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Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you,

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Speaker 1: along with my co host Lisa Brahma wits each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Let's take a look at the

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Speaker 1: oil as we think about the coronavirus clearly potentially going

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Speaker 1: to have a negative impact on global global growth. That

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Speaker 1: is what the market is discounting. When you take a

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Speaker 1: look at oil, you see that as well. W T

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Speaker 1: I and Brent both down over from their highs, reflecting

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Speaker 1: the concern about global growth. Opex trying to respond today

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Speaker 1: announcing that they will they look to reduce output by

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Speaker 1: one point five million barrels. I get the latest. We

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Speaker 1: welcome Regina Mayor. She's the global energy head for KPMG

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Speaker 1: based in Houston. Regina, thanks so much for joining us here.

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Speaker 1: Give us your sense of kind of the opeque move

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Speaker 1: here that one point five million barrel cut to output.

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Speaker 1: It's noted that Russia Mayor man May not be supporting it.

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Speaker 1: So you're right. The market is in free fall around

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Speaker 1: crude price, and it's very substantial. We're seeing significant demand destruction,

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Speaker 1: and current projections are that global demand will at least

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Speaker 1: be flat and potentially negative, and that would be only

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Speaker 1: the fourth time in forty years that we've seen global

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Speaker 1: demand go negative. So OPEC is trying to take decisive

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Speaker 1: action to stem the tide. If they do the one

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Speaker 1: point five million barrels per day, which has not been

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Speaker 1: agreed to by OPEC, plus and Russia being a key

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Speaker 1: constituent there, that would reduce supply by three and a

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Speaker 1: half percent, which would be roughly in line with flat

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Speaker 1: demand or even slightly declined demand, which hopefully puts the

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Speaker 1: market more imbalanced. But right now, the market seems to

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Speaker 1: be shrugging off the decisions that were even made today,

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Speaker 1: and they seem to be unimpressed by the actions that

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Speaker 1: have been taken Regina. Earlier this morning, Jeff Curry of

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Speaker 1: Goldman Sacks came on Bloomberg Surveillance and was talking about

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Speaker 1: how he expects oil prices to fall and I'm talking

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Speaker 1: Brent could fall to or even below barrel this year

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Speaker 1: in terms of the expectations of growth to you agree,

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Speaker 1: I do not agree that will will go that low,

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Speaker 1: but I did not believe that we would be in

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Speaker 1: this territory. So without decisive action tomorrow, it could potentially

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Speaker 1: be forty. I would say for w T, I think

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Speaker 1: I find it hard to see a scenario where Brent

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Speaker 1: dives below forty. But we don't know what's happening with

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Speaker 1: the coronavirus, and the market is incredibly jittery and not

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Speaker 1: very rational right now. So, Regina, there was some news

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Speaker 1: out earlier today that XN is slowing the pace of

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Speaker 1: its flagship shale project in the Permian basin. So obviously

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Speaker 1: this raising more concerns at the folks in the Permian

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Speaker 1: having a tough time at these oil levels. What are

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Speaker 1: your clients telling you right now? They're saying, it's still

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Speaker 1: stay the course, uh, steady as we go, And I

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Speaker 1: think the very large companies have made bold moves to

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Speaker 1: reassure investors. We're putting we're focusing on the dividend, we're

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Speaker 1: guaranteeing the dividend, we're focusing on value, We're keeping capex

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Speaker 1: in line with expectations. They're hopeful that this is a

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Speaker 1: four to six month process and we'll ultimately see ourselves

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Speaker 1: wash out of this. And in the end, we have

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Speaker 1: to make these these big decisions because these are long

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Speaker 1: lead time efforts. If we stay in the Permian, there

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Speaker 1: are players that operate more on the brink, and the

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Speaker 1: larger players are hoping perhaps that they'll get some of

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Speaker 1: those other players out of the market, which bodes well

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Speaker 1: for future Permian activity. How significant will the bankruptcies and

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Speaker 1: this shall patch be this year? I anticipate that they

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Speaker 1: will go up. We need to see consolidation. There are

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Speaker 1: still too many fringe players and the checkerboard of acreage

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Speaker 1: is still too patchy. Um. The bigger players are consolidating

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Speaker 1: and they can operate more effectively, but there are moves

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Speaker 1: that need to be made going down into the forties

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Speaker 1: that could drive more of the bankruptcies, and I anticipate

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Speaker 1: that that should chick up. So Regina, overall, let's assume

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Speaker 1: we are facing no lower demand. Um, what else can

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Speaker 1: OPEC do on the supply front? Can they take it

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Speaker 1: another level? And how critical is it having Russia as

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Speaker 1: a part of this. It's absolutely critical that Russia is

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Speaker 1: a part of it. Um. That's I think what the

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Speaker 1: market is waiting for and I don't think that they

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Speaker 1: can do a whole lot more, which worries me, and

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Speaker 1: we're probably the Goldman Fort scenario comes into play because

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Speaker 1: you can't just keep cutting cutting um. The market is

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Speaker 1: not responding to that. What we really need to see

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Speaker 1: is demand coming back, and some of the indicators that

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Speaker 1: I would look for is a return to shipping. So

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Speaker 1: we have idle manufacturing capacity, we have product that's in

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Speaker 1: containers waiting to be shipped, we have ships there in quarantine.

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Speaker 1: Once we start to see the supply chains move more

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Speaker 1: effectively and we see travel restrictions lifted and some of

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Speaker 1: the self quarantine activity uh run be taken off, then

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Speaker 1: demand comes back, and that I think will be the

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Speaker 1: thing that booies the oil price for the longer period.

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Speaker 1: There's a question about the elasticity of the market, just

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Speaker 1: how quickly oil producers can ramp up production if things

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Speaker 1: get back to normal. Is there concerned that there could

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Speaker 1: be a whip saw here with the oil prices diving

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Speaker 1: and then jerking way back up as people start to

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Speaker 1: uh generate some of the same trade and the same

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Speaker 1: travel that they had before and without the inventories the

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Speaker 1: oil production supply chain and production process cannot move as

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Speaker 1: agilely and as quickly as that. So while some may

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Speaker 1: say they're slowing down production, I don't actually see that

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Speaker 1: having a material effect on declining production. To have that

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Speaker 1: whip saw effect. If they could, they belly would, But

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Speaker 1: it's not. It's not. You're not able to respond to

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Speaker 1: that rapidly, So I don't see that forecast. Regina Mayor,

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Speaker 1: thank you so much for being with us. Regina Mayor,

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Speaker 1: Global Energy head at KPMG based in Houston. Let's talk

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Speaker 1: about volatility. Looking at the VIX index right here, thirty

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Speaker 1: six point zero seven. That's up four points today. This

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Speaker 1: thing just recently a few weeks ago, down around twelve thirteen.

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Speaker 1: Incredibly higher risk being priced into the market. And we

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Speaker 1: talked about market volatility. Is absolutely nobody better to do

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Speaker 1: it with than Nick call Us, co founder Data Trek Research.

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Speaker 1: He joins us here in a Bloomberg Interactive Broker studio. Nick,

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Speaker 1: thanks so much for joining us. Are you how are

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Speaker 1: you thinking about the volatility in this market? Is whether

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Speaker 1: you should be buying or selling? Here? At most people

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Speaker 1: it just scares the heck out of them. Well, it

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Speaker 1: is scary, and that's a very very logical response, at

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Speaker 1: least an emotional one. If you look at the vix

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Speaker 1: spect and look at where it kind of levels out

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Speaker 1: and where it creates a buying opportunity to three levels

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Speaker 1: that really matter forty two, fifty and fifty eight, because

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Speaker 1: that's three four and five standard deviations from the long

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Speaker 1: run mean. I hope Tom Keene is listening. So those

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Speaker 1: are the levels, and it's worked beautifully so far. On Friday,

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Speaker 1: during that really cataclysmic low around to one or two pm,

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Speaker 1: it hit forty nine right on top of four standard deviations,

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Speaker 1: and so that was so far the bottom. So what

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Speaker 1: we're telling clients is, if you want to trade this

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Speaker 1: this this tape, look for those levels and don't even

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Speaker 1: try until forty two and pr to kind of stick

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Speaker 1: your toe and even deeper at It's interesting. For a

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Speaker 1: long time, the low interest rate environment was said to

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Speaker 1: be dampening volatility. Not so this time. No, Because the

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Speaker 1: low estreating environment was coincided with a low volatility of

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Speaker 1: GDP growth, a low volatility of unemployment. Those numbers were

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Speaker 1: getting better or at least flat for a long period

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Speaker 1: of time, and now we have this shock that says

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Speaker 1: we have no idea what happens next, and then implied

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Speaker 1: volatility rises because the volatility of future economic reports going

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Speaker 1: to be volatile as well. So, Nick, what did you

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Speaker 1: make of the Fed rate cut intra meeting rate cut

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Speaker 1: earlier this week? Panic or wise? You know, it comes

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Speaker 1: down to, I think you got to read the Beige

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Speaker 1: Book yesterday, because the Beige Book had fifty you want

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Speaker 1: to say, fifty seven mentions of coronavirus or COVID nineteen,

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Speaker 1: which is higher than the thirty eight mentions that Tariff

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Speaker 1: scott last year when they began to become a real issue.

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Speaker 1: And I think you know, chairp How is a big

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Speaker 1: fan of that Beige Book. He reads it and so

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Speaker 1: I think he probably looked at the draft over the

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Speaker 1: weekend and said this is going to be just as

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Speaker 1: bad or worse as the trade war. And that's what

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Speaker 1: engendered this, this fifty basis point cut. Right now we're

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Speaker 1: seeing Fed funds futures price in another fifty basis point

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Speaker 1: rate cut later this month. What will that do in

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Speaker 1: terms of stock valuations, in terms of volatility? I mean,

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Speaker 1: the feels like the answer is very very little. I

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Speaker 1: think it's the case where you know, the FED is

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Speaker 1: on the ship and guiding it and it sees the

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Speaker 1: iceberg ahead, and maybe it's too late to swerve, or

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Speaker 1: maybe it's not that you gotta try. You gotta turn

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Speaker 1: the wheel as hard as you can and hope you

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Speaker 1: miss it, or I hope it's more of a grazing blow.

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Speaker 1: I think that's the best that can hope for, and

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Speaker 1: I think realistically they know that. So Nick, you know,

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Speaker 1: one of the things at least I talk a lot

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Speaker 1: about is, you know, the interest rate market in a

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Speaker 1: two year point zero point five eight on the two year,

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Speaker 1: the ten year back below one. What does this tell you?

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Speaker 1: You tell you that question, as our clients have asked

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Speaker 1: that question more often than what does the volatility means?

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Speaker 1: They view the volatility is sort of a function of

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Speaker 1: the virus, and that's probably right. They view the move

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Speaker 1: in the ten years, perhaps we're learning something more structural,

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Speaker 1: and they worry that America has kind of seen its

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Speaker 1: best days, that economic growth is going to be very slow,

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Speaker 1: structural GDP growth will be slower, inflation is going to

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Speaker 1: be non existent. We're gonna end up like Europe and Japan.

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Speaker 1: And that is the big warrior. My counter argument is

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Speaker 1: that we're not going to end up that way. That

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Speaker 1: we still have, you know, a fairly strong economy, a

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Speaker 1: really strong tech sector, and all the things that create

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Speaker 1: long term economic growth. But it is a huge source

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Speaker 1: of concern, far more than I would have thought going

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Speaker 1: right to that point with tech. What are the levels

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Speaker 1: at which you buy oh? So the you know, the

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Speaker 1: way we look at it is tech is the most

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Speaker 1: volatile part of the market, and so you have to

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Speaker 1: basically think about where the market can go and how

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Speaker 1: bad it can get. And they are not to go

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Speaker 1: back to the standard deviation math, but a five percent

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Speaker 1: down day is a five standard deviation move. That is

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Speaker 1: the kind of levels where you get real panic, and

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Speaker 1: we outside of oh eight, we've never really seen it

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Speaker 1: for a very long period of time. So the bottom

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Speaker 1: line is, if you want to trade tech, you wait

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Speaker 1: for a big, big down day, a down five percent

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Speaker 1: day on the SMP where tech is down seven, eight,

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Speaker 1: nine percent, and that's the kind of low that you

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Speaker 1: can safely nibble away at. So if it goes down

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Speaker 1: nine percent more from here at Facebook in a day,

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Speaker 1: Google in a day, you're in there buying interesting. So

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Speaker 1: as we think about the market here. I mean, are

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Speaker 1: you thinking about we are in fact in a you know,

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Speaker 1: you know, not a stagflation, but a lower growth for longer.

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Speaker 1: Is that kind of your base case here over the

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Speaker 1: next several years? It is strongtly the base case for

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Speaker 1: at least the next year or two. You know. I

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Speaker 1: think there were early on back in January, which feels

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Speaker 1: like a thousand years ago, there was a hope this

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Speaker 1: is going to be a V bottom kind of event.

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Speaker 1: We look at Chinese pollution and traffic congestion data to

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Speaker 1: get a sense of how quickly the Chinese economy is

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Speaker 1: coming back online. The good news is morning and evening

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Speaker 1: rush hour in the five biggest cities is now getting

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Speaker 1: back to normal. And in Shenzen, which is really important

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Speaker 1: for tech, it's back to normal. Pollution is getting back

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Speaker 1: to normal. But we can traffic still very slow. Midday

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Speaker 1: traffic still very slow. So this isn't going to be

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Speaker 1: a V bottom. It's going to be a slow grinding

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Speaker 1: improvement of higher not just for the US but everywhere

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Speaker 1: in the world. I was reading a Project Syndicate column

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Speaker 1: by Harvard professor kind of throw Off last night, and

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Speaker 1: he was talking about how This is fundamentally different from

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Speaker 1: other issues that the Fed and Central banks globally have

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Speaker 1: dealt with. And when we talk about, you know, the

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Speaker 1: idea of rate repression, we talk about no inflation. This

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Speaker 1: time he was arguing, could be different because the disruption

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Speaker 1: is on the supply side, not the demand side. When

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Speaker 1: you have a disruption and supplies the demand is still there,

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Speaker 1: that means prices get bit up and we could end

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Speaker 1: up in a nineteen seventies like situation. Do you give

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Speaker 1: any credence to that idea super smart guy, so you

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Speaker 1: can't just blow it off. But I'll tell you, I'll

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Speaker 1: give you, you know, two anecdotes. The first is the

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Speaker 1: China traffic One. China consumer is not back. There is

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Speaker 1: no consumer demand in China to speak of, for all

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Speaker 1: the obvious reasons. Walking across town from from the West

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Speaker 1: side of Manhattan this morning, I was able to jaywalk

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Speaker 1: across Park Avenue in the middle of the day because

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Speaker 1: there was no traffic for a block and a half.

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Speaker 1: It just says that normal midtown traffic, which is usually

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Speaker 1: quite heavy, is extremely light in New York and that

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Speaker 1: could be a function of tourism, which is obviously down.

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Speaker 1: It could be a function of work from home. But

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Speaker 1: I can tell you haven't lived in New York my

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Speaker 1: whole life as you have. Looks very light out there.

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Speaker 1: It's not quite back to oh eight levels, but it

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Speaker 1: is light. What is your sense of how long will

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Speaker 1: take the cycle through the U S economy? I mean,

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Speaker 1: because it's the V is probably out of the discussion,

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Speaker 1: as you were suggesting. Yeah, the V feels like it's

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Speaker 1: off the table for now, and it feels like it's

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Speaker 1: three to six months, three months being kind of dragging

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Speaker 1: your way down towards the bottom of whatever happens, and

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Speaker 1: then three months coming back. And I think there's a

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Speaker 1: piece of this that really revolves around holiday and Christmas

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Speaker 1: as well, both from the supply and the demand side,

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Speaker 1: because if you do get an economic shock, then you

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Speaker 1: do have a different picture going into holiday and as

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Speaker 1: well as the elections. So unfortunately, this touches on every

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Speaker 1: single topic investors care about. Nicholas, thank you so much

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Speaker 1: for being with us. Nicholas is co founder of data

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Speaker 1: Check Research, joining us here in our interactive broker studios.

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Speaker 1: We are looking at markets pulling back a little bit

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Speaker 1: from their earlier lasses still solidly in the red and

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Speaker 1: the question for a lot of people is not just

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Speaker 1: when do I buy the dip, but when do I

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Speaker 1: even get involved? How do I even understand when to

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Speaker 1: make allocation shifts into response to this news, Barry red

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Speaker 1: Holds joins us now Bard Holds, founder of Widholds Wealth

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Speaker 1: Management and a Bloomberg opinion columnist. Barry, I know what

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Speaker 1: your advice is, sixty forty, keep it in long term boom.

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Speaker 1: But I have a question for you, based on what

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Speaker 1: is going on currently right and that is how much

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Speaker 1: do we have to bring down our earnings and our

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Speaker 1: dividend expectations for the S and P five hundred at

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Speaker 1: this point given what we're seeing with respect to some

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Speaker 1: of the guidance that we're getting out of airlines, out

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Speaker 1: of entertainment companies, out of gaming companies, Sure anything involving

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Speaker 1: travel tourism go down the list. The more challenging aspect

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Speaker 1: that's easy airlines kind of to zero. They're they're gonna

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Speaker 1: have their profits, are gonna be for the quarter, are

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Speaker 1: going to really be pressured. The bigger question that I

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Speaker 1: think we have a hard time answering is what about

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Speaker 1: the global supply chain. Already there have been rumors of

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Speaker 1: an inability to replace iPhones from Verizon and A T

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Speaker 1: and T because the shipments are down. So the bad

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Speaker 1: news is, we don't know how severe this is going

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Speaker 1: to be, and we don't know how long it's gonna last.

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Speaker 1: The good news is every time we've seen one of

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Speaker 1: these over the past century, it has its impact, it lasts,

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Speaker 1: say a couple of quarters, and then on the other side,

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Speaker 1: with things go back to normal. Today we have a

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Speaker 1: double bled sword. On the one hand, we can develop

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Speaker 1: tests to see if you're positive or negative much quicker

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Speaker 1: than we have were able to do before, and theoretically

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Speaker 1: will come up with a vaccine for those of us

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Speaker 1: who actually believe in things like science and vaccines, much

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Speaker 1: more quickly than we used to. The flip side of

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Speaker 1: that is technology spreads information and misinformation about this, which

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Speaker 1: leads to panic and fear. I don't think you would

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Speaker 1: have seen a week like last week half a century ago,

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Speaker 1: because the relentless drumbeat of panic and fear and info

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Speaker 1: and miss info just didn't exist in that same way,

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Speaker 1: and so we would not have had that immediate emotional response.

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Speaker 1: You still may have ended up down twelve, but it

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Speaker 1: would have been over a couple of quarters as we

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Speaker 1: actually saw it work its way into earnings instead of

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Speaker 1: work its way into the fear of earnings. Barry, what

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Speaker 1: did you make of the Fed's action earlier this week

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Speaker 1: the fifty base? His point cut was that panic? To you?

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Speaker 1: Was that then looking too much at the markets? Or

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Speaker 1: do you think the underlining data supported it? You know,

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Speaker 1: the data suggests that we're going to have a demand

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Speaker 1: side slowdown. That's all the all the different sectors at

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Speaker 1: least was talking about. That's there. Nothing at all is

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Speaker 1: suggested suggesting if only rates were lower, I would go

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Speaker 1: to Disneyland. If only rates were lower, I could go

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Speaker 1: to the Facebook Developers Conference, or the New York Auto

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Speaker 1: Show or anywhere else, any of these other big events

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Speaker 1: that are being canceled. So it seems that we have

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Speaker 1: developed this unfortunate habit of responding to situations with a

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Speaker 1: monetary solution when it really calls for a fiscal solution.

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Speaker 1: And the old joke is to the man whose only

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Speaker 1: tool is a hammer, everything looks like a nail. We

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Speaker 1: seem to have a band in the traditional Keynesian response

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Speaker 1: to diminish demands for goods and services. Hey, when the

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Speaker 1: private sector slows down, the government should step in uh

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Speaker 1: with either tax cuts or or spending or both to

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Speaker 1: temporarily replace that demands, assuming you want to cushion the

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Speaker 1: blow of the slowing economy caused by this sure and

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Speaker 1: we can talk about what they should do. What they

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Speaker 1: are doing and what they're expected to do is another story.

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Speaker 1: And currently looking at Fed funds futures just more aggressively

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Speaker 1: pricing in lower rates sooner to full rate cuts currently

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Speaker 1: being priced into Fed fund futures for the meeting on

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Speaker 1: March eighteen, in less than three weeks, coming up after

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Speaker 1: their five fifty basis point emergency rate cut, the first

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Speaker 1: that they've done inter meeting since two thousand and eight

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Speaker 1: and since the crisis. Then it raises a question what

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Speaker 1: does it do? Does its support equity valuations anymore, especially

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Speaker 1: if the response is to something that we cannot evaluate

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Speaker 1: right now in its face. We don't know how much

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Speaker 1: it's going to bring down earnings, We don't know the

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Speaker 1: relative valuation case at this point. Is this the time

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Speaker 1: when we see that relationship lower rates pushing up this

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Speaker 1: sort of risk to you know, they search for for yields.

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Speaker 1: This this flight to risk is that connection broken. I'm

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Speaker 1: not sure if it's broken. What what seems to be

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Speaker 1: going on? And this is I have access to the

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Speaker 1: same information that you do. I'm not speaking to fit insiders.

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Speaker 1: I don't know what they're talking about. I do recall

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Speaker 1: them saying a long time ago, I think it was January,

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Speaker 1: that they're concerned about negative interest rates. We heard that

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Speaker 1: throughout Well, if you want negative interest rates in the

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Speaker 1: United States, hey keep cutting uh federal funds rates. If

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Speaker 1: you drive that low enough, eventually your worst nightmare will

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Speaker 1: be here, which is negative interest rates. So I don't understand.

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Speaker 1: Are they responding to presidential pressure? Does the Fed have

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Speaker 1: the same sort of unhealthy obsession with how high the

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Speaker 1: stock market is that the president does. It's hard to judge.

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Speaker 1: From the outside. It looked like panick to me. And

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Speaker 1: it also looked like the wrong um prescription. You know,

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Speaker 1: an aspirin isn't gonna cure um a common cold, and

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Speaker 1: and this sort of viral infection is going to have

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Speaker 1: an ongoing impact on demand that we have no idea

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Speaker 1: how big it's going to be cutting rates, talk about

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Speaker 1: pushing on a string. How are cutting rates going to

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Speaker 1: have a positive impact on this, it's it's really really surprised.

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Speaker 1: You know. I was speaking with Jim Bianca earlier this morning.

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Speaker 1: I love his world well, and one thing he said

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Speaker 1: is that there is actually a fundamental plumbing issue that

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Speaker 1: as people the repost side or and I mean that

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Speaker 1: that's well known free how long over a year now,

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Speaker 1: but that basically, uh, that that people have been pulling

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Speaker 1: their cash out of markets. That basically cutting rates will

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Speaker 1: help ameliorate some of the plumbing issues. If you have

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Speaker 1: a problem with the repo market because of a lack

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Speaker 1: of liquidity, as we learned in the aftermath of eight

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Speaker 1: oh nine, the solution is to flood that market with

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Speaker 1: additional liquidity. I don't think rates make all that much

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Speaker 1: of a difference. I think they have an ability. The

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Speaker 1: FED has an ability to take a market that is

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Speaker 1: I don't want to say frozen, but creaky. Remember the

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Speaker 1: eight seven crash was caused by plumbing issues, uh, within

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Speaker 1: the market structure. I mean literally, Um, this is really

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Speaker 1: a much more narrow little niche hopefully less systemic than

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Speaker 1: what we saw in eight seven. But the FED is

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Speaker 1: aware of it. We know how to fix it. We

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Speaker 1: just did this a decade ago. None of it has

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Speaker 1: to do with rates that by any historical measure, are

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Speaker 1: incredibly low and very accommodative. So I don't understand the

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Speaker 1: FED and their hammer. Everything apparently is in now. Barry Ridholtz,

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Speaker 1: thanks so much for joining us. As always, Buries a

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Speaker 1: Bloomberg opinion columnist. He's also host of Master's in Business

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Speaker 1: on Bloomberg Radio. When we talk about the disruptions to

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Speaker 1: business in the wake of the coronavirus outbreak, we really

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Speaker 1: have to focus on the airline industry, in particular the

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Speaker 1: fact that there is a new estimate that more than

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Speaker 1: a hundred billion dollars of revenue will be taken off

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Speaker 1: the top line of airlines given the coronavirus outbreak. And

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Speaker 1: for more details, Brendan Case joins US now Industrial, Aerospace

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Speaker 1: and Chemicals Team leader for Bloomberg. Brendan how are airlines

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Speaker 1: responding to this so far? What they're doing is moving

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Speaker 1: very quickly to cut costs. UM United and Jet Blue

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Speaker 1: have announced that they're going to trim flights in the

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Speaker 1: short term. UM and I think we'll probably see a

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Speaker 1: lot more of that. Jet Blue was in fact very

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Speaker 1: explicit about the need to preserve cash, which it's certainly

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Speaker 1: not a phrase that you would have expected the airline

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Speaker 1: industry to be using just a couple of months ago. Um.

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Speaker 1: This is an industry that has been consistently making a

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Speaker 1: lot of money after all of the consolidation that it

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Speaker 1: went through over the last decade UM, and now all

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Speaker 1: of a sudden it's facing uh, you know, a very

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Speaker 1: very big crisis. So Brendan, it's interesting here how much

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Speaker 1: can and how quickly can these airlines cut their costs

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Speaker 1: to offset uh slowing demand on from consumers. Well, they

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Speaker 1: can certainly do things like pair their flight schedules. They

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Speaker 1: can they can stop flying some planes um and and

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Speaker 1: and they'll have a bit of a cost break on

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Speaker 1: on jet fuel, which which also because of coronavirus, has

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Speaker 1: been going down quite a lot in price UM. But

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Speaker 1: what they can't do is rest onto a situation where, um,

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Speaker 1: where people just aren't flying. And we don't have a

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Speaker 1: whole lot of of of great data about about that yet. UM.

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Speaker 1: But you know, this is an industry that has said

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Speaker 1: that it's ready for something like a recession, which would

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Speaker 1: you know, entail certainly a consistent sluggishness in demand. But

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00:23:21,280 --> 00:23:23,639
Speaker 1: I think what people are are wondering about now is

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00:23:23,680 --> 00:23:27,840
Speaker 1: just how sharp the drop in bookings will be over

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00:23:27,880 --> 00:23:30,199
Speaker 1: the next the next few weeks, in few months. Is

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Speaker 1: anyone talking about actual insolvencies. That seems like a little

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00:23:36,160 --> 00:23:39,320
Speaker 1: far fetched, especially in the US. Certainly in Europe you're

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00:23:39,320 --> 00:23:43,960
Speaker 1: already seeing it with with Flyby going into administration today.

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00:23:44,000 --> 00:23:47,880
Speaker 1: In Great Britain. There's also certainly other carriers such as

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00:23:47,880 --> 00:23:53,080
Speaker 1: Norwegian and Alatalia that have been financially weak in recent months.

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00:23:53,080 --> 00:23:55,800
Speaker 1: In the US, though, um, you've got that, You've got

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Speaker 1: an industry that is dominated by four or five really

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00:23:59,720 --> 00:24:04,960
Speaker 1: big carriers um and at this point it seems like barring,

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00:24:05,600 --> 00:24:09,800
Speaker 1: you know, a situation that drags on and on. Um,

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00:24:09,840 --> 00:24:13,520
Speaker 1: you've got companies that that in theory at least should

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00:24:13,560 --> 00:24:17,000
Speaker 1: have the sort of the wherewithal to to to to

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00:24:17,119 --> 00:24:19,760
Speaker 1: web of the crisis. But again it depends on it

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00:24:19,800 --> 00:24:22,080
Speaker 1: depends on how it shapes up. So Brenda, we've been

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00:24:22,119 --> 00:24:24,520
Speaker 1: seeing headlines really over the last week or so about

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Speaker 1: corporations severely curtailing business travel. Have the airlines also seeing

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00:24:31,400 --> 00:24:34,920
Speaker 1: material cancelations just from consumers, vacation goers, that type of thing.

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Speaker 1: That's one of the questions that were very keen to

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00:24:38,440 --> 00:24:41,840
Speaker 1: learn more about. UM. Certainly their comments about a sharp

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00:24:41,920 --> 00:24:44,440
Speaker 1: drop in demand over the last twenty four hours would

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00:24:44,440 --> 00:24:48,159
Speaker 1: indicate that that's the case. UM. We don't have a

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Speaker 1: whole lot of insight about that, though certainly you know

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Speaker 1: we're in we're in the spring break timetable, and the

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00:24:53,640 --> 00:24:58,040
Speaker 1: airlines are already already getting ready, uh for the summer,

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00:24:58,560 --> 00:25:02,439
Speaker 1: the summer travel season. UM, But we don't have a

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00:25:02,440 --> 00:25:04,520
Speaker 1: whole bunch of data on that so far. The way,

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00:25:04,560 --> 00:25:08,400
Speaker 1: we do have data on the business cutbacks that you mentioned,

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00:25:08,440 --> 00:25:11,240
Speaker 1: which which last night, by the way, UM, you know

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Speaker 1: Boeing joined those ranks, boat Bowing said it would it

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Speaker 1: would curtail a lot of non essential travel and and

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Speaker 1: rely more on on video meetings. UM. And so there

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Speaker 1: you have. You know, what are the airline industry's biggest

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00:25:23,640 --> 00:25:27,600
Speaker 1: suppliers saying there's gonna be less travel for our guys too, Brennan.

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Speaker 1: We've seen the share price of some of these airlines

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Speaker 1: absolutely tumble. How much more does it have to go?

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Speaker 1: When you speak to analysts, UM, you know, there was

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Speaker 1: a no doubt this morning from Bernstein that was saying

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Speaker 1: that it seems like the shares have may be sold

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00:25:43,760 --> 00:25:46,600
Speaker 1: off a little bit too much if you if you

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00:25:46,760 --> 00:25:52,439
Speaker 1: posit that this will be a relatively temporary disruption. Um.

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00:25:52,560 --> 00:25:55,359
Speaker 1: The big question though, is you know, if you have

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Speaker 1: a situation, let's say three or six months from now,

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00:25:58,800 --> 00:26:03,919
Speaker 1: where people are staying home, schools or clothes, nobody's flying. Uh,

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Speaker 1: it's really anybody's guess how bad it could get. Brendan,

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Speaker 1: is there any indication from the companies that are considering layoffs? Um, well,

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00:26:12,560 --> 00:26:18,640
Speaker 1: they haven't used that word yet, but United did freeze hiring.

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Speaker 1: It also halted any pay increases for management employees until July,

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Speaker 1: and so certainly you're starting to see some indications that

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00:26:28,560 --> 00:26:32,760
Speaker 1: things could head in that direction if it gets bad enough. Brendon,

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Speaker 1: thanks so much for joining us. We appreciate it. Brendan

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Speaker 1: Casey's Industrial, Aerospace and Chemicals team leader for Bloomberg News,

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00:26:38,160 --> 00:26:40,000
Speaker 1: joining us on the phone. Thanks for listening to the

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00:26:40,040 --> 00:26:42,640
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen

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00:26:42,680 --> 00:26:46,040
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa

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00:26:49,200 --> 00:26:51,840
Speaker 1: Abram Woyd's I'm on Twitter at Lisa A. Bramwoit's one

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Speaker 1: before the podcast. You can always catch us worldwide on

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Speaker 1: Bloomberg Radio