Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa A. Brawmowitz. Daily we bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. To find Bloomberg Surveillance on Apple Podcast, Suncloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Terminal.
Speaker 1: I thought we would give you a window into Scott
Speaker 1: Minor's past, and the first thing I said is get
Speaker 1: me Bob Diamond. Bob, thank you so much for joining
Speaker 1: us today. Take us back before Barclays, the credit sweez
Speaker 1: and you add this young Turk making bond decisions. Why
Speaker 1: was Scott Minored special in the trenches of fixed income
Speaker 1: the tumult of Europe in the late eighties early nineties. Uh,
Speaker 1: First of all, I just already missed him terribly. He
Speaker 1: had the kindest soul of anyone I've ever worked with,
Speaker 1: um for every person who worked with and Tom. It
Speaker 1: actually went before that to Morgan Stanley. Scott and I
Speaker 1: were in Morgan Stanley, New York. I moved to London
Speaker 1: in in uh durun international fixed income trading, the trading
Speaker 1: outside the US. Scott was good enough to leave his
Speaker 1: unit and come and join my unit, which was pretty
Speaker 1: new at the time. And when I think back at
Speaker 1: the at the incredible transaction we did during that period.
Speaker 1: Not many people recall this, but we did the first
Speaker 1: European currency unit bond ever issued in Scott and I
Speaker 1: were at Morgan Stanley UM. Ironically the issuer was the
Speaker 1: Bank of England and it was certainly a precursor to
Speaker 1: all that came following that with a single currency and
Speaker 1: the introduction of the Euro. That was just to me
Speaker 1: just another example of how Scott was always at the
Speaker 1: very very fourth front of everything going on in the
Speaker 1: fixed income markets. The Scarlet fu and our FED coverage
Speaker 1: have always seen how he's supple, how he could change
Speaker 1: his mind. As I say, he had a train of
Speaker 1: thought like a cp A, not like some fancy cf
Speaker 1: A Macro Bologny. But the answer is Scott minored for
Speaker 1: you and others, including Googaneim had to manage risk. What
Speaker 1: was the key risk attribute that he had daily on
Speaker 1: the desk at Morgan Stanley and a credit suez UM
Speaker 1: I think of a time at credit suites. First of all,
Speaker 1: this this is a this is a man who loved
Speaker 1: studying the markets, studying the FED. Always had a grasp
Speaker 1: on the macro environment, the medium term, the long term,
Speaker 1: and all of his shorter term actions were based on those.
Speaker 1: What a lot of people forget is the actions he
Speaker 1: took in Scott was working for me as head of
Speaker 1: credit trading at CSFB in New York. You will recall
Speaker 1: that was the last time we had this kind of
Speaker 1: real strong rate increase, and at that time the victim
Speaker 1: was Orange County. UM, and I remember Scott coming into
Speaker 1: my office. We sat down with a group of traders.
Speaker 1: He was the first to recognize the problems in Orange County.
Speaker 1: By that afternoon, we had exited every position. UM. These
Speaker 1: were repo positions. All the money was returned to Orange County,
Speaker 1: and it triggered the liquidation of those repo positions across
Speaker 1: all the other dealers. And to me, it was the
Speaker 1: vision Scott had then and has always had his grasp
Speaker 1: of the macro and his grasp of what was right
Speaker 1: for the regulators as well as what was right for
Speaker 1: us at c SFB. And one of the things that
Speaker 1: goes unrecognized is the incredible execution. We're out of those
Speaker 1: positions by the afternoon of the first recognition of what
Speaker 1: was going on with the at the time, the Orange
Speaker 1: County debacle. Tremendous, tremendous professional the nimbleness that it takes
Speaker 1: to be able to do that, the conviction, but also
Speaker 1: what we've been talking about all years. He melity to
Speaker 1: change your mind, to move on a dime. How did
Speaker 1: he embody that in a way that really speaks volumes
Speaker 1: to you about what it takes to be successful in
Speaker 1: a very changing place, which is Wall Street. Um, you know,
Speaker 1: I think right to your point, Leasa. Interesting is his
Speaker 1: move from Morgan Stanley and CSFP, where he was trading
Speaker 1: and every night was marked to market and most days
Speaker 1: you were turning over your inventory. His evolution into the
Speaker 1: investment management side, I think was a critical factor for Scott.
Speaker 1: If he could be better at something than he was
Speaker 1: at taking risk in the fixed income markets, he was
Speaker 1: even better as an investor, and I think that was
Speaker 1: because he spent so much time truly studying what was
Speaker 1: going on with the FED and the other central banks,
Speaker 1: and he had such a firm grisp on policy, so
Speaker 1: that all of his micro decisions were based around a
Speaker 1: conviction of what was happening in the mac environment, but
Speaker 1: he never sat on it, Lisa, Just to your point,
Speaker 1: he studied it consistently day in and day out. And um,
Speaker 1: I don't know anyone in either the trading environment or
Speaker 1: the investment management environment that spent as much time doing research,
Speaker 1: you know, throughout his career, even in the very very
Speaker 1: senior position he was in more recently at Guggenheim. As
Speaker 1: we enter a new territory, a new era, some people
Speaker 1: are calling it where perhaps central banks are not going
Speaker 1: to be the tailwin that they were for so long.
Speaker 1: Is your view that Wall Street and trading desks more
Speaker 1: generally have that spirit more broadly, or do you think
Speaker 1: that perhaps there is a lack of that experience on
Speaker 1: some of the trading floors after all of the churn
Speaker 1: that we've seen in the past decades. Well, listen, there's
Speaker 1: no question that the experience of people that grew up
Speaker 1: on trading desks in the eighties and the nineties and
Speaker 1: the two thousands is very different than the most recent
Speaker 1: period since the financial crisis in two thousd and eight,
Speaker 1: it's kind of been a one way, one way um. Bet,
Speaker 1: I hate to use the word bet, but kind of
Speaker 1: directionally zero interest rates um doing everything that was was required,
Speaker 1: that all those efforts kind of redoubled or maybe troubled
Speaker 1: um during covid um, and it's clearly a different environment
Speaker 1: right now. So I think the skills of people that
Speaker 1: are getting marked to market every day, turning their inventory
Speaker 1: every day far more typical of the trading floors of
Speaker 1: the of the of the big banks and the hedge funds.
Speaker 1: Our skills are gonna be paramount going forward. You've lived
Speaker 1: this in technicolor, and you know, I think of this year,
Speaker 1: the challenges you've had an at merchant, like a lot
Speaker 1: of other people in the equity space, and the whole
Speaker 1: spack thing in crypto and all the rest of this.
Speaker 1: Are there young Scott Minors out there? Or are we
Speaker 1: moving so fast in a two and twenty bonus world
Speaker 1: immediate gratification that we're not building the future Scott minors
Speaker 1: because is a brain drain out of our major banks.
Speaker 1: I think you just hit the you know you, you
Speaker 1: hit it square on the head. Tom. It's up to
Speaker 1: us as the leaders, because there's definitely the wrought talent
Speaker 1: out there, and are we're providing an environment um where
Speaker 1: people can learn m as Scott learned through trading in
Speaker 1: the US, through trading in Europe, through both trading and
Speaker 1: being in the investment side of being a real student
Speaker 1: of the markets and doing the homework day in and
Speaker 1: day out, the research day in and day out, keeping
Speaker 1: the relationships with the FED, keeping the relationships with the
Speaker 1: regulators and the clients. Um. Yes, the talents out there,
Speaker 1: it's up to us as leaders to develop talent. A
Speaker 1: Bob Diamond, thank you so much for Thattlas Merchant Capital
Speaker 1: of Berkleys of Credit Suite and Morgan Stanley from a
Speaker 1: bit ago. Today the only word one working at Bank
Speaker 1: of America's Michael gape In their head of US Economics,
Speaker 1: and we're thrilled to bring him in. Uh this morning.
Speaker 1: Michael gape In, I've seen adjustments to Q three g
Speaker 1: d P. We've just seen important QUE four data. Is
Speaker 1: Q four growth a mystery to you or do you
Speaker 1: have a confidence in where you stand? It seems like well,
Speaker 1: first of all, good morning, happy holidays to everyone. It
Speaker 1: seems like growth will come in certainly less than what
Speaker 1: we had in the third quarter. You know, estimates are
Speaker 1: around one to one and a half percent, maybe a
Speaker 1: little closer to two, but it does think seem like
Speaker 1: we're moderating into year end, so i'd i'd say somewhere
Speaker 1: in that range is likely where we're going to end up.
Speaker 1: But it does, as I think um Mike mentioned, some
Speaker 1: of the momentum and personal spending and business spending seems
Speaker 1: to be slowing as we get into year end, So
Speaker 1: I do think the fourth quarter will be running around
Speaker 1: half of where we were in the third quarter that
Speaker 1: slowed down, and we're seeing it in the bond market now,
Speaker 1: the two year distancing out over where it was before
Speaker 1: four point three a solid floor basis point higher yield
Speaker 1: in the two year equities uh for actually on an
Speaker 1: odd day take it on the chin, is well, how
Speaker 1: far apart are the markets in economics now? Michael Gabon
Speaker 1: Not too far. I mean, I still think it's an
Speaker 1: open question of you know, will we have a recession, when,
Speaker 1: when will it be? How deep and long lasting might
Speaker 1: it be? So there will be some disconnect here between say,
Speaker 1: where equity markets are and bond markets are. It will
Speaker 1: be hard for equity markets to price in a downturn
Speaker 1: and kind of know where to revise earnings until we
Speaker 1: start to see some of that slippage and in the
Speaker 1: underlying data. So certainly that if you look at the
Speaker 1: bond market, it is expecting I would say, it is
Speaker 1: pricing in some mild recession in a FED that's forced
Speaker 1: to cut in the second half of the year. There's
Speaker 1: a little dislocation between that and in equity markets. But
Speaker 1: you know time worlds tell and in this regard, so
Speaker 1: I'd say, yeah, there is a gap, um and that
Speaker 1: that gap is gonna narrow at some point in the
Speaker 1: data is going to tell us one. I was speaking
Speaker 1: with Peter Sheer of Academy Securities yesterday and he called
Speaker 1: for outright deflation next year. He said that prices are
Speaker 1: going to fall, uh, and that inflation is going to
Speaker 1: fade away. How do you push back against that, Well,
Speaker 1: I think I think you pushed back and say, two
Speaker 1: seventy two jobs a month wage growth and you know
Speaker 1: in the four to four and a half percent range
Speaker 1: kind of expected at least through the first half of
Speaker 1: the year. Uh, it's going to be really tough to
Speaker 1: get deflation unless unless what I'd call it's a bit
Speaker 1: of a mirage that some of these good prices like
Speaker 1: use cars, new cars, household furnishings that those just retrace
Speaker 1: their entire pandemic rise in in twelve months, so that
Speaker 1: will bring headline inflation down a lot, But underneath, I
Speaker 1: would still expect services inflation to be firm, so persistent
Speaker 1: deflation really hard to see at this point. So I'd
Speaker 1: say it's probably be a composition story unless you think
Speaker 1: the economy is about to fall off a cliff and
Speaker 1: the unemployment rates going to I don't know the Larry
Speaker 1: Summers six to seven to eight percent range. Otherwise, I
Speaker 1: think it's probably more just a goods retracement story bringing
Speaker 1: overall inflation down, but I don't think that's where we
Speaker 1: would settle in. I've noticed a real shift in tone
Speaker 1: from a lot of the people we've been speaking with.
Speaker 1: There's new optimism about a soft landing that was not
Speaker 1: there about a month ago. Do you think that it's
Speaker 1: misplaced or do you think that there's real evidence of
Speaker 1: that becoming a greater chance of a reality based on
Speaker 1: some of the disinflationary action that we've seen with goods,
Speaker 1: Even though it perhaps hasn't trickled into services as much,
Speaker 1: I would say it hasn't the data flow in the
Speaker 1: mix and kind of the rolling over goods prices. We've
Speaker 1: all been expecting that it's it's it's been about kind
Speaker 1: of timing and when it would show up. Hasn't really
Speaker 1: changed my view on the likelihood of a recession in three,
Speaker 1: because as I think you're getting to it's it's really
Speaker 1: about the labor market, wage and lation and services, and
Speaker 1: the FED is not going to feel comfortable that inflation
Speaker 1: will be going back to two unless it removes and
Speaker 1: balances from from the labor market. I don't think that
Speaker 1: picture has changed. It did to Gape, and I'm not
Speaker 1: a fan of the Michigan data. It's coming out at
Speaker 1: nine o'clock, but you know, I'm learning to follow it
Speaker 1: more and more. And the one thing I get a
Speaker 1: value there is this odd step snapshot of the public
Speaker 1: of the inflation guestimate five to ten years out, which
Speaker 1: is called inflation expectations. It's sort of up in a
Speaker 1: seven level three ish. Are we becoming unanchored in our
Speaker 1: heart and soul out of Olivier Blanchard's wonderful new research,
Speaker 1: Are we actually becoming unanchored and towards a higher expected inflation?
Speaker 1: I don't think so. I think if we look across
Speaker 1: the University of Michigan data and the and the other
Speaker 1: data on expectations and market implied measures. I still think
Speaker 1: we're broadly consistent with low and stable something around around
Speaker 1: two percent. And I do think with today's PC data,
Speaker 1: the last couple of CPI reports, I think it'll be
Speaker 1: kind of built in that, Okay, inflation is coming down.
Speaker 1: So step step number one, right, gut inflation on a
Speaker 1: downward trend. Step two, let's see if we can get
Speaker 1: it around two percent. So I do think it'll it'll
Speaker 1: become more noticeable that the rate of inflation is slowing.
Speaker 1: I don't think long run inflation expectations are are inconsistent
Speaker 1: with what the Fed is trying to achieve. Michael Gabe
Speaker 1: and thank you so much. Well hunkred in his office
Speaker 1: right now trying not to go out as Jim Bianco,
Speaker 1: who are so pleased is willing to join as president
Speaker 1: of Bianco Research, who has had some stunning calls over
Speaker 1: this year, has really been a breath of fresh air
Speaker 1: in his real reassessment of free money and the lack
Speaker 1: of it. Jim, really, I want to start on one
Speaker 1: of the big questions ending this year, which is the
Speaker 1: discrepancy between bond markets and their expectations of what the
Speaker 1: FED is going to do, and with the Fed is
Speaker 1: saying they are going to do, which is raised rates
Speaker 1: a lot more than market A certain certainly allowing for
Speaker 1: can you end the year helping us to understand who
Speaker 1: is right? Well that historically usually the market has been right,
Speaker 1: but in two it's been the Fed. The market has
Speaker 1: been dragged screaming and kicking to the belief that rates
Speaker 1: are going to go up. And while both the market
Speaker 1: and the FED are saying, you know, the terminal rate
Speaker 1: where they're gonna peak is around five, the market things
Speaker 1: are going to start cutting rates this year, where the
Speaker 1: FED has made it pretty much clear that they're not
Speaker 1: going to be cutting rates this year, and that discrepancy
Speaker 1: is going to pretty much I think drive you know,
Speaker 1: investing in the first half of twenty three. Are we
Speaker 1: going to get the pivot in? Or are we going
Speaker 1: to get the pivot in? If the market doesn't get
Speaker 1: the pivot which it is expecting, I think it's there's
Speaker 1: going to be some room for disappointment. I guess that
Speaker 1: there's another way of asking this, which is have we
Speaker 1: really gotten out of the woods with respect to some
Speaker 1: sort of more substantial financial disruption, or have we seen
Speaker 1: the bulk of it in terms of the rate move
Speaker 1: and the realization that we are we are in a
Speaker 1: new higher rate era. I think we've seen the bulk
Speaker 1: of the move. Yes, there's still more rate hikes to come.
Speaker 1: There can be as much as seventy more basis points
Speaker 1: more between now and say the spring. But yeah, I
Speaker 1: also think that whether or not we are in an
Speaker 1: era of higher rates, that's really the question. The market
Speaker 1: is still of some belief that in the next two
Speaker 1: years or so, inflation will settle back down to two
Speaker 1: percent and interest rates can go back down, you know,
Speaker 1: somewhere around two percent as well, and it can approximate
Speaker 1: something that we saw pre pandemic. Where I'm more of
Speaker 1: the camp that we're in a higher rate environment now
Speaker 1: that really when the Fed starts cutting, you'll get to
Speaker 1: three and a half and that will be pretty much
Speaker 1: at uh that's what what easing will be, or maybe
Speaker 1: three what's what easing will be in the future, and
Speaker 1: then in the next flare up rates will go higher
Speaker 1: from there. You know, Jimmyano, you've seen big shifts like
Speaker 1: let's to the Chicago Cubs landed dansby Cody Bellings. You're
Speaker 1: coming in, I mean, big shifts for the Cubs going
Speaker 1: into next year. The big shift in our world is
Speaker 1: Lisa alluded to, is money now costs something. We have
Speaker 1: a risk free rate, we have a legitimate sharp ratio.
Speaker 1: Explained to the ute how things change. Well, I think
Speaker 1: the big thing with that is that in two we
Speaker 1: saw that the total return in bonds, you know how
Speaker 1: much money you lost plus the income you got. Remember
Speaker 1: you started the year with no income, you started the
Speaker 1: year with pretty much the zero interest rate has been
Speaker 1: a record that we've not seen. Bank of America saying
Speaker 1: it's been a hundred and four years since we've seen
Speaker 1: these kind of losses in the bond market, and you're right.
Speaker 1: I mean I'm a little bit surprised too that if
Speaker 1: you if you told me in January the worst market
Speaker 1: in a hundred and four years, I would have thought
Speaker 1: that we would have had a lot more financial disruption
Speaker 1: then we've had so far. Maybe that's a sign that
Speaker 1: you know, rates are not as deletarious as we think
Speaker 1: they can go even higher. But nevertheless, I think as
Speaker 1: we're move into twenty three, we're gonna start the year
Speaker 1: with a coupon. We're gonna start the year with an
Speaker 1: interest rate. So if prices go down, you've got a cushion.
Speaker 1: Now you've got an interest rate that we haven't seen
Speaker 1: in fifteen years. But does it mean you know, you
Speaker 1: go back to eighteen and everything that happened there earlier
Speaker 1: in the year, folks who did the collapse of Russia
Speaker 1: after the war in Ukraine and what it did. The
Speaker 1: JP Morgan is really uh something. Let's drag it forward,
Speaker 1: Jim to seventy four and we were agreeded in seventy
Speaker 1: five with up up up. Can stocks stunned this year
Speaker 1: and do a seventy five or two? Sure? And they
Speaker 1: need one thing to do that. They need signs that
Speaker 1: inflation is after all transitory, it is on its way
Speaker 1: back to two percent without our recession, that that's its
Speaker 1: natural long run rate, and it's going to stay there.
Speaker 1: If you see something like that, the Fed can settle down,
Speaker 1: the market can take off then at that point, but
Speaker 1: if inflation is not on it's way to two, the
Speaker 1: market will struggle. I've argued that inflation in the post
Speaker 1: pandemic era, inflation is this story is the game and
Speaker 1: it will continue to be and whether or not it
Speaker 1: goes back to two on its own naturally, inflation is
Speaker 1: the story as everyone is saying that it is. How
Speaker 1: important is today's read the last inflation ryd that we
Speaker 1: get of two as we get a sense of where
Speaker 1: the consumer is ending the year. I think, you know
Speaker 1: we're gonna get PC, and the Fed is focused on
Speaker 1: core PC and they've made Chairman Polls made the case
Speaker 1: that neutral is getting the interest rates, all interest rates
Speaker 1: sustainably above uh core PCs rate, which should be about
Speaker 1: four point five or four point six. When we get
Speaker 1: the number, well, now that all of a sudden, that
Speaker 1: puts that interest rate or interest rates within that possibility
Speaker 1: of getting above the inflation rates, something they haven't been
Speaker 1: this whole cycle. So if we see that four point
Speaker 1: five four point six and we see a trending lower,
Speaker 1: we could be getting a lot closer to at least neutral.
Speaker 1: According to the fat Jim Biancle, thank you so much
Speaker 1: from Chicago, Stay warm, Mr Bianco. Bianco Research providing weather
Speaker 1: forecast for blue mood expiens. This is a joy right now.
Speaker 1: I usually when I'm giving speeches, I'll say something like
Speaker 1: you know, the two great things in America antibiotics, air conditioning,
Speaker 1: and the other great thing is what Brian Kelly invented.
Speaker 1: He is the points guy and whatever you say, he's
Speaker 1: a pinata for the industry. Brian Kelly changed how we travel.
Speaker 1: No way to butt Brian. I did it, Brian Kelly.
Speaker 1: The other day I took a family member business class
Speaker 1: the Philippines twenty one thousand dollars. I did the Brian
Speaker 1: Kelly pixie dust and I paid fifth d six dollars
Speaker 1: for that trip with a lot of miles. Are those
Speaker 1: kind of things gonna happen next year? Are we still
Speaker 1: going to get the mileage pop next year? Absolutely? The
Speaker 1: airlines depend on the mileage programs. You know, they sold
Speaker 1: billions of dollars worth of miles, you know, to kind
Speaker 1: of survive over the pandemic. So the loyalty programs are
Speaker 1: alive and well, but as you kind of hinted at,
Speaker 1: their increasing the amount of miles that you need for
Speaker 1: each trip. So what I recommend to people, instead of
Speaker 1: holding your miles long term, use them now. And UH
Speaker 1: airlines like United now you cancel your mileage reservations for free.
Speaker 1: So what I say during storms like this. Use your
Speaker 1: frequent Flyer miles as a backup option. If your flight
Speaker 1: is canceled on one airline, use your miles to fly
Speaker 1: out on another. Brian, what's so important to me is
Speaker 1: the idea interviewed. The interview with airline types, which is
Speaker 1: their optimistic. But I don't see a lot of thrill
Speaker 1: about investing in the business. They come off the pandemic
Speaker 1: lows and that are you optimistic on American a dation
Speaker 1: out of this horrific pandemic? I am, because you know,
Speaker 1: when you look at the generations millennials, gen Z, people
Speaker 1: want to travel. You know, wealth and luxury are these
Speaker 1: days defined by having great experiences, and luxury travel is
Speaker 1: seeing a huge increase from pre pandemic. I don't see that,
Speaker 1: you know, showing any signs of slowing down. So I
Speaker 1: think long term the travel industry will be okay. But
Speaker 1: you know, every industry right now, there's just so many
Speaker 1: question marks with what's going to happen in twenty three unemployment,
Speaker 1: et cetera. But I'm bullish on travel. Maybe bullish on
Speaker 1: travel for the companies that arrange it, not necessarily the
Speaker 1: experience of travel for the consumer. We were speaking with
Speaker 1: Elane Becker over at count and she basically was saying
Speaker 1: people are going to pay more to get less. How
Speaker 1: much you seeing that reflected in what's available the perks,
Speaker 1: whether it's access to clubs, to lounges, whether it's how
Speaker 1: many points you can use as you're alluding to for
Speaker 1: each flight. Well, you bring up a good point with
Speaker 1: the airline lounges. So starting in March, m X Platinum
Speaker 1: members will no longer be able to bring in ESTs
Speaker 1: for free into those Centurion lounges. There's so many lines
Speaker 1: to get into the lounges. Airports are packed, so, uh,
Speaker 1: you know, the experience is being downgraded. You know. I
Speaker 1: was just looking at an hotel in Palm Beach in
Speaker 1: January three thousand dollars a night for a normal room.
Speaker 1: It's kind of crazy how much inflation has happened in
Speaker 1: travel um. But consumers don't show signs of pulling back
Speaker 1: because of these increase in prices. So we'll see. I
Speaker 1: do think there will be a tipping point where people
Speaker 1: say this is just crazy. I'm not going to spend
Speaker 1: this much money, uh for the experience that I get.
Speaker 1: We haven't gotten there yet though, and that's the reason
Speaker 1: why you continue to see this inflation. You mentioned hotels.
Speaker 1: What about on the hotel front, how much can you
Speaker 1: really use these points systems versus the pushback that you're
Speaker 1: seeing on the margin certain places in the airline industry. Yeah,
Speaker 1: hotels are I think particularly egregious. Uh. You know there's
Speaker 1: still luxury hotels where due to safety, they're not going
Speaker 1: to do housekeeping, right. I think that's egregious when you're
Speaker 1: spending at thousand dollars to night and have to thank you. Um.
Speaker 1: But overall, you know, the hotel industry actually I think
Speaker 1: is a lot more healthy than the airline industry. The
Speaker 1: margins there are much better. But loyal I highly recommend
Speaker 1: to people use your perks on your those hotel branded
Speaker 1: credit cards. Uh, you get free nights. You know, you
Speaker 1: can pay nine a year and get a free night
Speaker 1: at a hotel. So are a lot play the loyalty system.
Speaker 1: Brian Kelly, I took Kelly three oh two points Guy
Speaker 1: three oh two. I gotta be minus folks. I really
Speaker 1: didn't do that well. In Brian. There was a ratio
Speaker 1: of economy to premium, economy to business class, and I've
Speaker 1: never seen it as stupid it as is now. I've
Speaker 1: looked at two recent flights where business business was ten
Speaker 1: times more expensive than economy. Where are we in two
Speaker 1: years in the mix on airplanes? Yeah, well, you know,
Speaker 1: during the pandemic, things slowed down a little bit. Business
Speaker 1: was only moderately more expensive because, you know, the companies,
Speaker 1: the banks weren't paying for those crazy high you know,
Speaker 1: fullfare business class prices. You know, the trend is now
Speaker 1: airlines are putting in premium economy. That's the sweet spot.
Speaker 1: That's where they're making money. They charge a premium, but
Speaker 1: not the five x or ten x that you see
Speaker 1: for business class. Um. But airline pricing has always been
Speaker 1: frankly insane. Uh and I don't think that's gonna go
Speaker 1: away anytime soon. Tell me about the other side of
Speaker 1: the Brian Kelly equation, which is the charge cards. Are
Speaker 1: the banks enthused by the Brian Kelly world? Yeah, I
Speaker 1: mean the banks are making bookoo bucks on the rewards cards.
Speaker 1: They want premium consumers, especially going into three, you know,
Speaker 1: thoughts of a recession, people getting laid off and not
Speaker 1: paying their credit card balances. We're seeing credit card balances
Speaker 1: for Americans in general, go up dramatically. Over the pandemic,
Speaker 1: we saw a lot of people pay off their credit.
Speaker 1: Now Americans are accruing more credit, so the banks want
Speaker 1: those premium consumers who are gonna pay off in full
Speaker 1: every month. And uh so those people like the travel cards,
Speaker 1: and so I see a lot of investment in those
Speaker 1: premium travel credit cards. Just real quick here, Brian, do
Speaker 1: you think it's a fool's errand to try to travel
Speaker 1: for the December break? I'm just asking for a friend. Well,
Speaker 1: I know you're you're traveling today. I think especially out
Speaker 1: in New York, at third of flights out of Lagarty
Speaker 1: are canceled today. So if you're going to travel, pack
Speaker 1: your patients. And I really do want to urge everyone
Speaker 1: be nice to frontline employees at the air Yes, you
Speaker 1: know they are underpaid, overworked, and trust me, they want
Speaker 1: your flight to go out. Don't scream at them. They
Speaker 1: don't want you in front of them at the game.
Speaker 1: You know, just be nice this holiday season. And Brian,
Speaker 1: you know it's a personal note. I'm not supposed to
Speaker 1: do this, but I'm just gonna say it. You saved
Speaker 1: me about three months ago with Brian Kelly one on one.
Speaker 1: I I couldn't believe what I did on some of
Speaker 1: these international junk. It's my family's uh jake, and I
Speaker 1: can't say enough about it. Folks, usual charge cards care
Speaker 1: fully and wisely and try to figure out the points
Speaker 1: an annual visit with Mr Kelly, the Points Guy. Thank
Speaker 1: you so much. This is the Bloomberg Surveillance Podcast. Thanks
Speaker 1: for listening. Join us live weekdays from seven to ten
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each
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Speaker 1: and of course on the terminal. I'm Tom Keene, and
Speaker 1: this is Bloomberg