1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,680 Speaker 1: at Bloomberg dot com slash podcast. You know, I'm usually 7 00:00:22,680 --> 00:00:26,119 Speaker 1: not that keen to talk to economists, you know, but 8 00:00:26,680 --> 00:00:28,960 Speaker 1: there's a couple I really like that kind of make 9 00:00:29,000 --> 00:00:31,400 Speaker 1: it simple that I can understand stuff. Elena, she left Diva, 10 00:00:31,720 --> 00:00:33,680 Speaker 1: is one of them. She's the senior US economist for 11 00:00:33,680 --> 00:00:36,800 Speaker 1: Bloomberg News, and Elana lots to parts over. I know 12 00:00:36,880 --> 00:00:40,120 Speaker 1: you guys at Bloomberg Economics have been super busy. Uh 13 00:00:40,159 --> 00:00:44,720 Speaker 1: this week. Let's talk about this morning's g d P print. 14 00:00:44,920 --> 00:00:48,360 Speaker 1: UH much lower than expected, a negative number. What do 15 00:00:48,360 --> 00:00:51,000 Speaker 1: you take away from it? So? I think in terms 16 00:00:51,080 --> 00:00:55,440 Speaker 1: of recession and not I think maybe not yet, but 17 00:00:55,600 --> 00:01:01,280 Speaker 1: that clearly significantly raises risks for recess to happen this year. 18 00:01:01,800 --> 00:01:05,320 Speaker 1: And the reason is not just you know, the two 19 00:01:05,360 --> 00:01:09,720 Speaker 1: consecutive negative readings, but if you look beneath the surface, 20 00:01:10,160 --> 00:01:13,840 Speaker 1: you will see that, for example, final sales to domestic 21 00:01:13,880 --> 00:01:18,360 Speaker 1: purchases that GDP that excludes a volatile categories such as 22 00:01:18,440 --> 00:01:22,240 Speaker 1: trade and inventories that fail for the first time since 23 00:01:22,280 --> 00:01:25,839 Speaker 1: the COVID recession. So that is telling you that underlying 24 00:01:25,959 --> 00:01:29,760 Speaker 1: demand is weakening significantly. Another thing that I would like 25 00:01:29,840 --> 00:01:33,679 Speaker 1: to highlight is real services. You know, we we were 26 00:01:33,720 --> 00:01:36,920 Speaker 1: talking about people going on vacations. We were just discussing, 27 00:01:37,080 --> 00:01:41,520 Speaker 1: we were planning some vacations too. That was supposed to 28 00:01:41,520 --> 00:01:44,039 Speaker 1: be strong in June. But if you look at the 29 00:01:44,160 --> 00:01:48,840 Speaker 1: data and you calculate, uh, the implied growth rate in 30 00:01:49,000 --> 00:01:52,000 Speaker 1: June from the data we have, that will show you 31 00:01:52,200 --> 00:01:56,480 Speaker 1: services spending is slowing into the end of the second quarter. 32 00:01:56,560 --> 00:01:59,400 Speaker 1: I haven't seen my visable from July from my Hawaii trip, 33 00:02:01,560 --> 00:02:04,200 Speaker 1: but the data telling you that things are slowing down 34 00:02:04,400 --> 00:02:07,120 Speaker 1: quotes the end of the quarter, which creates risks for 35 00:02:07,200 --> 00:02:10,919 Speaker 1: the third quarter. So it was an ugly headline. Sounds 36 00:02:10,960 --> 00:02:13,200 Speaker 1: like the details under the surface where messy. Two When 37 00:02:13,200 --> 00:02:14,960 Speaker 1: it comes to GDP, I do want to talk about 38 00:02:15,000 --> 00:02:18,120 Speaker 1: the FED a little bit and where exactly they are 39 00:02:18,160 --> 00:02:20,040 Speaker 1: on the curve because it caught my eye yesterday. I mean, 40 00:02:20,040 --> 00:02:22,760 Speaker 1: everyone has an opinion about the FED. But we heard 41 00:02:22,800 --> 00:02:25,880 Speaker 1: from Scott Minor and Order Guggenheim, So his fear is that, 42 00:02:26,160 --> 00:02:28,400 Speaker 1: you know, perhaps the Central Bank opened the door a 43 00:02:28,400 --> 00:02:31,440 Speaker 1: little bit too wide to the possibility of cooling down 44 00:02:31,520 --> 00:02:33,519 Speaker 1: in terms of their rate hikes. Then you heard from 45 00:02:33,560 --> 00:02:36,280 Speaker 1: double and Jeff Gunlock, for example, saying that the FED 46 00:02:36,400 --> 00:02:39,560 Speaker 1: is no longer behind the curve. I would love to 47 00:02:39,600 --> 00:02:42,320 Speaker 1: hear where you fall on that debate. So I think 48 00:02:42,880 --> 00:02:45,440 Speaker 1: the FED will try to do as much as they 49 00:02:45,520 --> 00:02:49,639 Speaker 1: can at this point, and you know, they are going 50 00:02:49,680 --> 00:02:54,520 Speaker 1: to find reasons to keep saying that the economy remains strong, 51 00:02:54,680 --> 00:02:59,399 Speaker 1: you know, as long as the labor market continues to deliver, right, 52 00:03:00,520 --> 00:03:06,720 Speaker 1: I think that they will have to step back at 53 00:03:06,840 --> 00:03:10,040 Speaker 1: some point, you know, if if you know, if we 54 00:03:10,080 --> 00:03:13,800 Speaker 1: see the data start crippling. Look at jobless claims data 55 00:03:13,840 --> 00:03:18,640 Speaker 1: for example, So we're like halfway through from the trophy 56 00:03:18,639 --> 00:03:22,240 Speaker 1: and jobless claims in March to uh the level that 57 00:03:22,320 --> 00:03:25,160 Speaker 1: is associated with the start of a recession. So we 58 00:03:25,240 --> 00:03:30,320 Speaker 1: already halfway through in terms of the climb in jobless claims. 59 00:03:30,360 --> 00:03:33,320 Speaker 1: But I think what will be interesting to see next 60 00:03:33,360 --> 00:03:38,440 Speaker 1: week we're gonna get another Pail's report is where the 61 00:03:38,480 --> 00:03:42,480 Speaker 1: deceleration in job creation is happening which sectors, like, is 62 00:03:42,520 --> 00:03:47,240 Speaker 1: it just concentrated in housing and certain you know, goods 63 00:03:47,280 --> 00:03:50,720 Speaker 1: related sectors, or is it a broader slowing in the 64 00:03:50,800 --> 00:03:53,120 Speaker 1: labor So are you concerned about the labor market because 65 00:03:53,120 --> 00:03:55,880 Speaker 1: that's certainly one of the pillars that the argument and 66 00:03:55,960 --> 00:03:57,840 Speaker 1: the people that make the argument or we're not in 67 00:03:57,880 --> 00:04:00,160 Speaker 1: a recession because the labor market is so strong. The 68 00:04:00,280 --> 00:04:03,960 Speaker 1: data are so contradicting, and uh, you know, on the 69 00:04:03,960 --> 00:04:07,040 Speaker 1: one hand, you see diffusion index for example, that shows 70 00:04:07,080 --> 00:04:10,040 Speaker 1: breasts of job creation that was really strong in the 71 00:04:10,080 --> 00:04:14,880 Speaker 1: previous report in June, But what will July data they're 72 00:04:15,000 --> 00:04:17,960 Speaker 1: gonna tell us. On the other hand, I already mentioned 73 00:04:18,040 --> 00:04:21,840 Speaker 1: jobless claims are creeping higher, and we can see some 74 00:04:21,960 --> 00:04:24,680 Speaker 1: slow down in wage growth as well. Alright, so keep 75 00:04:24,720 --> 00:04:27,200 Speaker 1: an eye on the labor market. Let's talk about inflation though, 76 00:04:27,240 --> 00:04:29,560 Speaker 1: because it's interesting to me that if you look at, 77 00:04:29,680 --> 00:04:32,440 Speaker 1: you know, some of the measures of inflation expectations, whether 78 00:04:32,480 --> 00:04:34,760 Speaker 1: that's break evens in the bond market, if you look 79 00:04:34,800 --> 00:04:38,960 Speaker 1: at some of these surveys, it seems that expectations at 80 00:04:39,040 --> 00:04:42,039 Speaker 1: least have peaked. But when it comes to inflation itself 81 00:04:42,520 --> 00:04:44,560 Speaker 1: on do you think we could actually maybe start to 82 00:04:44,600 --> 00:04:50,000 Speaker 1: crest there. Well, it depends core versus headline, so uh, 83 00:04:50,040 --> 00:04:54,880 Speaker 1: and that will really depend on geo political developments I think. So, 84 00:04:55,640 --> 00:04:58,919 Speaker 1: you know, core has peaked, but there are some sticky 85 00:04:58,960 --> 00:05:02,440 Speaker 1: categories in the core, such a shelter, that will continue 86 00:05:02,480 --> 00:05:07,279 Speaker 1: to increase because it's just such a legging indicator. So 87 00:05:07,480 --> 00:05:10,800 Speaker 1: in terms of the headline, and it's important because you know, 88 00:05:11,000 --> 00:05:13,719 Speaker 1: the FED recently mentioned that they are looking at the 89 00:05:13,720 --> 00:05:19,680 Speaker 1: headline numbers. Depends on energy prices, and you know, I 90 00:05:19,720 --> 00:05:22,800 Speaker 1: am really scared to make any predictions on let's go 91 00:05:22,839 --> 00:05:26,240 Speaker 1: to that front. The daily national average gasoline prices, which 92 00:05:26,279 --> 00:05:28,279 Speaker 1: is the first ticker I bring up every morning, it 93 00:05:28,320 --> 00:05:30,960 Speaker 1: continues to tick over four dollars and twenty seven cents 94 00:05:31,000 --> 00:05:34,160 Speaker 1: per gallon UM. So it looks like at least at 95 00:05:34,200 --> 00:05:36,880 Speaker 1: the gas pump, which is a piece of inflation that 96 00:05:37,120 --> 00:05:40,159 Speaker 1: everybody feels except Tom Keane who doesn't have a car. 97 00:05:40,680 --> 00:05:45,200 Speaker 1: Everybody feels. And that's coming down pretty steadily, which will 98 00:05:45,240 --> 00:05:50,800 Speaker 1: be reflected in sentiment measures, I think, and perhaps you know, 99 00:05:50,880 --> 00:05:55,320 Speaker 1: people will spend a little bit more in real terms. Uh. 100 00:05:55,560 --> 00:05:58,760 Speaker 1: In the beginning of the third quarter. But I'm just 101 00:05:58,800 --> 00:06:01,680 Speaker 1: worried this is a little bit more broad based and 102 00:06:02,000 --> 00:06:06,080 Speaker 1: if you know, Europe goes into an energy crisis this full, 103 00:06:06,960 --> 00:06:10,839 Speaker 1: this will not leave everybody else like just isolated. That's 104 00:06:10,880 --> 00:06:13,279 Speaker 1: what my worry is. All right, there is a lot 105 00:06:13,400 --> 00:06:17,000 Speaker 1: for you economists to keep busy at Bloomberg Economics. Helena 106 00:06:17,160 --> 00:06:21,080 Speaker 1: Latti about senior US economists for Bloomberg joining us here 107 00:06:21,080 --> 00:06:23,720 Speaker 1: in our Bloomberg Interactive Broker studio. So much better when 108 00:06:23,720 --> 00:06:26,320 Speaker 1: people come in studio now, it's so nice see all 109 00:06:26,320 --> 00:06:32,600 Speaker 1: these smiling faces. Kind lots of cross currents in these 110 00:06:32,640 --> 00:06:34,240 Speaker 1: markets here and again we Sho could just see it 111 00:06:34,240 --> 00:06:36,880 Speaker 1: in the trading, big big moves up yesterday and his 112 00:06:36,960 --> 00:06:39,680 Speaker 1: Greg was just reporting giving some of that back today. 113 00:06:39,720 --> 00:06:42,480 Speaker 1: It kind of reflects some of the uncertainty as the 114 00:06:42,520 --> 00:06:44,760 Speaker 1: market tries at discount all these data points from the 115 00:06:44,800 --> 00:06:47,800 Speaker 1: Fed yesterday to earnings, to the data eco data we're 116 00:06:47,800 --> 00:06:49,560 Speaker 1: getting today in terms of GDP. Let's check them with 117 00:06:49,600 --> 00:06:52,120 Speaker 1: the professional. Does this for a living? Rick pitt Karen, 118 00:06:52,279 --> 00:06:55,839 Speaker 1: c io of Pitt Karen joins us. Rick, what's your 119 00:06:56,160 --> 00:07:00,560 Speaker 1: takeaway from you know, the earnings from the Fed yesterday, 120 00:07:00,600 --> 00:07:03,200 Speaker 1: from the g D pre print. How is your outlook changed, 121 00:07:03,240 --> 00:07:07,120 Speaker 1: if at all? Well, Hot, Paul, how are you? And 122 00:07:07,240 --> 00:07:10,520 Speaker 1: nice to be here today. It's an incredibly dynamic time 123 00:07:10,560 --> 00:07:15,120 Speaker 1: for the markets, and that was underscored by Pale statements yesterday. 124 00:07:15,160 --> 00:07:20,120 Speaker 1: You know, since November, they've placed in flight inflation fighting, 125 00:07:20,360 --> 00:07:23,480 Speaker 1: uh and at an inflation fighting at the expense of 126 00:07:23,560 --> 00:07:26,680 Speaker 1: all other economic issues at the forefront of their rhetoric 127 00:07:26,720 --> 00:07:30,400 Speaker 1: and their actions. And yesterday he began to open the 128 00:07:30,440 --> 00:07:32,840 Speaker 1: door in the second half of the speech to a 129 00:07:32,880 --> 00:07:37,920 Speaker 1: possible pause, a possible pivot. The markets reacted super positively 130 00:07:38,040 --> 00:07:41,800 Speaker 1: as we saw. I think our view is that it's 131 00:07:41,800 --> 00:07:46,000 Speaker 1: still a time for more caution than aggression because, uh, 132 00:07:46,040 --> 00:07:48,240 Speaker 1: there's a lot of dynamics, as you mentioned, going through 133 00:07:48,240 --> 00:07:50,280 Speaker 1: this market, and I don't think we have all the 134 00:07:50,320 --> 00:07:52,880 Speaker 1: answers yet. I think things are still subject to change, 135 00:07:53,240 --> 00:07:54,840 Speaker 1: and I'm not sure if we're all the way through 136 00:07:54,920 --> 00:07:58,720 Speaker 1: the tough times, even as strong as yesterday was. And Rick, 137 00:07:58,800 --> 00:08:02,200 Speaker 1: let's talk about that more caution than aggression. How does 138 00:08:02,280 --> 00:08:05,600 Speaker 1: that filter down into how you structure a portfolio? Where 139 00:08:05,640 --> 00:08:10,760 Speaker 1: do you see opportunity? Where are you avoiding? Well, I'm 140 00:08:10,840 --> 00:08:15,320 Speaker 1: lucky I've worked with high net worth individuals and high 141 00:08:15,560 --> 00:08:18,160 Speaker 1: net worth families for my whole career. They tend to 142 00:08:18,160 --> 00:08:21,440 Speaker 1: have a longer term view. They're all operating in the 143 00:08:21,520 --> 00:08:25,880 Speaker 1: land of taxes. Uh, so tax drag is important. So 144 00:08:26,160 --> 00:08:28,160 Speaker 1: you know, a pit care and portfolio will be a 145 00:08:28,760 --> 00:08:32,520 Speaker 1: more diverse portfolio that will be in a more strategic 146 00:08:32,520 --> 00:08:34,679 Speaker 1: than tactical in the way that it's laid out, and 147 00:08:34,720 --> 00:08:37,560 Speaker 1: it will rely on a series of managers underneath that. 148 00:08:38,080 --> 00:08:41,160 Speaker 1: And we see those managers pivoting right now to a 149 00:08:41,200 --> 00:08:43,079 Speaker 1: little bit different kind of a time. You know, two 150 00:08:43,160 --> 00:08:47,760 Speaker 1: years ago, long duration assets of stocks that were growing 151 00:08:47,920 --> 00:08:52,920 Speaker 1: revenue regardless of earnings. Uh, we're really highly valued. I 152 00:08:52,960 --> 00:08:56,680 Speaker 1: think in a land where liquidity is tighter, where the 153 00:08:56,720 --> 00:08:59,600 Speaker 1: FED will be tighter rather than looser, you have to 154 00:08:59,600 --> 00:09:02,000 Speaker 1: go to a different kind of a playbook. And and 155 00:09:02,400 --> 00:09:06,160 Speaker 1: we've seen some different kinds of asset classes that weren't 156 00:09:06,160 --> 00:09:09,880 Speaker 1: working in two thousands, sixteen, seventeen eighteen working very well 157 00:09:10,000 --> 00:09:14,239 Speaker 1: right now, whether that's small value and equity, land commodities, 158 00:09:14,440 --> 00:09:17,640 Speaker 1: certain kinds of hedge funds. So we're certainly emphasizing those 159 00:09:17,679 --> 00:09:20,440 Speaker 1: in our portfolios. Rick, we're kind of I would say, 160 00:09:20,520 --> 00:09:22,400 Speaker 1: kind of right in the middle of this earning season. 161 00:09:22,400 --> 00:09:24,720 Speaker 1: A lot of big tech numbers coming out this week, 162 00:09:24,720 --> 00:09:27,679 Speaker 1: while the Apple and Amazon after the close. Any takeaways 163 00:09:27,720 --> 00:09:30,040 Speaker 1: so far for you during kind of what you've seen, 164 00:09:30,080 --> 00:09:34,520 Speaker 1: what you've heard from managements. We were struck going into 165 00:09:34,559 --> 00:09:38,600 Speaker 1: this session, this earning season because we had an eight 166 00:09:38,640 --> 00:09:42,439 Speaker 1: point nine percent forecasted year over year earnings growth, and 167 00:09:42,880 --> 00:09:45,720 Speaker 1: you know, with the employment situation, we have very strong 168 00:09:45,720 --> 00:09:48,920 Speaker 1: employment market and very strong earnings growth. It's hard to 169 00:09:48,920 --> 00:09:52,000 Speaker 1: contemplate a really tough recession when you have those two 170 00:09:52,040 --> 00:09:55,959 Speaker 1: cornerstones on the positive side. So the conventional wisdom was, well, 171 00:09:56,000 --> 00:09:58,400 Speaker 1: at eight point nine, can't hold it has We're going 172 00:09:58,440 --> 00:10:01,120 Speaker 1: to go into recession area environment and that number is 173 00:10:01,120 --> 00:10:03,160 Speaker 1: going to get creamed. And I think that number will 174 00:10:03,240 --> 00:10:06,120 Speaker 1: come in based on the environment we have. But I 175 00:10:06,160 --> 00:10:10,000 Speaker 1: think this earning season, uh probably has been better than 176 00:10:10,000 --> 00:10:14,400 Speaker 1: the whispers in terms of forward guidance. The Honeywell number 177 00:10:14,440 --> 00:10:17,199 Speaker 1: this morning, he said, you know, regardless of the slowing 178 00:10:17,240 --> 00:10:21,360 Speaker 1: and the broader economy, our business lines have shown dynamic 179 00:10:21,400 --> 00:10:23,319 Speaker 1: growth in the first six months and they're going to 180 00:10:23,400 --> 00:10:26,320 Speaker 1: continue to show that growth throughout the rest of the year. 181 00:10:27,000 --> 00:10:29,679 Speaker 1: That wasn't what the Whisper had in mind in late 182 00:10:29,760 --> 00:10:32,000 Speaker 1: June they thought that forward guidance would be a little 183 00:10:32,040 --> 00:10:35,200 Speaker 1: bit worse. I think that's been another reason we've had, 184 00:10:35,640 --> 00:10:39,880 Speaker 1: you know, a stronger bounce back July in the speculative sectors. 185 00:10:41,120 --> 00:10:43,120 Speaker 1: And that bounced back though that we've seen in the 186 00:10:43,120 --> 00:10:46,240 Speaker 1: speculative sectors as you mentioned, I mean, or the past month, 187 00:10:46,320 --> 00:10:51,520 Speaker 1: it's actually been a very robust rally. Uh How I 188 00:10:51,559 --> 00:10:54,040 Speaker 1: guess what's your conviction there? Because I mean you look 189 00:10:54,080 --> 00:10:57,720 Speaker 1: at volume, you look at volatility just falling off a cliff. 190 00:10:57,840 --> 00:11:01,880 Speaker 1: Usually that means pretty low conviction. Wondering if that's the 191 00:11:01,960 --> 00:11:06,160 Speaker 1: case on your end as well. Well. Our technical research 192 00:11:06,480 --> 00:11:08,880 Speaker 1: doesn't really show that even though it's an impressive rally 193 00:11:08,920 --> 00:11:12,440 Speaker 1: on price, particularly in the n azdec, the internals are great. 194 00:11:12,520 --> 00:11:15,240 Speaker 1: They aren't just screaming, you know, like they did in 195 00:11:15,880 --> 00:11:19,280 Speaker 1: say April of two thousand and nine. You know, this 196 00:11:19,320 --> 00:11:21,520 Speaker 1: is a big time by here. There's a ton of 197 00:11:21,800 --> 00:11:24,840 Speaker 1: internal momentum. It's a little more tepid than that. I 198 00:11:24,840 --> 00:11:28,600 Speaker 1: would just tell investors, you know, we feel I think 199 00:11:28,640 --> 00:11:31,280 Speaker 1: a little bit in our personal lives, like COVID is over, 200 00:11:31,400 --> 00:11:33,000 Speaker 1: Like we can go to the restaurant we can get 201 00:11:33,040 --> 00:11:35,160 Speaker 1: on the airplane, we can we can travel, we can 202 00:11:35,640 --> 00:11:39,000 Speaker 1: do those things. But from a macro economic perspective, the 203 00:11:39,160 --> 00:11:44,320 Speaker 1: scale of the of of the various impacts that COVID 204 00:11:44,360 --> 00:11:47,320 Speaker 1: had on our economy, whether it was that massive liquidity 205 00:11:47,360 --> 00:11:50,559 Speaker 1: impulse in two thousand and twenty that caused a great rally, 206 00:11:50,720 --> 00:11:53,720 Speaker 1: now we're gonna pull that back. You know, I would 207 00:11:53,720 --> 00:11:57,679 Speaker 1: be cautious to uh, to flash the all green light here. 208 00:11:57,760 --> 00:12:00,880 Speaker 1: I think patients ain't patients is always a good thing, 209 00:12:01,160 --> 00:12:04,000 Speaker 1: uh in investment world, And even in light of the 210 00:12:04,040 --> 00:12:07,760 Speaker 1: last three weeks, which has thankfully been strong for markets', 211 00:12:08,040 --> 00:12:11,880 Speaker 1: I'd still, you know, tighten my seat belt and and 212 00:12:11,880 --> 00:12:14,160 Speaker 1: and keep an eye out for the changing data because 213 00:12:14,160 --> 00:12:17,120 Speaker 1: I think it's going to continue to change. All right, Rick, 214 00:12:17,160 --> 00:12:20,120 Speaker 1: good stuff there. We appreciate getting your thoughts, Rick pit Karen, 215 00:12:20,160 --> 00:12:23,680 Speaker 1: He's a c I O at Pitcairn, been managing money 216 00:12:23,720 --> 00:12:30,319 Speaker 1: for a long time. Getting his perspective here. All right, 217 00:12:30,360 --> 00:12:34,800 Speaker 1: here's aligned from a recent research note. From our next guest, quote, 218 00:12:35,120 --> 00:12:38,760 Speaker 1: pete fed hawkishness has passed. FED is preparing for a 219 00:12:38,840 --> 00:12:43,120 Speaker 1: slower pace of tightening without a specific guidance. Equities are 220 00:12:43,240 --> 00:12:47,040 Speaker 1: a go end quote. That line, and that content comes 221 00:12:47,040 --> 00:12:50,040 Speaker 1: from Ben EM's, Managing director of Global macro Strategy at 222 00:12:50,160 --> 00:12:53,880 Speaker 1: Medley Global Advisors. Ben I think the market yesterday kind 223 00:12:53,920 --> 00:12:56,960 Speaker 1: of agreed with you give us your thoughts about what 224 00:12:57,040 --> 00:13:01,880 Speaker 1: we heard from our Federal Reserve yesterday. Hey, Paul, thanks 225 00:13:01,880 --> 00:13:04,559 Speaker 1: for having me again. Um. Yeah, So he was clear 226 00:13:04,640 --> 00:13:08,040 Speaker 1: that they are now full mode data dependent, and therefore 227 00:13:08,240 --> 00:13:11,800 Speaker 1: there's no guidance at least not until September. After that 228 00:13:11,880 --> 00:13:14,560 Speaker 1: maybe it will return, but it does look like that 229 00:13:14,600 --> 00:13:16,360 Speaker 1: what they want to do is get out of the 230 00:13:16,400 --> 00:13:19,200 Speaker 1: Shenanigans of saying what we're going to do fifty or 231 00:13:19,240 --> 00:13:21,320 Speaker 1: seventy five and then it has to become a hundred 232 00:13:21,320 --> 00:13:24,000 Speaker 1: if a data point is more than expected and then 233 00:13:24,080 --> 00:13:26,480 Speaker 1: guiding that back, and I think that will cost too 234 00:13:26,559 --> 00:13:29,800 Speaker 1: much uncertainty in the markets and in the economy. So 235 00:13:30,120 --> 00:13:33,040 Speaker 1: going back to data dependent leads to what we went 236 00:13:33,040 --> 00:13:36,400 Speaker 1: through in sixteen on the Jennet Yellen right, and getting 237 00:13:36,400 --> 00:13:40,240 Speaker 1: actually a multi policy that doesn't surprise you because of 238 00:13:40,320 --> 00:13:43,000 Speaker 1: this data dependent and therefore it's not hawkish either. And 239 00:13:43,040 --> 00:13:46,400 Speaker 1: that's I think the interpretation the market is taking, especially 240 00:13:46,400 --> 00:13:49,600 Speaker 1: the bond market, today's stock market is as Katie reported 241 00:13:49,640 --> 00:13:51,839 Speaker 1: like it always is to day after cells off on 242 00:13:52,320 --> 00:13:55,199 Speaker 1: after fat day. But I do think the self is limited. 243 00:13:55,400 --> 00:13:57,480 Speaker 1: But that message in mind, we have a data dependent 244 00:13:57,559 --> 00:14:01,560 Speaker 1: fat that isn't as hawkish at this point. Isn't as 245 00:14:01,600 --> 00:14:04,079 Speaker 1: hawkish at this point. I mean, we've seen a lot 246 00:14:04,080 --> 00:14:07,840 Speaker 1: of conflicting notes as to whether the Fed truly did pivot. 247 00:14:07,880 --> 00:14:11,040 Speaker 1: But Ben, in your view, if equities are a go, 248 00:14:11,240 --> 00:14:13,680 Speaker 1: I'm curious what you make of this bond market move 249 00:14:13,800 --> 00:14:16,960 Speaker 1: because can equities and treasuries be ago at the same 250 00:14:17,000 --> 00:14:20,360 Speaker 1: time or does it? Is it too black and white? 251 00:14:21,120 --> 00:14:23,200 Speaker 1: There's some black and white in that, because I will 252 00:14:23,240 --> 00:14:25,160 Speaker 1: agree with you that you know, if you think of 253 00:14:25,200 --> 00:14:27,640 Speaker 1: the very short end of the Huker, so something of 254 00:14:28,120 --> 00:14:31,240 Speaker 1: say six month debails out to two year treasury notes, 255 00:14:31,840 --> 00:14:34,280 Speaker 1: they should be much more closer to the trajectory of 256 00:14:34,320 --> 00:14:38,000 Speaker 1: the fat funds rate in the future. And the reason 257 00:14:38,040 --> 00:14:41,680 Speaker 1: why is that Pow very clearly yesterday guided on on 258 00:14:41,720 --> 00:14:46,359 Speaker 1: twice that they're looking at the two and mediant dots 259 00:14:46,600 --> 00:14:49,320 Speaker 1: as they're objective to reach with the funds rate. So 260 00:14:49,640 --> 00:14:52,400 Speaker 1: I do think there's some level of mispricing happening there 261 00:14:53,000 --> 00:14:54,880 Speaker 1: on the on the equity side, on the other hand, 262 00:14:55,280 --> 00:14:57,760 Speaker 1: you know, the more hawkish the fact may still sound, 263 00:14:58,200 --> 00:15:00,600 Speaker 1: even though day depend is not hawkish. You know, long 264 00:15:00,720 --> 00:15:03,600 Speaker 1: end yields are somewhat now contained, right, there's not much 265 00:15:03,600 --> 00:15:06,600 Speaker 1: of a surprise from the fats with a sudden hounter 266 00:15:06,640 --> 00:15:09,360 Speaker 1: based when hikes, say, for example, so the turn premium 267 00:15:09,480 --> 00:15:13,160 Speaker 1: is decrining. I think that's will support I think in 268 00:15:13,200 --> 00:15:16,400 Speaker 1: the long term stocks on the under the assumption that 269 00:15:16,480 --> 00:15:18,360 Speaker 1: you do get a fund raiate that's high enough to 270 00:15:18,360 --> 00:15:20,560 Speaker 1: bring inflation down. So I kind of come down to that, 271 00:15:20,600 --> 00:15:22,760 Speaker 1: the short of the yuker looks to start to be 272 00:15:22,880 --> 00:15:25,200 Speaker 1: somewhat miss priced. The long end of the curve is 273 00:15:25,200 --> 00:15:27,600 Speaker 1: more about well, if you're reaching three and a half 274 00:15:27,600 --> 00:15:30,320 Speaker 1: to send funds raids, maybe it is sufficient to bring 275 00:15:30,320 --> 00:15:33,280 Speaker 1: inflation down. Why you don't see much traction and higher 276 00:15:33,400 --> 00:15:37,480 Speaker 1: unser So Ben, there's you know, for strategists like yourselves 277 00:15:37,480 --> 00:15:40,800 Speaker 1: and economist there's no shortage of data points here to 278 00:15:40,920 --> 00:15:43,360 Speaker 1: try to get a handle where this market might be headed. Uh. 279 00:15:43,400 --> 00:15:46,880 Speaker 1: Today we had GDP print for the second quarter came 280 00:15:46,880 --> 00:15:49,640 Speaker 1: in a negative zero point nine percent. To get sensus 281 00:15:49,760 --> 00:15:52,840 Speaker 1: was for positive zero point four percent. So that's two 282 00:15:52,920 --> 00:15:56,160 Speaker 1: quarters in a row of a negative GDP print. What 283 00:15:56,280 --> 00:15:58,720 Speaker 1: do you take away from that? More important, what do 284 00:15:58,720 --> 00:16:02,720 Speaker 1: you think fetch JPL takes away from that? Yeah, and 285 00:16:02,760 --> 00:16:05,400 Speaker 1: you could start again with that same kind of headlines speak. 286 00:16:05,440 --> 00:16:09,440 Speaker 1: Hargus is like technically a recession, right, because you know 287 00:16:09,520 --> 00:16:12,080 Speaker 1: that's what people say. So the inventory data is all 288 00:16:12,120 --> 00:16:14,000 Speaker 1: over the map, right, and that was highlighted by the 289 00:16:14,080 --> 00:16:16,880 Speaker 1: b A that the private investment in inventory is really 290 00:16:16,920 --> 00:16:20,640 Speaker 1: declining and the PC is slowing. So I do take 291 00:16:20,680 --> 00:16:23,920 Speaker 1: away from that it's an economy really slowing, but it's 292 00:16:23,960 --> 00:16:27,920 Speaker 1: still an economy that is on an annualized basis above potential. 293 00:16:28,480 --> 00:16:32,440 Speaker 1: And that's what Powell also said yesterday, right, he pushed 294 00:16:32,440 --> 00:16:35,560 Speaker 1: back on the recession one because we don't have rising 295 00:16:35,640 --> 00:16:38,320 Speaker 1: fast rising uneppoyment or any uneppoyment, but we also have 296 00:16:38,360 --> 00:16:41,160 Speaker 1: an economy above potential. But even though this number is 297 00:16:41,240 --> 00:16:45,120 Speaker 1: negative and the previous number was negative and technically says 298 00:16:45,200 --> 00:16:48,800 Speaker 1: that it's the recession, the potential analysis I think is important. 299 00:16:48,880 --> 00:16:50,640 Speaker 1: Come in here. Now. If we do start to slow 300 00:16:50,720 --> 00:16:53,560 Speaker 1: to potential or lower, then then we we were like 301 00:16:53,720 --> 00:16:56,520 Speaker 1: the r in the recession. So I think that's how 302 00:16:56,600 --> 00:16:58,880 Speaker 1: the market is somewhat taking and find the agree market, 303 00:16:59,120 --> 00:17:01,480 Speaker 1: you know, a limit to in its in its reaction 304 00:17:01,560 --> 00:17:04,240 Speaker 1: to this negative number. But I want to go back 305 00:17:04,280 --> 00:17:06,720 Speaker 1: to something that you said that data dependent in terms 306 00:17:06,760 --> 00:17:09,840 Speaker 1: of the FED is not hawkish, And just to play 307 00:17:09,920 --> 00:17:13,280 Speaker 1: Devil's advocate a little bit, I mean, isn't it entirely 308 00:17:13,520 --> 00:17:16,879 Speaker 1: unknowable if it does depend on the data which who 309 00:17:17,000 --> 00:17:18,760 Speaker 1: knows what it will come in? When we think about 310 00:17:18,840 --> 00:17:22,680 Speaker 1: PC coming up for example, Yeah, for sure, and you know, 311 00:17:22,920 --> 00:17:27,000 Speaker 1: and and back again the sixteen periods. I was at 312 00:17:27,040 --> 00:17:29,879 Speaker 1: that time portfolio manager. I was debating that same idea. 313 00:17:29,920 --> 00:17:31,680 Speaker 1: I was like, wait a minute, this data dependent actually 314 00:17:31,680 --> 00:17:33,879 Speaker 1: makes it more volatile, right, we don't know what this 315 00:17:34,040 --> 00:17:36,080 Speaker 1: data is going to be and how to react. Shouldn't 316 00:17:36,240 --> 00:17:39,600 Speaker 1: be more uncertain. But the market takes to the opposite, right. 317 00:17:39,680 --> 00:17:42,479 Speaker 1: It says basically that if you're going to be hawkish, 318 00:17:42,520 --> 00:17:44,800 Speaker 1: you're going to guide us right to be hawkish, to 319 00:17:44,880 --> 00:17:47,359 Speaker 1: say we really think we should hike by another fifty 320 00:17:47,440 --> 00:17:50,240 Speaker 1: seventy five base points. That that brings like we had 321 00:17:50,400 --> 00:17:54,560 Speaker 1: from the period May through July just now and again. 322 00:17:54,640 --> 00:17:56,480 Speaker 1: I think that they wanted to get away from that. 323 00:17:57,160 --> 00:17:59,760 Speaker 1: Not only that they probably recognize the economy softening it's 324 00:17:59,800 --> 00:18:03,280 Speaker 1: just and statement, but also that they recognize it causes 325 00:18:03,359 --> 00:18:06,320 Speaker 1: too much uncertainty because they had to scale up through 326 00:18:06,359 --> 00:18:08,200 Speaker 1: the walls of journey, even leaking that they had to 327 00:18:08,240 --> 00:18:10,639 Speaker 1: go for seventy five set of fifty. I think they 328 00:18:10,720 --> 00:18:13,560 Speaker 1: wanted to get out of that sort of communication, and 329 00:18:13,680 --> 00:18:17,160 Speaker 1: therefore I think it's not hawkish. Now are they hawkish? 330 00:18:17,320 --> 00:18:19,120 Speaker 1: Every would agree that if you're going to move further 331 00:18:19,200 --> 00:18:22,560 Speaker 1: bit the festival's rate above mutual, that's restrictive multip policy, 332 00:18:22,600 --> 00:18:25,480 Speaker 1: as they call us, That is actually hawkish. I think 333 00:18:25,520 --> 00:18:27,560 Speaker 1: for the ball markets more taking like you're not going 334 00:18:27,640 --> 00:18:31,240 Speaker 1: to surprise us anymore, which a sudden major hike unless 335 00:18:31,240 --> 00:18:34,560 Speaker 1: the data truly confirms it. And therefore your language currently 336 00:18:34,680 --> 00:18:39,240 Speaker 1: is not considered as hawkish. So you know, it's interesting, Ben. 337 00:18:39,680 --> 00:18:41,760 Speaker 1: One of the arguments that I hear from the camp 338 00:18:41,840 --> 00:18:44,639 Speaker 1: of folks saying that we're not in a recession or 339 00:18:44,640 --> 00:18:47,040 Speaker 1: it's not going to be that bad is that the 340 00:18:47,160 --> 00:18:49,440 Speaker 1: labor market is still strong. That's something you pointed out to. 341 00:18:49,560 --> 00:18:51,639 Speaker 1: But we had initial drobles. Claims today came in a 342 00:18:51,680 --> 00:18:56,000 Speaker 1: little bit higher than expected. The revision was also higher. 343 00:18:56,160 --> 00:19:00,200 Speaker 1: Is there some initial signs that the job market not 344 00:19:00,320 --> 00:19:03,760 Speaker 1: be as stronger, maybe weakening, Yeah, I would say it 345 00:19:03,880 --> 00:19:06,879 Speaker 1: more like loosening up in the labor market, which I 346 00:19:06,960 --> 00:19:10,960 Speaker 1: think was with Powers referring to yesterday too and noticed right, 347 00:19:11,000 --> 00:19:13,879 Speaker 1: the claims are the best indicative of the labor market. 348 00:19:14,520 --> 00:19:16,840 Speaker 1: You know. That's the same as you follow the Sam 349 00:19:17,000 --> 00:19:19,760 Speaker 1: rule for Claudia Sam. It's it's exactually a very linked 350 00:19:19,800 --> 00:19:23,280 Speaker 1: to that. Once that that average starts to move up higher, 351 00:19:23,520 --> 00:19:26,639 Speaker 1: it does indicate at least a softening or losing of 352 00:19:26,800 --> 00:19:29,640 Speaker 1: labor market. I think in this case that is loosening 353 00:19:29,760 --> 00:19:32,200 Speaker 1: because of so many people so out of the labor force. 354 00:19:32,880 --> 00:19:35,159 Speaker 1: And now maybe on the retail level there some layoffs 355 00:19:35,240 --> 00:19:38,480 Speaker 1: happening and some other things going on. Was striking though 356 00:19:38,520 --> 00:19:41,919 Speaker 1: too that Powe mentioned the claims data specifically. But then 357 00:19:42,000 --> 00:19:45,160 Speaker 1: that's kind of make much of it. We actually think 358 00:19:45,200 --> 00:19:48,919 Speaker 1: it may not be real. So that's an interesting statement, right, 359 00:19:48,920 --> 00:19:50,720 Speaker 1: because it is sticking up right as you say. So 360 00:19:50,840 --> 00:19:53,680 Speaker 1: it's the note, all right, Ben, great stuff. Always appreciate 361 00:19:53,720 --> 00:19:56,120 Speaker 1: getting your perspective here. Again, a lot of data points 362 00:19:56,160 --> 00:19:58,000 Speaker 1: to part through here. Ben Emmett helps us do that. 363 00:19:58,080 --> 00:20:01,159 Speaker 1: He's a managing director of Globe a macro strategy at 364 00:20:01,240 --> 00:20:09,920 Speaker 1: Medley Global Advisors, Busy M and A times in the 365 00:20:10,080 --> 00:20:15,159 Speaker 1: airline business. Jet Blue Airways today's acquiring deep discounter Spirit 366 00:20:15,240 --> 00:20:17,720 Speaker 1: Airlines for at least three point eight billion dollars in cash, 367 00:20:18,240 --> 00:20:21,520 Speaker 1: clinching a deal less than a day after Spirit called 368 00:20:21,560 --> 00:20:24,880 Speaker 1: off a planned murder with Frontier Group Holdings. To get 369 00:20:24,880 --> 00:20:27,800 Speaker 1: the latest on that deal, we're very happy to welcome 370 00:20:27,880 --> 00:20:32,560 Speaker 1: Barry Biffle, CEO and President of Frontier Airlines. Barry, thanks 371 00:20:32,600 --> 00:20:34,320 Speaker 1: so much for joining. I know it's been a crazy, 372 00:20:34,400 --> 00:20:37,760 Speaker 1: crazy time for you and your company. Give us your 373 00:20:37,800 --> 00:20:40,800 Speaker 1: perspective here on the news that Jet Blue appears to 374 00:20:40,920 --> 00:20:44,879 Speaker 1: have won the day for Spirit. Hey, looks, thanks for 375 00:20:44,920 --> 00:20:48,240 Speaker 1: having us on. And um, look, we're disappointed in the 376 00:20:48,320 --> 00:20:50,240 Speaker 1: fact we weren't able to say consumers a lot of 377 00:20:50,240 --> 00:20:53,320 Speaker 1: money by merging the two low cost carriers, but look, 378 00:20:53,400 --> 00:20:55,800 Speaker 1: it's still a great day for Frontier. They have paved 379 00:20:55,880 --> 00:20:58,680 Speaker 1: the way for Frontier to be the low cost carrier 380 00:20:58,680 --> 00:21:00,679 Speaker 1: of the United States. And and I think is one 381 00:21:00,680 --> 00:21:02,879 Speaker 1: of the analysts pointed out, we we just got handed 382 00:21:02,920 --> 00:21:04,920 Speaker 1: the key, the keys to the kingdom of low costs. 383 00:21:05,000 --> 00:21:07,840 Speaker 1: So so it's it's still a windfall for our shareholders. 384 00:21:07,880 --> 00:21:10,040 Speaker 1: I think our employees are really gonna win because we've 385 00:21:10,080 --> 00:21:12,760 Speaker 1: got the growth. But if you're a spirit consumer, you're 386 00:21:12,840 --> 00:21:15,879 Speaker 1: you're you're facing increase in costs. So that's a challenge 387 00:21:15,920 --> 00:21:18,080 Speaker 1: from But I invite them to come to fly Frontier 388 00:21:18,119 --> 00:21:20,680 Speaker 1: dot com. We'll have low affairs for him. So I 389 00:21:20,760 --> 00:21:24,040 Speaker 1: am curious, Barry, I mean, where does Frontier go from here? 390 00:21:24,160 --> 00:21:25,880 Speaker 1: Like you said, you've got the growth, are you looking 391 00:21:25,920 --> 00:21:30,280 Speaker 1: at any other mergers, any other airlines? Now, look, we're 392 00:21:30,320 --> 00:21:32,359 Speaker 1: we're we're doubling down on what we're doing. I think, 393 00:21:32,480 --> 00:21:35,080 Speaker 1: you know, while all this distraction was going on, I 394 00:21:35,160 --> 00:21:37,600 Speaker 1: think what's what's interesting if you if you look, is 395 00:21:37,920 --> 00:21:42,120 Speaker 1: we were able to increase revenues to queue BYT versus 396 00:21:42,200 --> 00:21:45,200 Speaker 1: the same period in twenty nineteen had the highest RASM 397 00:21:46,000 --> 00:21:48,320 Speaker 1: growth in our history, highest I think record for for 398 00:21:48,359 --> 00:21:51,679 Speaker 1: the U S industry. And so we're we're we're all 399 00:21:51,720 --> 00:21:54,240 Speaker 1: systems go. We're headed to be sub six cents, which 400 00:21:54,320 --> 00:21:56,480 Speaker 1: is kind of a near o our kind of pre 401 00:21:56,600 --> 00:21:59,639 Speaker 1: pandemic level from a cost perspective. So we're really excited 402 00:21:59,640 --> 00:22:02,440 Speaker 1: about turning the profitability this quarter and um we expect 403 00:22:02,480 --> 00:22:04,439 Speaker 1: the margins to continue to improve through the year end 404 00:22:04,520 --> 00:22:07,240 Speaker 1: so we think it's great for organic growth, for frontier 405 00:22:07,280 --> 00:22:09,360 Speaker 1: and and now that we're kind of kind of left 406 00:22:09,400 --> 00:22:12,040 Speaker 1: to our own devices to have to have the whole 407 00:22:12,040 --> 00:22:14,080 Speaker 1: space of the United States is the low cost carrier. 408 00:22:14,600 --> 00:22:18,440 Speaker 1: Things are looking pretty up from an organic perspective. Tell 409 00:22:18,520 --> 00:22:20,600 Speaker 1: us marriage, remind us kind of for those of us 410 00:22:20,640 --> 00:22:23,520 Speaker 1: that have not been following the deal, what was your 411 00:22:23,640 --> 00:22:28,959 Speaker 1: rationale for looking to get together with Spirit? So our 412 00:22:29,040 --> 00:22:33,280 Speaker 1: rationale was, you take two ultralow cost carriers, you combine them, 413 00:22:33,640 --> 00:22:37,320 Speaker 1: you provide a true ultralow cost alternative to the Big 414 00:22:37,440 --> 00:22:40,520 Speaker 1: four and high cost carriers across the United States, and 415 00:22:40,920 --> 00:22:43,439 Speaker 1: we would actually lower affairs for more people in more places. 416 00:22:44,119 --> 00:22:46,720 Speaker 1: But in the end, um, you know, our board was 417 00:22:46,840 --> 00:22:50,280 Speaker 1: a very discipline and unwilling to overbid and overpay because 418 00:22:50,280 --> 00:22:52,000 Speaker 1: we've gotta look out for our own shareholders and our 419 00:22:52,000 --> 00:22:54,520 Speaker 1: own employees. And so if if Jeff Blue wants it 420 00:22:54,640 --> 00:22:57,879 Speaker 1: that bad, that's fine. But sadly, I think some of 421 00:22:57,920 --> 00:23:00,119 Speaker 1: the Spirit consumers, you know, millions of them, are going 422 00:23:00,160 --> 00:23:03,000 Speaker 1: to be faced with a increase in the middle of 423 00:23:03,119 --> 00:23:05,480 Speaker 1: some some great inflation. This is actually a heck of 424 00:23:05,520 --> 00:23:06,840 Speaker 1: a heck of a bill that people are gonna have 425 00:23:06,880 --> 00:23:09,760 Speaker 1: to pay so Um, So that's disappointing. But for us 426 00:23:09,880 --> 00:23:12,840 Speaker 1: and and and our stakeholders are shareholders and our employees, 427 00:23:13,200 --> 00:23:16,240 Speaker 1: we're really excited today. So I mean we have to 428 00:23:16,320 --> 00:23:20,480 Speaker 1: talk about antitrust concerns because I mean the Jet Blue 429 00:23:20,800 --> 00:23:23,960 Speaker 1: Spirit tie up a lot of speculation about what regulars 430 00:23:24,080 --> 00:23:27,600 Speaker 1: might say about that. I'm curious about what it would 431 00:23:27,600 --> 00:23:30,040 Speaker 1: have looked like on your end had this deal with 432 00:23:30,240 --> 00:23:33,840 Speaker 1: Spirit gone through, what pressure you might have faced, and 433 00:23:34,000 --> 00:23:36,840 Speaker 1: what you anticipated now potentially the Jet Blue and Spirit 434 00:23:37,400 --> 00:23:40,800 Speaker 1: uh tie up coming under Well, look, I think you know, 435 00:23:40,840 --> 00:23:43,600 Speaker 1: the Department of Justice is is a is an organization 436 00:23:43,680 --> 00:23:45,399 Speaker 1: that would have I'm sure done its job and it 437 00:23:45,440 --> 00:23:48,320 Speaker 1: would have you know, validated what we were saying, which 438 00:23:48,359 --> 00:23:51,639 Speaker 1: is we were gonna lower prices for consumers. Um. I 439 00:23:51,800 --> 00:23:54,840 Speaker 1: think this is a more challenging path that they've chosen, right, 440 00:23:54,880 --> 00:23:57,800 Speaker 1: I mean, they're gonna raise prices for consumers and that 441 00:23:57,920 --> 00:23:59,879 Speaker 1: has obviously a lot more risk of getting through the 442 00:24:00,040 --> 00:24:01,760 Speaker 1: o J. But you know, I'm not gonna speculate whether 443 00:24:01,800 --> 00:24:05,119 Speaker 1: they get it done. In the end. Um, Spirit shareholders 444 00:24:05,160 --> 00:24:08,240 Speaker 1: were had access to the information and they made a 445 00:24:08,280 --> 00:24:10,679 Speaker 1: decision that even with higher risk, it was a risk 446 00:24:10,720 --> 00:24:13,280 Speaker 1: they were willing to take. So, um, we wish them luck. 447 00:24:13,520 --> 00:24:15,199 Speaker 1: All right, Barry, let's st back. Take take a look 448 00:24:15,240 --> 00:24:17,600 Speaker 1: at the industry as a whole. Here, Um, you know 449 00:24:17,680 --> 00:24:19,760 Speaker 1: it's been in the industry had a very difficult time 450 00:24:19,800 --> 00:24:23,119 Speaker 1: dealing with a surgeon demand. Uh there's a shortage of pilots, 451 00:24:23,160 --> 00:24:25,080 Speaker 1: which I don't understand. And I put a lot of 452 00:24:25,080 --> 00:24:27,720 Speaker 1: blame on the airlines. There's a shortage of backhounds. Again, 453 00:24:27,760 --> 00:24:30,520 Speaker 1: I put it on the airlines. Tell me why I'm wrong. 454 00:24:30,640 --> 00:24:35,000 Speaker 1: Why can't the industry Your job is to forecast demand. 455 00:24:35,600 --> 00:24:41,360 Speaker 1: How did the industry so mismatched the demand and the supply? Well, 456 00:24:41,920 --> 00:24:44,320 Speaker 1: I think, look, you said you didn't know a lot 457 00:24:44,359 --> 00:24:45,960 Speaker 1: about it. I think there's I don't know that I 458 00:24:46,000 --> 00:24:48,560 Speaker 1: would blame the industry, but I do because I just 459 00:24:48,640 --> 00:24:52,040 Speaker 1: got I've had some very bad experiences this summer. So 460 00:24:52,160 --> 00:24:55,040 Speaker 1: I am firmly blaming the industry. But tell me why 461 00:24:55,080 --> 00:24:58,200 Speaker 1: I'm wrong there. Well, the industry has been warning about 462 00:24:58,280 --> 00:25:02,159 Speaker 1: this for years and we are unique in in in 463 00:25:02,280 --> 00:25:07,680 Speaker 1: the world requiring fifteen hours, which is an arbitrary, uh 464 00:25:08,920 --> 00:25:11,240 Speaker 1: number of minimum hours. I mean, you're you're in a 465 00:25:11,280 --> 00:25:13,800 Speaker 1: few hundred hours in most countries in the world to 466 00:25:13,920 --> 00:25:17,800 Speaker 1: become a pilot. So that arbitrary thing, and rather than 467 00:25:18,400 --> 00:25:21,680 Speaker 1: focusing on safety and the training quality and so forth, 468 00:25:22,080 --> 00:25:25,200 Speaker 1: UM is actually put a barrier to entry to people 469 00:25:25,320 --> 00:25:27,320 Speaker 1: being able to afford to get through it. And so 470 00:25:27,720 --> 00:25:30,600 Speaker 1: that has resulted in a in a dried up supply. So, 471 00:25:30,880 --> 00:25:33,119 Speaker 1: you know, argument to make barry because we have the 472 00:25:33,200 --> 00:25:36,679 Speaker 1: safest guys in the world, and we take that for granted, 473 00:25:36,800 --> 00:25:39,919 Speaker 1: I would argue, or some would argue that why are 474 00:25:39,960 --> 00:25:42,160 Speaker 1: you putting all the onus on the individuals to get trained. 475 00:25:42,480 --> 00:25:45,199 Speaker 1: Why don't the airlines themselves train their pilots so they 476 00:25:45,240 --> 00:25:47,800 Speaker 1: have a ready pool of pilots. Well it's funny. Well 477 00:25:47,840 --> 00:25:50,440 Speaker 1: it's funny you mentioned that. So so the shortage is 478 00:25:50,520 --> 00:25:52,879 Speaker 1: what it is. And so yesterday we announced a cadet program. 479 00:25:52,960 --> 00:25:55,800 Speaker 1: So if you're interested in leaving Bloomberg Radio and becoming 480 00:25:55,840 --> 00:25:59,239 Speaker 1: a pilot UM with zero hours, you can you can 481 00:25:59,359 --> 00:26:01,600 Speaker 1: join with us in in two years you could be 482 00:26:01,680 --> 00:26:04,960 Speaker 1: flying an airplane for us. And you know, we've we've 483 00:26:05,040 --> 00:26:08,439 Speaker 1: arranged financing and it's as little as eighty thousand dollars 484 00:26:08,960 --> 00:26:11,800 Speaker 1: to become a pilot and you'll easily make that back 485 00:26:11,880 --> 00:26:13,720 Speaker 1: with the wages that are out there. So we're doing 486 00:26:13,720 --> 00:26:15,720 Speaker 1: a lot to to coach them through it and get 487 00:26:15,760 --> 00:26:18,600 Speaker 1: them through the process and get them through this cadet program. 488 00:26:18,760 --> 00:26:20,920 Speaker 1: And the response in the last twenty four hours has 489 00:26:20,960 --> 00:26:23,120 Speaker 1: just been huge. So so we're excited. But the truth 490 00:26:23,240 --> 00:26:25,960 Speaker 1: is is what what actually helps us even more is 491 00:26:26,040 --> 00:26:28,200 Speaker 1: that we are one of the highest growth airlines in 492 00:26:28,280 --> 00:26:30,639 Speaker 1: the world. And so one of the biggest pay raises 493 00:26:30,680 --> 00:26:32,840 Speaker 1: you get as a pilot is moving from the right 494 00:26:32,880 --> 00:26:35,320 Speaker 1: seat to the left seat and so to be captain. 495 00:26:35,560 --> 00:26:37,919 Speaker 1: And so because of our growth, you upgrade the captain 496 00:26:38,000 --> 00:26:40,919 Speaker 1: within four years, whereas you might be sitting. You might 497 00:26:40,960 --> 00:26:44,160 Speaker 1: be sitting you know, you know, it's in sitting reserve 498 00:26:44,240 --> 00:26:47,440 Speaker 1: in JFK for Jeff Blue, Whereas whereas you could already 499 00:26:47,440 --> 00:26:50,160 Speaker 1: be a captain with us potentially, so so they see 500 00:26:50,240 --> 00:26:52,760 Speaker 1: that so you can make more money and you have 501 00:26:52,920 --> 00:26:55,159 Speaker 1: better options for more basis. We have bases all over 502 00:26:55,200 --> 00:26:57,600 Speaker 1: the United States and really desirable places. So that's why 503 00:26:57,640 --> 00:26:59,920 Speaker 1: we actually have a surplus of pilot. To say very 504 00:27:00,040 --> 00:27:02,159 Speaker 1: we only have thirty seconds left. But before we let 505 00:27:02,240 --> 00:27:04,720 Speaker 1: you go, I have to ask should the Spirit Jet 506 00:27:04,800 --> 00:27:07,240 Speaker 1: Blue deal fall through? I mean, would you try to 507 00:27:07,320 --> 00:27:11,000 Speaker 1: tie up with Spirit again. So I'm not gonna speculate, 508 00:27:11,160 --> 00:27:14,680 Speaker 1: but look, we're always looking for ways to save more consumers, Mike, 509 00:27:14,760 --> 00:27:16,720 Speaker 1: so so I'm not gonna close the door in it. 510 00:27:16,800 --> 00:27:20,000 Speaker 1: But let's let's let them, uh, you know, pursue their 511 00:27:20,000 --> 00:27:21,800 Speaker 1: path and we'll see how it goes. All right, Barry, 512 00:27:22,000 --> 00:27:23,840 Speaker 1: I really appreciate you taking a time to come on. 513 00:27:24,160 --> 00:27:25,800 Speaker 1: I know it's been busy times for you and the company. 514 00:27:25,840 --> 00:27:28,360 Speaker 1: Barry Billfe was a ceto on president of Frontier Airlines. 515 00:27:31,240 --> 00:27:35,639 Speaker 1: Earlier today, Kat we're talking with ivery Jersey Bluemer markets 516 00:27:35,840 --> 00:27:37,680 Speaker 1: rate strategist, and he was talking about just kind of 517 00:27:37,680 --> 00:27:40,639 Speaker 1: the markets, what's going on and a real liquidity problem 518 00:27:40,680 --> 00:27:43,679 Speaker 1: and it really rears its head, um, you know, when 519 00:27:43,720 --> 00:27:45,639 Speaker 1: you get some volatility in the market, and we've had 520 00:27:45,680 --> 00:27:47,280 Speaker 1: so much data come out and recently there's been a 521 00:27:47,320 --> 00:27:50,160 Speaker 1: lot of volatility here, Um, and he kind of sites 522 00:27:50,280 --> 00:27:52,760 Speaker 1: that's just the big investment banks are not stepping up 523 00:27:52,760 --> 00:27:54,520 Speaker 1: as much as I used to for variety of reasons, 524 00:27:54,520 --> 00:27:56,520 Speaker 1: some of them regulatory. So our next guest here, I'm 525 00:27:56,520 --> 00:27:59,000 Speaker 1: sure has some thoughts in that. Chris kun Cannon, CEO 526 00:27:59,200 --> 00:28:02,639 Speaker 1: and president of Market Access that is a publicly traded company. 527 00:28:02,840 --> 00:28:05,080 Speaker 1: M k t X is what you put into your 528 00:28:05,080 --> 00:28:08,000 Speaker 1: Bloomberg terminal. It's got a ten billion dollar market cap. Chris, 529 00:28:08,080 --> 00:28:10,120 Speaker 1: thanks so much for joining us here in the fixed 530 00:28:10,160 --> 00:28:12,680 Speaker 1: income markets. Give us a sense of kind of where 531 00:28:12,800 --> 00:28:16,000 Speaker 1: we are in terms of liquidity lack of liquidity, Is 532 00:28:16,040 --> 00:28:18,280 Speaker 1: it a problem? If so, what are some of the 533 00:28:18,400 --> 00:28:22,560 Speaker 1: solutions potentially well? First, thanks Paul and thanks Katie for 534 00:28:22,640 --> 00:28:25,000 Speaker 1: having me. It's great to be on the show. And uh, 535 00:28:25,720 --> 00:28:29,760 Speaker 1: absolutely right. There are some liquidity challenges in our market. 536 00:28:30,520 --> 00:28:33,480 Speaker 1: UM definitely the result of the volatility that we're seeing, 537 00:28:33,560 --> 00:28:36,800 Speaker 1: and we've been seeing some volatility in the market throughout 538 00:28:36,920 --> 00:28:40,240 Speaker 1: the course of two and we would expect that volatility 539 00:28:40,320 --> 00:28:44,880 Speaker 1: to continue, particularly given UM the moves that the SAID 540 00:28:45,000 --> 00:28:48,040 Speaker 1: and and other central banks are are taking to really 541 00:28:48,120 --> 00:28:51,040 Speaker 1: ward off the inflation that we're seeing in the market. 542 00:28:51,160 --> 00:28:56,200 Speaker 1: So I would expect volatility UM to UM continue in 543 00:28:56,320 --> 00:29:02,480 Speaker 1: that market, and that does create challenging liquidity UM liquidity 544 00:29:02,920 --> 00:29:07,400 Speaker 1: challenges for our clients, but particularly around the large investment thanks, 545 00:29:07,520 --> 00:29:10,800 Speaker 1: they have to be very careful about their inventory and 546 00:29:10,880 --> 00:29:14,240 Speaker 1: what they take on onto their balance sheet, particularly given 547 00:29:14,320 --> 00:29:18,200 Speaker 1: many of the regulations that they're subject to christ and Cannon. First, 548 00:29:18,280 --> 00:29:19,760 Speaker 1: let me say it is thrilling to talk to you 549 00:29:20,040 --> 00:29:22,160 Speaker 1: no new for a long time. Second, I want to 550 00:29:22,200 --> 00:29:25,920 Speaker 1: dig into the numbers of the market access business because 551 00:29:25,920 --> 00:29:29,040 Speaker 1: I'm looking at your latest Sarnings report grown market share 552 00:29:29,120 --> 00:29:32,520 Speaker 1: to of the composite corporate bond market. But when I 553 00:29:32,600 --> 00:29:37,000 Speaker 1: think about electronic trading platforms, specifically for corporate bonds, it 554 00:29:37,000 --> 00:29:40,440 Speaker 1: almost feels like a duopoly. You have market access, You've 555 00:29:40,560 --> 00:29:43,560 Speaker 1: trade Web. It's almost like an uber lift sort of situation. 556 00:29:44,160 --> 00:29:47,080 Speaker 1: And I'm curious whether right now you know this increase 557 00:29:47,120 --> 00:29:49,480 Speaker 1: in market share that you're seeing is that is that 558 00:29:49,640 --> 00:29:53,000 Speaker 1: the pie growing larger? Are you chipping away at some 559 00:29:53,120 --> 00:29:56,800 Speaker 1: of your competitors market share? Well, it's great to talk 560 00:29:56,880 --> 00:29:59,840 Speaker 1: to you as well, Katie, and um. Really what we're 561 00:30:00,000 --> 00:30:02,680 Speaker 1: seeing is the overall market. When you look at the 562 00:30:03,080 --> 00:30:05,920 Speaker 1: global bond market, you're talking about a hundred and thirty 563 00:30:06,000 --> 00:30:08,760 Speaker 1: trillion dollar market. It's one of the largest asset classes 564 00:30:08,840 --> 00:30:11,959 Speaker 1: on the planet, and it is still in early innings 565 00:30:12,080 --> 00:30:16,560 Speaker 1: in developing true electronic solutions, and clearly in the US 566 00:30:17,040 --> 00:30:20,640 Speaker 1: close to that market is still manual that means over 567 00:30:20,720 --> 00:30:24,240 Speaker 1: the phone via chat. So the market opportunity that we 568 00:30:24,400 --> 00:30:28,000 Speaker 1: have at market access is is truly sizeable. UM. Where 569 00:30:28,120 --> 00:30:32,040 Speaker 1: as you mentioned of the US corporate bond market, that 570 00:30:32,160 --> 00:30:35,400 Speaker 1: means close to one in every five bond trades in 571 00:30:35,440 --> 00:30:38,360 Speaker 1: the US take place on market access, but that's still 572 00:30:38,600 --> 00:30:41,920 Speaker 1: at a very low rate given the overall electronic um 573 00:30:42,400 --> 00:30:46,160 Speaker 1: the electronic adoption UH in the US bond market and 574 00:30:46,400 --> 00:30:51,000 Speaker 1: more importantly globally, we offer electronic trading and in emerging 575 00:30:51,080 --> 00:30:54,760 Speaker 1: market bonds and euro bonds and US treasuries, and and 576 00:30:55,280 --> 00:30:58,280 Speaker 1: my favorite in the municipal bond market, which is still 577 00:30:58,880 --> 00:31:02,760 Speaker 1: far from adopting electronic trading. It's very early days. And 578 00:31:03,360 --> 00:31:05,960 Speaker 1: in the US municipal bond market. I'm sorry you're saying 579 00:31:05,960 --> 00:31:10,440 Speaker 1: the municipal bond market is your favorite. It actually is. 580 00:31:10,720 --> 00:31:14,800 Speaker 1: It has it just has such great attributes. For obviously, 581 00:31:14,880 --> 00:31:18,080 Speaker 1: the tax benefits of the municipal bond market continue to thrive. 582 00:31:18,200 --> 00:31:22,080 Speaker 1: And UM, just this recent quarter we traded over twenty 583 00:31:22,160 --> 00:31:24,880 Speaker 1: three billion in muni bonds on our trading platform. So 584 00:31:25,000 --> 00:31:27,640 Speaker 1: we are delivering some benefits in that market and some 585 00:31:27,800 --> 00:31:32,000 Speaker 1: elect um sorely needed electronic trading in the municipal bond market. 586 00:31:32,360 --> 00:31:34,760 Speaker 1: All right, Well, Bloomberg's Joe Meazac would be thrilled to 587 00:31:34,840 --> 00:31:36,240 Speaker 1: hear that, But I do want to get your thoughts 588 00:31:36,680 --> 00:31:39,640 Speaker 1: on portfolio trading. Of course, I cover E t F 589 00:31:39,760 --> 00:31:43,720 Speaker 1: specifically fixed income et f s an important component there, 590 00:31:43,760 --> 00:31:46,520 Speaker 1: and portfolio trading. It was sort of presented as the 591 00:31:46,680 --> 00:31:50,240 Speaker 1: next big boom on Wall Street in terms of you know, 592 00:31:50,480 --> 00:31:53,000 Speaker 1: when it comes to bond trading, it feels like it's 593 00:31:53,240 --> 00:31:55,160 Speaker 1: stalled out a little bit. I mean, I'm looking at 594 00:31:55,200 --> 00:31:58,160 Speaker 1: some numbers from February where you saw it come down 595 00:31:58,600 --> 00:32:01,600 Speaker 1: in terms of total you US corporate bond volume. Curious 596 00:32:01,840 --> 00:32:06,120 Speaker 1: what insight you can provide there. Well, the we tracked 597 00:32:06,160 --> 00:32:10,440 Speaker 1: the portfolio bond trading, portfolio trading in our bond market, 598 00:32:10,480 --> 00:32:13,200 Speaker 1: particularly in the US, where we saw it grow UM 599 00:32:13,560 --> 00:32:18,440 Speaker 1: really most rapidly, probably in one UM. I would call 600 00:32:18,520 --> 00:32:22,840 Speaker 1: portfolio trading in the bond market as a very expensive trade. 601 00:32:23,120 --> 00:32:27,000 Speaker 1: You're obviously trading a full basket UH typically trading with 602 00:32:27,400 --> 00:32:30,360 Speaker 1: one or two dealers, and UM, the spread of that 603 00:32:30,520 --> 00:32:35,000 Speaker 1: trade is quite expensive, UM, but it provides some useful 604 00:32:35,320 --> 00:32:39,920 Speaker 1: UM ways of deploying capital and and UM moving portfolio 605 00:32:40,440 --> 00:32:43,720 Speaker 1: at a much rapid pace. We actually had record trading 606 00:32:43,840 --> 00:32:48,080 Speaker 1: portfolio in our in our last quarter volume of twenty 607 00:32:48,160 --> 00:32:50,920 Speaker 1: two billion in portfolio trades on our platform, So we 608 00:32:51,360 --> 00:32:54,800 Speaker 1: we do provide an electronic solution in portfolio trading as well. 609 00:32:55,240 --> 00:32:58,200 Speaker 1: But as I mentioned, it's it's only about between five 610 00:32:58,240 --> 00:33:00,720 Speaker 1: and six percent of the overall mark, and we've really 611 00:33:00,800 --> 00:33:04,840 Speaker 1: seen it stabilize around that rate. It's very hard to 612 00:33:04,920 --> 00:33:09,480 Speaker 1: do portfolio trading in a volatile market, and as we 613 00:33:09,640 --> 00:33:13,240 Speaker 1: talked about the you know, the the liquidity challenges makes 614 00:33:13,440 --> 00:33:16,480 Speaker 1: portfolio trading that much harder in this type of market. 615 00:33:17,080 --> 00:33:19,200 Speaker 1: And Chris, we only have about thirty seconds left. But 616 00:33:19,360 --> 00:33:21,000 Speaker 1: I mean, if I look at some of these numbers 617 00:33:21,000 --> 00:33:24,040 Speaker 1: again from February, it seems like the peak in terms 618 00:33:24,080 --> 00:33:27,400 Speaker 1: of portfolio trading came in November. Like you said, I mean, 619 00:33:27,680 --> 00:33:31,040 Speaker 1: perhaps it doesn't make as much sense involvedal markets, but 620 00:33:31,160 --> 00:33:33,520 Speaker 1: how how big do you think it could grow again? 621 00:33:33,560 --> 00:33:36,560 Speaker 1: If you look at the total share of corporate bond volume. 622 00:33:37,760 --> 00:33:41,240 Speaker 1: I you know, we saw portfolio trading hit its peak 623 00:33:41,400 --> 00:33:44,720 Speaker 1: in the stock market back in the in the late 624 00:33:44,880 --> 00:33:47,320 Speaker 1: nineties actually, and it it really hit a peak and 625 00:33:47,400 --> 00:33:51,120 Speaker 1: then really ebbed down. Um, so I wouldn't expect it 626 00:33:51,200 --> 00:33:56,040 Speaker 1: to grow anywhere over Chris, really good stuff. I really 627 00:33:56,080 --> 00:33:59,480 Speaker 1: appreciate getting your time. Chris con Cannon, CEO and president 628 00:34:00,040 --> 00:34:03,680 Speaker 1: of Market Access, talking about the automation of trading, particularly 629 00:34:03,720 --> 00:34:06,600 Speaker 1: in the fixed income space, a growing trend for sure. 630 00:34:09,360 --> 00:34:12,440 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 631 00:34:12,480 --> 00:34:16,240 Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever 632 00:34:16,360 --> 00:34:20,000 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 633 00:34:20,280 --> 00:34:24,080 Speaker 1: at Matt Miller three. On Fall Sweeney, I'm on Twitter 634 00:34:24,160 --> 00:34:26,960 Speaker 1: at pt Sweeney before the podcast. You can always catch 635 00:34:27,080 --> 00:34:28,600 Speaker 1: us worldwide at Bloomberg Radio.