WEBVTT - Trump Treasury Pick, Spirit Bankruptcy 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.320 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:15.800 Eastern on fo car Playing and Broud Auto with the 0:00:15.840 --> 0:00:19.720 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:19.960 --> 0:00:22.320 or watch US live on YouTube. 0:00:23.160 --> 0:00:26.639 In all this reporting about the new administration in the 0:00:26.680 --> 0:00:29.880 Treasury pic, I've heard the number bending about that the 0:00:29.960 --> 0:00:33.280 US treasury market is twenty eight trillion dollars in size. 0:00:33.960 --> 0:00:35.920 It's large, So say that. 0:00:35.840 --> 0:00:37.600 Means I have to be a little bit nicer to 0:00:37.640 --> 0:00:39.360 our next guest than I typically. 0:00:39.400 --> 0:00:40.800 Am Ira Jersey joins us. 0:00:40.840 --> 0:00:44.280 I didn't know he was so influential. Twenty eight trillion dollars. Ira, 0:00:44.880 --> 0:00:47.120 do you care or to what extent does your market 0:00:47.159 --> 0:00:50.920 care about who President lect Trump selects as Secretary of 0:00:50.960 --> 0:00:51.440 the Treasury. 0:00:52.760 --> 0:00:55.200 Well, so people have been talking about who it's going 0:00:55.240 --> 0:00:58.840 to be, and you know there's a mantra at the 0:00:58.840 --> 0:01:01.959 Treasury Department that typical is they want to be regular 0:01:02.080 --> 0:01:05.360 and predictable in terms of how they issue debt. So 0:01:05.600 --> 0:01:07.920 if you wind up with any of the three main 0:01:07.959 --> 0:01:10.480 picks that we've been hearing about, I don't suspect that 0:01:10.520 --> 0:01:12.840 you'll see a major seed change from that. But they 0:01:12.880 --> 0:01:17.400 do influence how many of which securities are issued. In fact, 0:01:17.400 --> 0:01:20.640 when the Treasury Borrowing Advisory Committee, that's a committee of 0:01:20.680 --> 0:01:24.480 investors and dealers and the like, when they get together, 0:01:24.560 --> 0:01:29.160 they actually send a recommendation to the Treasury Secretary of how. 0:01:29.080 --> 0:01:30.080 Things should be issued. 0:01:30.120 --> 0:01:33.080 Now, in reality, you know, the Treasury Secretary kind of 0:01:33.120 --> 0:01:35.600 signs off on it, but mostly the decisions are made 0:01:35.800 --> 0:01:39.240 by the people under the Treasury Secretary. But I think that, 0:01:39.600 --> 0:01:42.880 you know, all three of these picks are reasonably middle 0:01:42.920 --> 0:01:45.440 of the road in terms of, you know, how they're 0:01:45.480 --> 0:01:48.840 going to operate the Treasury Department in my opinion. And look, 0:01:48.880 --> 0:01:51.240 I haven't had any discussions with any of these folks, 0:01:51.280 --> 0:01:55.120 but I don't think that they're really outside of the 0:01:55.320 --> 0:01:58.240 realm of what we might expect as normal, especially since 0:01:58.280 --> 0:02:00.680 two of them are very much market people. 0:02:00.680 --> 0:02:02.200 And they don't want to rock the boat. 0:02:02.200 --> 0:02:05.680 They'll get feedback from markets and market participants and investors 0:02:05.920 --> 0:02:09.760 before they make any sweeping changes to how treasuries are issued, 0:02:09.760 --> 0:02:10.880 which treasuries. 0:02:10.440 --> 0:02:11.320 Are issued, and the like. 0:02:11.880 --> 0:02:12.320 T back. 0:02:12.480 --> 0:02:14.600 So the cool kids call it IRA, it's good to 0:02:14.639 --> 0:02:17.519 chat with you. So I was out of commission for 0:02:17.560 --> 0:02:19.440 about a month and a half. And when that happened, 0:02:19.440 --> 0:02:21.720 you know, we're looking at treasury yields, hey, around like 0:02:21.760 --> 0:02:23.960 three point six percent. It was like, all right, guys, 0:02:23.960 --> 0:02:25.640 we're going to move money out of treasuries and we're 0:02:25.680 --> 0:02:27.520 going to put it into stocks. That's where the return 0:02:27.600 --> 0:02:28.920 is going to be. And then I come into the 0:02:28.919 --> 0:02:31.200 office and we're touching and we're close to four point five. 0:02:31.360 --> 0:02:34.120 That's a big shift. How high do we stay for 0:02:34.200 --> 0:02:36.960 how long? And is that thesis? Then look, guys, you 0:02:37.000 --> 0:02:38.760 still got to put money in the long end. 0:02:39.680 --> 0:02:41.880 Well, there's a so I do think that there's a 0:02:41.919 --> 0:02:44.080 cap on how high treasury yields are going to be 0:02:44.080 --> 0:02:46.120 able to go. There's going to be a kind of 0:02:46.120 --> 0:02:50.480 this supply demand balance that probably is somewhere between four 0:02:50.520 --> 0:02:53.640 and a half and five percent, particularly in long term treasuries, 0:02:53.680 --> 0:02:57.040 just because the higher yields go from here, the more 0:02:57.080 --> 0:03:01.520 we get into the place where lie ability managers tend 0:03:01.560 --> 0:03:05.000 to really like like bond yields, and especially unless you 0:03:05.040 --> 0:03:08.320 get you know, really big shift up in inflation, there's 0:03:08.320 --> 0:03:10.560 no reason to think that we won't stabilize somewhere in 0:03:10.560 --> 0:03:13.040 this area. So our view is will wind up staying 0:03:13.040 --> 0:03:15.079 in a pretty wide range over the next year. 0:03:15.480 --> 0:03:17.240 Smaller range and we had the past year. 0:03:17.320 --> 0:03:20.440 Remember over the past year, we've been between five percent 0:03:20.480 --> 0:03:22.120 and three and a half percent, right, so one hundred 0:03:22.120 --> 0:03:24.200 and fifty basis point range. I think it's probably a 0:03:24.200 --> 0:03:27.160 bit narrower than that over the next year, but we 0:03:27.320 --> 0:03:31.040 still wind up being volatile in that range. More important 0:03:31.200 --> 0:03:32.760 is going to be the or as important as going 0:03:32.800 --> 0:03:34.760 to be the curve, I think, and where do two 0:03:34.840 --> 0:03:38.120 year yields go, which is far less certain because we 0:03:38.160 --> 0:03:40.120 don't know how far the Fed's going to cut. Right, 0:03:40.120 --> 0:03:41.720 the Fed's probably going to cut at least a little 0:03:41.760 --> 0:03:43.600 bit more. But are they only going to cut another 0:03:43.640 --> 0:03:46.120 seventy five basis points as the market expects, or are 0:03:46.120 --> 0:03:47.880 they going to cut another one hundred and fifty to 0:03:47.880 --> 0:03:49.760 two hundred basis points like we thought. 0:03:49.520 --> 0:03:51.840 Just when you know, before you went out on. 0:03:51.880 --> 0:03:54.960 Break, Because that's really been the big move and the 0:03:55.040 --> 0:03:58.000 reason why we've seen this massive selloff in treasuries is 0:03:58.080 --> 0:04:00.320 just a shifting expectation for what the Fed's going to do. 0:04:00.840 --> 0:04:03.640 So what will we get at the December eighteenth meeting 0:04:03.720 --> 0:04:07.080 is I guess I've heard the word skip used. It's 0:04:07.080 --> 0:04:09.840 the first time I've heard that. But is skipping the 0:04:09.880 --> 0:04:12.600 December meeting in terms of rate cuts? Is that reasonable 0:04:12.720 --> 0:04:14.160 or is what? Do you think they're going to move forward? 0:04:15.280 --> 0:04:17.719 Yeah, Paul, I do think that they There is the 0:04:17.720 --> 0:04:21.120 big distinct possibility that they skip in December. 0:04:21.760 --> 0:04:23.120 You heard some language. 0:04:22.800 --> 0:04:25.080 Out of out of Chair Powell over the last week 0:04:25.160 --> 0:04:28.440 that basically hinted that they might do that. So you know, 0:04:28.480 --> 0:04:30.880 you wind up getting an okay payroll report and okay 0:04:30.960 --> 0:04:34.839 CPI report, and you wind up with maybe a skip. 0:04:35.080 --> 0:04:37.599 The market right now, keep in mind, is basically pricing 0:04:37.640 --> 0:04:41.440 a skip in either December or January. So basically one 0:04:41.480 --> 0:04:44.679 cut between the two meetings. Kind of unsure which one 0:04:44.720 --> 0:04:46.880 is of those two meetings is going to be the skip. 0:04:47.279 --> 0:04:49.080 What's interesting, though, is that it feels like we priced 0:04:49.120 --> 0:04:51.920 out a lot of the drama and the rate cuts 0:04:51.960 --> 0:04:53.800 that we had already priced in and say over the summer. 0:04:54.080 --> 0:04:56.479 So are we sort of at neutral in essence in 0:04:56.520 --> 0:04:58.640 terms of what the market actually expects versus what the 0:04:58.640 --> 0:04:59.680 Fed's actually going to deliver. 0:05:00.920 --> 0:05:02.800 Well, I think, well, the market seems to think that 0:05:02.839 --> 0:05:04.880 maybe if the Fed's going to get back to neutral, 0:05:04.920 --> 0:05:07.800 that maybe the neutral rate is three and three quarters 0:05:07.800 --> 0:05:10.400 to four percent, because that's what the market's priced for 0:05:10.440 --> 0:05:12.440 where the Fed's going to get to. So again, a 0:05:12.440 --> 0:05:15.000 little bit more in terms of cuts, but not the 0:05:15.320 --> 0:05:17.599 not down to you know, two point seventy five percent, 0:05:17.640 --> 0:05:19.599 where we were priced very briefly for a. 0:05:19.600 --> 0:05:21.080 Cup of coffee back in September. 0:05:21.440 --> 0:05:25.000 So I do think that the market believes that neutral 0:05:25.080 --> 0:05:25.520 is higher. 0:05:25.800 --> 0:05:27.560 I think the FED is skeptical of that. 0:05:27.600 --> 0:05:29.680 Right, which is the reason why the FED, I think 0:05:29.720 --> 0:05:32.160 thinks that they might need to remain restrictive a little 0:05:32.160 --> 0:05:34.080 bit longer. And they do think that they're restrictive, right, 0:05:34.120 --> 0:05:36.480 Almost every single member of the FED has said that 0:05:36.560 --> 0:05:39.360 they that they're restrictive. But the question is how restrictive 0:05:39.480 --> 0:05:42.680 and will the Fed, you know, get when they get 0:05:42.720 --> 0:05:45.080 to restrictive, how long then will they stay there? And 0:05:45.120 --> 0:05:47.159 that's when the reason why you have two year yields 0:05:47.160 --> 0:05:48.800 that kind of can't make up their mind whether or 0:05:48.839 --> 0:05:50.880 not they want to be at four percent or four 0:05:50.920 --> 0:05:53.000 and a quarter percent. And I suspect that we'll want 0:05:53.320 --> 0:05:55.240 a two year yields to wind up back back at 0:05:55.279 --> 0:05:58.280 four even under four percent by the end of next year. 0:05:58.640 --> 0:06:03.200 But there's still you know, that's that's incremental tightening or 0:06:03.240 --> 0:06:05.600 easing by the Federal Reserve over the course of that 0:06:05.920 --> 0:06:08.960 period of time. And you know, unless we get a recession, 0:06:08.960 --> 0:06:12.080 it's hard to see how the yield curve significantly steepens 0:06:12.080 --> 0:06:14.200 from here unless you wind up with some kind of 0:06:14.480 --> 0:06:18.040 you know, deficit shock where where the Treasury Department has 0:06:18.080 --> 0:06:20.080 to go out initial a whole lot of long term debt. 0:06:20.880 --> 0:06:23.800 It's possible, but that I think is kind of an 0:06:23.880 --> 0:06:24.760 educase scenario. 0:06:25.320 --> 0:06:27.640 All right, Ara, thank you so much as I always appreciate it. 0:06:27.720 --> 0:06:31.039 Our Jersey chief viewers, interest rates strategists for Bloomberg Intelligence 0:06:31.120 --> 0:06:34.839 joining us from the b I headquarters down there in Princeton, 0:06:35.000 --> 0:06:35.640 New Jersey. 0:06:37.120 --> 0:06:41.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:41.080 --> 0:06:44.600 weekdays at ten am Eastern on applecard Play and Androud 0:06:44.640 --> 0:06:47.400 Auto with the Bloomberg Business app. You can also listen 0:06:47.520 --> 0:06:50.600 live on Amazon Alexa from our flagship New York station. 0:06:51.000 --> 0:06:54.680 Just say Alexa play Bloomberg eleven thirty. 0:06:54.839 --> 0:06:57.000 We alex you here alongside Paul Sweeney. This is Bloomberg 0:06:57.080 --> 0:06:59.400 Intelligence Radio. We bring you all the top news and business, 0:06:59.400 --> 0:07:02.599 economics and finance through our lens of our Bloomberg intelligence folks. 0:07:02.600 --> 0:07:04.640 They cover two thousand companies and one hundred and thirty 0:07:04.640 --> 0:07:07.680 industries all around the world. We also like to tap 0:07:07.720 --> 0:07:10.280 them outside of Bloomberg as well to get a good 0:07:10.320 --> 0:07:12.680 read on what's actually happening in the market. If you're 0:07:12.680 --> 0:07:14.680 putting money to work, what's the smartest way to do that? 0:07:14.720 --> 0:07:17.520 Fill Orlando, a chief equity market strategistic head of client 0:07:17.560 --> 0:07:21.760 portfolio Management at Federated Hermes, joins me. Now, Phil, what's 0:07:21.840 --> 0:07:23.640 the case for not being in equities? 0:07:26.120 --> 0:07:29.880 Well, the stock market has had a phenomenal run here. 0:07:30.720 --> 0:07:34.720 Animal spirits have returned and from the bottom of the 0:07:34.760 --> 0:07:38.400 market in early to mid August, a lot of the 0:07:38.440 --> 0:07:42.720 indices are up fifteen to twenty percent, So that the 0:07:42.840 --> 0:07:47.200 case for not being in equities or being underweight equities 0:07:47.240 --> 0:07:50.240 at the moment is perhaps you think stocks are overvalued 0:07:50.360 --> 0:07:54.400 near term and you'd like to have you'd like to 0:07:54.400 --> 0:07:57.800 be patient and get a better re entry point in 0:07:57.960 --> 0:08:01.480 order to get back to an overweight. But if we're taking, 0:08:02.080 --> 0:08:06.680 you know, a longer cycle position and looking at the 0:08:06.720 --> 0:08:12.640 prospect of less regulation, lower tax rates both individual and corporate, 0:08:13.400 --> 0:08:17.200 stronger economic growth, all of those things are good for 0:08:17.320 --> 0:08:23.240 corporate earnings. Ultimately, share prices reflect stronger earnings, and we 0:08:23.320 --> 0:08:25.920 could see the S and P five hundred, you know, 0:08:26.000 --> 0:08:29.560 from six thousand. Now let's call it up into the 0:08:29.600 --> 0:08:33.160 seventy five hundred neighborhood as we look out over the 0:08:33.160 --> 0:08:34.040 next couple of years. 0:08:34.840 --> 0:08:38.920 So, Phil, to what extent did your I guess market 0:08:38.920 --> 0:08:41.440 call change the day after the election when it became 0:08:41.480 --> 0:08:44.000 a parent that not only president like Donald Trump coming 0:08:44.000 --> 0:08:45.319 back to the White House, but it looks like he's 0:08:45.320 --> 0:08:48.600 going to have a pretty solid Republican support in Congress. 0:08:48.760 --> 0:08:50.040 How has that impacted your call? 0:08:51.480 --> 0:08:54.840 The good news, Paul, is it did absolutely nothing to 0:08:54.880 --> 0:09:00.600 our call because we were we were expecting a a 0:09:00.640 --> 0:09:03.280 red wave, if you will, and had positioned for that 0:09:03.400 --> 0:09:08.880 accordingly in terms of overweights in domestic large cap value 0:09:09.080 --> 0:09:15.160 and the small cap categories. We had been essentially fading 0:09:15.760 --> 0:09:19.400 the dramatic outperformance of the mag seven names over the 0:09:19.440 --> 0:09:22.400 eighteen month period into the middle of this year. And 0:09:22.840 --> 0:09:24.800 you know, as you look back on the third quarter 0:09:24.920 --> 0:09:28.720 and results over the last you know, six weeks or so, 0:09:30.120 --> 0:09:32.200 the values and the small caps have had a pretty 0:09:32.240 --> 0:09:34.280 good run of it. So we didn't need to make 0:09:34.320 --> 0:09:37.800 any changes after the election results became known. 0:09:39.000 --> 0:09:40.800 What other thing I was just talking about that struck 0:09:40.840 --> 0:09:43.880 me was the rise in ten year yield almost a 0:09:43.920 --> 0:09:47.040 four and a half percent and the continued money into 0:09:47.120 --> 0:09:50.360 money market funds. Is that ever going to leave? 0:09:52.000 --> 0:09:57.200 Well, there's a concern that's growing based upon developments over 0:09:57.320 --> 0:10:00.320 just the course of the last week. L And I 0:10:00.320 --> 0:10:03.920 think you know, we've seen this with the backup in 0:10:04.000 --> 0:10:07.120 treasury yields. We were at three point fifty three sixty 0:10:07.240 --> 0:10:09.560 or so a couple of months ago. You know, we're 0:10:09.559 --> 0:10:12.200 now up in that four forty four to fifty neighborhood. 0:10:12.640 --> 0:10:14.520 And the question is whether or not we're going to 0:10:14.559 --> 0:10:17.640 go back and retest you know, the four seventy five 0:10:17.720 --> 0:10:21.320 or five percent level we saw you know, October of 0:10:21.400 --> 0:10:24.960 last year. The reasons for that backup, in our view 0:10:26.000 --> 0:10:31.079 is that inflation is is is not going down anymore. 0:10:31.120 --> 0:10:34.000 It's sort of stalled. And you know, based upon the 0:10:34.000 --> 0:10:37.120 wholesale inflation metrics we saw last week are actually starting 0:10:37.160 --> 0:10:40.600 to re accelerate. Is we look ahead to the core 0:10:40.720 --> 0:10:43.760 personal consumption expenditure index that we're going to get I 0:10:43.800 --> 0:10:47.600 think the day after Thanksgiving, the expectation is that that 0:10:47.679 --> 0:10:49.720 number is going to continue to go up as well 0:10:50.160 --> 0:10:52.679 to two point eight percent. Remember the Fed's target there 0:10:52.760 --> 0:10:57.520 is two percent. You had some pretty strong economic growth 0:10:57.520 --> 0:11:01.840 from the second and third quarters compared to the first quarter. 0:11:02.520 --> 0:11:07.360 Last week's retail sales numbers upward, revisions in September, some 0:11:07.400 --> 0:11:10.520 strong nominal or headline numbers out of October. So the 0:11:10.600 --> 0:11:15.719 thinking is that the economy strong, inflation is sticky and persistent. 0:11:16.800 --> 0:11:19.880 You've got a red waves here that in all likelihood 0:11:19.920 --> 0:11:23.320 is going to result in stronger economic growth. Maybe the 0:11:23.360 --> 0:11:27.400 Feds not on a glide path to you know, take 0:11:27.400 --> 0:11:30.920 the funds right down at three percent, which was sort 0:11:30.960 --> 0:11:34.240 of the gist of what most investors got out of 0:11:34.280 --> 0:11:37.280 their SEP back on September eighteenth. 0:11:37.880 --> 0:11:42.040 So given that backdrop, Phil kind of where's your best 0:11:42.120 --> 0:11:44.720 opportunity after that? As you look at the equity markets here, 0:11:44.720 --> 0:11:46.520 where are you guys focusing these days? 0:11:46.800 --> 0:11:49.640 Well, again, we're taking a longer term view and that 0:11:49.720 --> 0:11:53.959 if we're right that the issues that we just talked 0:11:54.000 --> 0:11:58.040 about do result in you know, let's our forecast is 0:11:58.080 --> 0:12:00.600 three hundred and fifty dollars in corporate earnings for the 0:12:00.679 --> 0:12:05.440 S ANDP looking out to calendar twenty seven embedded in 0:12:05.520 --> 0:12:12.240 that assumption is comparable or perhaps lower corporate tax rates 0:12:12.600 --> 0:12:15.320 and extension of the individual tax rates at the end 0:12:15.320 --> 0:12:17.839 of next year, the end of calendar twenty five when 0:12:17.840 --> 0:12:20.720 they come up for renewal. So, as a result, as 0:12:20.720 --> 0:12:23.360 we look out to twenty six and twenty seven, the 0:12:23.440 --> 0:12:26.120 economy ought to do pretty well. So if we discount 0:12:26.120 --> 0:12:29.240 back three hundred and fifty dollars in earnings into the 0:12:29.320 --> 0:12:32.160 end of twenty six, that would suggest the seventy five 0:12:32.240 --> 0:12:36.079 hundred SMP we're trading at six thousand now. So if 0:12:36.080 --> 0:12:38.679 the market does pull back here, you know, let's say 0:12:38.679 --> 0:12:41.280 we pulled back to the two hundred day moving average, 0:12:41.440 --> 0:12:44.000 you know, roughly about fifty four hundred. That gives you 0:12:44.240 --> 0:12:47.160 a couple of thousand points in the S and P 0:12:47.160 --> 0:12:49.720 potentially the upside over the next couple of years. That 0:12:49.760 --> 0:12:51.520 looks pretty attractive to us. 0:12:51.320 --> 0:12:54.200 And sounds pretty attractive to me certainly. Phill Er, Orlando, 0:12:54.440 --> 0:12:57.080 Chief Epity market strategist and head of Client Portfolio Management 0:12:57.080 --> 0:12:58.080 and federator and Armies. 0:12:58.520 --> 0:12:59.480 Thank you for your time. 0:13:00.920 --> 0:13:04.800 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:13:04.880 --> 0:13:07.599 weekdays at ten am Eastern on Apple card Playing and 0:13:07.720 --> 0:13:10.560 broud Auto with the Bloomberg Business App. Listen on demand 0:13:10.640 --> 0:13:14.359 wherever you get your podcasts, or watch us live on YouTube. 0:13:15.080 --> 0:13:17.559 Happy Monday, everybody. Alex Deal here alongside paulse We need. 0:13:17.559 --> 0:13:20.000 This is Bloomberg Intelligence. We are broadcasting to live on 0:13:20.000 --> 0:13:22.920 this lovely Monday morning for our interactive broker studio right 0:13:22.960 --> 0:13:26.440 here in Midtown Manhattan. Maybe lovely morning for us, but 0:13:26.480 --> 0:13:31.240 maybe not so much for Spirit Airlines. The company declares 0:13:31.400 --> 0:13:34.720 Chapter eleven bankruptcy. It's seeking Chapter eleven protection in New 0:13:34.800 --> 0:13:37.520 York to restructure about one point six billion dollars of debt. 0:13:37.640 --> 0:13:40.000 It did tell customers on Monday that they should continue 0:13:40.000 --> 0:13:44.000 feeling comfortable booking fights now and in the future. I 0:13:44.000 --> 0:13:48.040 don't really I guess that stock is obviously halted for 0:13:48.080 --> 0:13:51.079 bankruptcy protection filing. We wanted to get the latest now 0:13:51.080 --> 0:13:53.920 with Francois do Flow. He is US airline analyst with 0:13:54.000 --> 0:13:59.240 Bloomberg News. He joins us, excuse me, Bloomberg Intelligence. I think, yes, okay, 0:13:59.240 --> 0:14:02.160 Bloomberg Elligence. That's important. We want to sparse that out. 0:14:03.520 --> 0:14:06.160 What happens to Spirit, like, what does this process wind 0:14:06.200 --> 0:14:06.760 up looking like? 0:14:08.000 --> 0:14:08.240 Yeah? 0:14:08.320 --> 0:14:12.040 So good morning. Spirit have been struggling struggling since twenty 0:14:12.120 --> 0:14:15.760 twenty with losses and cashburns things. So God only was 0:14:15.880 --> 0:14:18.839 since twenty twenty three after the merger with Jeed Blue 0:14:18.920 --> 0:14:21.680 was blocked and Praught and Whitney and on the need 0:14:21.800 --> 0:14:25.480 for some engines to be inspected and that granted some 0:14:25.600 --> 0:14:30.160 twenty four aircraft for this year. So with everything, unicodes 0:14:30.200 --> 0:14:34.320 have increased faster than revenue, both because of inflationary effects 0:14:34.360 --> 0:14:38.440 and also from competition. And there was this need of 0:14:39.000 --> 0:14:43.240 refinance one point one billion of debt raised during the 0:14:43.240 --> 0:14:46.800 pandemic that was packed by loyalty program and that was 0:14:46.880 --> 0:14:49.760 due on September twenty twenty five, and there is another 0:14:50.480 --> 0:14:53.600 five hundred million compatible debt due in twenty twenty six. 0:14:54.080 --> 0:14:59.400 And because of this cash burn and losses, this debt 0:14:59.680 --> 0:15:03.320 was needed to be written, recognociated, or restructure one way 0:15:03.400 --> 0:15:05.840 or another. And that's what's managed to do with this 0:15:05.920 --> 0:15:10.000 announcement today. So eighty million or so of the date 0:15:10.160 --> 0:15:14.760 will be equitized, an exit of about eighty million eight 0:15:14.840 --> 0:15:18.400 hundred million will be issued and you on twenty thirty 0:15:19.000 --> 0:15:22.280 and in the meantime, Spirit will get three hundred million 0:15:22.400 --> 0:15:27.320 of debt in the orin position facility to go through 0:15:27.360 --> 0:15:31.000 the winter and continue to operate and make sure that 0:15:31.080 --> 0:15:35.280 the flyer passenger can still fly during this important radio season. 0:15:36.040 --> 0:15:39.360 Is there an expectation about when Spirit will come out of. 0:15:39.480 --> 0:15:44.880 Bankruptcy, so they expect they expect to end to exit 0:15:44.920 --> 0:15:49.680 the bankruptcy early March twenty twenty five, so there is 0:15:50.080 --> 0:15:53.520 an extension period of forty days that is possible. That 0:15:53.640 --> 0:15:56.400 will still be early twenty five to twenty five, which 0:15:56.440 --> 0:15:59.720 is a very fast process. But it's also because they 0:15:59.760 --> 0:16:03.080 managed to arrange to play arrange most of the big 0:16:03.360 --> 0:16:05.240 although before filing. 0:16:05.280 --> 0:16:11.320 So what could a new administration under President Trump free 0:16:11.400 --> 0:16:15.040 up some more merger possibilities that were kind of squashed 0:16:15.080 --> 0:16:18.400 and does that sort of become Spirit's future in like 0:16:18.480 --> 0:16:19.640 April of twenty twenty. 0:16:19.520 --> 0:16:21.800 Five, good course, that could be. 0:16:22.720 --> 0:16:28.960 Definitely Spirit will emerge from this bankruptcy a liner and 0:16:29.840 --> 0:16:34.000 hopefully more profitable in the long term airlines, not necessarily 0:16:34.040 --> 0:16:36.560 in twenty twenty five. They only help to get back 0:16:36.600 --> 0:16:39.520 to profits in twenty twenty six, which can be event 0:16:39.600 --> 0:16:44.800 though very very hard to achieve, but definitely liner and 0:16:45.200 --> 0:16:49.200 better position and a more attractive airline for somebody else 0:16:49.280 --> 0:16:55.000 to grab, and definitely a change of an administration would 0:16:55.120 --> 0:16:58.800 luckily make that easier for a new buyer. 0:17:00.280 --> 0:17:04.320 So what what kind of looking at Spirit are they do? 0:17:04.440 --> 0:17:06.600 Are they a bad operator or do they just have 0:17:06.640 --> 0:17:07.960 a bad capital structure. 0:17:09.200 --> 0:17:14.080 No, they faced a lot of end winds from everywhere, 0:17:14.200 --> 0:17:18.399 ending from exiting from the pandemic. They faced higher courts 0:17:18.520 --> 0:17:25.280 because of pilots, because of everything getting more expensive, and 0:17:25.359 --> 0:17:29.520 at the same time they faced strong competition from American Delta, 0:17:29.920 --> 0:17:34.920 United Airlines who were looking for passengers to fill seats 0:17:34.920 --> 0:17:40.399 at business travelers were we're not feeling and this was 0:17:40.480 --> 0:17:45.800 pressuring yields at low cost airlines, including Spirit. So and 0:17:45.840 --> 0:17:48.879 then on top of that you add their engine problems. 0:17:49.359 --> 0:17:53.200 That makes only everything worse with one out of ten 0:17:53.280 --> 0:17:58.880 airplane grounded, even though they got some conversation from Product win. 0:17:59.160 --> 0:18:01.879 So it's a nation of plenty of things. Plus the 0:18:01.920 --> 0:18:06.240 fact that it seems that travelers are moving away from 0:18:07.640 --> 0:18:14.440 low cost ticket to more premium fly and that's why 0:18:14.520 --> 0:18:17.360 they are also changing their business model a little bit, 0:18:17.600 --> 0:18:22.399 offering more premium seats and services to their customers, and 0:18:22.440 --> 0:18:24.760 they are trying to change their experience. 0:18:24.960 --> 0:18:26.120 And this is not something that. 0:18:26.160 --> 0:18:30.160 Is specific to Spirit. But we also say that at 0:18:30.160 --> 0:18:34.360 a legend and frontier because of this change in customer behavior. 0:18:34.720 --> 0:18:36.879 Yeah, and also you know then you add things they 0:18:36.920 --> 0:18:38.520 make their money by. Hey, I'm going to check a 0:18:38.520 --> 0:18:40.440 bag out, you pay for something. I want a pretty ticket, 0:18:40.440 --> 0:18:42.000 you got to pay for I'm a coffee, you got 0:18:42.000 --> 0:18:43.760 to pay for it at some point. It's like guys 0:18:44.320 --> 0:18:46.480 enoup with that. All right, I think so much. FIRSTOI, 0:18:46.480 --> 0:18:49.760 we appreciate Francois de Flow he joins us s Boomberg Intelligence, 0:18:49.880 --> 0:18:54.200 US Airlines analysts joining us from Princeton, New Jersey. Again, 0:18:54.280 --> 0:18:58.080 that tickers s a ve. Also the big guys get 0:18:58.160 --> 0:19:01.720 Alta United, for example, they can really compete on lower 0:19:01.760 --> 0:19:03.760 affairs if they want to want at the end of 0:19:03.760 --> 0:19:05.600 the day too, So how do you compete with that? 0:19:05.760 --> 0:19:05.920 Right? 0:19:05.960 --> 0:19:08.920 And I didn't understand it, but now since Francois explained it. 0:19:09.320 --> 0:19:10.960 During the pandemic, when they lost some of their business 0:19:11.000 --> 0:19:13.240 passengers or a lot of their business passengers, they had 0:19:13.280 --> 0:19:15.760 to fill those seats, and so let's discount some prices 0:19:15.800 --> 0:19:18.760 and get those people in boom So I think your 0:19:18.840 --> 0:19:20.639 question was the best, which is, now that we have 0:19:20.680 --> 0:19:23.040 a new administration, can we get a deal done with 0:19:23.119 --> 0:19:26.439 JetBlue or our Frontier one of those two, because it 0:19:26.480 --> 0:19:28.960 doesn't seem like they can operate on their own and 0:19:29.359 --> 0:19:31.200 it's a smaller market stick they get hurt. 0:19:31.440 --> 0:19:33.919 Exactly because then you got to close maybe less flights, 0:19:33.920 --> 0:19:35.600 and it actually went to hurting the people who need 0:19:36.240 --> 0:19:36.639 the flight. 0:19:36.680 --> 0:19:42.000 There, you're listening to the Bloomberg Intelligence Podcast. Catch us 0:19:42.040 --> 0:19:45.440 live weekdays at ten am Eastern on applecar Play and 0:19:45.440 --> 0:19:48.359 Android Auto with the Bloomberg Business app. You can also 0:19:48.440 --> 0:19:51.920 listen live on Amazon Alexa from our flagship New York station. 0:19:52.280 --> 0:19:56.200 Just say Alexa playing Bloomberg eleven thirty. 0:19:56.280 --> 0:19:58.240 Else you'll Paul Sweeney, You're live here in our Bloomberg 0:19:58.280 --> 0:20:01.359 Interactive Broker Studio. When you're streaming live on YouTube as well, 0:20:01.400 --> 0:20:04.200 also head over to YouTube dot com search Bloomberg Podcast 0:20:04.200 --> 0:20:05.880 and that's where you'll find it. So it's just listening 0:20:05.920 --> 0:20:09.000 to Charlie's report here the NASDAK up almost nine tens 0:20:09.000 --> 0:20:11.000 a one percent. Said what's pushing the NASDAC car and 0:20:11.000 --> 0:20:13.879 I look, go over to the mov function Tesla. It 0:20:14.040 --> 0:20:16.439 counts for forty five points of the move there in 0:20:16.480 --> 0:20:19.479 the Nasdaq. So Tesla stock up set seven point two 0:20:19.520 --> 0:20:23.199 percent today, leading the Nasdaq higher the question is the 0:20:23.240 --> 0:20:23.960 Trump trade? 0:20:24.119 --> 0:20:26.560 Is it a thing? How do you play it? Has 0:20:26.560 --> 0:20:27.240 it played out? 0:20:27.720 --> 0:20:29.480 Let's talk to somebody who does this stuff for a living. 0:20:29.520 --> 0:20:34.440 Carol Schlife, chief investment officer for BEMO Family Office. Carol, 0:20:34.480 --> 0:20:38.960 the world's a different place since the election on November sixth. 0:20:39.040 --> 0:20:42.240 Here, how did your investment out look change? If at all? 0:20:45.080 --> 0:20:48.720 It didn't really change. We're always very intent about building 0:20:48.800 --> 0:20:53.040 durable and sturdy portfolios. And actually we had thought going 0:20:53.080 --> 0:20:56.159 into the election that you know, of a variety of 0:20:56.200 --> 0:21:02.880 potential outcome comes of red suite, Actually it was one 0:21:02.920 --> 0:21:06.240 of the most likely outcomes, and we didn't have high 0:21:06.280 --> 0:21:08.840 probabilities on any of them, if you will. It's not 0:21:08.920 --> 0:21:11.560 like it was run away, but you know, it is 0:21:11.600 --> 0:21:14.240 interesting because you are trying to make sure that you're 0:21:14.480 --> 0:21:19.040