Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 1: with Jonathan Ferwell and Lisa Brownwitz Jaily, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. Well, what we
Speaker 1: need to do, John and Lisa is remain calm on
Speaker 1: radio and television. Right now, we welcome Neil dot Ahead
Speaker 1: of US Economic Research, Renaissance macro research. Neil, you are
Speaker 1: the king of transitory. Why is six point x per
Speaker 1: cent inflation transitory? Well, I don't know that I'm the
Speaker 1: king of transitory yet, Tom. I mean, we have been
Speaker 1: telling clients that that inflation is going to be getting
Speaker 1: worse before it gets better, and um, you know, today's
Speaker 1: inflation data has been so it vindicates that. I mean,
Speaker 1: I think if you look at this, this is actually
Speaker 1: somewhat worse under the surface than it is on the surface. Um,
Speaker 1: so you know, I'm looking at my Bloomberg obviously shelter,
Speaker 1: but you know, look, we still got a beat despite
Speaker 1: no contribution from airfares. Air airline fares were actually a drag.
Speaker 1: It's hard to see how that keeps up. Considering, um,
Speaker 1: you know, the travel situation which is beginning to heat up.
Speaker 1: I mean, if you look at search interests for flights, uh,
Speaker 1: there's increasing demand for travel. So it's it's unlikely that
Speaker 1: that we see a repeat performance on that front going forward. Um.
Speaker 1: You know, I still think there's a decent amount in
Speaker 1: the pipeline for use car and truck prices to keep
Speaker 1: going up. Um. But again, the big, the big story
Speaker 1: is here is rental inflation, and it's and it's and
Speaker 1: it's firming. So UM, I do think that the FEDS
Speaker 1: still has a story to tell. So it's not so
Speaker 1: much what the lation is doing. Obviously that's important, but
Speaker 1: really it's what's the FED going to do about it? Um?
Speaker 1: And I think Powell, um, it's not ready to do
Speaker 1: something about it. Yeah to Q one, Nail if you can,
Speaker 1: Sorry to jump in, but I think this is important
Speaker 1: when we get to Q one, and as I listen
Speaker 1: to you, it seems to be getting broader and stickier
Speaker 1: when we get to Q one. If we're still in
Speaker 1: this position, and unemployment, as Jim Pallada suggested, could drop
Speaker 1: to a three handle. How do you think communication evolves
Speaker 1: around that? From your perspective, you're understanding of the reaction
Speaker 1: function of the FED. Well, I think that that will
Speaker 1: keep the door open for rate hikes starting in the
Speaker 1: second half of of next year. I mean, remember that
Speaker 1: the FED is a very slow moving entity, right, and
Speaker 1: their institutional constraints. I mean, think about what Powell said
Speaker 1: last week. I mean, you know, you had folks like
Speaker 1: Waller and soon to depart corals talking about how, well,
Speaker 1: if the next two inflation prints or firm, we may
Speaker 1: have to shift the timeline for rate hikes. Um, you know,
Speaker 1: maybe even hinting at speeding up the tapering process. Powell,
Speaker 1: I think effectively put the kabash on on that talk
Speaker 1: last week. So they've kind of locked themselves in to
Speaker 1: a steady pace of tapering I think over the first
Speaker 1: half of next year. So you know, look, we're talking about,
Speaker 1: you know, potentially substantial acceleration and employment activity between now
Speaker 1: and the end of the year. Obviously inflation is firming,
Speaker 1: so we're seeing an acceleration and nominal growth and guess
Speaker 1: what the FET is still buying right, So, um, So
Speaker 1: it just tells you how slow moving the fete is
Speaker 1: um And look, I mean I think that labor supply
Speaker 1: is going to come up, and I think the FED
Speaker 1: will have a good story to tell and they'll they'll,
Speaker 1: you know, and they'll continue to stick to that. But
Speaker 1: you know, the risk, of course, is that there's more
Speaker 1: of an abrupt shifting policy. Sometime later night, steer Neil.
Speaker 1: Let's say the data continues to come in like this,
Speaker 1: and the fact it feels like it needs to hike rates.
Speaker 1: How high can rates go given where the economy is,
Speaker 1: given how much debt we've incurred. Well, so that's the issue, right.
Speaker 1: Li says that if you look at the pricing in
Speaker 1: the forward market, I mean, the curve is so flat.
Speaker 1: So basically, if I'm interpreting the market correctly, it's, you know,
Speaker 1: let's hike twice and then be done, which sort of
Speaker 1: raises the question like why hike at all? Like so
Speaker 1: I don't, um, you know, to me, the back end
Speaker 1: of the curve looks very misspriced. Um, because there looks
Speaker 1: to be, at least in my mind, a significant amount
Speaker 1: of momentum in the in the in the economic situation,
Speaker 1: I mean, demand is running very very strong, and it
Speaker 1: still continues to run strong, and you know, you mentioned
Speaker 1: about how real wages may slow demand. That's unlikely in
Speaker 1: my view, because aggregate incomes are surging, right, So it's
Speaker 1: not just about what people are making on each our work.
Speaker 1: It's about how many people are working, how long they're working,
Speaker 1: and also they're hourly earnings. And if you up the
Speaker 1: some product of those three things, I mean, that's growing
Speaker 1: like ten percent, So that's a rough proxy annualize, So
Speaker 1: that's a rough proxy phenomenal GDP. So now we need
Speaker 1: to think about what's going to be the distribution of
Speaker 1: that growth. I mean, is it going to be you know,
Speaker 1: six percent real real activity and maybe four percent inflation?
Speaker 1: Is it going to be seven percent real activity and
Speaker 1: three percent inflation? What I can tell you at a
Speaker 1: minimum is that the FED is going to be having
Speaker 1: to revise up their inflation estimates for next year. And
Speaker 1: one of the things that we've been seeing is that
Speaker 1: they've you know, when you look at the median expectations,
Speaker 1: they've always been sort of just expecting inflation to slow
Speaker 1: down to two percent, right, So it's just sort of
Speaker 1: this mark to market exercise. There hasn't been this kind
Speaker 1: of capitulation from the FED on the inflation story. And
Speaker 1: I wouldn't expect that in December, and I wouldn't expect
Speaker 1: it in March either, because, if anything, the composition of
Speaker 1: the of the farm C is going to change. I
Speaker 1: don't think Biden is going to put people in there
Speaker 1: that are going to adopt a more hawkish response function
Speaker 1: to the data that's coming in. Neil Love catching up
Speaker 1: with you, the perfect guest to talk about this with
Speaker 1: Neil down to that every nice on smacro research. Right now,
Speaker 1: we will pause, and this is a wonderful interlude into
Speaker 1: cp I and all that we cover here. Jeanne Plan
Speaker 1: the CEO of BMP perry Ba USA. He's an acclaimed
Speaker 1: world class sailor, but far more he has carried forward
Speaker 1: the heritage of b MP Parry Ba from Roland Garrows
Speaker 1: almost fifty years ago, where it's safe to say he
Speaker 1: and his bank brand and own the sport of tennis. John,
Speaker 1: the only equivalent, see I know, is what Barclays did
Speaker 1: in Premier League years ago. Jean, if you have had
Speaker 1: a bang up year in the branding of tennis, what
Speaker 1: will b MP Parry BA do in two thousand twenty two?
Speaker 1: How do you carry for the open in Indian Wells
Speaker 1: and bring it into your banking business of next year. Well, Tom,
Speaker 1: John and Lisa, thank you so much for having me
Speaker 1: on the show. Um and Tom, you definitely follow and
Speaker 1: no tennis extremely well. You mentioned Indian Wals, which we
Speaker 1: managed to you know, really host in one, which we
Speaker 1: could not do in twenty and it was an amazing
Speaker 1: way to send the message at work, back back in business,
Speaker 1: back with clients. And as you said, the bank is
Speaker 1: has tennis in its DNA and the plan is to
Speaker 1: having Indian Wells in twenty twenty two in March. This
Speaker 1: is you know, spring season opener and hopefully this time
Speaker 1: full capacity a lot of fans. And you know, the
Speaker 1: values of tennis fits pretty well the value of the
Speaker 1: bank going forward. Uh. We you know, it's a it's
Speaker 1: a global sport. The bank is a global bank. It's
Speaker 1: all about sportsmanship, you know, personal improvement and really uh,
Speaker 1: it's a it's it's a sport that you can really
Speaker 1: you know, develop and and and uh and follow around
Speaker 1: the world. And this is this is why we like
Speaker 1: the game, Johnny. If let's pick up on that line
Speaker 1: you just mentioned, the bank is back. The bank is back,
Speaker 1: the employees back at the back on the trading floors,
Speaker 1: business is usual. Can you help me understand how things
Speaker 1: are revolving at the moment, how things are normalizing in
Speaker 1: your business, your bank. We are absolutely, John, we are
Speaker 1: really you know, uh, asking and more specifically, you know,
Speaker 1: incentifizing our staff to come back on premises. You know,
Speaker 1: we have to acknowledge that the digitalization of our economy
Speaker 1: during the pandemic, you know, as allower us to stay
Speaker 1: in business, to stay connected, including today, by the way,
Speaker 1: I love I love being in the studio. I look
Speaker 1: forward to being back in person with you hopefully you know,
Speaker 1: in the months to come. But having said that, nothing
Speaker 1: replaces the in person relationship and connectivity. It's very complicated
Speaker 1: to convey companies values digitally. And this is what we
Speaker 1: do on the His coast, you know, in the building
Speaker 1: you know, well here in mid town Manhattan, we now
Speaker 1: have over thirty percent for staff back on premises on
Speaker 1: a rotational basis obviously, uh. And we're targeting for by
Speaker 1: your hand and hopefully early in two. We are trying
Speaker 1: to make the office attractive or we're designing of frauds
Speaker 1: to make the time effective. Um. You know it has
Speaker 1: We have to provide value for employees to enjoy being
Speaker 1: back on premises, and management is a refocused on it.
Speaker 1: They want to be paid more. You know that you
Speaker 1: can say the bank is back, we will care about
Speaker 1: this business. I care about this industry. You care about
Speaker 1: this industry. It's great to see people on trading flaws again.
Speaker 1: But you know, if something's got lost with this younger generation,
Speaker 1: they don't want to be a part of it. In
Speaker 1: the same way, how are you grappling with that? Does
Speaker 1: the price get it done well? It's uh, it's one
Speaker 1: of the major challenges and concerns. There is a tremendous
Speaker 1: competition for talent. Uh and it's already by the way,
Speaker 1: within the banking industry. Competition comes from outside of the
Speaker 1: banking industry. UH. And it's in some very targeted areas
Speaker 1: you're rightly mentioned, you know, in corporate banking, the juniors.
Speaker 1: It's in leverage finance as well. Whether it's such a
Speaker 1: high demand, I can tell you. It's in some you know,
Speaker 1: new technology areas as well, such as cyber and AI.
Speaker 1: And it's in retail. We have a retail bank in
Speaker 1: the United States. Retail as well is experiencing some tensions
Speaker 1: in terms of uh, you know, a strong competition for
Speaker 1: some positions. How do we deal with it? Listen, first
Speaker 1: and foremost, as you said, you know, it's about remaining
Speaker 1: competitive in terms of compensation. That is absolutely critical. But
Speaker 1: it's not only about compensation, john it's uh, it's working
Speaker 1: for a company that has a purpose. I believe that
Speaker 1: the mp PI BAT or focus on CSR on sustainability
Speaker 1: is quite compelling. It's acknowledging the fact that some of
Speaker 1: our staff, particularly the younger generation, is looking for flexibility
Speaker 1: and the new ways of you know, digitizing. The business
Speaker 1: is probably there, and we have to make the workplace
Speaker 1: attractive and people coming back here. It has to be
Speaker 1: for a real value, Johnny, especially as you expand again
Speaker 1: in the United States, I do wonder how you compete
Speaker 1: with the likes of JP Morgan and the oligarchy of
Speaker 1: US banks at a time when everyone wants a piece
Speaker 1: of the US dynamism. That's very true. And you know,
Speaker 1: for a bank like BNP PIPA, which is a leader
Speaker 1: in the EUBO zone and as you know, Lisa, we
Speaker 1: have a fairly large platform in the United States. We
Speaker 1: have a diversified business model. We have a retail activity
Speaker 1: or wholesale activity. We have fourteen thousand people in this country,
Speaker 1: meaning contributing to the workforce here. But to be successful
Speaker 1: as a US bank owned by a European leader, you
Speaker 1: have to be very targeted and to get a piece
Speaker 1: of the dynamism in this country of this, by the way,
Speaker 1: amazing recovery that we believe will continue into a twenty two.
Speaker 1: You have to be targeted. You have to really realize
Speaker 1: what kind of value can provide to clients. And this
Speaker 1: is what we've done. With our wholesale activities and retail activities.
Speaker 1: We we can be quite effective with US clients who
Speaker 1: not only have a business model in the United States,
Speaker 1: but who are becoming much more international and benefiting from
Speaker 1: the U s cross but European expansion that we see
Speaker 1: happening as well. In one and twenty twenty two, Johnny,
Speaker 1: if you forgive me, because only have sixty seconds left
Speaker 1: on the clock, we get some inflation data in American
Speaker 1: about five minutes. What's your take from the companies you
Speaker 1: serve you finance, what are you learning understanding? What are
Speaker 1: you learning at the moment about the price pressure in America. Well,
Speaker 1: first and foremost, I'm learning that, you know, they are
Speaker 1: really very optimistic about you know, the expansion only the
Speaker 1: recovery we face here, which is carry which will carry
Speaker 1: you out in a carry on in two. And I
Speaker 1: see them investing. I see them, uh, you know, positioning
Speaker 1: themselves for more capex investment and obviously trying to hire. Uh.
Speaker 1: Inflation is a concern for sure, but we believe that
Speaker 1: with um, you know, the supply chain disruptions will we'll
Speaker 1: probably you know normalize opput in two uh and uh
Speaker 1: that they should. It's that's not the biggest concern, particularly
Speaker 1: with such a g D pickles that we're experiencing in
Speaker 1: in this country. Johnny, thank you, sir. As always it's
Speaker 1: going to catch up. A privilege, a pleasure. Johnny philly
Speaker 1: on there the BNP paraboun USA CEO right now, and
Speaker 1: this is a joy. He's a gentleman and this is
Speaker 1: always a joy, and that he's running an airline and
Speaker 1: actually is familiar with the cockpit. He's a former gentleman
Speaker 1: from Colorado Springs and outside Dallas, Texas. Scott Kirby joins
Speaker 1: US now the chief executive officer of United Airlines. I
Speaker 1: don't want to ask a snirt question, but I think Scott,
Speaker 1: it goes to the pressure you face with COVID and vaccine.
Speaker 1: Could Aaron Rodgers fly out at Green Bay this morning
Speaker 1: on United Airlines? I have no idea where Aaron Rodgers ploye,
Speaker 1: but at the moment, uh, there there's we have a
Speaker 1: requirement frire employee. Uh and we got nine nine point
Speaker 1: seven percent of employees. Yeah. I'm really glad you have
Speaker 1: that done. And if you fly international, you've gotta have
Speaker 1: you got to be vaccinated in most geographies. But what
Speaker 1: about domestic right now? Are you checking? I mean United
Speaker 1: is lead on this, folks. Let's be direct about it.
Speaker 1: And this is your experience running American and all the
Speaker 1: other responsibilities you've had. What do you do with passengers
Speaker 1: right now? Domestically in America? There is not a requirement
Speaker 1: domestically for vaccines. There is a requirement, of course to
Speaker 1: wear a mask onboard airplanes. And the airflow on airplane,
Speaker 1: you know, literally is the best if you're going to
Speaker 1: be anywhere indoors. And our view has been on this
Speaker 1: point at and the administration has already said this, and
Speaker 1: I agree with them, which is the best way to
Speaker 1: get people vaccinated is frictional trans transactions every time you
Speaker 1: go to a restaurant, every time you get on a
Speaker 1: airplane or a train or a bus or a subway.
Speaker 1: But to do it through work and then you do
Speaker 1: it once and you get a high percentage of the
Speaker 1: population vaccinated. And that's really the most efficient way. And
Speaker 1: of course that's what we did at United as well. Scott,
Speaker 1: how much resistance did you face from your employees to
Speaker 1: these mandates? Well, you know, we got ninety nine point
Speaker 1: seven and uh, you know, there's so many of those people,
Speaker 1: uh started off unvaccinated or did not want UM to
Speaker 1: to have the mandate. Ironically, a lot of them actually
Speaker 1: had been vaccinated, but they just didn't They objected to
Speaker 1: the requirement. But um, But the good news is we
Speaker 1: were open, honest, and transparent. We started started talking to
Speaker 1: our employees about it in January, and so when we
Speaker 1: did it, it wasn't a surprise. It didn't come out
Speaker 1: of left field. We were firm. We never waffled about it.
Speaker 1: It is always about safety, that's what it was. You know,
Speaker 1: I literally have written a letter to the families of
Speaker 1: every employee that lost their lives to COVID and when
Speaker 1: you do that, you know it feel you feel it. Um.
Speaker 1: I felt it, and that the second time I started
Speaker 1: writing a letter again in July, after the delta variant
Speaker 1: kicking up, you know, I walked around and talk to
Speaker 1: my wife and call our teams. Said, we're doing it, um,
Speaker 1: because it's about saving lines. Scott looking ahead to the
Speaker 1: end of the pandemic, because it does feel like we
Speaker 1: are getting to a place where we can talk about that.
Speaker 1: How much will prices of airfares be higher? Simply because
Speaker 1: there is such a debt overhang, there is such a
Speaker 1: lost year, a lost era feels like of travel. Well,
Speaker 1: you know, ultimately I think prices, you know, by the
Speaker 1: time we're getting the next summer, I guess I'm guessing
Speaker 1: we'll be back to two thousand nineteen levels. Uh and
Speaker 1: and then they'll go up based on kind of our
Speaker 1: cost input. You know, fuel is a perfect example. When
Speaker 1: fuel goes up, airline tickets up, and when people goes down,
Speaker 1: they tend to come down. Um. And you know, the
Speaker 1: good but the good news is most airlines and particularly
Speaker 1: United you know, got much more productive using technology and
Speaker 1: more efficient, and so our core cost structure. We at
Speaker 1: United think that we can be ten percent larger than
Speaker 1: we were before with the same level of employment, and
Speaker 1: so some of that is gonna is gonna help mitigate
Speaker 1: any increases. But my guess is we're gonna be getting
Speaker 1: back to kind of two thousand nineteen levels by this
Speaker 1: coming summer. If you're just joining us Bloomberg, Greece. Scott Kirby,
Speaker 1: the chief executive officer of United Airlines, Lisa brand Woodson
Speaker 1: Tim Kane. Mr Kirby Lansing, Michigan, is looking at Delta
Speaker 1: in American and not looking at United this morning. I
Speaker 1: believe you pull out of eleven smaller towns today. Is
Speaker 1: this some form of reversion to monopsony or monopoly within
Speaker 1: the airline business that we don't have competition into some
Speaker 1: of these smaller towns. Uh, not at all. This is
Speaker 1: simply the economic reality of Frankly, you know, not enough
Speaker 1: pilots in the country, and with not enough pilots, you know,
Speaker 1: flying small regional jets just gets to be impossible in
Speaker 1: your choices. If you're only gonna have enough pilot do
Speaker 1: you want to fly to London or do you want
Speaker 1: to be landing and we're gonna fly to London and
Speaker 1: and it's as simple as that. Did you do this
Speaker 1: in conversation with the other domestic carriers? Was this an
Speaker 1: organized plan to be sure to two airlines say we're
Speaker 1: left in each town? Absolutely not. That would have been illegal,
Speaker 1: but we didn't do it. Now Robert Crandell's listening down
Speaker 1: in Florida. Question, Scott, I do wonder your conversations with
Speaker 1: other executives how much you hear about business travel coming back,
Speaker 1: how much you're adapting airplanes to an era without the
Speaker 1: kind of business class that you used to have. Well,
Speaker 1: you know, I'm in uh. It used to be a
Speaker 1: year and after it as a minority of one, and
Speaker 1: it's still a minority today. But there are a lot
Speaker 1: more people that agree with say, which is I think
Speaker 1: business travel is gonna come back. Um. We see all
Speaker 1: kinds of anecdotes, and particularly once people start traveling, they're
Speaker 1: getting back to traveling. I'm here at right now, and
Speaker 1: it is so much more impactful being here in person
Speaker 1: than it would be doing doom meetings. You know everything
Speaker 1: that you know, the magic happens at dinners or at
Speaker 1: a happy hour, meeting someone for a drink, that's where
Speaker 1: things really happen. You get to know pi where you
Speaker 1: build relationships, and that is human nature hasn't changed. Technology
Speaker 1: is great, but just like video conferencing didn't kill business
Speaker 1: travel back in the eighties when Bob Crandell was worried
Speaker 1: about it. Uh, it's not gonna kill it now. One
Speaker 1: final question. Lisa is really focused in on this s
Speaker 1: f OO is c d G. She wants to take
Speaker 1: the seven Dreamliner. How bad are you getting killed on
Speaker 1: fuel costs for Lisa to go first class s FO
Speaker 1: to c d G. Yeah, well, you know, fuel prices
Speaker 1: are up. There are biggest there are biggest cost in
Speaker 1: but um, but we're glad to be getting back to
Speaker 1: flying from San France to Paris and all the other markets. Uh.
Speaker 1: And love welcoming the customers on board. And I can
Speaker 1: tell you having phone for International in the last week there,
Speaker 1: everybody on board is excited, employees, customers. If it's palpable
Speaker 1: when you get on board of the International fly, do
Speaker 1: you call Muhammad Larian like at the end of every
Speaker 1: month and thank him for flying United? Dr Larry and Cambridge.
Speaker 1: He only flies United. He like literally won't go unless
Speaker 1: you know he goes there. Well, I I will now
Speaker 1: that you told me that. I think one of our
Speaker 1: other biggest flyers secretary carry last night, because we have
Speaker 1: we have a lot of those. Uh yeah, Scott Kirby,
Speaker 1: thank you so much, greatly appreciate it. Right now, the
Speaker 1: CEO they're ringing a bell for Scott Kirby the the
Speaker 1: end of the pandemic. Perhaps we are who we are,
Speaker 1: David Rubinstein. This is a star football player whose career
Speaker 1: ended early, and this is someone who was ever framed
Speaker 1: by the horrific mining accident of Farmington, West Virginia in
Speaker 1: nineteen Who is Joe Manchin And what do the Washington
Speaker 1: elite not understand about him? Well? I think they don't
Speaker 1: understand that he is in a state that's heavily Republican,
Speaker 1: and though he's a Democrat and he was Democratic governor
Speaker 1: as well, the state went for President Trump overwhelmingly, and
Speaker 1: therefore I just don't think you can expect him to
Speaker 1: be doing whatever the Democratic Party leadership wants. He is
Speaker 1: a Democrat and he's not going to switch to being
Speaker 1: a Republican. But he's very independent and he's not dependent
Speaker 1: on the Democratic leadership for his power base. Do you
Speaker 1: since David, and this is after the election, to be
Speaker 1: unfair that he is in close conversation with Democratic moderates
Speaker 1: who are shell shocked. Yes, absolutely, Um, I think he's
Speaker 1: saying to them, and I think he believes that the
Speaker 1: election in Virginia showed that you can go too far
Speaker 1: to the left, and that's what he thinks probably happened
Speaker 1: in Virginia. So what he's trying to do is to say,
Speaker 1: we don't need to have some of these policies that
Speaker 1: are spending a lot of money. We shouldn't, he believes
Speaker 1: very strongly, and not giving people more what he would
Speaker 1: call handouts or more gifts from the government in his view. Uh,
Speaker 1: and really we should pay for some of the things
Speaker 1: that we are paying that we're trying to get through legislation,
Speaker 1: and right now we're not really paying for it. And
Speaker 1: he doesn't favor increasing taxes either. He would favor not
Speaker 1: having these programs. But he is a very personable person.
Speaker 1: I've known him for a long time. Uh, he's very intelligent,
Speaker 1: he's very engaging. He just happens to have a views
Speaker 1: that are a little more conservative than Democratic Party leadership,
Speaker 1: and a little bit more conservative then maybe some other
Speaker 1: people in Washington would like him to be. But he's
Speaker 1: reflecting his constituency. Remember it's a constituency does a very
Speaker 1: Republican and Uh he could probably win as the state
Speaker 1: if he if he switched to a Republican, which is
Speaker 1: not going to do, he could probably get elected as
Speaker 1: a Republican. He's very popular, but he's also trying to
Speaker 1: reflect the views of his state. David. Does he enjoy
Speaker 1: his power. I've met very few people that don't enjoy
Speaker 1: their power in Washington, d C. So I would think
Speaker 1: he probably does enjoy it. He doesn't run around saying,
Speaker 1: look how powerful I am. But when you are as
Speaker 1: powerful as he as he is, and I don't think
Speaker 1: I've ever seen a person who's not in the leadership,
Speaker 1: not the majority leader, a minority leader, have as much
Speaker 1: power as he has. He has much more power now
Speaker 1: to affect the outcome of major legislation than anybody I
Speaker 1: know other than a majority leader or a minority leader
Speaker 1: or the Speaker of the House. Enormous amount of power,
Speaker 1: and I think he probably does enjoy it. Why would
Speaker 1: he not? Does he plan to use it? Just launch
Speaker 1: into something else politically? Say President Uh to be realistic
Speaker 1: about it. I don't think that's that that can happen.
Speaker 1: I mean, and he wouldn't say that it can happen. Remember,
Speaker 1: he's now, I think, in his early to mid seventies,
Speaker 1: and while that's young for some presidents, you might say, Um,
Speaker 1: he would not be about that attractive to the Democratic
Speaker 1: Party UH primaries in my view, because he'd probably be
Speaker 1: too much of a moderate to do when in the primaries,
Speaker 1: and I therefore think it's unrealistic. Um, he is not
Speaker 1: likely to run again for governor in my view. I
Speaker 1: think he's pretty happy in the Senate, So I think
Speaker 1: he's going to stay in the Senate. UH. If he
Speaker 1: runs re election, he will be up in two years,
Speaker 1: and he hasn't announced yet whether he'll run again. I
Speaker 1: suspect he will, but he hasn't society yet. David, you
Speaker 1: have studied and indeed live, the path from Mr Jones
Speaker 1: to Mr Welch to Mr m l and on to
Speaker 1: what we have now with Mr Kupp at General Electric.
Speaker 1: Your thoughts on the end of GE as we knew it, Well,
Speaker 1: it's a sad situation for American corp life. You might
Speaker 1: think about it that way, because this is one of
Speaker 1: the most powerful companies in the world for a long time,
Speaker 1: and when Jack Welsh was running it, it seemed to
Speaker 1: be the most impressive company in America. And now the
Speaker 1: company is being broken up. Larry Colp is a very
Speaker 1: talented executive. He did a terrific job at Danaher and
Speaker 1: after a couple of years, if his conclusion is the
Speaker 1: best thing to do is to break it up to
Speaker 1: unlock value, I think he's probably made the right decision.
Speaker 1: So it's unfortunate, but you know, time moves on, and
Speaker 1: no company can stay as big as as g was forever.
Speaker 1: And it really had to make some change that it
Speaker 1: didn't make changes quickly enough, and that's why they now
Speaker 1: have to do what they're doing. And David, do you
Speaker 1: think that in ten twenty years we're gonna be saying
Speaker 1: the same thing about Amazon? There very few companies that
Speaker 1: stay at the top of the world for as long
Speaker 1: as the g E did. Amazon could be one of them.
Speaker 1: But Amazon is still a relatively young company. But there's
Speaker 1: no doubt that there's gonna be more companies coming along
Speaker 1: that we haven't heard of that are going to be
Speaker 1: the dominant companies uh in the world. In a few years.
Speaker 1: For example, twenty years ago, who heard of Amazon, tesla Um?
Speaker 1: Even Apple wasn't that big a deal then, or Netflix.
Speaker 1: So the world changes. That took one of the great
Speaker 1: things about capitals, and you can start a company and
Speaker 1: a few years you can make it a very powerful company.
Speaker 1: Amazon has in pretty good shape though. I think there'll
Speaker 1: be around for quite some time though. David Rubin saying
Speaker 1: thank you so much, greatly appreciating and peer to peer conversations.
Speaker 1: Look for that tonight with a timely conversation with the
Speaker 1: Senator from West Virginia, John on this guest. We've got
Speaker 1: to start with CPI Wednesday, but there's a whole lot
Speaker 1: going on that Robbo Bank is truly expert at TAK.
Speaker 1: There's a ton and I think the overwhelming story still
Speaker 1: is to try and understand what the incoming data means
Speaker 1: for the fence next move. Let's start that with Jane
Speaker 1: Funny right now, head of FX Strategy at RAMA Bank. Jane,
Speaker 1: can we begin there what the incoming data CPI this morning, payrolls,
Speaker 1: last week, the ice M actually mean for the federal's
Speaker 1: eve gun into next year. Well, to be honest, I
Speaker 1: think we're going to answer the question of whether or
Speaker 1: not a transitory is gone des by looking at to
Speaker 1: today's data. I mean, yes, if it comes in a
Speaker 1: lot weaker than maybe some of the less inflationary among
Speaker 1: us are going to just to say, you know what,
Speaker 1: this is transitory. But I think more of the answers
Speaker 1: have got to be in the wage inflation because it's
Speaker 1: only when we see wage inflation. If we don't see
Speaker 1: wage inflation, that will be able to tell whether or
Speaker 1: not there are those second round effects. You know. When
Speaker 1: One thing that I think it's going to be really
Speaker 1: quite thematic for for the currency markets certainly going forward
Speaker 1: over the next over the next six months, or maybe
Speaker 1: even beyond, is the fact that not all labor markets
Speaker 1: are the same. They are very different. You have more flexibility,
Speaker 1: for instance, in the US probably going to have more
Speaker 1: wage inflation, and yet that's not going to be a
Speaker 1: pattern that we see elsewhere, and that is going to
Speaker 1: be really important in trying to judge interest rate differentials
Speaker 1: and effects going forward. Jenny's you understand better than most
Speaker 1: most things are solved in economics with the calendar. Just time,
Speaker 1: let it pass. For the Chairman of the Federal Reserve,
Speaker 1: I wonder how much time is on his side, and
Speaker 1: how you balance what we're seeing on wages which picked
Speaker 1: up still below inflation in America, but wages picking up
Speaker 1: at the same time the participation rate in America is
Speaker 1: not How do you balance those two things, Jane, Well,
Speaker 1: that's exactly the problem. In the US. You have a
Speaker 1: very flexible labor market. The participation rate has dropped. People
Speaker 1: have fallen out of the labor market, and therefore you're
Speaker 1: going to have or we've seen wage pressures as firms
Speaker 1: scowring around trying to find labor. Now you go to
Speaker 1: a country like Japan, it's not the same sort of
Speaker 1: labor market. Firms tend to hoard labor. You don't have
Speaker 1: firm scowing around trying to find workers because they already
Speaker 1: have them. And that's probably a situation more work into
Speaker 1: what we have in Europe too, So at Legard for instance,
Speaker 1: that remaining quite davish, expecting that inflation is going to
Speaker 1: be more transitory. Well, maybe the answer to that maybe
Speaker 1: the differences in the labor market. Similarly, you can you
Speaker 1: can see differences in the labor market in Australia too.
Speaker 1: They haven't had the same reactions in the US. So
Speaker 1: in the US, yeah, we're potentially going to see an
Speaker 1: interest rate hike. We think at the end of next year,
Speaker 1: maybe around December. Obviously some people thinking it's going to
Speaker 1: come earlier. But that's not going to be necessarily the
Speaker 1: same dynamic that you see elsewhere for those of you
Speaker 1: on radio, and you can see it clearly on TV.
Speaker 1: Jane folio is at the Rabble Bank London desk. That
Speaker 1: is a desk of the Netherlands. And what's important here
Speaker 1: John and Lisa with the inflation argument is Robbo Bank
Speaker 1: is absolute ground zero for the food industry hedging in
Speaker 1: the world. They own it from forward. Jane, you have
Speaker 1: a view of food inflation like not one single person
Speaker 1: we talked to. What do you observe it, Robbo Bank
Speaker 1: about food inflation, hedging and speculation dynamics right now? Well,
Speaker 1: to be honest, I we take that back into energy
Speaker 1: and awful lot of food companies like it, well sort
Speaker 1: of manufacturers have big factories and energy but picularly in
Speaker 1: Europe parts of Asia has been a real problem this year.
Speaker 1: So an awful lot of people trying to hedge that energy,
Speaker 1: trying not to pass those costs onto the consumer. But
Speaker 1: they are probably coming. So we are seeing that sort
Speaker 1: of inflation coming through. And this is this is why,
Speaker 1: of course central banks or various central banks are going
Speaker 1: to be going to be cautious, because even if wages
Speaker 1: go up, if you've got food inflation or energy inflation
Speaker 1: going up by more of a pace, you're still going
Speaker 1: to have real wage depreciation. And that's not the sort
Speaker 1: of thing that's central banks high interest rates into. So
Speaker 1: this whole dynamic is really quite complex and really quite fascinating,
Speaker 1: and I think that's going to be the situation next year.
Speaker 1: So some more volatility. I think at the short end
Speaker 1: of the curve Gene, why isn't the dollar stronger given
Speaker 1: the back draft you just laid out, I think there's
Speaker 1: a lot of good news in the price. So for instance,
Speaker 1: if we go back to June, I think June for me,
Speaker 1: the done FMC was really interesting because that's when we
Speaker 1: saw that big movement in the dock plots of various
Speaker 1: f WEGM seen was relative too much. That's when we
Speaker 1: began to see this dollar rally. Now, the dollar really
Speaker 1: has been on the front foot. It's been rallying, you know,
Speaker 1: since June. It's it's it's it's gained ground. And I
Speaker 1: think at this point in time, there's a lot of
Speaker 1: news in the price. And when you've got a lot
Speaker 1: of good news in the price and in terms of
Speaker 1: the fair et cetera, well you know, how much more
Speaker 1: can the dollar go. You're also looking at a situation
Speaker 1: where we see risk appetite, certainly for US stocks really benefiting.
Speaker 1: So you've got the dollar gaining and risk appetite for
Speaker 1: for stocks gaining too. And I think perhaps that's not
Speaker 1: a natural dynamic, and perhaps that's something which has has
Speaker 1: has maybe forced some of the bullishness out of the
Speaker 1: US dollar as well. You said it, Jane, what a
Speaker 1: fascinating moment this is. It's great to explore it with
Speaker 1: your Jaane Farley There, Ramma Bank, it's a different Disney
Speaker 1: John and you know, I guess they're waiting for Mandalorian
Speaker 1: and streaming and a John. Did you watch Mandalorian? I
Speaker 1: did not. Yeah, it's it's you know, it's cappy. It's
Speaker 1: like there and we're all waiting for it. Okay, should
Speaker 1: we talk to an expert? We should probably think we
Speaker 1: should do that. Michael Michael Nathans and joining a senior
Speaker 1: analyst at Marfat Nathans and with Craig mafat Definitive. Here, Michael,
Speaker 1: I want to talk about Disney on this conference call
Speaker 1: in the fear they have over the streamers. I've got
Speaker 1: Apple and Culver City over five hundred thousand square feet,
Speaker 1: doubling employee count to three thousand something, Netflix with three
Speaker 1: hundred thousand square feet. They've got a million square feet
Speaker 1: in l A. How scared is Disney about the new
Speaker 1: streamers joining them in l A. I don't think Disney
Speaker 1: is scared about competition. I think Disney is gonna be
Speaker 1: focused on how can they accelerate their growth because in
Speaker 1: the past couple of quarters has been a slowdown at Disney.
Speaker 1: Plus I don't you know, I think there's enough room
Speaker 1: for Disney probably to win, and they need to talk
Speaker 1: to us about what they're seeing, why there's a slowdown,
Speaker 1: or whether they're gonna do about it. Okay, what are
Speaker 1: they gonna do about it? I mean Disney is here,
Speaker 1: They're coming out of a pandemic. They get x thousand
Speaker 1: people at Shanghai Disney. You know, COVID and Shine and
Speaker 1: all that. What does your crystal ball see or is
Speaker 1: it like a massive opportunity coming out of the pandemic
Speaker 1: to buy pandemic affected Disney. You know, we're neutral, truly neutral,
Speaker 1: because I think the stock last year more than compensated
Speaker 1: for the streaming opportunity in the park recovery, and for
Speaker 1: the past twelve months or so, it's it's just been
Speaker 1: trading water. Our thesis is that to spend a lot
Speaker 1: more money on content. Maybe that's to your Appling and
Speaker 1: Netflix point, that there's so much great content available that
Speaker 1: the only way you get stub to this point is
Speaker 1: by spending more money and content building awareness, trying to
Speaker 1: have a breakthrough head. Disney has done a great job
Speaker 1: gang in this level. In order to grow further, they
Speaker 1: need a lot more content. Um, you know, they have
Speaker 1: to have a flywheel spinning faster. They don't then they've
Speaker 1: done so far. They've also got to consolidate what they own.
Speaker 1: And Michael, now you're focused on this, how did they
Speaker 1: leverage Huluk? What do you make spanking them to do
Speaker 1: in the coming months? Courts Okay, so Hulu is a
Speaker 1: JV between them and Comcast. In two years, they have
Speaker 1: the right to buy it back. Rethink they'd be smart
Speaker 1: to buy back sooner and try to create a more
Speaker 1: unified Disney bundle. You know Who's on its own Apple
Speaker 1: Island and Disney Plus has allen. You put him together, um,
Speaker 1: and you create one single application where you can get
Speaker 1: Who and Disney Plus UM and basically try to push
Speaker 1: more people to the bundle than's Disney and Who plus
Speaker 1: Disney Plus and Who. They have to buy it from
Speaker 1: Comcast UM. I'm sure they're talking to them now about it.
Speaker 1: It's not going to be cheap to do it, but
Speaker 1: they need to. Basically, we've find we've had the research
Speaker 1: is at Disney Plus has done. It's not well penetrated
Speaker 1: amongst older viewers. It's done a great job among kids,
Speaker 1: families and fans of their content. But for the older
Speaker 1: viewer that's not a Disney Disney fan that wants gen
Speaker 1: entertainment content need to do more and putting it together
Speaker 1: with Hulu more closely probably could drive penetration. So we're
Speaker 1: expecting something in the next two years before actually the
Speaker 1: timetables up to try to consolidate the position. It is
Speaker 1: this for a biggest slice for Bigger Pie or Michael.
Speaker 1: Could that be in a hate this term the Netflix killer,
Speaker 1: but could that be something that hurts Netflix if the
Speaker 1: likes of Disney can diversify the content slate beyond that
Speaker 1: narrow demographic you described. Yeah, So our our view is
Speaker 1: like Netflix is a base a based consumer choice, but
Speaker 1: as time goes on, what you're seeing is more people
Speaker 1: are adding more services on top of Netflix. Our Netflix
Speaker 1: nesis you know we've been running on the stock is
Speaker 1: that content is not monopoly, that it's impossible to have
Speaker 1: a monopoly position and content and the competition and Tom
Speaker 1: talked about you're talking about to us impacts Netflix is
Speaker 1: the time spent in Netflix, Netflix, the price and power,
Speaker 1: maybe the cost of doing business. So ultimately more competition
Speaker 1: I would think would have some negative packed on Netflix's
Speaker 1: ability to raise prices and to compete. But in the
Speaker 1: past twelve to fifty months, the pandemic has really slowed
Speaker 1: down the ability to compete because you can't. You had
Speaker 1: a good two months slowdown with no content is produced,
Speaker 1: and Netflix had a massive advantage. So for us, the
Speaker 1: next one to two years will be a catch up
Speaker 1: on spending for all these companies that couldn't compete during
Speaker 1: the pandemic. Michael, when you talk about the fact that
Speaker 1: Disney Plus hasn't really penetrated the older individuals, the older households.
Speaker 1: Are they fully penetrated with the younger households with those
Speaker 1: that have children? Lisa, obviously no. You know, Netflix is
Speaker 1: about penetrated across the board. Disney added best penetration rates
Speaker 1: about so there's room to go amongst you know, the
Speaker 1: core demo, So there's definitely room to go. But then
Speaker 1: as we show, it drops off dramatically, So yeah, there's
Speaker 1: upside going to the core, and then they have to
Speaker 1: expand past the corn. That's what we want to hear about,
Speaker 1: you know, and there is cultivate endings a little bit later, Mark,
Speaker 1: before you go, what was meta about? We haven't spoken
Speaker 1: since then? What was that about? What are you telling?
Speaker 1: What is that? Exactly? By the way, we have a
Speaker 1: buying Facebook right exactlete. What's meta about? Meta is about
Speaker 1: a world in which Facebook could, um try to have
Speaker 1: more control live or not over the world they have
Speaker 1: now right where it's it's it's a it's a universe
Speaker 1: where there will be commerce, they'll be communication, um, there'll
Speaker 1: be games, and Facebook's trying to basically have a leading
Speaker 1: position in that world. We've done some Mark on this
Speaker 1: recovery the gaming industry. We think gaming will lead, and
Speaker 1: I'm not sure that Facebook actually have a position they
Speaker 1: want to have in this business. The other thing, Jonathan,
Speaker 1: is it was a way to take the turn of
Speaker 1: investment dollars, classify it and we can now separate that
Speaker 1: from the core Facebook earnings number, and we can say
Speaker 1: to you and everyone else, look how cheap Facebook is.
Speaker 1: It's meta. If you ever met a no value at all,
Speaker 1: which we do, the core business is actually a lot
Speaker 1: more properly you think. But yeah, we'll talk to you
Speaker 1: in three to five to ten years about meta um
Speaker 1: and we don't evaluate at all. But it's helped us,
Speaker 1: you know, clarify the valuation. I look forward to it.
Speaker 1: It's a world Tom where regulates us like us politicians.
Speaker 1: I want to sit around a table with us in
Speaker 1: sharra drink. Michael Nathan said thank you, sir. Michael Niceton
Speaker 1: said a muffit next and said thank you very much.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
Speaker 1: us live weekdays from seven to ten am Eastern on
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six
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Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg.