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Speaker 1: This is Bloomberg Business Wait inside from the reporters and

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Speaker 1: editors who bring you America's most trusted business magazine, plus

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Speaker 1: global business finance and tech news. The Bloomberg Business Week

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Speaker 1: podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

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Speaker 2: We are going to do an interview right now that

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Speaker 2: I've really been looking forward to. Over the past couple

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Speaker 2: of weeks. I've been getting a lot of well not

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Speaker 2: a lot. I've been getting I guess, on a daily

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Speaker 2: basis emails, usually holding a nugget or a chart that

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Speaker 2: just really piques my interest. From Torson Slock. He's a

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Speaker 2: chief economist and a partner over to Apollo Global Management,

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Speaker 2: and I'm glad to welcome him to the show. Torson,

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Speaker 2: Welcome to Bloomberg Business Week. I got to start by

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Speaker 2: asking you about how worried you are. I see kind

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Speaker 2: of a trend in the charts you send about rising

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Speaker 2: credit card usage among consumers or rising, say, you know,

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Speaker 2: car payment delinquencies, and I wonder if you're looking for

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Speaker 2: this next recession to kick off.

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Speaker 3: Yeah, no, thanks, Manni, thanks for having me on.

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Speaker 4: I think that there's a number of indicators more recently

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Speaker 4: that indeed are flashing a bit more yellow, and some

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Speaker 4: of them.

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Speaker 3: Actually even flashing some red.

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Speaker 4: Specifically, as you just mentioned, if you look at the

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Speaker 4: linguaity rates on credit cards across different age cohorts, you're

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Speaker 4: seeing for younger generations that the level of delinquencies is

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Speaker 4: now at the same level as we had in two

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Speaker 4: thousand and eight.

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Speaker 3: Likewise, if you look at the linguaity rates for.

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Speaker 4: Auto loans, you're also seeing for younger cohorts and here

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Speaker 4: meaning people who are twenties to thirty, thirty to forty,

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Speaker 4: that we have also a level of delininguities that is

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Speaker 4: close to what we had in two thousand and eight.

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Speaker 4: Combining that with a fits Celrosa survey which tells us

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Speaker 4: something about how tight are credit conditions, which both said

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Speaker 4: is that demand for corporate loans is at two thousand

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Speaker 4: and eight levels and also says that demand for cer

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Speaker 4: re loans is at two thousand eight levels, and it

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Speaker 4: also shows that credit conditions more broadly have tightened.

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Speaker 3: I do get a bit worried that.

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Speaker 4: Credit conditions are beginning to tighten so much that it

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Speaker 4: ultimately is having that negative impact on the economy that

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Speaker 4: the Fed quite frankly has been waiting for for now

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Speaker 4: several quarters, Torstan.

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Speaker 5: How do I chart this? How do I tight chart

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Speaker 5: those tighter credit conditions? Because I look at things like

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Speaker 5: financial conditions indexes and I don't know these accurse. Again,

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Speaker 5: these are market based measures, and it shows that things

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Speaker 5: are pretty easy. But then I listen to you and

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Speaker 5: things sound pretty tight, and I want to know how

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Speaker 5: to show this.

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Speaker 3: Yeah, no, that's absolutely right, Katie.

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Speaker 4: But if you wait together the market based measures of

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Speaker 4: financial conditions, so that's the stock markets, that's the IG spread,

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Speaker 4: the highyeer spread, the spread for loans, those are not

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Speaker 4: flashing really any worries.

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Speaker 3: If anything, they're still green on the recession worry front.

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Speaker 4: So from that perspective, you're right that markets obviously have

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Speaker 4: been waiting for the recession to arrive. A five type ECFC.

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Speaker 4: Go on my Bloomberg screen and look at expectations to

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Speaker 4: GDP growth. The consensus has expected a recession since October

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Speaker 4: and the recession has still not arrived. So I think

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Speaker 4: there's recession exhaustion in credit markets and equity markets, and

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Speaker 4: people saying, well, where is this recession that these bond

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Speaker 4: investsels have talked about for so long, and if there's

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Speaker 4: no recession, maybe you should have equities trading higher and

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Speaker 4: credits bressed trading tighter. So the only issue that I

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Speaker 4: think is under appreciated in that debate is that behind

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Speaker 4: all this is the FED trying to cool the economy down.

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Speaker 4: And the number one domino break in this debate is

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Speaker 4: that inflation today is in round numbers five percent, both

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Speaker 4: if you look at call, if you look at headline,

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Speaker 4: no matter what specific measure of inflation you look at,

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Speaker 4: it is around five percent.

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Speaker 3: And the Fed's target is that it should be two.

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Speaker 4: And if inflation is five and it should be two,

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Speaker 4: the FED is not going to ease anytime soon, and

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Speaker 4: they may actually begin to race raise again in July.

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Speaker 4: So if that's the case, the market is not appreciating

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Speaker 4: enough that the FED is actually trying to cool the

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Speaker 4: economy down. They're trying to slow down earnings growth, They're

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Speaker 4: trying to lower the e in the pe ratio, and

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Speaker 4: with that will of course come a slow down, and therefore, ultimately,

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Speaker 4: in my view of recession, we have.

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Speaker 2: A great story on the Bloomberg today, tourist and fedbacks

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Speaker 2: away from wages focus, bolstering case for rate pause, And

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Speaker 2: the idea here is that there's been more and more

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Speaker 2: research showing that wage growth doesn't have a direct impact

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Speaker 2: on inflation. Now, I can't understand how that could be,

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Speaker 2: because to me, it makes sense if you pay people

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Speaker 2: more money, they're going to have more money to buy

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Speaker 2: more stuff or pay higher prices at least. But I've

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Speaker 2: heard it from very smart people, including Danny Blanchflower from Dartmouth,

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Speaker 2: that you know, the labor numbers we look at just

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Speaker 2: really aren't effective in gauging whether or not we're going

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Speaker 2: to have an inflation, whether or not the economy is

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Speaker 2: slowing down enough to bring inflation down. What do you

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Speaker 2: think about that connection?

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Speaker 4: Yeah, so this is very important and I did see

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Speaker 4: that story and it is a very good It's very

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Speaker 4: well written and will very well laid out. You're right,

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Speaker 4: this is a debate in FED working papers at the moment.

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Speaker 4: There was a paper recently, and this is very controversial

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Speaker 4: what you're highlighting, namely by the San Francisco FED, saying

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Speaker 4: wage inflation is not important for consumer price inflation. And

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Speaker 4: why is that controversial? Because that basically rips up page

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Speaker 4: one in the economics textbook, which says that when you

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Speaker 4: have higher cost of production through higher labor costs, then

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Speaker 4: you should also see higher prices of the products that

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Speaker 4: are produced. The issue with that paper, and the issue

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Speaker 4: with that approach, is that that's a statistical correlation where

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Speaker 4: the author basically finds that the correlation between wage inflation

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Speaker 4: and consumer price inflation is basically very low, only.

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Speaker 3: Zero point one.

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Speaker 4: So now you can ask the question, Okay, does that

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Speaker 4: mean that wages do not matify inflation? Well, if you

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Speaker 4: doubled everyone's wages in the US economy, are you telling

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Speaker 4: me that that would have no impact on inflation, on

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Speaker 4: consumer price inflation?

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Speaker 3: I think we can all agree that that would not

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Speaker 3: be the case.

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Speaker 4: So therefore it really becomes almost the statistical exercise of saying,

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Speaker 4: maybe a statistical correlation is close to zero, but the

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Speaker 4: economic connection is very obvious. Exactly as you said, Matt,

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Speaker 4: that you would have expected if people high incomes, they

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Speaker 4: go out and go more to restaurants, fly more on airplanes,

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Speaker 4: day more hotels, and that all creates more inflation. So

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Speaker 4: it is the case, in particular, given worth saving sign

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Speaker 4: the economy is still being so strong that the amount

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Speaker 4: of money that people spend on different things are still

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Speaker 4: the key driver of.

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Speaker 5: Inflation, right, Well, let's talk about some of the inflation

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Speaker 5: figures that we're going to get tomorrow. For May, I

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Speaker 5: want to zero in on what we're going to get

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Speaker 5: on the year over year numbers. So headline CPI year

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Speaker 5: over year is expected to come in at four point

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Speaker 5: one percent. Core CPI year over year is expected at

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Speaker 5: five point two percent. That seems like a really big

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Speaker 5: gap to me over a percentage point. Does that have

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Speaker 5: any bearing on what we might see from the fat

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Speaker 5: How do they factor in that sort of divergence that

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Speaker 5: we're seeing be between core and headline inflation.

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Speaker 3: That's a very important question, Katie.

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Speaker 4: So the reason for that difference, and that is also

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Speaker 4: a bit unusual, is that when Russia invaded Ukraine, energy

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Speaker 4: prices went not a lot. And of course, as you

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Speaker 4: get through the episode, now we now are twelve months

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Speaker 4: more away from that event in February twenty twenty two.

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Speaker 4: So the result of that is that the year over

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Speaker 4: year way of measuring inflation is that inflation is actually

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Speaker 4: now beginning to decline in food and energy.

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Speaker 3: So that means that the drag because.

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Speaker 4: Of us getting to the other side of February twenty

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Speaker 4: twenty three. The drag on headline inflation is bigger simply

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Speaker 4: because food and energy can no longer quote unquote remember

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Speaker 4: what happened in February twenty twenty zero. What the FED

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Speaker 4: focuses on is coinflation. And as you highlighted, and I'm

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Speaker 4: here on my Blueberg screen Tyving Ecoco, you can see

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Speaker 4: as you say that coin inflation the spects to drop

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Speaker 4: from five point five in the month of April to

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Speaker 4: five point two in the month of May, and that,

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Speaker 4: of course is.

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Speaker 3: A decent decline. Again, the fit target is that inflationship

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Speaker 3: be two.

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Speaker 4: So all these numbers that we talk about here four, five,

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Speaker 4: five and a half are way too high for the FAT.

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Speaker 4: But that's why the Fed of course has this debate about, well,

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Speaker 4: we need to have coin inflation in particular move down

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Speaker 4: closer to two. And that's happening, but it's just happening

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Speaker 4: very very slowly, and it does probably require interest rates

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Speaker 4: at these elevated levels for at least well into next

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Speaker 4: year before we begin to see a meaningful move down

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Speaker 4: to two percent.

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Speaker 2: All right, Tors and I have a ton of viewer

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Speaker 2: slash listener questions, so I'm gonna fire off a couple

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Speaker 2: of these here.

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Speaker 5: And rapid fire around one.

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Speaker 2: Especially that relates to a chart you sent recently that's

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Speaker 2: stuck in my mind, which is the fact that there's

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Speaker 2: still a lot of state excess savings in the economy

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Speaker 2: or in bank accounts from the stimulus listener rites in,

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Speaker 2: when do these elevation did prices start to hurt or

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Speaker 2: pain in the consumer? You know, if you look like

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Speaker 2: at the consumer like a monolith, then it's easier, I

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Speaker 2: guess to answer this. Let's not get into the bifurcation

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Speaker 2: that surveillance would start digging into. When is it going

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Speaker 2: to really hit? You know, Joe Plumber.

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Speaker 3: Yeah, So the FED actually also had a working paper.

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Speaker 4: On that saying that households will basically run out of

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Speaker 4: these excess savings by the end of this year. That's

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Speaker 4: quite unusual for a FED working paper to spill that

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Speaker 4: out so clearly.

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Speaker 3: But that means that consumers.

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Speaker 4: Still have more savings left even though prices have been

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Speaker 4: going up. So from that question, we can basically exactly

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Speaker 4: conclude that it still is at least a few quarters

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Speaker 4: away before we get to the point when consumers will

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Speaker 4: no longer have money to stay at hotels, go to restaurants,

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Speaker 4: flying airplanes, go to sporting events and broadway shows. Because

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Speaker 4: all that data continues to be reasonably strong, simply because

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Speaker 4: savings are still so high.

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Speaker 2: I just we never would have expected inflation to be

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Speaker 2: this sticky, right. I remember watching Ben bernanke on sixty

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Speaker 2: Minutes and he was like, we could crush inflation with

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Speaker 2: a hammer, you know, but it's obviously more difficult. It's

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Speaker 2: more easily said than done.

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Speaker 4: Honestly, this whole episode of inflation going up and now

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Speaker 4: down so slowly, it is a bit of an embarrassment

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Speaker 4: for the economics profession. Nobody really predicted infistion would go up,

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Speaker 4: and now everyone is so.

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Speaker 3: Busy saying, oh, it will come down very quickly.

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Speaker 4: And now there's more and more people, including myself, who

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Speaker 4: are beginning to worry. Maybe it's not going to come

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Speaker 4: down to it quickly. Maybe as an investor, I do

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Speaker 4: need to take into account that the cost of capital

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Speaker 4: will stay elevated for longer, that the fit is just

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Speaker 4: not going to go at lower rates as quickly as

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Speaker 4: markets currently uprising. So you're right, it is very surprising

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Speaker 4: that the economics toolbox and the textbook that we all

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Speaker 4: have been studying all these years.

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Speaker 2: Well, well, Torson, don't be too embarrassed, because you absolutely rule.

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Speaker 2: Thanks so much for joining us. Torson slock from Apollo Global.

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Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

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Speaker 1: Lie weekday afternoons from three to six Eastern Listen on

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Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,

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Speaker 1: or wants us live on YouTube.

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Speaker 2: We have on with us the first black female CEO

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Speaker 2: of a major PR firm, Lisa Osborne Ross joins us

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Speaker 2: the US CEO at Adelman, And it's I think especially

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Speaker 2: important because we also have the results of Adelman's Trust Barometer,

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Speaker 2: Business and Racial Justice Report at a time when you know,

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Speaker 2: more Americans are concerned about racism but fewer are optimistic

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Speaker 2: about progress being made. It reminds me of last week.

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Speaker 2: I saw this story the Supreme Court back's extra black

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Speaker 2: Alabama district and the GOP rebuff, and I just thought,

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Speaker 2: what year is it that we're still dealing with this

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Speaker 2: kind of thing? How come we haven't already solved issues

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Speaker 2: like this? So Lisa joins us right now on Zoom

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Speaker 2: from Washington, DC and Lisa, it's great to have you here.

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Speaker 2: Thanks so much for coming on the program. I would

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Speaker 2: love to know first, just an overview of the results

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Speaker 2: of your survey. I feel like more and more people

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Speaker 2: are concerned. We talk more and more about this issue,

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Speaker 2: but there's just not being not enough progress actually being made.

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Speaker 6: Look, the research is critical because this, whether it should

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Speaker 6: be or not, is an emotional issue. And the reason

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Speaker 6: we do it is because the data matters. There's a

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Speaker 6: wide range of feelings on this. There's defeatism to defensiveness.

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Speaker 6: There's in some cases even an outright disagreement on whether

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Speaker 6: racism even exists or not. Now, I'm happy to report

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Speaker 6: that less than fifteen percent of those polled believe that

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Speaker 6: racism is not a problem. But the example that you

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Speaker 6: just gave is, you know, we live in two different worlds.

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Speaker 6: You were shocked by the Supreme Court's movement, but others

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Speaker 6: lived that on a daily basis, and they're.

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Speaker 7: Not shocked at all.

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Speaker 6: I think it's even no, you go ahead, no, I

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Speaker 6: don't know others.

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Speaker 2: There was only one black congressional district in Alabama. That's

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Speaker 2: what blew me away. I mean, you know, there needs

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Speaker 2: to be more. I've been to Alabama. There needs to

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Speaker 2: be more representation there, right, So how come the supremium

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Speaker 2: to make this decision in the sixties, right?

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Speaker 3: Right?

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Speaker 6: You and I both know that there are enough black

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Speaker 6: people in Alabama for that to not be the case.

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Speaker 7: But that is a that is.

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Speaker 6: It's related to this conversation, but it is part and

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Speaker 6: parcel of the environment that many people still live in,

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Speaker 6: and it is problematic. I was I was struck when

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Speaker 6: we saw the results of this research because I think

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Speaker 6: people had one of four reactions. One people were like,

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Speaker 6: tell me something I didn't know. Racism exists, fully exist

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Speaker 6: in corporate America. Other people were like, you know what,

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Speaker 6: I knew it. I felt it, felt it, felt it,

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Speaker 6: but I couldn't put my finger on it, and the

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Speaker 6: data supported it. A third group of people were like,

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Speaker 6: oh my god, this is shocking, this is terrible. I

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Speaker 6: don't know where those people have been, but for some

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Speaker 6: people it was still very surprising. And most unfortunately, there's

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Speaker 6: a fourth group of people who have said, Okay, it

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Speaker 6: simply doesn't matter because nothing is going to change.

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Speaker 5: And I mean, looking through the results of this report,

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Speaker 5: you talk about two different worlds. It seems like there's

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Speaker 5: a real sort of divergence between what executives think their

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Speaker 5: company is doing or the progress that they've made, and

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Speaker 5: what non executives say when we talk about making progress

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Speaker 5: and addressing racism, it seems like the executives have a

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Speaker 5: much different view on that than maybe the people that

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Speaker 5: report to them.

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Speaker 6: Bingo, I fell into that second category of you know what,

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Speaker 6: I thought that there was a problem inside the organizations

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Speaker 6: that I work with and that I counsel, and then

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Speaker 6: just everything that I see and what you say that

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Speaker 6: is exactly it. The executives are feeling good about themselves.

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Speaker 6: They're like, hey, I go to my DEI training a

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Speaker 6: mentor people of color. I'm supportive, I'm anti racist. But

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Speaker 6: the rank and file see things very very differently. And

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Speaker 6: the reason that we're not making progress is that those

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Speaker 6: executives who are in decision making roles, they think they're

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Speaker 6: doing well and don't have a problem. But the rank

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Speaker 6: and file sees every day that we have a significant problem.

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Speaker 6: And that to me was the most shocking.

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Speaker 2: So why do executives think that they're doing well?

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Speaker 7: Then?

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Speaker 2: I mean, is it just that they're checking boxes here

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Speaker 2: and not actually moving the ball forward? I mean, I

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Speaker 2: don't understand.

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Speaker 6: Yes, there's a lot of box checking, but also if

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Speaker 6: you look at it, we've been having this conversation about

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Speaker 6: racism and particularly racism in the workplace for some time.

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Speaker 6: After the murder of George Floyd, the nation had a reckoning.

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Speaker 6: They had a reckoning, and for many people this was

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Speaker 6: the first time that they really started to pay attention

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Speaker 6: to the conversations. They started to look at their teams

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Speaker 6: and realize and recognize that their teams were not representative.

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Speaker 6: They started to look at their leadership, at their boards,

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Speaker 6: and they saw that they were not representative. And you know,

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Speaker 6: there's been all this conversation about like a retraction on

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Speaker 6: ESG and particularly the S and ESG. I have seen

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Speaker 6: and said that those companies that got it in the

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Speaker 6: first place, who were about it, who were not running

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Speaker 6: DEI programs, but looking at representation at all levels of

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Speaker 6: their organization, they haven't stopped. In fact, they are even

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Speaker 6: stronger those organizations who for whatever reason FOMO peer pressure,

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Speaker 6: Oh everybody's doing it, so I guess I should too.

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Speaker 6: Those are the organizations that have pulled back. But those

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Speaker 6: that were in it in the first place, they're even

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Speaker 6: stronger in this space.

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Speaker 5: So, Lisa, how does this problem get fixed? I mean,

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Speaker 5: is the obvious answer here that perhaps you know, those

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Speaker 5: at the executive rank should maybe look like the people

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Speaker 5: that they represent, that we need more diversity in management,

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Speaker 5: or what do you think really needs to happen to

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Speaker 5: propel this conversation forward.

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Speaker 6: I think wanted some honest conversation. For example, when I

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Speaker 6: am interviewing people and they tell me how much they

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Speaker 6: value DEI and how important it is to them, the

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Speaker 6: first question I ask is, I think that's lovely, that's important.

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Speaker 6: How diverse is your senior team? How many people of

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Speaker 6: color do you have on your senior team that are

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Speaker 6: in decision making roles? And so I think moving it

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Speaker 6: from the box checking to the narrative, and I think

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Speaker 6: we change when two things are realized by business leaders.

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Speaker 6: And I say this to my team at Edelman. You

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Speaker 6: cannot credibly create content, you can't credibly create campaigns, You

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Speaker 6: can't represent a point of view unless you have a

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Speaker 6: representative team. In this current day, you've got forty of

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Speaker 6: the population that is non white, non male, non straight,

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Speaker 6: And so if you don't put together teams that represent

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Speaker 6: the wide array of what America looks like right now,

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Speaker 6: and I say America because I'm a US CEO.

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Speaker 7: So when when.

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Speaker 6: Leaders realize their their work is not credible unless it's

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Speaker 6: created by representative teams.

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Speaker 2: Alice Osborne Ross from Edelman. Great to have you.

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Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

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Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,

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Speaker 1: the Bloomberg Business App, and YouTube. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 2: It's ams Amymsra. All Right, I do want to fly,

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Speaker 2: but not in a narrow body seven thirty seven.

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Speaker 3: Max.

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Speaker 2: I'm still a little bit worried about flying on a

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Speaker 2: seven thirty seven? Is it just me?

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Speaker 7: No?

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Speaker 5: I get that I don't know enough about planes to

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Speaker 5: sort of suss out what aircraft.

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Speaker 2: I know very little about planes, but I know this

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Speaker 2: one tends to crash a lot.

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Speaker 5: Those numbers seem bad.

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Speaker 2: Yeah, And apparently the Chinese for a while they were

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Speaker 2: cool with it until the plane started to crash. They

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Speaker 2: were buying a ton of boeings. Trump's trade war and

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Speaker 2: then COVID and all of a sudden, Boeing went from

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Speaker 2: like the most beloved plane maker in China to the

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Speaker 2: biggest loser to air Bus. This duopoly is something we're

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Speaker 2: going to talk about with Bloomberg BusinessWeek editor in chief

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Speaker 2: Joel Weber. He joins us here in the Interactive Broker studio,

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Speaker 2: as well as Julie Johnson, the Aerospace reporter, and Joel

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Speaker 2: I was telling Katie earlier, my love for this business

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Speaker 2: has grown exponentially since I read Airframe by Michael Crichton.

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Speaker 8: H Okay, you read have you read it? No?

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Speaker 2: Man, I feel like this is one of the most

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Speaker 2: novels he wrote. Jurassic Park. Yeah, and it's a great movie.

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Speaker 2: It touches on China to.

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Speaker 3: Everyone.

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Speaker 2: So how did how did Julie whin you over this pitch?

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Speaker 3: Then?

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Speaker 8: Well, you know, we have this interest in airplanes and

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Speaker 8: air lines and the people who are running those companies

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Speaker 8: and also the people who manufacture them. There's this thing

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Speaker 8: that happened in China where you know, they closed the

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Speaker 8: borders for a really long time during COVID travel and

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Speaker 8: demand went away, uh internally domestically in China, uh internationally,

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Speaker 8: and that had all kinds of implications for the global economy.

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Speaker 8: It also had implications for people who make and sell airplanes,

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Speaker 8: and and that was sort of an interest of us,

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Speaker 8: especially ahead of the Paris Air Show, which is just

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Speaker 8: around the corner. And and so we circled back to

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Speaker 8: Julie to talk more about Boeing. So, so, what what's

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Speaker 8: happening with Boeing since China has been such a crucial

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Speaker 8: market for the company for so long.

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Speaker 7: Julie, pretty fascinating, I mean, for for the last three

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Speaker 7: or four years. The story had been pretty much the

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Speaker 7: same until very recently, and it was one of frustration

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Speaker 7: for Boeing. They were locked out of their largest international market,

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Speaker 7: frozen out, whatever you want to call it. And and

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Speaker 7: the they very much seemed to be caught in the

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Speaker 7: middle of this you know, trade war, and they were

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Speaker 7: all kinds of other issues mixed in, including the fact

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Speaker 7: that China was the first nation to ground the Max

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Speaker 7: after those two crashes and one of the last to

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Speaker 7: unground it.

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Speaker 2: So it was only two were there only two?

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Speaker 7: There were only two?

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Speaker 8: Enough to get Ma's attention.

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Speaker 7: Yeah, well it was. Yeah, it was a terrible, terrible tragedy.

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Speaker 2: But and it was only one kind of version of

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Speaker 2: the seven three seven, right, Julie, because there are so

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Speaker 2: many of those planes out there. But this was just

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Speaker 2: like the Max eight or the.

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Speaker 7: No. The design flaw was in was baked into all

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Speaker 7: the Max family and it's it's been addressed, I mean

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Speaker 7: that was. But anyway, so what's going on here is

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Speaker 7: that market dynamics have overtaken politics there because of COVID

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Speaker 7: and the Max grounding. The global air mark market is

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Speaker 7: thousands of planes short of demand, and so if you

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Speaker 7: want a Boeing jet, you want a Max, you better

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Speaker 7: get in line because they're sold out now into twenty

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Speaker 7: twenty eight. We just saw Ryanair place this monster order

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Speaker 7: that that goes into the twenty just to line up aircraft.

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Speaker 7: So and Airbus is sold out almost to twenty thirty.

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Speaker 7: So it's pretty pretty fascinating to see. Suddenly, you know,

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Speaker 7: there's all this activity in China. They need their planes,

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Speaker 7: and things are starting to look good for Boeing.

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Speaker 2: The numbers are striking. I mean, I took from the

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Speaker 2: story that Boeing was like a big was beloved in

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Speaker 2: China and was selling more planes than anybody else there.

441
00:23:29,880 --> 00:23:33,919
Speaker 2: And then the geopolitical tensions I think are key, right,

442
00:23:33,960 --> 00:23:36,800
Speaker 2: the Trump trade war plus COVID plus the MAX crashes.

443
00:23:37,200 --> 00:23:41,199
Speaker 2: Since twenty twenty, Airbus has sold three hundred or delivered

444
00:23:41,200 --> 00:23:43,760
Speaker 2: three hundred and eighty four planes to China. Boeing has

445
00:23:43,800 --> 00:23:47,760
Speaker 2: delivered four, why haven't bothered? And Ryanair has now put

446
00:23:47,800 --> 00:23:50,560
Speaker 2: in an order for three hundred. United has ordered like

447
00:23:50,600 --> 00:23:53,440
Speaker 2: two hundred, and the Indians have ordered another one hundred.

448
00:23:53,520 --> 00:23:57,640
Speaker 2: So you know, everybody wants these things. And I guess

449
00:23:57,680 --> 00:23:59,840
Speaker 2: Boeing is now optimistic? Is Dave Calhoun? The guy who

450
00:24:00,200 --> 00:24:03,600
Speaker 2: Boeing now he's optimistic that what the Chinese are going

451
00:24:03,680 --> 00:24:06,280
Speaker 2: to start ordering him again because he had a backlog

452
00:24:06,320 --> 00:24:08,359
Speaker 2: of like ten billion dollars of the planes that he

453
00:24:08,440 --> 00:24:10,960
Speaker 2: was supposed to sell to them but had started already

454
00:24:10,960 --> 00:24:11,800
Speaker 2: giving to other clients.

455
00:24:11,840 --> 00:24:13,600
Speaker 8: Surely you did it, that's firedough.

456
00:24:16,320 --> 00:24:19,359
Speaker 7: Yeah, So so there's a lot of unpack here. Boeing

457
00:24:19,480 --> 00:24:23,000
Speaker 7: has one hundred and forty planes that they built for China,

458
00:24:23,080 --> 00:24:26,440
Speaker 7: most of them in twenty twenty nineteen, that have been

459
00:24:26,480 --> 00:24:31,280
Speaker 7: in storage because China was closed to the MAX, and

460
00:24:31,400 --> 00:24:35,600
Speaker 7: China has not resumed imports of the MAX yet, but

461
00:24:36,840 --> 00:24:41,280
Speaker 7: apparently that could happen. It's basically all they need is

462
00:24:41,320 --> 00:24:44,800
Speaker 7: a stamp from the government for that to happen. The

463
00:24:44,840 --> 00:24:51,240
Speaker 7: airlines want their planes. So so yeah, that's the ten

464
00:24:51,280 --> 00:24:55,680
Speaker 7: billion dollars that's tied up. That's been very frustrating to Boeing.

465
00:24:56,000 --> 00:25:01,120
Speaker 7: But if China, you know, Boeing kind of ran out

466
00:25:01,160 --> 00:25:03,760
Speaker 7: of patients last year as the market started to heat up,

467
00:25:03,960 --> 00:25:07,560
Speaker 7: and Calhoun was not subtle at all in saying, you know,

468
00:25:07,880 --> 00:25:10,720
Speaker 7: we're marketing these If you don't want these planes, they're

469
00:25:10,720 --> 00:25:14,320
Speaker 7: gonna be other buyers. And that's that's right around the

470
00:25:14,359 --> 00:25:17,920
Speaker 7: time that China started reopening and this this relationship flipped

471
00:25:18,400 --> 00:25:20,440
Speaker 7: and by the way, I mean it could flip again,

472
00:25:20,880 --> 00:25:25,280
Speaker 7: Like the politics are crazy here, I mean, but it's

473
00:25:25,320 --> 00:25:26,320
Speaker 7: looking good for Boeing.

474
00:25:27,040 --> 00:25:33,119
Speaker 8: So how did Airbus managed to to really just continue

475
00:25:33,160 --> 00:25:36,680
Speaker 8: to you know, sell planes. There's so much more dramatically

476
00:25:36,720 --> 00:25:37,200
Speaker 8: than Boeing.

477
00:25:38,040 --> 00:25:42,159
Speaker 7: Well, their plane wasn't grounded. I mean, this is so

478
00:25:43,119 --> 00:25:46,760
Speaker 7: the max. The global grounding was I think the longest

479
00:25:47,280 --> 00:25:52,560
Speaker 7: in aviation history, certainly the longest for a really important aircraft,

480
00:25:53,200 --> 00:25:57,919
Speaker 7: and Airbus Boeing had to shut down production during COVID.

481
00:25:58,040 --> 00:26:04,240
Speaker 7: Airbus managed to keep factories going and running semi semi hot.

482
00:26:05,000 --> 00:26:07,919
Speaker 7: And then Airbus has also done a lot of direct

483
00:26:07,960 --> 00:26:11,880
Speaker 7: investment in China, and they've got they've you know, they're

484
00:26:11,880 --> 00:26:16,359
Speaker 7: building their A three twenty NEOs in China that's the

485
00:26:16,880 --> 00:26:21,360
Speaker 7: rival to the Max. So so they've managed they've got

486
00:26:21,359 --> 00:26:24,400
Speaker 7: a really good relationship that they've you know, they've managed

487
00:26:24,400 --> 00:26:29,360
Speaker 7: to foster through the trade tensions. And by the way,

488
00:26:29,520 --> 00:26:33,720
Speaker 7: Washington's kind of irritated by some of the ordering that

489
00:26:33,720 --> 00:26:35,880
Speaker 7: that's gone to Airbus's way.

490
00:26:36,040 --> 00:26:40,000
Speaker 2: Well please, they've brought it upon themselves. I mean, you know,

491
00:26:40,040 --> 00:26:43,280
Speaker 2: if you want to win a congressional campaign, dissing China

492
00:26:43,359 --> 00:26:45,439
Speaker 2: is a great way to do that to get votes.

493
00:26:45,520 --> 00:26:48,119
Speaker 2: And the Europeans have been courting the Chinese with the

494
00:26:48,160 --> 00:26:51,199
Speaker 2: Belton Road initiative and letting him straight up in through Italy,

495
00:26:51,320 --> 00:26:54,600
Speaker 2: right up into the heart of of Europe. That's got

496
00:26:54,640 --> 00:26:56,040
Speaker 2: to help a lot as well, doesn't it.

497
00:26:56,760 --> 00:26:57,040
Speaker 3: Yeah?

498
00:26:57,800 --> 00:26:59,879
Speaker 7: Yeah, absolutely so.

499
00:27:01,520 --> 00:27:04,840
Speaker 2: I wonder why does China not have its own I

500
00:27:04,880 --> 00:27:06,960
Speaker 2: was talking about Airframe. I was talking about Airframe, the

501
00:27:06,960 --> 00:27:10,639
Speaker 2: book by Michael Crichton. Julie, have you read it? Sorry, okay,

502
00:27:10,840 --> 00:27:14,000
Speaker 2: I thought it was popular anyway. Part of the book

503
00:27:14,240 --> 00:27:18,920
Speaker 2: talks about how the airplane ip like, for example, how

504
00:27:18,960 --> 00:27:22,560
Speaker 2: you make a wing is so heavily guarded in this country,

505
00:27:22,600 --> 00:27:25,119
Speaker 2: and I'm sure air Bus guards theirs as well. But

506
00:27:25,160 --> 00:27:28,840
Speaker 2: they have to outsource some of this manufacturing to China.

507
00:27:28,920 --> 00:27:33,200
Speaker 2: As you know, the global economy became too intertwined. China

508
00:27:33,480 --> 00:27:35,480
Speaker 2: knows how to make planes, now, why don't they make

509
00:27:35,960 --> 00:27:37,680
Speaker 2: an uncomfortable narrow body jet.

510
00:27:39,160 --> 00:27:44,879
Speaker 7: They have China just to make things even more complicated.

511
00:27:44,920 --> 00:27:49,760
Speaker 7: So China has its rival, homegrown rival to the Max

512
00:27:49,840 --> 00:27:53,320
Speaker 7: and to the A three twenty neo, and it just

513
00:27:53,640 --> 00:27:59,840
Speaker 7: entered service last month and more than ten years behind schedule,

514
00:28:00,040 --> 00:28:05,280
Speaker 7: by the way, and about I've seen estimates that around

515
00:28:05,320 --> 00:28:08,800
Speaker 7: eighty percent of the technology in that plane, basically everything

516
00:28:08,880 --> 00:28:14,920
Speaker 7: that you need to keep it aloft is Western made,

517
00:28:15,280 --> 00:28:22,200
Speaker 7: and so manufacturing commercial jets is really, really, really difficult,

518
00:28:22,520 --> 00:28:28,200
Speaker 7: and to build them on scale even tougher. So it's

519
00:28:28,280 --> 00:28:30,120
Speaker 7: one thing to get it into the air, but then

520
00:28:30,320 --> 00:28:34,560
Speaker 7: the next challenge for China is to start churning these out,

521
00:28:35,359 --> 00:28:40,360
Speaker 7: and it's you know, they put a lot of resources

522
00:28:40,360 --> 00:28:42,600
Speaker 7: into it. I wouldn't count them out at all, but

523
00:28:44,080 --> 00:28:48,600
Speaker 7: it's going to be probably decades before they're a threat

524
00:28:48,640 --> 00:28:51,840
Speaker 7: to Boeing an air bus. And that also works in

525
00:28:51,880 --> 00:28:53,280
Speaker 7: Boeing's favor right now.

526
00:28:53,720 --> 00:28:57,880
Speaker 8: Okay, Well, if Matt is reluctant to get on the Max, Katie,

527
00:28:57,920 --> 00:29:02,360
Speaker 8: I'm curious the seat nine to nineteen that's going to

528
00:29:02,400 --> 00:29:06,200
Speaker 8: be China's answer to the Max. Matt, when you're gonna

529
00:29:06,200 --> 00:29:07,520
Speaker 8: step on one of those?

530
00:29:07,240 --> 00:29:13,360
Speaker 2: No, I mean no, it's like getting a Chinese COVID vaccine. No,

531
00:29:13,480 --> 00:29:17,920
Speaker 2: thank you, ma'am. No, it could work. It could, yeah,

532
00:29:17,960 --> 00:29:18,440
Speaker 2: it could.

533
00:29:18,640 --> 00:29:21,720
Speaker 5: Okay, Julie, I have a question about the competitive landscape here,

534
00:29:21,760 --> 00:29:25,240
Speaker 5: because again it seems like this dynamic maybe is shifting

535
00:29:25,280 --> 00:29:29,200
Speaker 5: again in favor of Boeing. But I mean you also

536
00:29:29,200 --> 00:29:32,480
Speaker 5: made the point that if you look at airbuses, waitless,

537
00:29:32,520 --> 00:29:35,520
Speaker 5: I mean we're talking until the start of the next decade.

538
00:29:35,600 --> 00:29:38,720
Speaker 5: So from a competitive standpoint, it still seems like when

539
00:29:38,720 --> 00:29:42,720
Speaker 5: it comes to China, Boeing is far behind that of

540
00:29:42,760 --> 00:29:44,120
Speaker 5: air Bus. Is that safe to say?

541
00:29:45,080 --> 00:29:48,959
Speaker 7: Yeah, that's that's spot on. Yeah, that's exactly right on.

542
00:29:49,880 --> 00:29:53,880
Speaker 7: The on air Bus is clearly in the driver's seat

543
00:29:54,080 --> 00:29:58,920
Speaker 7: and on. Frankly, because they both Boeing and Airbus have

544
00:29:59,120 --> 00:30:02,600
Speaker 7: struggled postc OVID to get their factories back up and

545
00:30:02,680 --> 00:30:06,440
Speaker 7: running smoothly, and when You're coordinating hundreds of thousands of

546
00:30:06,520 --> 00:30:09,120
Speaker 7: planes or parts that go into a plane, and they've

547
00:30:09,120 --> 00:30:12,480
Speaker 7: got to arrive on schedule. You know, sometimes down time

548
00:30:12,560 --> 00:30:15,960
Speaker 7: to the half hour. You can just see how quickly,

549
00:30:17,040 --> 00:30:19,840
Speaker 7: you know, how difficult that is, and how quickly things

550
00:30:20,200 --> 00:30:24,720
Speaker 7: things can go amiss. And so air Bus is inability to,

551
00:30:25,400 --> 00:30:28,240
Speaker 7: you know, to make good on their their schedule has

552
00:30:28,360 --> 00:30:30,640
Speaker 7: kind of left going back into the game a little bit.

553
00:30:31,160 --> 00:30:34,560
Speaker 7: But air Bus right now dominates. I mean, there's just

554
00:30:34,640 --> 00:30:37,200
Speaker 7: no question it's their market.

555
00:30:37,640 --> 00:30:43,280
Speaker 8: Okay, Julia, I'm curious. Air show coming up soon Paris? Yeah,

556
00:30:43,520 --> 00:30:45,520
Speaker 8: do you get to go? And if not, what are

557
00:30:45,560 --> 00:30:46,920
Speaker 8: you going to be looking for from Afar?

558
00:30:48,120 --> 00:30:50,440
Speaker 7: No, I'm I'm I'm gonna be there. I'm gonna be

559
00:30:51,240 --> 00:30:57,600
Speaker 7: sleep deprived and you know, eating bread and cheese and

560
00:30:57,680 --> 00:30:58,600
Speaker 7: sitting in traffic.

561
00:30:59,480 --> 00:30:59,840
Speaker 3: Maybe just.

562
00:31:03,440 --> 00:31:06,840
Speaker 2: Poor Julie, she's gonna be eating French cheese and drinking wine.

563
00:31:07,120 --> 00:31:09,160
Speaker 8: What are you most looking forward to there, Julie?

564
00:31:10,280 --> 00:31:14,480
Speaker 7: You know it's on it. The excitement is palpable. So

565
00:31:14,680 --> 00:31:20,200
Speaker 7: it's it's very cool to have the whole industry, I mean,

566
00:31:20,360 --> 00:31:24,440
Speaker 7: tens of thousands of people jammed into an airfield for

567
00:31:24,480 --> 00:31:27,040
Speaker 7: a few days and you run into I mean, like,

568
00:31:27,160 --> 00:31:30,600
Speaker 7: oh my gosh, there's a you know, four star general

569
00:31:31,160 --> 00:31:34,960
Speaker 7: walking by. I mean, it's just it's really really cool

570
00:31:35,560 --> 00:31:40,720
Speaker 7: just and and as a as a I love airplanes,

571
00:31:40,800 --> 00:31:43,840
Speaker 7: and so just just to see them up close, to

572
00:31:43,840 --> 00:31:46,640
Speaker 7: see the flying displays, to run into people, I know,

573
00:31:46,880 --> 00:31:48,760
Speaker 7: it's it's like, it's very cool.

574
00:31:48,800 --> 00:31:52,240
Speaker 8: Matt wants you to ask why Airframe wasn't a bigger hit.

575
00:31:54,440 --> 00:31:57,080
Speaker 2: Now you guys read it. I'm excited to I'm excited

576
00:31:57,080 --> 00:31:58,520
Speaker 2: to see what they have. And Julie, we're going to

577
00:31:58,560 --> 00:32:01,160
Speaker 2: have you back on out of Paris Air Show because

578
00:32:01,160 --> 00:32:04,680
Speaker 2: they always have the coolest new things, new products there

579
00:32:04,800 --> 00:32:05,880
Speaker 2: and it'll be interesting to see.

580
00:32:06,160 --> 00:32:09,840
Speaker 8: I always an open question overrated underrated The book air

581
00:32:09,880 --> 00:32:12,720
Speaker 8: Frame by Michael Creton, just putting it out there.

582
00:32:13,600 --> 00:32:18,880
Speaker 2: The book apparently is under red, all right, Julie Johnson

583
00:32:18,960 --> 00:32:23,000
Speaker 2: there covers airlines for US or aerospace is more than

584
00:32:23,040 --> 00:32:26,560
Speaker 2: just airlines, the makers of planes and defense stuff as well.

585
00:32:26,760 --> 00:32:29,720
Speaker 2: Joel Eber, Editor and Chief at Bloomberg BusinessWeek.

586
00:32:32,440 --> 00:32:36,800
Speaker 1: This is Bloomberg Business Wait inside from the reporters and

587
00:32:36,960 --> 00:32:40,520
Speaker 1: editors who bring you America's most trusted business magazine, plus

588
00:32:40,600 --> 00:32:44,760
Speaker 1: global business finance and tech news. The Bloomberg Business Week

589
00:32:44,800 --> 00:33:02,280
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

590
00:32:58,000 --> 00:32:58,480
Speaker 3: Journal.

591
00:32:59,440 --> 00:33:06,840
Speaker 4: Now about you let me oh, no, no, no, honey, please,

592
00:33:07,280 --> 00:33:08,000
Speaker 4: I want to drive.

593
00:33:10,280 --> 00:33:11,720
Speaker 1: It's a good question that.

594
00:33:14,960 --> 00:33:15,800
Speaker 3: This is good.

595
00:33:15,880 --> 00:33:21,400
Speaker 1: Drive to the clothes me well, don on Bloomberg Radio.

596
00:33:22,680 --> 00:33:24,920
Speaker 2: All right, Matt Miller here and for Tim Stenevick, I've

597
00:33:24,920 --> 00:33:28,200
Speaker 2: got Katie Greifeld by my side filling in for Carrol Master.

598
00:33:28,400 --> 00:33:31,160
Speaker 2: Carrol's out for a couple of days today and tomorrow.

599
00:33:31,280 --> 00:33:32,360
Speaker 2: Well deserved, R and R.

600
00:33:32,720 --> 00:33:33,240
Speaker 5: Good for her.

601
00:33:33,320 --> 00:33:35,240
Speaker 2: I guess I actually don't know what she's doing, but

602
00:33:36,240 --> 00:33:39,360
Speaker 2: hopefully not listening anyway. Aaron Kennon joins us right now.

603
00:33:39,400 --> 00:33:41,480
Speaker 2: He's a co founder and chief executive officer of Clean

604
00:33:41,560 --> 00:33:44,880
Speaker 2: Harbor Asset Management. They have over a billion dollars of

605
00:33:45,200 --> 00:33:48,280
Speaker 2: assets under management out of Stamford, Connecticut. Aaron, great to

606
00:33:48,280 --> 00:33:50,880
Speaker 2: get you on the program right as we, you know,

607
00:33:50,960 --> 00:33:53,240
Speaker 2: break into this bull market at the end of last

608
00:33:53,280 --> 00:33:55,880
Speaker 2: week and today, it looks like investors are behind that

609
00:33:55,880 --> 00:33:59,760
Speaker 2: they're on board with it. We've talked to a number

610
00:33:59,760 --> 00:34:03,960
Speaker 2: of statisticians who tell us anytime we go up twenty

611
00:34:03,960 --> 00:34:06,880
Speaker 2: percent from a bottom, or let's say ninety two percent

612
00:34:06,920 --> 00:34:10,160
Speaker 2: of the time we continue up twelve months later.

613
00:34:10,360 --> 00:34:14,240
Speaker 3: What do you think, Well, we'll have to wait and see.

614
00:34:14,800 --> 00:34:19,759
Speaker 9: I mean, I think after a significant tightening cycle like

615
00:34:19,800 --> 00:34:22,799
Speaker 9: the one we've just gone through, assuming we pause here,

616
00:34:23,080 --> 00:34:28,000
Speaker 9: usually markets bottom after the FED starts cutting rates, not

617
00:34:28,520 --> 00:34:32,080
Speaker 9: as the FED is pausing, and so we'll have to

618
00:34:32,080 --> 00:34:32,839
Speaker 9: see on that front.

619
00:34:32,840 --> 00:34:33,080
Speaker 3: Map.

620
00:34:33,080 --> 00:34:37,080
Speaker 9: But I think the market is clearly optimistic that we're

621
00:34:37,120 --> 00:34:40,080
Speaker 9: not going to experience a hard landing. Trading at the

622
00:34:40,239 --> 00:34:44,960
Speaker 9: SMP trading at twenty times this year's anticipated earnings level

623
00:34:45,600 --> 00:34:47,840
Speaker 9: is certainly in sort of the top deathcile over the

624
00:34:47,920 --> 00:34:53,080
Speaker 9: last twenty five years of valuations, and so this notion

625
00:34:53,160 --> 00:34:55,200
Speaker 9: of a hard landing certainly is not pricing of the

626
00:34:55,200 --> 00:34:57,719
Speaker 9: equity market as we head into the FED meeting on Wednesday.

627
00:34:58,000 --> 00:35:02,200
Speaker 5: Well, Aaron, how seriously do you you factor in valuations,

628
00:35:02,280 --> 00:35:04,160
Speaker 5: because I mean, the number you just gave for the

629
00:35:04,200 --> 00:35:06,320
Speaker 5: S and P five hundred, it's very high, as you mentioned,

630
00:35:06,360 --> 00:35:09,439
Speaker 5: especially looking historically. But you know, you could have said

631
00:35:09,440 --> 00:35:12,320
Speaker 5: the valuations were high last year or the year before

632
00:35:12,440 --> 00:35:14,839
Speaker 5: the year before that, and it still seems like this

633
00:35:15,040 --> 00:35:18,400
Speaker 5: index finds a way higher. So when you're looking in

634
00:35:18,480 --> 00:35:21,239
Speaker 5: the totality of the market. I mean, how do you

635
00:35:21,640 --> 00:35:24,000
Speaker 5: factor in valuations?

636
00:35:24,680 --> 00:35:28,320
Speaker 9: Well, I think ultimately earnings drive the long term performance

637
00:35:28,360 --> 00:35:32,080
Speaker 9: of the equity market. But the pe band, if you will,

638
00:35:32,200 --> 00:35:34,360
Speaker 9: that you just referred to over the last several years

639
00:35:34,760 --> 00:35:38,759
Speaker 9: is certainly worth exploring. Trading as low as let's say,

640
00:35:38,760 --> 00:35:41,400
Speaker 9: fifteen times and as high as twenty one times, we

641
00:35:41,480 --> 00:35:43,960
Speaker 9: may be in the upper end of that band, and

642
00:35:44,040 --> 00:35:47,160
Speaker 9: so the notion that we go into a moderately hard

643
00:35:47,239 --> 00:35:49,600
Speaker 9: or harder landing I certainly do not think is priced

644
00:35:49,600 --> 00:35:52,719
Speaker 9: into the nearly forty four hundred s and P five

645
00:35:52,800 --> 00:35:55,600
Speaker 9: hundred levels. That isn't to say that we don't believe

646
00:35:55,600 --> 00:35:57,960
Speaker 9: in stocks for the long haul. We certainly do. We

647
00:35:58,000 --> 00:36:03,120
Speaker 9: think that they're core to most client long term acid allocations.

648
00:36:03,760 --> 00:36:05,799
Speaker 9: And that doesn't mean that we don't see opportunities within

649
00:36:05,840 --> 00:36:09,840
Speaker 9: the equity market even today. But certainly a point of caution,

650
00:36:10,120 --> 00:36:12,160
Speaker 9: we're training at the upper end of that band as

651
00:36:12,200 --> 00:36:16,160
Speaker 9: growth is decelerating, is employment appears to be peaking at

652
00:36:16,160 --> 00:36:19,920
Speaker 9: the moment, and other signs of economic deceleration are upon us.

653
00:36:20,560 --> 00:36:24,320
Speaker 2: What is your what are the odds on a surprise

654
00:36:24,680 --> 00:36:27,040
Speaker 2: at the FED meeting on Wednesday. I mean we got

655
00:36:27,840 --> 00:36:30,160
Speaker 2: I think a surprise from the Bank of Canada. For sure.

656
00:36:30,200 --> 00:36:32,920
Speaker 2: We were expecting a pause there as well, and they

657
00:36:33,040 --> 00:36:38,080
Speaker 2: hiked rates. We've seen the Bank of Canada make moves

658
00:36:38,239 --> 00:36:40,200
Speaker 2: before the FED. It's one of the few banks that

659
00:36:40,239 --> 00:36:42,360
Speaker 2: seems to be able to do that. Everybody else follows.

660
00:36:42,640 --> 00:36:45,000
Speaker 2: What are you expecting from J pallin Coo on Wednesday?

661
00:36:45,920 --> 00:36:49,080
Speaker 9: Yeah, I think the surprise would have to emanate out

662
00:36:49,080 --> 00:36:53,640
Speaker 9: of a really hot CPI number tomorrow. Otherwise, I think

663
00:36:53,680 --> 00:36:56,440
Speaker 9: it's essentially cooked in the books that the FED pauses.

664
00:36:57,360 --> 00:36:59,560
Speaker 9: The FED Q and A will be interesting. I think

665
00:36:59,600 --> 00:37:02,960
Speaker 9: the talk about data dependency, and I think that's what

666
00:37:03,000 --> 00:37:05,560
Speaker 9: the market anticipates too. You know, we've gone from nine

667
00:37:05,600 --> 00:37:10,560
Speaker 9: percent headline inflation to four point nine percent on the

668
00:37:10,600 --> 00:37:14,720
Speaker 9: heels of sort of a post COVID normalization of supply

669
00:37:14,920 --> 00:37:16,920
Speaker 9: chains and the like, and now, you know, I think

670
00:37:16,920 --> 00:37:20,759
Speaker 9: there's a conventional wisdom embedded in the market at Moving

671
00:37:20,800 --> 00:37:24,320
Speaker 9: from nearly five percent headline back down towards the fed's

672
00:37:24,400 --> 00:37:27,600
Speaker 9: two percent target's going to require some heavy lifting. But

673
00:37:27,640 --> 00:37:33,279
Speaker 9: if inflation trends lower towards the FED in surprises to

674
00:37:33,360 --> 00:37:36,239
Speaker 9: the degree that it accelerates towards the two percent level.

675
00:37:36,280 --> 00:37:39,560
Speaker 3: It may be due to sort of the more traditional.

676
00:37:38,920 --> 00:37:43,960
Speaker 9: Components of the economy, which is employment cracking, wages softening,

677
00:37:44,440 --> 00:37:47,600
Speaker 9: and growth slowing. We didn't see that happen from nine

678
00:37:47,600 --> 00:37:49,319
Speaker 9: to four point nine, but we may see it from

679
00:37:49,320 --> 00:37:52,040
Speaker 9: four point nine to a two percent handle on inflation

680
00:37:52,360 --> 00:37:52,759
Speaker 9: mm hmm.

681
00:37:52,880 --> 00:37:55,319
Speaker 5: Yeah, all eyes on those numbers of course, coming at

682
00:37:55,360 --> 00:37:58,400
Speaker 5: eight thirty am Eastern tomorrow morning.

683
00:37:58,520 --> 00:38:01,840
Speaker 2: But we are expecting a east and drop yeah, number right,

684
00:38:01,880 --> 00:38:04,280
Speaker 2: four point nine percent to four point one percent.

685
00:38:04,640 --> 00:38:06,840
Speaker 5: Yeah, and also a drop in core.

686
00:38:06,680 --> 00:38:08,919
Speaker 2: Inflation, but five and a half to five point two.

687
00:38:09,000 --> 00:38:12,480
Speaker 5: But as we've talked about that divergence between core and headline,

688
00:38:12,520 --> 00:38:15,720
Speaker 5: it's definitely growing. But Aaron, so far we've talked about equities,

689
00:38:15,719 --> 00:38:18,239
Speaker 5: I want to bring bonds into these conversations because this

690
00:38:18,320 --> 00:38:21,640
Speaker 5: year was supposed to be the year of the bond.

691
00:38:21,960 --> 00:38:24,919
Speaker 5: I guess a did you buy into that? And where

692
00:38:24,960 --> 00:38:26,279
Speaker 5: are we on that narrative now?

693
00:38:27,600 --> 00:38:32,800
Speaker 9: Well, it's been an interesting year, right because we we

694
00:38:32,960 --> 00:38:36,719
Speaker 9: we've experienced this the sort of banking crisis on the

695
00:38:36,719 --> 00:38:40,719
Speaker 9: West Coast with Silicon Valley Bank really had you know,

696
00:38:40,960 --> 00:38:44,000
Speaker 9: bond bonds trending, you know, lower on the heels of that,

697
00:38:45,160 --> 00:38:48,520
Speaker 9: and now now we've seen a re emergence of higher

698
00:38:48,640 --> 00:38:52,279
Speaker 9: bond yields. You know, yields haven't really moved much relatively

699
00:38:52,320 --> 00:38:55,960
Speaker 9: speaking since the commencement of the year, even though inflations

700
00:38:56,000 --> 00:38:58,840
Speaker 9: come off. So it's been a little bit of a

701
00:38:58,840 --> 00:39:00,759
Speaker 9: head scratcher. And I think one would argue that if

702
00:39:00,800 --> 00:39:03,640
Speaker 9: we were sitting here at the beginning of the year

703
00:39:03,640 --> 00:39:07,719
Speaker 9: and someone said that rates are unchanged, where are equities,

704
00:39:07,760 --> 00:39:10,680
Speaker 9: you'd probably say equities would be lower. But that hasn't

705
00:39:10,719 --> 00:39:15,000
Speaker 9: been the case either, So you know, a lot occurring

706
00:39:15,040 --> 00:39:17,520
Speaker 9: on that front. What I think going forward is that

707
00:39:18,040 --> 00:39:22,600
Speaker 9: inflation will continue to trend downward, that maybe we avoid

708
00:39:22,600 --> 00:39:26,360
Speaker 9: a hard landing, but we're certainly moving into a slower

709
00:39:26,400 --> 00:39:30,239
Speaker 9: growth period, and that eventually we'll see the longer end

710
00:39:30,239 --> 00:39:33,720
Speaker 9: of the curve in particular. But as the Fed normalizes rates,

711
00:39:33,719 --> 00:39:37,400
Speaker 9: perhaps in twenty twenty four, we'll see rates trending downward

712
00:39:37,440 --> 00:39:42,319
Speaker 9: across the board. Maybe the curve finally lose the inversion

713
00:39:43,080 --> 00:39:48,920
Speaker 9: sometime in late twenty twenty four, but higher prices for bonds.

714
00:39:48,960 --> 00:39:53,439
Speaker 9: I think this is another asset allocation opportunity for those

715
00:39:53,440 --> 00:39:56,799
Speaker 9: who own balanced portfolios of equities and bonds where a

716
00:39:56,960 --> 00:40:00,239
Speaker 9: slower economic growth picture augurs well for the over all

717
00:40:00,280 --> 00:40:04,040
Speaker 9: bond market, particularly in a soft landing scenario where maybe

718
00:40:04,040 --> 00:40:07,799
Speaker 9: credit doesn't widen so significantly, particularly high yield and even

719
00:40:07,840 --> 00:40:11,759
Speaker 9: investment grade. It could set up well for balanced portfolios

720
00:40:11,760 --> 00:40:12,400
Speaker 9: going forward.

721
00:40:13,000 --> 00:40:16,880
Speaker 2: Aaron just got about thirty seconds left. My late grandmother

722
00:40:17,400 --> 00:40:21,520
Speaker 2: always requested Pacific salmon for some reason. She was a stickler.

723
00:40:21,520 --> 00:40:23,160
Speaker 2: And I note that you are on the board of

724
00:40:23,200 --> 00:40:27,600
Speaker 2: the Atlantic Salmon Federation. Why is that? What is that?

725
00:40:28,680 --> 00:40:31,239
Speaker 9: Well, it's a very important organization. We're trying to say

726
00:40:31,280 --> 00:40:35,399
Speaker 9: wild runs of Atlantic salmon. It's an international challenge. It's

727
00:40:35,400 --> 00:40:39,800
Speaker 9: faced by the United States, where we have a moratorm.

728
00:40:39,840 --> 00:40:41,759
Speaker 9: We can't fish for Atlantic salmon because there are so

729
00:40:41,840 --> 00:40:44,000
Speaker 9: few of them moving into the main waters. We have

730
00:40:44,120 --> 00:40:48,879
Speaker 9: very few runs left. In the Canadian provinces have seen

731
00:40:48,960 --> 00:40:54,320
Speaker 9: salmon runs collapse. It's more than about salmon. It's about

732
00:40:54,360 --> 00:40:59,200
Speaker 9: how we treat our coastal areas, how we deal with

733
00:40:59,239 --> 00:41:03,239
Speaker 9: the habitat that ultimately allow for salmon to return to

734
00:41:03,280 --> 00:41:04,120
Speaker 9: their home waters.

735
00:41:04,880 --> 00:41:07,160
Speaker 1: If it's the international.

736
00:41:08,480 --> 00:41:10,920
Speaker 9: Relaynmark week away.

737
00:41:12,160 --> 00:41:14,600
Speaker 2: All right, Hey, I got to cut you off there, Eric, Aaron,

738
00:41:14,680 --> 00:41:17,160
Speaker 2: but I'm pleased if we guy you on. Aaron Kennan

739
00:41:17,520 --> 00:41:19,040
Speaker 2: from Clear Harbor Asset Managements.

740
00:41:20,719 --> 00:41:25,400
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741
00:41:25,520 --> 00:41:29,240
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742
00:41:29,239 --> 00:41:32,880
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743
00:41:32,920 --> 00:41:36,239
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