:09:24.080 --> 0:09:24.520 It's okay. 0:09:24.559 --> 0:09:26.760 With that in mind, are we two dubshly priced or 0:09:26.760 --> 0:09:29.480 two conservatively priced in the rates market at the moment? 0:09:30.800 --> 0:09:31.640 Well, if you have. 0:09:31.640 --> 0:09:33.880 Pushed me against a wall, I say, we're pricing for 0:09:34.360 --> 0:09:38.840 a faster pace of rate cuts than is likely unless 0:09:38.960 --> 0:09:42.120 things go pretty badly wrong. But the destination, which is 0:09:42.120 --> 0:09:46.400 looking at an eventual fall till three percent or somewhere 0:09:46.400 --> 0:09:49.640 near three percent in rates, that's not an excessive fall. 0:09:49.920 --> 0:09:52.840 The last time the trough in rates were three percent 0:09:53.240 --> 0:09:56.840 was in nineteen ninety two, when you know, inflation expectations 0:09:56.840 --> 0:09:59.360 were an awful lot higher than they are our real 0:09:59.440 --> 0:10:02.080 rates were less distractive, and the economic recovery that we 0:10:02.120 --> 0:10:04.760 had when we got to that trough surprised everybody, and 0:10:04.800 --> 0:10:06.000 we called it the Great Moderation. 0:10:06.120 --> 0:10:09.960 So the destination of three percent ish. I think it's fine. 0:10:10.520 --> 0:10:12.520 The idea that we get as many rate cuts between 0:10:12.520 --> 0:10:14.160 now in the beginning of next year as a priced 0:10:14.160 --> 0:10:17.079 in that the data need to be pretty awful. 0:10:17.600 --> 0:10:19.680 Kit I was wondering whether this was going to be 0:10:19.679 --> 0:10:22.800 sort of the dramatic salvos that could be heard across 0:10:22.840 --> 0:10:24.920 Wall Street during the fall, given the fact that so 0:10:24.960 --> 0:10:26.880 many people for most of this year had been so 0:10:26.960 --> 0:10:30.640 overweight the dollar. How offsides will this market be when 0:10:30.679 --> 0:10:33.160 it starts to adapt to the idea of the rate 0:10:33.200 --> 0:10:35.480 cuts that the market is pricing in. If we should 0:10:35.480 --> 0:10:39.000 get the kind of cuts that currently are being represented 0:10:39.000 --> 0:10:42.040 in fed fund's futures, how much dollar weakness could we 0:10:42.120 --> 0:10:42.679 end up seeing? 0:10:44.000 --> 0:10:47.560 Well, a fair bit, I mean, that's my concern. There's 0:10:47.600 --> 0:10:50.320 a piece about the Chinese yuan that was the most 0:10:50.360 --> 0:10:55.320 read story on your Terminal overnight, citing Stephen jen who 0:10:55.400 --> 0:10:58.400 talked about an avalanche of money. But I've been struck 0:10:58.520 --> 0:11:01.400 for years the two big dollar at it's the really 0:11:01.400 --> 0:11:03.240 big one in the eighties that ended in eighty five, 0:11:03.559 --> 0:11:05.280 and then the big one in the nineties that ended 0:11:05.320 --> 0:11:09.079 two thousand and one. Both of them were completely reversed, 0:11:09.440 --> 0:11:12.160 the first without any kind of recession, the second with 0:11:12.200 --> 0:11:14.920 a very mild recession. And there is this sense that 0:11:15.640 --> 0:11:18.120 we've seen, you know, not just carry trades, but foreign 0:11:18.120 --> 0:11:21.960 investors buying US equities, foreign investors buying US bonds, everybody 0:11:22.000 --> 0:11:26.400 buying American everything for years now, and that if people 0:11:26.480 --> 0:11:30.120 start taking those trades off, bringing that money home whatever 0:11:30.160 --> 0:11:32.240 it is they're doing with it, because they're a bit spooked, 0:11:32.679 --> 0:11:36.640 that you can have an outsized correction on the other 0:11:36.679 --> 0:11:38.760 side over the course of the next few years. And 0:11:38.800 --> 0:11:41.800 I know, I for one, definitely never saw either how 0:11:41.880 --> 0:11:43.560 much the dollar was going to go up into eighty 0:11:43.600 --> 0:11:46.800 five or how much it would fall, and was continually 0:11:46.840 --> 0:11:49.560 perplexed by how strong it got and then how much 0:11:49.640 --> 0:11:52.439 it fell between ninety five and two thousand and four. 0:11:52.520 --> 0:11:55.439 So I'll be surprised again if the dollar goes all 0:11:55.440 --> 0:11:57.760 the way back, but I'm beginning. 0:11:57.480 --> 0:11:58.640 To understand how it happens. 0:11:58.640 --> 0:12:00.880 And it's this, if you like it, this avalanche, to 0:12:01.720 --> 0:12:04.440 use the term from the Bloomberg story, but of just 0:12:04.640 --> 0:12:08.160 money going home because it's had a great time being 0:12:08.160 --> 0:12:08.720 in America. 0:12:08.760 --> 0:12:09.600 But the holidays are. 0:12:09.520 --> 0:12:12.640 Over, kid, the holidays are over. But are they really 0:12:12.679 --> 0:12:15.320 beginning at other places? I hear John Pharaoh's voice in 0:12:15.320 --> 0:12:17.760 my head. Where do you want to go? Germany? Where 0:12:17.760 --> 0:12:19.679 do you want to go? China? I mean there is 0:12:19.720 --> 0:12:22.560 this question. I mean, how much confidence is there in 0:12:22.679 --> 0:12:24.840 one of these companies a lot of these investors to 0:12:24.960 --> 0:12:26.480 go home from the holidays. 0:12:28.000 --> 0:12:31.240 And that's the really big challenge in a sense. You know, 0:12:31.280 --> 0:12:33.040 if I look at Japan and say if Dolly en 0:12:34.080 --> 0:12:36.040 purchasing power parity for Dolly yenn is now in the 0:12:36.080 --> 0:12:38.720 mid nineties, how far could that go on no money 0:12:38.720 --> 0:12:41.360 doing anything. That's a big current account surplus economy. If 0:12:41.360 --> 0:12:43.400 it doesn't want to ship money to the States, to 0:12:43.480 --> 0:12:46.520 the yen will appreciate enormous amount. I can't imagine you're 0:12:46.559 --> 0:12:48.840 a dollar going miles. I think, let's put it this 0:12:48.880 --> 0:12:52.160 way that I am almost certain in my mind that 0:12:52.240 --> 0:12:56.040 we're going to see another cyclical lower high for the 0:12:56.080 --> 0:12:59.040 Euro after a series of them since two thousand and eight. 0:12:59.200 --> 0:13:01.080 So we did one six, we did one forty, we 0:13:01.120 --> 0:13:04.480 did one twenty seven, then we did one twenty three. 0:13:04.760 --> 0:13:06.520 I don't think we're getting close to one twenty three 0:13:06.520 --> 0:13:09.840 in the cycle, but I do look at history and say, 0:13:10.440 --> 0:13:13.680 you know, once a stone starts gathering momentum, it goes down. 0:13:13.760 --> 0:13:16.400 Or put another way, what are the conditions for an avalanche? 0:13:16.520 --> 0:13:18.400 A lot of snow at the top of a mountain 0:13:18.520 --> 0:13:20.120 and a catalyst, where does the. 0:13:20.040 --> 0:13:20.920 Snow go down? 0:13:21.000 --> 0:13:23.600 It's not asking how attractive it is at the bottom 0:13:23.640 --> 0:13:24.160 of the valley. 0:13:24.240 --> 0:13:26.880 It's just going. And there's a bit of that in this. 0:13:27.000 --> 0:13:28.880 Okay, before you go, I've only got a few seconds least. 0:13:28.960 --> 0:13:31.000 I've got a note. Did you call Stephen and ask 0:13:31.040 --> 0:13:31.800 him about that call? 0:13:33.240 --> 0:13:33.800 No? I haven't. 0:13:34.720 --> 0:13:36.720 I've only got This is my first day into work. 0:13:37.080 --> 0:13:39.040 I'm as close to his office as I could usefully 0:13:39.080 --> 0:13:40.840 be in your studios in London. 0:13:40.840 --> 0:13:42.520 But I have not spoken to Stephen yet. 0:13:42.559 --> 0:13:44.720 Okay, let me know what your talent cat Jase's self 0:13:44.760 --> 0:13:57.199 gent first stupid A STIFL is looking ahead to twenty 0:13:57.200 --> 0:14:00.439 twenty five delivery expectations as the company built What's up 0:14:00.520 --> 0:14:03.640 inventory but joined us now for more. But I think 0:14:03.640 --> 0:14:05.160 we need to take a giant step back and talk 0:14:05.200 --> 0:14:08.240 about this overall company. The challenges for the incoming CEO. 0:14:08.720 --> 0:14:12.240 We've got commercial planes, Boeing Defense, and then we've got 0:14:12.280 --> 0:14:14.640 the venture into space and that's where the difficulty is 0:14:14.720 --> 0:14:17.360 right now. Given the to do list, how long is 0:14:17.400 --> 0:14:18.960 that to do list for that new CEO. 0:14:20.440 --> 0:14:22.760 Yeah, well thanks for having me on the program. You know, 0:14:22.800 --> 0:14:24.920 it's certainly a long to do list. You know, what 0:14:24.960 --> 0:14:27.680 we've been looking for over the last few months was first, 0:14:28.120 --> 0:14:30.040 you know, to get a successor CEO and the door 0:14:30.080 --> 0:14:33.000 and so sort of check mark on that and from here, 0:14:33.160 --> 0:14:35.320 you know, mister Orberg just started three weeks ago, and 0:14:35.360 --> 0:14:38.120 so he's in the process of you know, meeting with customers, 0:14:38.160 --> 0:14:40.160 trying to understand the problems and. 0:14:40.520 --> 0:14:41.720 Sort of put forth a solution. 0:14:41.840 --> 0:14:45.040 And so unfortunately, you've seen a couple of you know, 0:14:45.120 --> 0:14:47.960 negative headlines over the last two weeks, between the Triple 0:14:48.000 --> 0:14:51.160 seven X having a setback and then Starliner obviously over 0:14:51.200 --> 0:14:54.360 the weekend announcing that SpaceX is going to bring back 0:14:54.400 --> 0:14:57.440 the two astronauts up there. But you know, maybe just 0:14:57.480 --> 0:14:59.840 to contextualize things, because I think it's important as you 0:14:59.840 --> 0:15:03.240 think about the Boeing story, you know, the BDS business 0:15:03.240 --> 0:15:06.600 which houses the space business, makes up about twenty five 0:15:06.640 --> 0:15:09.080 percent of the normalized business called it a thirty three 0:15:09.120 --> 0:15:12.960 percent of the business today, and within that business, fifteen 0:15:13.000 --> 0:15:15.840 percent of it is the fixed price development programs, of 0:15:15.880 --> 0:15:18.920 which starline are is one of them. So this program 0:15:19.000 --> 0:15:22.280 itself is relatively small, which is why you tend to 0:15:22.320 --> 0:15:24.480 see a lot more focus on the BCA side, the 0:15:24.480 --> 0:15:27.160 airplane side, and within that a lot of focus on 0:15:27.200 --> 0:15:28.520 the seven three seven program. 0:15:28.560 --> 0:15:30.960 There's also a lot of questions around why Boeing should 0:15:31.040 --> 0:15:35.720 keep their space program, considering how many losses they've posted 0:15:35.760 --> 0:15:38.040 for this. If Boeing were to announce that it was 0:15:38.120 --> 0:15:42.640 jettison ng it's fleet and it's sort of relationship with NASA, 0:15:42.880 --> 0:15:45.720 how much could this share price rally. 0:15:45.800 --> 0:15:47.960 Yeah, I'm not it's an interesting question. 0:15:48.000 --> 0:15:49.840 I mean the space program itself, you know, I think 0:15:49.880 --> 0:15:51.920 we think of it as the United Launch Alliance, which 0:15:52.080 --> 0:15:54.200 is a joint venture between them and Lockheed, which. 0:15:54.040 --> 0:15:56.200 Has already been rumored to be potentially sold. 0:15:56.200 --> 0:15:58.080 I think the number out there's three billion dollars, so 0:15:58.080 --> 0:16:00.840 they could be monetizing part of that. There's the Space 0:16:00.920 --> 0:16:03.480 Launch System, which is the SLS program. That's what's called 0:16:03.480 --> 0:16:06.280 a cost plus program, and so their risk there is 0:16:06.720 --> 0:16:09.400 much lower. The NASA takes the risk, and then you 0:16:09.400 --> 0:16:12.200 have the Starliner program and obviously engineering and other things 0:16:12.200 --> 0:16:14.840 that go into NASA. Boeing has been working with NASA 0:16:14.880 --> 0:16:17.360 for decades, so I guess the question would be, you know, 0:16:17.400 --> 0:16:20.200 what they see from the space business longer term? Is 0:16:20.200 --> 0:16:22.040 this an area where they want to be exposed down 0:16:22.080 --> 0:16:24.120 the road or do they want to sort of tighten 0:16:24.160 --> 0:16:27.040 their focus, you know, on the commercial airplane business. I 0:16:27.040 --> 0:16:29.320 compare it to Lockheed. You know, they used to compete 0:16:29.320 --> 0:16:31.560 in commercial airplanes. They decided they were much better in 0:16:31.640 --> 0:16:34.320 fighters and satellites and weapons and they went down that 0:16:34.320 --> 0:16:37.040 path and that was very successful for them. So, you know, 0:16:37.080 --> 0:16:39.120 I think if they got out of this business, investors 0:16:39.160 --> 0:16:41.840 would look at it as you know, potentially reducing a 0:16:41.840 --> 0:16:45.760 future cash trag, but perhaps at the expense of sort 0:16:45.760 --> 0:16:48.960 of reducing an opportunity in space down the road. So 0:16:49.040 --> 0:16:51.520 you know, it'd be an interesting decision, this interesting sort 0:16:51.520 --> 0:16:53.720 of thought process on how much worldper goes through this 0:16:54.120 --> 0:16:56.280 as he thinks about, you know, the future of Boeing. 0:16:56.200 --> 0:16:58.120 They're taking a step back. So there's been this question 0:16:58.400 --> 0:17:00.960 of whether Airbus would be able to cape on some 0:17:01.000 --> 0:17:03.840 of the problems that we've seen on Boeing and whether 0:17:04.080 --> 0:17:06.240 they could really take the lead in a more meaningful way. 0:17:06.440 --> 0:17:08.320 I have been surprised that they have not, and one 0:17:08.320 --> 0:17:10.080 of the reasons why is because they're facing off for 0:17:10.119 --> 0:17:12.399 the same kind of supply chain issues that Boeing is 0:17:12.400 --> 0:17:13.879 maybe a little bit less publicized. 0:17:13.880 --> 0:17:14.440 But I'm just. 0:17:14.400 --> 0:17:17.280 Wondering whether we have fully emerged from the sort of 0:17:17.280 --> 0:17:21.680 post pandemic induced supply chain disruptions that's continue to plague 0:17:21.760 --> 0:17:22.880 the aerospace industry. 0:17:23.880 --> 0:17:27.320 Yeah, it's a great point. Look, Airbus, I think everybody. 0:17:27.040 --> 0:17:29.280 Thought after January Airbus is going to be in this 0:17:29.320 --> 0:17:31.679 position to take all this market share, and there's certainly 0:17:31.720 --> 0:17:34.159 been limits to what they've been able to do. But 0:17:34.320 --> 0:17:36.880 for airbuses, you know, a positive for Airbus to people 0:17:36.880 --> 0:17:39.560 I think overlook is you know, they have really high targets. 0:17:39.560 --> 0:17:41.479 So they're talking about getting seventy five on the eight 0:17:41.480 --> 0:17:43.919 three twenty per month. Boeing is talking about getting to 0:17:43.960 --> 0:17:47.159 fifty on the seven three seven, So you know, Airbus 0:17:47.320 --> 0:17:49.840 is already close to fifty on their program, you know, 0:17:49.880 --> 0:17:52.520 maybe even certain months above that number. So they're progressing 0:17:52.520 --> 0:17:55.399 pretty well, but they've seen limits on their ability to 0:17:55.400 --> 0:17:57.919 get to their targets, and they keep extending that and 0:17:58.000 --> 0:17:59.879 part of that has been supply chain driven. You know, 0:18:00.200 --> 0:18:02.600 there are many tiers of the supply chain. There has 0:18:02.600 --> 0:18:05.440 to be an orchestration and how they work together. There's 0:18:05.440 --> 0:18:08.439