WEBVTT - GDP, Markets, And Frontier Airlines (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.680 at Bloomberg dot com slash podcast. You know, I'm usually 0:00:22.680 --> 0:00:26.119 not that keen to talk to economists, you know, but 0:00:26.680 --> 0:00:28.960 there's a couple I really like that kind of make 0:00:29.000 --> 0:00:31.400 it simple that I can understand stuff. Elena, she left Diva, 0:00:31.720 --> 0:00:33.680 is one of them. She's the senior US economist for 0:00:33.680 --> 0:00:36.800 Bloomberg News, and Elana lots to parts over. I know 0:00:36.880 --> 0:00:40.120 you guys at Bloomberg Economics have been super busy. Uh 0:00:40.159 --> 0:00:44.720 this week. Let's talk about this morning's g d P print. 0:00:44.920 --> 0:00:48.360 UH much lower than expected, a negative number. What do 0:00:48.360 --> 0:00:51.000 you take away from it? So? I think in terms 0:00:51.080 --> 0:00:55.440 of recession and not I think maybe not yet, but 0:00:55.600 --> 0:01:01.280 that clearly significantly raises risks for recess to happen this year. 0:01:01.800 --> 0:01:05.320 And the reason is not just you know, the two 0:01:05.360 --> 0:01:09.720 consecutive negative readings, but if you look beneath the surface, 0:01:10.160 --> 0:01:13.840 you will see that, for example, final sales to domestic 0:01:13.880 --> 0:01:18.360 purchases that GDP that excludes a volatile categories such as 0:01:18.440 --> 0:01:22.240 trade and inventories that fail for the first time since 0:01:22.280 --> 0:01:25.839 the COVID recession. So that is telling you that underlying 0:01:25.959 --> 0:01:29.760 demand is weakening significantly. Another thing that I would like 0:01:29.840 --> 0:01:33.679 to highlight is real services. You know, we we were 0:01:33.720 --> 0:01:36.920 talking about people going on vacations. We were just discussing, 0:01:37.080 --> 0:01:41.520 we were planning some vacations too. That was supposed to 0:01:41.520 --> 0:01:44.039 be strong in June. But if you look at the 0:01:44.160 --> 0:01:48.840 data and you calculate, uh, the implied growth rate in 0:01:49.000 --> 0:01:52.000 June from the data we have, that will show you 0:01:52.200 --> 0:01:56.480 services spending is slowing into the end of the second quarter. 0:01:56.560 --> 0:01:59.400 I haven't seen my visable from July from my Hawaii trip, 0:02:01.560 --> 0:02:04.200 but the data telling you that things are slowing down 0:02:04.400 --> 0:02:07.120 quotes the end of the quarter, which creates risks for 0:02:07.200 --> 0:02:10.919 the third quarter. So it was an ugly headline. Sounds 0:02:10.960 --> 0:02:13.200 like the details under the surface where messy. Two When 0:02:13.200 --> 0:02:14.960 it comes to GDP, I do want to talk about 0:02:15.000 --> 0:02:18.120 the FED a little bit and where exactly they are 0:02:18.160 --> 0:02:20.040 on the curve because it caught my eye yesterday. I mean, 0:02:20.040 --> 0:02:22.760 everyone has an opinion about the FED. But we heard 0:02:22.800 --> 0:02:25.880 from Scott Minor and Order Guggenheim, So his fear is that, 0:02:26.160 --> 0:02:28.400 you know, perhaps the Central Bank opened the door a 0:02:28.400 --> 0:02:31.440 little bit too wide to the possibility of cooling down 0:02:31.520 --> 0:02:33.519 in terms of their rate hikes. Then you heard from 0:02:33.560 --> 0:02:36.280 double and Jeff Gunlock, for example, saying that the FED 0:02:36.400 --> 0:02:39.560 is no longer behind the curve. I would love to 0:02:39.600 --> 0:02:42.320 hear where you fall on that debate. So I think 0:02:42.880 --> 0:02:45.440 the FED will try to do as much as they 0:02:45.520 --> 0:02:49.639 can at this point, and you know, they are going 0:02:49.680 --> 0:02:54.520 to find reasons to keep saying that the economy remains strong, 0:02:54.680 --> 0:02:59.399 you know, as long as the labor market continues to deliver, right, 0:03:00.520 --> 0:03:06.720 I think that they will have to step back at 0:03:06.840 --> 0:03:10.040 some point, you know, if if you know, if we 0:03:10.080 --> 0:03:13.800 see the data start crippling. Look at jobless claims data 0:03:13.840 --> 0:03:18.640 for example, So we're like halfway through from the trophy 0:03:18.639 --> 0:03:22.240 and jobless claims in March to uh the level that 0:03:22.320 --> 0:03:25.160 is associated with the start of a recession. So we 0:03:25.240 --> 0:03:30.320 already halfway through in terms of the climb in jobless claims. 0:03:30.360 --> 0:03:33.320 But I think what will be interesting to see next 0:03:33.360 --> 0:03:38.440 week we're gonna get another Pail's report is where the 0:03:38.480 --> 0:03:42.480 deceleration in job creation is happening which sectors, like, is 0:03:42.520 --> 0:03:47.240 it just concentrated in housing and certain you know, goods 0:03:47.280 --> 0:03:50.720 related sectors, or is it a broader slowing in the 0:03:50.800 --> 0:03:53.120 labor So are you concerned about the labor market because 0:03:53.120 --> 0:03:55.880 that's certainly one of the pillars that the argument and 0:03:55.960 --> 0:03:57.840 the people that make the argument or we're not in 0:03:57.880 --> 0:04:00.160 a recession because the labor market is so strong. The 0:04:00.280 --> 0:04:03.960 data are so contradicting, and uh, you know, on the 0:04:03.960 --> 0:04:07.040 one hand, you see diffusion index for example, that shows 0:04:07.080 --> 0:04:10.040 breasts of job creation that was really strong in the 0:04:10.080 --> 0:04:14.880 previous report in June, But what will July data they're 0:04:15.000 --> 0:04:17.960 gonna tell us. On the other hand, I already mentioned 0:04:18.040 --> 0:04:21.840 jobless claims are creeping higher, and we can see some 0:04:21.960 --> 0:04:24.680 slow down in wage growth as well. Alright, so keep 0:04:24.720 --> 0:04:27.200 an eye on the labor market. Let's talk about inflation though, 0:04:27.240 --> 0:04:29.560 because it's interesting to me that if you look at, 0:04:29.680 --> 0:04:32.440 you know, some of the measures of inflation expectations, whether 0:04:32.480 --> 0:04:34.760 that's break evens in the bond market, if you look 0:04:34.800 --> 0:04:38.960 at some of these surveys, it seems that expectations at 0:04:39.040 --> 0:04:42.039 least have peaked. But when it comes to inflation itself 0:04:42.520 --> 0:04:44.560 on do you think we could actually maybe start to 0:04:44.600 --> 0:04:50.000 crest there. Well, it depends core versus headline, so uh, 0:04:50.040 --> 0:04:54.880 and that will really depend on geo political developments I think. So, 0:04:55.640 --> 0:04:58.919 you know, core has peaked, but there are some sticky 0:04:58.960 --> 0:05:02.440 categories in the core, such a shelter, that will continue 0:05:02.480 --> 0:05:07.279 to increase because it's just such a legging indicator. So 0:05:07.480 --> 0:05:10.800 in terms of the headline, and it's important because you know, 0:05:11.000 --> 0:05:13.719 the FED recently mentioned that they are looking at the 0:05:13.720 --> 0:05:19.680 headline numbers. Depends on energy prices, and you know, I 0:05:19.720 --> 0:05:22.800 am really scared to make any predictions on let's go 0:05:22.839 --> 0:05:26.240 to that front. The daily national average gasoline prices, which 0:05:26.279 --> 0:05:28.279 is the first ticker I bring up every morning, it 0:05:28.320 --> 0:05:30.960 continues to tick over four dollars and twenty seven cents 0:05:31.000 --> 0:05:34.160 per gallon UM. So it looks like at least at 0:05:34.200 --> 0:05:36.880 the gas pump, which is a piece of inflation that 0:05:37.120 --> 0:05:40.159 everybody feels except Tom Keane who doesn't have a car. 0:05:40.680 --> 0:05:45.200 Everybody feels. And that's coming down pretty steadily, which will 0:05:45.240 --> 0:05:50.800 be reflected in sentiment measures, I think, and perhaps you know, 0:05:50.880 --> 0:05:55.320 people will spend a little bit more in real terms. Uh. 0:05:55.560 --> 0:05:58.760 In the beginning of the third quarter. But I'm just 0:05:58.800 --> 0:06:01.680 worried this is a little bit more broad based and 0:06:02.000 --> 0:06:06.080 if you know, Europe goes into an energy crisis this full, 0:06:06.960 --> 0:06:10.839 this will not leave everybody else like just isolated. That's 0:06:10.880 --> 0:06:13.279 what my worry is. All right, there is a lot 0:06:13.400 --> 0:06:17.000 for you economists to keep busy at Bloomberg Economics. Helena 0:06:17.160 --> 0:06:21.080 Latti about senior US economists for Bloomberg joining us here 0:06:21.080 --> 0:06:23.720 in our Bloomberg Interactive Broker studio. So much better when 0:06:23.720 --> 0:06:26.320 people come in studio now, it's so nice see all 0:06:26.320 --> 0:06:32.600 these smiling faces. Kind lots of cross currents in these 0:06:32.640 --> 0:06:34.240 markets here and again we Sho could just see it 0:06:34.240 --> 0:06:36.880 in the trading, big big moves up yesterday and his 0:06:36.960 --> 0:06:39.680 Greg was just reporting giving some of that back today. 0:06:39.720 --> 0:06:42.480 It kind of reflects some of the uncertainty as the 0:06:42.520 --> 0:06:44.760 market tries at discount all these data points from the 0:06:44.800 --> 0:06:47.800 Fed yesterday to earnings, to the data eco data we're 0:06:47.800 --> 0:06:49.560 getting today in terms of GDP. Let's check them with 0:06:49.600 --> 0:06:52.120 the professional. Does this for a living? Rick pitt Karen, 0:06:52.279 --> 0:06:55.839 c io of Pitt Karen joins us. Rick, what's your 0:06:56.160 --> 0:07:00.560 takeaway from you know, the earnings from the Fed yesterday, 0:07:00.600 --> 0:07:03.200 from the g D pre print. How is your outlook changed, 0:07:03.240 --> 0:07:07.120 if at all? Well, Hot, Paul, how are you? And 0:07:07.240 --> 0:07:10.520 nice to be here today. It's an incredibly dynamic time 0:07:10.560 --> 0:07:15.120 for the markets, and that was underscored by Pale statements yesterday. 0:07:15.160 --> 0:07:20.120 You know, since November, they've placed in flight inflation fighting, 0:07:20.360 --> 0:07:23.480 uh and at an inflation fighting at the expense of 0:07:23.560 --> 0:07:26.680 all other economic issues at the forefront of their rhetoric 0:07:26.720 --> 0:07:30.400 and their actions. And yesterday he began to open the 0:07:30.440 --> 0:07:32.840 door in the second half of the speech to a 0:07:32.880 --> 0:07:37.920 possible pause, a possible pivot. The markets reacted super positively 0:07:38.040 --> 0:07:41.800 as we saw. I think our view is that it's 0:07:41.800 --> 0:07:46.000 still a time for more caution than aggression because, uh, 0:07:46.040 --> 0:07:48.240 there's a lot of dynamics, as you mentioned, going through 0:07:48.240 --> 0:07:50.280 this market, and I don't think we have all the 0:07:50.320 --> 0:07:52.880 answers yet. I think things are still subject to change, 0:07:53.240 --> 0:07:54.840 and I'm not sure if we're all the way through 0:07:54.920 --> 0:07:58.720 the tough times, even as strong as yesterday was. And Rick, 0:07:58.800 --> 0:08:02.200 let's talk about that more caution than aggression. How does 0:08:02.280 --> 0:08:05.600 that filter down into how you structure a portfolio? Where 0:08:05.640 --> 0:08:10.760 do you see opportunity? Where are you avoiding? Well, I'm 0:08:10.840 --> 0:08:15.320 lucky I've worked with high net worth individuals and high 0:08:15.560 --> 0:08:18.160 net worth families for my whole career. They tend to 0:08:18.160 --> 0:08:21.440 have a longer term view. They're all operating in the 0:08:21.520 --> 0:08:25.880 land of taxes. Uh, so tax drag is important. So 0:08:26.160 --> 0:08:28.160 you know, a pit care and portfolio will be a 0:08:28.760 --> 0:08:32.520 more diverse portfolio that will be in a more strategic 0:08:32.520 --> 0:08:34.679 than tactical in the way that it's laid out, and 0:08:34.720 --> 0:08:37.560 it will rely on a series of managers underneath that. 0:08:38.080 --> 0:08:41.160 And we see those managers pivoting right now to a 0:08:41.200 --> 0:08:43.079 little bit different kind of a time. You know, two 0:08:43.160 --> 0:08:47.760 years ago, long duration assets of stocks that were growing 0:08:47.920 --> 0:08:52.920 revenue regardless of earnings. Uh, we're really highly valued. I 0:08:52.960 --> 0:08:56.680 think in a land where liquidity is tighter, where the 0:08:56.720 --> 0:08:59.600 FED will be tighter rather than looser, you have to 0:08:59.600 --> 0:09:02.000 go to a different kind of a playbook. And and 0:09:02.400 --> 0:09:06.160 we've seen some different kinds of asset classes that weren't 0:09:06.160 --> 0:09:09.880 working in two thousands, sixteen, seventeen eighteen working very well 0:09:10.000 --> 0:09:14.239 right now, whether that's small value and equity, land commodities, 0:09:14.440 --> 0:09:17.640 certain kinds of hedge funds. So we're certainly emphasizing those 0:09:17.679 --> 0:09:20.440 in our portfolios. Rick, we're kind of I would say, 0:09:20.520 --> 0:09:22.400 kind of right in the middle of this earning season. 0:09:22.400 --> 0:09:24.720 A lot of big tech numbers coming out this week, 0:09:24.720 --> 0:09:27.679 while the Apple and Amazon after the close. Any takeaways 0:09:27.720 --> 0:09:30.040 so far for you during kind of what you've seen, 0:09:30.080 --> 0:09:34.520 what you've heard from managements. We were struck going into 0:09:34.559 --> 0:09:38.600 this session, this earning season because we had an eight 0:09:38.640 --> 0:09:42.439 point nine percent forecasted year over year earnings growth, and 0:09:42.880 --> 0:09:45.720 you know, with the employment situation, we have very strong 0:09:45.720 --> 0:09:48.920 employment market and very strong earnings growth. It's hard to 0:09:48.920 --> 0:09:52.000 contemplate a really tough recession when you have those two 0:09:52.040 --> 0:09:55.959 cornerstones on the positive side. So the conventional wisdom was, well, 0:09:56.000 --> 0:09:58.400 at eight point nine, can't hold it has We're going 0:09:58.440 --> 0:10:01.120 to go into recession area environment and that number is 0:10:01.120 --> 0:10:03.160 going to get creamed. And I think that number will 0:10:03.240 --> 0:10:06.120 come in based on the environment we have. But I 0:10:06.160 --> 0:10:10.000 think this earning season, uh probably has been better than 0:10:10.000 --> 0:10:14.400 the whispers in terms of forward guidance. The Honeywell number 0:10:14.440 --> 0:10:17.199 this morning, he said, you know, regardless of the slowing 0:10:17.240 --> 0:10:21.360 and the broader economy, our business lines have shown dynamic 0:10:21.400 --> 0:10:23.319 growth in the first six months and they're going to 0:10:23.400 --> 0:10:26.320 continue to show that growth throughout the rest of the year. 0:10:27.000 --> 0:10:29.679 That wasn't what the Whisper had in mind in late 0:10:29.760 --> 0:10:32.000 June they thought that forward guidance would be a little 0:10:32.040 --> 0:10:35.200 bit worse. I think that's been another reason we've had, 0:10:35.640 --> 0:10:39.880 you know, a stronger bounce back July in the speculative sectors. 0:10:41.120 --> 0:10:43.120 And that bounced back though that we've seen in the 0:10:43.120 --> 0:10:46.240 speculative sectors as you mentioned, I mean, or the past month, 0:10:46.320 --> 0:10:51.520 it's actually been a very robust rally. Uh How I 0:10:51.559 --> 0:10:54.040 guess what's your conviction there? Because I mean you look 0:10:54.080 --> 0:10:57.720 at volume, you look at volatility just falling off a cliff. 0:10:57.840 --> 0:11:01.880 Usually that means pretty low conviction. Wondering if that's the 0:11:01.960 --> 0:11:06.160 case on your end as well. Well. Our technical research 0:11:06.480 --> 0:11:08.880 doesn't really show that even though it's an impressive rally 0:11:08.920 --> 0:11:12.440 on price, particularly in the n azdec, the internals are great. 0:11:12.520 --> 0:11:15.240 They aren't just screaming, you know, like they did in 0:11:15.880 --> 0:11:19.280 say April of two thousand and nine. You know, this 0:11:19.320 --> 0:11:21.520 is a big time by here. There's a ton of 0:11:21.800 --> 0:11:24.840 internal momentum. It's a little more tepid than that. I 0:11:24.840 --> 0:11:28.600 would just tell investors, you know, we feel I think 0:11:28.640 --> 0:11:31.280 a little bit in our personal lives, like COVID is over, 0:11:31.400 --> 0:11:33.000 Like we can go to the restaurant we can get 0:11:33.040 --> 0:11:35.160 on the airplane, we can we can travel, we can 0:11:35.640 --> 0:11:39.000 do those things. But from a macro economic perspective, the 0:11:39.160 --> 0:11:44.320 scale of the of of the various impacts that COVID 0:11:44.360 --> 0:11:47.320 had on our economy, whether it was that massive liquidity 0:11:47.360 --> 0:11:50.559 impulse in two thousand and twenty that caused a great rally, 0:11:50.720 --> 0:11:53.720 now we're gonna pull that back. You know, I would 0:11:53.720 --> 0:11:57.679 be cautious to uh, to flash the all green light here. 0:11:57.760 --> 0:12:00.880 I think patients ain't patients is always a good thing, 0:12:01.160 --> 0:12:04.000 uh in investment world, And even in light of the 0:12:04.040 --> 0:12:07.760 last three weeks, which has thankfully been strong for markets', 0:12:08.040 --> 0:12:11.880 I'd still, you know, tighten my seat belt and and 0:12:11.880 --> 0:12:14.160 and keep an eye out for the changing data because 0:12:14.160 --> 0:12:17.120 I think it's going to continue to change. All right, Rick, 0:12:17.160 --> 0:12:20.120 good stuff there. We appreciate getting your thoughts, Rick pit Karen, 0:12:20.160 --> 0:12:23.680 He's a c I O at Pitcairn, been managing money 0:12:23.720 --> 0:12:30.319 for a long time. Getting his perspective here. All right, 0:12:30.360 --> 0:12:34.800 here's aligned from a recent research note. From our next guest, quote, 0:12:35.120 --> 0:12:38.760 pete fed hawkishness has passed. FED is preparing for a 0:12:38.840 --> 0:12:43.120 slower pace of tightening without a specific guidance. Equities are 0:12:43.240 --> 0:12:47.040 a go end quote. That line, and that content comes 0:12:47.040 --> 0:12:50.040 from Ben EM's, Managing director of Global macro Strategy at 0:12:50.160 --> 0:12:53.880 Medley Global Advisors. Ben I think the market yesterday kind 0:12:53.920 --> 0:12:56.960 of agreed with you give us your thoughts about what 0:12:57.040 --> 0:13:01.880 we heard from our Federal Reserve yesterday. Hey, Paul, thanks 0:13:01.880 --> 0:13:04.559 for having me again. Um. Yeah, So he was clear 0:13:04.640 --> 0:13:08.040 that they are now full mode data dependent, and therefore 0:13:08.240 --> 0:13:11.800 there's no guidance at least not until September. After that 0:13:11.880 --> 0:13:14.560 maybe it will return, but it does look like that 0:13:14.600 --> 0:13:16.360 what they want to do is get out of the 0:13:16.400 --> 0:13:19.200 Shenanigans of saying what we're going to do fifty or 0:13:19.240 --> 0:13:21.320 seventy five and then it has to become a hundred 0:13:21.320 --> 0:13:24.000 if a data point is more than expected and then 0:13:24.080 --> 0:13:26.480 guiding that back, and I think that will cost too 0:13:26.559 --> 0:13:29.800 much uncertainty in the markets and in the economy. So 0:13:30.120 --> 0:13:33.040 going back to data dependent leads to what we went 0:13:33.040 --> 0:13:36.400 through in sixteen on the Jennet Yellen right, and getting 0:13:36.400 --> 0:13:40.240 actually a multi policy that doesn't surprise you because of 0:13:40.320 --> 0:13:43.000 this data dependent and therefore it's not hawkish either. And 0:13:43.040 --> 0:13:46.400 that's I think the interpretation the market is taking, especially 0:13:46.400 --> 0:13:49.600 the bond market, today's stock market is as Katie reported 0:13:49.640 --> 0:13:51.839 like it always is to day after cells off on 0:13:52.320 --> 0:13:55.199 after fat day. But I do think the self is limited. 0:13:55.400 --> 0:13:57.480 But that message in mind, we have a data dependent 0:13:57.559 --> 0:14:01.560 fat that isn't as hawkish at this point. Isn't as 0:14:01.600 --> 0:14:04.079 hawkish at this point. I mean, we've seen a lot 0:14:04.080 --> 0:14:07.840 of conflicting notes as to whether the Fed truly did pivot. 0:14:07.880 --> 0:14:11.040 But Ben, in your view, if equities are a go, 0:14:11.240 --> 0:14:13.680 I'm curious what you make of this bond market move 0:14:13.800 --> 0:14:16.960 because can equities and treasuries be ago at the same 0:14:17.000 --> 0:14:20.360 time or does it? Is it too black and white? 0:14:21.120 --> 0:14:23.200 There's some black and white in that, because I will 0:14:23.240 --> 0:14:25.160 agree with you that you know, if you think of 0:14:25.200 --> 0:14:27.640 the very short end of the Huker, so something of 0:14:28.120 --> 0:14:31.240 say six month debails out to two year treasury notes, 0:14:31.840 --> 0:14:34.280 they should be much more closer to the trajectory of 0:14:34.320 --> 0:14:38.000 the fat funds rate in the future. And the reason 0:14:38.040 --> 0:14:41.680 why is that Pow very clearly yesterday guided on on 0:14:41.720 --> 0:14:46.359 twice that they're looking at the two and mediant dots 0:14:46.600 --> 0:14:49.320 as they're objective to reach with the funds rate. So 0:14:49.640 --> 0:14:52.400 I do think there's some level of mispricing happening there 0:14:53.000 --> 0:14:54.880 on the on the equity side, on the other hand, 0:14:55.280 --> 0:14:57.760 you know, the more hawkish the fact may still sound, 0:14:58.200 --> 0:15:00.600 even though day depend is not hawkish. You know, long 0:15:00.720 --> 0:15:03.600 end yields are somewhat now contained, right, there's not much 0:15:03.600 --> 0:15:06.600 of a surprise from the fats with a sudden hounter 0:15:06.640 --> 0:15:09.360 based when hikes, say, for example, so the turn premium 0:15:09.480 --> 0:15:13.160 is decrining. I think that's will support I think in 0:15:13.200 --> 0:15:16.400 the long term stocks on the under the assumption that 0:15:16.480 --> 0:15:18.360 you do get a fund raiate that's high enough to 0:15:18.360 --> 0:15:20.560 bring inflation down. So I kind of come down to that, 0:15:20.600 --> 0:15:22.760 the short of the yuker looks to start to be 0:15:22.880 --> 0:15:25.200 somewhat miss priced. The long end of the curve is 0:15:25.200 --> 0:15:27.600 more about well, if you're reaching three and a half 0:15:27.600 --> 0:15:30.320 to send funds raids, maybe it is sufficient to bring 0:15:30.320 --> 0:15:33.280 inflation down. Why you don't see much traction and higher 0:15:33.400 --> 0:15:37.480 unser So Ben, there's you know, for strategists like yourselves 0:15:37.480 --> 0:15:40.800 and economist there's no shortage of data points here to 0:15:40.920 --> 0:15:43.360 try to get a handle where this market might be headed. Uh. 0:15:43.400 --> 0:15:46.880 Today we had GDP print for the second quarter came 0:15:46.880 --> 0:15:49.640 in a negative zero point nine percent. To get sensus 0:15:49.760 --> 0:15:52.840 was for positive zero point four percent. So that's two 0:15:52.920 --> 0:15:56.160 quarters in a row of a negative GDP print. What 0:15:56.280 --> 0:15:58.720 do you take away from that? More important, what do 0:15:58.720 --> 0:16:02.720 you think fetch JPL takes away from that? Yeah, and 0:16:02.760 --> 0:16:05.400 you could start again with that same kind of headlines speak. 0:16:05.440 --> 0:16:09.440 Hargus is like technically a recession, right, because you know 0:16:09.520 --> 0:16:12.080 that's what people say. So the inventory data is all 0:16:12.120 --> 0:16:14.000 over the map, right, and that was highlighted by the 0:16:14.080 --> 0:16:16.880 b A that the private investment in inventory is really 0:16:16.920 --> 0:16:20.640 declining and the PC is slowing. So I do take 0:16:20.680 --> 0:16:23.920 away from that it's an economy really slowing, but it's 0:16:23.960 --> 0:16:27.920 still an economy that is on an annualized basis above potential. 0:16:28.480 --> 0:16:32.440 And that's what Powell also said yesterday, right, he pushed 0:16:32.440 --> 0:16:35.560 back on the recession one because we don't have rising 0:16:35.640 --> 0:16:38.320 fast rising uneppoyment or any uneppoyment, but we also have 0:16:38.360 --> 0:16:41.160 an economy above potential. But even though this number is 0:16:41.240 --> 0:16:45.120 negative and the previous number was negative and technically says 0:16:45.200 --> 0:16:48.800 that it's the recession, the potential analysis I think is important. 0:16:48.880 --> 0:16:50.640 Come in here. Now. If we do start to slow 0:16:50.720 --> 0:16:53.560 to potential or lower, then then we we were like 0:16:53.720 --> 0:16:56.520 the r in the recession. So I think that's how 0:16:56.600 --> 0:16:58.880 the market is somewhat taking and find the agree market, 0:16:59.120 --> 0:17:01.480 you know, a limit to in its in its reaction 0:17:01.560 --> 0:17:04.240 to this negative number. But I want to go back 0:17:04.280 --> 0:17:06.720 to something that you said that data dependent in terms 0:17:06.760 --> 0:17:09.840 of the FED is not hawkish, And just to play 0:17:09.920 --> 0:17:13.280 Devil's advocate a little bit, I mean, isn't it entirely 0:17:13.520 --> 0:17:16.879 unknowable if it does depend on the data which who 0:17:17.000 --> 0:17:18.760 knows what it will come in? When we think about 0:17:18.840 --> 0:17:22.680 PC coming up for example, Yeah, for sure, and you know, 0:17:22.920 --> 0:17:27.000 and and back again the sixteen periods. I was at 0:17:27.040 --> 0:17:29.879 that time portfolio manager. I was debating that same idea. 0:17:29.920 --> 0:17:31.680 I was like, wait a minute, this data dependent actually 0:17:31.680 --> 0:17:33.879 makes it more volatile, right, we don't know what this 0:17:34.040 --> 0:17:36.080 data is going to be and how to react. Shouldn't 0:17:36.240 --> 0:17:39.600 be more uncertain. But the market takes to the opposite, right. 0:17:39.680 --> 0:17:42.479 It says basically that if you're going to be hawkish, 0:17:42.520 --> 0:17:44.800 you're going to guide us right to be hawkish, to 0:17:44.880 --> 0:17:47.359 say we really think we should hike by another fifty 0:17:47.440 --> 0:17:50.240 seventy five base points. That that brings like we had 0:17:50.400 --> 0:17:54.560 from the period May through July just now and again. 0:17:54.640 --> 0:17:56.480 I think that they wanted to get away from that. 0:17:57.160 --> 0:17:59.760 Not only that they probably recognize the economy softening it's 0:17:59.800 --> 0:18:03.280 just and statement, but also that they recognize it causes 0:18:03.359 --> 0:18:06.320 too much uncertainty because they had to scale up through 0:18:06.359 --> 0:18:08.200 the walls of journey, even leaking that they had to 0:18:08.240 --> 0:18:10.639 go for seventy five set of fifty. I think they 0:18:10.720 --> 0:18:13.560 wanted to get out of that sort of communication, and 0:18:13.680 --> 0:18:17.160 therefore I think it's not hawkish. Now are they hawkish? 0:18:17.320 --> 0:18:19.120 Every would agree that if you're going to move further 0:18:19.200 --> 0:18:22.560 bit the festival's rate above mutual, that's restrictive multip policy, 0:18:22.600 --> 0:18:25.480 as they call us, That is actually hawkish. I think 0:18:25.520 --> 0:18:27.560 for the ball markets more taking like you're not going 0:18:27.640 --> 0:18:31.240 to surprise us anymore, which a sudden major hike unless 0:18:31.240 --> 0:18:34.560 the data truly confirms it. And therefore your language currently 0:18:34.680 --> 0:18:39.240 is not considered as hawkish. So you know, it's interesting, Ben. 0:18:39.680 --> 0:18:41.760 One of the arguments that I hear from the camp 0:18:41.840 --> 0:18:44.639 of folks saying that we're not in a recession or 0:18:44.640 --> 0:18:47.040 it's not going to be that bad is that the 0:18:47.160 --> 0:18:49.440 labor market is still strong. That's something you pointed out to. 0:18:49.560 --> 0:18:51.639 But we had initial drobles. Claims today came in a 0:18:51.680 --> 0:18:56.000 little bit higher than expected. The revision was also higher. 0:18:56.160 --> 0:19:00.200 Is there some initial signs that the job market not 0:19:00.320 --> 0:19:03.760 be as stronger, maybe weakening, Yeah, I would say it 0:19:03.880 --> 0:19:06.879 more like loosening up in the labor market, which I 0:19:06.960 --> 0:19:10.960 think was with Powers referring to yesterday too and noticed right, 0:19:11.000 --> 0:19:13.879 the claims are the best indicative of the labor market. 0:19:14.520 --> 0:19:16.840 You know. That's the same as you follow the Sam 0:19:17.000 --> 0:19:19.760 rule for Claudia Sam. It's it's exactually a very linked 0:19:19.800 --> 0:19:23.280 to that. Once that that average starts to move up higher, 0:19:23.520 --> 0:19:26.639 it does indicate at least a softening or losing of 0:19:26.800 --> 0:19:29.640 labor market. I think in this case that is loosening 0:19:29.760 --> 0:19:32.200 because of so many people so out of the labor force. 0:19:32.880 --> 0:19:35.159 And now maybe on the retail level there some layoffs 0:19:35.240 --> 0:19:38.480 happening and some other things going on. Was striking though 0:19:38.520 --> 0:19:41.919 too that Powe mentioned the claims data specifically. But then 0:19:42.000 --> 0:19:45.160 that's kind of make much of it. We actually think 0:19:45.200 --> 0:19:48.919 it may not be real. So that's an interesting statement, right, 0:19:48.920 --> 0:19:50.720 because it is sticking up right as you say. So 0:19:50.840 --> 0:19:53.680 it's the note, all right, Ben, great stuff. Always appreciate 0:19:53.720 --> 0:19:56.120 getting your perspective here. Again, a lot of data points 0:19:56.160 --> 0:19:58.000 to part through here. Ben Emmett helps us do that. 0:19:58.080 --> 0:20:01.159 He's a managing director of Globe a macro strategy at 0:20:01.240 --> 0:20:09.920 Medley Global Advisors, Busy M and A times in the 0:20:10.080 --> 0:20:15.159 airline business. Jet Blue Airways today's acquiring deep discounter Spirit 0:20:15.240 --> 0:20:17.720 Airlines for at least three point eight billion dollars in cash, 0:20:18.240 --> 0:20:21.520 clinching a deal less than a day after Spirit called 0:20:21.560 --> 0:20:24.880 off a planned murder with Frontier Group Holdings. To get 0:20:24.880 --> 0:20:27.800 the latest on that deal, we're very happy to welcome 0:20:27.880 --> 0:20:32.560 Barry Biffle, CEO and President of Frontier Airlines. Barry, thanks 0:20:32.600 --> 0:20:34.320 so much for joining. I know it's been a crazy, 0:20:34.400 --> 0:20:37.760 crazy time for you and your company. Give us your 0:20:37.800 --> 0:20:40.800 perspective here on the news that Jet Blue appears to 0:20:40.920 --> 0:20:44.879 have won the day for Spirit. Hey, looks, thanks for 0:20:44.920 --> 0:20:48.240 having us on. And um, look, we're disappointed in the 0:20:48.320 --> 0:20:50.240 fact we weren't able to say consumers a lot of 0:20:50.240 --> 0:20:53.320 money by merging the two low cost carriers, but look, 0:20:53.400 --> 0:20:55.800 it's still a great day for Frontier. They have paved 0:20:55.880 --> 0:20:58.680 the way for Frontier to be the low cost carrier 0:20:58.680 --> 0:21:00.679 of the United States. And and I think is one 0:21:00.680 --> 0:21:02.879 of the analysts pointed out, we we just got handed 0:21:02.920 --> 0:21:04.920 the key, the keys to the kingdom of low costs. 0:21:05.000 --> 0:21:07.840 So so it's it's still a windfall for our shareholders. 0:21:07.880 --> 0:21:10.040 I think our employees are really gonna win because we've 0:21:10.080 --> 0:21:12.760 got the growth. But if you're a spirit consumer, you're 0:21:12.840 --> 0:21:15.879 you're you're facing increase in costs. So that's a challenge 0:21:15.920 --> 0:21:18.080 from But I invite them to come to fly Frontier 0:21:18.119 --> 0:21:20.680 dot com. We'll have low affairs for him. So I 0:21:20.760 --> 0:21:24.040 am curious, Barry, I mean, where does Frontier go from here? 0:21:24.160 --> 0:21:25.880 Like you said, you've got the growth, are you looking 0:21:25.920 --> 0:21:30.280 at any other mergers, any other airlines? Now, look, we're 0:21:30.320 --> 0:21:32.359 we're we're doubling down on what we're doing. I think, 0:21:32.480 --> 0:21:35.080 you know, while all this distraction was going on, I 0:21:35.160 --> 0:21:37.600 think what's what's interesting if you if you look, is 0:21:37.920 --> 0:21:42.120 we were able to increase revenues to queue BYT versus 0:21:42.200 --> 0:21:45.200 the same period in twenty nineteen had the highest RASM 0:21:46.000 --> 0:21:48.320 growth in our history, highest I think record for for 0:21:48.359 --> 0:21:51.679 the U S industry. And so we're we're we're all 0:21:51.720 --> 0:21:54.240 systems go. We're headed to be sub six cents, which 0:21:54.320 --> 0:21:56.480 is kind of a near o our kind of pre 0:21:56.600 --> 0:21:59.639