WEBVTT - Covid Triggering Incredible Opportunities In Fallen Angels: Mellon 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEO, market pros and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:20.520 and on Bloomberg dot com. All right, let's spend some 0:00:20.600 --> 0:00:23.079 time chatting about the credit markets, and let's go out 0:00:23.239 --> 0:00:26.160 on the risk spectrum a little bit, talking high yield, 0:00:26.200 --> 0:00:28.880 talking maybe even fallen angels. We can do that with Paul. 0:00:28.920 --> 0:00:33.040 Benson had a fixed income efficient BETA. The firm is Melon, 0:00:33.080 --> 0:00:35.120 a B and Y Melon Investment management firm. They have 0:00:35.200 --> 0:00:38.120 five hundred and fifty eight billion. That's with a B 0:00:38.600 --> 0:00:41.159 under management located in San Francisco. Paul, thanks so much 0:00:41.159 --> 0:00:43.519 for joining us here. You know, first of all, I 0:00:43.560 --> 0:00:46.400 want to talk about risk return. Talk to us a 0:00:46.440 --> 0:00:49.919 little bit about fallen angels. What is a fallen angel 0:00:50.400 --> 0:00:54.160 and what kind of activity are we seeing in that market? Yeah, no, 0:00:54.280 --> 0:00:57.040 this is a great topic for today. Fallen angels have 0:00:57.240 --> 0:01:02.120 really come onto the marketplace here, uh in in size, 0:01:02.160 --> 0:01:06.160 in this aftermath of the COVID UH nineteen crisis. So 0:01:06.200 --> 0:01:09.200 what a fallen angel is is it's just an investment 0:01:09.200 --> 0:01:13.560 grade bond that has been downgraded. So remember the investment 0:01:13.600 --> 0:01:15.840 grade sort of ends at the bottom tier at the 0:01:15.880 --> 0:01:19.679 triple B rating level. Downgraded below triple B, so it's 0:01:19.720 --> 0:01:22.800 now double B R lower that enters the high yield portion. 0:01:23.080 --> 0:01:25.919 So really it's just a high yield bond that once 0:01:26.240 --> 0:01:29.960 was an investment grade bond. And what investors are seeing 0:01:30.040 --> 0:01:33.520 is that these bonds have really really attractive risk return 0:01:33.600 --> 0:01:36.880 characteristics and making for a terrific investment in this kind 0:01:36.880 --> 0:01:40.080 of environment. So give us some examples of some fallen 0:01:40.120 --> 0:01:41.800 angels that have you know, kind of come to the 0:01:41.800 --> 0:01:46.320 fore here during the pandemic. So there are actually a ton. 0:01:46.560 --> 0:01:49.560 So what's exciting about this this pandemic? Uh, you know, 0:01:49.600 --> 0:01:52.480 if anything can be exciting from an investor perspective, it 0:01:52.800 --> 0:01:57.280 is that it's an unprecedented delusion of activity and sort 0:01:57.280 --> 0:02:01.600 of ratings migration perspective, and the markets really are not 0:02:01.920 --> 0:02:05.360 very efficient on the fixed income side at handling that 0:02:05.440 --> 0:02:10.640 trans transmission from investment grade investors to high yield investors. 0:02:10.680 --> 0:02:13.960 So you know, in typical year you might have twenty billion, 0:02:14.080 --> 0:02:17.120 thirty billion dollars of downgrades across a handful of bonds 0:02:17.240 --> 0:02:20.520 or or maybe ten or fifteen bonds. In twenty so 0:02:20.600 --> 0:02:25.320 far we've had we've had almost two hundred billion dollars 0:02:25.360 --> 0:02:28.640 of following angel downgrades. And this spans, you know, across 0:02:28.720 --> 0:02:31.880 more than two hundred bonds, two hundred fifty bonds UH. 0:02:31.919 --> 0:02:34.200 And it's not just one sector, you know, like in 0:02:34.200 --> 0:02:36.320 in the energy crisis in two thousands sixty and it 0:02:36.400 --> 0:02:39.960 was predominantly energy bonds. Now this is across everything. This 0:02:40.040 --> 0:02:43.800 is across consumer cyclicals, This is across banking, this is 0:02:43.840 --> 0:02:47.560 across capital goods, basic industry. You know, you're basically seeing 0:02:47.560 --> 0:02:50.120 it all here. And that actually is a real boon 0:02:50.200 --> 0:02:55.600 for high yield investors because a diversified play is going 0:02:55.639 --> 0:02:58.400 to allow you a much greater chance of success of 0:02:58.520 --> 0:03:03.280 harvesting that that patrol risk premium, that discount, rather than 0:03:03.400 --> 0:03:07.840 you know, some idiosyncratic UH investment. So, Paul, when a 0:03:07.919 --> 0:03:12.919 bond gets downgraded from investment grade to UH non investment grade, 0:03:13.320 --> 0:03:16.160 does that mean a lot of owners of that bond 0:03:16.240 --> 0:03:18.840 have to sell by because of their charter they can't 0:03:18.840 --> 0:03:21.600 own non investment grade debt? Is that kind of how 0:03:21.600 --> 0:03:25.320 the play starts exactly exactly. And if you look at 0:03:25.320 --> 0:03:28.280 the the sort of the the the last ten years, 0:03:28.440 --> 0:03:30.880 you know, within the i G space investment grade space, 0:03:31.240 --> 0:03:35.480 you'll see that there's been a very inexorable rise in 0:03:36.240 --> 0:03:40.560 passive passive managers. So you know, think of not just 0:03:40.720 --> 0:03:44.280 indexing traditional indexing, the growth of that uh as you 0:03:44.320 --> 0:03:47.640 know fees have been pushed lower, but also areas like ets. 0:03:47.720 --> 0:03:50.280 A lot of these et s are very passive in nature. 0:03:50.920 --> 0:03:53.760 And so you've got two camps. You've got one camp 0:03:53.800 --> 0:03:57.160 which is traditional for example, pension plans that have strict 0:03:57.200 --> 0:04:00.200 guidelines and say, you know, thou shalt not invest in 0:04:00.320 --> 0:04:04.160 junk bonds. And so you know, if if I'm managing 0:04:04.680 --> 0:04:08.080 and i G portfolio for a client like that, and 0:04:08.440 --> 0:04:13.160 a bond gets downgraded below investigrade, it becomes a fallen angel. 0:04:13.560 --> 0:04:16.120 Even if I think it's a very very attractive investment 0:04:16.360 --> 0:04:19.039 and it's the worst possible time to sell, I don't 0:04:19.080 --> 0:04:21.599 have a choice. I have to sell it now. That 0:04:21.680 --> 0:04:24.480 becomes a real benefit for the folks. On the other side, 0:04:24.560 --> 0:04:26.960 if you're a high yield investor, and especially if you're 0:04:26.960 --> 0:04:30.360 investor focusing just on fallen angels, you can pick up 0:04:30.400 --> 0:04:34.240 these bonds at an incredible discount. All right, So Paul, 0:04:34.240 --> 0:04:36.280 give us a sense of just kind of the the 0:04:36.360 --> 0:04:40.200 credit quality environment that we find ourselves in. I know, 0:04:40.279 --> 0:04:43.880 is we kind of entered this pandemic in March April. 0:04:44.360 --> 0:04:46.760 You know, from a credit perspective, there's really concerns that 0:04:46.800 --> 0:04:50.479 we're going to see it, just this huge wave of defaults, 0:04:50.880 --> 0:04:54.880 particularly in the leverage loan business, the high yield market business. 0:04:54.880 --> 0:04:58.480 How we in fact seen that, you know, that's been 0:04:58.520 --> 0:05:01.240 the story of the year. It's people tend to panic 0:05:01.320 --> 0:05:05.239 when when when things when volatility picks up, the first 0:05:05.279 --> 0:05:08.120 instinct is to panic. And you know exactly what we 0:05:08.160 --> 0:05:11.760 saw with all the news articles, all the prognostications, even 0:05:11.760 --> 0:05:18.200 from the major houses, predicting you know, unprecedented uh delusion 0:05:18.200 --> 0:05:23.359 of defaults and that just has not materialized. And further, 0:05:23.480 --> 0:05:26.200 you know what really scares us a little bit is 0:05:26.279 --> 0:05:28.960 when you look under the hood. And that's what we're 0:05:28.960 --> 0:05:31.800 really good at as a quantity We're a quantitative investment manager, 0:05:32.080 --> 0:05:35.560 so we really dive into the details. And people are 0:05:35.640 --> 0:05:38.960 misinterpreting default rates by and large, they're looking at broad 0:05:39.400 --> 0:05:43.480 you know, Moodies SMP type speculative grade default rates, which 0:05:43.560 --> 0:05:48.760 have a completely different composition than what investors, institutional investors 0:05:48.760 --> 0:05:51.719 are actually investing in. You know, these SMP and Moodies 0:05:51.760 --> 0:05:55.160 default rates include these very small companies. They include floating 0:05:55.240 --> 0:05:58.440 rate debt, all sorts of stuff. Whereas you know, se 0:05:59.000 --> 0:06:03.640 of the institutional investors are focused on big, big investible 0:06:03.640 --> 0:06:07.200 benchmarks such as the Bloomberg Barkley's High Yield Corporate Index 0:06:07.360 --> 0:06:11.560 or you know, the Bambo Master to Index. These benchmarks 0:06:11.560 --> 0:06:14.520 have only seen about half of the default rates that 0:06:15.000 --> 0:06:17.920 that these sort of you know, worst case prognonctiications came 0:06:17.920 --> 0:06:20.440 out at and so we're looking at numbers like like, 0:06:20.520 --> 0:06:23.520 you know, sub four percent year to date. You know, 0:06:23.600 --> 0:06:26.520 this is not this is this is certainly higher than 0:06:26.640 --> 0:06:30.320 last year, but it's not anything to be overly concerned 0:06:30.320 --> 0:06:34.039 about as a high yeld investor. Very interesting, Paul, thanks 0:06:34.040 --> 0:06:35.400 so much for joining us. Share. This is part of 0:06:35.400 --> 0:06:37.320 the market we don't probably don't spend enough time on, 0:06:37.440 --> 0:06:40.240 but certainly some opportunities there, the fallen angels, the high 0:06:40.279 --> 0:06:44.520 yield credit market, the leverage loan uh business. Paul Benson 0:06:44.600 --> 0:06:48.200 head a fixed income efficient data at Melan, giving us 0:06:48.279 --> 0:06:51.160 his thoughts again on these fallen angels UH and some 0:06:51.200 --> 0:06:53.800 of the higher leverage loan sectors of the marketplace. Yes, 0:06:53.839 --> 0:06:58.400 they've been impacted by the economic downturn resulting from the pandemic, 0:06:58.440 --> 0:07:02.920 but probably performing better than expected, so some opportunities there 0:07:03.520 --> 0:07:08.159 more to come. This is Bloomberg Now in terms of 0:07:08.160 --> 0:07:10.560 a new Biden administrator, a lot of folks from wondering 0:07:10.600 --> 0:07:13.360 what it means for their industries, what kind of policies 0:07:13.560 --> 0:07:17.280 will the new administration come up with for for specific industries. 0:07:17.320 --> 0:07:20.640 One of those industries is technology. Uh, there's obviously a 0:07:20.640 --> 0:07:23.160 big issue with China. There's a big issue with to 0:07:23.240 --> 0:07:27.200 what extent does technology in the United States need to 0:07:27.400 --> 0:07:31.920 be regulated. Victoria Espinal, President, chief executive officer of BSA, 0:07:32.040 --> 0:07:36.360 the software alliance based on Washington, d C. She joins US. Now, so, Victoria, 0:07:36.520 --> 0:07:40.960 you know, we think about technology in the United States. Historically, 0:07:41.480 --> 0:07:46.400 the US has taken a very light hand to regulating technology, 0:07:46.400 --> 0:07:48.560 and one could argue that's been maybe one of the 0:07:48.720 --> 0:07:52.200 main catalysts for the growth and development of tech in 0:07:52.440 --> 0:07:54.880 the U S. Silicon Valley and all of that. How 0:07:54.880 --> 0:07:58.480 do you expect President elect Joe Biden and his administration 0:07:58.520 --> 0:08:03.600 to UH to manage technology policy. Well, first of all, 0:08:03.600 --> 0:08:05.720 I would saying that I don't think it's about no 0:08:05.920 --> 0:08:09.480 regulation or lots of regulation. I think it's about smart regulation, 0:08:09.880 --> 0:08:12.600 you know, where it's appropriate. UM. In terms of the 0:08:12.680 --> 0:08:16.120 Biden administration now, I'm expecting that we're going to see 0:08:16.520 --> 0:08:21.200 continue to see some increased scrutiny on the technology industry. UM. 0:08:21.400 --> 0:08:24.040 I think there are some legitimate issues that need to 0:08:24.040 --> 0:08:26.360 be concerned, that that need to be addressed, and I 0:08:26.360 --> 0:08:28.560 think the Biden administration will focus on that. You know, 0:08:28.640 --> 0:08:31.960 I will say, speaking for the enterprise software industry, which 0:08:32.000 --> 0:08:34.920 is the essay, we're excited to work with the administration 0:08:35.080 --> 0:08:37.520 on those. We feel like there are a number of 0:08:37.520 --> 0:08:40.960 places where laws and regulations could be updated and improved 0:08:41.000 --> 0:08:44.960 and modernized UM, and we are really looking for places 0:08:44.960 --> 0:08:47.800 where we can find solutions. There are some thorny issues 0:08:47.840 --> 0:08:54.440 out there, artificial intelligence, privacy, cybersecurity. So we UM you know, 0:08:54.520 --> 0:08:57.640 as a as an organization, as an industry, we try 0:08:57.720 --> 0:09:00.000 not to run from challenges but to try to address them. 0:09:00.000 --> 0:09:02.880 And we're really excited about working with the Biden administration 0:09:02.880 --> 0:09:05.320 and how to find some long term solutions to some 0:09:05.360 --> 0:09:07.800 of the real problems that are out there, so Victoria. 0:09:07.880 --> 0:09:09.679 One of the problems that has really come to the 0:09:09.720 --> 0:09:13.120 four of the last several years has been UH China 0:09:13.400 --> 0:09:17.160 and technology transfers between US and China, and there's some 0:09:17.200 --> 0:09:20.439 concern that there might be a technology cold war developing 0:09:20.480 --> 0:09:24.160 between let's call it China and just broadly define the West. 0:09:24.760 --> 0:09:27.560 How do you expect the Biden administration What would you 0:09:27.559 --> 0:09:31.720 recommend to the Biden administration as it thinks about technology 0:09:31.920 --> 0:09:35.319 policy visa each China. I think it's going to be 0:09:35.400 --> 0:09:38.840 a major issue going forward, you know, in terms of 0:09:38.880 --> 0:09:41.480 what I would expect to the Biden administration, I think 0:09:41.480 --> 0:09:43.920 a Biden administration is going to be tough on China. 0:09:44.480 --> 0:09:47.320 I think, you know, look, there's a whole range of 0:09:47.360 --> 0:09:51.040 issues beyond the technology issues and the economic issues with China, 0:09:51.240 --> 0:09:56.160 right human rights, Taiwan, the situation in Hong Kong, um. 0:09:56.200 --> 0:09:59.040 There have been a number of approaches the Trump administration 0:09:59.040 --> 0:10:01.880 has taken on the eco comics sides, tariffs and trade 0:10:01.920 --> 0:10:04.200 and got in the most attention, I would say, but 0:10:04.520 --> 0:10:09.439 you know, other approaches including export controls, investment restrictions. Of course, 0:10:09.480 --> 0:10:11.360 in the Biden administration goes in, they're going to do 0:10:11.400 --> 0:10:13.960 their own assessment of what the issues are and what 0:10:14.040 --> 0:10:16.120 the approaches are. I think they're going to bring a 0:10:16.120 --> 0:10:20.480 lot of expertise to that assessment, but I would expect 0:10:20.960 --> 0:10:23.000 that coming out of that, we're going to see two 0:10:23.040 --> 0:10:27.080 differences in terms of approach. Broadly speaking, one I think 0:10:27.160 --> 0:10:28.480 is I think there will be a focus on a 0:10:28.480 --> 0:10:32.600 broader range of issues, so again not just economic issues, 0:10:32.640 --> 0:10:35.520 but issues like human rights for example. I expect we'll 0:10:35.559 --> 0:10:39.520 see more UM focus on that from them Biden administration, 0:10:39.800 --> 0:10:44.320 and even in the economic issues, I think we will 0:10:44.480 --> 0:10:46.600 see a focus on trying to come up with long 0:10:46.760 --> 0:10:50.480 term solutions to those issues. And again it's sort of 0:10:50.480 --> 0:10:53.640 a broader range of economic issues that we faced with China, 0:10:53.960 --> 0:10:59.160 including UM in the technology space. The second difference I 0:10:59.240 --> 0:11:03.480 expect that we will the is working with other countries 0:11:03.800 --> 0:11:06.840 and building alliances. You know, the United States is not 0:11:06.920 --> 0:11:10.120 the only country certainly that has concerns with China, and 0:11:10.280 --> 0:11:13.520 I think the US will address is concerned directly with China, 0:11:13.760 --> 0:11:16.880 but also I expect um the Biden administration will be 0:11:16.880 --> 0:11:19.680 looking to build alliances and be doing that in concert 0:11:19.760 --> 0:11:24.040 with other countries that also share those concerns. UM. The 0:11:24.080 --> 0:11:27.520 last thing I would say is, you know, the president 0:11:27.559 --> 0:11:30.199 look by then the major commitment during the campaign in 0:11:30.280 --> 0:11:34.960 terms of R and D investment in technology, Um, the 0:11:35.040 --> 0:11:37.120 United States, unlike China, a lot of our investment in 0:11:37.160 --> 0:11:39.120 the United States comes from the private sector, and I 0:11:39.160 --> 0:11:41.679 think that's appropriate. But it's also great to see that 0:11:41.720 --> 0:11:44.640 this administration is going to be focused on putting public sector, 0:11:45.000 --> 0:11:50.040 significant public sector of funding into basic R and D investment. UM. 0:11:50.080 --> 0:11:53.440 I think that's the really important part of this interesting so, Victoria. 0:11:53.720 --> 0:11:55.680 I guess as it relates to China, one of the 0:11:55.720 --> 0:11:58.360 more immediate things that the incoming Biden administration will need 0:11:58.400 --> 0:12:01.360 to address is to talk I'm not even sure where 0:12:01.400 --> 0:12:04.360 we are on the TikTok issue. Can you bring us 0:12:04.440 --> 0:12:07.880 up to date? Well? Um, you know, in terms of 0:12:07.880 --> 0:12:10.400 the administration, I think the lot of the administrations speak 0:12:10.440 --> 0:12:11.840 for yourself, and I think what they've said is that 0:12:11.880 --> 0:12:14.760 it's too early for them to say what you know. 0:12:14.760 --> 0:12:17.080 I guess what I would say more generally is I 0:12:17.120 --> 0:12:20.960 don't think this is an administration where policy is going 0:12:21.000 --> 0:12:27.079 to be determined by any one particular company. In general, 0:12:27.400 --> 0:12:29.720 I think it's going to be an administration that is, 0:12:30.200 --> 0:12:34.000 as I said, looking to find ways to set global 0:12:34.080 --> 0:12:38.800 standards and rain in bad actors of all different kinds. 0:12:39.320 --> 0:12:42.000 Um But I think it's going to be at my 0:12:42.600 --> 0:12:44.920 anticipate it will be a policy approach that it's more 0:12:44.920 --> 0:12:49.120 about finding that long term, sustainable, durable framework as opposed 0:12:49.160 --> 0:12:51.839 to being driven by any one particular company or one 0:12:51.880 --> 0:12:56.439 particular situation. So, Victoria, I guess the other thing is 0:12:56.480 --> 0:12:59.000 just kind of you know, the big U s technology companies, 0:12:59.040 --> 0:13:03.079 particularly this social platforms, do you expect them to face 0:13:03.160 --> 0:13:06.400 continued scrutiny, increased Scrutinyou is this something that's just gonna 0:13:06.400 --> 0:13:09.360 be a factive life for the facebooks of the world 0:13:09.400 --> 0:13:12.839 and others. Um? So I'll say this, you know, as 0:13:12.960 --> 0:13:16.040 my organization doesn't represent Facebook, you know where the enterprise 0:13:16.160 --> 0:13:18.679 B two B side of the software industry. Um But 0:13:18.760 --> 0:13:20.960 I think I think it's also fair to say that 0:13:21.040 --> 0:13:24.400 the tech industry, including the social media platforms, I think 0:13:24.720 --> 0:13:28.280 will face increasing scrutiny. I think we're going to see 0:13:28.320 --> 0:13:30.360 that in competition. I think we're going to see that 0:13:30.440 --> 0:13:36.320 in accountability issues, platform accountability issues generally. I think that, um, 0:13:36.360 --> 0:13:38.080 you know, that has been true for a while, so 0:13:38.160 --> 0:13:41.000 that will not be new with a Biden administration, but 0:13:41.160 --> 0:13:45.040 I think it I anticipate that there will be increased 0:13:45.040 --> 0:13:48.040 scrutiny and a Biden administration. And again, as I was 0:13:48.040 --> 0:13:51.040 saying at the beginning, and I think there are some 0:13:51.440 --> 0:13:55.320 legitimate concerns that need to be addressed, and um, you know, 0:13:55.559 --> 0:13:58.280 that's something I think that the Biden administration will be 0:13:58.280 --> 0:14:01.040 focused on as well. Hey, Victoria, thank you so much. 0:14:01.080 --> 0:14:04.920 We really appreciate your thoughts and insight. Victoria Spinel, president 0:14:04.960 --> 0:14:08.760 and chief executive officer of b s A, the Software Alliance. 0:14:08.760 --> 0:14:11.640 They're based in Washington, d C. Giving us some thoughts 0:14:11.640 --> 0:14:15.679 about how the incoming Biden administration may think about policy 0:14:16.120 --> 0:14:19.640 as it relates to technology, particularly the software companies. And again, 0:14:20.080 --> 0:14:24.360 probably issue number one on day one will be the 0:14:24.400 --> 0:14:27.120 relationship of U with the U S and China as 0:14:27.160 --> 0:14:33.400 it relates to technology. We are waiting for a discussion 0:14:33.960 --> 0:14:37.720 on Bloomberg Television between Bowing CEO Dave Calhoun and Rhiner 0:14:37.800 --> 0:14:41.360 CEO Michael O'Leary. Uh. They announced the deal today for 0:14:41.440 --> 0:14:45.200 some planes to be acquired by Ryan Air. Let's chat 0:14:45.240 --> 0:14:49.040 with George Ferguson, Senior Aerospace, Defense and Airlines analyst for 0:14:49.040 --> 0:14:51.760 Bloomberg Intelligence on what we might hear. So George talked 0:14:51.760 --> 0:14:53.840 to us a little bit about this deal for Boeing, 0:14:54.280 --> 0:14:57.560 uh with Ryan Air. It seems like really good news 0:14:57.680 --> 0:15:01.720 for Boeing here. Yeah, thanks Paul. I think it's absolute 0:15:01.800 --> 0:15:05.560 endorsement here for the Bowing Max and the sixes that 0:15:05.600 --> 0:15:08.560 have taken place, and it's where, you know, where Ryan 0:15:08.600 --> 0:15:11.680 Air sees that whole process. They must feel pretty comfortable 0:15:12.280 --> 0:15:14.640 of the airplane's viability. We've been saying it's a viable 0:15:14.680 --> 0:15:16.960 So I think they feel pretty comfortable and they're and 0:15:16.960 --> 0:15:19.840 they're coming in for a nice size order seventy five. 0:15:20.040 --> 0:15:23.440 I actually thought it might have been larger, and I 0:15:23.480 --> 0:15:26.200 think it's not larger. Maybe a testament to the fact 0:15:26.240 --> 0:15:29.240 that we heard the Bowing CEO Calhoun say they're not 0:15:29.240 --> 0:15:31.400 going to buy themselves back into the market or something 0:15:31.440 --> 0:15:33.640 like that. Not an exact quote, but I think maybe 0:15:34.120 --> 0:15:36.320 a testament. You know, we knew Ryan Air was sort 0:15:36.320 --> 0:15:39.720 of sniffing around looking for order actually for I think 0:15:39.720 --> 0:15:42.200 it's been at least a year or so. They love 0:15:42.280 --> 0:15:46.520 to buy airplanes cheap. I guess is that maybe um oh, 0:15:46.600 --> 0:15:48.840 Larry didn't get quite the prices he wanted and sort 0:15:48.880 --> 0:15:52.080 of stepped in for seventy. But looks a good endorsement, 0:15:52.080 --> 0:15:54.840 good endorsement to the airplane, good news for Bowling, and 0:15:54.920 --> 0:15:57.520 tell me good news for Ryan Air too. Yeah, so 0:15:57.600 --> 0:16:00.760 George talked us about this seventh three of Max. You know, 0:16:00.920 --> 0:16:03.720 I just speaking for myself, you know, if I were to, 0:16:04.200 --> 0:16:06.680 you know, actually take a flight, which is a huge 0:16:06.720 --> 0:16:09.040 if here in this pandemic world, and I walked up 0:16:09.040 --> 0:16:10.240 to the gate and I looked out the window and 0:16:10.280 --> 0:16:12.560 I saw seven three seven Max parked at my gate, 0:16:12.760 --> 0:16:15.479 I'd have no problems getting on the plane, am I? 0:16:15.480 --> 0:16:18.920 Am I the exception or how do you think this 0:16:19.040 --> 0:16:21.640 plane is going to be uh kind of embraced by 0:16:21.800 --> 0:16:25.880 the airlines as well as in the passengers. Yeah, you know, 0:16:26.040 --> 0:16:29.480 I think that, Um, I think that the public has 0:16:29.560 --> 0:16:32.280 sort of a short memory on some of these things, 0:16:32.280 --> 0:16:34.360 and I think there are some people that would be 0:16:34.720 --> 0:16:38.560 concerned about flying the Max given the history. I think that, 0:16:38.680 --> 0:16:41.040 you know, really some of their concerns you put to 0:16:41.080 --> 0:16:43.520 bed by the fact that the f a A and 0:16:43.720 --> 0:16:46.720 European regulators have really poured over the airplane to make 0:16:46.760 --> 0:16:48.520 sure it's safe. They really don't want egg in their 0:16:48.520 --> 0:16:50.800 face with it with another problem with the airplane, and 0:16:50.840 --> 0:16:53.480 we're now going to have simulator training for the pilots 0:16:53.880 --> 0:16:56.440 transitioning from the seven three seven eight to the max 0:16:56.480 --> 0:16:58.680 which I think should also give people comfort. I think 0:16:58.680 --> 0:17:02.320 you'll see advertising campaign around some of those you know, 0:17:02.360 --> 0:17:05.600 some of that training. Um. And look again, I think 0:17:05.600 --> 0:17:07.960 that there there'll be a short memory and you know, 0:17:07.960 --> 0:17:10.920 sort of Brian Air buying here and have this airplane 0:17:11.080 --> 0:17:15.040 feathered into their fleet out in one Americans starts to fly. 0:17:15.520 --> 0:17:17.919 I think at the end of the year here, you know, 0:17:17.960 --> 0:17:20.080 given the news around the pandemic, I think it'll get 0:17:20.080 --> 0:17:22.520 lost and I think there won't be as much reticence 0:17:22.560 --> 0:17:24.600 to fly the airplane had there not been sort of 0:17:24.600 --> 0:17:27.080 the backdrop of a lot more bigger news stories right 0:17:27.240 --> 0:17:29.679 right now. So, George, I think the last time we chatted, 0:17:29.680 --> 0:17:33.040 one of the discussion points was China. UM, it's really important, 0:17:33.480 --> 0:17:37.359 uh that China certify the seven three seven max A. 0:17:37.560 --> 0:17:40.680 It's a huge market. B Uh, it's an economy that's 0:17:40.680 --> 0:17:43.760 actually growing. They're they're out of their lockdown and there 0:17:43.760 --> 0:17:47.520 people are beginning to travel. Any sense of when we'll 0:17:47.560 --> 0:17:50.159 get the green light from China as relates to the 0:17:50.200 --> 0:17:53.520 seven three seven Max. Yeah, I mean I'm hearing that 0:17:53.640 --> 0:17:55.960 the you know, potentially we could see something like that 0:17:56.000 --> 0:17:58.160 in the new year. I mean I think that Bill 0:17:58.720 --> 0:18:03.159 the Chinese will want to find a way to do 0:18:03.359 --> 0:18:07.199 the write word is embrace the Biden administration as they 0:18:07.240 --> 0:18:09.000 come in. They'd love to be, I think, in the 0:18:09.080 --> 0:18:11.879 good graces of the Biden administrations to change a tone 0:18:12.440 --> 0:18:15.639 hopefully from the Trump administration for the Chinese when it 0:18:15.680 --> 0:18:18.880 comes to trade. And I think you'll see it closer 0:18:18.920 --> 0:18:22.600 to Joe Biden present elect Biden coming into power. But 0:18:22.680 --> 0:18:25.000 so I would expect it sometime earlier next year. And 0:18:25.040 --> 0:18:27.280 it's it is a core market, super important for about 0:18:28.160 --> 0:18:31.160 talk to us, George, you know about boweing here, maybe 0:18:31.160 --> 0:18:32.920 a little bit of a post mortem here, we've got 0:18:32.920 --> 0:18:36.719 the a little bit of a hindsight here. It just 0:18:36.840 --> 0:18:40.320 it feels like they didn't manage the process. Well I'm 0:18:40.320 --> 0:18:42.560 not sure you know what else they could have done, 0:18:42.600 --> 0:18:44.600 but it just feels like they didn't manage the process. Well, 0:18:44.600 --> 0:18:47.520 what's the what's the feeling among you know, you aviation 0:18:47.600 --> 0:18:50.920 geeks that you know look at the stuff all the time. Yes, 0:18:51.040 --> 0:18:54.600 So I do think they I do think you know, 0:18:54.720 --> 0:18:57.479 perhaps a little bit of Hubris took over at Boeing, 0:18:58.520 --> 0:19:03.280 a little bit of marketing uh and managing financial statements 0:19:04.040 --> 0:19:08.200 private was prioritized over engineering. And you know, I think 0:19:08.200 --> 0:19:10.880 Calhoun's job is really to make sure that he resets 0:19:10.960 --> 0:19:14.720 that um, you know, resets that uh. You know that 0:19:15.160 --> 0:19:19.399 environment at Boeing where the focuses on solid engineering. You 0:19:19.480 --> 0:19:23.199 try to keep the Hubris down UM. And so you know, 0:19:23.320 --> 0:19:27.199 it feels like as they've moved the airplane through the 0:19:27.240 --> 0:19:30.720 recertification process, it feels like they're getting that back in order. 0:19:30.840 --> 0:19:33.359 You know. Look, I think it's a constant challenge. They 0:19:33.400 --> 0:19:35.640 are one of the pre eminent airplane builders in the world, 0:19:35.760 --> 0:19:37.560 you know, one of the two compared to air MUTH 0:19:38.000 --> 0:19:40.159 and I think they really have to manage that that 0:19:40.320 --> 0:19:43.359 culture going forward. So it feels like it's gotten better 0:19:43.400 --> 0:19:44.760 and it looks like they've really got a good job 0:19:44.760 --> 0:19:48.080 in re certification. I think Calhoun and his success are 0:19:48.480 --> 0:19:52.680 really need to think about keeping that engineering culture forefront 0:19:52.720 --> 0:19:54.080 at the company. And I think they got to start 0:19:54.160 --> 0:19:56.960 thinking about their next product, you know, and that's another 0:19:57.040 --> 0:20:01.720 engineering challenge, so I know, and the other again aviation geek, 0:20:01.760 --> 0:20:05.080 you guys take your yearly pilgrimage to either you know, 0:20:05.240 --> 0:20:07.719 London or Paris for the annual air shows, which is, 0:20:07.840 --> 0:20:09.919 you know, just a scam in and of itself in 0:20:09.960 --> 0:20:12.320 my opinion, But you guys do it every year. What 0:20:12.440 --> 0:20:15.520 happens at the next time, when post pandemic you guys 0:20:15.760 --> 0:20:20.040 meet in Paris and or London. What's Boeing's position going 0:20:20.080 --> 0:20:22.480 to be in terms of, you know, selling the seven 0:20:22.520 --> 0:20:24.560 thirty seven Max. Are they going to be able to 0:20:24.640 --> 0:20:29.360 successfully uh put some more these planes into the fleet? Well? 0:20:29.440 --> 0:20:32.160 So I think today was again, you know, a big 0:20:32.240 --> 0:20:35.120 endorsement there for their delay to sell the airplane. Um, 0:20:35.160 --> 0:20:38.800 I don't know anything about a scam, but it's a 0:20:38.880 --> 0:20:42.639 big cocktail party, is what I think. Look, there's still 0:20:43.320 --> 0:20:46.240 there's still a heck of a lot of orders in 0:20:46.280 --> 0:20:49.080 the backlog, and I think really their job is to 0:20:49.080 --> 0:20:52.520 go out and touch those customers and and get them 0:20:52.560 --> 0:20:55.120 happy about the airplane and wanting to take those orders 0:20:55.119 --> 0:20:57.639 in the backlog, because the beauty is they don't have 0:20:57.680 --> 0:21:00.480 to sell the plane. It's already sold. You've got a 0:21:00.480 --> 0:21:04.159 good death back, all right, George, thanks so much. We 0:21:04.240 --> 0:21:06.520 appreciate it. As always, I look forward to you making 0:21:06.560 --> 0:21:09.920 your pilgrimage over to London and Paris. George Ferguson's senior Aerospace, 0:21:09.920 --> 0:21:15.800 Defense and Airlines Animals for Bloomberg Intelligence. It is time 0:21:16.080 --> 0:21:19.399 for Bloomberg Opinion. We're joined today by Near case Or, 0:21:19.440 --> 0:21:22.840 founder of Unison Advisors and a Bloomberg Opinion columnists. Near 0:21:22.880 --> 0:21:24.960 thanks so much for joining us. I know you and 0:21:25.280 --> 0:21:28.080 Tim O'Brien and Bloomberg Opinion out with a column today 0:21:28.119 --> 0:21:31.840 where you're you're talking about what Congress should consider as 0:21:31.880 --> 0:21:35.359 it does move forward slowly on a fourth round of 0:21:35.359 --> 0:21:37.240 physical stimulus. What are some of your key takeaways that 0:21:37.280 --> 0:21:41.520 you think Congress really needs to think about here? Well, um, 0:21:41.560 --> 0:21:44.760 good morning, Paul, thanks for having me. Um. We're um. 0:21:44.960 --> 0:21:48.159 You know, we think that more stimulus is probably necessary. 0:21:48.280 --> 0:21:50.439 You know, the economy is improving, markets are up. It 0:21:50.520 --> 0:21:52.520 looks like there's light at the end of the tunnel, 0:21:52.560 --> 0:21:55.000 so to speak, with a vaccine coming, but there's still 0:21:55.000 --> 0:21:56.720 a lot of suffering and it's not clear what the 0:21:56.760 --> 0:21:59.240 timing around that is going to be. So more similar, 0:21:59.359 --> 0:22:01.960 more stimulus is probably appropriate and probably and around the 0:22:02.000 --> 0:22:05.040 size that they're thinking about, but there's an it's another 0:22:05.080 --> 0:22:07.399