1 00:00:02,600 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,159 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We 5 00:00:28,240 --> 00:00:31,440 Speaker 1: are on the bid in moving higher minute by minute. 6 00:00:31,680 --> 00:00:33,120 Speaker 1: Just showed a bolt on high. It's got that real 7 00:00:33,159 --> 00:00:34,800 Speaker 1: mounts up fill to start the year. Then we went 8 00:00:34,920 --> 00:00:37,040 Speaker 1: bumped into the Middle East tension to Lisa, but back 9 00:00:37,080 --> 00:00:39,960 Speaker 1: on track again equity features pushing higher. What's interesting is 10 00:00:39,960 --> 00:00:41,920 Speaker 1: we didn't really see a meltdown, right, I mean I 11 00:00:42,040 --> 00:00:44,640 Speaker 1: made all of the sort of potentially sensational headlines. The 12 00:00:44,640 --> 00:00:47,280 Speaker 1: meltdown wasn't that significant. But the melt up persists and 13 00:00:47,320 --> 00:00:49,199 Speaker 1: sort of is the dominant headline. I think that is 14 00:00:49,200 --> 00:00:51,760 Speaker 1: the narrative. This is surprised me. I gotta I gotta 15 00:00:51,800 --> 00:00:53,440 Speaker 1: be honest here. I mean, I knew we would recover 16 00:00:53,520 --> 00:00:55,240 Speaker 1: with good news and all that, But this is where 17 00:00:55,440 --> 00:00:59,040 Speaker 1: I want to really emphasize to people driving worldwide. The 18 00:00:59,160 --> 00:01:01,480 Speaker 1: vengeance of this melt up is extraordinary. At least the 19 00:01:01,520 --> 00:01:04,120 Speaker 1: breadth is actually pretty good out there at the moment. 20 00:01:04,160 --> 00:01:06,319 Speaker 1: I think of SMP five hundred firms above their average 21 00:01:06,319 --> 00:01:08,479 Speaker 1: for the past two hundred days. It's not just some 22 00:01:08,560 --> 00:01:11,520 Speaker 1: massive companies dominating things. Although they've done really well over 23 00:01:11,520 --> 00:01:13,679 Speaker 1: the last twelve months. Some of the stocks out there 24 00:01:13,680 --> 00:01:15,640 Speaker 1: outside of the big names are still up there. If 25 00:01:15,680 --> 00:01:20,440 Speaker 1: you've avoided starks, you've been punished. So basically traders have Lauren, 26 00:01:21,400 --> 00:01:23,360 Speaker 1: I mean, come on, are you gonna make it? Quadruple 27 00:01:23,440 --> 00:01:25,959 Speaker 1: averaged a cash fund at this point? Do you miss 28 00:01:25,959 --> 00:01:28,000 Speaker 1: the announcement last week? You weren't with us? I was 29 00:01:28,040 --> 00:01:30,959 Speaker 1: not with us. No, no, no, you weren't. Tom said 30 00:01:30,959 --> 00:01:33,680 Speaker 1: he was coming out of cash a five per day 31 00:01:34,319 --> 00:01:38,800 Speaker 1: that if the year grows older, is cash allocation will 32 00:01:38,800 --> 00:01:45,160 Speaker 1: slowly fall. It's the triple average anti beta fun who 33 00:01:45,200 --> 00:01:50,360 Speaker 1: manages that? Mrs it's quite a goodvantage. I will say 34 00:01:50,360 --> 00:01:52,760 Speaker 1: that does Mark John. What's the observation you see today? 35 00:01:52,960 --> 00:01:55,120 Speaker 1: I think things are okay, Things are all right, and 36 00:01:55,200 --> 00:01:57,520 Speaker 1: for that reason, it's actually were through last year and 37 00:01:57,520 --> 00:02:01,720 Speaker 1: into this year. Though, is a owe me the money. Yeah, 38 00:02:01,880 --> 00:02:04,640 Speaker 1: show me the better data, show me the earnings, show 39 00:02:04,680 --> 00:02:06,960 Speaker 1: me everything's okay. You've had your reason. We had that 40 00:02:07,000 --> 00:02:08,840 Speaker 1: from the FED last year we had it from the ECB. 41 00:02:09,360 --> 00:02:11,720 Speaker 1: Now show me the improvement. Well, and show me the improvement, 42 00:02:11,720 --> 00:02:13,959 Speaker 1: but not too much improvement that actually calls the Fed's 43 00:02:13,960 --> 00:02:16,080 Speaker 1: hand or calls the ECB's hand. Right, And we're still 44 00:02:16,200 --> 00:02:18,760 Speaker 1: in that Goldilocks scenario because at a certain point, if 45 00:02:18,760 --> 00:02:20,919 Speaker 1: we do start to see inflation pick up, that could 46 00:02:20,919 --> 00:02:22,880 Speaker 1: be this sort of shock that a lot of people 47 00:02:22,919 --> 00:02:25,000 Speaker 1: are waiting for us to bring a Jim Glassman. We 48 00:02:25,000 --> 00:02:29,120 Speaker 1: should early jpmore consinor economists joining us a day early, 49 00:02:29,120 --> 00:02:32,799 Speaker 1: where you with us for Payrolls Day, about to turn 50 00:02:32,840 --> 00:02:38,359 Speaker 1: the alarm clock off payroll Special. Actually, my colleagues are 51 00:02:39,520 --> 00:02:43,239 Speaker 1: telling us that when Thanksgiving hits late, you tend to 52 00:02:43,240 --> 00:02:46,200 Speaker 1: get a soft December. So we got low expectations for December, 53 00:02:46,200 --> 00:02:49,400 Speaker 1: even though ADP came in on the surprisingly good side. 54 00:02:49,680 --> 00:02:52,960 Speaker 1: And I had to tell you, I'm amazed the job 55 00:02:53,000 --> 00:02:56,040 Speaker 1: growth is as strong as it is given the demographic 56 00:02:56,120 --> 00:02:58,320 Speaker 1: that's going on. We keep thinking it's gonna be slowing down. 57 00:02:58,360 --> 00:03:00,120 Speaker 1: It is slowing down a little bit. I think this 58 00:03:00,160 --> 00:03:02,760 Speaker 1: will be the year when we see somewhat slower job growth. 59 00:03:02,840 --> 00:03:04,600 Speaker 1: We got a headline just at least, I don't mean 60 00:03:04,600 --> 00:03:09,600 Speaker 1: to interrupt Lisa, but Coal's really keeping on this retail difficulty. 61 00:03:09,720 --> 00:03:12,560 Speaker 1: Calls out at the low end of their estimate, and 62 00:03:12,600 --> 00:03:14,840 Speaker 1: that goes really into the retail spirit that we saw 63 00:03:14,840 --> 00:03:18,200 Speaker 1: with Macy's closing thirty stores yesterday and also the failure 64 00:03:18,200 --> 00:03:20,200 Speaker 1: on the part of some retailers to actually adapt to 65 00:03:20,240 --> 00:03:24,160 Speaker 1: the modern era. Interesting to see. Right now, we're looking 66 00:03:24,520 --> 00:03:27,280 Speaker 1: in pre market down nine percent, so definitely a pretty 67 00:03:27,280 --> 00:03:29,760 Speaker 1: big response there and will continue to give color on 68 00:03:29,840 --> 00:03:31,720 Speaker 1: that as the day goes on. But I do have 69 00:03:31,760 --> 00:03:34,320 Speaker 1: to wonder when you when you talk about job growth, Jim, 70 00:03:34,320 --> 00:03:36,880 Speaker 1: I was looking today twenty nine team was the slowest 71 00:03:36,960 --> 00:03:39,360 Speaker 1: pace of jobs added to the United States since two 72 00:03:39,400 --> 00:03:41,560 Speaker 1: thousand and eleven. Yes, it was still good, but it 73 00:03:41,600 --> 00:03:44,320 Speaker 1: was the slowest since two thousand and eleven. How much 74 00:03:44,400 --> 00:03:47,800 Speaker 1: can it continue to slow down while supporting what we've 75 00:03:47,800 --> 00:03:51,560 Speaker 1: seen with the consumer driving the US economy. Well, uh, 76 00:03:51,920 --> 00:03:53,960 Speaker 1: we think it ought to be slowing down more because 77 00:03:53,960 --> 00:03:55,440 Speaker 1: if you look at the number of people who are 78 00:03:55,480 --> 00:03:58,560 Speaker 1: sixteen years of age to seventy, it's slowed down to 79 00:03:58,800 --> 00:04:02,640 Speaker 1: roughly fifty month. Uh. Ten years ago was two a month. 80 00:04:02,920 --> 00:04:05,920 Speaker 1: So that's the that's the that's the reference point where 81 00:04:06,040 --> 00:04:08,240 Speaker 1: economists are using to figure out where should we be 82 00:04:08,280 --> 00:04:10,920 Speaker 1: going to UM. I don't think that's bad news for 83 00:04:10,960 --> 00:04:14,240 Speaker 1: consumers because what if what that What is happening is 84 00:04:14,680 --> 00:04:17,800 Speaker 1: we are settling into a sustainable pace on unemployment, stay 85 00:04:17,839 --> 00:04:19,640 Speaker 1: is low. Pay is going to be doing better. To me, 86 00:04:19,760 --> 00:04:22,839 Speaker 1: the key to the consumer pictures. Our workers are gonna 87 00:04:22,839 --> 00:04:25,560 Speaker 1: get game paid better. Who cares about you know, the 88 00:04:25,560 --> 00:04:28,760 Speaker 1: first jobs, Uh don't generate a lot of pay. So 89 00:04:28,880 --> 00:04:31,880 Speaker 1: if you have a fully employed economy and we're staying 90 00:04:31,920 --> 00:04:34,960 Speaker 1: at full employment, uh, you know, not not having to 91 00:04:35,000 --> 00:04:37,360 Speaker 1: worry about recession, I think that's real good news for consumers. 92 00:04:37,480 --> 00:04:39,760 Speaker 1: And actually one of the undertold stories of last year 93 00:04:39,880 --> 00:04:43,400 Speaker 1: is that pay rises did increase significantly, And actually I 94 00:04:43,400 --> 00:04:45,640 Speaker 1: think it's a three percent now on average, but it's 95 00:04:45,640 --> 00:04:47,720 Speaker 1: more for the for the lower end though, which which 96 00:04:47,760 --> 00:04:51,719 Speaker 1: is basically almost double the actual inflation rate. So everything 97 00:04:51,760 --> 00:04:55,400 Speaker 1: seems low right now. So three seems really modest considering 98 00:04:55,440 --> 00:04:58,240 Speaker 1: compared with the historical But the thing is, inflations come down. 99 00:04:58,240 --> 00:05:00,960 Speaker 1: Everything is running slower. But I think if you look 100 00:05:00,960 --> 00:05:04,920 Speaker 1: at worker pay, finally, workers real pay is actually more 101 00:05:04,960 --> 00:05:07,680 Speaker 1: in line with productivity, which is what we expect over time. 102 00:05:08,040 --> 00:05:10,599 Speaker 1: The shock to the consumer to the worker was really 103 00:05:10,800 --> 00:05:14,120 Speaker 1: a couple of decades ago when Amazon and everybody came 104 00:05:14,160 --> 00:05:18,000 Speaker 1: on stream, and you get this massive jolt to the 105 00:05:18,080 --> 00:05:20,599 Speaker 1: share of income that was going to workers median estimate 106 00:05:20,600 --> 00:05:23,400 Speaker 1: and our survey for tomorrow's payrolls print one hundred and sixty. 107 00:05:23,800 --> 00:05:26,320 Speaker 1: Before that, we had a month to two sixty six 108 00:05:26,440 --> 00:05:29,599 Speaker 1: least mentioning the destivating payrolls growth over the last twelve months. 109 00:05:29,720 --> 00:05:31,680 Speaker 1: We've been told that would happen for the last four years, 110 00:05:32,200 --> 00:05:35,080 Speaker 1: and finally starting to see the characteristics of the labor 111 00:05:35,120 --> 00:05:37,880 Speaker 1: market that has reached full employment where you will get 112 00:05:38,120 --> 00:05:41,120 Speaker 1: a sizeable desaturation in payrolls growth, but it's not necessarily 113 00:05:41,160 --> 00:05:43,480 Speaker 1: a sign that things are falling apont exactly. And I 114 00:05:43,520 --> 00:05:45,280 Speaker 1: think that's gonna be a difficult story to get our 115 00:05:45,279 --> 00:05:47,120 Speaker 1: hands around this year because everybody is so used to 116 00:05:47,160 --> 00:05:49,120 Speaker 1: what we saw in the last ten years, and two 117 00:05:49,400 --> 00:05:52,400 Speaker 1: d jobs a month on average over the last ten years, 118 00:05:52,640 --> 00:05:55,200 Speaker 1: that's what you get in recoveries. The thing is that's 119 00:05:55,320 --> 00:05:58,440 Speaker 1: very low by historical standards. But if the natural growth 120 00:05:58,440 --> 00:06:02,160 Speaker 1: of our economy is slower, um, you know it's adequate. 121 00:06:02,240 --> 00:06:04,360 Speaker 1: And the thing is it's been sufficient to get us 122 00:06:04,360 --> 00:06:06,520 Speaker 1: back to very low levels of unemployment. So you you 123 00:06:06,640 --> 00:06:10,120 Speaker 1: just know, if things stay okay, the pace of job 124 00:06:10,160 --> 00:06:12,560 Speaker 1: guards is going to be slown down. But Dr Glassman, 125 00:06:12,680 --> 00:06:15,039 Speaker 1: do we need to aggregate the economy? Do we need 126 00:06:15,080 --> 00:06:18,120 Speaker 1: to aggregate the labor economy of America? To me, it's 127 00:06:18,240 --> 00:06:22,000 Speaker 1: truly two America's there's a whole American taken part in this. 128 00:06:22,480 --> 00:06:25,760 Speaker 1: But my number one mail is when suits and ties 129 00:06:25,800 --> 00:06:28,920 Speaker 1: like you come in and say it's it's one America 130 00:06:28,960 --> 00:06:31,400 Speaker 1: and people are going, no, it's not. It isn't. And 131 00:06:31,440 --> 00:06:34,159 Speaker 1: you see it more in the pay trends. So to 132 00:06:34,200 --> 00:06:36,279 Speaker 1: be the thing that's I mean, this plays into the 133 00:06:36,279 --> 00:06:39,680 Speaker 1: equity market story too, because the thing that's really surprising 134 00:06:39,680 --> 00:06:41,919 Speaker 1: to me is when you look at the you know, 135 00:06:41,960 --> 00:06:44,560 Speaker 1: where does the income go that's generated in the economy. 136 00:06:44,560 --> 00:06:47,400 Speaker 1: The amount that goes to workers has been drifting down 137 00:06:47,520 --> 00:06:50,160 Speaker 1: over the last decade, the last two decades. Actually, the 138 00:06:50,200 --> 00:06:52,719 Speaker 1: amount going to profits has been high. And that's telling 139 00:06:52,760 --> 00:06:55,200 Speaker 1: you some people are doing really well. But that's telling 140 00:06:55,200 --> 00:06:57,880 Speaker 1: you somebody must be really struggling, and you see it 141 00:06:57,960 --> 00:07:02,440 Speaker 1: when you're traveling around. Meanwhile, there is the idea of 142 00:07:02,560 --> 00:07:05,960 Speaker 1: ken companies continue to pay these higher wages and to 143 00:07:06,040 --> 00:07:10,120 Speaker 1: liver numbers that are acceptable to investors. John, to your point, 144 00:07:10,200 --> 00:07:12,360 Speaker 1: and we are seeing margins come in. I do have 145 00:07:12,400 --> 00:07:16,080 Speaker 1: to wonder on the flip side, you know, whether profitability 146 00:07:16,400 --> 00:07:19,480 Speaker 1: is sort of commensurate with the increase in some of 147 00:07:19,520 --> 00:07:21,760 Speaker 1: the wages that we're seeing. You know, people expected that 148 00:07:21,800 --> 00:07:24,400 Speaker 1: should be. But I from my point of view, profitabilities, 149 00:07:24,480 --> 00:07:27,320 Speaker 1: the margins are still very high by historical standards. For example, 150 00:07:27,920 --> 00:07:30,600 Speaker 1: after tax profits of American companies for most of the 151 00:07:30,640 --> 00:07:33,600 Speaker 1: post war period was like six percent of GDP. It 152 00:07:33,800 --> 00:07:35,840 Speaker 1: rose over the last couple of decades to almost ten 153 00:07:35,880 --> 00:07:40,000 Speaker 1: percent of GDP. So I don't worry much about profit margins. 154 00:07:40,040 --> 00:07:43,120 Speaker 1: And I think I kind of worried about the corporate executives. No, 155 00:07:43,240 --> 00:07:44,720 Speaker 1: I don't. I don't worry much about them. I think 156 00:07:44,720 --> 00:07:47,600 Speaker 1: that they're doing fine and and I think and I 157 00:07:47,640 --> 00:07:49,600 Speaker 1: think pay. You know, they can, they can offer, They're 158 00:07:49,680 --> 00:07:51,440 Speaker 1: going to be have to be offering more. It's in 159 00:07:51,480 --> 00:07:54,120 Speaker 1: their interest to offer more, better pay, better benefit. And 160 00:07:54,200 --> 00:07:56,160 Speaker 1: we welcome all of you, James glassmom with us one 161 00:07:56,200 --> 00:07:58,960 Speaker 1: day earlier with JP more gonna always giving his leadership 162 00:07:59,000 --> 00:08:00,960 Speaker 1: on Jobs Day, and we do early this year which 163 00:08:00,960 --> 00:08:04,880 Speaker 1: is a great idea. How do you respond to the 164 00:08:04,920 --> 00:08:08,880 Speaker 1: incentives of change for corporations to support labor and support 165 00:08:08,880 --> 00:08:11,080 Speaker 1: ways and I mean all of labor, not just staff 166 00:08:11,160 --> 00:08:16,800 Speaker 1: for that, because corporate officers need their fair share, even 167 00:08:16,840 --> 00:08:19,640 Speaker 1: if they get better text treatment with it as well 168 00:08:20,320 --> 00:08:23,280 Speaker 1: with our new laws, have we skewed the incentives too 169 00:08:23,360 --> 00:08:26,360 Speaker 1: much towards five or six c e o s at 170 00:08:26,400 --> 00:08:28,640 Speaker 1: the top of a given company? You know, I think 171 00:08:28,720 --> 00:08:32,360 Speaker 1: the cyclical dynamic is changing that story in the following way. 172 00:08:32,720 --> 00:08:35,160 Speaker 1: When we when you when you look at that, you 173 00:08:35,160 --> 00:08:37,400 Speaker 1: think about what's going on labor market. When we pick 174 00:08:37,480 --> 00:08:39,800 Speaker 1: up in our surveys, for example, JP Morgan Chase just 175 00:08:39,920 --> 00:08:42,760 Speaker 1: did a survey of business leaders. What we're finding is 176 00:08:43,200 --> 00:08:45,680 Speaker 1: everybody is realizing they could do so much more if 177 00:08:45,720 --> 00:08:47,800 Speaker 1: they had more workers. They can't find workers, That's what 178 00:08:47,920 --> 00:08:50,520 Speaker 1: they tell us. So that tells me. I think, what's 179 00:08:50,559 --> 00:08:52,480 Speaker 1: going on When I when I talk to people, I 180 00:08:52,520 --> 00:08:54,640 Speaker 1: see all kinds of creative stuff going on. They realized 181 00:08:54,679 --> 00:08:56,840 Speaker 1: they've got to train people more. Once you've got people 182 00:08:56,840 --> 00:08:59,200 Speaker 1: in the door, uh, you need to figure out how 183 00:08:59,160 --> 00:09:01,560 Speaker 1: to do more with a few people that you have. 184 00:09:02,080 --> 00:09:04,880 Speaker 1: And I think that what's going on is there's a 185 00:09:04,920 --> 00:09:08,440 Speaker 1: recognition that you the way you're going to grow is 186 00:09:08,559 --> 00:09:14,520 Speaker 1: by developing your staff and by keeping him retaining them. 187 00:09:14,559 --> 00:09:17,000 Speaker 1: So I I think this is a I think this 188 00:09:17,280 --> 00:09:21,160 Speaker 1: story that's changing as the second dynamic gives work as 189 00:09:21,160 --> 00:09:23,160 Speaker 1: a little more bargaining. Paer'll change your plans for tomorrow. 190 00:09:23,160 --> 00:09:25,000 Speaker 1: We'd love to see you tomorrow as well. I don't 191 00:09:25,000 --> 00:09:26,719 Speaker 1: know how I feel about this. Jim Glassman on a 192 00:09:26,760 --> 00:09:29,280 Speaker 1: Thursday before pay rolls out. We don't need to know 193 00:09:29,360 --> 00:09:31,520 Speaker 1: tomorrow's number. It's you already know. We don't need to 194 00:09:31,520 --> 00:09:37,679 Speaker 1: know to freaking look you know, actually, can we just 195 00:09:37,720 --> 00:09:41,520 Speaker 1: put on the record, doesn't send it to Are you 196 00:09:41,559 --> 00:09:50,160 Speaker 1: speaking to Mr tomorrow schedule? If you work? If to 197 00:09:50,240 --> 00:09:52,439 Speaker 1: work tomorrow? After you just said I didn't want to 198 00:09:52,480 --> 00:09:54,559 Speaker 1: start a rumor there, I mean, I just I just 199 00:09:54,640 --> 00:10:13,400 Speaker 1: decided to thank you. You give me class from a 200 00:10:13,520 --> 00:10:16,520 Speaker 1: big year ahead, and I wonder whether if was the 201 00:10:16,600 --> 00:10:18,760 Speaker 1: year for Triple bas where could be the year for 202 00:10:18,800 --> 00:10:22,280 Speaker 1: Triple C's slowly people coming around to that idea to 203 00:10:22,400 --> 00:10:23,880 Speaker 1: bring it on? Ne s guest Yalla, I'm pleased to 204 00:10:23,880 --> 00:10:26,640 Speaker 1: say that. Jeffrey Rosenberg joins US now Senior Portfolio manager 205 00:10:26,679 --> 00:10:29,439 Speaker 1: of black Rock Systemic Fixed Income team, Jeff. Great to 206 00:10:29,520 --> 00:10:31,960 Speaker 1: catch up with you. Walk me through the conviction calls 207 00:10:32,000 --> 00:10:35,240 Speaker 1: from the team at black Rock going into a new year. Well, 208 00:10:35,360 --> 00:10:38,079 Speaker 1: you know, it's it's a it's a it's a backdrop 209 00:10:38,200 --> 00:10:41,680 Speaker 1: of a year for which you know, you're coming off 210 00:10:41,800 --> 00:10:47,560 Speaker 1: of very very strong policy supported UH returns across both 211 00:10:47,640 --> 00:10:49,920 Speaker 1: debt and equity, and you think about what happened in 212 00:10:49,960 --> 00:10:52,800 Speaker 1: two nineteen. It was the opposite of what people expected, 213 00:10:52,880 --> 00:10:56,680 Speaker 1: what people got into, right. Remember an eighteen was booth 214 00:10:56,720 --> 00:10:59,720 Speaker 1: stocks and bonds were down ten nineteen, you know, thirty 215 00:11:00,000 --> 00:11:03,760 Speaker 1: sent stocks almost ten in bonds. And so you go 216 00:11:03,840 --> 00:11:06,680 Speaker 1: into two thousand twenty and certainly that's a year that's 217 00:11:06,840 --> 00:11:10,000 Speaker 1: not going to be repeated because that's a year about 218 00:11:10,160 --> 00:11:14,240 Speaker 1: policy and what we see here. You know, forget the economy. 219 00:11:14,480 --> 00:11:18,840 Speaker 1: The economy has moved in tiny increments relative to twenty 220 00:11:19,000 --> 00:11:23,199 Speaker 1: and thirty swings in market performance, so it tells you 221 00:11:23,320 --> 00:11:26,880 Speaker 1: it's really much more about policy and what we're seeing 222 00:11:26,960 --> 00:11:30,400 Speaker 1: for two thou twenties policies on hold, So without the 223 00:11:30,600 --> 00:11:34,960 Speaker 1: tail winds of a policy support, you're really bringing down 224 00:11:35,120 --> 00:11:38,680 Speaker 1: expectations across the board. It's a year where fixed income 225 00:11:38,760 --> 00:11:43,440 Speaker 1: returns are gonna barely be able to squeak out the yields, 226 00:11:43,480 --> 00:11:45,520 Speaker 1: and you're starting at lower yield levels, so you're bringing 227 00:11:45,559 --> 00:11:50,000 Speaker 1: those fixed income return expectations lower with the possibility of slightly. 228 00:11:50,120 --> 00:11:52,480 Speaker 1: But no one has higher interest rates. No one has 229 00:11:52,559 --> 00:11:56,280 Speaker 1: ourselves included. The set is on hold, and there's an asymmetry. 230 00:11:56,760 --> 00:11:59,560 Speaker 1: If anything bad happens, this set is going to cut rates. 231 00:11:59,800 --> 00:12:03,240 Speaker 1: To anything good happens, to inflation, they're gonna watch it 232 00:12:03,640 --> 00:12:06,160 Speaker 1: so a lot more. I'll pause there. So is there 233 00:12:06,800 --> 00:12:08,880 Speaker 1: is there is this a year to go for the coupon, 234 00:12:09,040 --> 00:12:12,520 Speaker 1: to buy the risky is debt and just hold it. Well, 235 00:12:12,679 --> 00:12:15,200 Speaker 1: you know it's not at the start of the year 236 00:12:15,280 --> 00:12:17,720 Speaker 1: the time to go for the riskiest debt because there's 237 00:12:17,720 --> 00:12:21,880 Speaker 1: another aspect to what happened in two thousand nineteen returns, 238 00:12:21,920 --> 00:12:23,719 Speaker 1: which is you had a great equity year and you 239 00:12:23,840 --> 00:12:26,439 Speaker 1: had a great rate year, So your coupons are very 240 00:12:26,600 --> 00:12:30,520 Speaker 1: low and your spreads are very tight. So valuations across 241 00:12:30,559 --> 00:12:32,600 Speaker 1: the board, across credit now, I think in the earlier 242 00:12:32,640 --> 00:12:35,600 Speaker 1: segment you were talking about triple c's there's a pocket 243 00:12:36,240 --> 00:12:40,719 Speaker 1: of of under performance in two thousand nineteen where it 244 00:12:40,840 --> 00:12:44,679 Speaker 1: was really a quality red lead rally. Uh. And so 245 00:12:44,840 --> 00:12:47,079 Speaker 1: you saw at the end of December, middle of December 246 00:12:47,160 --> 00:12:49,600 Speaker 1: a little bit of the bottom end of the capital 247 00:12:49,679 --> 00:12:51,839 Speaker 1: stack under performing. But do you want to start the 248 00:12:52,000 --> 00:12:56,079 Speaker 1: year where everything is priced for perfection reaching for the 249 00:12:56,160 --> 00:12:58,240 Speaker 1: bottom of the pack capital stack? No, you want to 250 00:12:58,320 --> 00:13:01,280 Speaker 1: be more defensive. It's not that we think spreads are 251 00:13:01,280 --> 00:13:04,520 Speaker 1: gonna wide, but you have no margin for error and valuations. 252 00:13:04,559 --> 00:13:07,320 Speaker 1: So it's more up in quality to start. Jeff frozen Erg, 253 00:13:07,360 --> 00:13:10,760 Speaker 1: You've got a pro chart, which is a double vector chart, 254 00:13:10,800 --> 00:13:12,720 Speaker 1: and I I'm gonna go to the dynamics folks, because 255 00:13:12,720 --> 00:13:15,000 Speaker 1: I don't want people driving off the road. But it's 256 00:13:15,000 --> 00:13:18,240 Speaker 1: the relationship of the equity market to the bond market 257 00:13:18,800 --> 00:13:22,560 Speaker 1: and then also worried about the market separate. It's called 258 00:13:22,640 --> 00:13:27,719 Speaker 1: conditional correlations. Translate that from mere mortals and that do 259 00:13:27,880 --> 00:13:33,040 Speaker 1: you delink a bond belief from the equity market this year? Yeah, 260 00:13:33,040 --> 00:13:35,679 Speaker 1: it's it's a it's a really important point when you're 261 00:13:35,760 --> 00:13:39,880 Speaker 1: thinking about your overall portfolio. You know, a lot of 262 00:13:39,960 --> 00:13:42,360 Speaker 1: times we we we we talked about what's the outlook 263 00:13:42,360 --> 00:13:44,400 Speaker 1: for the stock market, what's the outlook for the bond market? 264 00:13:44,480 --> 00:13:46,760 Speaker 1: What are you doing in bonds? But people invest in 265 00:13:46,800 --> 00:13:49,800 Speaker 1: their portfolios, and so it's about how do the pieces 266 00:13:50,440 --> 00:13:53,480 Speaker 1: relate to one another. And the expectation in terms of 267 00:13:53,520 --> 00:13:57,280 Speaker 1: the relation is I'm owning safe bonds, you know, high 268 00:13:57,400 --> 00:14:01,280 Speaker 1: quality bonds, treasury bonds. Even my immune inissable bond portfolio, 269 00:14:01,480 --> 00:14:05,000 Speaker 1: you know that's mostly related to interest rates and and 270 00:14:05,280 --> 00:14:07,559 Speaker 1: and has a has a higher quality element to it, 271 00:14:07,640 --> 00:14:11,000 Speaker 1: which means that bond portion of that portfolio shouldn't have 272 00:14:11,080 --> 00:14:13,240 Speaker 1: a lot of sensitivity and actually should move in the 273 00:14:13,320 --> 00:14:17,760 Speaker 1: opposite direction, should provide some diversifications and ballast against my equities. 274 00:14:17,920 --> 00:14:19,680 Speaker 1: But those bonds don't have a lot of yields. So 275 00:14:19,760 --> 00:14:22,840 Speaker 1: when I start adding a lot of yield earlier questions, 276 00:14:22,920 --> 00:14:24,920 Speaker 1: I go down in quality. What about high yield, about 277 00:14:24,960 --> 00:14:27,600 Speaker 1: bank loans, about e M You know, the juicy stuff 278 00:14:27,720 --> 00:14:30,160 Speaker 1: is great, it helps me to achieve my income, but 279 00:14:30,480 --> 00:14:34,160 Speaker 1: the conditional correlation is a reminder that when things go 280 00:14:34,320 --> 00:14:37,640 Speaker 1: bad in my equity market, when things are going bad 281 00:14:37,720 --> 00:14:40,320 Speaker 1: in my equity portfolio, if I have a lot of 282 00:14:40,400 --> 00:14:44,080 Speaker 1: that higher yielding stuff, what I'm introducing into my portfolio 283 00:14:44,320 --> 00:14:46,720 Speaker 1: is a lot of conditional correlation, meaning my bonds are 284 00:14:46,760 --> 00:14:49,480 Speaker 1: gonna go down. I'm gonna see the sensitivity of my 285 00:14:49,600 --> 00:14:53,840 Speaker 1: higher risk bond portfolio when I least can afford it, 286 00:14:53,920 --> 00:14:56,160 Speaker 1: that is when my equity portfolio is going down. So 287 00:14:56,240 --> 00:14:59,480 Speaker 1: it's just about remembering that assessing the balance between my 288 00:15:00,120 --> 00:15:03,480 Speaker 1: income producing my riskier portions of my bond portfolio has 289 00:15:03,520 --> 00:15:07,040 Speaker 1: to be balanced against what I'm doing on my equity portfolio. 290 00:15:07,080 --> 00:15:09,280 Speaker 1: And it's not the kind of overall well, most of 291 00:15:09,360 --> 00:15:11,840 Speaker 1: the time, these things you know, are okay. It's what 292 00:15:12,000 --> 00:15:14,320 Speaker 1: happens when the stock market is going down five or 293 00:15:14,360 --> 00:15:16,680 Speaker 1: ten percent, and that's when you really see the sensitivity 294 00:15:16,720 --> 00:15:19,200 Speaker 1: of these riskier portions of the bond market. Jefs really 295 00:15:19,240 --> 00:15:21,920 Speaker 1: thoughtful stuff and appreciate your inside Jeff Rosenberg there of 296 00:15:22,120 --> 00:15:23,720 Speaker 1: of Black Rock, and I think that's going to resonate 297 00:15:23,760 --> 00:15:34,960 Speaker 1: with a lot of people now, without question, the most 298 00:15:35,000 --> 00:15:40,920 Speaker 1: important conversation today for America and quite frankly for our 299 00:15:41,240 --> 00:15:45,640 Speaker 1: people are officers and are enlisted in our military joining US. 300 00:15:45,720 --> 00:15:49,160 Speaker 1: James trevidis the former Animal Supreme Commander of NATO and 301 00:15:49,200 --> 00:15:52,360 Speaker 1: of course with mcclardy, and he's been hugely visible in 302 00:15:52,440 --> 00:15:55,840 Speaker 1: the media and the last number of days almost vines 303 00:15:55,880 --> 00:15:57,920 Speaker 1: thank you so much for joining us with your new book, 304 00:15:58,000 --> 00:16:00,440 Speaker 1: Sailing through North. And I've really got to go to 305 00:16:00,520 --> 00:16:03,080 Speaker 1: the zeitgeist at the moment, which is the gentleman from 306 00:16:03,200 --> 00:16:07,560 Speaker 1: Utah who I've interviewed many times, the even handed Michael Lee, 307 00:16:07,800 --> 00:16:13,200 Speaker 1: Senator of Utah, really tearing apart the White House on 308 00:16:13,320 --> 00:16:17,840 Speaker 1: the brief to Capitol Hill late yesterday on these matters 309 00:16:17,960 --> 00:16:21,000 Speaker 1: in Iran and a rock admiral What actually goes on 310 00:16:21,360 --> 00:16:26,920 Speaker 1: in those briefs. Yeah, I feel for the military officers 311 00:16:26,960 --> 00:16:29,240 Speaker 1: who had to go and do those briefings, and you 312 00:16:29,280 --> 00:16:33,520 Speaker 1: could you could sense the palpable rage, I think is 313 00:16:33,600 --> 00:16:36,960 Speaker 1: not too strong a word from Senator Lee. Um hear. 314 00:16:37,120 --> 00:16:40,080 Speaker 1: What you have, Tom of Cors is a collision between 315 00:16:41,040 --> 00:16:43,720 Speaker 1: a desire on the part of the administration to closely 316 00:16:43,800 --> 00:16:48,280 Speaker 1: control all that intelligence and a they're terrified that they'll 317 00:16:48,320 --> 00:16:51,800 Speaker 1: be leaks and the sources will be revealed. And on 318 00:16:51,880 --> 00:16:54,760 Speaker 1: the other side, the Congress clearly wants to do a 319 00:16:54,960 --> 00:16:58,400 Speaker 1: job in oversight. So it's gonna be a it's gonna 320 00:16:58,400 --> 00:17:01,920 Speaker 1: be a contested space. Where where does the Pentagon fit in? 321 00:17:02,120 --> 00:17:05,080 Speaker 1: Did they report and did they do lockstep with what 322 00:17:05,320 --> 00:17:08,320 Speaker 1: President Trump and the administration want or is there any 323 00:17:08,400 --> 00:17:12,760 Speaker 1: independence to the messaging of the Pentagon on these intelligence matters. 324 00:17:14,000 --> 00:17:17,080 Speaker 1: Let me give you a nuanced answer to that. Certainly, 325 00:17:17,240 --> 00:17:19,960 Speaker 1: the Pentagon is always going to follow the direction of 326 00:17:20,040 --> 00:17:24,240 Speaker 1: the civilian leadership, the Secretary Defense of political appointee and 327 00:17:24,600 --> 00:17:27,280 Speaker 1: in fact obviously the President at the commander in chief. 328 00:17:27,440 --> 00:17:31,760 Speaker 1: But Tom, whenever I testified in front of Congress, particularly 329 00:17:31,840 --> 00:17:36,879 Speaker 1: the Senate Senator McCain, would always say, you, senior military 330 00:17:36,960 --> 00:17:40,680 Speaker 1: have a responsibility to us, to the Congress, to always 331 00:17:40,760 --> 00:17:45,280 Speaker 1: tell the truth, brutally, the full truth. And so yes, 332 00:17:45,560 --> 00:17:50,040 Speaker 1: it will be following some level of political guidance. But 333 00:17:50,240 --> 00:17:52,760 Speaker 1: you can be assured when a uniformed officer goes up 334 00:17:52,800 --> 00:17:55,200 Speaker 1: to the hill, he or she is gonna lay out 335 00:17:55,320 --> 00:17:57,960 Speaker 1: the whole truth and nothing but the truth. So let's 336 00:17:58,000 --> 00:18:01,720 Speaker 1: talk about the issue between Iran and US. Everybody's saying 337 00:18:02,280 --> 00:18:05,440 Speaker 1: issue over the tensions have been diffused, and yet here 338 00:18:05,480 --> 00:18:09,480 Speaker 1: we have uh this Boeing jet that crashed near Tehran 339 00:18:10,080 --> 00:18:13,880 Speaker 1: that was headed to Ukraine basically in the back seat here, 340 00:18:14,040 --> 00:18:16,959 Speaker 1: but people sort of saying it looks incredibly suspicious. There 341 00:18:17,000 --> 00:18:19,479 Speaker 1: could bear have been some allegations that could be uh 342 00:18:19,920 --> 00:18:22,560 Speaker 1: an errand missile what do you make of that? How 343 00:18:22,680 --> 00:18:28,119 Speaker 1: closely our US military members watching that very closely? And 344 00:18:28,240 --> 00:18:32,800 Speaker 1: I think not only US military members, but anybody commercially 345 00:18:33,000 --> 00:18:37,199 Speaker 1: who is considering flying in and out of not only Iran, 346 00:18:37,400 --> 00:18:40,879 Speaker 1: but frankly the broader Middle East right now ought to 347 00:18:41,080 --> 00:18:45,520 Speaker 1: take that into consideration. Look, there needs to be a full, thorough, 348 00:18:45,600 --> 00:18:49,760 Speaker 1: transparent international investigation, and I think the black box will 349 00:18:49,960 --> 00:18:53,960 Speaker 1: quickly tell us whether those pilots had a sudden catastrophic 350 00:18:54,119 --> 00:18:59,000 Speaker 1: explosion read a missile or UH, they had some kind 351 00:18:59,040 --> 00:19:02,680 Speaker 1: of engine feel you're there are engine failure scenarios that 352 00:19:02,760 --> 00:19:06,960 Speaker 1: can result in explosion and fire as well, but you'll 353 00:19:07,040 --> 00:19:12,600 Speaker 1: know from those black boxes. So I call on the 354 00:19:12,680 --> 00:19:17,440 Speaker 1: Iranians to reveal those The international aviation industry needs to 355 00:19:17,560 --> 00:19:20,359 Speaker 1: know what happened here. What does the US do with 356 00:19:20,600 --> 00:19:23,520 Speaker 1: those black boxes? Let's say they reveal, uh, the the 357 00:19:23,760 --> 00:19:27,520 Speaker 1: jet was shot down, what does the U S do? Uh? 358 00:19:27,640 --> 00:19:31,320 Speaker 1: The US will, along with the entire international community, will 359 00:19:31,440 --> 00:19:35,320 Speaker 1: condemn Iran for the shootdown if that occurs. But let's 360 00:19:35,359 --> 00:19:37,760 Speaker 1: not get ahead of ourselves. UM. I think it would 361 00:19:37,760 --> 00:19:42,119 Speaker 1: be irresponsible at this point to start uh chain that 362 00:19:42,320 --> 00:19:45,320 Speaker 1: leads to some kind of conspiracy theory, we all ought 363 00:19:45,359 --> 00:19:48,119 Speaker 1: to be calling on Iran to reveal the contents of 364 00:19:48,200 --> 00:19:51,600 Speaker 1: those black boxes. Uh. If there is mouthfeasance, that ought 365 00:19:51,600 --> 00:19:54,440 Speaker 1: to be revealed. In the same way that when the 366 00:19:55,000 --> 00:20:00,960 Speaker 1: airliner was shot down over Ukraine by Russian and Ukraine insurgents, 367 00:20:01,200 --> 00:20:03,840 Speaker 1: there's been widespread condemnation of that. And by the way, 368 00:20:03,880 --> 00:20:05,680 Speaker 1: we had to own up to the fact that the 369 00:20:05,840 --> 00:20:09,919 Speaker 1: United States of America, our navy shot down in Iranian 370 00:20:10,040 --> 00:20:14,960 Speaker 1: jet in an accident in that had two nineties civilians 371 00:20:15,040 --> 00:20:17,800 Speaker 1: on it. These things happen, they're terrible. They need to 372 00:20:17,840 --> 00:20:21,960 Speaker 1: be fully investigated and fully transparent, which the United States 373 00:20:22,119 --> 00:20:24,520 Speaker 1: was in the incident. I just mentioned, Emma, with your 374 00:20:24,560 --> 00:20:26,960 Speaker 1: public service to the nation over the last number of days, 375 00:20:27,040 --> 00:20:30,080 Speaker 1: your essay in Time magazine, your essay for Bloomer Opinion, 376 00:20:30,200 --> 00:20:33,399 Speaker 1: and your many media appearances, I would like to review 377 00:20:33,520 --> 00:20:36,359 Speaker 1: one moment I believe it was on Friday, where you 378 00:20:36,520 --> 00:20:41,160 Speaker 1: discuss the optionality of the Iranian navy at the Gulf 379 00:20:41,359 --> 00:20:46,280 Speaker 1: of Hormuz. Repeat that again quickly, I can. As we 380 00:20:46,359 --> 00:20:49,280 Speaker 1: all know, thirty percent of the world's oil flows through 381 00:20:49,359 --> 00:20:52,720 Speaker 1: the Straight of Hormuse, coming out of the Arabian Gulf 382 00:20:52,920 --> 00:20:56,560 Speaker 1: into the Indian Ocean, so it's highly traffic. The Iranians 383 00:20:56,600 --> 00:21:00,840 Speaker 1: have diesel submarines, very quiet, capable and shallow waters. They 384 00:21:00,920 --> 00:21:04,640 Speaker 1: can swarm small craft that have surface to surface missiles 385 00:21:04,680 --> 00:21:07,840 Speaker 1: on them, even against a larger destroyer and maybe destroyer 386 00:21:07,960 --> 00:21:10,639 Speaker 1: that's a challenge. And they have cruise missiles which can 387 00:21:10,680 --> 00:21:14,800 Speaker 1: be launched from coastal regions against our ships. So the 388 00:21:14,880 --> 00:21:18,920 Speaker 1: Iranians are very capable in that scenario. That's where another 389 00:21:19,359 --> 00:21:22,960 Speaker 1: concern ought to be very quickly is their line officer 390 00:21:23,280 --> 00:21:27,240 Speaker 1: military separate from the Revolutionary Guard and separate from the 391 00:21:27,400 --> 00:21:31,359 Speaker 1: leaders of the Islamic Republic. Yes there is, and in 392 00:21:31,560 --> 00:21:35,280 Speaker 1: general they are very professional. When we see, if you will, 393 00:21:35,480 --> 00:21:40,360 Speaker 1: cowboy antics at sea runs against our ships, crazy things 394 00:21:40,440 --> 00:21:44,239 Speaker 1: on the radio, threats, it comes from the Revolutionary Guards, who, 395 00:21:44,359 --> 00:21:46,800 Speaker 1: let's face it will be at a high state of 396 00:21:47,000 --> 00:21:50,119 Speaker 1: emotion given the killing of their leader, General Sula Money. 397 00:21:50,400 --> 00:21:52,480 Speaker 1: James Travitas, thank you so much. And again the book 398 00:21:52,520 --> 00:21:55,000 Speaker 1: folks can't say enough about a chapter to chapter on 399 00:21:55,160 --> 00:21:58,560 Speaker 1: individual admirals. I'll go right as he mentions diesel submarines 400 00:21:58,640 --> 00:22:01,720 Speaker 1: to rick Over that after alone on aivial, rick Over's 401 00:22:01,760 --> 00:22:15,879 Speaker 1: worth of the price of Admission. Brook Sutherland, Bloomberg Opinion 402 00:22:15,920 --> 00:22:18,720 Speaker 1: columnists covers all things industrials, but right now she's focused 403 00:22:18,800 --> 00:22:23,720 Speaker 1: on Boeing. Brooke seven seven Max is still not in 404 00:22:23,800 --> 00:22:26,760 Speaker 1: the air. What's the latest in terms of trying to 405 00:22:26,840 --> 00:22:29,040 Speaker 1: get it back in the air. So the latest is 406 00:22:29,080 --> 00:22:32,200 Speaker 1: that Boeing has come out and recommended that pilots undergo 407 00:22:32,359 --> 00:22:35,800 Speaker 1: flight simulator training. Now, this is a significant shift from 408 00:22:35,840 --> 00:22:38,560 Speaker 1: Boeing's previous stance of the key reason why we're even 409 00:22:38,640 --> 00:22:42,120 Speaker 1: talking about the seven seven Max is that Boeing did 410 00:22:42,200 --> 00:22:44,720 Speaker 1: not want to have pilots go through simulator training. That 411 00:22:44,800 --> 00:22:46,639 Speaker 1: was a key selling point for the plane, that was 412 00:22:46,760 --> 00:22:49,000 Speaker 1: key to Boeing's efforts to catch up to a air 413 00:22:49,080 --> 00:22:51,800 Speaker 1: bus is a three program. So for them to be 414 00:22:51,880 --> 00:22:55,359 Speaker 1: pivoting at this point signals to me that the gravity 415 00:22:55,480 --> 00:22:57,560 Speaker 1: of this crisis is finally sinking in for them and 416 00:22:57,600 --> 00:23:00,439 Speaker 1: that they're starting to realize the extent of the financial penalty. 417 00:23:00,480 --> 00:23:02,760 Speaker 1: There's reports from the New York Times and others that 418 00:23:02,880 --> 00:23:06,919 Speaker 1: they made this decision after pilots from United Airlines, American Southwest, 419 00:23:07,200 --> 00:23:11,280 Speaker 1: and Aero Mexico were in simulators testing out that new software, 420 00:23:11,320 --> 00:23:14,720 Speaker 1: and they did not follow expected emergency checklist, that they 421 00:23:14,920 --> 00:23:17,199 Speaker 1: were able to avoid crashes of the airplane, but they 422 00:23:17,240 --> 00:23:20,440 Speaker 1: did not follow proper procedures. So that just reinforces the 423 00:23:20,520 --> 00:23:23,240 Speaker 1: idea that this is a fundamentally different plane and that 424 00:23:23,359 --> 00:23:26,440 Speaker 1: pilots need to be properly informed and trained on its features. 425 00:23:26,880 --> 00:23:30,080 Speaker 1: So okay, so that's a big change. And so my 426 00:23:30,320 --> 00:23:32,840 Speaker 1: guests would be that would delay if I have to 427 00:23:32,880 --> 00:23:35,399 Speaker 1: get every pilot you know, to go through the simulator. 428 00:23:35,720 --> 00:23:37,119 Speaker 1: This is going to push back when this you can 429 00:23:37,200 --> 00:23:39,760 Speaker 1: get in the air. So now what are we talking about? 430 00:23:39,960 --> 00:23:42,119 Speaker 1: So a key thing to note is that there are 431 00:23:42,160 --> 00:23:46,160 Speaker 1: only thirty four simulators currently certified for the Max by 432 00:23:46,280 --> 00:23:49,960 Speaker 1: some estimates, so there's a logistical challenge and just getting 433 00:23:50,000 --> 00:23:53,280 Speaker 1: all the pilots to actually sit in a simulator. So 434 00:23:53,359 --> 00:23:55,560 Speaker 1: you're right, this is certainly going to be a delay 435 00:23:55,680 --> 00:23:58,040 Speaker 1: for the return to service of the MAX. And it's 436 00:23:58,040 --> 00:24:01,160 Speaker 1: also going to be an expense because simulators are expensive 437 00:24:01,240 --> 00:24:03,720 Speaker 1: to buy, and it's expensive for the airlines to pull 438 00:24:03,760 --> 00:24:05,960 Speaker 1: the pilots out at their normal work to sit in 439 00:24:06,040 --> 00:24:07,760 Speaker 1: one of these. And you know, to my point, on 440 00:24:07,880 --> 00:24:11,560 Speaker 1: flight deck out in Anaheim with minutes three, these are 441 00:24:11,600 --> 00:24:15,320 Speaker 1: adults in their dead series. How long do they simulate 442 00:24:16,119 --> 00:24:20,640 Speaker 1: for before they feel confidence in flying the new seven 443 00:24:20,720 --> 00:24:23,640 Speaker 1: thirty seven? That part is not clear yet. We don't 444 00:24:23,680 --> 00:24:26,440 Speaker 1: know exactly what all this will entail, if they'll have 445 00:24:26,560 --> 00:24:28,800 Speaker 1: to go through the same degree of training as they 446 00:24:28,800 --> 00:24:32,320 Speaker 1: would if it's an entirely new airplane, if it'll be supplemental. Uh, 447 00:24:32,520 --> 00:24:34,560 Speaker 1: that part we don't know. And Boeing is also I 448 00:24:34,560 --> 00:24:39,600 Speaker 1: should know, exploring retrofitting simulators for older seven thirty seven models, 449 00:24:39,640 --> 00:24:41,720 Speaker 1: but it's not clear out whether or not they can do. 450 00:24:42,359 --> 00:24:44,840 Speaker 1: You have been brilliant on this. You know, you've had 451 00:24:44,880 --> 00:24:49,280 Speaker 1: a journalistic skepticism of the Boeing story from day one. 452 00:24:49,560 --> 00:24:54,440 Speaker 1: Are you less skeptical now? I'm not because I have 453 00:24:54,560 --> 00:24:56,679 Speaker 1: a very hard time giving Bowing a lot of credit 454 00:24:56,800 --> 00:24:58,920 Speaker 1: for this thing. Is it's more than a year after 455 00:24:59,040 --> 00:25:02,760 Speaker 1: the first Max crash, and given everything that's taken place 456 00:25:02,880 --> 00:25:05,840 Speaker 1: and all of the delays and the public upbraiding by 457 00:25:05,880 --> 00:25:08,600 Speaker 1: the f A, A what just a month ago? I mean, 458 00:25:08,640 --> 00:25:10,800 Speaker 1: I don't I find it hard to believe that this 459 00:25:10,920 --> 00:25:13,520 Speaker 1: is a company that has truly turned over a new leaf. 460 00:25:13,560 --> 00:25:15,680 Speaker 1: I think what we learned from the Max crisis is 461 00:25:15,760 --> 00:25:19,399 Speaker 1: that there was a culture of arrogance and superiority at 462 00:25:19,480 --> 00:25:23,040 Speaker 1: Boeing and sort of a refusal to accept accountability for 463 00:25:23,280 --> 00:25:27,840 Speaker 1: this crisis. Remind me here from Kansas. From Kansas folks, 464 00:25:27,920 --> 00:25:29,920 Speaker 1: for those of you worldwide, and you know even on 465 00:25:30,000 --> 00:25:34,440 Speaker 1: the East and left coast, people in Kansas are mental 466 00:25:34,640 --> 00:25:37,639 Speaker 1: about aviation. The heritage goes back and you think the 467 00:25:37,680 --> 00:25:40,440 Speaker 1: Wright brothers in North Carolina and all that. No, it's 468 00:25:40,720 --> 00:25:45,000 Speaker 1: Kansas is ground zero of testing? Is that because it's flat? 469 00:25:46,480 --> 00:25:49,560 Speaker 1: Maybe you know what, there is a hill in Lawrence 470 00:25:50,280 --> 00:25:56,800 Speaker 1: Campion Hill. Yeah, Lawrence, Kansas. Serious. Someone about the new CEO, 471 00:25:58,359 --> 00:26:00,879 Speaker 1: you think he will can be an agent for change 472 00:26:00,960 --> 00:26:04,200 Speaker 1: in that culture you're talking about here. So the CEO 473 00:26:04,800 --> 00:26:09,480 Speaker 1: UH has spent nearly three decades at General Electric under 474 00:26:09,560 --> 00:26:11,680 Speaker 1: Jack Welch, and then he was in the running to 475 00:26:11,800 --> 00:26:14,760 Speaker 1: become Boeing CEO. He lost that job to Jim McNerney, 476 00:26:14,800 --> 00:26:17,600 Speaker 1: who was also an ex GE guy. He UH the 477 00:26:17,680 --> 00:26:20,919 Speaker 1: CEO the current CEO of Boeing or to b CEO 478 00:26:21,000 --> 00:26:24,040 Speaker 1: in a few days. Dave Calhoun Um was on the 479 00:26:24,119 --> 00:26:27,159 Speaker 1: board since two thousand nine, so he was responsible for 480 00:26:27,400 --> 00:26:30,040 Speaker 1: blessing a lot of the decisions that got Bowing into 481 00:26:30,160 --> 00:26:33,480 Speaker 1: this mess and coming from the culture that was ge 482 00:26:33,800 --> 00:26:36,600 Speaker 1: Having been at Boeing for so long, I am a 483 00:26:36,680 --> 00:26:39,480 Speaker 1: little skeptical that he is necessarily the change agent that 484 00:26:39,560 --> 00:26:42,360 Speaker 1: Boeing needs. And I do wonder if you might see 485 00:26:42,440 --> 00:26:45,200 Speaker 1: sort of a John Flannery two point oh type of situation. 486 00:26:45,359 --> 00:26:48,720 Speaker 1: John Flannery was the successor to Jeff Immelt, who succeeded 487 00:26:48,800 --> 00:26:51,480 Speaker 1: Jack Welch, and he was there for fourteen months. He 488 00:26:51,560 --> 00:26:53,879 Speaker 1: basically had to take out the garbage and air all 489 00:26:53,960 --> 00:26:56,360 Speaker 1: of G's dirty laundry, and then you needed somebody else 490 00:26:56,400 --> 00:26:59,119 Speaker 1: to come in and Larry Culpter really change that company. 491 00:26:59,160 --> 00:27:01,600 Speaker 1: And I think you could see a similar situation play 492 00:27:01,640 --> 00:27:03,280 Speaker 1: out of them. What is the dynamic right now? Have 493 00:27:03,359 --> 00:27:07,560 Speaker 1: the great are split of bowing between defense and commercial? 494 00:27:07,800 --> 00:27:10,239 Speaker 1: What is that dynamic right now? So Defense has been 495 00:27:10,520 --> 00:27:12,520 Speaker 1: strong for them, and I think it will continue to 496 00:27:12,560 --> 00:27:15,000 Speaker 1: be strong. I mean, certainly there's been a lot of 497 00:27:15,119 --> 00:27:19,440 Speaker 1: negative headlines on their tanker plane that they have had 498 00:27:19,520 --> 00:27:22,000 Speaker 1: some issues with sort of straight parts being left there, 499 00:27:22,119 --> 00:27:24,480 Speaker 1: and the Department of Defense has not been super pleased 500 00:27:24,520 --> 00:27:29,520 Speaker 1: about that. But they do seem to be stronger into commercial. Tragically, 501 00:27:29,600 --> 00:27:31,440 Speaker 1: thirty seconds left, we should have you back, and is 502 00:27:31,560 --> 00:27:33,680 Speaker 1: what can you do, Brook Sutherland, to be sure the 503 00:27:33,760 --> 00:27:37,560 Speaker 1: seven seven is never mothballed? Can we just have it 504 00:27:37,640 --> 00:27:41,440 Speaker 1: fled forever? I can, I can look into can work 505 00:27:41,520 --> 00:27:44,160 Speaker 1: into this. What do you like about it? It's great. 506 00:27:44,280 --> 00:27:46,680 Speaker 1: It's it's the only airplane that matters. It's part of 507 00:27:46,760 --> 00:27:51,320 Speaker 1: the fabric of our generation. I advantage, folks, and then 508 00:27:51,359 --> 00:27:53,360 Speaker 1: I can sit rock Star up on the upper deck, 509 00:27:53,520 --> 00:27:56,720 Speaker 1: you know, with the pilot's and all that. But it's 510 00:27:56,760 --> 00:27:58,720 Speaker 1: the only real plane out there. All the rest of 511 00:27:58,760 --> 00:28:01,280 Speaker 1: them were tinker toys. Well are in my right squeeze. 512 00:28:02,119 --> 00:28:03,280 Speaker 1: I love it. I love to see that. I think 513 00:28:03,280 --> 00:28:05,840 Speaker 1: pull up to the gate. They're trying to pivot more 514 00:28:05,920 --> 00:28:11,440 Speaker 1: towards narrow bodies from Brook subtle and expert. I'm going 515 00:28:11,600 --> 00:28:14,920 Speaker 1: thank you so much. Thanks for listening to the Bloomberg 516 00:28:14,960 --> 00:28:20,880 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 517 00:28:21,280 --> 00:28:25,479 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 518 00:28:25,560 --> 00:28:29,760 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 519 00:28:30,280 --> 00:28:31,320 Speaker 1: I'm Bloomberg Radio.