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Speaker 3: As we mentioned, we are bringing you the latest on
Speaker 3: everything when it comes to the tragedy of this seven
Speaker 3: eighty seven Dreamliner operated by Air India that crashed, helping
Speaker 3: turn twenty twenty five into one of the deadliest years
Speaker 3: in the past decade for civil aviation. Right now, Sean Duffy,
Speaker 3: the Transportation Secretary, is giving a press conference. Much of
Speaker 3: the press conference not focused on this crash, but a
Speaker 3: couple headlines emerging. The Transportation Secretary is saying that they're
Speaker 3: deploying the FA and n TSB teams on Air India crash,
Speaker 3: though India will lead the investigation and the US will assist.
Speaker 4: All right, so let's get more on all of this
Speaker 4: joining us right now from excuse me, I'm a little confused.
Speaker 2: London are going to go to London.
Speaker 3: Let's go to London and go to George Ferguson. He's
Speaker 3: senior aerospace and defense and airlines analysts for Bloomberg Intelligence.
Speaker 3: He joins us from London. George, I want to get
Speaker 3: you know you've been flying actually today when we spoke,
Speaker 3: when we heard from you earlier on Bloomberg, I heard
Speaker 3: that you were in was it Oslo earlier in the day.
Speaker 3: This is all setting up, yeah, all setting up for
Speaker 3: you to, I think, and do some European work in
Speaker 3: the coming weeks. Sean, excuse me and George, we're hearing
Speaker 3: from Sean Duffy that India will lead this investigation, the
Speaker 3: US will assist. Is this typically how it works when
Speaker 3: it comes to how the FAA investigates, I.
Speaker 5: Think it is pretty standard.
Speaker 6: I think the fa obviously gets involved because it's a
Speaker 6: US built aircraft, but typically I think they let the nation,
Speaker 6: you know, that's the airline operates and lead the investigation.
Speaker 3: Okay, so let's talk a little bit about what we've
Speaker 3: been able to glean just in a few hours since
Speaker 3: this tragedy. I want to talk about just the process
Speaker 3: of determining what happens here. And I think when you
Speaker 3: hear boeing and you hear a plane crash. Unfortunately, a
Speaker 3: lot of people, a lot of people's minds turned to
Speaker 3: what happened with the seven thirty seven Max and the
Speaker 3: disasters that were truly a result of I guess we
Speaker 3: could call it a manufacturing defect, a software defect that
Speaker 3: led to a longtime grounding of these airplanes. Given the
Speaker 3: history of the seven eighty seven, what's the right way
Speaker 3: to think about this tragedy.
Speaker 6: Yeah, I think that we don't have and we don't
Speaker 6: know for sure, right, but I think most of the
Speaker 6: science point to the fact that we don't have that
Speaker 6: kind of problem here, a systemic manufacturing problem. I mean,
Speaker 6: one of the things I look at is this airplane
Speaker 6: was in fleets for eleven years.
Speaker 5: That's a pretty long time to be lying. Uh, it's
Speaker 5: it's gone.
Speaker 6: Through some level of maintenance at Air India at this point.
Speaker 6: And you know the way the airplane crashed, you know
Speaker 6: it was it was in somewhat controlled flight, but looked
Speaker 6: like it couldn't get altitude. Typically on a takeoff, when
Speaker 6: an aircraft can't get altitude, there's some sort of problem
Speaker 6: with the engines. Those are ge engines on Air India's fleet. Again,
Speaker 6: eleven year old engine would have been maintained since it
Speaker 6: left Gees factories.
Speaker 5: So I'm wondering if it's.
Speaker 6: Either some level of maintenance or conditions there in the
Speaker 6: in the area today, George.
Speaker 4: Because of that, you know, both Tim and I were,
Speaker 4: you know, listening to you earlier. I believe it was
Speaker 4: on Bloomberg Surveillance and really kind of breaking it down
Speaker 4: and just saying that, you know, you look at the
Speaker 4: video and it seemed like everything was okay until it wasn't.
Speaker 4: And so you bring up the maintenance issue. How quickly
Speaker 4: do they figure something like that out?
Speaker 6: So you know, I would imagine that it's not going
Speaker 6: to be hard to find the recorders in this jet,
Speaker 6: and so that I would give him some sign as
Speaker 6: to where different throttle positions were and how much thrust
Speaker 6: the engine was producing. So I'd imagine, you know, in
Speaker 6: fairly short order they could probably get at least a
Speaker 6: sense for that, which I think is going to start
Speaker 6: to point them the right direction in the investigation. I
Speaker 6: guess as you're talking a couple of weeks, you know,
Speaker 6: not extended periods of time.
Speaker 7: We did speak with Julie Johnson.
Speaker 3: A little earlier, and she reminded us that there is
Speaker 3: this sort of checkered past when it comes to this plane,
Speaker 3: which includes some manufacturing issues just a few years ago,
Speaker 3: but before that the battery issues, and before that with
Speaker 3: the earliest planes there was the sort of retrofitting that
Speaker 3: she talked about.
Speaker 7: To you, George, is it too it's Does.
Speaker 3: It make sense to be talking about that in this
Speaker 3: context or has the track record of the seven eighty
Speaker 3: seven essentially proven that it's not something that has to
Speaker 3: do with the defect of the plane.
Speaker 5: Yeah.
Speaker 6: To me, again, the track record does indicate I think
Speaker 6: that the airplanes had been performing fine for sure. I mean,
Speaker 6: some of the latest challenges we had in the airplane
Speaker 6: was joining of the fuselage pieces together. But again, what
Speaker 6: we saw was in an airplane that was very much intact,
Speaker 6: it just looked like it couldn't develop enough lift. And
Speaker 6: so I'm just thinking it isn't you know, some of
Speaker 6: those defects that we're thinking there was no fire that
Speaker 6: the battery box issue would suggest if you're having that
Speaker 6: would be going on. So it just seems like, again
Speaker 6: it was just too stable. It was just too stable,
Speaker 6: and really again looked like an airplane, it couldn't develop
Speaker 6: enoughful lift. And so to me, the first place I'd
Speaker 6: be looking, I imagine investigators will too, will be to
Speaker 6: see how the engines were performing at that moment.
Speaker 4: Well, you mentioned engines, right, I'm looking at shares a
Speaker 4: ge George. They were down about two and a quarter
Speaker 4: percent today. Boeing was down about four point eight percent today.
Speaker 4: It's just one day trade, and obviously it's not surprising
Speaker 4: to see that kind of reaction.
Speaker 2: I just before we go back to ge I want
Speaker 2: to ask.
Speaker 4: You about Boeing as we get ready for the air show,
Speaker 4: the Powers Air Show, and I just wonder, you know,
Speaker 4: is it just Bowie's just had such a tough time
Speaker 4: and it felt like they were just kind of getting
Speaker 4: back on track. Tim and I were in a seven
Speaker 4: thirty seven Max and it's a really nice plane.
Speaker 7: And everything seemed brand new.
Speaker 2: Everything.
Speaker 4: It was just hard not to be impressed with it.
Speaker 4: Is this a problem for Boeing or it's not just
Speaker 4: you know, especially if it turns out to be something
Speaker 4: like a maintenance issue, because it just seems like everybody's like,
Speaker 4: you know, another thing in the air, another thing with Boeing.
Speaker 6: I do get the sense, like you said, that there's
Speaker 6: a lot of concern Boeing has had quality issues.
Speaker 5: You know, the questions are is this a.
Speaker 6: Manifestation of another quality issue or something we don't know
Speaker 6: at Boeing. Again, I from everything I've seen so far,
Speaker 6: I would tend to think I think it isn't.
Speaker 5: A Boeing quality issues.
Speaker 6: We never like to see airplane crashes, and for sure
Speaker 6: Boeing set its challenges, but Airbus does get them from
Speaker 6: time to time.
Speaker 5: But everything I'm.
Speaker 6: Seeing don't lead me to believe that it's a Boeing
Speaker 6: quality issue. And I wouldn't even think potentially a GE issue.
Speaker 6: I think it was in the field so long, it's
Speaker 6: probably not a GE issue.
Speaker 4: Will it bother either of them at the air show?
Speaker 4: I mean often we get right orders out of these shows.
Speaker 4: Do you think any of this is going to color
Speaker 4: any of that or change any of that?
Speaker 6: I think unless we would hear very shortly that again
Speaker 6: it was a problem with that some of their manufacturing.
Speaker 5: Yeah, No.
Speaker 6: Seven eighty seven is one of the airplanes. I think
Speaker 6: that you'll see a lot of competition around seven eight
Speaker 6: seven and eight three point fifty. Both of the manufacturers
Speaker 6: those are two competing products that they would like to
Speaker 6: increase production rates for. I suspect supply chains could probably
Speaker 6: boost a higher build rates in the near future on it.
Speaker 6: So we're kind of watching that competition at Paris there show.
Speaker 6: I think that could be some of the source of
Speaker 6: orders for both Airbus and Boeing. The A three fifty
Speaker 6: and seventy seven.
Speaker 3: Georgian the story the Bloomberg News story about this tragedy.
Speaker 3: It includes information about who was commanding the aircraft and
Speaker 3: who the first officer was. The commander of the aircraft
Speaker 3: eighty two hundred flying hours and then eleven hundred flying
Speaker 3: hours for the first officer.
Speaker 7: Eighty two hundred flying hours.
Speaker 3: That is a long career when it comes to any
Speaker 3: type of aviation. Yeah, yeah, I mean it doesn't seem
Speaker 3: like that serious experience.
Speaker 5: Yeah yeah, it.
Speaker 6: Wasn't an experience. I mean it seemed like the captain
Speaker 6: at a bunch of times. So yeah, I sometimes you know,
Speaker 6: things say I'm a databad, I'm not doing a great
Speaker 6: job of pronouncing that. I'm sure from what I understand
Speaker 6: is a hot and high city. And to remember, the
Speaker 6: airplanes also perform have to work harder, engines have to
Speaker 6: work harder to to get airplanes out of those kind
Speaker 6: of cities. So I'm you know, I'm wondering that if
Speaker 6: that is probably part of the problem here, where the
Speaker 6: engines are just worked really really hard, and maybe something
Speaker 6: something wet wrong in the engine that just couldn't wouldn't
Speaker 6: allowed to produce full lift and get out of there.
Speaker 2: Do we know is this kind of a newer route?
Speaker 4: I thought I thought I had seen Air India had
Speaker 4: recently opened this up, but I may have read that incorrectly.
Speaker 4: But is this a route that's been taken often?
Speaker 5: Yeah, not sure about that for sure.
Speaker 6: I've you know, I've heard flights in and out of
Speaker 6: the city, and you know, some cities you just have
Speaker 6: to sort of manage around, yeah, temperatures and how much
Speaker 6: you fill the airplane. You know, how much fuel you
Speaker 6: put on, how many passengers, how much cargo.
Speaker 5: But I'm not sure if it's new round.
Speaker 4: Hey, listen, because you are over there in London, I'm
Speaker 4: assuming I don't know, are you headed to the Paris
Speaker 4: or so I am tell us what's kind of We're
Speaker 4: you know, we always love checking in with you, And obvi,
Speaker 4: this is a difficult story, a tragic story and a
Speaker 4: story of human lives that are lost. But in our
Speaker 4: last minute, curious about kind of what's top of mind
Speaker 4: is that that show gets underway.
Speaker 6: Yeah, and so we're going to put a report out
Speaker 6: tomorrow on the Bloomberg terminal. But I think, you know,
Speaker 6: we don't see a lot of orders coming out of
Speaker 6: the show this year. I think tariffs are probably going
Speaker 6: to be the dampening factor. I think everyone wants to
Speaker 6: figure out what the effects tariff have on their aircraft deliveries.
Speaker 5: We're watching deliveries, seeing recent deliveries. Last month's deliveries for
Speaker 5: Airbus and Boeing. Airbus had a few into the US,
Speaker 5: but less than usual. Boeing had really none into Europe,
Speaker 5: where I think they're both experiencing tariffs. So I think
Speaker 5: that kind.
Speaker 6: Of well, it's a great sky over lovely Paris.
Speaker 3: Just in the last thirty seconds that we have with you,
Speaker 3: it seems like Boeing has is starting to be used
Speaker 3: as a bargaining chip to its advantage when it comes
Speaker 3: to the way that the President is negotiating these things.
Speaker 7: What's your view on that.
Speaker 6: Yeah, expecting more of that, and I think that's one
Speaker 6: of the reasons Boeing probably has the best potential for
Speaker 6: more orders.
Speaker 5: Orders have been light in the last couple of years.
Speaker 6: I think is Boeing's customers watch build rates and look
Speaker 6: for confidence that Boeing is getting that production act together.
Speaker 5: Boeing is starting to show that.
Speaker 6: So we think this year could probably be pretty good
Speaker 6: and we think the President's going to probably try to
Speaker 6: use it to balance trade with partners that might be
Speaker 6: in his words, off sides on trade. So it could
Speaker 6: be a good year for sales for Boeing. I'm not
Speaker 6: sure it's going to come through at the show, but
Speaker 6: we're looking for a pretty good year for su.
Speaker 4: Yeah, and you could see investor sentiment has certainly been
Speaker 4: much more optimistic on Boeing. That stocks up about fifteen
Speaker 4: percent year to date, and that's even with the more
Speaker 4: than four percent four point eight percent drop in today's session. George, Thanks,
Speaker 4: We know it's later over by you, and we're glad
Speaker 4: we could touch base with you.
Speaker 2: Busy day and I know you've got a busy week ahead.
Speaker 4: George Ferguson, senior Aerospace, Defense and Airlines analyst, our go
Speaker 4: to on all things when it comes to airlines and aerospace.
Speaker 4: Of course, here at our Bloomberg Intelligence joining us from London.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
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Speaker 4: Do you want to point out the US dollar did
Speaker 4: fall to its lowest in three years. I'm at PPI
Speaker 4: data well, at the same time, President Trump's terror threats
Speaker 4: revived concerns over US economic outlook. So together the jobless
Speaker 4: claims jumping to the highest since the end of twenty
Speaker 4: twenty one. Although Mike just gave us some great perspective
Speaker 4: on that the data push traders to add tibets that
Speaker 4: the Fed.
Speaker 2: Might be a little bit more aggressive this year.
Speaker 3: Yeah, with a look at how FX and pressure on
Speaker 3: the US dollar. We've got a jat Bardwash joining us,
Speaker 3: Director in FX and EM Strategy at TD Securities, joined
Speaker 3: us here in the Bloomberg Business Week Studio. JT welcome,
Speaker 3: Good to have you. I want to start with the
Speaker 3: week dollar. As Carol mentioned, I mean, we're seeing weakness
Speaker 3: that we haven't seen in years here in the US
Speaker 3: big picture. What is the signal that that sends about
Speaker 3: the faith of the US economy and the way that
Speaker 3: investors both here in the US and internationally are thinking
Speaker 3: about the US right now.
Speaker 8: Thank you so much for having me. I think definitely
Speaker 8: the move in effects has been very interesting because we've
Speaker 8: seen yields go back up higher, you know, even equities
Speaker 8: have tried to go back higher to pre Trump levels,
Speaker 8: but the dollar has just been collapsing. Nothing gets the
Speaker 8: dollar to rally. Strong US data, hawkish fed tariff threads,
Speaker 8: you know, geopolitical uncertainty rising, Nothing is you know, fueling
Speaker 8: any strength in the dollar. I think what this is
Speaker 8: indicating is probably a shift in global investor preferences. For
Speaker 8: the last five years, people have been long US assets,
Speaker 8: and interestingly, they have been long US assets unheedged because
Speaker 8: you could also, you know, always rely on a very
Speaker 8: strong dollar return to get a nice boost to your portfolio.
Speaker 8: But that's not happening anymore. And from the data we have,
Speaker 8: we do see that investors are finally starting to change
Speaker 8: their hedging practices. They are now waking up to the
Speaker 8: fact that they cannot no longer rely on the dollar
Speaker 8: just coming back to its strong, raging days, and they
Speaker 8: actually need to hedge that exposure. In order to do that,
Speaker 8: you need to be sending dollars in forward markets, which
Speaker 8: is likely what's structurally keeping the dollars so weak right now.
Speaker 4: So that's the difference the hedging that we're seeing that
Speaker 4: we haven't seen for a long time, where the US
Speaker 4: was kind of Tina right, the only like it just
Speaker 4: seemed like all investors wanted to be a dollar based US,
Speaker 4: dollar based investments. So what we're seeing now is hedging
Speaker 4: and that's making an impact. Yes, does it make does
Speaker 4: is it assigned to I mean, do you go as
Speaker 4: far jt that it's the idea that the US is uninvestable?
Speaker 4: Tim and I like to ask this question because yeah,
Speaker 4: it's a great headline, but it's more important. It would
Speaker 4: be a very different mind frame, investing mind frame.
Speaker 8: I think that's that's the one question that you know,
Speaker 8: we've been trying to answer.
Speaker 2: You know, the gap. The Treasury auction just went well, like,
Speaker 2: so investors saw that instable. Yeah, exactly.
Speaker 8: So I would say the gap between the US and
Speaker 8: the rest of the world has been extremely wide for
Speaker 8: the last five years. I wouldn't say it has been
Speaker 8: completely bridged to zero. But the gap is definitely meaningfully
Speaker 8: shrinking enough from both sides, the US thanks to its
Speaker 8: own policies. But the one silver lining from all of
Speaker 8: this is that it's actually forcing other countries to introspect.
Speaker 8: They're now looking at more fiscal spending domestically. They're actually
Speaker 8: also looking at cutting intra regional trade trade barriers. They're
Speaker 8: also talking amongst each other to you know, have stronger
Speaker 8: intraregional trading relationships, so that all is actually making the
Speaker 8: rest of the world more investible. I wouldn't say that
Speaker 8: the US has completely you know, given up its crown position,
Speaker 8: but I would definitely say that there are a lot
Speaker 8: more investable places are now coming up to the surface
Speaker 8: where they had been very underground for the last five years.
Speaker 3: So is it, forgive me, what is it about them
Speaker 3: being underground and becoming above ground in recent years or
Speaker 3: is it about risks that investors see to the US
Speaker 3: in your view, great question.
Speaker 2: I think it's.
Speaker 8: Both coming together at the same time. And you could
Speaker 8: say the sources is the same, right, because the US
Speaker 8: tanks for its own policies, is actually not forcing the
Speaker 8: rest of the world to step up. The European Union
Speaker 8: is taking a much more proactive approach to talks with
Speaker 8: Russia Ukraine. Something they've not done right. The world realizes
Speaker 8: they can no longer just you know, solely rely on
Speaker 8: the US for everything, and they are being forced to
Speaker 8: step up and actually do a lot more of themselves.
Speaker 2: Well, just to push even further.
Speaker 4: I mean, and Tim knows, I've asked this a lot
Speaker 4: coming off of Milkin, which was back in May last month.
Speaker 4: But the whole idea, and what we kept hearing from
Speaker 4: a lot of folks was that it's not the case
Speaker 4: of the US being uninvestable. It's just that investors became
Speaker 4: overbalanced in their portfolio overexposed, i should say, to US
Speaker 4: dollar based investments, and so now they're you know, reallocating
Speaker 4: and rebalancing.
Speaker 2: But almost felt like, wait a minute, is that just
Speaker 2: an excuse.
Speaker 4: To kind of cover the idea that people are turning
Speaker 4: away from the US and not so comfortable with the
Speaker 4: US and risk And that's why so tie that in also,
Speaker 4: if you would.
Speaker 8: So for the last five years, the US has been
Speaker 8: relying on the kindness of strangers because all the global
Speaker 8: portfolio managers and the savers of the world in Europe,
Speaker 8: in Asia, they all had been piling money into the US.
Speaker 8: You had the chase for carry, you had the commodity
Speaker 8: shock where the US was energy independent, and you had
Speaker 8: an exceptionally strong and growing US. So all the three
Speaker 8: factors which were driving investment in global markets resided in
Speaker 8: the US with the US, so everything was a US investment.
Speaker 8: US equity investment has ballooned. In fact, foreigner investment holding
Speaker 8: of US equities as a share of market cap has
Speaker 8: also been going higher. That also actually led to a
Speaker 8: very strong and overvalued dollar. So the overvalued dollar vent
Speaker 8: hand in hand with very strong portfolio investment into the US,
Speaker 8: and that's why both of them are being questioned at
Speaker 8: the same time. The dollar as a diversifier, as a
Speaker 8: safe haven, we see those correlations are breaking down. The dollar,
Speaker 8: actually it's on some days. I actually think it is
Speaker 8: trading a lot more like an emerging market than it
Speaker 8: is like a say and unfortunately.
Speaker 4: So wait a minute, so, net net, is this better
Speaker 4: for the global investment environment the long term? Is this
Speaker 4: not so great for the US investment market? Is it
Speaker 4: also all the result of President Trump?
Speaker 8: I think net net, it's a healthy recalibration of markets,
Speaker 8: you know, like the last five years, we've all come
Speaker 8: to two points where we're like, is the US markets?
Speaker 8: Are they overvalued? Are they bubbled up? Is our evaluations expensive?
Speaker 8: I think this was a very healthy recalibration that was needed.
Speaker 8: For the last many years, every most markets have been
Speaker 8: a pure dollar bat What are US rates doing? What
Speaker 8: are US secretaries doing? What is the US dollar doing?
Speaker 8: But I think this levels the playing field a little
Speaker 8: bit now. Which is which is healthy?
Speaker 4: I think is it the result of President Trump and
Speaker 4: his policies?
Speaker 2: Just I think it is definite it is.
Speaker 8: The one source is the policies of the current administration
Speaker 8: and just the volatility associated with it. The one interesting
Speaker 8: thing in all of this is that while the US
Speaker 8: is trying to negotiate with ninety countries in ninety days,
Speaker 8: those other countries have only one country to negotiate with.
Speaker 8: So that is also one factor which is equating the
Speaker 8: US for the rest of the world.
Speaker 3: At this point, just about forty five seconds left. I know,
Speaker 3: emerging markets and FX is what you focus on. Is
Speaker 3: Bitcoin on your radar at all?
Speaker 8: In that context, we prefer not to comment on bitcoin.
Speaker 8: That's not under a purview of coverage. But I would
Speaker 8: say that when people are talking about the safety of
Speaker 8: US assets, you know, things like gold, you know, cryptocurrencies,
Speaker 8: they do come up a lot more than they usually have.
Speaker 8: My answer is that why like not comment on cryptocurrency.
Speaker 8: I can say that you can potentially look for other
Speaker 8: alternative safe havens in FX that is euro euros clearly
Speaker 8: shining out as one of those, the Japanese yen. We
Speaker 8: do see scope for them to see more upside this year.
Speaker 8: In fact, one currency, you know, or one sector of
Speaker 8: currencies where we can see you can see a good
Speaker 8: upside is Asia and Aussie which is something which isn't
Speaker 8: talked about it a lot. But I just wanting to
Speaker 8: leave it at that, like that's something which could see
Speaker 8: big games at the end of the year.
Speaker 4: J T. Bard Watch, thank you so much, really appreciate it.
Speaker 4: Over at ted Securities.
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Speaker 2: Mcle how about you let me drive?
Speaker 3: Oh no, no, no, no, this is not a toy.
Speaker 7: Please, honey, please, how do the gravel listen?
Speaker 4: I want to drive.
Speaker 9: It's a good question.
Speaker 2: God, this is the drive to the clothes Punks music well.
Speaker 1: On Bloomberg Radio.
Speaker 4: All right, TikTok everybody, just about ten minutes to go
Speaker 4: until we wrap up.
Speaker 7: The trading alor starty, Carol Messer.
Speaker 2: I didn't really we had a shot. I had a
Speaker 2: big shot.
Speaker 7: I had no bachelor party. Really yeah no, no, it
Speaker 7: was a busy time, not even.
Speaker 2: A bunch of you do like taking a biking ride.
Speaker 7: I wanted to do that, but it didn't. It didn't.
Speaker 7: I want to do with my brothers.
Speaker 3: And my brother had just had a kid, like a
Speaker 3: brand new kid, so I was like, we can't really make.
Speaker 4: A brand new kid versus an old Yeah kid, I
Speaker 4: just had a nineteen year old.
Speaker 7: Well, like he couldn't really leave until again anyway.
Speaker 2: Yeah, I know, okay, topic.
Speaker 4: I know.
Speaker 2: Wow, it's just that kind of a thing.
Speaker 4: Let's talk about the markets, because there's a lot coming
Speaker 4: at us.
Speaker 2: Let's get to it.
Speaker 4: Eric Wiener, special guest for US senior editor Equit America's
Speaker 4: at Bloomberg News. Love having him at this time. He's
Speaker 4: right here in our Bloomberg Interactive Brokers studio.
Speaker 2: There's a you know, markets.
Speaker 4: Aren't I mean, they're up, Eric, but it's not like
Speaker 4: massive gains, and yet there's so much going on behind us.
Speaker 10: Yesterday was the big shock. I mean, after the CPI
Speaker 10: came in so nicely, we assumed that, you know, we'd
Speaker 10: get to the record on the S and P five hundred,
Speaker 10: and instead we ended up down. Today, producer prices came
Speaker 10: in also looking good, and we're up a little bit. Yeah,
Speaker 10: it's it's basically like the most unloved rally we've seen
Speaker 10: in a while.
Speaker 3: Okay, there's I think that I think it's telling that.
Speaker 2: Mister context guy.
Speaker 3: I think there's something telling here. No, you know what,
Speaker 3: I'm not gonna I'm not gonna do it. I'm not
Speaker 3: gonna do it. What I'm gonna do is I'm going
Speaker 3: to say we've spent the last one hour and forty
Speaker 3: three minutes not talking about a US China trade deal
Speaker 3: or anything that happened in the last two days. And
Speaker 3: I think that's because a framework for a trade deal
Speaker 3: is not a trade deal. Oh, that's absolutely And I
Speaker 3: think that that's what happened yesterday to the markets, they said,
Speaker 3: wait a second, we're not actually seeing anything of substance
Speaker 3: here emerge.
Speaker 10: Well, so you're getting at the what we're hearing from traders,
Speaker 10: which is that they're not expecting anything to emerge for
Speaker 10: a while. They also can see that China is slow
Speaker 10: walking this. They also know that China knows that this
Speaker 10: could all be canceled by the courts. So moving like
Speaker 10: as you say, moving forward really requires an agreement with
Speaker 10: the US and China, and we probably aren't going to
Speaker 10: see that for a long time. And that creates this
Speaker 10: situation where if you look at the way that the
Speaker 10: market has moved over well, so over the last four
Speaker 10: weeks we're up about one point four percent. In the
Speaker 10: prior four weeks before that we were up twelve and
Speaker 10: a half percent, So we basically have gotten as far
Speaker 10: as we can go. And now the question becomes do
Speaker 10: we take it over? Do we step in as an
Speaker 10: incident social investor? Do you step in and buy this?
Speaker 10: What do you do when you know that really there
Speaker 10: isn't anything that is there. There isn't anything to stop gains,
Speaker 10: but there also isn't anything to galvanize a change in
Speaker 10: the market tone.
Speaker 4: Okay, I can tell you what will change maybe market
Speaker 4: tone in just about a month.
Speaker 2: Guess what we get JP Morgan earning. Well, no, I'm didn't.
Speaker 7: We just get in video earnings.
Speaker 2: We kind of just did.
Speaker 4: But I'm thinking that's going to be the next kind
Speaker 4: of gut check on things.
Speaker 10: I think people are kind of concerned about earnings going forward.
Speaker 10: So to JP Morgan's earnings, yet there was some news.
Speaker 10: Wasn't ansterday, It was two days ago. The city said
Speaker 10: that they are adding capital to the reserves for bad loans.
Speaker 10: So right, So this is where you start getting concerned
Speaker 10: about what consumers are buying what consumers And really it's
Speaker 10: about going to be about the outlooks because it's the
Speaker 10: second and half of the year, like this will be
Speaker 10: the second quarter, and so they'll be saying, okay, for
Speaker 10: the rest of the year, we're expecting whatever. And if
Speaker 10: more companies pull their out looks, if more companies say
Speaker 10: there's all this uncertainty, we don't know and the numbers
Speaker 10: don't come in beautifully, we could see a drop from records.
Speaker 3: Before we get Jamie Diamond commentary, we get Jay Powell
Speaker 3: commentary next Wednesday, we hear from the FED chair two
Speaker 3: hundred basis points cut.
Speaker 10: That actually made me laugh.
Speaker 7: When it hit the terminal. You're not the only one.
Speaker 7: I was with three colleagues.
Speaker 3: I was with three colleagues, all of whom our audience
Speaker 3: would know, and I will not blow up their spot,
Speaker 3: but they are all on the on the TV side,
Speaker 3: and we got this headline and I said, guess what
Speaker 3: the president is calling for? And I said two percent.
Speaker 3: And then somebody said two basis points and I said, no,
Speaker 3: two hundred basis points.
Speaker 10: So the problem with that is that would actually call
Speaker 10: a panic in the market because right exactly, it means
Speaker 10: like the world is ending and we need to save everybody,
Speaker 10: get into the lifeboats all that. The thing, though, is,
Speaker 10: if you look at the numbers that have come in,
Speaker 10: you would think it's kind of we're ready for him
Speaker 10: to say something dubvish, something where you know, I'm ready
Speaker 10: to think we're ready to think about cutting and everything
Speaker 10: like that.
Speaker 7: But if you heard Janet.
Speaker 10: Yellen talking today, she's saying she expects the FED to
Speaker 10: go slow and she expects inflation to rise to three percent.
Speaker 10: And that's headline on.
Speaker 5: The CPI, which was two point four.
Speaker 10: She expects the inflation to go to three such by
Speaker 10: the end of the year. What's or tariffs mainly, Yeah,
Speaker 10: and so if you're expecting you know, Dubvish, you know,
Speaker 10: smooth jazz Jay to come on in and you know,
Speaker 10: make everything really cool. I don't necessarily know that that's
Speaker 10: the case, but yes, like that actually could. So if
Speaker 10: he came out and said, hey, listen, you know, we're
Speaker 10: actually in a place where we're thinking that, you know,
Speaker 10: we're ready to start moving and whatever he would say,
Speaker 10: that would sort of set up and then then you'd
Speaker 10: have the fed uh speakers coming through setting up this,
Speaker 10: you know, move lower. That would actually goose the market.
Speaker 10: But I don't know that we're going to hear that.
Speaker 4: It's smooth jazz jay or it's like weamo j right,
Speaker 4: Like you get into a WEIMO, you like obsessed.
Speaker 2: You know, I'm obsessed. I know it's like you get
Speaker 2: into weimo and it's like I'm in a spot.
Speaker 7: I take full credit for this other way, No.
Speaker 4: I totally give you full credit because you were all
Speaker 4: in after your ride and then I'm.
Speaker 2: Like I got to do this, I got to check
Speaker 2: it out.
Speaker 3: You're like, if you're like turning into a Californian and
Speaker 3: they're like you did in Arizona though you didn't. California
Speaker 3: did an Arizona did everywhere everywhere you go, you get
Speaker 3: in Amo.
Speaker 2: You know, I want to be Tim when I grow up.
Speaker 2: That's what I want to be.
Speaker 4: We all do any signs I know totally forty five
Speaker 4: fifty seconds signs that investors, any signs that they're they're
Speaker 4: moving into cash or cash like investments. Like it's making
Speaker 4: me wonder was it a conversation.
Speaker 2: We had with you?
Speaker 4: There is about like, Okay, we bounced back, maybe it's
Speaker 4: time to like, I'm out.
Speaker 10: Well, the returns on treasuries are nice, you know, so
Speaker 10: it's not like it's a bad deal there. There is
Speaker 10: some hiding out going on. What we haven't seen is
Speaker 10: there was a big pile of money that was ready
Speaker 10: for shorts that that got moved in and sold.
Speaker 7: So what we're not.
Speaker 10: Seeing is like just a ton of positioning against the market.
Speaker 10: What we're seeing is just sort of a wait and
Speaker 10: see mode. And then you have retail mind.
Speaker 1: Good stuff.
Speaker 10: What was it?
Speaker 2: Slows smooth jazz.
Speaker 7: Smooth jazz, that's what we call the will.
Speaker 5: He either does smooth jazz or punk rock.
Speaker 7: I thought is a grateful dead guy.
Speaker 4: Eric, Thank you so much. Eric Ween our senior editor
Speaker 4: Equities America at Bloomberg News.
Speaker 1: Joining us here, you're listening to the Bloomberg Business Week
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Speaker 3: We're getting shares of URH almost called it restoration hardware.
Speaker 2: That's what it was known for.
Speaker 6: Law.
Speaker 7: Yeah, it's not called RAH right, No, it's RH here. Yeah,
Speaker 7: of twelve percent.
Speaker 3: In the after hours, the company out with some headlines,
Speaker 3: out with some news. As Romain mentioned, the way we
Speaker 3: get these numbers is really difficult because of the way
Speaker 3: that OURH publishes the numbers. So we're just now getting
Speaker 3: them in. Twenty one percent or fifty two percent rather
Speaker 3: of upholstered furniture will be produced in the US, twenty
Speaker 3: one percent will be produced in Italy by the end
Speaker 3: of fiscal twenty twenty five. The company also reporting first
Speaker 3: quarter ad just at EPs came in at thirteen cents.
Speaker 3: The estimates were for a loss of four point six cents.
Speaker 3: The company also seeing first saying first quarter revenue coming
Speaker 3: in just below estimates at eight hundred and fourteen million dollars.
Speaker 3: Estimates are for eight hundred and twenty million dollars.
Speaker 4: Yeah, And I think what's interesting is we mentioned kind
Speaker 4: of earlier is that the stock has taken quite a
Speaker 4: beating this year. It's down about fifty five percent year
Speaker 4: to date. And ASA also mentioned that almost twenty one
Speaker 4: percent of the float is shorted, so any signs of outperformance,
Speaker 4: and we certainly saw that with the first adjusted first
Speaker 4: quarter ADJ justed EPs number, that was a big beat
Speaker 4: that we could see some short covering, and that is
Speaker 4: why you might see the stock bumping up in the
Speaker 4: after hours.
Speaker 2: The company also.
Speaker 4: Delaying the launch to spring of twenty twenty six, delaying
Speaker 4: launch to spring of twenty twenty six due to tariffs,
Speaker 4: delaying launch of a new concept planned for the second
Speaker 4: half of twenty twenty five. They're now shifting that into
Speaker 4: the spring of twenty twenty six. So quick check on
Speaker 4: this stock in the aftermarket. It is up tim about
Speaker 4: fourteen percent, So again that second it looks like that
Speaker 4: out per formance certainly maybe is why we're seeing investors
Speaker 4: move into that stock.
Speaker 3: Yeah, o urhc's tariff disruption hitting revenue by about six
Speaker 3: points in the second quarter. We're going to bring you
Speaker 3: more updates as we do get them from our age
Speaker 3: and other companies that are continuing to report. In the meantime,
Speaker 3: I want to talk a little bit about private credit
Speaker 3: and private markets. The influx of wealthy individual investors is
Speaker 3: set to reshape private markets, bringing new risks around liquidity, transparency,
Speaker 3: and evaluations to this still largely opaque industry. This according
Speaker 3: to report published on Tuesday by Moody's Ratings. We've got
Speaker 3: with us Christina Paget, Associate Managing Director, head of Leveraged
Speaker 3: Finance at Research Analytics at Moody's Ratings. She joins us
Speaker 3: once again from New York. Christina, good to have you
Speaker 3: back with us. We've spoken to you quite a bit
Speaker 3: over the last couple of years about private credit, specifically
Speaker 3: leveraged finance. I'm wondering about the research that you and
Speaker 3: the team have done over at Moody's and what you
Speaker 3: found in terms of new risks as this market has grown.
Speaker 9: I don't know if we've seen a dramatic change in
Speaker 9: terms of the kinds of risks that we've identified.
Speaker 5: Maybe they're just getting more dramatic.
Speaker 9: You know, we get closer to a size in which
Speaker 9: there are systemic implications, and so that becomes part of
Speaker 9: the challenge. There are some changes though that I would
Speaker 9: want to highlight. Some of the relationships between the direct
Speaker 9: lenders and LBOs when they were exclusively bilateral. There were
Speaker 9: some strengths to that relationship, the tightness of the documentation
Speaker 9: for those transactions.
Speaker 5: Some of that is loosening further.
Speaker 9: As demand increases for assets themselves, So there's the risk
Speaker 9: on that side.
Speaker 5: And then, as we highlighted.
Speaker 9: In the report, the presence of a retail investor does
Speaker 9: change some of the dynamics. Again, it probably exacerbates a
Speaker 9: liquidity issue that we thought was balanced by long term.
Speaker 4: Cap Christina, anytime there's like all of a sudden, everyone
Speaker 4: wants to run into an asse A class, it always
Speaker 4: makes me a little nervous, and I just feel like
Speaker 4: in the last year or two, the momentum behind private
Speaker 4: credit has just the velocity and the run towards it
Speaker 4: just seems to have grown exponentially, and so it makes
Speaker 4: me nervous that money then maybe isn't as particular in
Speaker 4: terms of where it goes.
Speaker 2: Because you're going to have a lot of money.
Speaker 4: Chasing similar assets, it drives up values, but it also
Speaker 4: then maybe puts pressure on money to go into places
Speaker 4: that aren't as beneficial, safe, secure, transparent, pick your word.
Speaker 4: So is that kind of what you guys are thinking.
Speaker 9: Well, some of what you've just described is what we
Speaker 9: highlighted in the report, and I guess the thing I
Speaker 9: would add is that sometimes also it allows for more
Speaker 9: leverage in the system, which is obviously something as a
Speaker 9: credit analyst we are concerned with. The side of that
Speaker 9: is that with the expansion of private credit, we saw
Speaker 9: more liquidity enter this space broadly, And if they're really
Speaker 9: taking the risk off the bank's balance sheet and putting
Speaker 9: it in the hands of a different set of investors,
Speaker 9: that doesn't have to be an increase in risk. And
Speaker 9: if the life insurance, you know, long term investing is
Speaker 9: finding that there's attractive assets within private credit, that may
Speaker 9: be a safer place for those assets to be than
Speaker 9: on banks balance sheets. Again, so some of this migration
Speaker 9: could be beneficial to the overall system. But you sort
Speaker 9: of take the words out of my mouth right when
Speaker 9: you say if there's too much, too many investors in
Speaker 9: too short of a time pursuing these assets. We might
Speaker 9: see sort of too much asset appreciation and some poor
Speaker 9: decisions being made. I think the other thing that we
Speaker 9: tend to highlight is the concentration among you know, not
Speaker 9: that many large asset managers. And so those are some
Speaker 9: of the things that we highlight as concerns.
Speaker 7: Why why is that a concern?
Speaker 3: Because you know, you have the folks at the traditional
Speaker 3: banks that we talk about all the time. I've heard
Speaker 3: some of them say, you know, express not not to
Speaker 3: stain but criticize private credit in the sense of, well,
Speaker 3: they don't have to deal with the same regulatory environment
Speaker 3: that we do as big banks. Is that a concern
Speaker 3: to you?
Speaker 5: Sure?
Speaker 9: And I don't think we're shocked that, you know, one
Speaker 9: set of competitors is criticizing a different exactly. But we
Speaker 9: are fans of a certain kind of regulation, the kind
Speaker 9: of regulation that brings transparency to an asset class. So
Speaker 9: the banks are obliged to submit to much greater regulation,
Speaker 9: but also provide much more data, you know, to the
Speaker 9: federal agencies. That's very instructive. And there is a limit
Speaker 9: on that same kind of transparency on the private side,
Speaker 9: and that does give us pause.
Speaker 4: So hm, you know, we think of the ratings agencies
Speaker 4: to kind of, you know, hopefully be on top of
Speaker 4: all of this. But is it hard to be on
Speaker 4: top of everything that's going on in the private credit
Speaker 4: world because those investments. I don't know, Like how much
Speaker 4: information can you really gather on various private credit investments.
Speaker 4: I mean, obviously, like if folks that are creating the funds,
Speaker 4: if they're not doing well, investors aren't going to put
Speaker 4: money continue to put money into them. So in some
Speaker 4: ways there's a checks and balance system, but I do
Speaker 4: wonder about other ways to have checks and balances on
Speaker 4: these types of investments.
Speaker 2: How do you guys do it.
Speaker 10: Well?
Speaker 9: Some assets are much more visible than others. So for example,
Speaker 9: you know, the largest share of private credits today are
Speaker 9: the business development corps in the US. They have to
Speaker 9: value their levels every quarter, they have to provide other
Speaker 9: kind of credit metrics. Many of them.
Speaker 5: Most of them.
Speaker 9: Are publicly traded, so there is some information there, and
Speaker 9: we rate probably the majority of them, so that has
Speaker 9: some value. But it's also up to us to take
Speaker 9: that information and put it into our own systems. And
Speaker 9: make sure that, for example, everybody is valuing that loan
Speaker 9: the same way. There are other parts of private credit
Speaker 9: that we have we do have less insight into. You know,
Speaker 9: it is depending on how you measure it is. You know,
Speaker 9: how big the market itself is hard to say. There
Speaker 9: is that aspect as well.
Speaker 2: But Christina, we're going to do rate the insurance right for.
Speaker 5: They give us access, so.
Speaker 2: We're gonna have to leave it there.
Speaker 4: Christina Paget, Associate Managing Director, Head of Leverage, Finance, Research
Speaker 4: and Analytics at Moody's Ratings.
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