Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
Speaker 1: you the latest news from the world's of business and finance,
Speaker 1: plus technology, politics, economics, all harnessing the power of Business
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Speaker 1: You can also listen to our radio show at two
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Speaker 1: YouTube search Bloomberg Global News. Well, the new issue of
Speaker 1: Bloomberg Business Week is out now. The cover story Shocks
Speaker 1: to the System. Yes, the global economy is in a
Speaker 1: fragile state, but here's a practical way to think about
Speaker 1: the risks. It's all about the new economy as well.
Speaker 1: We got with us this afternoon Christina Lynn Blatch. She's
Speaker 1: Global Economics editor for Bloomberg Business Week. She's with us
Speaker 1: right now in the Bloomberg Interactive Broker's studio. Christina, before
Speaker 1: we get into specific stories, just give us an overview
Speaker 1: of the New Economy issue and you know, of course
Speaker 1: is associated with Bloomberg's New Economy Forum. Um. But what
Speaker 1: was the goal here in putting this together? Well, one
Speaker 1: of the things when we started, we were looking at
Speaker 1: sort of where we were last year when we were
Speaker 1: putting this together, and we were feeling quite hopeful two
Speaker 1: years after COVID that the scars were starting to heal.
Speaker 1: Was not great, a lot better has been kind of brutal,
Speaker 1: and then well, you know, we were in the grips
Speaker 1: of a crazy virus and then all these other things
Speaker 1: started happening. More crazy people. They're back on the horizon
Speaker 1: now on the stage rather um. Yeah. So I think
Speaker 1: part of the story, one of the stories that we
Speaker 1: did is is that now geopolitics are back as as
Speaker 1: a risk you know, which we hadn't. You know, we
Speaker 1: had biological risk for like a year or two write
Speaker 1: um and that, you know, and it's not like the
Speaker 1: pandemic has gone away. So it's basically risk on top
Speaker 1: of risk on top of risk, um and um. And
Speaker 1: then we thought, wow, the world feels so fragile right now.
Speaker 1: It does feel fragile, doesn't it talk about recession and well,
Speaker 1: to your point that we've had biological risks. It feels
Speaker 1: like the pandemic has been so all consuming over the
Speaker 1: past two and a half years. But I like the
Speaker 1: framing of this story because you bring up Brexit, the
Speaker 1: U S. China trade war. Haven't thought about that in
Speaker 1: a while, Russia's invasion of Ukraine. To your point that
Speaker 1: the world is very fragile right now, I mean, what's
Speaker 1: what's next helped me. Well, it's actually hard to feel
Speaker 1: very hopeful right now. By three, I mean, I think
Speaker 1: the best that we can hope for is is that
Speaker 1: you know, there's resilience, uh, that countries will get through
Speaker 1: what undoubtedly Europe will soon be in recession. Russia already
Speaker 1: is um. In the US, of course, Bloomberg Economics expects
Speaker 1: ite um. But I think that in a way, some
Speaker 1: of the things we thought were going great, like in
Speaker 1: the last chair, which was the resilience of the labor
Speaker 1: market in the US, has turned to have a huge
Speaker 1: downside right in terms of fighting inflation. So it's like
Speaker 1: you can't even count like you're you know, the your
Speaker 1: you give thanks for some of these things before you
Speaker 1: realize that, oh no, you know, some of these things
Speaker 1: are actually weaknesses. Well, we learned about how intertwined the
Speaker 1: world is when it comes to supply chains, specifically when
Speaker 1: it comes to China. I think two has been about
Speaker 1: our reliance on oil in a different way with Russia's
Speaker 1: invasion of Ukraine. When we think about the country is that.
Speaker 1: I don't want to say calling the shots in two,
Speaker 1: but to look forward to three, what are the countries
Speaker 1: we need to watch? Um? I think US and China
Speaker 1: are still big protagonists. Of course, they're pulling apart from
Speaker 1: each other, and that has consequences for many many countries,
Speaker 1: countries that are going to potentially be forced to choose
Speaker 1: on which side you know they're on, maybe not yet,
Speaker 1: but like in subtle ways right, um, Well, Saudi Arabia
Speaker 1: we saw recently the people you count on as friends
Speaker 1: in the US may not always be there for you
Speaker 1: in terms of you know, what's happening in energy markets.
Speaker 1: I mean, if you think about it now, you know
Speaker 1: countries have to look at their own well being. What
Speaker 1: Saudi Arabia is doing in terms of oil, it's like,
Speaker 1: you know, you're talking about a country that has one
Speaker 1: giant pilot of this commodity and which in twenty years
Speaker 1: may not be in demand much anymore, right, So they're
Speaker 1: maximizing their benefits. So in a way, it's like what
Speaker 1: we're gonna be seeing next year again in our with
Speaker 1: a with a background of our recession, is people are
Speaker 1: going to be looking to maximize their own well being
Speaker 1: and countries are right, and so that is going to
Speaker 1: cause further strains. Um And you have new governments in
Speaker 1: some places, you know, in the UK and Brazil, um
Speaker 1: and and the new government in the yeah, um you
Speaker 1: could or you could say though that he probably knows
Speaker 1: more about the inner working So what's happening in that
Speaker 1: country right now? Um And, And they're going to be
Speaker 1: making choices, I mean, domestic politics are going to be
Speaker 1: you know, foremost, although interestingly in the US there's been
Speaker 1: a tradition that lame duck presidents tend to focus very
Speaker 1: much on international agenda. So we'll see what we see.
Speaker 1: You know, if there's if there's something that Biden he's
Speaker 1: already duck president, we don't know you heard it here first,
Speaker 1: we don't know your right space. I want to talk
Speaker 1: more about China though, because the idea that the US
Speaker 1: and China are pulling apart, what falls in the void
Speaker 1: and who you know which countries go along with either side.
Speaker 1: If the U S And China are pulling apart, is
Speaker 1: that inherently inflationary? That's a good question, thank you. Um,
Speaker 1: because you think about bobalization, I mean, the thing you
Speaker 1: always hear is that it's been deflationary. You've gotten lower
Speaker 1: prices as technology and trade just continues to flow. So
Speaker 1: I don't know, is the is the complete opposite of
Speaker 1: that a globalization? Is that that? I don't know, what
Speaker 1: does the logic follow that that's inflationary? Well, I mean,
Speaker 1: one of the reasons we are seeing some manufacturing coming
Speaker 1: back to the US isn't because you know, American policymakers
Speaker 1: have been standing on the shores, you know, calling companies
Speaker 1: to come back. Uh, it's because shipping costs got to
Speaker 1: be so high, you know, and and supply chains headaches,
Speaker 1: you know. So some companies believe they can actually manufacture
Speaker 1: closer to their main market at at a low cost.
Speaker 1: So if that is the case, then it shouldn't necessarily
Speaker 1: be inflationary that these you know, that these countries are
Speaker 1: pulling apart. The thing about this what we're seeing right now, though,
Speaker 1: is there's so many different factors also involved. In those calculations, right,
Speaker 1: because the strength of the dollar. You know, people have said, oh,
Speaker 1: the US is exporting inflation to other countries through that conduit.
Speaker 1: And if you think about, for example, the fact that
Speaker 1: global commodities tend to be prized in dollars, what it
Speaker 1: is like for a country that is a net import
Speaker 1: or of oil uh to be having to you know,
Speaker 1: to to to pay for that commodity now in like
Speaker 1: you know, and and which is much more expensive, then
Speaker 1: you can understand that we've seen all sorts of traditional
Speaker 1: kind of that that that that those calculus is not
Speaker 1: a good word, are constantly shifting, and they've been shifting
Speaker 1: in the last year. UM. I mean from a from
Speaker 1: a business perspective. UM. I think people companies have seen
Speaker 1: the downside of of how heavily they came to rely
Speaker 1: on one country for manufacturing uh. And I think that,
Speaker 1: you know, on the margin, when a company thinks, now,
Speaker 1: maybe not where am I going to move that plant
Speaker 1: out of China, but where am I going to with
Speaker 1: the second or third plant? Uh? And those are good
Speaker 1: conversations to be having. Okay, twenty seconds left. There are
Speaker 1: a lot of stories in here that I want to
Speaker 1: get to we have time for one more birth control
Speaker 1: in developing countries. Um, why do we need to focus
Speaker 1: on sort of an old school method? Twenty seconds? Well,
Speaker 1: I think it's Africa in particular, because there's this thing
Speaker 1: called the demographic transition, and if you mismanage it, you
Speaker 1: get poorer before you know, you miss out on prosperity.
Speaker 1: All right, Christina Lyndblad, Global Economics editor for Bloomberg Business Week,
Speaker 1: with us in the Bloomberg Interactive Broker Studio. Check out
Speaker 1: the current issue of Bloomberg Business Week. It's online, It's
Speaker 1: on newsstands now and of course it's also on the
Speaker 1: Bloomberg terminal. It's the new Economy issue of Bloomberg Business Week.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Very pleased right
Speaker 1: now to be joined by Dr Tom Inglesby, Director for
Speaker 1: the Center for Health Security, the JOHNS Hopkins Bloomberg School
Speaker 1: of Public Health. It is supported by Michael R. Bloomberg,
Speaker 1: the founder of Bloomberg LP and Bloomberg Philanthropies. Doctor Inglesby
Speaker 1: joined us on the phone from Baltimore. Dr good to
Speaker 1: have you back with us. As I mentioned just a
Speaker 1: few moments ago, Katie and I both moderated panels from
Speaker 1: the Bloomberg Growth Summit Bloomberg Live event here, and I
Speaker 1: gotta tell you, it feels like we are back to
Speaker 1: totally normal, pre pandemic uh activities, full full room, a
Speaker 1: couple of masks, but you know, not by the majority
Speaker 1: or anything. And you know there was you were able
Speaker 1: to join virtually, but there are people here in person.
Speaker 1: Uh are we out of this pandemic? Well, Hi, Tim
Speaker 1: and Katie, thanks so much for having me. We are
Speaker 1: not out of the pandemic. Uh that things are obviously
Speaker 1: much better than they were a year ago or even
Speaker 1: six months ago. But if you look at the numbers
Speaker 1: every day, there still are fifty people on average dying
Speaker 1: from COVID every day in the United States. And you
Speaker 1: know that this the majority of people who are getting
Speaker 1: serious CODED infection are unvaccinated or have some kind of
Speaker 1: underlying immune suppression. But there are people who are vaccinated
Speaker 1: and are still getting very serious COVID infections, And so
Speaker 1: it's importable to know. It's it's far far better than
Speaker 1: it was, but it's fairly steady. We are still in
Speaker 1: a pretty steady state of people having a fatal infection
Speaker 1: from COVID every day. If you look at the the
Speaker 1: stats across the country, it's still for adults something like
Speaker 1: the sixth or seventh leading cause of death in the
Speaker 1: United States. So it's nothing to be kind of trifled with.
Speaker 1: It's still a very serious illness. And so I mean,
Speaker 1: is that just going to be sort of the new
Speaker 1: normal going forward? And to your point that they're still
Speaker 1: unvaccinated people in this country at this point, is it
Speaker 1: safe to say if you haven't gotten a vaccine by now,
Speaker 1: you're probably not going to go get the job. Well,
Speaker 1: I hope that's not the case. I think, you know,
Speaker 1: the more that we learn about the vaccine and more
Speaker 1: than information is published about it, the more the doctors
Speaker 1: and nurses who take care of people and communities keep
Speaker 1: talking about the value of vaccine. I am hopeful that
Speaker 1: more people will get vaccinated. You're right, only only about
Speaker 1: two thirds of the country or have gotten the first
Speaker 1: two shots of vaccine, and so the other third of
Speaker 1: the country is walking around pretty vulnerable, were very vulnerable
Speaker 1: to a COVID infection and maybe a very serious one
Speaker 1: or even a fatal one. So hopefully with time, as
Speaker 1: people see that the vaccine has been really well tolerated,
Speaker 1: that major side effects have not occurred, that more people
Speaker 1: will decide to get vaccinated. It is not too late.
Speaker 1: Some people may think I've missed the window. You haven't
Speaker 1: missed the window. You could get vaccinated today. It's free,
Speaker 1: uh in places around the country. And so I really
Speaker 1: would encourage people to do that. Okay, So in the
Speaker 1: last minute and a half that we have with you,
Speaker 1: Dr Englesby, give us, give us some lessons that we've
Speaker 1: learned over the past two and a half years that
Speaker 1: could help us deal with future viral outbreaks. And I
Speaker 1: got to tell you there are the virus I mean,
Speaker 1: you know, my son had RSV last week. We know
Speaker 1: kids in the hospital with RSV. There's ten foot mouth
Speaker 1: going around at daycare, like there are other viruses out there. Oh,
Speaker 1: you're absolutely right. I think we're entering a wintertime where
Speaker 1: we're gonna have continued covid infection. We're gonna have a
Speaker 1: probably pretty serious flu season and a lot of RSB
Speaker 1: like like your son. I think, you know, one of
Speaker 1: the lessons is that we have tools to fight these viruses.
Speaker 1: For many of them, I think rs V. Unfortunately, we
Speaker 1: don't have the same tools we have for flu and
Speaker 1: for COVID, but research and development in America matters a lot.
Speaker 1: We can actually still make a lot of progress against
Speaker 1: these viruses. Wearing a mask makes a big difference. That
Speaker 1: lowers your chance of getting infected. So if you're if
Speaker 1: you're vulnerable to one of these infections, then then that
Speaker 1: kind of intervention or UM that that kind of like
Speaker 1: removing yourself from infection is important. And um getting tested
Speaker 1: also is really useful because it then leads to the
Speaker 1: potential for treatment. So we have now rapid tests available
Speaker 1: around the country for COVID, really easy to get flu
Speaker 1: tests as well, and getting those tests helps make a
Speaker 1: diagnosis and then can lead to rapid treatment and that
Speaker 1: can make a big difference for people. Dr Tom Angles,
Speaker 1: director of the Center Frail Security at the Johns Hopkins
Speaker 1: Bloomberg School of Public Health. Dr Engels, be good to
Speaker 1: have you with us here on a Bloomberg Business Week Radio.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, the
Speaker 1: hotel search platform Tree Vago reported earnings earlier this week.
Speaker 1: Revenue for the third quarter beat, but it was a
Speaker 1: miss when it came to the bottom line. The company
Speaker 1: reported a lost per share of nineteen euro cents versus
Speaker 1: an estimate of actually an earnings of four euro cents.
Speaker 1: We're gonna get more right now with Axel Heafer, he's
Speaker 1: the CEO of Tree Vago. He joins his via zoom
Speaker 1: right now from Dusseldorf, Germany. Axel, good to have you
Speaker 1: back with us. How are you. I'm very well. How
Speaker 1: are you? We're doing well? Thanks? Hey, um, let's start
Speaker 1: with earnings and then I want to get to what
Speaker 1: you're seeing when it comes to travel demand in Europe
Speaker 1: and around the world. What happened when it came to
Speaker 1: the bottom line just expenses rose, No, not at all.
Speaker 1: I mean we had the highest adjustity but of all times,
Speaker 1: so I record. What happened is that we have have
Speaker 1: quite a lot of goodwill on our balance sheet, which
Speaker 1: is coming from an acquisition ideal years back, and with
Speaker 1: a rising interest rate environment, you basically need to do
Speaker 1: impairment tests every quarter, and the impairment has basically brought
Speaker 1: down the net income and what was there any impact
Speaker 1: at all from the strong dollar. I feel like when
Speaker 1: you look over the third quarter earnings reporting season so far,
Speaker 1: that has been a consistent theme. Was that a factor
Speaker 1: for Triviago as well? Not really. I mean, we are
Speaker 1: a global business, so we operated pretty much everywhere other
Speaker 1: than in China, and so um currencies have an impact,
Speaker 1: but but not a material impact on our numbers. Okay, well,
Speaker 1: let's move out and talk about broader travel environment right now,
Speaker 1: as I've been talking about this throughout the program. Today
Speaker 1: I did a panel for Bloomberg Live at the Bloomberg
Speaker 1: Growth Summit. Katie did as well, and I started off.
Speaker 1: I asked the CMO in chief Digital officer of Virgin Atlantic,
Speaker 1: the airliner based in the UK part of Virgin Group
Speaker 1: also ready nine percent owned by Delta, about demanding what
Speaker 1: she's seeing, Chavonne pitz Fitzpatrick, and she told me that
Speaker 1: they are still seeing robust demand. They're not seeing any
Speaker 1: sort of slow down when it comes to what people
Speaker 1: want to purchase in terms of flights and traveling. And
Speaker 1: it kind of runs counter to what we've been hearing
Speaker 1: about concerns about a recession globally. ACXL. What are you
Speaker 1: seeing on your platform. Yes, so the if you just
Speaker 1: look at the third quarter, the summer was very very
Speaker 1: strong for sure. Um, if you now look look at
Speaker 1: the fourth quarter and really at an automate winter, the
Speaker 1: the demand is very strong. So and what But on
Speaker 1: the other hand, what we are seeing is that they
Speaker 1: are very very first signs, tiny signs of changing consumer
Speaker 1: behavior in Europe, and we believe that Europe will be
Speaker 1: actually hit harder than than the US. What are those tines?
Speaker 1: What are those tiny signs? So what we are seeing,
Speaker 1: I mean, what what you would expect in in in
Speaker 1: a more difficult time that people will try to mitigate
Speaker 1: the increase in in prices by somehow trading down. And
Speaker 1: there are three ways how you can trade down. One
Speaker 1: is you just reduce the length of your trip, and
Speaker 1: we've seen some very early signs of a reduction in
Speaker 1: the length of stay in Europe. The second one is
Speaker 1: that you are taking a cheaper destination. And the destination
Speaker 1: can be cheaper either because it's cheaper to get there
Speaker 1: you can drive there rather and have to fly there,
Speaker 1: or the destination is as such cheaper, and again we've
Speaker 1: seen some very early signs there in Europe and the
Speaker 1: third one is that you just compare more, which is
Speaker 1: obviously for US great because that's what we offer. We
Speaker 1: help users to compare hotel prices. So so actually just
Speaker 1: sticking with this because this is really interesting, interesting data
Speaker 1: that you guys have. Are you talking about this just
Speaker 1: for European customers or is this globally? We can't see
Speaker 1: it in America's yet. And and that that also makes
Speaker 1: sense because the impact of the current crisis is much
Speaker 1: more severe in in Europe. Inflation obviously has hit the
Speaker 1: Western world everywhere, but in Europe you have you have
Speaker 1: a lot more visibility and you have real shortage. So
Speaker 1: there there is concerned that you will run out of
Speaker 1: certain basic goods over winter because they are supply shortages.
Speaker 1: And in addition you have rapidly increasing prices. So the
Speaker 1: sentiment is much worse than than in the US. And
Speaker 1: that's why I would also expect for next year the
Speaker 1: recession or the cool down of the economy to be
Speaker 1: worse in Europe versus the US. Actually you mentioned that
Speaker 1: in Europe, what you're seeing is that people are not
Speaker 1: staying for as long. Uh, their stays have been shortening up.
Speaker 1: And it's interesting, I mean comparing and contrasting that with
Speaker 1: what we heard from Airbnb, who reported earlier this week
Speaker 1: as well. They give a week forecast. There was weakness
Speaker 1: in high end rentals, maybe people not using rentals as
Speaker 1: a place to work from home. Is it a similar
Speaker 1: read and what's going on in Europe with people shortening
Speaker 1: their stays. I think it's very different. I mean, the
Speaker 1: the mix of all the travel companies is obviously very different,
Speaker 1: and geographic makes Europe versus the US, but also the
Speaker 1: business makes and I think Whateverbnb is referring to is
Speaker 1: really this this remote working which is um in a way,
Speaker 1: an upper class phenomenon, and so we we don't have
Speaker 1: the same exposure, not as strong asposure as they have.
Speaker 1: But that that again makes sense because they you have
Speaker 1: more and more companies that moved to a hybrid model
Speaker 1: or some even returned fully to the office. So that's
Speaker 1: not a surprise to me that that you have a
Speaker 1: less demand for fully flexible housing. A lot of people
Speaker 1: think about Triviago as a hotel search platform, but what
Speaker 1: kind of visibility do you have when it comes to
Speaker 1: flights and when it comes to car rentals? Zero it's it,
Speaker 1: but you can book those services on Trivago. No, not really.
Speaker 1: I mean so, so we've run some tests where we
Speaker 1: have actually used wide labeled solutions of other partners. But
Speaker 1: but we we are ourselves. We only operate as an
Speaker 1: accommodation search class. It's interesting and find what I'm seeing
Speaker 1: the problem what we see here see here in the
Speaker 1: US must be a white label version because we can
Speaker 1: go ahead and book those here in the US. We
Speaker 1: were talking earlier about the signs of trouble that you're
Speaker 1: starting to see in Europe. You said you're not seeing
Speaker 1: it here in the US yet. But what do you
Speaker 1: expect to see as a as a person running a
Speaker 1: company that operates in what pretty much every country except
Speaker 1: for China, How are you planning for? So we think
Speaker 1: that actually the absolute spend on travel will be up
Speaker 1: next year, and and why is that the prices will
Speaker 1: continue to rise. You have inflation on pretty much everything
Speaker 1: in the Western world, and we do think that that
Speaker 1: will continue um, but consumers will and that's to a
Speaker 1: different degree in Europe and the US will try to
Speaker 1: counter that that increase in prices. But that that we
Speaker 1: do expect that the overall spending will be up in
Speaker 1: absolute terms. Well, Okay, overall spending, you expect to see
Speaker 1: it up. But tell us about how inflation is impacting
Speaker 1: the business now and pacting travelers. Now, do you see
Speaker 1: an effect? I mean that right now, you see very
Speaker 1: little effect, to be perfectly honest, and in a way
Speaker 1: with that's that's more or less what we've expected. I mean,
Speaker 1: we expected the very very strong summer as we've seen
Speaker 1: the last two years as well, even during the pandemic,
Speaker 1: because in summer is really the time to travel where
Speaker 1: you really want to get a break, um, and where
Speaker 1: you want to see friends and family, et cetera. And
Speaker 1: we've seen that to a very very strong degree. The
Speaker 1: other thing that helped the summer is obviously that the
Speaker 1: savings rate has been very high and in a lot
Speaker 1: of countries, in most countries actually through the pandemic, So
Speaker 1: people have saved money that they could spend on expensive
Speaker 1: travel this year. Um and uh. And they were just
Speaker 1: a lot of a lot of things that were promised
Speaker 1: that were they were pushed out, that that you needed
Speaker 1: to needed to do. I don't know, Disneyland was one
Speaker 1: of our top destinations and you can really imagine how
Speaker 1: many kids were promised that they would they would be
Speaker 1: taken to Disneyland in the last two years, and at
Speaker 1: some point in time you need to honor your promise. Um. So,
Speaker 1: so that's why you can't really see it right now
Speaker 1: other than the very first signs of it. But if
Speaker 1: you look at the world around us and the world
Speaker 1: we are currently living on, everything is getting very expensive
Speaker 1: and the the real wages in a lot of our
Speaker 1: core markets are under pressure, which means that people have
Speaker 1: to save. Um. And so I don't think it's it's
Speaker 1: prudent to assume that, um, that the market will will
Speaker 1: just go up with inflation. Um. We believe that that
Speaker 1: consumers will will save and and and encounter some of
Speaker 1: the inflationary pressure on travel costs. So how are you
Speaker 1: dealing with this internally right now? At the end of
Speaker 1: last year, you had what about eight hundred employees Actel
Speaker 1: talk to us about what you're doing inside the company
Speaker 1: to potentially plan for some sort of downturn. Yeah, I
Speaker 1: mean we we actually took a decision that was quite
Speaker 1: tough in summer, and then in summerre he said, Okay,
Speaker 1: it's very clear that we were entering more turbulent times
Speaker 1: or we were in more turbulent times already in summer
Speaker 1: and being based in Europe, obviously we're in the middle
Speaker 1: of it. And we said what it was quite clear
Speaker 1: that inflation will be around us for the foreseeable future,
Speaker 1: and that will saving money and comparing prices for pretty
Speaker 1: much everything from milk to t shirts to hotels will
Speaker 1: be on top of everybody's mind. So we decided to
Speaker 1: focus on our core value proposition and we've shut down
Speaker 1: some of our more adjacent products, which which basically allows
Speaker 1: us to to really focus on our core and to
Speaker 1: serve our customers with the product that we think is
Speaker 1: most suitable. On the other hand, it also helped us
Speaker 1: to reduce our costs and because of that, we do
Speaker 1: believe that will be able to reduce our cost twenty
Speaker 1: two to twenty three, even though inflation will will push
Speaker 1: up our expenses. And actually we have a little less
Speaker 1: than a minute left with you. But of the regions
Speaker 1: that you have visibility on, which is the closest to
Speaker 1: pre pandemic times, I would say pretty much all of
Speaker 1: the West, so western Europe and northern America's um in
Speaker 1: this summer, people were traveling like crazy. Um So, yeah,
Speaker 1: it was it goes as as good as it could
Speaker 1: go for a travel company. Alright, Axel Hea for for
Speaker 1: CEO at Trivago, joining us via zoom from Dusseldorf, Germany.
Speaker 1: Always going to chat with you. Excellent. Get an idea
Speaker 1: for what's happening when it comes to the world of
Speaker 1: travel and specifically hotels and lodging room a journal. Yeah,
Speaker 1: but you let me drive? Oh no, no, no, no, please,
Speaker 1: I'll do the right gravels. I want to drive. It's
Speaker 1: good question. This is good Drive to the clothes on
Speaker 1: Bluebird Radio. It's that time already less than ten minutes
Speaker 1: ago in until the bells here for our drive to
Speaker 1: the clothes. We are very pleased to be joined by
Speaker 1: Mona Mahajan, a senior investment strategist at Edward Jones. She
Speaker 1: joins us this afternoon via zoom from Warren, New Jersey. Mona,
Speaker 1: good to have you with us. How are you great?
Speaker 1: Thanks for having me? Great to be here on a
Speaker 1: beautiful day, beautiful day maybe outside, beautiful day here at
Speaker 1: the office. But you take a look at the markets
Speaker 1: and there's not a lot of beauty to see. Um,
Speaker 1: how do you explain it? Yeah? Look, it was a
Speaker 1: big week in markets, and the FED was probably the
Speaker 1: culprit of what's causing not only yesterday's volatility, but some
Speaker 1: of the follow through we're seeing today. Um, you know,
Speaker 1: we went into yesterday hopeful that the FED would move
Speaker 1: at a more moderate pace going forward. Well we got
Speaker 1: that message loud and clear from Joe Powell, but we
Speaker 1: also got the messages that, um, not only would they
Speaker 1: perhaps be moving at a more gradual page, but they
Speaker 1: would be doing so for potentially longer, moving rates higher
Speaker 1: than what they had outlined in the September meeting. And interestingly,
Speaker 1: I thought it was a notable that Jerome Powell outlined
Speaker 1: that the risk he sees at least is to ease
Speaker 1: and you know, pause too soon rather than overtighten and
Speaker 1: then have the ability to cut rates a later. So
Speaker 1: clearly his bias and perhaps out of the f O
Speaker 1: m C, is to keep moving forward, of course, until
Speaker 1: we start to see that infamous inflation CPI print start
Speaker 1: to move more lower at a more consistent and clear pace.
Speaker 1: And so Mona, can I tell you how wrong I was?
Speaker 1: I had been, you know, hearing and seeing chatter about
Speaker 1: peak hawkishness for example, maybe that you know, Jerome Powell
Speaker 1: would somehow make some sort of non to that pivot trade,
Speaker 1: maybe that they would dial back the pace of rate highs.
Speaker 1: It feels like we almost got that in the statement
Speaker 1: that quickly went away as soon as he started talking.
Speaker 1: But I WinCE your time inline for when maybe we
Speaker 1: do start to discuss peak hawkishness in the rear view mirror. Yeah,
Speaker 1: you know, Look, I think the bottom line is we're
Speaker 1: certainly closer to the end than we are at the beginning.
Speaker 1: So that's a good news for investors. You know, keep
Speaker 1: in mind, the Feds already done four basis points in
Speaker 1: the span of probably about eight months. You know, that's
Speaker 1: pretty unprecedented in terms of pace of tightening UM. But
Speaker 1: of course inflation has remained sticky. It's broadened out to
Speaker 1: some extent. But keep in mind, and the Fed did
Speaker 1: acknowledge this that there are lag impacts not only from
Speaker 1: their rate hikes, but also the CPI prints that we're
Speaker 1: getting don't quite reflect some of the underlying fundamentals that
Speaker 1: we're seeing. You know, certainly areas like housing, parts of
Speaker 1: even the rental markets are starting to show signs of
Speaker 1: softening weakening UM. Some forlooking indicators of inflation are starting
Speaker 1: to roll over. We're seeing it in you know, I
Speaker 1: S M prices paid in manufacturing at least certainly in
Speaker 1: supply chain pressure indices. Even areas like inflation expectations are
Speaker 1: moderating and so, you know, good signal leading indicators. We
Speaker 1: would love to see them show up in the CPI
Speaker 1: prints ultimately. Um. But I think we're, you know, probably
Speaker 1: hopefully in the next couple of quarters, close to that
Speaker 1: peak hawkishness. Okay, So give us an idea of what
Speaker 1: you're thinking about when it comes to the terminal rate
Speaker 1: and how long the Fed will keep interest rates there. Yeah.
Speaker 1: You know, I think interestingly, the market didn't really move
Speaker 1: much in terms of the terminal rate between let's say
Speaker 1: Monday and Tuesday of this week. Um, and then you know,
Speaker 1: after the FED meeting on Wednesday, we're still at about
Speaker 1: that five five and a quarter percent terminal rate for
Speaker 1: the FED funds. And how we get there could be interesting,
Speaker 1: whether it's you know, two fifties and twenty five or
Speaker 1: seventy five and you know, a couple of but I
Speaker 1: do think that we're probably headed towards that five percent,
Speaker 1: and maybe it's five and five and a quarter percent
Speaker 1: level UM, just so you know, the CPI giving some
Speaker 1: time for the CPI inflation prints to to catch up, UM,
Speaker 1: but hopefully also for that supply picture to fully you know,
Speaker 1: get back into shape as and so I do think
Speaker 1: we're heading towards that direction. But UM, keep in mind, historically,
Speaker 1: you know, when we do hit peak FED funds rate
Speaker 1: where whenever that may be, whether it's March or in
Speaker 1: sometime in mid three, historically the twelve months after we
Speaker 1: hit the terminal FED funds rate has been very good
Speaker 1: for markets. In fact, SMP is up on average about
Speaker 1: fift in that twelve month period following that peak rate.
Speaker 1: So we're heading towards you know, that type of backdrop,
Speaker 1: hopefully in the months ahead. So what do you do
Speaker 1: in the meantime? Where do you position your portfolio and
Speaker 1: kind of hang out a little bit? Yeah? Absolutely, you know,
Speaker 1: first and foremost of course, for longer term investors, trying
Speaker 1: to time yourself in and out of the market UM
Speaker 1: is much tougher than you know, probably time in the market.
Speaker 1: And keep in mind when you do try to go
Speaker 1: in and out, you have to make two decisions. You
Speaker 1: have to decide the best time to leave in the
Speaker 1: best time to re enter. And you know, timing markets,
Speaker 1: as we all know, is notoriously difficult. But what we
Speaker 1: would say for both equity and bond investors there are
Speaker 1: interesting opportunities forming. You know, in equities there has been
Speaker 1: this concentration um and probably relative outperformance and the value
Speaker 1: and defensive parts of the market, uh, certainly energy, but
Speaker 1: also areas like healthcare, staples, utilities. Over time, we would
Speaker 1: think that as you know, yields peak, that funds peak
Speaker 1: um and start to stabilize and potentially roll over, that's
Speaker 1: a better environment for growth, and we would say quality growth.
Speaker 1: So start maybe thinking about the opportunities forming to complement
Speaker 1: you know, maybe not wholesale shift out of your your
Speaker 1: value and defensive. Similarly, in bonds, you know a lot
Speaker 1: of concentration in that shorter end CDs one to two
Speaker 1: year bonds, which have been providing very interesting value. But
Speaker 1: as we get closer to peak rates, there could be
Speaker 1: value in that longer duration trade as well, especially in
Speaker 1: the investment great space. Okay, start thinking, start thinking about
Speaker 1: opportunities forming in the equity market. At what point do
Speaker 1: you start to deploy that capital? Yeah? Absolutely, you know, look,
Speaker 1: we'll probably get bouts of volatility between you know, call
Speaker 1: it now and your end now and peak fed funds UM,
Speaker 1: and those are the opportunities that you have to look
Speaker 1: for to deploy. And we do think as people as
Speaker 1: investors are starting to plan for a year ahead, that
Speaker 1: tends to be a time where money flows into the
Speaker 1: markets and we tend to get and we hear Santa
Speaker 1: Claus Rally various terms for this, but that's really when
Speaker 1: people start to think about their three portfolios UM, and
Speaker 1: so perhaps you start thinking about it UM in the
Speaker 1: weeks ahead of the new year as well. But also
Speaker 1: keep in mind we have midterm elections coming up next
Speaker 1: next week as well, and and historically that's been a
Speaker 1: good time the twelve months post midterm elections, and this
Speaker 1: year it may coincide with hopefully UM a peak and
Speaker 1: Fed funds rate and also a potential rollover in inflation
Speaker 1: more meaningfully at least mona twenty seconds. What is the
Speaker 1: pain trade right now? You know, I think people are
Speaker 1: still positioned for volatility, and so maybe a move higher
Speaker 1: or at least straight higher would be more painful for
Speaker 1: a lot of investors, especially after yesterday. I think a
Speaker 1: lot of bets were, or at least more bets were
Speaker 1: on a FED moving more in a more devish direction
Speaker 1: than they got the hawk ish tilt. So keep in
Speaker 1: mind volatility probably not going away anytime soon, but that's
Speaker 1: the opportunity, all right. Monamahajan, Senior investment strategist at Edward
Speaker 1: Jones Running spas um from Warren New Jersey. Checker out
Speaker 1: on Twitter. Mona Mahajan view on Twitter. Thanks for listening
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