WEBVTT - Time to Keep Reducing Risk, Particularly EM, Some Stocks: Tchir 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.440 Along with my co host Lisa A. Bramowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:32.360 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:32.360 --> 0:00:36.960 It was a choppy response to the consumer price Index 0:00:37.000 --> 0:00:40.199 as well as the retail sales number. Uh. Here to 0:00:40.320 --> 0:00:43.640 kind of have us shape our idea of how to 0:00:43.760 --> 0:00:46.240 view these two numbers is Peter Sheer, head of macro 0:00:46.320 --> 0:00:50.720 strategy at Academy Securities based in Connecticut. Peter, thank you 0:00:50.720 --> 0:00:53.680 so much for joining us. So Uh, the initial response 0:00:53.760 --> 0:00:58.480 was to sell stocks, sell bonds, gold Who knows? People 0:00:58.600 --> 0:01:00.400 just wringing their hands. What don't you ache of this? 0:01:00.440 --> 0:01:03.080 I mean, was this a good report given the CPI 0:01:03.280 --> 0:01:05.800 accelerating fast more than people expected, or was it a 0:01:05.800 --> 0:01:08.440 bad report given the retail sales coming in in an 0:01:08.520 --> 0:01:13.800 underwhelming way. I think it is a bad report. Um. 0:01:13.840 --> 0:01:16.800 I think this retail sales is very problematic, and when 0:01:16.840 --> 0:01:18.720 I look back at some of the recent data we had, 0:01:19.040 --> 0:01:21.120 I think it was the Richmond said, the New York said, 0:01:21.120 --> 0:01:23.800 a lot of the regional feds have missed on their reports. 0:01:24.360 --> 0:01:26.760 I look at the city Economic Surprise Index that's been 0:01:26.760 --> 0:01:30.080 turning down. So the one thing that helps this market 0:01:30.120 --> 0:01:33.039 through all this volatility is this real belief that the 0:01:33.040 --> 0:01:35.640 fundamentals are okay. I'm wondering if this is going to 0:01:35.720 --> 0:01:38.800 call it some of that into question. So Pete, what's 0:01:38.840 --> 0:01:42.280 the trade? I think you continue to sell risk. We 0:01:42.440 --> 0:01:45.720 bounced off that low on Friday. We have an opportunity 0:01:45.760 --> 0:01:47.600 to take off some risks. I think you want to 0:01:47.600 --> 0:01:50.280 be careful here. It's still very volatile, it's still very 0:01:50.360 --> 0:01:53.760 uncertain what's going on. And if there is anything that 0:01:53.800 --> 0:01:56.920 starts to show weakness in the economy or some of 0:01:57.040 --> 0:01:59.640 the trade negotiations start turning bad, I think there's just 0:01:59.760 --> 0:02:02.080 some more downside and going back to those glows. Okay, 0:02:02.120 --> 0:02:05.760 So what risk do you sell? Do you sell riskier 0:02:06.040 --> 0:02:08.760 credit in the US? Do you sell emerging markets? Do 0:02:08.800 --> 0:02:11.760 you sell stocks? I think you saw a little bit 0:02:11.760 --> 0:02:14.720 of stocks here. I think emerging markets. I would not 0:02:14.800 --> 0:02:17.320 be selling high yield here, although people are selling that 0:02:17.360 --> 0:02:19.280 again today, only because I think that has become a 0:02:19.440 --> 0:02:22.320 very crowded short position. For some reason, people in the 0:02:22.320 --> 0:02:24.960 credit markets state high yield. If you're a macro player, 0:02:24.960 --> 0:02:27.320 you hate high yield. Everyone's kind of stixated on high 0:02:27.360 --> 0:02:30.840 yield as a short, and it's very costly to short 0:02:30.919 --> 0:02:33.680 that right now. So I think there's better opportunities, So 0:02:33.680 --> 0:02:36.040 I'd be probably shorting some em and more likely even 0:02:36.120 --> 0:02:39.240 some US equities of here. So with emerging markets, how 0:02:39.280 --> 0:02:43.080 should people be trying to either go short UH emerging 0:02:43.080 --> 0:02:45.079 markets or should they just sell? Because I was looking 0:02:45.160 --> 0:02:49.320 this morning at UH spreads, extra yield over benchmarks on 0:02:49.800 --> 0:02:52.280 high yield bonds in the US versus high old bonds 0:02:52.280 --> 0:02:56.680 and emerging markets, and right now you're getting no premium 0:02:56.760 --> 0:03:00.160 whatsoever for going into emerging markets high yield bonds or 0:03:00.240 --> 0:03:03.240 US high old bonds. How do people play that? I 0:03:03.240 --> 0:03:04.760 think you could take a look at something like e 0:03:04.919 --> 0:03:08.760 m B, which is a emerging market bond ets. It's 0:03:08.760 --> 0:03:10.600 not going to quite capture what you're looking at there, 0:03:10.600 --> 0:03:12.160 but I think close enough. And I think that's what 0:03:12.160 --> 0:03:13.800 people are going to start doing, is they're gonna look 0:03:13.840 --> 0:03:16.160 at high heels and say, wow, my high heeld bonds 0:03:16.160 --> 0:03:18.400 are down three points or four points and my e 0:03:18.560 --> 0:03:21.280 M bonds only down one point, Maybe I should sell those. 0:03:21.320 --> 0:03:24.600 So I think that is a relative value transformation that 0:03:24.639 --> 0:03:27.560 tends to occur. So, Peter, why you're not fixing it 0:03:27.600 --> 0:03:33.600 on the consumer Price Index? It's been so volatile. They 0:03:33.600 --> 0:03:35.160 have told us, you know, time and time again to 0:03:35.200 --> 0:03:39.200 focus on PC. Anyways, it's one number and of anything. 0:03:39.520 --> 0:03:41.600 If I really want to fixate on this, you start 0:03:41.640 --> 0:03:43.920 getting nervous that we're seeing from signs of stagflation. Right, 0:03:43.920 --> 0:03:47.600 we're finally creating inflation without the underlying growth. Maybe there 0:03:47.600 --> 0:03:50.040 that needs to be Again, it's premature to look at 0:03:50.040 --> 0:03:52.600 it like that, but I think we're gonna start testing 0:03:52.640 --> 0:03:56.800 this whole economic fundamental is great theory in the next 0:03:56.840 --> 0:03:58.920 week or so in terms of data. So what does 0:03:58.960 --> 0:04:00.760 this do for the FED? I mean, right now the 0:04:00.760 --> 0:04:04.360 market is pricing chance of a March rate hike. Does 0:04:04.400 --> 0:04:07.800 this mean that they have more ammunition to increase rates 0:04:07.840 --> 0:04:11.080 faster because of some inflationary pressure, or does that mean 0:04:11.080 --> 0:04:14.080 that they're going to hold back because there's sort of 0:04:14.080 --> 0:04:18.080 a questionable dynamic underlying the growth story. My view is 0:04:18.120 --> 0:04:20.200 that they will hike in March. I think that's still 0:04:20.240 --> 0:04:22.240 on the table, and you know the CPI lets them 0:04:22.279 --> 0:04:24.400 do that, but I think they will give us some 0:04:24.440 --> 0:04:26.920 cautionary tales that they want to watch what's going on 0:04:27.000 --> 0:04:29.320 with the consumer. You know, this is now not just 0:04:29.360 --> 0:04:32.680 this month number is bad, but they revised down last month. 0:04:33.160 --> 0:04:36.279 You've seen an uptick and credit card delinquencies. You've also 0:04:36.320 --> 0:04:38.839 seen all these bizarre stories. To me, I in mind 0:04:39.240 --> 0:04:41.640 of people not being allowed to buy bitcoin on their 0:04:41.640 --> 0:04:44.080 credit cards, which cause into questions who is buying bitcoin 0:04:44.160 --> 0:04:46.520 on credit cards? So I think they're going to be 0:04:46.560 --> 0:04:48.960 cautious and say, hey, we've risen rates a lot, let's 0:04:49.000 --> 0:04:52.040 see what this does to the consumer. Pete, what about 0:04:52.040 --> 0:04:54.640 stag inflation? What would have to happen for you to 0:04:54.800 --> 0:04:57.880 make that a headline for you? I think we need 0:04:57.920 --> 0:05:02.440 to really believe that inflation is here, and I just 0:05:02.560 --> 0:05:04.479 questioned that. And we're starting to see, you know, things 0:05:04.520 --> 0:05:06.720 like oil rolled over a little bit, so a lot 0:05:06.720 --> 0:05:09.360 of the inflationary pressures that were there. I think we'll 0:05:09.400 --> 0:05:13.240 go down. We will see maybe there are going to 0:05:13.279 --> 0:05:15.440 be all these way chikes related to tax reform and 0:05:15.480 --> 0:05:17.960 that could help and really drive some pressure. But right 0:05:17.960 --> 0:05:20.400 now we're just seeing more one time bonuses rather than 0:05:21.000 --> 0:05:26.000 big wage increases and there's no inflation number that would 0:05:26.040 --> 0:05:28.960 get you to change your mind. Yeah, I think it's 0:05:29.000 --> 0:05:31.880 discontinues in its persistent. I would become concerned then that 0:05:31.920 --> 0:05:35.600 we really created inflation, and hopefully, if we've created that, 0:05:36.120 --> 0:05:38.560 these bad retail sales numbers will be an anomaly. So 0:05:38.600 --> 0:05:40.599 I guess I'm looking for probably another month or so 0:05:40.720 --> 0:05:43.800 that starts confirming or at least the sneaking suspicion that 0:05:43.880 --> 0:05:46.920 inflation has increased while growth is flowing. All right, well, 0:05:46.920 --> 0:05:49.280 we're gonna check in with you then. Of course. Peter 0:05:49.400 --> 0:05:52.840 Cheer is the head of macro strategy at Academy Securities. 0:05:53.200 --> 0:05:56.960 He's based in Connecticut, giving this giving us his thoughts 0:05:56.960 --> 0:06:01.600 about inflation, but also really sparing uh no effort when 0:06:01.640 --> 0:06:18.680 he looks at those retail sales numbers. The future of 0:06:18.800 --> 0:06:22.599 infrastructure in the United States calls for experts to give 0:06:22.680 --> 0:06:27.400 us their thoughts, advice, and their experience. Walter Kempsis is 0:06:27.560 --> 0:06:31.159 economist and chief strategist for U Sports, Airports and Global 0:06:31.200 --> 0:06:35.120 Infrastructure Group of j A L. That's Jones lang Lassalle 0:06:35.480 --> 0:06:38.320 and they're based in Chicago. Walter, thank you very much 0:06:38.520 --> 0:06:41.280 for being here. Maybe just tell people a little bit 0:06:41.320 --> 0:06:44.359 about your background and that you are currently advising the 0:06:44.440 --> 0:06:48.440 U s Department of Commerce their Advisory Committee on Supply 0:06:48.560 --> 0:06:52.800 Chain Competitiveness, as well as the Department of Transportations Task 0:06:52.839 --> 0:06:56.360 Force on Infrastructure Valuation. Maybe just give us a little 0:06:56.360 --> 0:06:58.520 bit of a hint of your background and how you're 0:06:58.520 --> 0:07:03.640 applying that to the President's effort to improve the infrastructure 0:07:03.800 --> 0:07:07.760 quality in the United States. Thank you. I'm a former 0:07:07.800 --> 0:07:11.200 investment banker who got pulled into a marine engineering firm 0:07:11.200 --> 0:07:15.640 Mofitta Nickel to help the financial community as they were 0:07:15.680 --> 0:07:20.920 trying to initially invest in infrastructure about twelve fifteen years ago. UH. 0:07:21.000 --> 0:07:25.520 That role eventually morphed into planning the infrastructure, and I've 0:07:25.560 --> 0:07:28.120 worked with the number of port authorities around the country 0:07:28.520 --> 0:07:32.360 in strategic development plans, making sure they had the capacity 0:07:32.480 --> 0:07:35.120 in advance of the freight coming in. And as a 0:07:35.160 --> 0:07:37.640 result of that work, um I was asked to join 0:07:37.760 --> 0:07:43.760 the Department of Commerce uh Advisory Committee on Supply Chain Competitiveness, 0:07:43.880 --> 0:07:48.440 which is comprised of port authorities, railroads are big importers 0:07:48.480 --> 0:07:51.680 and big exporters, as well as a few, uh you know, 0:07:51.920 --> 0:07:56.560 advisory experts like myself. So Walter. Since you talk with 0:07:56.840 --> 0:08:01.680 US ports and airports and other infrastructure groups, what's their 0:08:01.760 --> 0:08:04.480 outlook and how much money is going to get unleashed 0:08:04.600 --> 0:08:07.760 by some sort of infrastructure spending program and what can 0:08:07.800 --> 0:08:12.000 we glean from the budget the President Trump put out 0:08:12.080 --> 0:08:14.080 earlier this week that most people said it was dead 0:08:14.080 --> 0:08:16.520 on arrival. Is there anything any details that we can 0:08:16.560 --> 0:08:19.560 hang on to? Okay, I mean, just if you're just 0:08:19.600 --> 0:08:21.920 looking at the ports sector. On the water side of 0:08:21.920 --> 0:08:26.240 the ports, uh, the American Association Port Authorities estimates about 0:08:26.280 --> 0:08:29.560 sixty six billion dollars, you know, to raise bridges, to 0:08:29.720 --> 0:08:33.240 drudge channels, to strengthen key walls, and buy bigger equipment 0:08:33.280 --> 0:08:36.080 to handle the bigger ships. The what they don't have 0:08:36.120 --> 0:08:39.600 an estimate for is on the land side, because you know, 0:08:39.840 --> 0:08:42.480 as the volumes have grown in this country, the economy, 0:08:42.559 --> 0:08:46.520 the population, the number of of paved miles have not 0:08:46.640 --> 0:08:51.560 kept pace. And in the major ports cities we see 0:08:51.600 --> 0:08:55.000 a lot of congestion, such as in Los Angeles Long 0:08:55.040 --> 0:08:58.160 Beach as well as New York. Uh. You can add 0:08:58.200 --> 0:09:00.839 other cities to that, but that's the part where the 0:09:01.080 --> 0:09:04.520 estimated cost doesn't exist. But I would put that number 0:09:04.640 --> 0:09:09.160 at twice what we need for the for the waterside um. 0:09:09.200 --> 0:09:11.880 In terms of the plan itself, I think people need 0:09:11.920 --> 0:09:14.400 to understand that this is not supposed to be an 0:09:14.440 --> 0:09:18.839 Eisenhower interstate program. We've already built our interstate. We've built 0:09:18.840 --> 0:09:21.680 the core infrastructure. But this is supposed to be a 0:09:21.760 --> 0:09:27.520 means to repair and upgrade all of our infrastructure, including transportation, energy, 0:09:27.559 --> 0:09:30.920 and the water supply. You know. And ever since the 0:09:30.960 --> 0:09:36.880 Eisenhower era, responsibility has shifted the states and local governments, uh, 0:09:36.920 --> 0:09:39.920 you know, to not only direct the infrastructure investments, but 0:09:40.040 --> 0:09:43.280 also as a means to reduce the incentives to use 0:09:43.400 --> 0:09:46.240 free federal money and I say free in quotes, but 0:09:46.400 --> 0:09:50.199 free federal money to generate jobs building roads to nowhere. 0:09:50.760 --> 0:09:53.120 So the whole idea here is to target about two 0:09:53.559 --> 0:09:57.400 billion dollars as seed capital, which, along with other actions 0:09:57.440 --> 0:10:00.240 such as a shock clock on on permit approval time, 0:10:00.640 --> 0:10:03.080 will make it a lot easier for private capital to 0:10:03.160 --> 0:10:06.880 invest um. The other part of the program also includes 0:10:07.200 --> 0:10:11.240 loosening the federal loan programs such as TIFFIA, WI, A 0:10:11.440 --> 0:10:14.920 RIFF and the other you know alphabet soup of programs 0:10:14.960 --> 0:10:18.720 that exist that currently um, you know, our structure to 0:10:19.000 --> 0:10:23.520 help somebody, you know, do the upfront capital expenditures but 0:10:23.679 --> 0:10:26.560 be able to wait a number of years before generating 0:10:26.600 --> 0:10:30.079 the revenue necessary for debt repayment. The problem with these 0:10:30.120 --> 0:10:33.360 programs is they've been extremely stingy, and loans generally don't 0:10:33.400 --> 0:10:36.960 get approved, So there is an effort to loosen that, uh, 0:10:37.360 --> 0:10:42.080 in order to unleash the federal support that's available already. Walter, 0:10:42.280 --> 0:10:46.520 is there a project that you could use as a showcase, 0:10:46.559 --> 0:10:49.520 and I mean you as collectively of the industry that 0:10:49.600 --> 0:10:52.960 could be used as a showcase in order to demonstrate 0:10:53.000 --> 0:10:56.520 both the politicians and to the electorate that these programs 0:10:56.600 --> 0:11:00.840 can work. That then would foster even greater incentive and 0:11:00.920 --> 0:11:03.480 desire to accomplish these things, because it seems as though 0:11:03.520 --> 0:11:06.120 we don't have a specific objective and that makes it 0:11:06.160 --> 0:11:10.959 even more challenging. Yeah, I completely agree with you. Um 0:11:11.000 --> 0:11:14.200 you know where one of the things that the program 0:11:14.240 --> 0:11:17.280 falls short on is to tie all of this this 0:11:17.440 --> 0:11:21.679 effort into some kind of national economic objective. And the 0:11:21.720 --> 0:11:25.040 simplest one, and this relates to the efforts for free 0:11:25.040 --> 0:11:31.160 trade agreement renegotiations, is to support exports. Most of our 0:11:31.200 --> 0:11:34.520 infrastructure investment in the last twenty thirty years has gone 0:11:34.559 --> 0:11:38.800 towards the import side of the trade flows. And when 0:11:38.840 --> 0:11:41.360 you look at it, you know, volume wise, the US 0:11:41.640 --> 0:11:46.680 trade deficit is practically zero. But we import high value 0:11:46.720 --> 0:11:51.280 per Ton goods and we export low value per Ton goods. 0:11:51.360 --> 0:11:54.160 So on a dollar basis, we run a very large 0:11:54.200 --> 0:11:57.000 trade deficit, averaging half a trillion a year for the 0:11:57.120 --> 0:12:01.400 last you know, five ten years. So the money would 0:12:01.480 --> 0:12:04.160 naturally be attracted to where there is a high value 0:12:04.200 --> 0:12:06.839 per Ton, there's more pricing power and earned there's more 0:12:06.920 --> 0:12:12.520 return available. If we tied the infrastructure program to something 0:12:12.600 --> 0:12:16.960 like supporting exports, uh, then I think things would work 0:12:17.040 --> 0:12:19.600 a little bit better. And part of the problem is 0:12:19.679 --> 0:12:22.880 that as jobs have left the US, jobs in the 0:12:22.920 --> 0:12:27.120 export oriented industries haven't taken up the slack in the 0:12:27.200 --> 0:12:31.600 labor markets. So if we do renegotiate the trade agreements 0:12:31.600 --> 0:12:34.959 and opener markets to US exports, we will need to 0:12:35.000 --> 0:12:38.040 invest in infrastructure to support that. So just to be 0:12:38.120 --> 0:12:44.199 really clear, what is that spending that needs to support exports? Yeah? Um, 0:12:44.520 --> 0:12:47.120 the first off, it would be on the Mississippi Waterway. 0:12:47.559 --> 0:12:51.200 Most of that was built in the nineties. Uh, you know, 0:12:51.320 --> 0:12:55.960 during the great depression. That infrastructure is now uh seventy 0:12:56.000 --> 0:13:00.000 five years or older. The Soybean Transportation Coalition has done 0:13:00.000 --> 0:13:02.880 to report a couple of them now and they've pointed 0:13:02.920 --> 0:13:07.599 out that roughly three fourths of our Mississippi Waterway infrastructures 0:13:07.640 --> 0:13:10.360 over seventy five years of age. And the way it 0:13:10.440 --> 0:13:12.600 works with the dams and the locks is that they're 0:13:12.600 --> 0:13:15.800 built with the fifty year life cycle, and every twenty 0:13:15.840 --> 0:13:19.160 five years you inspected and try to retrofit it a 0:13:19.160 --> 0:13:21.760 little bit and get another twenty five years out of it. 0:13:22.360 --> 0:13:25.079 But when you hit seventy five years, that's it. You're done. 0:13:25.160 --> 0:13:27.280 You need to replace it, just like we're doing with 0:13:27.320 --> 0:13:30.080 the bridges in New York. You know, perhaps a little late, 0:13:30.600 --> 0:13:35.320 but yeah, that Mississippi Waterway infrastructure when it breaks down. 0:13:35.320 --> 0:13:38.839 When a lock breaks down, miles of barges back up 0:13:38.840 --> 0:13:42.560 on either side because they can't traverse the step in 0:13:42.600 --> 0:13:46.160 the river, and oftentimes we have two three D print 0:13:46.200 --> 0:13:50.160 apart because it just doesn't exist anymore. Walter Kemsies, thank 0:13:50.200 --> 0:13:51.880 you so much for your insights. We'll have to have 0:13:51.920 --> 0:13:55.000 you back. Walter Kemsie's economist and chief strategist for US 0:13:55.080 --> 0:13:58.599 Ports Airports and Global Infrastructure Group at j L L. 0:13:58.720 --> 0:14:17.120 Jones Langless Sality, Chicago, joining us by phone the shares 0:14:17.160 --> 0:14:19.760 of Marriott International. They're hired by a little bit more 0:14:19.800 --> 0:14:23.040 than one percent right now. The company will report results 0:14:23.080 --> 0:14:26.480 after the close of trading today. Based in Bethesda, Maryland, 0:14:26.480 --> 0:14:29.680 home to Bloomberg and one oh five point seven FM 0:14:29.840 --> 0:14:31.920 HD two and here to tell us about the company 0:14:31.960 --> 0:14:35.640 and more in the hospitality industry is Mike Belisario, equity 0:14:35.680 --> 0:14:38.560 analyst at Baird. Mike, what can you tell us about 0:14:38.680 --> 0:14:41.600 Marriott and the I guess it's the years since they 0:14:41.760 --> 0:14:45.800 acquired the Star Wars brand. What are they going to 0:14:45.920 --> 0:14:50.920 post in terms of savings and asset sales? Good morning, 0:14:50.960 --> 0:14:53.160 things for having me UM. I think you're going to 0:14:53.320 --> 0:14:56.440 hear a lot from Marriott that we heard from Hyatt, 0:14:56.520 --> 0:14:59.920 from Tuney, from Hilton this morning. Really strong fourth quarter 0:15:00.480 --> 0:15:05.880 guidance for that is pretty much in line with UM. 0:15:05.960 --> 0:15:09.560 The results that they posted for fully, I mean specifically 0:15:09.560 --> 0:15:12.760 for Marriott, it's been fifteen sixteen months since they've closed 0:15:12.760 --> 0:15:16.840 the transaction. Investors are really focused on the synergies. A 0:15:16.880 --> 0:15:20.000 lot of those have been realized assets sales here or there, 0:15:20.080 --> 0:15:22.080 that's important. A lot of the heavy lifting has been done. 0:15:22.440 --> 0:15:24.760 I think the thing people are really focused on is 0:15:25.120 --> 0:15:29.200 all the extra benefit that Marriott being bigger, having more 0:15:29.320 --> 0:15:32.480 negotiating power can pass to its owners, especially in a 0:15:32.520 --> 0:15:36.240 tough operating environment like today. So, Mike, I'm wondering just 0:15:36.320 --> 0:15:40.040 about the tourism industry in general. We had heard reports, 0:15:40.120 --> 0:15:44.520 given some of the talk of the current presidential administration 0:15:44.600 --> 0:15:48.880 about UH foreigners and immigrants and all of that, that 0:15:48.920 --> 0:15:52.560 it had would have a dampening effect on tourism. Did 0:15:52.560 --> 0:15:56.200 we see any of that from Hilton's results? We did, 0:15:56.240 --> 0:15:59.680 and we've seen that broadly in the data. Inbound international 0:15:59.680 --> 0:16:04.960 travel to the US was down a bit. In Hilton 0:16:05.040 --> 0:16:08.400 this morning thinks it's inbound travel was down about four percent, 0:16:09.280 --> 0:16:11.400 But that only makes up call it, you know, five 0:16:11.680 --> 0:16:14.600 ish percent of their total business. You know. Some of 0:16:14.640 --> 0:16:17.640 that is the you know, the political backlash if if 0:16:17.680 --> 0:16:19.520 you're someone overseas and you might not want to come 0:16:19.520 --> 0:16:21.640 to the US because you don't like what you're hearing, 0:16:21.800 --> 0:16:24.480 that's possible. Some of it is also the US dollar. 0:16:25.200 --> 0:16:28.480 It just was more expensive throughout seventeen to come to 0:16:28.480 --> 0:16:31.440 the US. Flip side too, we don't talk about it enough. 0:16:31.680 --> 0:16:34.840 Is the domestic traveler, the US traveler not going on 0:16:34.960 --> 0:16:37.760 vacation to Florida or southern California, But because it's so 0:16:37.840 --> 0:16:40.520 cheap to go to Europe or Japan, for example, more 0:16:41.040 --> 0:16:44.680 US citizens going abroad too. So that's also an impact 0:16:44.680 --> 0:16:46.360 in the numbers that people don't talk a lot about. 0:16:46.400 --> 0:16:49.360 But yes, there there was an impact in seventeen. We're 0:16:49.400 --> 0:16:52.080 still seeing it on the inbound international travel side. So 0:16:52.280 --> 0:16:55.880 of the big hospitality companies which are most exposed to 0:16:56.000 --> 0:17:00.360 that trend of domestic tourists from the US is going 0:17:00.400 --> 0:17:05.240 international and not as many inbound tourists in the US. Actually, 0:17:05.240 --> 0:17:08.199 the biggest beneficiary come on a percentage basis, would be 0:17:08.320 --> 0:17:14.280 Highatt because a larger percentage of their portfolio is overseas Hilton, 0:17:14.600 --> 0:17:18.399 Marriott and high Att. Hilton is the most domestic focused. Um. 0:17:18.520 --> 0:17:19.960 The way to think about it too is where where 0:17:19.960 --> 0:17:22.040 do people come to the US To go to New York, 0:17:22.040 --> 0:17:24.280 They go to San Francisco, Los Angeles. So anyone that 0:17:24.359 --> 0:17:28.080 has urban market gateway market exposure, if you're an owner 0:17:28.119 --> 0:17:30.080 of hotels in those markets, which a lot of the 0:17:30.119 --> 0:17:35.040 reeds are, those companies are also disproportionately impacted. But you know, 0:17:35.080 --> 0:17:38.879 Marriott's brand, Hilton's brand in the US overseas, if you 0:17:38.920 --> 0:17:41.080 can capture that same traveler that was maybe going to 0:17:41.200 --> 0:17:43.600 travel to the Marriott in Orlando, but they're going to 0:17:43.640 --> 0:17:46.040 the Marriott in Prague, that's kind of a win win 0:17:46.080 --> 0:17:48.800 for Marriott in its eyes. So does this mean that 0:17:48.960 --> 0:17:53.639 Mike that expansion for these growth markets in Asia and Europe, 0:17:53.640 --> 0:17:58.639 would that be key to achieving some of these profit targets. Absolutely, 0:17:59.080 --> 0:18:02.520 Roughly half of the big brand's pipelines is outside of 0:18:02.560 --> 0:18:06.920 the United States. We can't zoom out these big global 0:18:06.960 --> 0:18:09.919 hotel companies. They're very focused in the US and in 0:18:10.000 --> 0:18:13.320 North America. There's a lot of white space still uh 0:18:13.359 --> 0:18:18.040 in Europe, in Asia, Pacific and even in Africa, so 0:18:18.160 --> 0:18:20.120 a lot of the growth is coming from there. You're 0:18:20.160 --> 0:18:22.760 just also working off a smaller base. But yeah, that's 0:18:22.480 --> 0:18:24.560 that's where they're focusing a lot of their efforts to 0:18:24.640 --> 0:18:28.080 kind of capture both of the inbound and outbound travel, 0:18:28.280 --> 0:18:32.120 but particularly from China. We've actually seen the dollar week 0:18:32.160 --> 0:18:34.280 in this year a little bit. Does that matter or 0:18:34.320 --> 0:18:36.040 in the scheme of things, is it such a minimal 0:18:36.080 --> 0:18:38.000 weakening that it's not going to change the trend that 0:18:38.040 --> 0:18:42.040 we saw in it matters that actually came up on 0:18:42.119 --> 0:18:45.359 Hilton's conference call. It's hard to tell on a week 0:18:45.400 --> 0:18:49.119 to week, month to month basis. I think over rolling 0:18:49.200 --> 0:18:52.720 twelve month periods it's important. Um And on the margin, 0:18:52.760 --> 0:18:54.879 it does cause people to either say yes or no, 0:18:55.000 --> 0:18:56.399 I want to go to the U S or yes 0:18:56.520 --> 0:18:59.960 or no, I want to go to London instead of Japan, 0:19:00.280 --> 0:19:02.960 for example. Um And there's also a lag to booking. 0:19:03.520 --> 0:19:06.840 If you're a leisure traveler, you're more price sensitive and 0:19:06.840 --> 0:19:09.720 you're sometimes booking three to six months out. So if 0:19:09.720 --> 0:19:11.880 there is a weakening or strengthening of the dollar, you're 0:19:11.880 --> 0:19:13.800 not necessarily going to see it now. It might not 0:19:13.880 --> 0:19:16.840 be until June or July or August, for example, when 0:19:16.840 --> 0:19:19.439 we actually see the impact of what happened to the 0:19:19.480 --> 0:19:22.920 dollar today. Mike Belisario, thank you so much for joining us. 0:19:23.160 --> 0:19:27.720 Really interesting insights. Mike Belisario is senior equity research analyst 0:19:27.840 --> 0:19:45.360 at Baird, coming to us from Chicago. The New York 0:19:45.400 --> 0:19:48.399 Fed put out a report this week taking a look 0:19:48.440 --> 0:19:53.000 at consumer debt, and it showed that student loan outstanding 0:19:53.720 --> 0:19:58.080 have totaled one point for trillion dollars, and delinquencies could 0:19:58.160 --> 0:20:01.600 be up to twenty two percent if you take out 0:20:01.640 --> 0:20:05.439 instances of students who are not required to make payments 0:20:05.480 --> 0:20:08.320 because they're still in schooled UH and still in school, unemployed, 0:20:08.640 --> 0:20:11.800 or for other reasons. Joining us now is Marshall Steinbaum, 0:20:12.040 --> 0:20:15.399 research director and fellow at the Roosevelt Institute in Washington, 0:20:15.600 --> 0:20:18.040 d C. Marshall, thank you so much for joining us. 0:20:18.080 --> 0:20:20.840 This is a really important topic. I'm just wondering. You 0:20:20.880 --> 0:20:25.640 did a report looking at the macroeconomic implications of this 0:20:25.880 --> 0:20:30.120 rising pile of student debt. What what are the implications? 0:20:30.119 --> 0:20:32.919 I mean they could be quite significant, considering that this 0:20:33.000 --> 0:20:36.040 is uh now a one point four trillion dollar pile 0:20:36.119 --> 0:20:41.560 of debt. The effect on the macro economy of canceling 0:20:41.600 --> 0:20:43.879 all the outstanding student debt and what we found is 0:20:43.920 --> 0:20:49.000 that it would have a moderate stimulative effect on overall output. 0:20:49.040 --> 0:20:51.399 I think the numbers of a v six billion to 0:20:51.440 --> 0:20:54.000 a hundred billion dollars a year approximately given the two 0:20:54.040 --> 0:20:57.080 models that we used, um that it would reduce the 0:20:57.160 --> 0:21:02.880 unemployment rate and increase the total rate of people being employed. 0:21:02.960 --> 0:21:06.080 And the main effect is because essentially the debt is 0:21:06.560 --> 0:21:10.600 burdening the balance sheets of households, especially young households, and 0:21:10.640 --> 0:21:12.360 if they didn't have to make those payments, they would 0:21:12.400 --> 0:21:14.200 spend the money on other things, and that would increase 0:21:14.200 --> 0:21:17.760 aggregate demand. Where would the money come from in order 0:21:17.880 --> 0:21:22.000 to pay off this debt? That's a good question. Currently 0:21:22.240 --> 0:21:25.840 the federal government is the lender for about the debt, 0:21:25.880 --> 0:21:29.000 and what we modeled is essentially then for canceling it, 0:21:29.119 --> 0:21:32.320 so just writing it off, and then the other ten 0:21:32.400 --> 0:21:35.760 percent the federal government would assume making payments to the 0:21:35.840 --> 0:21:39.120 private lenders on behalf of students um. So overall, both 0:21:39.119 --> 0:21:42.520 of those two things would increase the federal deficit um 0:21:42.560 --> 0:21:46.120 and and the federal debt outstanding um while relieving debt 0:21:46.200 --> 0:21:51.760 from individual households. And the whole macroeconomic UH mechanism that's 0:21:51.800 --> 0:21:54.040 going on in the in the forecast of the effects 0:21:54.080 --> 0:21:56.520 is that that transfer of the debt from households to 0:21:56.600 --> 0:22:00.919 the government is h macroeconomically beneficial. Okay, But if the 0:22:01.000 --> 0:22:03.520 government is going to be the one to put the bill, 0:22:03.800 --> 0:22:06.400 doesn't that really mean that the taxpayer is the one 0:22:06.480 --> 0:22:09.800 to foot the bill. Well, we've been running up dead 0:22:09.840 --> 0:22:12.720 and deficits for a long time. Now UM, and the 0:22:12.800 --> 0:22:15.080 tax share of total output is I think at its 0:22:15.119 --> 0:22:18.080 lowest ever UM and our lowest in a very long time, 0:22:18.119 --> 0:22:22.160 and uh low for the state of the business cycle 0:22:22.160 --> 0:22:24.359 where we currently are. Normally, you'd expect the federal government 0:22:24.359 --> 0:22:27.639 to be collecting the most in taxes when the economy 0:22:27.720 --> 0:22:31.520 is doing relatively well. UM. So I think you know, 0:22:32.840 --> 0:22:36.400 whether there's this tight connection between the federal government assuming 0:22:36.400 --> 0:22:38.400 debt and collecting taxes to pay that debt. I think 0:22:38.400 --> 0:22:42.400 that's an open question at macroeconomics. I'm trying to figure out. 0:22:42.440 --> 0:22:45.920 So your report found that there would be this modest 0:22:45.960 --> 0:22:49.840 stimulative effect if the student debt were canceled of up 0:22:49.920 --> 0:22:53.800 to one hundred and eight billion dollars per year. Does 0:22:53.840 --> 0:22:56.639 that change over time? I mean, is it? How do 0:22:56.720 --> 0:23:02.280 you quantify the economic effect of student debt on a 0:23:02.320 --> 0:23:05.359 generation of people who might be delaying home purchases or 0:23:05.400 --> 0:23:09.640 having children, or taking jobs that that are risk here 0:23:09.720 --> 0:23:12.760 but might have more potential. That's a great question, and 0:23:12.800 --> 0:23:14.879 we don't really do that in the paper. That is 0:23:14.920 --> 0:23:17.520 specifically look at questions of like home ownership or small 0:23:17.520 --> 0:23:19.879 business formation, or what jobs do people take as a 0:23:19.920 --> 0:23:23.480