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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa A. Brawmowitz. Daily we bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. To find Bloomberg Surveillance on Apple Podcast, Suncloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Terminal.

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Speaker 1: I thought we would give you a window into Scott

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Speaker 1: Minor's past, and the first thing I said is get

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Speaker 1: me Bob Diamond. Bob, thank you so much for joining

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Speaker 1: us today. Take us back before Barclays, the credit sweez

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Speaker 1: and you add this young Turk making bond decisions. Why

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Speaker 1: was Scott Minored special in the trenches of fixed income

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Speaker 1: the tumult of Europe in the late eighties early nineties. Uh,

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Speaker 1: First of all, I just already missed him terribly. He

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Speaker 1: had the kindest soul of anyone I've ever worked with,

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Speaker 1: um for every person who worked with and Tom. It

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Speaker 1: actually went before that to Morgan Stanley. Scott and I

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Speaker 1: were in Morgan Stanley, New York. I moved to London

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Speaker 1: in in uh durun international fixed income trading, the trading

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Speaker 1: outside the US. Scott was good enough to leave his

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Speaker 1: unit and come and join my unit, which was pretty

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Speaker 1: new at the time. And when I think back at

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Speaker 1: the at the incredible transaction we did during that period.

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Speaker 1: Not many people recall this, but we did the first

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Speaker 1: European currency unit bond ever issued in Scott and I

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Speaker 1: were at Morgan Stanley UM. Ironically the issuer was the

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Speaker 1: Bank of England and it was certainly a precursor to

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Speaker 1: all that came following that with a single currency and

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Speaker 1: the introduction of the Euro. That was just to me

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Speaker 1: just another example of how Scott was always at the

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Speaker 1: very very fourth front of everything going on in the

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Speaker 1: fixed income markets. The Scarlet fu and our FED coverage

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Speaker 1: have always seen how he's supple, how he could change

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Speaker 1: his mind. As I say, he had a train of

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Speaker 1: thought like a cp A, not like some fancy cf

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Speaker 1: A Macro Bologny. But the answer is Scott minored for

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Speaker 1: you and others, including Googaneim had to manage risk. What

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Speaker 1: was the key risk attribute that he had daily on

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Speaker 1: the desk at Morgan Stanley and a credit suez UM

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Speaker 1: I think of a time at credit suites. First of all,

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Speaker 1: this this is a this is a man who loved

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Speaker 1: studying the markets, studying the FED. Always had a grasp

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Speaker 1: on the macro environment, the medium term, the long term,

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Speaker 1: and all of his shorter term actions were based on those.

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Speaker 1: What a lot of people forget is the actions he

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Speaker 1: took in Scott was working for me as head of

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Speaker 1: credit trading at CSFB in New York. You will recall

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Speaker 1: that was the last time we had this kind of

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Speaker 1: real strong rate increase, and at that time the victim

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Speaker 1: was Orange County. UM, and I remember Scott coming into

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Speaker 1: my office. We sat down with a group of traders.

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Speaker 1: He was the first to recognize the problems in Orange County.

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Speaker 1: By that afternoon, we had exited every position. UM. These

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Speaker 1: were repo positions. All the money was returned to Orange County,

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Speaker 1: and it triggered the liquidation of those repo positions across

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Speaker 1: all the other dealers. And to me, it was the

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Speaker 1: vision Scott had then and has always had his grasp

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Speaker 1: of the macro and his grasp of what was right

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Speaker 1: for the regulators as well as what was right for

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Speaker 1: us at c SFB. And one of the things that

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Speaker 1: goes unrecognized is the incredible execution. We're out of those

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Speaker 1: positions by the afternoon of the first recognition of what

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Speaker 1: was going on with the at the time, the Orange

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Speaker 1: County debacle. Tremendous, tremendous professional the nimbleness that it takes

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Speaker 1: to be able to do that, the conviction, but also

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Speaker 1: what we've been talking about all years. He melity to

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Speaker 1: change your mind, to move on a dime. How did

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Speaker 1: he embody that in a way that really speaks volumes

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Speaker 1: to you about what it takes to be successful in

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Speaker 1: a very changing place, which is Wall Street. Um, you know,

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Speaker 1: I think right to your point, Leasa. Interesting is his

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Speaker 1: move from Morgan Stanley and CSFP, where he was trading

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Speaker 1: and every night was marked to market and most days

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Speaker 1: you were turning over your inventory. His evolution into the

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Speaker 1: investment management side, I think was a critical factor for Scott.

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Speaker 1: If he could be better at something than he was

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Speaker 1: at taking risk in the fixed income markets, he was

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Speaker 1: even better as an investor, and I think that was

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Speaker 1: because he spent so much time truly studying what was

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Speaker 1: going on with the FED and the other central banks,

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Speaker 1: and he had such a firm grisp on policy, so

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Speaker 1: that all of his micro decisions were based around a

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Speaker 1: conviction of what was happening in the mac environment, but

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Speaker 1: he never sat on it, Lisa, Just to your point,

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Speaker 1: he studied it consistently day in and day out. And um,

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Speaker 1: I don't know anyone in either the trading environment or

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Speaker 1: the investment management environment that spent as much time doing research,

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Speaker 1: you know, throughout his career, even in the very very

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Speaker 1: senior position he was in more recently at Guggenheim. As

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Speaker 1: we enter a new territory, a new era, some people

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Speaker 1: are calling it where perhaps central banks are not going

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Speaker 1: to be the tailwin that they were for so long.

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Speaker 1: Is your view that Wall Street and trading desks more

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Speaker 1: generally have that spirit more broadly, or do you think

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Speaker 1: that perhaps there is a lack of that experience on

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Speaker 1: some of the trading floors after all of the churn

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Speaker 1: that we've seen in the past decades. Well, listen, there's

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Speaker 1: no question that the experience of people that grew up

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Speaker 1: on trading desks in the eighties and the nineties and

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Speaker 1: the two thousands is very different than the most recent

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Speaker 1: period since the financial crisis in two thousd and eight,

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Speaker 1: it's kind of been a one way, one way um. Bet,

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Speaker 1: I hate to use the word bet, but kind of

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Speaker 1: directionally zero interest rates um doing everything that was was required,

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Speaker 1: that all those efforts kind of redoubled or maybe troubled

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Speaker 1: um during covid um, and it's clearly a different environment

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Speaker 1: right now. So I think the skills of people that

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Speaker 1: are getting marked to market every day, turning their inventory

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Speaker 1: every day far more typical of the trading floors of

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Speaker 1: the of the of the big banks and the hedge funds.

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Speaker 1: Our skills are gonna be paramount going forward. You've lived

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Speaker 1: this in technicolor, and you know, I think of this year,

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Speaker 1: the challenges you've had an at merchant, like a lot

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Speaker 1: of other people in the equity space, and the whole

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Speaker 1: spack thing in crypto and all the rest of this.

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Speaker 1: Are there young Scott Minors out there? Or are we

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Speaker 1: moving so fast in a two and twenty bonus world

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Speaker 1: immediate gratification that we're not building the future Scott minors

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Speaker 1: because is a brain drain out of our major banks.

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Speaker 1: I think you just hit the you know you, you

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Speaker 1: hit it square on the head. Tom. It's up to

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Speaker 1: us as the leaders, because there's definitely the wrought talent

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Speaker 1: out there, and are we're providing an environment um where

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Speaker 1: people can learn m as Scott learned through trading in

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Speaker 1: the US, through trading in Europe, through both trading and

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Speaker 1: being in the investment side of being a real student

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Speaker 1: of the markets and doing the homework day in and

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Speaker 1: day out, the research day in and day out, keeping

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Speaker 1: the relationships with the FED, keeping the relationships with the

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Speaker 1: regulators and the clients. Um. Yes, the talents out there,

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Speaker 1: it's up to us as leaders to develop talent. A

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Speaker 1: Bob Diamond, thank you so much for Thattlas Merchant Capital

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Speaker 1: of Berkleys of Credit Suite and Morgan Stanley from a

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Speaker 1: bit ago. Today the only word one working at Bank

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Speaker 1: of America's Michael gape In their head of US Economics,

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Speaker 1: and we're thrilled to bring him in. Uh this morning.

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Speaker 1: Michael gape In, I've seen adjustments to Q three g

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Speaker 1: d P. We've just seen important QUE four data. Is

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Speaker 1: Q four growth a mystery to you or do you

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Speaker 1: have a confidence in where you stand? It seems like well,

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Speaker 1: first of all, good morning, happy holidays to everyone. It

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Speaker 1: seems like growth will come in certainly less than what

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Speaker 1: we had in the third quarter. You know, estimates are

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Speaker 1: around one to one and a half percent, maybe a

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Speaker 1: little closer to two, but it does think seem like

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Speaker 1: we're moderating into year end, so i'd i'd say somewhere

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Speaker 1: in that range is likely where we're going to end up.

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Speaker 1: But it does, as I think um Mike mentioned, some

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Speaker 1: of the momentum and personal spending and business spending seems

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Speaker 1: to be slowing as we get into year end, So

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Speaker 1: I do think the fourth quarter will be running around

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Speaker 1: half of where we were in the third quarter that

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Speaker 1: slowed down, and we're seeing it in the bond market now,

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Speaker 1: the two year distancing out over where it was before

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Speaker 1: four point three a solid floor basis point higher yield

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Speaker 1: in the two year equities uh for actually on an

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Speaker 1: odd day take it on the chin, is well, how

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Speaker 1: far apart are the markets in economics now? Michael Gabon

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Speaker 1: Not too far. I mean, I still think it's an

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Speaker 1: open question of you know, will we have a recession, when,

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Speaker 1: when will it be? How deep and long lasting might

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Speaker 1: it be? So there will be some disconnect here between say,

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Speaker 1: where equity markets are and bond markets are. It will

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Speaker 1: be hard for equity markets to price in a downturn

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Speaker 1: and kind of know where to revise earnings until we

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Speaker 1: start to see some of that slippage and in the

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Speaker 1: underlying data. So certainly that if you look at the

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Speaker 1: bond market, it is expecting I would say, it is

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Speaker 1: pricing in some mild recession in a FED that's forced

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Speaker 1: to cut in the second half of the year. There's

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Speaker 1: a little dislocation between that and in equity markets. But

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Speaker 1: you know time worlds tell and in this regard, so

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Speaker 1: I'd say, yeah, there is a gap, um and that

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Speaker 1: that gap is gonna narrow at some point in the

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Speaker 1: data is going to tell us one. I was speaking

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Speaker 1: with Peter Sheer of Academy Securities yesterday and he called

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Speaker 1: for outright deflation next year. He said that prices are

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Speaker 1: going to fall, uh, and that inflation is going to

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Speaker 1: fade away. How do you push back against that, Well,

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Speaker 1: I think I think you pushed back and say, two

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Speaker 1: seventy two jobs a month wage growth and you know

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Speaker 1: in the four to four and a half percent range

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Speaker 1: kind of expected at least through the first half of

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Speaker 1: the year. Uh, it's going to be really tough to

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Speaker 1: get deflation unless unless what I'd call it's a bit

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Speaker 1: of a mirage that some of these good prices like

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Speaker 1: use cars, new cars, household furnishings that those just retrace

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Speaker 1: their entire pandemic rise in in twelve months, so that

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Speaker 1: will bring headline inflation down a lot, But underneath, I

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Speaker 1: would still expect services inflation to be firm, so persistent

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Speaker 1: deflation really hard to see at this point. So I'd

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Speaker 1: say it's probably be a composition story unless you think

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Speaker 1: the economy is about to fall off a cliff and

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Speaker 1: the unemployment rates going to I don't know the Larry

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Speaker 1: Summers six to seven to eight percent range. Otherwise, I

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Speaker 1: think it's probably more just a goods retracement story bringing

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Speaker 1: overall inflation down, but I don't think that's where we

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Speaker 1: would settle in. I've noticed a real shift in tone

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Speaker 1: from a lot of the people we've been speaking with.

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Speaker 1: There's new optimism about a soft landing that was not

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Speaker 1: there about a month ago. Do you think that it's

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Speaker 1: misplaced or do you think that there's real evidence of

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Speaker 1: that becoming a greater chance of a reality based on

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Speaker 1: some of the disinflationary action that we've seen with goods,

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Speaker 1: Even though it perhaps hasn't trickled into services as much,

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Speaker 1: I would say it hasn't the data flow in the

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Speaker 1: mix and kind of the rolling over goods prices. We've

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Speaker 1: all been expecting that it's it's it's been about kind

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Speaker 1: of timing and when it would show up. Hasn't really

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Speaker 1: changed my view on the likelihood of a recession in three,

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Speaker 1: because as I think you're getting to it's it's really

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Speaker 1: about the labor market, wage and lation and services, and

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Speaker 1: the FED is not going to feel comfortable that inflation

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Speaker 1: will be going back to two unless it removes and

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Speaker 1: balances from from the labor market. I don't think that

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Speaker 1: picture has changed. It did to Gape, and I'm not

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Speaker 1: a fan of the Michigan data. It's coming out at

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Speaker 1: nine o'clock, but you know, I'm learning to follow it

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Speaker 1: more and more. And the one thing I get a

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Speaker 1: value there is this odd step snapshot of the public

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Speaker 1: of the inflation guestimate five to ten years out, which

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Speaker 1: is called inflation expectations. It's sort of up in a

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Speaker 1: seven level three ish. Are we becoming unanchored in our

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Speaker 1: heart and soul out of Olivier Blanchard's wonderful new research,

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Speaker 1: Are we actually becoming unanchored and towards a higher expected inflation?

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Speaker 1: I don't think so. I think if we look across

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Speaker 1: the University of Michigan data and the and the other

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Speaker 1: data on expectations and market implied measures. I still think

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Speaker 1: we're broadly consistent with low and stable something around around

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Speaker 1: two percent. And I do think with today's PC data,

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Speaker 1: the last couple of CPI reports, I think it'll be

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Speaker 1: kind of built in that, Okay, inflation is coming down.

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Speaker 1: So step step number one, right, gut inflation on a

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Speaker 1: downward trend. Step two, let's see if we can get

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Speaker 1: it around two percent. So I do think it'll it'll

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Speaker 1: become more noticeable that the rate of inflation is slowing.

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Speaker 1: I don't think long run inflation expectations are are inconsistent

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Speaker 1: with what the Fed is trying to achieve. Michael Gabe

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Speaker 1: and thank you so much. Well hunkred in his office

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Speaker 1: right now trying not to go out as Jim Bianco,

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Speaker 1: who are so pleased is willing to join as president

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Speaker 1: of Bianco Research, who has had some stunning calls over

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Speaker 1: this year, has really been a breath of fresh air

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Speaker 1: in his real reassessment of free money and the lack

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Speaker 1: of it. Jim, really, I want to start on one

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Speaker 1: of the big questions ending this year, which is the

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Speaker 1: discrepancy between bond markets and their expectations of what the

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Speaker 1: FED is going to do, and with the Fed is

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Speaker 1: saying they are going to do, which is raised rates

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Speaker 1: a lot more than market A certain certainly allowing for

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Speaker 1: can you end the year helping us to understand who

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Speaker 1: is right? Well that historically usually the market has been right,

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Speaker 1: but in two it's been the Fed. The market has

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Speaker 1: been dragged screaming and kicking to the belief that rates

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Speaker 1: are going to go up. And while both the market

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Speaker 1: and the FED are saying, you know, the terminal rate

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Speaker 1: where they're gonna peak is around five, the market things

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Speaker 1: are going to start cutting rates this year, where the

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Speaker 1: FED has made it pretty much clear that they're not

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Speaker 1: going to be cutting rates this year, and that discrepancy

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Speaker 1: is going to pretty much I think drive you know,

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Speaker 1: investing in the first half of twenty three. Are we

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Speaker 1: going to get the pivot in? Or are we going

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Speaker 1: to get the pivot in? If the market doesn't get

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Speaker 1: the pivot which it is expecting, I think it's there's

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Speaker 1: going to be some room for disappointment. I guess that

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Speaker 1: there's another way of asking this, which is have we

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Speaker 1: really gotten out of the woods with respect to some

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Speaker 1: sort of more substantial financial disruption, or have we seen

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Speaker 1: the bulk of it in terms of the rate move

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Speaker 1: and the realization that we are we are in a

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Speaker 1: new higher rate era. I think we've seen the bulk

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Speaker 1: of the move. Yes, there's still more rate hikes to come.

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Speaker 1: There can be as much as seventy more basis points

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Speaker 1: more between now and say the spring. But yeah, I

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Speaker 1: also think that whether or not we are in an

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Speaker 1: era of higher rates, that's really the question. The market

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Speaker 1: is still of some belief that in the next two

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Speaker 1: years or so, inflation will settle back down to two

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Speaker 1: percent and interest rates can go back down, you know,

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Speaker 1: somewhere around two percent as well, and it can approximate

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Speaker 1: something that we saw pre pandemic. Where I'm more of

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Speaker 1: the camp that we're in a higher rate environment now

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Speaker 1: that really when the Fed starts cutting, you'll get to

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Speaker 1: three and a half and that will be pretty much

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Speaker 1: at uh that's what what easing will be, or maybe

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Speaker 1: three what's what easing will be in the future, and

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Speaker 1: then in the next flare up rates will go higher

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Speaker 1: from there. You know, Jimmyano, you've seen big shifts like

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Speaker 1: let's to the Chicago Cubs landed dansby Cody Bellings. You're

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Speaker 1: coming in, I mean, big shifts for the Cubs going

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Speaker 1: into next year. The big shift in our world is

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Speaker 1: Lisa alluded to, is money now costs something. We have

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Speaker 1: a risk free rate, we have a legitimate sharp ratio.

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Speaker 1: Explained to the ute how things change. Well, I think

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Speaker 1: the big thing with that is that in two we

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Speaker 1: saw that the total return in bonds, you know how

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Speaker 1: much money you lost plus the income you got. Remember

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Speaker 1: you started the year with no income, you started the

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Speaker 1: year with pretty much the zero interest rate has been

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Speaker 1: a record that we've not seen. Bank of America saying

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Speaker 1: it's been a hundred and four years since we've seen

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Speaker 1: these kind of losses in the bond market, and you're right.

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Speaker 1: I mean I'm a little bit surprised too that if

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Speaker 1: you if you told me in January the worst market

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Speaker 1: in a hundred and four years, I would have thought

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Speaker 1: that we would have had a lot more financial disruption

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Speaker 1: then we've had so far. Maybe that's a sign that

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Speaker 1: you know, rates are not as deletarious as we think

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Speaker 1: they can go even higher. But nevertheless, I think as

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Speaker 1: we're move into twenty three, we're gonna start the year

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Speaker 1: with a coupon. We're gonna start the year with an

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Speaker 1: interest rate. So if prices go down, you've got a cushion.

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Speaker 1: Now you've got an interest rate that we haven't seen

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Speaker 1: in fifteen years. But does it mean you know, you

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Speaker 1: go back to eighteen and everything that happened there earlier

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Speaker 1: in the year, folks who did the collapse of Russia

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Speaker 1: after the war in Ukraine and what it did. The

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Speaker 1: JP Morgan is really uh something. Let's drag it forward,

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Speaker 1: Jim to seventy four and we were agreeded in seventy

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Speaker 1: five with up up up. Can stocks stunned this year

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Speaker 1: and do a seventy five or two? Sure? And they

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Speaker 1: need one thing to do that. They need signs that

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Speaker 1: inflation is after all transitory, it is on its way

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Speaker 1: back to two percent without our recession, that that's its

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Speaker 1: natural long run rate, and it's going to stay there.

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Speaker 1: If you see something like that, the Fed can settle down,

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Speaker 1: the market can take off then at that point, but

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Speaker 1: if inflation is not on it's way to two, the

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Speaker 1: market will struggle. I've argued that inflation in the post

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Speaker 1: pandemic era, inflation is this story is the game and

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Speaker 1: it will continue to be and whether or not it

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Speaker 1: goes back to two on its own naturally, inflation is

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Speaker 1: the story as everyone is saying that it is. How

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Speaker 1: important is today's read the last inflation ryd that we

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Speaker 1: get of two as we get a sense of where

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Speaker 1: the consumer is ending the year. I think, you know

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Speaker 1: we're gonna get PC, and the Fed is focused on

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Speaker 1: core PC and they've made Chairman Polls made the case

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Speaker 1: that neutral is getting the interest rates, all interest rates

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Speaker 1: sustainably above uh core PCs rate, which should be about

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Speaker 1: four point five or four point six. When we get

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Speaker 1: the number, well, now that all of a sudden, that

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Speaker 1: puts that interest rate or interest rates within that possibility

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Speaker 1: of getting above the inflation rates, something they haven't been

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Speaker 1: this whole cycle. So if we see that four point

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Speaker 1: five four point six and we see a trending lower,

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Speaker 1: we could be getting a lot closer to at least neutral.

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Speaker 1: According to the fat Jim Biancle, thank you so much

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Speaker 1: from Chicago, Stay warm, Mr Bianco. Bianco Research providing weather

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Speaker 1: forecast for blue mood expiens. This is a joy right now.

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Speaker 1: I usually when I'm giving speeches, I'll say something like

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Speaker 1: you know, the two great things in America antibiotics, air conditioning,

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Speaker 1: and the other great thing is what Brian Kelly invented.

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Speaker 1: He is the points guy and whatever you say, he's

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Speaker 1: a pinata for the industry. Brian Kelly changed how we travel.

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Speaker 1: No way to butt Brian. I did it, Brian Kelly.

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Speaker 1: The other day I took a family member business class

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Speaker 1: the Philippines twenty one thousand dollars. I did the Brian

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Speaker 1: Kelly pixie dust and I paid fifth d six dollars

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Speaker 1: for that trip with a lot of miles. Are those

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Speaker 1: kind of things gonna happen next year? Are we still

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Speaker 1: going to get the mileage pop next year? Absolutely? The

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Speaker 1: airlines depend on the mileage programs. You know, they sold

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Speaker 1: billions of dollars worth of miles, you know, to kind

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Speaker 1: of survive over the pandemic. So the loyalty programs are

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Speaker 1: alive and well, but as you kind of hinted at,

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Speaker 1: their increasing the amount of miles that you need for

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Speaker 1: each trip. So what I recommend to people, instead of

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Speaker 1: holding your miles long term, use them now. And UH

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Speaker 1: airlines like United now you cancel your mileage reservations for free.

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Speaker 1: So what I say during storms like this. Use your

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Speaker 1: frequent Flyer miles as a backup option. If your flight

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Speaker 1: is canceled on one airline, use your miles to fly

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Speaker 1: out on another. Brian, what's so important to me is

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Speaker 1: the idea interviewed. The interview with airline types, which is

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Speaker 1: their optimistic. But I don't see a lot of thrill

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Speaker 1: about investing in the business. They come off the pandemic

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Speaker 1: lows and that are you optimistic on American a dation

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Speaker 1: out of this horrific pandemic? I am, because you know,

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Speaker 1: when you look at the generations millennials, gen Z, people

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Speaker 1: want to travel. You know, wealth and luxury are these

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Speaker 1: days defined by having great experiences, and luxury travel is

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Speaker 1: seeing a huge increase from pre pandemic. I don't see that,

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Speaker 1: you know, showing any signs of slowing down. So I

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Speaker 1: think long term the travel industry will be okay. But

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Speaker 1: you know, every industry right now, there's just so many

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Speaker 1: question marks with what's going to happen in twenty three unemployment,

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Speaker 1: et cetera. But I'm bullish on travel. Maybe bullish on

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Speaker 1: travel for the companies that arrange it, not necessarily the

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Speaker 1: experience of travel for the consumer. We were speaking with

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Speaker 1: Elane Becker over at count and she basically was saying

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Speaker 1: people are going to pay more to get less. How

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Speaker 1: much you seeing that reflected in what's available the perks,

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Speaker 1: whether it's access to clubs, to lounges, whether it's how

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Speaker 1: many points you can use as you're alluding to for

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Speaker 1: each flight. Well, you bring up a good point with

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Speaker 1: the airline lounges. So starting in March, m X Platinum

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Speaker 1: members will no longer be able to bring in ESTs

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Speaker 1: for free into those Centurion lounges. There's so many lines

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Speaker 1: to get into the lounges. Airports are packed, so, uh,

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Speaker 1: you know, the experience is being downgraded. You know. I

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Speaker 1: was just looking at an hotel in Palm Beach in

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Speaker 1: January three thousand dollars a night for a normal room.

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Speaker 1: It's kind of crazy how much inflation has happened in

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Speaker 1: travel um. But consumers don't show signs of pulling back

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Speaker 1: because of these increase in prices. So we'll see. I

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Speaker 1: do think there will be a tipping point where people

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Speaker 1: say this is just crazy. I'm not going to spend

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Speaker 1: this much money, uh for the experience that I get.

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Speaker 1: We haven't gotten there yet though, and that's the reason

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Speaker 1: why you continue to see this inflation. You mentioned hotels.

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Speaker 1: What about on the hotel front, how much can you

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Speaker 1: really use these points systems versus the pushback that you're

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Speaker 1: seeing on the margin certain places in the airline industry. Yeah,

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Speaker 1: hotels are I think particularly egregious. Uh. You know there's

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Speaker 1: still luxury hotels where due to safety, they're not going

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Speaker 1: to do housekeeping, right. I think that's egregious when you're

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Speaker 1: spending at thousand dollars to night and have to thank you. Um.

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Speaker 1: But overall, you know, the hotel industry actually I think

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Speaker 1: is a lot more healthy than the airline industry. The

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Speaker 1: margins there are much better. But loyal I highly recommend

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Speaker 1: to people use your perks on your those hotel branded

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Speaker 1: credit cards. Uh, you get free nights. You know, you

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Speaker 1: can pay nine a year and get a free night

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Speaker 1: at a hotel. So are a lot play the loyalty system.

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Speaker 1: Brian Kelly, I took Kelly three oh two points Guy

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Speaker 1: three oh two. I gotta be minus folks. I really

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Speaker 1: didn't do that well. In Brian. There was a ratio

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Speaker 1: of economy to premium, economy to business class, and I've

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Speaker 1: never seen it as stupid it as is now. I've

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Speaker 1: looked at two recent flights where business business was ten

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Speaker 1: times more expensive than economy. Where are we in two

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Speaker 1: years in the mix on airplanes? Yeah, well, you know,

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Speaker 1: during the pandemic, things slowed down a little bit. Business

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00:23:57,840 --> 00:24:00,720
Speaker 1: was only moderately more expensive because, you know, the companies,

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Speaker 1: the banks weren't paying for those crazy high you know,

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00:24:03,920 --> 00:24:06,960
Speaker 1: fullfare business class prices. You know, the trend is now

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Speaker 1: airlines are putting in premium economy. That's the sweet spot.

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Speaker 1: That's where they're making money. They charge a premium, but

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00:24:12,240 --> 00:24:14,359
Speaker 1: not the five x or ten x that you see

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00:24:14,359 --> 00:24:18,120
Speaker 1: for business class. Um. But airline pricing has always been

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00:24:18,400 --> 00:24:21,679
Speaker 1: frankly insane. Uh and I don't think that's gonna go

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Speaker 1: away anytime soon. Tell me about the other side of

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Speaker 1: the Brian Kelly equation, which is the charge cards. Are

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Speaker 1: the banks enthused by the Brian Kelly world? Yeah, I

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00:24:32,880 --> 00:24:36,919
Speaker 1: mean the banks are making bookoo bucks on the rewards cards.

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00:24:36,960 --> 00:24:41,080
Speaker 1: They want premium consumers, especially going into three, you know,

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00:24:41,119 --> 00:24:43,719
Speaker 1: thoughts of a recession, people getting laid off and not

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00:24:43,760 --> 00:24:46,719
Speaker 1: paying their credit card balances. We're seeing credit card balances

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Speaker 1: for Americans in general, go up dramatically. Over the pandemic,

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Speaker 1: we saw a lot of people pay off their credit.

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Speaker 1: Now Americans are accruing more credit, so the banks want

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Speaker 1: those premium consumers who are gonna pay off in full

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Speaker 1: every month. And uh so those people like the travel cards,

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Speaker 1: and so I see a lot of investment in those

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00:25:06,680 --> 00:25:10,760
Speaker 1: premium travel credit cards. Just real quick here, Brian, do

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Speaker 1: you think it's a fool's errand to try to travel

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Speaker 1: for the December break? I'm just asking for a friend. Well,

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Speaker 1: I know you're you're traveling today. I think especially out

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00:25:20,240 --> 00:25:21,919
Speaker 1: in New York, at third of flights out of Lagarty

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00:25:21,960 --> 00:25:24,640
Speaker 1: are canceled today. So if you're going to travel, pack

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00:25:24,720 --> 00:25:27,040
Speaker 1: your patients. And I really do want to urge everyone

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Speaker 1: be nice to frontline employees at the air Yes, you

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00:25:30,240 --> 00:25:33,720
Speaker 1: know they are underpaid, overworked, and trust me, they want

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Speaker 1: your flight to go out. Don't scream at them. They

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Speaker 1: don't want you in front of them at the game.

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Speaker 1: You know, just be nice this holiday season. And Brian,

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Speaker 1: you know it's a personal note. I'm not supposed to

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Speaker 1: do this, but I'm just gonna say it. You saved

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Speaker 1: me about three months ago with Brian Kelly one on one.

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Speaker 1: I I couldn't believe what I did on some of

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00:25:53,520 --> 00:25:57,000
Speaker 1: these international junk. It's my family's uh jake, and I

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00:25:57,000 --> 00:25:59,960
Speaker 1: can't say enough about it. Folks, usual charge cards care

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00:26:00,040 --> 00:26:03,080
Speaker 1: fully and wisely and try to figure out the points

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00:26:03,240 --> 00:26:05,960
Speaker 1: an annual visit with Mr Kelly, the Points Guy. Thank

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Speaker 1: you so much. This is the Bloomberg Surveillance Podcast. Thanks

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00:26:09,280 --> 00:26:12,600
Speaker 1: for listening. Join us live weekdays from seven to ten

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00:26:12,640 --> 00:26:17,119
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

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00:26:17,240 --> 00:26:20,960
Speaker 1: day from six to nine am for insight from the

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00:26:21,000 --> 00:26:26,200
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

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00:26:26,240 --> 00:26:31,160
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,

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00:26:31,240 --> 00:26:34,480
Speaker 1: and of course on the terminal. I'm Tom Keene, and

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00:26:34,600 --> 00:26:36,520
Speaker 1: this is Bloomberg