Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best an economics, geopolitics, finance and investment.
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Speaker 1: to bring you. The chairman of Evercore, Isi at Heimann
Speaker 1: joins us for a midyear update. I wanted a little
Speaker 1: history at John's got like six serious questions. I'm calling
Speaker 1: the October Bottom, the Ralphankopora, Edward Yard Denny Bottom. Many
Speaker 1: other people were out there as optimistic, but Edyard Denny
Speaker 1: absolutely nailed the bottom. You basically gave him his job.
Speaker 1: You were at CJ. Lawrence a million years ago. I
Speaker 1: read your research worshipfully, and you went out the door
Speaker 1: to set up your own shop, and Yard Denny replaced you.
Speaker 1: Is that true?
Speaker 2: So I had to deal with my boss then, Jim Molt,
Speaker 2: who ran the firm, that I wouldn't leave until we've
Speaker 2: got a replacement. And so Jim came in and said,
Speaker 2: Ed you can leave.
Speaker 1: I said, oh, the imbred optimism that Ed Heyman has
Speaker 1: an ed Yard Denny has. What does the gloom crew
Speaker 1: get wrong here about the need to understand America will persevere?
Speaker 2: So I think we're going to have a recession. And
Speaker 2: I follow ed Yard any closely and I just read
Speaker 2: his piece over the weekend where he's doesn't have a recession.
Speaker 2: And I've been through this more time than anybody on
Speaker 2: your show. The He'll curve works, and the you'll curve
Speaker 2: is really inverted, and then if that doesn't do it,
Speaker 2: you have a contraction and the money supply the most
Speaker 2: since the nineteen thirties, and then you have a significant
Speaker 2: recent rates plus QT and so Mike Tyson could get
Speaker 2: you with any one of those much less. It's got
Speaker 2: three shots.
Speaker 1: And so.
Speaker 2: I just have to add that.
Speaker 3: From when the.
Speaker 2: Yell curve inverts, it can take eighteen months for the
Speaker 2: economy to go into recession, and just before it goes
Speaker 2: into recession it looks great. It's a very humbling business.
Speaker 2: And Tom, I got to say, I have not been
Speaker 2: forecasting a recession for the past year. I fought last
Speaker 2: year the two down quarters like crazy and I have
Speaker 2: the third quarter down, which seems too aggressive, but I'm
Speaker 2: pretty flexible, but I'm sure it's coming.
Speaker 3: Does this have a preweight feel to it in that regard.
Speaker 2: Not really just except for the yell curve, but that
Speaker 2: the wait my ment specifically, well for sure on that,
Speaker 2: and it's playing out pretty much like that. But you
Speaker 2: don't have the housing bubble, you don't have something that
Speaker 2: would cause a severe recession like we had in eight
Speaker 2: or nine.
Speaker 3: Where are you on the inflation backdrop at the moment?
Speaker 3: We had a guest in the Lost down rows So
Speaker 3: who suggested that inflation expectations are bottominc botsomic for the cycle,
Speaker 3: that ultimately inflation is going to be sticky and a
Speaker 3: recession won't address it.
Speaker 2: So I'm on the other side big time. So I
Speaker 2: just looked before I came over here at gasoline prices,
Speaker 2: which have a big influence on inflation expectations. Inflation expectations
Speaker 2: have come down significantly, but they also are influenced by
Speaker 2: gasoline prices, and the futures have gasoline prices going down
Speaker 2: another ten cents in the next six weeks, not a
Speaker 2: big move, but not up twenty cents, and gasoline prices
Speaker 2: where they were fifteen years ago. So inflation is coming
Speaker 2: down around the world. They just reported this morning the
Speaker 2: PPI for the Eurozone was now in deflation minus one
Speaker 2: and a half percent, which you reported, and then last
Speaker 2: week the Spain CPI went below two percent for the
Speaker 2: first time. So I try and connect the dots the
Speaker 2: best I can, and it looks to me as though
Speaker 2: inflation is really going down. And with that policy backdrop
Speaker 2: I mentioned, it's going to keep going down.
Speaker 3: We let's build on that. So we've got you on growth,
Speaker 3: got you on inflation, build on the policy backdrop. Most
Speaker 3: people anticipating now the FED goes again this month, right,
Speaker 3: maybe goes again after that. Where are you doing the
Speaker 3: scene now?
Speaker 2: So Chrishna Guha does our FED work. He has one
Speaker 2: more and done, and so that's what I would follow.
Speaker 2: At this point, the one more is baked in the cake.
Speaker 2: I think anything from now is a mistake. They're just
Speaker 2: creating a deeper recession or the more likelihood of a recession.
Speaker 2: But at you know, five and at quarter, with the
Speaker 2: bonyle at three eighty, they're pretty much done and inflation slowing.
Speaker 2: The FED height rates in March of twenty twenty two,
Speaker 2: and at that point inflation had already gone crazy, and
Speaker 2: they were still doing the transitory and then they were
Speaker 2: still doing Q. They're still doing Q and so, and
Speaker 2: as I can tell, by the time they by the
Speaker 2: time they cut rates, inflation will be so far down
Speaker 2: it'll make them look a little wrong.
Speaker 1: Forted together, in the years, you've been considered for a
Speaker 1: FED president, certainly as a FED governor as well. And
Speaker 1: what did this FED get wrong? Was it too much communication?
Speaker 1: Were we advantaged with the silence of green spin.
Speaker 2: I think it's very difficult to have three hundred PhDs
Speaker 2: make a forecast, not buttering you up town. But I'd
Speaker 2: rather have you make that forecast than three hundred PhDs.
Speaker 1: Mike said, I can't do Mike walked in one day.
Speaker 1: So Tom, I don't need any forecasts on air continue.
Speaker 2: And so I think it's it's just part of the
Speaker 2: stickiness of the decision making.
Speaker 1: It's by committee.
Speaker 2: It's by committee. And I also tend to try and
Speaker 2: always go where the puck is going to put it
Speaker 2: in your terms, and boy, the evidence, the evidence that
Speaker 2: things are slowing on inflation is really pretty awesome.
Speaker 1: We're going to have you back but you hired Gretzky.
Speaker 1: How's Julian Emmanuel doing to me? Like his his weekly
Speaker 1: note during earning season is the most valuable thing that
Speaker 1: comes over the transom. And what I want to say
Speaker 1: is this guy captured the equity market left maybe not
Speaker 1: all tech tech. He didn't tell you to buy him Vidio.
Speaker 1: But is Julian Emanuel doing okay? Over at the show
Speaker 1: doing great?
Speaker 2: So we have an open office, I learned from Mike Bloomberg.
Speaker 2: So I have a desk, and I have Rich Ross,
Speaker 2: and then I have Julian Emmanuel. And where within I
Speaker 2: wouldn't say shouting distance with her? In talking distance?
Speaker 1: Is he talking about a second leg of the bullmarket?
Speaker 1: Like Edheiman nailed? Got to be quick here, but second
Speaker 1: leg of the bullmarket?
Speaker 2: All of a sudden he cautious, cautiously, up, very cautiously.
Speaker 3: They separate Tom and in the office you know that
Speaker 3: I didn't know, so that we're not allowed to sit
Speaker 3: next to each other at Hymen.
Speaker 1: I want you to talk about the hallmark of your
Speaker 1: work back to CJ. Lawrence, And that's the granularity of
Speaker 1: studying data. Does the granularity of freight rates? This that
Speaker 1: the green spanning and data study still work in a
Speaker 1: modern high tech age.
Speaker 2: Or it's even better. Why because there is so much
Speaker 2: high quality data now, you know, generated by a computer.
Speaker 2: And so I really think that my success in studying
Speaker 2: the economy and forecasting comes from being more granular. So
Speaker 2: the FED seems to look at one data point that
Speaker 2: comes out like the super core, and I've looked at
Speaker 2: maybe twenty at that point, and like what Michael was
Speaker 2: talking about on the employment number, there's a lot of
Speaker 2: data points and they're generally pretty darn strong for employment.
Speaker 2: So we're estimating two twenty Alan Zentner, I think is terrific.
Speaker 2: But I don't see that sub one hundred number or
Speaker 2: a really low number in the data that we get
Speaker 2: so far, like unemployment claims or we servey employment agencies
Speaker 2: once a week.
Speaker 1: I look at the data, and I mean the hallmark
Speaker 1: here across the decades is we used to aggregate off
Speaker 1: the revolution of nineteen forty seven, the way we bring
Speaker 1: in macrodata. Do you, what, ever, core ISI still aggregate
Speaker 1: or are you partitioning out now for different quintiles, death
Speaker 1: siles or John Edwards to Americas? Can you aggregate still? Yes?
Speaker 2: But you have to take into account the different pieces,
Speaker 2: and right now the manufacturing sector is pretty weak maybe
Speaker 2: inner session, and many other parts of the economy are
Speaker 2: doing quite well. Services like over the holiday July fourth,
Speaker 2: and you also have home buildings now actually coming back.
Speaker 2: It's been very strong and has accelerated in the past
Speaker 2: couple of months.
Speaker 1: Right you took a kufel Annuncer slide rule from Texas
Speaker 1: to MIT. I don't know if you study was solo
Speaker 1: there after fifty seven productivity, but explain the evercore ISI
Speaker 1: view on America's productivity given the new technology over there.
Speaker 1: You're an optimist or not.
Speaker 2: I'm an optimist, but it's not in the numbers. One
Speaker 2: of the phrases is proctivity is everywhere but in the numbers.
Speaker 2: But you know, what you do has enormous proctivity, and
Speaker 2: what I do, frankly has enormous proctivity. But it's but
Speaker 2: you're not getting it period right now in the numbers
Speaker 2: and plumbent's good, but the economy is still slowing.
Speaker 1: I think, what do you think about the Frenzy Gloom Crew,
Speaker 1: particularly they come out every Friday. Friday seems to you know,
Speaker 1: you're published for the weekend and that. But the I
Speaker 1: mean we've always worried back. I mean think of eighty
Speaker 1: seven or the August of nineteen ninety eight. The worry,
Speaker 1: the angst has always been there, but there seems to
Speaker 1: be a different character to have gloomed. How do you
Speaker 1: respond to that?
Speaker 2: So the forecast for recession was virtually unanimous a few
Speaker 2: months ago, and now there are many people going to
Speaker 2: a non recession forecast. I am the most parish I've
Speaker 2: ever been on the economy without being in a recession.
Speaker 2: It's because of the yell curve, the contraction of money
Speaker 2: and QT at the same time they're hiking rates.
Speaker 1: That three.
Speaker 2: Blow hit to the economy is going to cause recession,
Speaker 2: but it doesn't happen overnight.
Speaker 1: So can you own stocks given the statement you just
Speaker 1: made that you're the most gloomy you've ever are you
Speaker 1: all in cash or can you own ebodies and participate?
Speaker 2: So I mentioned I think three times now the six
Speaker 2: oh seven going into eight, and the S and P
Speaker 2: went up twenty and peaked like two months before the
Speaker 2: Great Recession hit. Boys, it tough, and so right now
Speaker 2: I think the economy is doing well and the stock
Speaker 2: markets going up the technicals are good, and so I
Speaker 2: think we'll keep going up until it looks like we're
Speaker 2: about to hit the recession. And that's not today.
Speaker 1: I got two minutes left. You're the only one who
Speaker 1: hasn't moved to Florida. You are part of the New
Speaker 1: York City fabric. Explain how you view the future of
Speaker 1: this great city.
Speaker 2: It's very tough because so many people are moving to Florida,
Speaker 2: but this city is so vibrant just being here with you,
Speaker 2: which I know you love the city and all the
Speaker 2: institutions in.
Speaker 1: Never bet against New York. That's the only reason I
Speaker 1: got this job. That the mayor at the time, he said,
Speaker 1: you're hired.
Speaker 2: Anyway, as long as Mike Bloomberger is here. I think
Speaker 2: we're here.
Speaker 1: Okay, what do we do with the FED? One final question?
Speaker 1: What's the fed Aedheimen FED strategy here forward?
Speaker 2: So they're gonna hike one more and then they're done.
Speaker 1: When did they cut? Uh? Probably?
Speaker 2: You know, I think towards the end of this year,
Speaker 2: but maybe early next year. But I can I can
Speaker 2: look down the street, I can't see around the corner,
Speaker 2: but when I get to the corner, you'll have a
Speaker 2: much better idea.
Speaker 1: Just a smoke from Canada. That's why I can't see
Speaker 1: Ed Hyman. Thank you so much. I know you've got
Speaker 1: a run here. He is with evercore Isi and truly
Speaker 1: iconic on the street today. In your equity belief, we're
Speaker 1: going to bring it over to the fixed in comes
Speaker 1: to face. Thomssorus Jones has not had a fixed income
Speaker 1: research at stigas it is a bird company. You have
Speaker 1: the huge advantage Tom of working with one Jay Trennert,
Speaker 1: who does beautiful quality stock free cash flow persistency of
Speaker 1: profit analysis, did it with Adheimen and will join us
Speaker 1: here later. You guys own the high ground on the
Speaker 1: linkage of equity analysis into your bond analysis. What does
Speaker 1: your bond analysis say about a second leg of a
Speaker 1: bull market?
Speaker 4: Ah, highly unlikely. And with that said, we recognize that
Speaker 4: the equity market seems to disagree with that hypothesis. But
Speaker 4: when we look at that inverted yield curve, what we
Speaker 4: see is a market an economy which has is already
Speaker 4: facing excessive tightening from the Federal reserve. That is, the
Speaker 4: Federal Reserve is already tightened to the point where Main
Speaker 4: Street is feeling the pinch. But When you see, as
Speaker 4: you mentioned earlier, financial conditions easing, what you also see
Speaker 4: is a financial market where the FED has not tightened
Speaker 4: enough on Wall Street. So one of the ways we
Speaker 4: phrase this is, when you use the FED funds rate
Speaker 4: to tighten, you put most of the pain on Main Street.
Speaker 4: When you use the balance sheet to tighten, you put
Speaker 4: most of the pain on Wall Street. The FED has
Speaker 4: not tightened enough on Wall Street. By using the balance
Speaker 4: sheet to reduce liquidity in the financial system, they've already
Speaker 4: tightened excessively on Main Street. So a recession still seems
Speaker 4: inevitable to us in the second half of the year,
Speaker 4: and that has got to impact earnings on the equity side.
Speaker 1: As a thermometer, I'm gonna look at the inflation adjusted
Speaker 1: ten year yield. There's other metrics as well that are
Speaker 1: sophisticate lesi source uses, but I'm gonna look at the
Speaker 1: ten year real yield at one point five to eight
Speaker 1: up percent, maybe it was one point six to two,
Speaker 1: getting a little lofty. Do you anticipate that that will
Speaker 1: break out to a higher real yield? And what level
Speaker 1: is normal of the higher real yield?
Speaker 4: Well, a normal might be keep in mind we only
Speaker 4: have about twenty five years of actual data on real
Speaker 4: yields I yesterday back to the tips market of ninety
Speaker 4: seven ninety eight, normal might be one hundred and fifty
Speaker 4: bases points. So we're roughly at what you might expect
Speaker 4: to be a normal real interest on ten year treasury. Now,
Speaker 4: with that said, we do not necessarily expect ten year
Speaker 4: real yields to rise much from here because we expect
Speaker 4: inflation expectations to get Inflation itself is getting close to
Speaker 4: bottoming this cycle. We think it's going to be very
Speaker 4: difficult for the Fed to get inflation below three percent,
Speaker 4: and we've already gotten expectations below three.
Speaker 1: The headline there, John is on the edge of beyonco.
Speaker 1: I mean, this is the second time in forty eight hours.
Speaker 3: That phras I almost thought you misspoke. You think inflation
Speaker 3: expectations are bottoming for this cycle.
Speaker 4: Yes, and that's because we buy into the hypothesis that
Speaker 4: inflation is going to remain sticky and that the Fed
Speaker 4: does not have the stomach to do what it takes
Speaker 4: to permanently bring this structural inflation back to a neutral.
Speaker 4: By that, we mean do excessive damage to the labor
Speaker 4: market bring aggregate demand well below potential. That's what's required,
Speaker 4: and that's a pretty deeper session. We don't think the
Speaker 4: Fed has the appetite to do that.
Speaker 3: You ju'mp buy into the vulcaresque delivery of cham and
Speaker 3: pound in late August last year. No, I don't.
Speaker 4: If they were serious about bringing inflation in line with
Speaker 4: long run targets, they would have reduced the balance sheet
Speaker 4: at probably three times the pace they're going on.
Speaker 3: So, just to be clear on the pane of sheet cool,
Speaker 3: you think they should be more aggressive with QT, You
Speaker 3: don't think they will be?
Speaker 4: Oh, absolutely exactly both to them.
Speaker 3: Yes, to both of those.
Speaker 4: We think they should have been more aggressive, but we
Speaker 4: think they will not be.
Speaker 1: I'm fascinated by this. Jim Bianco out in Chicago, and
Speaker 1: you guys have a call of a dis disinflation. We're
Speaker 1: gonna disinflate, come down and then at three percent, what
Speaker 1: do you do reverse and go up? How much? What's
Speaker 1: that model show?
Speaker 4: Well, right now we're expecting a bottom around three percent.
Speaker 4: We'll call it your overra headline CPI. On a quarter
Speaker 4: over quarter basis, we might see inflation dip below three
Speaker 4: percent fairly easily. But you start to see around three percent,
Speaker 4: the FED gets weak knees. You start to see that
Speaker 4: the labor market is getting to a point where to
Speaker 4: bring inflation down much lower, you gotta do a substantial
Speaker 4: amount of damage because all of a sudden, businesses are
Speaker 4: no longer hoarding staff. They're laying off staff they do need,
Speaker 4: and that's demand destruction, and that's a bigger recession ahead
Speaker 4: of twenty twenty four that the FED probably go again.
Speaker 1: Does it bring it over to Jason Trunnet's work. If
Speaker 1: I have a sustained three percent, which is your minimum call,
Speaker 1: maybe actually higher, that gives me a nominal GDP that's extraordinary.
Speaker 1: Does that support well run companies in America?
Speaker 4: Well, that supports companies that have low borrowing costs. That
Speaker 4: supports companies that have bargaining power or pricing power in
Speaker 4: their industry and strong management and have basically barriers to
Speaker 4: entry as well. It doesn't support companies.
Speaker 1: It describes john Ford Stocks.
Speaker 4: And we'll look at the Russell two Forty five percent
Speaker 4: of the companies in the Russell two thousand don't fit that.
Speaker 4: They're the exact opposite.
Speaker 3: These are big cos if you're expecting inflation expectations to
Speaker 3: bought them out. What is that LAFE fixed income for
Speaker 3: people sitting in the tenure right now? Taking on a
Speaker 3: bit more, you're ration, what are your tuning them?
Speaker 5: Well?
Speaker 4: Right now, let's say ten year treasury at three eighty five.
Speaker 4: That actually looks attractive to us. In a environment where
Speaker 4: the US economy goes into recession, real yields come down,
Speaker 4: inflation expectations really.
Speaker 3: Don't move much. They might even go up.
Speaker 4: You still have downside and ten year treasury yield up
Speaker 4: down to maybe a three percent to three and a
Speaker 4: quarter percent. But let's put that in perspective. The average
Speaker 4: recession sees a ten year treasury drop two hundred and
Speaker 4: twenty five to two hundred and fifty basis points. That's
Speaker 4: probably not going to happen this cycle.
Speaker 3: At most.
Speaker 4: We're looking at that ten year going from four to
Speaker 4: thirty where it peaked last year, maybe down to a
Speaker 4: three twenty to three percent.
Speaker 3: This is really important stuff. What we're discussing here is
Speaker 3: ultimately how the bum market's going to behave in what
Speaker 3: you've described, and I'll put a name on it, and
Speaker 3: a saxflation we will yep. Is that correct?
Speaker 1: Yes?
Speaker 3: Exactly?
Speaker 4: And again we're looking at positive total return in a
Speaker 4: ten year treasury. We'll call it a seven percent total
Speaker 4: return upside when yields drop, And if you're levered three
Speaker 4: times like many funds are, that's a twenty percent return
Speaker 4: that offsets maybe a twenty five to thirty percent loss
Speaker 4: on the x what he said. But the thing is,
Speaker 4: you're not looking at a fifty percent return in treasuries.
Speaker 4: You're looking at a six percent, seven percent levered up
Speaker 4: to twenty percent.
Speaker 3: Amazing, some just amazing.
Speaker 1: I really can't say enough. You know, we're making jokes
Speaker 1: about it, folks. We're going to the summer. We're getting
Speaker 1: lazy and sloppy like everybody else. It's an incredibly holiday
Speaker 1: shortened week. We're compressing three days john of serious economic analysis.
Speaker 1: And I got two competent shops, Bionco and Strtigas saying
Speaker 1: the same thing that we're gonna diss I'm making this
Speaker 1: word up, dis disinflate.
Speaker 3: Well that let's all brand new. That phrase. Just this
Speaker 3: idea that inflation expectations are bottoming out for the cycle.
Speaker 3: That is not what this feder Reserve Tom wants to
Speaker 3: hear at all, at all. No, So twenty five in
Speaker 3: July is what most people anticipate, some people saying maybe
Speaker 3: another twenty five, the Committee suggesting that might be the
Speaker 3: direction of travel, and then you think they're done as well.
Speaker 3: I think so, And let's keep this in mind.
Speaker 4: The higher they go with the Fed funds rate, the
Speaker 4: more likely they are to reach their target of two
Speaker 4: percent inflation. But we just don't think that they have
Speaker 4: the stomach to keep doing this. There's gonna be demand destruction.
Speaker 4: And you've got to also look at the second half
Speaker 4: of the year. The two stories in the second half
Speaker 4: of the year. Obviously, recession risk is one of them.
Speaker 4: The other one is you're looking at massive liquidity drain
Speaker 4: from the treasury raising cash and adding back to its
Speaker 4: Treasury General account. And you're looking at the FED continuing
Speaker 4: to reduce its balance sheet, albeit at a very slow pace.
Speaker 4: So if the Fed were to go to let's say
Speaker 4: a six percent Fed funds rate, of course the chances
Speaker 4: of them bringing inflation down are much higher. But I
Speaker 4: don't see them doing that because it's already liquidity drag
Speaker 4: or liquidity drain coming in the second half.
Speaker 3: Well, you o code in recession anyway, yep, And a
Speaker 3: recession that comes without right cuts.
Speaker 4: For now, Yes, because I do think where the FED
Speaker 4: will be sticky. And keep in mind, I don't think
Speaker 4: the FED is going to go to six percent Fed
Speaker 4: funds rate, but I do think they're gonna hold the
Speaker 4: funds rate at whatever they terminate, five and a quarter,
Speaker 4: five and a half, whatever it is, They're gonna hold
Speaker 4: it there for as long as possible, and then they're
Speaker 4: gonna cut. So that means now we're looking at those
Speaker 4: first cuts probably coming in February of next year.
Speaker 3: The WORL would you describe, so stack flashin a FED
Speaker 3: that's not went into crush inflation ultimately might start cutting
Speaker 3: next year. Sounds pretty dreadful for risk assets, doesn't it?
Speaker 3: Recession as well all these codes that you've got, It
Speaker 3: absolutely does.
Speaker 4: And I think the silver lining here is that eventually
Speaker 4: they do cut. And because you're looking at an economy
Speaker 4: that is still relatively balanced for the most part at
Speaker 4: this point, you're not looking at extreme excesses and housing
Speaker 4: in energy investment, Your recession is shallow and there should
Speaker 4: be more of a V shaped bounce off of it
Speaker 4: once we reach that trough.
Speaker 3: Well, how'd you get the vey if it's shallow?
Speaker 4: Just to build on that just fondly, because you do
Speaker 4: get a FED that does eventually cut aggressively in twenty
Speaker 4: twenty four, twenty five.
Speaker 3: And it's just one of those conversations that later on
Speaker 3: today I'm going to replay and listen back to. This
Speaker 3: was great Tom to Sourus that a strategist with this
Speaker 3: around a table, David Leibovitz Global Market's trying to just
Speaker 3: a JP Morgan Asset Management. David want to put a
Speaker 3: catch up with you, sir, post your life fourth and
Speaker 3: I hope you had a wonderful holiday. Let's start there.
Speaker 3: You missed it. What do you do now?
Speaker 5: So I think what's interesting is that we all missed it.
Speaker 5: You know, people came into this year with a view that, Okay,
Speaker 5: maybe you get a little bit of a bounce because
Speaker 5: twenty twenty two is so bad, but certainly not fifteen
Speaker 5: percent on the S and P in the first half
Speaker 5: of the year. And so I think what you do
Speaker 5: is you actually don't do all that much because what
Speaker 5: we don't want people to do is to begin chasing
Speaker 5: this rally. You know, we do see some storm clouds
Speaker 5: on the horizon. We do think that the risk of
Speaker 5: recession has risen. I do think that the FED is
Speaker 5: going to continue hiking rates. Yes, we've had a very
Speaker 5: good run in risk assets, but but I wouldn't chase
Speaker 5: this rally too much. I would stick to your plan,
Speaker 5: stick to your acid allocation rather than moving things around
Speaker 5: one way or the other.
Speaker 1: I'll get that. But you have to identify a second
Speaker 1: leg of able market. Is JP Morgan allowed with all
Speaker 1: your economic work Chasm Faroli to say, we have the
Speaker 1: underpinning of what can be a legitimate broadening out bullmarket.
Speaker 5: So I guess there are two things that give me
Speaker 5: pause about that, that possibility of broadening out from a
Speaker 5: bull market perspective. The first is that the majority, the entirety, effectively,
Speaker 5: of the rally that we've seen year to date has
Speaker 5: been driven by multiple expansion right, so earning hasn't really participated.
Speaker 5: And so what we need to see in order to
Speaker 5: remain constructive on risk assets here is evidence that you know,
Speaker 5: the potential downside on earnings is potentially not as bad
Speaker 5: as what a lot of people would expect if we
Speaker 5: do hit a slower patch in the economy, potentially a recession.
Speaker 5: I think you're looking at earnings estimates which are signaling
Speaker 5: that products will continue to rise, and to me, that's
Speaker 5: a tough pill to swallow.
Speaker 1: In the real world of sitting around when the you know,
Speaker 1: we celebrate that the colonies one and we're sitting around
Speaker 1: and we're having mustard not catch up on our hot dogs,
Speaker 1: and there's one guy there livid at a given institution.
Speaker 1: Let's pick on JP Morgan and saying, Okay, what's the
Speaker 1: plan to catch up? What's the JP Morgan plan to
Speaker 1: catch up? If I was above average but nothing like
Speaker 1: what Nvidia.
Speaker 5: Did, So I think the best thing that people can
Speaker 5: do today is try to preserve their optionality, and we
Speaker 5: would encourage two ways of a place. First would be
Speaker 5: by not forgetting about fixed income.
Speaker 1: Right.
Speaker 5: You know, we talked about how sitting in cash feels comfortable,
Speaker 5: and obviously you're getting paid from the bond market. Once again,
Speaker 5: we still think that that optionality, maintaining a relatively short
Speaker 5: duration could work in your favor because if you get
Speaker 5: a big pullback in equities, you're going to be able
Speaker 5: to deploy that capital and try to catch up. To
Speaker 5: your question. The other thing is we would maintain that
Speaker 5: shorter duration on the equity side as well. Focus on
Speaker 5: the dividend payers focus on the high cash flow companies. Again,
Speaker 5: there's a lot of excitement and a lot of enthusiasm
Speaker 5: about things like artificial intelligence, and I do think that
Speaker 5: it'll boost productivity over the longer term, but I'm not
Speaker 5: sure it's going to boost productivity tomorrow, and I'm not
Speaker 5: sure it means that we're going to avoid some sort
Speaker 5: of soft patch in the economy over the course of
Speaker 5: the next twelve months. So this all feels very sentiment driven.
Speaker 5: That's why we're so focused on profits and the optionality
Speaker 5: that those cash flows.
Speaker 3: Can prove in videos making money, metas making money, What
Speaker 3: does tech fit into that? Just to build on that
Speaker 3: a little bit more.
Speaker 5: No, and we talked about this a couple of months ago.
Speaker 5: What was really interesting about watching tech into the end
Speaker 5: of twenty twenty two in the beginning of this year
Speaker 5: is that they've been taking their medicine right, they've been
Speaker 5: laying people off, they've been defending that margin. They don't
Speaker 5: necessarily have the type of pricing power that you're seeing
Speaker 5: from say the airlines, in the current environment, and so
Speaker 5: you're actually seeing tech margins hang in there. And I
Speaker 5: think that that does limit the downside to the market
Speaker 5: if we do hit a slow patch or a recession in
Speaker 5: the economy. But you know, my general take is that
Speaker 5: even if inflation is still above the Fed's target and
Speaker 5: real growth is slowing, tough to see how earnings in
Speaker 5: aggregate continue to.
Speaker 3: Expand just going through the top ten on the S
Speaker 3: and P five hundred YEA Today and video we all
Speaker 3: know that name Meta. Then you've got these cruise operators
Speaker 3: Carnival up by one hundred and thirty five percent, Royal
Speaker 3: Caribbean up one hundred and nine percent, YEAT today, Norweighting
Speaker 3: up seventy nine there's a home builder in there by
Speaker 3: close to seventy percent. What's all that about?
Speaker 5: So I think that this, this is the big question,
Speaker 5: and I think this is part of why so many
Speaker 5: people have gotten the market wrong this year. It feels
Speaker 5: like we're seeing these rolling recessions in the economy, where
Speaker 5: first it was the cyclical parts, the rate sensitive parts
Speaker 5: like housing. Obviously you had services shut down during the pandemic,
Speaker 5: and things have continued to bounce there quite nicely. The
Speaker 5: path to a soft landing here is that everything fails
Speaker 5: to roll over at the same time, and we just
Speaker 5: see these little kind of mini explosions in many soft patches,
Speaker 5: which isn't completely unfeasible. But I think what you're seeing
Speaker 5: in terms of the top performers outside of the tech
Speaker 5: names services, people are still out there spending money. They're
Speaker 5: still going on vacation. I was in Orlando the other week.
Speaker 5: The airport was full. You look at home builders, right
Speaker 5: when it comes to mortgage rates, it's the big move
Speaker 5: that puts things on ice.
Speaker 1: Now.
Speaker 5: People look at the numbers and they say, well, the
Speaker 5: house is more expensive. Rates are more expensive, but I
Speaker 5: don't think that they're necessarily going to continue to rise,
Speaker 5: and so you're beginning to see that stabilization in those
Speaker 5: parts of the economy. And I think that that's why
Speaker 5: people continue to gravitate to this soft landing thesis, although
Speaker 5: it seems like a bit of a story in so,
Speaker 5: I think that bonds for us, the shorter end of
Speaker 5: the curve continues to look most attractive. You're not getting
Speaker 5: paid to go all the way out. I think selectively
Speaker 5: adding duration when you get a ten year that edges
Speaker 5: up towards four percent makes a lot of sense because
Speaker 5: over twelve months, right if rates end up falling that's
Speaker 5: going to work.
Speaker 1: If the zeitgeist this weekend, John while you were away
Speaker 1: was simple. People are stunned at how retail, in particularly
Speaker 1: older retail, is all in stocks. The lessons we learned
Speaker 1: cfa kind of chit chat. It's been thrown out the
Speaker 1: window by a public just buying and buying and buying stocks.
Speaker 3: So let's talk about something that's going to come up along.
Speaker 3: You'll hear people in programs like this talking about triple
Speaker 3: digit inversion two year, ten year, negative one hundred and
Speaker 3: five basis points for a lot of people listening, and
Speaker 3: they've heard this a million times. The curves inverted. That's dangerous.
Speaker 3: That's bad, isn't it. What does that mean? Negative one
Speaker 3: o five?
Speaker 5: So that's close to as inverted as the curve has.
Speaker 5: He takes, right, we have to all the way back
Speaker 5: to the eighties. And you know, again, you think about
Speaker 5: history and it doesn't always repeat itself, but it does
Speaker 5: tend to rhyme. And I think what the yield curve
Speaker 5: is telling us is is something that you know, a
Speaker 5: lot of people I think know in the back of
Speaker 5: their minds, but but hesitate to really wrap their arms about.
Speaker 5: Is that squeezing the last little bit of water out
Speaker 5: of this inflation sponge is probably going to be more
Speaker 5: difficult than a lot of people expect, and it's arguably
Speaker 5: going to require a recession. And I think that that's
Speaker 5: what the yield curve is saying. It said, the FED
Speaker 5: has recognized that if they want to prioritize controlling prices,
Speaker 5: they're going to need to potentially crash the plane, and
Speaker 5: I think that that's why you're seeing the curve as
Speaker 5: inverted as it is, just.
Speaker 3: To finish on that. Then, David, does that imply this
Speaker 3: FED has to sit at five point fifty for a
Speaker 3: longer time than people expect, or does that imply that
Speaker 3: this FED needs to go high than five fifty and
Speaker 3: maybe even closer to six percent.
Speaker 5: So I think that the risk to rates is still
Speaker 5: to the upside. Obviously, my boss's boss thinks that six
Speaker 5: percent is potentially in play. It wouldn't surprise me. But
Speaker 5: I think at a minimum, what investors need to be
Speaker 5: prepared for is the FED going to somewhere around five
Speaker 5: fifty and then not blinking until the labor market deteriorates
Speaker 5: in a way that they can no longer ignore it.
Speaker 5: Right three point seven percent on unemployment is not going
Speaker 5: to catch the Fed's attention. Four and a half.
Speaker 1: Well, it's David. It's a slow news day. Can can
Speaker 1: you state that mister Diamond's looking for a six percent
Speaker 1: level in FED funds? Right?
Speaker 5: He came out and said that.
Speaker 1: He came out and said that he thought we were going.
Speaker 3: To set You know that's not news. You're trying to
Speaker 3: get him INTROUPO.
Speaker 1: I don't know. David writes his annual letter, you know,
Speaker 1: it's like a fifty eight page level call up leve it.
Speaker 1: So they go, come on, write this thing.
Speaker 3: For us on that.
Speaker 5: Well, I think what's interesting is that it wasn't too
Speaker 5: long ago that people were highly skeptical that we were
Speaker 5: going to five And this is a FED that has
Speaker 5: taken the inflation problem personally. They've already made one policy error, right,
Speaker 5: they started too late. I don't think that they're going
Speaker 5: to make another. In the office, we're in the office
Speaker 5: five days a week, five days a week.
Speaker 1: Are you going to get a view of Park Avenue
Speaker 1: in Grant and the uh, you know, the down at
Speaker 1: the end of Park there pan Am building, or are
Speaker 1: you going to be looking out over New Jersey and
Speaker 1: in the Hudson. How do we fit that in?
Speaker 5: I think time will tell I heard it. How good
Speaker 5: I am at calling THEE.
Speaker 3: Six got a star office view, David, Thank you much,
Speaker 3: David Leave it's there of JP Morgan Asset Management.
Speaker 1: This is really a special treat here. I was hugely
Speaker 1: influenced years ago and reading i'll say five books on
Speaker 1: the Kingdom of Saudi Arabia and all the romance back
Speaker 1: to seventy five millimeter Lawrence of Arabia a million years
Speaker 1: ago of this experiment that is the Saudi family. Alan
Speaker 1: Wald is definitive on this. We usually talked to her
Speaker 1: about the major revenue maker, which is oil, maybe a
Speaker 1: Ramco at Formula one. But today we digress and with
Speaker 1: ellen Wald we speak of this royal family and what
Speaker 1: they're doing to global sports. Ellen, are you surprised that
Speaker 1: the Saudis want to acquire entertainment prestige?
Speaker 6: No, I'm not. I think that this really goes along
Speaker 6: very well with their kind of general search for global prestige,
Speaker 6: especially in terms of the West. And you know they're
Speaker 6: not really getting it from oil anymore. Yes, they still
Speaker 6: are providing this incredibly vital resources, as you just mentioned
Speaker 6: to the world, But it doesn't necessarily come with prestige.
Speaker 6: In fact, it comes with a bit of the opposite,
Speaker 6: given how prominent the climate issues are today and how
Speaker 6: prominent they are in discussion. You even saw the OPEC
Speaker 6: Secretary General making reference to the fact that, of course
Speaker 6: we want an admissions free future. Well really, aren't you
Speaker 6: guys a bunch of oil producers. So I think that
Speaker 6: they are searching for other avenues to acquire prestige, and
Speaker 6: that generally for the Saudi involves throwing money at it.
Speaker 1: Miamateur, take on this, off, lacy and off your work
Speaker 1: is a basic idea that these are tribal clans, tribal families.
Speaker 1: Whether it's United Era memorates Kuwait, the originality of the
Speaker 1: experiment in Jordan, et cetera. Give us an update on
Speaker 1: the power structure of the royal family in Saudi Arabia.
Speaker 1: Does it parken back to Faisal or is it something new?
Speaker 6: So I think it's kind of a combination of both,
Speaker 6: in effect, because the Sautists have always looked for ways
Speaker 6: to show their prestige, and so way back when you
Speaker 6: had you know, Abdolzes even so he would basically, you know,
Speaker 6: before he had oil. His way of showing his kind
Speaker 6: of rule and affirming his rule over the various tribes
Speaker 6: in Saudi Arabia was to go around and basically promise
Speaker 6: them stuff. So people would show up and they'd ask
Speaker 6: for things, and he promised them, and then they'd have
Speaker 6: to show up at his you know, treasurer, and the
Speaker 6: treasurer would have to dole out the money. And you know,
Speaker 6: for oil, there wasn't that much money, so as soon
Speaker 6: as it was gone, he'd kind of pack up and
Speaker 6: slink away. But still the Saudi king would kind of
Speaker 6: keep promising things. Well, now they've got tons of oil
Speaker 6: and tons of money, and so they're promising things, you know,
Speaker 6: in terms of going out and trying to acquire big
Speaker 6: time footballers or do this deal with PGA, which is
Speaker 6: essentially going to allow them to kind of bank roll
Speaker 6: this commercial entity for golf around the world. And it's
Speaker 6: basically a way of ensuring that people don't say bad
Speaker 6: things about them, but also ensuring to their people, hey, look,
Speaker 6: we're doing all this great stuff and you know, we're
Speaker 6: behind it and we're funding it.
Speaker 3: And none of this is new. As you've illustrated that
Speaker 3: China tried to do this with football, it wasn't very successful.
Speaker 3: Russia is trying to do this in a various ways
Speaker 3: to use sport as a vehicle to basically achieve certain goals,
Speaker 3: whether it be the Winter Olympics, a Formula one race.
Speaker 3: World can't for football. And I want to understand from
Speaker 3: your perspective, what would success look like for the Saudis.
Speaker 3: What does that actually look like.
Speaker 6: That's a good question. I think success is it partially
Speaker 6: it is winning. So their sports teams have to do well.
Speaker 6: And I remember there was a whole big controversy about
Speaker 6: the Saudis trying to acquire a football club in England
Speaker 6: and then they didn't get the one that they wanted,
Speaker 6: so they got a lesser one. So they've got to
Speaker 6: do well. But they've also got to kind of make
Speaker 6: money out of it. So even if they don't win,
Speaker 6: it's not so much about winning. It's more about you know,
Speaker 6: being on TV and getting that prestige and people kind
Speaker 6: of showing them difference. You know, their big time people
Speaker 6: get invited to all the big events and they show
Speaker 6: them on camera and they you know, say good things
Speaker 6: about them, and nobody says anything bad about them. So
Speaker 6: this is a way of kind of ensuring Oh that
Speaker 6: koshogi thing that happened back there, you know, no one,
Speaker 6: no one remembers that because now we've got you know,
Speaker 6: Rumayan at you know, the center of the PGA golf tournament,
Speaker 6: and you know, NBS show up to whatever football game
Speaker 6: he wants, and you know they'll show him on camera
Speaker 6: and say, you know, if not good things, at least
Speaker 6: they won't say bad things.
Speaker 3: Are you expecting the West to close the door to this, Well, I.
Speaker 6: Do think that there's going to be pushback. But money
Speaker 6: is a really powerful motivator and it's very hard to
Speaker 6: say no when you know there's a deep pocket here.
Speaker 6: I mean, look at PGA, and you know, as long
Speaker 6: as there isn't any kind of major human rights issue
Speaker 6: that pops up, of course, I do think that that
Speaker 6: kind of thing is inevitable. There will be another big
Speaker 6: human rights issue that comes up, and the issue will
Speaker 6: be will these leagues be able to say, no, we
Speaker 6: don't want your money anymore, or will they say, oh,
Speaker 6: well we do want your money.
Speaker 1: We just want you to write Ellen, you're away from
Speaker 1: what Ed Moore says. Jeff Curry and the rest of
Speaker 1: the bandits in hydrocarbon analysis. What's your price barrel of
Speaker 1: oil that you think the royal family needs in Saudi Arabia?
Speaker 1: Do you have a Brent crude price that gets it
Speaker 1: done for them?
Speaker 6: I think that anything above you know, sixty sixty five
Speaker 6: is getting it done for them. They don't need to
Speaker 6: cover their budget with the price of oil. So I
Speaker 6: know the IMF says, you know, oh, they need eighty
Speaker 6: or eighty five dollars oil to cover their budget. That's
Speaker 6: not how the Saudis are thinking. They don't need to
Speaker 6: cover their budget with oil. They can, you know, they
Speaker 6: can take loans, They've done that, and not necessarily that
Speaker 6: they have other sources of revenue. I think they would
Speaker 6: love eighty or eighty five in order to keep expanding
Speaker 6: their investments and keep having more money to just throw
Speaker 6: at these prestige things. But you know, to be perfectly satisfied,
Speaker 6: I think honestly they're fine with sixty. They can make
Speaker 6: it even at forty or fifty.
Speaker 3: And just to be clear on the record, Newcastle United
Speaker 3: is a lesser team, Is that right? Anon? Well, you know, I'm.
Speaker 6: Not really up on my British all teams.
Speaker 3: That's when I heard that seek in Shepherdson, Pantheon, macrowe
Speaker 3: Can was with us.
Speaker 6: I tried United, right.
Speaker 1: Yeah, Well, Ellen had to wait to come on because
Speaker 1: my soccer talk was so lame while you were going.
Speaker 1: Brima really helped. We had we had on uh Ian,
Speaker 1: Shepherdson and Panthe and then we were tied it into
Speaker 1: Saudi Arabia's investment with the Newcastle United and then one
Speaker 1: was it fourth place, the wonderful fourth place.
Speaker 3: Finish secure Champions League.
Speaker 1: It was great. But you know my question is to
Speaker 1: two of you. We got another fifteen minutes with Allen.
Speaker 1: I think I'm kidding a fifty and I got to
Speaker 1: talk F one racing in a Ramco's investment.
Speaker 3: There and well, thank you Ellen, thank you. That was.
Speaker 1: Elene Becker joins us now on the tragedy was just
Speaker 1: domestic air travel. What I learned over the weekend lane
Speaker 1: in two instances, one with John Farrell, who actually got
Speaker 1: on an airplane and got home, is in an national
Speaker 1: travel is actually pretty good, and domestic travel is an
Speaker 1: absolute train wreck. You drive out of Denver and you
Speaker 1: and I remember the horrific Stapleton International Airport with the
Speaker 1: winds going sideways and you were lucky you could land.
Speaker 1: This is an history and you're going across the fields
Speaker 1: of Denver East and there are those teepees in the distance,
Speaker 1: which was a huge success of Denver. Den built a
Speaker 1: stunning twenty seven years ago. Why can't we build new
Speaker 1: airports in America?
Speaker 7: That's a great question, tom So. The number one issue
Speaker 7: is space. We don't have enough space. If you think
Speaker 7: about Newark Airport, to the right you have one highway
Speaker 7: and to the left you have the New Jersey turnpikes.
Speaker 7: So there's no place to put a third parallel runway
Speaker 7: that would alleviate some of the problems. And then people
Speaker 7: don't want big airports in their backyard. The reason Denver
Speaker 7: was able to be built is because they bought so
Speaker 7: much of the land out there that you can have.
Speaker 7: I think there's four parallel runways now and I think
Speaker 7: they can go up to six or eight, so they
Speaker 7: have the space for growth. Most of the rest of
Speaker 7: the country is built around cities and you just don't
Speaker 7: have that within that.
Speaker 1: Scott Kirby of United belieguered I believe he called in
Speaker 1: from Teeterborough. We're trying to get him on the phone
Speaker 1: but Scott Kirby of United madclear they will do less
Speaker 1: flights out of EWR the companies you follow, is that
Speaker 1: the future, which is they're just going to have fewer flights.
Speaker 7: Yep. Absolutely, We've been seeing that Tom as you know,
Speaker 7: for a couple of years now, for at least five
Speaker 7: or seven years. It's going to be more seats per departure,
Speaker 7: so bigger aircraft, and it's going to be fewer departures
Speaker 7: per day. You remember you and I talked about this
Speaker 7: the Secretary of Transportation as the four big airlines serving
Speaker 7: the New York area, Delta, American, United and Jeff Blow
Speaker 7: to cut their summer capacity by ten percent because air
Speaker 7: traffic control is understaffed. And you add that, you add
Speaker 7: to an understaffed air traffic control system. Then you add
Speaker 7: to that winter or summer rather thunderstorms, and you have
Speaker 7: all the aircraft have to land, especially the ones coming
Speaker 7: in from overseas, and then nothing's taking off. So you get, right,
Speaker 7: you get those issues with aircraft that can't find gates,
Speaker 7: and the next thing you know, people are trapped.
Speaker 1: One final question on this insanity, and I actually want
Speaker 1: to talk Graham, Dodd and Coddle with you actual adult
Speaker 1: securities analysis not so much who do you blame? But
Speaker 1: years ago weren't there thunderstorms as well. I mean, I
Speaker 1: don't get why thunderstorms are now a new.
Speaker 7: Thing, right exactly. So the biggest issue is when thunderstorms
Speaker 7: roll through the area, they're number one unpredictable, so you
Speaker 7: don't really know where the cells are. You cannot have
Speaker 7: because of all that at all, if there's lightning in
Speaker 7: the area, you cannot have your people on the ramp
Speaker 7: loading and unloading the tags. They have to come in.
Speaker 7: You can't refuel, so they have to command. So that's
Speaker 7: to your point, that hasn't changed. But what has changed
Speaker 7: is that the entire system is just overtaxed. And it
Speaker 7: goes back to years, it goes back decades. The system
Speaker 7: has been underinvested in. And that's infrastructure. It includes airports,
Speaker 7: and includes government right, and it includes airlines.
Speaker 1: Let's talk securities analysis by hold Sell hullaen Becker on
Speaker 1: say typic United Airlines. I did a log regression of
Speaker 1: United Airlines back to two thousand and eight where they
Speaker 1: cratered in the Great Contraction. Great they could go up
Speaker 1: one hundred percent off that that log extrapolation out based
Speaker 1: pre pandemic. Do you envision these airlines going up fifty
Speaker 1: eighty indeed one hundred percent in the near term.
Speaker 7: Off the two thousand and eight bases. Yeah, there's no
Speaker 7: reason why they shouldn't maybe not one hundred percent, but
Speaker 7: certainly doubles from here. Even from here, I mean, it's
Speaker 7: not going to be as robust as it would have
Speaker 7: been without the pandemic because with the exception of Delton,
Speaker 7: I think Alaska are everybody else issued equity. So if
Speaker 7: we thought they could earn like United take for example,
Speaker 7: our best idea for twenty three, if we thought they
Speaker 7: could earn three dollars thirteen dollars a share at the
Speaker 7: peak at a ten multiple would be one hundred and thirty.
Speaker 7: But now you have to adjust for the increase you know,
Speaker 7: in shares outstandings, So thirteen becomes twelve, one hundred and
Speaker 7: thirty becomes one hundred and twenty, and the stock's at
Speaker 7: fifty five is fifty four. So no reason why I
Speaker 7: can't go up from here, especially given the fact that
Speaker 7: we think we're in a multi year growth phase where
Speaker 7: you're going to have these issues. These are not issues
Speaker 7: that are going to be solved speedily. If for short,
Speaker 7: three thousand air traffic controllers and we only train five
Speaker 7: or six hundred a year, that's a five or six
Speaker 7: year problem right there. So curious to what Scott will
Speaker 7: say that, Yeah, it's kind of probably what Helene.
Speaker 1: This is important because I remember I treasured my conversation
Speaker 1: with Robert crandall, you know, American Airlines and all that
Speaker 1: he did and the history of aviation. The romance of
Speaker 1: what Helene Becker covers great. The bottom line is, have
Speaker 1: they found a new maturity of persistent cash flow or
Speaker 1: are the group of planes? Are they still sharks where
Speaker 1: they boom they bust, they boom they bust. Is it
Speaker 1: a new regime?
Speaker 7: No? I mean, I just I don't know the answer
Speaker 7: to that specifically. I don't think I can. I would
Speaker 7: never have foretested the pandemic, right and I'm not sure.
Speaker 7: In fact, I famously said that in one of my
Speaker 7: reports that you can't shut down the world, and it
Speaker 7: turned out we did and you could. It's just turning
Speaker 7: it back on. It's not that easy. And I think
Speaker 7: that's a big problem. We stopped figuring out how to
Speaker 7: make this work. And the fix is a multi year fix.
Speaker 7: But in the interim there will always be shocks to
Speaker 7: the system that will cause the earnings to decline, will
Speaker 7: cause losses, will cause airlines to go bankrupt again. But
Speaker 7: I think in the main because of all these infrastructure issues,
Speaker 7: a lack of OEM deliveries that our good friend Kaivon Rumor,
Speaker 7: my colleague at td COW and talk about all the time,
Speaker 7: the ATC system that we've talked about. You add all
Speaker 7: those issues together, plus you have ten ten thousand at
Speaker 7: this point. Pilot's retiring in this decade and it's hard
Speaker 7: to replace them and so on. So by the time
Speaker 7: you're done with all of this, Yeah, it's it's really
Speaker 7: problematic because their travel is just going to get more.
Speaker 6: Expensive real quick.
Speaker 1: Here, Helene, you get to breathe the same air as
Speaker 1: Kaivon Rumor. I mean, he's the giant for all of
Speaker 1: us with an airline transportation security analysis. Is Kaivon Rumor
Speaker 1: optimistic on the future of Boeing whether they're out of
Speaker 1: Seattle or Chicago or I think they're moving to Washington
Speaker 1: this week? Is he still plus plus on BA?
Speaker 6: Yeah?
Speaker 3: I think so.
Speaker 7: I think it's one of his one of his top picks.
Speaker 1: Okay, Helene, thank you so much. Helene Becker there with
Speaker 1: TD Cowen on an upper Thanks to all your anecdotal
Speaker 1: comments over the weekend on domestic travel. And I've had
Speaker 1: a couple very worried messages about Baramo and I'm really
Speaker 1: not sure which airport she's in, but you know it's
Speaker 1: you know, does they set up the airports and there's
Speaker 1: no place to lay down because they don't want people
Speaker 1: laying down, and so you know, she's got a fold
Speaker 1: out thing where she puts it across the railings of
Speaker 1: the chair, so at least the cherubs can sleep. But
Speaker 1: she's had her fair share of the domestic travel as well.
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