1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,639 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg For 5 00:00:27,680 --> 00:00:30,080 Speaker 1: those of you have Global Wall Street working on a 6 00:00:30,120 --> 00:00:32,760 Speaker 1: Friday and reading into the weekend. This is with our 7 00:00:32,880 --> 00:00:36,800 Speaker 1: question the most important interview Bloomberg will do on the 8 00:00:36,880 --> 00:00:41,040 Speaker 1: state of global fiscal policy. Vita gas Bar doesn't get 9 00:00:41,040 --> 00:00:45,320 Speaker 1: the ga Gina Geita Gopinath gets at the I m F. 10 00:00:45,440 --> 00:00:49,360 Speaker 1: But trust me, his Fiscal Monitor is a critical document 11 00:00:49,479 --> 00:00:53,320 Speaker 1: in these times. Dr Gaspar joins us. Now, Vitor, I 12 00:00:53,400 --> 00:00:57,200 Speaker 1: want you to give me an update on your confidence 13 00:00:57,240 --> 00:01:01,480 Speaker 1: that we can expand by trillions. Are debt over the 14 00:01:01,560 --> 00:01:05,680 Speaker 1: justification that interest rates are so low? Do you buy 15 00:01:05,720 --> 00:01:12,840 Speaker 1: that concept? Yes? I do, uh dom So, what we 16 00:01:13,240 --> 00:01:17,120 Speaker 1: emphasize in this sub blog that I've just put out 17 00:01:17,160 --> 00:01:22,600 Speaker 1: together with pakpe Enough is that global debt is at 18 00:01:22,680 --> 00:01:28,360 Speaker 1: this point in time at record levels never in history 19 00:01:28,760 --> 00:01:33,040 Speaker 1: as global public that being so high. It is now 20 00:01:33,120 --> 00:01:37,920 Speaker 1: above a hundred of percent of world GDP. It is 21 00:01:38,000 --> 00:01:43,280 Speaker 1: so high because we're facing a crisis like no other, 22 00:01:44,280 --> 00:01:48,920 Speaker 1: and in that context, the fiscal response has been very 23 00:01:49,000 --> 00:01:52,560 Speaker 1: quick and and precedented. Just to give you an idea, 24 00:01:52,560 --> 00:01:57,280 Speaker 1: in the last few months, the response of fiscal policy 25 00:01:57,320 --> 00:02:02,200 Speaker 1: is bigger than during the local finational crisis. If you 26 00:02:02,280 --> 00:02:06,920 Speaker 1: take together two thousand and eight, nine and ten, so 27 00:02:07,000 --> 00:02:10,800 Speaker 1: in a few months we're above the response of three 28 00:02:10,880 --> 00:02:16,320 Speaker 1: years during the global finational crisis that was absolutely appropriate 29 00:02:16,760 --> 00:02:21,960 Speaker 1: to support to extend lifelines to households and firs made 30 00:02:22,040 --> 00:02:27,320 Speaker 1: vulnerable by the crisis. Right, this enormous level of debt, 31 00:02:27,320 --> 00:02:32,639 Speaker 1: this enormous level of debt is in a sense compensated 32 00:02:33,000 --> 00:02:36,960 Speaker 1: in terms of impact on the budget by these very 33 00:02:37,000 --> 00:02:42,120 Speaker 1: low interest rates that you're talking about. And this but 34 00:02:42,280 --> 00:02:46,240 Speaker 1: I want to I don't mean to interrupts her, but 35 00:02:46,400 --> 00:02:49,080 Speaker 1: because of time, I want to cut to the chase. 36 00:02:49,639 --> 00:02:52,080 Speaker 1: We have Dr L. Aaron on with us in the 37 00:02:52,120 --> 00:02:56,360 Speaker 1: next hour. He has acclaimed for speaking of T decisions. 38 00:02:56,960 --> 00:03:00,200 Speaker 1: What is the T decision we are all going to 39 00:03:00,320 --> 00:03:04,440 Speaker 1: make two and three and five years out after we 40 00:03:04,560 --> 00:03:07,400 Speaker 1: count up the trillions of dollars of debt? What is 41 00:03:07,440 --> 00:03:11,800 Speaker 1: the T decision down the road for political authorities is 42 00:03:11,800 --> 00:03:18,160 Speaker 1: they look at endless debt, so I would not put 43 00:03:18,200 --> 00:03:22,440 Speaker 1: the issue that way. Nominal infest rates and so debt 44 00:03:22,520 --> 00:03:26,240 Speaker 1: service costs are relatively low as a percentage of GDP, 45 00:03:27,639 --> 00:03:31,359 Speaker 1: even with these very high levels of that, because inflation 46 00:03:31,680 --> 00:03:36,320 Speaker 1: and inflation expectations are very low, and at this point 47 00:03:36,360 --> 00:03:41,320 Speaker 1: in time, as getago enough, my colleague emphasized yesterday, we're 48 00:03:41,400 --> 00:03:45,000 Speaker 1: more concerned about too low inflation than to high inflation. 49 00:03:45,800 --> 00:03:53,800 Speaker 1: The epidemic has boosted precautionary savings, investment will be prudent, 50 00:03:54,080 --> 00:03:56,120 Speaker 1: and so for a while we are going to have 51 00:03:56,240 --> 00:04:02,040 Speaker 1: a situation where savings exceeds investments. So our balance of 52 00:04:02,200 --> 00:04:08,040 Speaker 1: risks points to the fact that premature withdrawal of fiscal 53 00:04:08,120 --> 00:04:13,760 Speaker 1: support is a more pressing danger than the high levels 54 00:04:13,800 --> 00:04:18,440 Speaker 1: of that, and that's our balance at the moment. There's 55 00:04:18,440 --> 00:04:22,240 Speaker 1: a question of how companies, how nations are spending the 56 00:04:22,360 --> 00:04:25,680 Speaker 1: money that they're pumping into their economies as they try 57 00:04:25,760 --> 00:04:28,920 Speaker 1: to support everything as it gets back up and running. 58 00:04:29,120 --> 00:04:33,160 Speaker 1: How good a job our nations doing at supporting companies 59 00:04:33,200 --> 00:04:35,520 Speaker 1: that are viable in the longer term rather than just 60 00:04:35,680 --> 00:04:38,599 Speaker 1: the zombies that are going to die out even if 61 00:04:38,760 --> 00:04:42,800 Speaker 1: they are supported in the short term. So as I 62 00:04:42,960 --> 00:04:47,000 Speaker 1: was saying the short term priority, the number one priority 63 00:04:47,240 --> 00:04:51,920 Speaker 1: is public health, and that requires fiscal support to vulnerable households, 64 00:04:52,040 --> 00:04:57,599 Speaker 1: vulnerable firms, and those interventions should be regarded as life lives. 65 00:04:58,240 --> 00:05:03,560 Speaker 1: As the situation normalizes, as we pass the face of 66 00:05:03,680 --> 00:05:08,880 Speaker 1: the Great lockdown, as the economy is opened gradually, you 67 00:05:09,360 --> 00:05:14,280 Speaker 1: we have in a sense to pivot towards policies that 68 00:05:15,160 --> 00:05:20,680 Speaker 1: facilitate the reallocation of resources. And so it is necessary 69 00:05:20,800 --> 00:05:25,520 Speaker 1: to pivot from support to jobs, to support to people, 70 00:05:26,279 --> 00:05:31,479 Speaker 1: from a blanket lending to firms to a much more 71 00:05:31,760 --> 00:05:39,240 Speaker 1: discriminating approach. And again, as Getago penas Uh said yesterday, 72 00:05:39,600 --> 00:05:46,320 Speaker 1: it's important that the intervention by the government includes capital 73 00:05:46,520 --> 00:05:54,960 Speaker 1: type instruments, equity participations, perhaps even partial nationalizations, so that 74 00:05:55,440 --> 00:06:00,360 Speaker 1: the issues of solvency can be tackled appropriately and the 75 00:06:00,720 --> 00:06:06,120 Speaker 1: natural restructuring of the economy actually takes place. You know, 76 00:06:06,400 --> 00:06:09,279 Speaker 1: this is philosophy, Friday. We hear a lot of big ideas, 77 00:06:09,320 --> 00:06:11,720 Speaker 1: and this has been an era of big ideas as 78 00:06:11,760 --> 00:06:14,320 Speaker 1: people try to reimagine what society will look like. On 79 00:06:14,400 --> 00:06:17,200 Speaker 1: the other side, there is a question of how good 80 00:06:17,400 --> 00:06:20,280 Speaker 1: a job in the here and now governments currently are 81 00:06:20,360 --> 00:06:23,200 Speaker 1: doing how optimistic you are based on what you have 82 00:06:23,440 --> 00:06:26,919 Speaker 1: seen that they will implement the policies as you're talking about, 83 00:06:27,279 --> 00:06:29,640 Speaker 1: are you optimistic about that or are you sort of 84 00:06:29,680 --> 00:06:31,800 Speaker 1: doubling down on these messages because you think that they're 85 00:06:31,800 --> 00:06:38,840 Speaker 1: not getting through. So we are actually quite impressed by 86 00:06:39,279 --> 00:06:46,000 Speaker 1: how speedy and how effective the interventions by governments have 87 00:06:46,200 --> 00:06:49,960 Speaker 1: been in the phase of the Great Lockdown. We have 88 00:06:50,240 --> 00:06:54,680 Speaker 1: put out a annexed to the World Economic Outlook with 89 00:06:54,839 --> 00:07:00,080 Speaker 1: the physical perspectives, and we have an online document that 90 00:07:00,560 --> 00:07:05,160 Speaker 1: reviews policies followed by more than fifty countries. What we 91 00:07:05,279 --> 00:07:12,360 Speaker 1: see is unprecedented action. We see eleven trillion dollars of measures. 92 00:07:12,800 --> 00:07:17,600 Speaker 1: Many of those measures are measures with above the line 93 00:07:17,720 --> 00:07:21,880 Speaker 1: impact on the budget. There have been crucial to support firms, 94 00:07:22,000 --> 00:07:27,040 Speaker 1: to support households. Now the situation is very difficult. We 95 00:07:27,480 --> 00:07:33,720 Speaker 1: face radical uncertainty, and the first priority is public health. 96 00:07:34,440 --> 00:07:39,600 Speaker 1: The first priority is to control the epidemic. Why because 97 00:07:39,800 --> 00:07:43,240 Speaker 1: only by controlling the epidemic are we going to be 98 00:07:43,440 --> 00:07:48,320 Speaker 1: able to reduce uncertainty and so to create conditions for 99 00:07:48,520 --> 00:07:52,240 Speaker 1: the economy to pick up in a sustainable way, for 100 00:07:52,960 --> 00:07:56,880 Speaker 1: investment to pick up, and for the transition to a 101 00:07:57,040 --> 00:08:02,520 Speaker 1: new model of sustainable and inclusive growth they call. So 102 00:08:02,600 --> 00:08:05,520 Speaker 1: we're not out of the woods yet. A lot remains 103 00:08:05,600 --> 00:08:09,560 Speaker 1: to be done, but up to now, the ability of 104 00:08:09,640 --> 00:08:15,560 Speaker 1: governments to deliver timely, targeted and temporary measures have been 105 00:08:15,920 --> 00:08:19,880 Speaker 1: quite impressive. Okay, so fantastic, get your thoughts on a 106 00:08:19,920 --> 00:08:22,280 Speaker 1: program today. I appreciate your time. Always valuable to us, 107 00:08:22,360 --> 00:08:35,040 Speaker 1: we tell guessed by that of the IMAF. No one 108 00:08:35,120 --> 00:08:37,640 Speaker 1: has studied the cycles of this like Jim Paulson and 109 00:08:37,720 --> 00:08:41,440 Speaker 1: Luther Oldweden. He's really a student of melding economics into 110 00:08:41,480 --> 00:08:45,240 Speaker 1: the history of our financial system and the opportunities to 111 00:08:45,400 --> 00:08:48,680 Speaker 1: take and the mind fields to avoid. Jim Paulson joins 112 00:08:48,760 --> 00:08:53,600 Speaker 1: us now from his UH Minnesota. Jim Paulson the courage 113 00:08:53,679 --> 00:08:56,079 Speaker 1: to be in the market now was Lesa mentions the 114 00:08:56,240 --> 00:09:00,480 Speaker 1: confidence of the CFO. How do you develop confidence to 115 00:09:00,640 --> 00:09:07,360 Speaker 1: participate in anything except Amazon and Apple? Yeah, it seems 116 00:09:07,400 --> 00:09:11,079 Speaker 1: like that on some days. Tom, I um, you know, 117 00:09:11,280 --> 00:09:14,800 Speaker 1: I really think that in some ways that this is 118 00:09:14,800 --> 00:09:17,920 Speaker 1: a very you know, unique situation where and there's no 119 00:09:18,400 --> 00:09:22,160 Speaker 1: doubt about that, But in some ways it's also very 120 00:09:22,280 --> 00:09:25,719 Speaker 1: common to what it feels like at the start of 121 00:09:25,960 --> 00:09:31,040 Speaker 1: other new expansions and new bowl markets. Um, there's a 122 00:09:31,120 --> 00:09:34,559 Speaker 1: lot of doubt. There's a lot of problems on Main Street. UM, 123 00:09:35,320 --> 00:09:36,839 Speaker 1: a lot of them seem like they're going to last 124 00:09:36,880 --> 00:09:39,719 Speaker 1: for a long time, and they probably will. But yet 125 00:09:39,800 --> 00:09:43,960 Speaker 1: that's the same kind of situation that existed like when 126 00:09:44,000 --> 00:09:47,560 Speaker 1: the market first took off, or in two thousand nine, 127 00:09:47,960 --> 00:09:50,240 Speaker 1: when it first took off, there was a lot of 128 00:09:50,360 --> 00:09:52,480 Speaker 1: doubt there too, and the market went up and it 129 00:09:52,520 --> 00:09:55,120 Speaker 1: seemed like it was disconnected from the reality that was 130 00:09:56,040 --> 00:09:57,880 Speaker 1: that was going on on Main Street in both of 131 00:09:57,920 --> 00:10:02,240 Speaker 1: those cases. And yet against that wall of fear, with 132 00:10:02,480 --> 00:10:07,040 Speaker 1: massive policy support that we had in two and we 133 00:10:07,240 --> 00:10:11,319 Speaker 1: had in two thousand nine, the market kept rising and 134 00:10:11,800 --> 00:10:17,080 Speaker 1: eventually economic conditions on Main Street also improved. It took 135 00:10:17,120 --> 00:10:19,520 Speaker 1: a long time before we got back to normal. We 136 00:10:19,640 --> 00:10:24,040 Speaker 1: had elevated unemployment rates well into the late eighties, well 137 00:10:24,360 --> 00:10:27,559 Speaker 1: into the last expansion. We never really got back to 138 00:10:27,640 --> 00:10:31,559 Speaker 1: the unemployment rate again until many, many years later. So 139 00:10:31,920 --> 00:10:34,319 Speaker 1: you know, we've got a lot of issues today. But 140 00:10:34,480 --> 00:10:37,160 Speaker 1: I still think we're in a new expansion in a 141 00:10:37,200 --> 00:10:40,960 Speaker 1: new ball market. And jam I had this argument a lot. 142 00:10:41,000 --> 00:10:42,760 Speaker 1: In fact, I think you're closely aligned with the thoughts 143 00:10:42,800 --> 00:10:46,599 Speaker 1: of Morecin Stanley that this is normal, the reopening, the 144 00:10:46,720 --> 00:10:50,520 Speaker 1: recession playbook. It stands people, as you know Jimmy pushing back. 145 00:10:50,520 --> 00:10:53,000 Speaker 1: They'll say, there's a structural sailing to how quickly we 146 00:10:53,040 --> 00:10:56,280 Speaker 1: can normalize it, stopped start, it's different, it's not normal. 147 00:10:56,559 --> 00:11:00,559 Speaker 1: What's your message for them, Well, I I think that 148 00:11:01,040 --> 00:11:03,920 Speaker 1: you know, there's certainly differences every time, and we've got 149 00:11:04,000 --> 00:11:06,319 Speaker 1: a big difference to your child. I totally agree with that. 150 00:11:06,640 --> 00:11:10,040 Speaker 1: We've not ever had a pandemic that I've been you know, 151 00:11:10,200 --> 00:11:14,839 Speaker 1: studied before, and it does have unique characteristics. But you know, 152 00:11:14,920 --> 00:11:17,920 Speaker 1: there's been unique characteristics in the past. There were start 153 00:11:18,040 --> 00:11:21,439 Speaker 1: stop in the two thousand nine recovery too. I mean, 154 00:11:21,480 --> 00:11:27,600 Speaker 1: we had massive bank failures and brokerage from failures. Our 155 00:11:27,679 --> 00:11:31,319 Speaker 1: banking system was totally challenged. Sometimes that looks a little better, 156 00:11:31,440 --> 00:11:34,920 Speaker 1: Sometimes it looked a little worse. Um In in in 157 00:11:35,280 --> 00:11:38,800 Speaker 1: the early eighties we had basically a depression and energy 158 00:11:38,840 --> 00:11:44,240 Speaker 1: and agriculture in my home state of Iowa. UM commodity deflation. Uh, 159 00:11:44,800 --> 00:11:46,760 Speaker 1: that was a lot of starting stop there too. I 160 00:11:46,880 --> 00:11:51,480 Speaker 1: don't know if they're this specific thing is is unique 161 00:11:51,520 --> 00:11:55,599 Speaker 1: to the day, but in reality it's pretty common to 162 00:11:55,720 --> 00:12:00,320 Speaker 1: the past. We The real key here is you don't 163 00:12:00,440 --> 00:12:04,040 Speaker 1: have to get back to normal before security prices move. 164 00:12:05,400 --> 00:12:07,880 Speaker 1: They've already moved long before we're back to normal, and 165 00:12:07,920 --> 00:12:11,240 Speaker 1: they probably continue to do that. UM. If we can 166 00:12:11,320 --> 00:12:15,160 Speaker 1: just trend northward in terms of economics, I think that's 167 00:12:15,160 --> 00:12:17,600 Speaker 1: going to be sufficient, even if it's slow, and even 168 00:12:17,640 --> 00:12:21,360 Speaker 1: if it's starting style well, let's say it's slow. When 169 00:12:21,400 --> 00:12:23,160 Speaker 1: it's start and stop, let's talk about what you want 170 00:12:23,200 --> 00:12:25,839 Speaker 1: to own. The rotation into the cyclical areas of this 171 00:12:25,960 --> 00:12:28,520 Speaker 1: market worked for about five minutes and then really stalled 172 00:12:28,840 --> 00:12:31,880 Speaker 1: through the month of June. Jim with the backdrop right 173 00:12:31,880 --> 00:12:34,800 Speaker 1: now that we're facing with a week where the dominance 174 00:12:34,840 --> 00:12:38,600 Speaker 1: of megacat tech is back on top, how uncomfortable does 175 00:12:38,640 --> 00:12:41,520 Speaker 1: it fail to pivot away from that story and back 176 00:12:41,559 --> 00:12:44,120 Speaker 1: to value again, back to the cyclical areas of this market. 177 00:12:46,080 --> 00:12:49,360 Speaker 1: I do own Bolt John, I'd own the Barbell, I 178 00:12:49,559 --> 00:12:53,679 Speaker 1: continue to own New Era growth, and I would I 179 00:12:53,760 --> 00:12:57,880 Speaker 1: would continue to add exposure in what I'd say the 180 00:12:57,960 --> 00:13:00,920 Speaker 1: broader market, which to me is who go small caps 181 00:13:00,960 --> 00:13:05,360 Speaker 1: in their nationals UM. And I really think, on the 182 00:13:05,400 --> 00:13:11,320 Speaker 1: one hand that there's greater participation going on here than advertised. Yes, 183 00:13:11,480 --> 00:13:13,959 Speaker 1: it's done. It's been a their or market since the 184 00:13:14,040 --> 00:13:19,280 Speaker 1: June eight top here. But from the Marche low, the 185 00:13:20,040 --> 00:13:25,120 Speaker 1: Russell two thousand index, the equally weighted SMP five and 186 00:13:25,360 --> 00:13:28,559 Speaker 1: the market cap weighted SMP five hundred are all up, 187 00:13:29,480 --> 00:13:34,600 Speaker 1: are all had risen by about so there is greater 188 00:13:34,679 --> 00:13:37,800 Speaker 1: participation here still still going on. It may not be 189 00:13:37,960 --> 00:13:41,520 Speaker 1: every week, but I think if right now we've got 190 00:13:41,559 --> 00:13:46,080 Speaker 1: a baristattitude towards pandemic and reopening, if that turns back 191 00:13:46,120 --> 00:13:48,480 Speaker 1: to bullishness again, I think we'll see the broader market 192 00:13:48,559 --> 00:13:52,640 Speaker 1: pick up. In the meantime, your high growth equities are 193 00:13:52,679 --> 00:13:55,079 Speaker 1: going to continue do well. I don't really see a 194 00:13:55,160 --> 00:14:00,320 Speaker 1: bubble in growth like I saw in two thousand. I mean, 195 00:14:00,440 --> 00:14:03,959 Speaker 1: right now in tech, for example, the forward multiple on 196 00:14:04,160 --> 00:14:07,920 Speaker 1: SMPF under text twenty seven times. It was fifty five 197 00:14:08,040 --> 00:14:12,360 Speaker 1: times in two thousands. Right now the relative key motiple 198 00:14:12,679 --> 00:14:15,680 Speaker 1: is one point one times the SMP. It was two 199 00:14:15,760 --> 00:14:18,400 Speaker 1: times SMP. And the reason that people are buying those 200 00:14:18,440 --> 00:14:22,320 Speaker 1: stocks today, it's not because they're out over their skis 201 00:14:22,400 --> 00:14:27,280 Speaker 1: with massive you know, bullishness. It's because of defensiveness. They're 202 00:14:27,320 --> 00:14:31,480 Speaker 1: buying those stocks like they used to buy utility right. Well, Jim, 203 00:14:31,560 --> 00:14:33,520 Speaker 1: this has sort of been the argument by a lot 204 00:14:33,560 --> 00:14:36,640 Speaker 1: of big investors that basically the big tech are the 205 00:14:36,720 --> 00:14:39,680 Speaker 1: stalwarts and are the utilities going forward. On the other hand, 206 00:14:39,720 --> 00:14:42,280 Speaker 1: if you take a look at who is buying, retail 207 00:14:42,360 --> 00:14:45,560 Speaker 1: investors are accounting for a greater proportion of total volumes 208 00:14:45,600 --> 00:14:47,480 Speaker 1: in the equity market in the United States. The head 209 00:14:47,480 --> 00:14:50,360 Speaker 1: of execution for Citadel coming out yesterday and saying at 210 00:14:50,360 --> 00:14:53,640 Speaker 1: any given day, uh, there is one fifth of all 211 00:14:53,720 --> 00:14:57,360 Speaker 1: trading activity attributed to these retail investors, which have traditionally 212 00:14:57,400 --> 00:14:59,600 Speaker 1: been thought of as the dumb money. Do you agree 213 00:14:59,720 --> 00:15:01,680 Speaker 1: or do you think that they're smarter than the institutions 214 00:15:01,720 --> 00:15:06,240 Speaker 1: that are being more reticent to pile in. Well, I 215 00:15:06,320 --> 00:15:09,320 Speaker 1: guess that you have to be be determined. I don't. 216 00:15:10,360 --> 00:15:14,280 Speaker 1: I don't believe that the size of the retail run 217 00:15:14,360 --> 00:15:20,000 Speaker 1: to me um is is of a magnitude. I think 218 00:15:20,080 --> 00:15:23,720 Speaker 1: that's concerning like it might have been in earlier periods. 219 00:15:24,440 --> 00:15:26,880 Speaker 1: And I also don't know at least one who knows. 220 00:15:27,560 --> 00:15:32,120 Speaker 1: But I also don't think it's it's backed by you know, uh, 221 00:15:32,640 --> 00:15:38,640 Speaker 1: rabid bullishness and optimism. I think there are people that 222 00:15:38,840 --> 00:15:44,200 Speaker 1: were looking and using these growth stocks as defensive investment. 223 00:15:45,000 --> 00:15:47,000 Speaker 1: Whether that's going to prove to be accurate, I don't know, 224 00:15:47,640 --> 00:15:50,760 Speaker 1: but it's it's not something we've done in the past. 225 00:15:51,120 --> 00:15:55,160 Speaker 1: When when we've had this run concentrated run into these 226 00:15:55,200 --> 00:15:57,680 Speaker 1: big cap tech stocks in the past, it's been a 227 00:15:57,840 --> 00:16:02,240 Speaker 1: signal of over bullishness, and that just does not evidence 228 00:16:02,240 --> 00:16:06,640 Speaker 1: to me today the character of that sector has really changed. 229 00:16:06,880 --> 00:16:09,920 Speaker 1: Jim fantastic to catch up with these as always Jim 230 00:16:09,960 --> 00:16:21,760 Speaker 1: Paulson there of Luthold Wait and really fortunate to be 231 00:16:21,840 --> 00:16:24,720 Speaker 1: joined on the program now by Mohammed al Arian, chief 232 00:16:24,800 --> 00:16:28,480 Speaker 1: economic advisor to Ali and son of course Bloomberg opinion columnist. Mohammed, 233 00:16:28,680 --> 00:16:31,280 Speaker 1: We've been following this crisis over the last several months together, 234 00:16:31,320 --> 00:16:33,880 Speaker 1: and it just feels like we're entering something different, a 235 00:16:34,000 --> 00:16:36,400 Speaker 1: new phase. There's a shift here. What are your thoughts 236 00:16:36,480 --> 00:16:40,280 Speaker 1: on it? There is drawn and it's really happening in 237 00:16:40,360 --> 00:16:43,040 Speaker 1: the economy in the US, and that is a migration 238 00:16:43,280 --> 00:16:46,920 Speaker 1: up of layoffs from small and medium sized companies to 239 00:16:47,120 --> 00:16:50,880 Speaker 1: larger ones. And that's consequential. Vote for what it says 240 00:16:50,880 --> 00:16:54,040 Speaker 1: about the demand side, but also what it says about 241 00:16:54,240 --> 00:16:56,400 Speaker 1: the supply side, and there is a lot of businesses 242 00:16:56,440 --> 00:16:59,680 Speaker 1: are not buying into the v they see a different 243 00:17:00,080 --> 00:17:05,480 Speaker 1: the nation and regardless of the journey, Dr Larry and 244 00:17:05,520 --> 00:17:09,360 Speaker 1: Warren Buffett made a t decision this week to invest 245 00:17:09,440 --> 00:17:12,119 Speaker 1: in a distress asset. I think what's missing in our 246 00:17:12,200 --> 00:17:16,640 Speaker 1: analysis on a Friday in July is how businesses, how 247 00:17:16,800 --> 00:17:22,800 Speaker 1: executives will respond, what are the t decisions CEO, CFOs 248 00:17:22,880 --> 00:17:25,680 Speaker 1: and big money is going to make over the next year. 249 00:17:27,280 --> 00:17:30,120 Speaker 1: So for most businesses it really comes down to three issues. 250 00:17:30,840 --> 00:17:35,399 Speaker 1: Is my balance sheet strong enough a B what is 251 00:17:35,480 --> 00:17:38,639 Speaker 1: demand and where you're gonna look like? And see what 252 00:17:38,840 --> 00:17:41,359 Speaker 1: is my cost structure is going to look like? For 253 00:17:41,520 --> 00:17:45,200 Speaker 1: the marketplace, that's a really interesting aspect going on because 254 00:17:45,240 --> 00:17:49,200 Speaker 1: the marketplace has to also incorporate two things. One is 255 00:17:49,280 --> 00:17:55,040 Speaker 1: the very heavy hand of policy and secondly are technicals 256 00:17:55,119 --> 00:17:59,800 Speaker 1: that have proven very strong but remain delicate. So it's 257 00:17:59,800 --> 00:18:03,000 Speaker 1: a really interesting configuration um that we're going to be 258 00:18:03,040 --> 00:18:05,920 Speaker 1: talking about for a long time tom going forward. But 259 00:18:06,080 --> 00:18:08,960 Speaker 1: the basic issue is that there's much more fluidity out 260 00:18:09,000 --> 00:18:12,800 Speaker 1: there economic and financial of course health wise than we've 261 00:18:12,840 --> 00:18:16,600 Speaker 1: seen for a very long time. Mommed, what is it 262 00:18:16,640 --> 00:18:20,639 Speaker 1: about the technicals that you think a delicate right now. So, 263 00:18:20,760 --> 00:18:23,320 Speaker 1: I think what you have is the extension of what 264 00:18:23,520 --> 00:18:26,920 Speaker 1: has been the formal trade, the Tina trade, and the 265 00:18:27,040 --> 00:18:30,160 Speaker 1: fear of missing out because central banks are our best 266 00:18:30,240 --> 00:18:34,240 Speaker 1: friends the Tina. There is no alternative but stocks, but 267 00:18:34,560 --> 00:18:38,040 Speaker 1: but certain stocks within that that have become both defensive 268 00:18:38,119 --> 00:18:41,280 Speaker 1: and growth at the same time, and that has attracted 269 00:18:41,560 --> 00:18:44,480 Speaker 1: a lot more interest from the retail side. And the 270 00:18:44,560 --> 00:18:47,120 Speaker 1: retail side has had quite an influence in the last 271 00:18:47,240 --> 00:18:50,200 Speaker 1: month or so, you know, John, I think more retail 272 00:18:50,280 --> 00:18:55,440 Speaker 1: participation is very important. It broadens the marketplace and importantly 273 00:18:55,920 --> 00:19:00,600 Speaker 1: it means society buys into a market based system even more. However, 274 00:19:01,200 --> 00:19:04,040 Speaker 1: you don't want retail to be the victim of a 275 00:19:04,119 --> 00:19:08,479 Speaker 1: head fake. And that's what I really worry about. Victim 276 00:19:08,600 --> 00:19:10,760 Speaker 1: of a head fake. Another way to say, this is 277 00:19:10,920 --> 00:19:13,679 Speaker 1: a bubble. That's what Rob or not a research affiliates 278 00:19:13,720 --> 00:19:16,520 Speaker 1: called the tech stocks and the valuations right now there, 279 00:19:16,920 --> 00:19:21,040 Speaker 1: Do you agree? So, I think there's there's two issues 280 00:19:21,080 --> 00:19:23,960 Speaker 1: of the head fake. One is to be careful that 281 00:19:24,480 --> 00:19:27,680 Speaker 1: central bank support does not go all the way down 282 00:19:27,960 --> 00:19:33,000 Speaker 1: to the faulting companies. The false imply capital impairment and 283 00:19:33,119 --> 00:19:36,720 Speaker 1: the experience with Hurts, where should be one that that 284 00:19:36,800 --> 00:19:40,040 Speaker 1: should be puts front and center of every retail investor. 285 00:19:40,680 --> 00:19:44,120 Speaker 1: The second element relates to rob are not really good 286 00:19:44,160 --> 00:19:48,280 Speaker 1: interview with you yesterday, which is there was a time 287 00:19:48,320 --> 00:19:52,359 Speaker 1: when the marketplace thinks in relative terms, and there's a 288 00:19:52,440 --> 00:19:55,000 Speaker 1: time when it thinks in absolute terms. And relative terms, 289 00:19:55,200 --> 00:20:00,680 Speaker 1: tech makes absolute sense. They have strong balance feet, positive 290 00:20:00,720 --> 00:20:04,040 Speaker 1: cash flow, good management, and on the sunny side of 291 00:20:04,119 --> 00:20:06,800 Speaker 1: both the COVID journey and what's on the other side 292 00:20:06,880 --> 00:20:09,840 Speaker 1: of the COVID journey. But in absolute terms, look at 293 00:20:09,840 --> 00:20:14,040 Speaker 1: the valuations. And what I have learned in my experience 294 00:20:14,040 --> 00:20:17,320 Speaker 1: in the marketplace is that the market can be obsessed 295 00:20:17,400 --> 00:20:21,040 Speaker 1: with relative values for a very very long time and 296 00:20:21,200 --> 00:20:25,160 Speaker 1: then almost overnight, it shifts to absolute. And that moment 297 00:20:25,800 --> 00:20:29,680 Speaker 1: can be quite a jarring moment if you don't realize 298 00:20:29,760 --> 00:20:33,760 Speaker 1: where you are on valuations. In Muhammad, You've done this 299 00:20:33,920 --> 00:20:36,119 Speaker 1: with Bill Gross at PIMCO. You know, Bill Gross had 300 00:20:36,160 --> 00:20:39,520 Speaker 1: his famous Monroe trader on his desk where you're quota yield, 301 00:20:39,560 --> 00:20:41,360 Speaker 1: yield yield, and all of a sudden you go from 302 00:20:41,400 --> 00:20:44,160 Speaker 1: relative to absolute and all you're worried about his price 303 00:20:44,280 --> 00:20:47,719 Speaker 1: price price, How close are we in the bond market 304 00:20:48,160 --> 00:20:51,320 Speaker 1: with where nominal yields are, real yields are, and negative 305 00:20:51,400 --> 00:20:55,240 Speaker 1: yields are to you flipping from a yield analysis to 306 00:20:55,400 --> 00:21:01,600 Speaker 1: a price analysis to protect capital. So a lot depends 307 00:21:01,920 --> 00:21:04,919 Speaker 1: on which part of the bond market. And I think 308 00:21:04,960 --> 00:21:07,520 Speaker 1: it's really important to distinguished tom. And let me start 309 00:21:07,600 --> 00:21:09,640 Speaker 1: with a story that was often told that PIMCO, which 310 00:21:09,680 --> 00:21:12,440 Speaker 1: is the person who comes home and says, look, I 311 00:21:12,520 --> 00:21:15,680 Speaker 1: bought a dog for thirty dollars and his wife says, 312 00:21:15,680 --> 00:21:18,680 Speaker 1: are you crazy? You spend thirty tho dollars for a dog? 313 00:21:19,000 --> 00:21:21,159 Speaker 1: And he answers, yeah, a great deal. That cat was 314 00:21:21,200 --> 00:21:24,240 Speaker 1: selling for forty tho. Right, there's a point at which 315 00:21:24,359 --> 00:21:27,360 Speaker 1: relative trades don't make sense. I think you're gonna see 316 00:21:27,400 --> 00:21:29,679 Speaker 1: this in high yield You're gonna see this in emerging 317 00:21:29,800 --> 00:21:33,200 Speaker 1: market corporates. You're gonna see that in certain sovereign emerging markets. 318 00:21:33,280 --> 00:21:35,679 Speaker 1: You're not gonna see it higher up in the counital 319 00:21:35,720 --> 00:21:40,040 Speaker 1: structure because central banks have and will continue to influence 320 00:21:40,480 --> 00:21:43,720 Speaker 1: those yields and those spreads. So people have got to 321 00:21:43,800 --> 00:21:47,240 Speaker 1: be much more careful into how they treat the bond market. 322 00:21:47,359 --> 00:21:51,800 Speaker 1: It is very different when you get near the fault risk. Mohammad, 323 00:21:51,800 --> 00:21:53,919 Speaker 1: You've gotta be careful. Otherwise people listening to this might 324 00:21:54,000 --> 00:21:57,520 Speaker 1: think that people of pimp care actually brought thirty dollar dogs, 325 00:21:57,520 --> 00:22:00,280 Speaker 1: and I'm sure that maybe maybe that was in the 326 00:22:00,440 --> 00:22:05,280 Speaker 1: case you mentioned a couple of times, then they certainly didn't. 327 00:22:05,480 --> 00:22:09,040 Speaker 1: Pimco Bimko is and always has been a very fundamental 328 00:22:09,160 --> 00:22:13,520 Speaker 1: driven shop, right John, John, I paid thirty two thousand 329 00:22:13,640 --> 00:22:18,640 Speaker 1: ProVet Bill. I'm sorry, which is why you call him 330 00:22:18,680 --> 00:22:21,280 Speaker 1: vet bill. I'm sure because of the costs are Mohammed, 331 00:22:21,400 --> 00:22:24,080 Speaker 1: you mentioned them a couple of times there, didn't you, 332 00:22:24,480 --> 00:22:27,040 Speaker 1: And I just think that it wasn't by accident. Are 333 00:22:27,080 --> 00:22:30,960 Speaker 1: you concerned about the evaluations and emerging markets? I am. 334 00:22:31,160 --> 00:22:34,280 Speaker 1: I think people don't realize how tough it is for 335 00:22:34,640 --> 00:22:38,240 Speaker 1: the typical emerging market. Phase one was simply dealing with 336 00:22:38,280 --> 00:22:41,600 Speaker 1: the spin over from what was happening in China, what 337 00:22:41,840 --> 00:22:44,680 Speaker 1: was happening in Europe and the US, which is lower exports, 338 00:22:44,760 --> 00:22:49,119 Speaker 1: lower commodity prices, lower tourism, lower form direct investment. Phase 339 00:22:49,240 --> 00:22:53,639 Speaker 1: two is dealing with their own COVID our breaks. If 340 00:22:53,680 --> 00:22:55,840 Speaker 1: you look at what's happening in Latin America, it is 341 00:22:56,040 --> 00:22:58,480 Speaker 1: tragic if you're looking at parts of what's happening in Africa, 342 00:22:58,560 --> 00:23:02,119 Speaker 1: it is tragic. So the demand on their resources and 343 00:23:02,280 --> 00:23:06,440 Speaker 1: the need to divert more resources to the health care 344 00:23:06,600 --> 00:23:09,120 Speaker 1: system is just going to go up. And I think 345 00:23:09,160 --> 00:23:12,680 Speaker 1: that people don't realize that there is, to quote my 346 00:23:12,920 --> 00:23:17,040 Speaker 1: colleagues at Gramacy, a paradigm of non payments coming up 347 00:23:17,080 --> 00:23:23,720 Speaker 1: for certain emerging market credits. A paradigm of non payments. 348 00:23:23,800 --> 00:23:26,520 Speaker 1: The idea that perhaps some of the sovereign debt could 349 00:23:26,560 --> 00:23:29,000 Speaker 1: get written down, and we've seen some of that from 350 00:23:29,040 --> 00:23:31,840 Speaker 1: the I m F. So far, where are we in 351 00:23:32,000 --> 00:23:35,000 Speaker 1: that How much do you think the sovereign debt of 352 00:23:35,160 --> 00:23:40,040 Speaker 1: developing markets could get written down ultimately? So we've seen 353 00:23:40,320 --> 00:23:44,800 Speaker 1: ongoing with Ecuador, with Argentina, that's that market based solutions, 354 00:23:45,040 --> 00:23:46,720 Speaker 1: like you say, we've seen the I m F and 355 00:23:46,760 --> 00:23:49,560 Speaker 1: the World Bank work with the three twenty on a 356 00:23:49,720 --> 00:23:53,360 Speaker 1: debt service suspension initiative for the poorest countries, and they've 357 00:23:53,400 --> 00:23:57,399 Speaker 1: made it very clear that they expect burden sharing. Um. 358 00:23:57,560 --> 00:23:59,399 Speaker 1: The issue is, as you know, Lisa, it is not 359 00:24:00,000 --> 00:24:03,240 Speaker 1: easy to dictate burden sharing from a top down perspective, 360 00:24:03,640 --> 00:24:06,280 Speaker 1: and that's where the I m F and the World 361 00:24:06,320 --> 00:24:10,680 Speaker 1: Bank are struggling and finding a way for private sector involvement, 362 00:24:10,760 --> 00:24:13,160 Speaker 1: as they call it ps I. I think it's gonna come. 363 00:24:13,240 --> 00:24:16,680 Speaker 1: I think when countries go from immediate emergency assistance to 364 00:24:16,760 --> 00:24:19,680 Speaker 1: one thing, longer term support from this institution, one of 365 00:24:19,720 --> 00:24:22,399 Speaker 1: the requirements is going to be burden sharing. And I 366 00:24:22,440 --> 00:24:24,680 Speaker 1: don't think credit is quite realize that that's going to 367 00:24:24,840 --> 00:24:29,440 Speaker 1: migrate up from the lowest income countries to some, not all, 368 00:24:29,800 --> 00:24:33,919 Speaker 1: some of the middle income emerging markets as well. Mohammed. 369 00:24:33,920 --> 00:24:36,359 Speaker 1: When people say burden sharing right now, we think of 370 00:24:36,440 --> 00:24:38,680 Speaker 1: Europe and the fiscal talks are set to take place 371 00:24:38,800 --> 00:24:41,879 Speaker 1: later this month. You have really pushed back over the 372 00:24:41,960 --> 00:24:45,600 Speaker 1: last year, maybe longer, when people have come on programs 373 00:24:45,720 --> 00:24:48,080 Speaker 1: like this and talked about pivoting away from America and 374 00:24:48,119 --> 00:24:52,760 Speaker 1: American assets towards Europe and the consonant. What's the pushback now? 375 00:24:54,119 --> 00:24:56,280 Speaker 1: So I think we're getting closer to him. I think 376 00:24:56,600 --> 00:24:58,960 Speaker 1: we've learned once again that it takes a crisis to 377 00:24:59,040 --> 00:25:02,720 Speaker 1: move Europe, and what you're seeing happening in Europe is 378 00:25:02,840 --> 00:25:07,080 Speaker 1: I think an important moment. So I must say that 379 00:25:07,160 --> 00:25:10,800 Speaker 1: I'm really encouraged by what's going on in Europe right now, Um, 380 00:25:10,880 --> 00:25:14,760 Speaker 1: it would be important to see how these negotiations proceed. Um. 381 00:25:14,800 --> 00:25:17,119 Speaker 1: There are people that the countries are still resistant, but 382 00:25:17,240 --> 00:25:18,639 Speaker 1: on the whole, I think they're going to get to 383 00:25:18,840 --> 00:25:22,240 Speaker 1: a better place. And I told you that the time 384 00:25:22,280 --> 00:25:26,359 Speaker 1: will come to fade the US in favor of Europe. 385 00:25:26,400 --> 00:25:29,040 Speaker 1: We're getting much closer to that. I would not fade 386 00:25:29,080 --> 00:25:33,600 Speaker 1: the US in favor of the merger markets though, Mohammed, 387 00:25:33,680 --> 00:25:36,320 Speaker 1: always appreciate your time. Thank the family for us wind you. 388 00:25:36,359 --> 00:25:38,320 Speaker 1: I know it's super early on the West coast and 389 00:25:38,400 --> 00:25:41,080 Speaker 1: this is a disruption for the Larian household as well. 390 00:25:41,280 --> 00:25:43,520 Speaker 1: Have a fantastic to catch up this Mhammed al Arian 391 00:25:43,600 --> 00:25:46,879 Speaker 1: there of Blomberg opinion and of course chief economic advisor 392 00:25:47,080 --> 00:26:00,600 Speaker 1: to ALIAS, this is a joy and a day. Given 393 00:26:00,640 --> 00:26:04,200 Speaker 1: the pandemic and the carnege economically across the nation, it 394 00:26:04,359 --> 00:26:07,480 Speaker 1: is good to speak to someone authoritative from a firm 395 00:26:07,600 --> 00:26:11,360 Speaker 1: that owns the franchise. That would be Cowen and Company. 396 00:26:11,840 --> 00:26:15,720 Speaker 1: Not only with Chivan Rumor, the legendary airline analysts, the 397 00:26:15,800 --> 00:26:20,800 Speaker 1: Boeing analyst, but also with Helene Becker. Cowen truly owns 398 00:26:20,880 --> 00:26:24,560 Speaker 1: a high ground on airline analysis. To thrilled that MS 399 00:26:24,680 --> 00:26:27,480 Speaker 1: Becker could join us this morning, Helene, I want to 400 00:26:27,560 --> 00:26:30,240 Speaker 1: cut to the chase and the headlines. I know you've 401 00:26:30,320 --> 00:26:35,960 Speaker 1: done this, calculate how many people would become unemployed across 402 00:26:36,040 --> 00:26:40,440 Speaker 1: the American aviation business. Yeah. So at the start of 403 00:26:40,880 --> 00:26:44,560 Speaker 1: the year, there were seven d fifty people employed in aviation, 404 00:26:44,640 --> 00:26:46,640 Speaker 1: and we estimate that by the end of the year 405 00:26:47,000 --> 00:26:49,320 Speaker 1: there will only be between five hundred fifty and six 406 00:26:49,440 --> 00:26:53,080 Speaker 1: hundred thousand people employed. So somewhere between hundred fifty and 407 00:26:53,119 --> 00:26:57,119 Speaker 1: two hundred thousand people will lose their jobs. Um. You 408 00:26:57,200 --> 00:27:01,080 Speaker 1: know in the fourth quarter of this year. Hallong, we 409 00:27:01,240 --> 00:27:03,080 Speaker 1: caught up a several months ago. You and I were 410 00:27:03,119 --> 00:27:05,440 Speaker 1: talking and just how depressing some of these numbers would 411 00:27:05,480 --> 00:27:07,520 Speaker 1: be for the business. Can you just walk me through 412 00:27:07,560 --> 00:27:09,879 Speaker 1: what the industry looks like right now? What's booking look like? 413 00:27:10,000 --> 00:27:12,920 Speaker 1: What does capacity load factors look like on some of 414 00:27:13,000 --> 00:27:16,320 Speaker 1: these playing some of these roots. Yeah, so, um, so 415 00:27:16,440 --> 00:27:18,200 Speaker 1: we're better than we thought we'd be when we caught 416 00:27:18,280 --> 00:27:21,040 Speaker 1: up the first time. We thought we'd have by August first, 417 00:27:21,080 --> 00:27:24,639 Speaker 1: about four hundred thousand people traveling, and that was based 418 00:27:24,720 --> 00:27:27,159 Speaker 1: on the eight seven thousand people at the nater So 419 00:27:27,560 --> 00:27:31,480 Speaker 1: on April fourteen, t s A screened eighty seven thousand 420 00:27:31,520 --> 00:27:34,800 Speaker 1: people versus a normal day when they would screen about 421 00:27:34,960 --> 00:27:36,879 Speaker 1: two and a half a million, So you see the 422 00:27:38,359 --> 00:27:45,040 Speaker 1: decline there. And then now, um we're screening about on Tuesday's, Wednesday, Saturdays. 423 00:27:45,080 --> 00:27:48,000 Speaker 1: We're screening between six d six hundred fifty thousand people 424 00:27:48,800 --> 00:27:52,399 Speaker 1: on the peak four days, so that would be Thursday, Friday, Sunday, Monday, 425 00:27:52,480 --> 00:27:56,399 Speaker 1: we're screening you know, between seven seven fifty thousand people. 426 00:27:56,560 --> 00:28:00,440 Speaker 1: So that's a faster recovery than we were expecting. And 427 00:28:00,560 --> 00:28:04,520 Speaker 1: that's without business travel and really without international travel. Without 428 00:28:04,760 --> 00:28:08,080 Speaker 1: those two, we don't think traffic can really exceed a 429 00:28:08,200 --> 00:28:10,760 Speaker 1: million UM by the end of the year, and that's 430 00:28:10,840 --> 00:28:14,119 Speaker 1: our forecast. By the holidays, December holidays, we have a 431 00:28:14,200 --> 00:28:17,280 Speaker 1: million people going through UM T s A every day 432 00:28:19,600 --> 00:28:25,440 Speaker 1: with without business and without international Where are people going domestic? 433 00:28:25,680 --> 00:28:29,040 Speaker 1: That's that's actually a really good question. UM. So it's 434 00:28:29,200 --> 00:28:31,840 Speaker 1: visiting friends. So the people who are traveling visiting friends 435 00:28:31,880 --> 00:28:35,080 Speaker 1: and relatives, leisure and people who absolutely have to travel. 436 00:28:35,160 --> 00:28:37,600 Speaker 1: So this like eighty some one thousand people we saw 437 00:28:38,080 --> 00:28:41,320 Speaker 1: in April, we're people who were traveling because they were 438 00:28:41,360 --> 00:28:45,240 Speaker 1: probably rated related doing work related to the pandemic. Now 439 00:28:45,440 --> 00:28:49,000 Speaker 1: you have people, um where states have opened up and 440 00:28:49,480 --> 00:28:54,080 Speaker 1: where like Universal Orlando and SeaWorld opened earlier in June, 441 00:28:54,440 --> 00:28:59,200 Speaker 1: you have people starting to take vacations to those locations. Now. Um, 442 00:28:59,440 --> 00:29:04,120 Speaker 1: whether that continues given the rampant um a level of 443 00:29:04,400 --> 00:29:07,200 Speaker 1: of coronavirus that we're seeing in those states, you know, 444 00:29:07,320 --> 00:29:09,920 Speaker 1: remains to be seen. Disney is supposed to open, Disney 445 00:29:10,000 --> 00:29:13,440 Speaker 1: Orlando is supposed to open tomorrow. Um. You know, obviously 446 00:29:13,560 --> 00:29:17,080 Speaker 1: new rules, but that's what's happening. It's it's the Florida beaches, 447 00:29:17,480 --> 00:29:22,520 Speaker 1: it's western states with um national parks. You know, we're 448 00:29:22,520 --> 00:29:27,560 Speaker 1: seeing a lot of outdoor activities, all right, Helene. So, 449 00:29:27,720 --> 00:29:30,440 Speaker 1: given the fact that we're not expecting to see demand 450 00:29:30,600 --> 00:29:33,320 Speaker 1: for international or business pick up to the levels that 451 00:29:33,360 --> 00:29:37,160 Speaker 1: we had seen earlier in the year until perhaps according 452 00:29:37,200 --> 00:29:40,440 Speaker 1: to industry projections, how many airlines do you think have 453 00:29:40,640 --> 00:29:43,080 Speaker 1: to go out of business to right size to sort 454 00:29:43,120 --> 00:29:47,760 Speaker 1: of correct the over supply of seats and flights that 455 00:29:47,920 --> 00:29:51,040 Speaker 1: we have currently in the market. Yeah, so I think 456 00:29:51,160 --> 00:29:53,840 Speaker 1: that's a great question. I think the way the government 457 00:29:53,920 --> 00:29:55,480 Speaker 1: set it up in the short term, as none of 458 00:29:55,520 --> 00:29:58,560 Speaker 1: the airlines will go out of business but the amount 459 00:29:58,560 --> 00:30:00,880 Speaker 1: of capacity that will come out of the network. So 460 00:30:01,320 --> 00:30:05,000 Speaker 1: we've said between eight thousand aircraft will not have been 461 00:30:05,080 --> 00:30:08,800 Speaker 1: parked and will not come back, um, you know after 462 00:30:08,960 --> 00:30:13,560 Speaker 1: in let's say bye by this time next year. So UM, 463 00:30:13,880 --> 00:30:16,680 Speaker 1: when you think about the level of capacity, that's that's 464 00:30:16,800 --> 00:30:21,960 Speaker 1: equal to an air size of one full airline. Hello, 465 00:30:22,160 --> 00:30:23,720 Speaker 1: give me by a hold cell here, give me the 466 00:30:23,800 --> 00:30:27,200 Speaker 1: single best I three idea three years, five years out 467 00:30:27,520 --> 00:30:31,160 Speaker 1: which management is going to be most opportunistic and add 468 00:30:31,280 --> 00:30:35,840 Speaker 1: shareholder value when we get through this this tragedy. Yeah, 469 00:30:35,960 --> 00:30:40,160 Speaker 1: so Southwest is probably our best idea in the short term. UM, 470 00:30:40,640 --> 00:30:44,120 Speaker 1: just because they've they've got net cash. UM, they're really 471 00:30:44,200 --> 00:30:47,440 Speaker 1: well positioned. They did a huge cash grab earlier this 472 00:30:47,560 --> 00:30:50,720 Speaker 1: year about thirteen billion dollars worth a liquidity UM, they've 473 00:30:50,760 --> 00:30:52,880 Speaker 1: paid down their three six or four day term loan. 474 00:30:52,960 --> 00:30:55,040 Speaker 1: We think they're really well positioned to get share in 475 00:30:55,200 --> 00:30:58,080 Speaker 1: every recession since I've covered this group, which is more 476 00:30:58,120 --> 00:31:00,920 Speaker 1: than three decades, and they've grown share. I think that's 477 00:31:00,960 --> 00:31:04,440 Speaker 1: like our number one idea. UM are big contrarian idea. 478 00:31:04,600 --> 00:31:06,040 Speaker 1: The one that you know we got a lot of 479 00:31:06,080 --> 00:31:08,360 Speaker 1: pushback on is American because we don't think they're going 480 00:31:08,400 --> 00:31:11,560 Speaker 1: out of business. They've raised a ton of cash. Um 481 00:31:11,720 --> 00:31:14,600 Speaker 1: they still have some assets that they can raise. They 482 00:31:14,640 --> 00:31:17,360 Speaker 1: don't have any debt do before two they paid down 483 00:31:17,360 --> 00:31:19,800 Speaker 1: there two sixty four day term loan that was due 484 00:31:19,880 --> 00:31:22,720 Speaker 1: next year, so they're not in that you know shape 485 00:31:22,800 --> 00:31:25,600 Speaker 1: right now. And um So I think those would be, 486 00:31:25,800 --> 00:31:28,600 Speaker 1: you know, one very contrarian and kind of out there 487 00:31:28,640 --> 00:31:30,720 Speaker 1: and the other, you know, more of a um quote 488 00:31:30,760 --> 00:31:36,000 Speaker 1: unquote safety idea very contrariant given the borrowing costs. Helen, 489 00:31:36,200 --> 00:31:38,160 Speaker 1: I always enjoy catching up with your fantastic to get 490 00:31:38,200 --> 00:31:40,680 Speaker 1: your insights on this program. Elne back there of Cowen 491 00:31:40,880 --> 00:31:43,600 Speaker 1: and Helene is always so compassionate about the work is 492 00:31:43,680 --> 00:31:46,400 Speaker 1: to make up some of these companies. This industry is 493 00:31:46,480 --> 00:31:49,040 Speaker 1: really going to strop the top for a long long time. 494 00:31:50,200 --> 00:31:54,280 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 495 00:31:54,440 --> 00:31:59,680 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 496 00:31:59,720 --> 00:32:02,760 Speaker 1: play for him you prefer. I'm on Twitter at Tom 497 00:32:02,880 --> 00:32:06,719 Speaker 1: Keane before the podcast. You can always catch us worldwide. 498 00:32:07,200 --> 00:32:08,280 Speaker 1: I'm Bloomberg Radio.