Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: those of you have Global Wall Street working on a
Speaker 1: Friday and reading into the weekend. This is with our
Speaker 1: question the most important interview Bloomberg will do on the
Speaker 1: state of global fiscal policy. Vita gas Bar doesn't get
Speaker 1: the ga Gina Geita Gopinath gets at the I m F.
Speaker 1: But trust me, his Fiscal Monitor is a critical document
Speaker 1: in these times. Dr Gaspar joins us. Now, Vitor, I
Speaker 1: want you to give me an update on your confidence
Speaker 1: that we can expand by trillions. Are debt over the
Speaker 1: justification that interest rates are so low? Do you buy
Speaker 1: that concept? Yes? I do, uh dom So, what we
Speaker 1: emphasize in this sub blog that I've just put out
Speaker 1: together with pakpe Enough is that global debt is at
Speaker 1: this point in time at record levels never in history
Speaker 1: as global public that being so high. It is now
Speaker 1: above a hundred of percent of world GDP. It is
Speaker 1: so high because we're facing a crisis like no other,
Speaker 1: and in that context, the fiscal response has been very
Speaker 1: quick and and precedented. Just to give you an idea,
Speaker 1: in the last few months, the response of fiscal policy
Speaker 1: is bigger than during the local finational crisis. If you
Speaker 1: take together two thousand and eight, nine and ten, so
Speaker 1: in a few months we're above the response of three
Speaker 1: years during the global finational crisis that was absolutely appropriate
Speaker 1: to support to extend lifelines to households and firs made
Speaker 1: vulnerable by the crisis. Right, this enormous level of debt,
Speaker 1: this enormous level of debt is in a sense compensated
Speaker 1: in terms of impact on the budget by these very
Speaker 1: low interest rates that you're talking about. And this but
Speaker 1: I want to I don't mean to interrupts her, but
Speaker 1: because of time, I want to cut to the chase.
Speaker 1: We have Dr L. Aaron on with us in the
Speaker 1: next hour. He has acclaimed for speaking of T decisions.
Speaker 1: What is the T decision we are all going to
Speaker 1: make two and three and five years out after we
Speaker 1: count up the trillions of dollars of debt? What is
Speaker 1: the T decision down the road for political authorities is
Speaker 1: they look at endless debt, so I would not put
Speaker 1: the issue that way. Nominal infest rates and so debt
Speaker 1: service costs are relatively low as a percentage of GDP,
Speaker 1: even with these very high levels of that, because inflation
Speaker 1: and inflation expectations are very low, and at this point
Speaker 1: in time, as getago enough, my colleague emphasized yesterday, we're
Speaker 1: more concerned about too low inflation than to high inflation.
Speaker 1: The epidemic has boosted precautionary savings, investment will be prudent,
Speaker 1: and so for a while we are going to have
Speaker 1: a situation where savings exceeds investments. So our balance of
Speaker 1: risks points to the fact that premature withdrawal of fiscal
Speaker 1: support is a more pressing danger than the high levels
Speaker 1: of that, and that's our balance at the moment. There's
Speaker 1: a question of how companies, how nations are spending the
Speaker 1: money that they're pumping into their economies as they try
Speaker 1: to support everything as it gets back up and running.
Speaker 1: How good a job our nations doing at supporting companies
Speaker 1: that are viable in the longer term rather than just
Speaker 1: the zombies that are going to die out even if
Speaker 1: they are supported in the short term. So as I
Speaker 1: was saying the short term priority, the number one priority
Speaker 1: is public health, and that requires fiscal support to vulnerable households,
Speaker 1: vulnerable firms, and those interventions should be regarded as life lives.
Speaker 1: As the situation normalizes, as we pass the face of
Speaker 1: the Great lockdown, as the economy is opened gradually, you
Speaker 1: we have in a sense to pivot towards policies that
Speaker 1: facilitate the reallocation of resources. And so it is necessary
Speaker 1: to pivot from support to jobs, to support to people,
Speaker 1: from a blanket lending to firms to a much more
Speaker 1: discriminating approach. And again, as Getago penas Uh said yesterday,
Speaker 1: it's important that the intervention by the government includes capital
Speaker 1: type instruments, equity participations, perhaps even partial nationalizations, so that
Speaker 1: the issues of solvency can be tackled appropriately and the
Speaker 1: natural restructuring of the economy actually takes place. You know,
Speaker 1: this is philosophy, Friday. We hear a lot of big ideas,
Speaker 1: and this has been an era of big ideas as
Speaker 1: people try to reimagine what society will look like. On
Speaker 1: the other side, there is a question of how good
Speaker 1: a job in the here and now governments currently are
Speaker 1: doing how optimistic you are based on what you have
Speaker 1: seen that they will implement the policies as you're talking about,
Speaker 1: are you optimistic about that or are you sort of
Speaker 1: doubling down on these messages because you think that they're
Speaker 1: not getting through. So we are actually quite impressed by
Speaker 1: how speedy and how effective the interventions by governments have
Speaker 1: been in the phase of the Great Lockdown. We have
Speaker 1: put out a annexed to the World Economic Outlook with
Speaker 1: the physical perspectives, and we have an online document that
Speaker 1: reviews policies followed by more than fifty countries. What we
Speaker 1: see is unprecedented action. We see eleven trillion dollars of measures.
Speaker 1: Many of those measures are measures with above the line
Speaker 1: impact on the budget. There have been crucial to support firms,
Speaker 1: to support households. Now the situation is very difficult. We
Speaker 1: face radical uncertainty, and the first priority is public health.
Speaker 1: The first priority is to control the epidemic. Why because
Speaker 1: only by controlling the epidemic are we going to be
Speaker 1: able to reduce uncertainty and so to create conditions for
Speaker 1: the economy to pick up in a sustainable way, for
Speaker 1: investment to pick up, and for the transition to a
Speaker 1: new model of sustainable and inclusive growth they call. So
Speaker 1: we're not out of the woods yet. A lot remains
Speaker 1: to be done, but up to now, the ability of
Speaker 1: governments to deliver timely, targeted and temporary measures have been
Speaker 1: quite impressive. Okay, so fantastic, get your thoughts on a
Speaker 1: program today. I appreciate your time. Always valuable to us,
Speaker 1: we tell guessed by that of the IMAF. No one
Speaker 1: has studied the cycles of this like Jim Paulson and
Speaker 1: Luther Oldweden. He's really a student of melding economics into
Speaker 1: the history of our financial system and the opportunities to
Speaker 1: take and the mind fields to avoid. Jim Paulson joins
Speaker 1: us now from his UH Minnesota. Jim Paulson the courage
Speaker 1: to be in the market now was Lesa mentions the
Speaker 1: confidence of the CFO. How do you develop confidence to
Speaker 1: participate in anything except Amazon and Apple? Yeah, it seems
Speaker 1: like that on some days. Tom, I um, you know,
Speaker 1: I really think that in some ways that this is
Speaker 1: a very you know, unique situation where and there's no
Speaker 1: doubt about that, But in some ways it's also very
Speaker 1: common to what it feels like at the start of
Speaker 1: other new expansions and new bowl markets. Um, there's a
Speaker 1: lot of doubt. There's a lot of problems on Main Street. UM,
Speaker 1: a lot of them seem like they're going to last
Speaker 1: for a long time, and they probably will. But yet
Speaker 1: that's the same kind of situation that existed like when
Speaker 1: the market first took off, or in two thousand nine,
Speaker 1: when it first took off, there was a lot of
Speaker 1: doubt there too, and the market went up and it
Speaker 1: seemed like it was disconnected from the reality that was
Speaker 1: that was going on on Main Street in both of
Speaker 1: those cases. And yet against that wall of fear, with
Speaker 1: massive policy support that we had in two and we
Speaker 1: had in two thousand nine, the market kept rising and
Speaker 1: eventually economic conditions on Main Street also improved. It took
Speaker 1: a long time before we got back to normal. We
Speaker 1: had elevated unemployment rates well into the late eighties, well
Speaker 1: into the last expansion. We never really got back to
Speaker 1: the unemployment rate again until many, many years later. So
Speaker 1: you know, we've got a lot of issues today. But
Speaker 1: I still think we're in a new expansion in a
Speaker 1: new ball market. And jam I had this argument a lot.
Speaker 1: In fact, I think you're closely aligned with the thoughts
Speaker 1: of Morecin Stanley that this is normal, the reopening, the
Speaker 1: recession playbook. It stands people, as you know Jimmy pushing back.
Speaker 1: They'll say, there's a structural sailing to how quickly we
Speaker 1: can normalize it, stopped start, it's different, it's not normal.
Speaker 1: What's your message for them, Well, I I think that
Speaker 1: you know, there's certainly differences every time, and we've got
Speaker 1: a big difference to your child. I totally agree with that.
Speaker 1: We've not ever had a pandemic that I've been you know,
Speaker 1: studied before, and it does have unique characteristics. But you know,
Speaker 1: there's been unique characteristics in the past. There were start
Speaker 1: stop in the two thousand nine recovery too. I mean,
Speaker 1: we had massive bank failures and brokerage from failures. Our
Speaker 1: banking system was totally challenged. Sometimes that looks a little better,
Speaker 1: Sometimes it looked a little worse. Um In in in
Speaker 1: the early eighties we had basically a depression and energy
Speaker 1: and agriculture in my home state of Iowa. UM commodity deflation. Uh,
Speaker 1: that was a lot of starting stop there too. I
Speaker 1: don't know if they're this specific thing is is unique
Speaker 1: to the day, but in reality it's pretty common to
Speaker 1: the past. We The real key here is you don't
Speaker 1: have to get back to normal before security prices move.
Speaker 1: They've already moved long before we're back to normal, and
Speaker 1: they probably continue to do that. UM. If we can
Speaker 1: just trend northward in terms of economics, I think that's
Speaker 1: going to be sufficient, even if it's slow, and even
Speaker 1: if it's starting style well, let's say it's slow. When
Speaker 1: it's start and stop, let's talk about what you want
Speaker 1: to own. The rotation into the cyclical areas of this
Speaker 1: market worked for about five minutes and then really stalled
Speaker 1: through the month of June. Jim with the backdrop right
Speaker 1: now that we're facing with a week where the dominance
Speaker 1: of megacat tech is back on top, how uncomfortable does
Speaker 1: it fail to pivot away from that story and back
Speaker 1: to value again, back to the cyclical areas of this market.
Speaker 1: I do own Bolt John, I'd own the Barbell, I
Speaker 1: continue to own New Era growth, and I would I
Speaker 1: would continue to add exposure in what I'd say the
Speaker 1: broader market, which to me is who go small caps
Speaker 1: in their nationals UM. And I really think, on the
Speaker 1: one hand that there's greater participation going on here than advertised. Yes,
Speaker 1: it's done. It's been a their or market since the
Speaker 1: June eight top here. But from the Marche low, the
Speaker 1: Russell two thousand index, the equally weighted SMP five and
Speaker 1: the market cap weighted SMP five hundred are all up,
Speaker 1: are all had risen by about so there is greater
Speaker 1: participation here still still going on. It may not be
Speaker 1: every week, but I think if right now we've got
Speaker 1: a baristattitude towards pandemic and reopening, if that turns back
Speaker 1: to bullishness again, I think we'll see the broader market
Speaker 1: pick up. In the meantime, your high growth equities are
Speaker 1: going to continue do well. I don't really see a
Speaker 1: bubble in growth like I saw in two thousand. I mean,
Speaker 1: right now in tech, for example, the forward multiple on
Speaker 1: SMPF under text twenty seven times. It was fifty five
Speaker 1: times in two thousands. Right now the relative key motiple
Speaker 1: is one point one times the SMP. It was two
Speaker 1: times SMP. And the reason that people are buying those
Speaker 1: stocks today, it's not because they're out over their skis
Speaker 1: with massive you know, bullishness. It's because of defensiveness. They're
Speaker 1: buying those stocks like they used to buy utility right. Well, Jim,
Speaker 1: this has sort of been the argument by a lot
Speaker 1: of big investors that basically the big tech are the
Speaker 1: stalwarts and are the utilities going forward. On the other hand,
Speaker 1: if you take a look at who is buying, retail
Speaker 1: investors are accounting for a greater proportion of total volumes
Speaker 1: in the equity market in the United States. The head
Speaker 1: of execution for Citadel coming out yesterday and saying at
Speaker 1: any given day, uh, there is one fifth of all
Speaker 1: trading activity attributed to these retail investors, which have traditionally
Speaker 1: been thought of as the dumb money. Do you agree
Speaker 1: or do you think that they're smarter than the institutions
Speaker 1: that are being more reticent to pile in. Well, I
Speaker 1: guess that you have to be be determined. I don't.
Speaker 1: I don't believe that the size of the retail run
Speaker 1: to me um is is of a magnitude. I think
Speaker 1: that's concerning like it might have been in earlier periods.
Speaker 1: And I also don't know at least one who knows.
Speaker 1: But I also don't think it's it's backed by you know, uh,
Speaker 1: rabid bullishness and optimism. I think there are people that
Speaker 1: were looking and using these growth stocks as defensive investment.
Speaker 1: Whether that's going to prove to be accurate, I don't know,
Speaker 1: but it's it's not something we've done in the past.
Speaker 1: When when we've had this run concentrated run into these
Speaker 1: big cap tech stocks in the past, it's been a
Speaker 1: signal of over bullishness, and that just does not evidence
Speaker 1: to me today the character of that sector has really changed.
Speaker 1: Jim fantastic to catch up with these as always Jim
Speaker 1: Paulson there of Luthold Wait and really fortunate to be
Speaker 1: joined on the program now by Mohammed al Arian, chief
Speaker 1: economic advisor to Ali and son of course Bloomberg opinion columnist. Mohammed,
Speaker 1: We've been following this crisis over the last several months together,
Speaker 1: and it just feels like we're entering something different, a
Speaker 1: new phase. There's a shift here. What are your thoughts
Speaker 1: on it? There is drawn and it's really happening in
Speaker 1: the economy in the US, and that is a migration
Speaker 1: up of layoffs from small and medium sized companies to
Speaker 1: larger ones. And that's consequential. Vote for what it says
Speaker 1: about the demand side, but also what it says about
Speaker 1: the supply side, and there is a lot of businesses
Speaker 1: are not buying into the v they see a different
Speaker 1: the nation and regardless of the journey, Dr Larry and
Speaker 1: Warren Buffett made a t decision this week to invest
Speaker 1: in a distress asset. I think what's missing in our
Speaker 1: analysis on a Friday in July is how businesses, how
Speaker 1: executives will respond, what are the t decisions CEO, CFOs
Speaker 1: and big money is going to make over the next year.
Speaker 1: So for most businesses it really comes down to three issues.
Speaker 1: Is my balance sheet strong enough a B what is
Speaker 1: demand and where you're gonna look like? And see what
Speaker 1: is my cost structure is going to look like? For
Speaker 1: the marketplace, that's a really interesting aspect going on because
Speaker 1: the marketplace has to also incorporate two things. One is
Speaker 1: the very heavy hand of policy and secondly are technicals
Speaker 1: that have proven very strong but remain delicate. So it's
Speaker 1: a really interesting configuration um that we're going to be
Speaker 1: talking about for a long time tom going forward. But
Speaker 1: the basic issue is that there's much more fluidity out
Speaker 1: there economic and financial of course health wise than we've
Speaker 1: seen for a very long time. Mommed, what is it
Speaker 1: about the technicals that you think a delicate right now. So,
Speaker 1: I think what you have is the extension of what
Speaker 1: has been the formal trade, the Tina trade, and the
Speaker 1: fear of missing out because central banks are our best
Speaker 1: friends the Tina. There is no alternative but stocks, but
Speaker 1: but certain stocks within that that have become both defensive
Speaker 1: and growth at the same time, and that has attracted
Speaker 1: a lot more interest from the retail side. And the
Speaker 1: retail side has had quite an influence in the last
Speaker 1: month or so, you know, John, I think more retail
Speaker 1: participation is very important. It broadens the marketplace and importantly
Speaker 1: it means society buys into a market based system even more. However,
Speaker 1: you don't want retail to be the victim of a
Speaker 1: head fake. And that's what I really worry about. Victim
Speaker 1: of a head fake. Another way to say, this is
Speaker 1: a bubble. That's what Rob or not a research affiliates
Speaker 1: called the tech stocks and the valuations right now there,
Speaker 1: Do you agree? So, I think there's there's two issues
Speaker 1: of the head fake. One is to be careful that
Speaker 1: central bank support does not go all the way down
Speaker 1: to the faulting companies. The false imply capital impairment and
Speaker 1: the experience with Hurts, where should be one that that
Speaker 1: should be puts front and center of every retail investor.
Speaker 1: The second element relates to rob are not really good
Speaker 1: interview with you yesterday, which is there was a time
Speaker 1: when the marketplace thinks in relative terms, and there's a
Speaker 1: time when it thinks in absolute terms. And relative terms,
Speaker 1: tech makes absolute sense. They have strong balance feet, positive
Speaker 1: cash flow, good management, and on the sunny side of
Speaker 1: both the COVID journey and what's on the other side
Speaker 1: of the COVID journey. But in absolute terms, look at
Speaker 1: the valuations. And what I have learned in my experience
Speaker 1: in the marketplace is that the market can be obsessed
Speaker 1: with relative values for a very very long time and
Speaker 1: then almost overnight, it shifts to absolute. And that moment
Speaker 1: can be quite a jarring moment if you don't realize
Speaker 1: where you are on valuations. In Muhammad, You've done this
Speaker 1: with Bill Gross at PIMCO. You know, Bill Gross had
Speaker 1: his famous Monroe trader on his desk where you're quota yield,
Speaker 1: yield yield, and all of a sudden you go from
Speaker 1: relative to absolute and all you're worried about his price
Speaker 1: price price, How close are we in the bond market
Speaker 1: with where nominal yields are, real yields are, and negative
Speaker 1: yields are to you flipping from a yield analysis to
Speaker 1: a price analysis to protect capital. So a lot depends
Speaker 1: on which part of the bond market. And I think
Speaker 1: it's really important to distinguished tom. And let me start
Speaker 1: with a story that was often told that PIMCO, which
Speaker 1: is the person who comes home and says, look, I
Speaker 1: bought a dog for thirty dollars and his wife says,
Speaker 1: are you crazy? You spend thirty tho dollars for a dog?
Speaker 1: And he answers, yeah, a great deal. That cat was
Speaker 1: selling for forty tho. Right, there's a point at which
Speaker 1: relative trades don't make sense. I think you're gonna see
Speaker 1: this in high yield You're gonna see this in emerging
Speaker 1: market corporates. You're gonna see that in certain sovereign emerging markets.
Speaker 1: You're not gonna see it higher up in the counital
Speaker 1: structure because central banks have and will continue to influence
Speaker 1: those yields and those spreads. So people have got to
Speaker 1: be much more careful into how they treat the bond market.
Speaker 1: It is very different when you get near the fault risk. Mohammad,
Speaker 1: You've gotta be careful. Otherwise people listening to this might
Speaker 1: think that people of pimp care actually brought thirty dollar dogs,
Speaker 1: and I'm sure that maybe maybe that was in the
Speaker 1: case you mentioned a couple of times, then they certainly didn't.
Speaker 1: Pimco Bimko is and always has been a very fundamental
Speaker 1: driven shop, right John, John, I paid thirty two thousand
Speaker 1: ProVet Bill. I'm sorry, which is why you call him
Speaker 1: vet bill. I'm sure because of the costs are Mohammed,
Speaker 1: you mentioned them a couple of times there, didn't you,
Speaker 1: And I just think that it wasn't by accident. Are
Speaker 1: you concerned about the evaluations and emerging markets? I am.
Speaker 1: I think people don't realize how tough it is for
Speaker 1: the typical emerging market. Phase one was simply dealing with
Speaker 1: the spin over from what was happening in China, what
Speaker 1: was happening in Europe and the US, which is lower exports,
Speaker 1: lower commodity prices, lower tourism, lower form direct investment. Phase
Speaker 1: two is dealing with their own COVID our breaks. If
Speaker 1: you look at what's happening in Latin America, it is
Speaker 1: tragic if you're looking at parts of what's happening in Africa,
Speaker 1: it is tragic. So the demand on their resources and
Speaker 1: the need to divert more resources to the health care
Speaker 1: system is just going to go up. And I think
Speaker 1: that people don't realize that there is, to quote my
Speaker 1: colleagues at Gramacy, a paradigm of non payments coming up
Speaker 1: for certain emerging market credits. A paradigm of non payments.
Speaker 1: The idea that perhaps some of the sovereign debt could
Speaker 1: get written down, and we've seen some of that from
Speaker 1: the I m F. So far, where are we in
Speaker 1: that How much do you think the sovereign debt of
Speaker 1: developing markets could get written down ultimately? So we've seen
Speaker 1: ongoing with Ecuador, with Argentina, that's that market based solutions,
Speaker 1: like you say, we've seen the I m F and
Speaker 1: the World Bank work with the three twenty on a
Speaker 1: debt service suspension initiative for the poorest countries, and they've
Speaker 1: made it very clear that they expect burden sharing. Um.
Speaker 1: The issue is, as you know, Lisa, it is not
Speaker 1: easy to dictate burden sharing from a top down perspective,
Speaker 1: and that's where the I m F and the World
Speaker 1: Bank are struggling and finding a way for private sector involvement,
Speaker 1: as they call it ps I. I think it's gonna come.
Speaker 1: I think when countries go from immediate emergency assistance to
Speaker 1: one thing, longer term support from this institution, one of
Speaker 1: the requirements is going to be burden sharing. And I
Speaker 1: don't think credit is quite realize that that's going to
Speaker 1: migrate up from the lowest income countries to some, not all,
Speaker 1: some of the middle income emerging markets as well. Mohammed.
Speaker 1: When people say burden sharing right now, we think of
Speaker 1: Europe and the fiscal talks are set to take place
Speaker 1: later this month. You have really pushed back over the
Speaker 1: last year, maybe longer, when people have come on programs
Speaker 1: like this and talked about pivoting away from America and
Speaker 1: American assets towards Europe and the consonant. What's the pushback now?
Speaker 1: So I think we're getting closer to him. I think
Speaker 1: we've learned once again that it takes a crisis to
Speaker 1: move Europe, and what you're seeing happening in Europe is
Speaker 1: I think an important moment. So I must say that
Speaker 1: I'm really encouraged by what's going on in Europe right now, Um,
Speaker 1: it would be important to see how these negotiations proceed. Um.
Speaker 1: There are people that the countries are still resistant, but
Speaker 1: on the whole, I think they're going to get to
Speaker 1: a better place. And I told you that the time
Speaker 1: will come to fade the US in favor of Europe.
Speaker 1: We're getting much closer to that. I would not fade
Speaker 1: the US in favor of the merger markets though, Mohammed,
Speaker 1: always appreciate your time. Thank the family for us wind you.
Speaker 1: I know it's super early on the West coast and
Speaker 1: this is a disruption for the Larian household as well.
Speaker 1: Have a fantastic to catch up this Mhammed al Arian
Speaker 1: there of Blomberg opinion and of course chief economic advisor
Speaker 1: to ALIAS, this is a joy and a day. Given
Speaker 1: the pandemic and the carnege economically across the nation, it
Speaker 1: is good to speak to someone authoritative from a firm
Speaker 1: that owns the franchise. That would be Cowen and Company.
Speaker 1: Not only with Chivan Rumor, the legendary airline analysts, the
Speaker 1: Boeing analyst, but also with Helene Becker. Cowen truly owns
Speaker 1: a high ground on airline analysis. To thrilled that MS
Speaker 1: Becker could join us this morning, Helene, I want to
Speaker 1: cut to the chase and the headlines. I know you've
Speaker 1: done this, calculate how many people would become unemployed across
Speaker 1: the American aviation business. Yeah. So at the start of
Speaker 1: the year, there were seven d fifty people employed in aviation,
Speaker 1: and we estimate that by the end of the year
Speaker 1: there will only be between five hundred fifty and six
Speaker 1: hundred thousand people employed. So somewhere between hundred fifty and
Speaker 1: two hundred thousand people will lose their jobs. Um. You
Speaker 1: know in the fourth quarter of this year. Hallong, we
Speaker 1: caught up a several months ago. You and I were
Speaker 1: talking and just how depressing some of these numbers would
Speaker 1: be for the business. Can you just walk me through
Speaker 1: what the industry looks like right now? What's booking look like?
Speaker 1: What does capacity load factors look like on some of
Speaker 1: these playing some of these roots. Yeah, so, um, so
Speaker 1: we're better than we thought we'd be when we caught
Speaker 1: up the first time. We thought we'd have by August first,
Speaker 1: about four hundred thousand people traveling, and that was based
Speaker 1: on the eight seven thousand people at the nater So
Speaker 1: on April fourteen, t s A screened eighty seven thousand
Speaker 1: people versus a normal day when they would screen about
Speaker 1: two and a half a million, So you see the
Speaker 1: decline there. And then now, um we're screening about on Tuesday's, Wednesday, Saturdays.
Speaker 1: We're screening between six d six hundred fifty thousand people
Speaker 1: on the peak four days, so that would be Thursday, Friday, Sunday, Monday,
Speaker 1: we're screening you know, between seven seven fifty thousand people.
Speaker 1: So that's a faster recovery than we were expecting. And
Speaker 1: that's without business travel and really without international travel. Without
Speaker 1: those two, we don't think traffic can really exceed a
Speaker 1: million UM by the end of the year, and that's
Speaker 1: our forecast. By the holidays, December holidays, we have a
Speaker 1: million people going through UM T s A every day
Speaker 1: with without business and without international Where are people going domestic?
Speaker 1: That's that's actually a really good question. UM. So it's
Speaker 1: visiting friends. So the people who are traveling visiting friends
Speaker 1: and relatives, leisure and people who absolutely have to travel.
Speaker 1: So this like eighty some one thousand people we saw
Speaker 1: in April, we're people who were traveling because they were
Speaker 1: probably rated related doing work related to the pandemic. Now
Speaker 1: you have people, um where states have opened up and
Speaker 1: where like Universal Orlando and SeaWorld opened earlier in June,
Speaker 1: you have people starting to take vacations to those locations. Now. Um,
Speaker 1: whether that continues given the rampant um a level of
Speaker 1: of coronavirus that we're seeing in those states, you know,
Speaker 1: remains to be seen. Disney is supposed to open, Disney
Speaker 1: Orlando is supposed to open tomorrow. Um. You know, obviously
Speaker 1: new rules, but that's what's happening. It's it's the Florida beaches,
Speaker 1: it's western states with um national parks. You know, we're
Speaker 1: seeing a lot of outdoor activities, all right, Helene. So,
Speaker 1: given the fact that we're not expecting to see demand
Speaker 1: for international or business pick up to the levels that
Speaker 1: we had seen earlier in the year until perhaps according
Speaker 1: to industry projections, how many airlines do you think have
Speaker 1: to go out of business to right size to sort
Speaker 1: of correct the over supply of seats and flights that
Speaker 1: we have currently in the market. Yeah, so I think
Speaker 1: that's a great question. I think the way the government
Speaker 1: set it up in the short term, as none of
Speaker 1: the airlines will go out of business but the amount
Speaker 1: of capacity that will come out of the network. So
Speaker 1: we've said between eight thousand aircraft will not have been
Speaker 1: parked and will not come back, um, you know after
Speaker 1: in let's say bye by this time next year. So UM,
Speaker 1: when you think about the level of capacity, that's that's
Speaker 1: equal to an air size of one full airline. Hello,
Speaker 1: give me by a hold cell here, give me the
Speaker 1: single best I three idea three years, five years out
Speaker 1: which management is going to be most opportunistic and add
Speaker 1: shareholder value when we get through this this tragedy. Yeah,
Speaker 1: so Southwest is probably our best idea in the short term. UM,
Speaker 1: just because they've they've got net cash. UM, they're really
Speaker 1: well positioned. They did a huge cash grab earlier this
Speaker 1: year about thirteen billion dollars worth a liquidity UM, they've
Speaker 1: paid down their three six or four day term loan.
Speaker 1: We think they're really well positioned to get share in
Speaker 1: every recession since I've covered this group, which is more
Speaker 1: than three decades, and they've grown share. I think that's
Speaker 1: like our number one idea. UM are big contrarian idea.
Speaker 1: The one that you know we got a lot of
Speaker 1: pushback on is American because we don't think they're going
Speaker 1: out of business. They've raised a ton of cash. Um
Speaker 1: they still have some assets that they can raise. They
Speaker 1: don't have any debt do before two they paid down
Speaker 1: there two sixty four day term loan that was due
Speaker 1: next year, so they're not in that you know shape
Speaker 1: right now. And um So I think those would be,
Speaker 1: you know, one very contrarian and kind of out there
Speaker 1: and the other, you know, more of a um quote
Speaker 1: unquote safety idea very contrariant given the borrowing costs. Helen,
Speaker 1: I always enjoy catching up with your fantastic to get
Speaker 1: your insights on this program. Elne back there of Cowen
Speaker 1: and Helene is always so compassionate about the work is
Speaker 1: to make up some of these companies. This industry is
Speaker 1: really going to strop the top for a long long time.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.