WEBVTT - Economy Appears to Have At Least 6 More Solid Months: Goldstein 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.080 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Good 0:00:33.120 --> 0:00:35.879 news from the Conference Board. The Conference Board Leading Economic 0:00:35.920 --> 0:00:38.760 Index for the United States increased in December. Here to 0:00:38.800 --> 0:00:41.559 help us understand the details is Ken Goldstein. He is 0:00:41.560 --> 0:00:43.879 the economist with the Conference Board, and he joins us 0:00:43.880 --> 0:00:46.800 here in our eleven three oh studios. Ken, always a pleasure, 0:00:46.840 --> 0:00:49.360 Thanks for being here. Not only do we have the 0:00:49.400 --> 0:00:52.560 information for December, but we have a number of revisions, 0:00:52.800 --> 0:00:54.920 and I'm wondering if you could just lay out the 0:00:55.520 --> 0:00:58.560 situation for us. Well, I look the revisions and the 0:00:58.600 --> 0:01:03.080 re benchmarking. It's so data cleaning, um, and we didn't 0:01:03.080 --> 0:01:05.959 find out very much that we didn't already know. What 0:01:06.160 --> 0:01:09.280 is interesting I think is that not just this month, 0:01:09.319 --> 0:01:12.520 but the last three months, we've seen this pickup in 0:01:12.520 --> 0:01:15.560 the I S M index for new orders. If you like, 0:01:15.680 --> 0:01:18.759 that's kind of an intention to new order. So even 0:01:18.800 --> 0:01:22.280 though the ordering rate itself hasn't picked up, uh, that 0:01:22.440 --> 0:01:25.000 sort of last you know, leg over the fence, if 0:01:25.040 --> 0:01:27.520 you like, looks like it might be improving. So not 0:01:27.560 --> 0:01:30.440 only is the economy continuing to move along with the 0:01:30.480 --> 0:01:32.679 signal that this is going to continue into the spring, 0:01:33.160 --> 0:01:35.760 but maybe with a little bit more kick, if indeed 0:01:35.800 --> 0:01:38.160 new orders are going to start to give us more strength. 0:01:38.319 --> 0:01:41.240 So ken we know that manufacturing is doing well, we 0:01:41.360 --> 0:01:43.600 know that the stock market is doing well, we know 0:01:43.680 --> 0:01:48.320 that credit markets are really robust. Um, I'm looking at 0:01:48.360 --> 0:01:51.440 these indications. The one thing that we don't know is 0:01:52.000 --> 0:01:55.160 why people aren't getting paid more. And I noticed that 0:01:55.240 --> 0:02:02.440 the one decline in the indicators was for average weekly hours. Yeah, 0:02:02.480 --> 0:02:04.480 that's that's just a bounce. I don't know that there's 0:02:04.480 --> 0:02:08.080 any trend there, but certainly the lack of more pickup 0:02:08.120 --> 0:02:11.760 in wages and therefore more pick up inflation has indeed 0:02:11.800 --> 0:02:14.000 been one of the one of the strange things, one 0:02:14.000 --> 0:02:17.000 of the unanswered questions, not just this month, but really 0:02:17.040 --> 0:02:20.040 for the last two years. We keep saying it's going 0:02:20.080 --> 0:02:23.600 to come. The labor market keeps getting tighter. Um, the 0:02:23.680 --> 0:02:27.080 question is when, and indeed when it does come how much, 0:02:27.120 --> 0:02:31.359 And that's tied two decisions about how much interstrates will 0:02:31.360 --> 0:02:34.880 pick up. Noticed not just that the indicators are also up, 0:02:35.200 --> 0:02:37.760 but that long term interest rates both US and now 0:02:37.840 --> 0:02:40.720 Germany are also starting to pick up. That's another sign 0:02:40.720 --> 0:02:42.920 of optimism, not just for the US, but we did 0:02:43.000 --> 0:02:45.920 across the globe can tell us about a commercial and 0:02:46.000 --> 0:02:50.240 industrial loans. I was looking at those results, well, you know, 0:02:50.280 --> 0:02:52.680 the combination and again coming back to what we're just 0:02:52.720 --> 0:02:55.480 talking about. You know, where's the inflation here? And yet 0:02:55.480 --> 0:02:59.200 profits are still good, loan demand has started to pick up. 0:02:59.600 --> 0:03:02.680 It's like it's hard to see any you know, any 0:03:02.760 --> 0:03:06.240 party economy. Uh, that's beginning to stutter a little bit. 0:03:06.280 --> 0:03:09.480 In fact, just the opposite. If anything, there are these 0:03:09.520 --> 0:03:12.919 sort of signs that I'm suggesting that if growth doesn't 0:03:12.919 --> 0:03:15.880 continue at the same pace, it's more likely that will 0:03:15.919 --> 0:03:17.760 be a little bit stronger than a little bit weaker. 0:03:18.400 --> 0:03:22.040 I guess I'm struggling with this idea of inflation. I mean, 0:03:22.040 --> 0:03:24.680 this is the big question. This is the reason why 0:03:25.000 --> 0:03:28.639 there is so much disagreement with respect to the sort 0:03:28.639 --> 0:03:31.560 of course of of bonds and where they're headed. I mean, 0:03:31.639 --> 0:03:34.760 right now, we're seeing yields take up, perhaps because of 0:03:34.800 --> 0:03:38.360 Mario Dragon what he said today. But but but but 0:03:38.360 --> 0:03:40.400 by ten, your yields have been taking up. Yes, you're right, 0:03:40.760 --> 0:03:45.280 well before that um still though, I mean, I understand 0:03:45.320 --> 0:03:47.920 that the hourly wages is not a trend. But it's 0:03:47.960 --> 0:03:51.040 concerning that there is no momentum there, certainly no. It's 0:03:51.080 --> 0:03:55.120 concerning that it hasn't started yet, that we keep saying 0:03:55.160 --> 0:03:58.640 it's still coming, and everybody believes it's still coming. That 0:03:58.760 --> 0:04:01.640 as the as the labor market continues to generate more 0:04:01.960 --> 0:04:05.120 than a d and fifty jobs a month, as the 0:04:05.240 --> 0:04:08.880 unemployment rate droughts below four percent, So a tight labor 0:04:08.920 --> 0:04:11.560 market getting even tighter, that's going to drive a wayes 0:04:11.600 --> 0:04:15.040 the question when does that begin to start, how strong 0:04:15.120 --> 0:04:17.200 is it going to be, and when does that trick 0:04:17.360 --> 0:04:20.760 tip off into a pick up in inflation. So that 0:04:20.839 --> 0:04:24.640 Phillips Curve argument, very few people believe it's dead. All 0:04:24.680 --> 0:04:26.960 of us believe it's been asleep and it's about to 0:04:27.000 --> 0:04:29.040 wake up. So, just to be clear to Phillips Curve, 0:04:29.120 --> 0:04:31.880 whenever people say these things, just in case anyone doesn't 0:04:31.880 --> 0:04:34.560 know what that is, it's the idea of an inverse 0:04:34.640 --> 0:04:40.720 correlation between a low jobless rate and inflation. So ideally, 0:04:41.000 --> 0:04:43.599 when the market does get really tight and the jobless 0:04:43.640 --> 0:04:47.200 rate goes very far down, you should see increases in 0:04:47.279 --> 0:04:50.680 wages and increases in inflation. We haven't seen that correlation, 0:04:50.720 --> 0:04:53.279 and people are wondering why and whether it just has 0:04:53.440 --> 0:04:55.960 to yet to start. So I just like to describe 0:04:55.960 --> 0:04:58.760 it all. Ken can also help me understand the diffusion 0:04:59.040 --> 0:05:02.839 index and what can we learn from the diffusion index. Well, 0:05:03.080 --> 0:05:06.080 this is really important because as I was just saying before, 0:05:06.279 --> 0:05:08.599 it's like, it's not just the labor market, it's not 0:05:08.680 --> 0:05:12.040 just the financial market, really goes across the board um 0:05:12.080 --> 0:05:15.479 into virtually every segment of the economy. So the fact 0:05:15.560 --> 0:05:18.840 that not only do we have this strong upward momentum 0:05:18.839 --> 0:05:21.480 in the economy, could you know, and we're only talking 0:05:21.520 --> 0:05:24.080 about two to an a percent GDP growth, We're not 0:05:24.120 --> 0:05:27.160 talking about more than that, and yet it's that much 0:05:27.360 --> 0:05:29.640 could even take up a little bit higher. But it's 0:05:29.640 --> 0:05:33.000 spread out across the across all the sectors. They diffuse. 0:05:33.240 --> 0:05:36.520 Hence the name of this is not only diffused across industry, 0:05:36.520 --> 0:05:40.039 it's diffuse also across regions. Uh, And so that is 0:05:40.080 --> 0:05:43.040 a further suggestion that this thing is not going to 0:05:43.120 --> 0:05:46.080 fall apart any time real soon. How far out does 0:05:46.120 --> 0:05:50.000 this to the leading economic indicators predict maybe the next 0:05:50.000 --> 0:05:52.440 three to six months? Okay, because this is this is 0:05:52.480 --> 0:05:55.280 helpful to remember, because we're hearing from Davos a lot 0:05:55.360 --> 0:05:58.520 of big thinkers and big investors and big executives say 0:05:58.640 --> 0:06:00.480 they expect the economy in the u US to be 0:06:00.600 --> 0:06:03.520 good and robust for the next twelve months. But this 0:06:03.560 --> 0:06:07.120 tells us nothing about what happens after that, right, This 0:06:07.200 --> 0:06:09.760 doesn't tell us anything about that. But this kind of momentum, 0:06:09.800 --> 0:06:12.320 as I was just suggesting, you know, it's not going 0:06:12.400 --> 0:06:14.920 to fall up the cliff in one day. If it's 0:06:14.960 --> 0:06:18.280 going to start to decline, that's going to happen gradually. 0:06:18.360 --> 0:06:21.680 And there's no sign here, not in the indicators, not 0:06:21.760 --> 0:06:24.000 in most of the forecast, not in terms of what 0:06:24.040 --> 0:06:26.960 the bond markets telling us that in the next twelve 0:06:27.000 --> 0:06:29.400 to eighteen months we're going to see any big significant 0:06:29.440 --> 0:06:34.640 drop absent a big economic shock, really quickly ten seconds. 0:06:35.480 --> 0:06:37.359 How long does it take before you start seeing the 0:06:37.400 --> 0:06:40.640 signs in the leading indicators before the downturn actually starts? 0:06:41.120 --> 0:06:44.840 Three to six months? Thank you so much, really helpful 0:06:44.880 --> 0:06:46.599 to have you on and break it down as always. 0:06:46.640 --> 0:06:49.760 Ken Goldstein, who is an economist with the Conference Board, 0:06:49.760 --> 0:06:56.320 talking about the December leading economic indicators showing ongoing strength 0:06:56.720 --> 0:06:59.200 certainly over the next three to six months in the 0:06:59.279 --> 0:07:02.440 United States, an increase of six tents of in December. 0:07:02.560 --> 0:07:18.760 That's right. Well, right now I'm looking at a headline 0:07:18.840 --> 0:07:22.600 that gets me a little bit depressed. The doomsday clock 0:07:22.720 --> 0:07:26.000 just moved. It's now two minutes to midnight, the symbolic 0:07:26.120 --> 0:07:29.360 hour of the apocalypse. This is from the Washington Post. 0:07:29.800 --> 0:07:32.400 Here to put my mind at ease, make me more worried. 0:07:32.840 --> 0:07:36.160 Jack Divine He is founding partner and president of the 0:07:36.280 --> 0:07:38.600 ark And Group, also a member of the Council of 0:07:38.640 --> 0:07:42.000 Foreign Relations UH and he is also the author of 0:07:42.240 --> 0:07:48.200 Good Hunting, a Spymaster's Story. Former acting director of the 0:07:48.360 --> 0:07:54.520 c I A. Jack, I'm having too much fun in 0:07:54.560 --> 0:07:58.200 life to be worried about doomsday, so I'm not miss 0:07:58.280 --> 0:08:01.440 all right, let's talk about North Korea right now. Now, 0:08:01.640 --> 0:08:04.800 now we can shift to doomsday. All right, So where 0:08:04.840 --> 0:08:07.000 are we in this? You know, it's been one year 0:08:07.000 --> 0:08:12.120 into Trump's tenure. We are seeing, uh, not a lot 0:08:12.160 --> 0:08:15.640 of progress. Where's the throat right now? I think he 0:08:15.680 --> 0:08:20.160 actually blinked. Who is he? Kim Jong? I mean, I 0:08:20.200 --> 0:08:23.160 think the first of all, I would say off the right, 0:08:23.200 --> 0:08:26.760 off the top, that I don't see any military resolution 0:08:26.840 --> 0:08:30.600 of this. There is no good way to resolve this militarily. 0:08:30.680 --> 0:08:34.720 I don't see how we could engage take out the site. 0:08:34.880 --> 0:08:37.720 So I've been from the very beginning of the most 0:08:37.760 --> 0:08:43.840 recent flare up in the relationships with with North Korea, UH, 0:08:44.080 --> 0:08:46.360 pushing the thought that we need to return to the table. 0:08:46.600 --> 0:08:50.360 So just the Trump administration adhered to that, do they Well, 0:08:50.400 --> 0:08:52.840 it's it's I think the Trump administration has taken a 0:08:52.880 --> 0:08:57.680 strong line. Uh. Interestingly enough, South Korea the new President 0:08:57.800 --> 0:09:00.959 Moon have sort of tried to war arm up relations 0:09:01.040 --> 0:09:04.240 and the question was whether Kim jongan was going to respond. 0:09:05.280 --> 0:09:08.360 And I find it interesting that he has now going 0:09:08.400 --> 0:09:12.760 to participate with the South Koreans and the Olympics and 0:09:12.760 --> 0:09:15.880 and is talking to them now. I would hope that 0:09:16.440 --> 0:09:19.560 behind closed doors, we're trying to expand those talks into 0:09:19.760 --> 0:09:24.000 the old six parties China, Russia, South Korea ourselves and 0:09:24.520 --> 0:09:28.800 try and come up with a eight some sort of 0:09:28.840 --> 0:09:31.920 temporary solution just slow him down. We're not gonna he's 0:09:31.920 --> 0:09:35.400 not gonna roll back his newclear program, but he's moving 0:09:35.640 --> 0:09:39.079 too fast and we don't have a military solution. So 0:09:39.200 --> 0:09:42.440 I think going back to the table, negotiating some sort 0:09:42.480 --> 0:09:47.120 of temporary arrangement, I think it's our best course of action. 0:09:48.880 --> 0:09:50.720 I was just gonna say on China, I was just 0:09:50.720 --> 0:09:52.920 gonna say one thing in China that you know, the 0:09:52.960 --> 0:09:57.720 Trump administration is putting a lot of it's betting on 0:09:58.000 --> 0:10:02.079 China support. I've been agnostic about that at best all along, 0:10:02.760 --> 0:10:05.800 but I do take some comfort recently if you believe 0:10:06.000 --> 0:10:10.880 the Chinese official statement that they've cut off coal and 0:10:11.120 --> 0:10:14.840 oil supplies, fuel supplies to China. I mean, if they 0:10:15.120 --> 0:10:18.080 actually stay the course and increase the pressure, then there's 0:10:18.160 --> 0:10:22.120 more more incentive to get the North Korea to the table. 0:10:22.200 --> 0:10:24.320 But they're not a band in the program. The question 0:10:24.400 --> 0:10:26.720 is whether or not we can stabilize it about where 0:10:26.720 --> 0:10:29.400 it is today. Well, since you mentioned China, then I've 0:10:29.400 --> 0:10:33.560 got to ask you about this, uh continuing news story 0:10:33.600 --> 0:10:37.920 about the Jerry should Shingle naturalized US citizen. He now 0:10:37.960 --> 0:10:40.480 lives in Hong Kong. He was taken into custody at 0:10:40.559 --> 0:10:44.760 the JFK Airport former c I a case officer, and 0:10:45.200 --> 0:10:48.400 he's under unrest on charges of illegally retaining highly classified 0:10:48.400 --> 0:10:55.400 information relating to US spy networks in China. Well, first 0:10:55.400 --> 0:10:57.640 of all, let me self reveal again I'm of the 0:10:57.720 --> 0:11:02.600 view that in the intelligence world, we always have a mall, 0:11:03.080 --> 0:11:05.480 you know, if you're the director of CIA, and I've 0:11:05.520 --> 0:11:07.200 talked a lot of them, and so they've gone in. 0:11:08.080 --> 0:11:11.679 I've made the point that there somewhere in the institution 0:11:11.720 --> 0:11:14.920 there's a there's a mall. It's part of the business. 0:11:14.960 --> 0:11:18.360 We have malls within the Russian system, within the Chinese system, 0:11:18.400 --> 0:11:21.920 I'm sure we have them and and have had for years. 0:11:21.920 --> 0:11:25.920 And they have had ten hours. It's finding those malls 0:11:25.960 --> 0:11:28.400 and finding out how much damage they've done. I was 0:11:28.480 --> 0:11:32.840 very familiar with the Hansen and rick Games cases and 0:11:32.880 --> 0:11:35.280 what was interesting, and this is from the public domain, 0:11:36.280 --> 0:11:38.520 that at the beginning, when they started to lose so 0:11:39.280 --> 0:11:43.600 uh the agency begin lose Chinese assets, it was well, 0:11:43.679 --> 0:11:46.880 it must be bad tradecraft in China, and then it 0:11:46.960 --> 0:11:49.080 was it must have been a communication, it must have 0:11:49.120 --> 0:11:52.080 hacked into something that's very reminiscent of the hunt for 0:11:52.360 --> 0:11:54.760 Rick Games at the beginning, no one could accept the 0:11:54.800 --> 0:11:57.719 fact that you had a trader in your meds who 0:11:57.720 --> 0:12:00.840 could do that, who could be in a be a 0:12:00.880 --> 0:12:05.400 member and be a trader and people should hasten so well, 0:12:05.400 --> 0:12:08.240 why do you think that others betray themselves in our 0:12:08.280 --> 0:12:11.480 work in the system. But eventually it became obvious that 0:12:11.679 --> 0:12:16.240 we had a there was a penetration, and it's part 0:12:16.360 --> 0:12:20.199 of uh part of doing business. But part of doing 0:12:20.240 --> 0:12:24.120 business is also being vigilant on this point. And I 0:12:24.160 --> 0:12:27.600 think I think this is just another reminder too bad, 0:12:27.679 --> 0:12:29.840 is so painful? All right, So I just wanted to 0:12:29.840 --> 0:12:32.960 follow up with this because I'm wondering what your perspective 0:12:33.040 --> 0:12:37.320 is on the president's comments and attitude. It seems to 0:12:37.400 --> 0:12:40.360 be that is sometimes put out in public on Twitter 0:12:41.600 --> 0:12:44.760 characterizing either the FBI but also the CIA and the 0:12:44.920 --> 0:12:48.280 U S Security forces. I think the burden of the 0:12:48.440 --> 0:12:52.000 criticism has been directed more to the FBI and surrounding 0:12:52.080 --> 0:12:56.920 the correct investigation. UM. I think it's worthwhile remembering the 0:12:57.080 --> 0:13:01.600 very first official government act and and visit was to 0:13:01.640 --> 0:13:05.520 the CIA. Okay, I think it's a very good it's 0:13:05.880 --> 0:13:10.439 demonstratively good with the director of of CI A One 0:13:10.480 --> 0:13:14.040 thing about as I reflect on what people in CI 0:13:14.240 --> 0:13:18.959 a military tender like is strong, decisive leadership, and then 0:13:19.040 --> 0:13:23.880 from their flows it's less political after that. Half the 0:13:23.960 --> 0:13:27.520 people in cee I A. I'm sure, sure, I'm inclined 0:13:27.600 --> 0:13:30.760 to believe, vote Democratic Party and the other half vote 0:13:30.760 --> 0:13:33.640 to Republican Party. It's made up pretty much of what 0:13:33.720 --> 0:13:36.040 America is. But there is a common thing, which is 0:13:36.559 --> 0:13:41.079 decisiveness and leadership. So I I question sort of just 0:13:41.200 --> 0:13:46.320 how much um turmoil or is around this issue in 0:13:46.440 --> 0:13:48.600 the CI. The FBI, of course, is going through what 0:13:48.679 --> 0:13:53.400 I think is very horrendous situation. I hope they for 0:13:53.480 --> 0:13:56.240 our country, I hope this passes quickly. For the we 0:13:56.280 --> 0:13:58.720 need the FBI, but there are there are real problems 0:13:58.720 --> 0:14:01.800 that need to be addressed. So with with respect to 0:14:02.320 --> 0:14:06.120 UH President Trump, he's been in office a year, do 0:14:06.200 --> 0:14:09.080 you think that the U. S Is in a more 0:14:09.160 --> 0:14:13.719 dangerous spot because of our perhaps less robust relationships with 0:14:13.800 --> 0:14:17.720 some of our allies like Canada. One of the things 0:14:17.720 --> 0:14:20.680 that I think it always struck me through the years 0:14:20.880 --> 0:14:25.200 is the public and private behavior of foreign governments, perhaps 0:14:25.280 --> 0:14:28.600 even our own, and that is you might have public outcries, 0:14:28.680 --> 0:14:30.840 but I will tell you in the back rooms around 0:14:30.840 --> 0:14:33.960 the world. It's still the predominance of how do you 0:14:33.960 --> 0:14:36.320 get along with the US governed. It's so important to 0:14:36.400 --> 0:14:41.440 the lives of everybody in every country that most most 0:14:41.560 --> 0:14:45.400 of our major allies are looking for ways to deal 0:14:45.440 --> 0:14:47.640 with us. In Davos, it's gonna be very interesting the 0:14:47.680 --> 0:14:51.680 sidebar discussions. So I think what they're not used to 0:14:51.840 --> 0:14:57.880 right now the foreign government is that the president is exerting, uh, 0:14:58.360 --> 0:15:03.000 pretty a very strong position that's not sort of consensus driven. 0:15:03.120 --> 0:15:06.760 And I think they're making adjustments. But um, I don't 0:15:06.760 --> 0:15:10.440 think any of the alliances are are at risk. It's 0:15:10.520 --> 0:15:12.720 just they need to figure out how to deal with 0:15:12.760 --> 0:15:16.640 the new president the United States. Jack Devine, thank you 0:15:16.760 --> 0:15:19.760 very much. Please come back and spend more time with us. 0:15:19.800 --> 0:15:23.520 We've barely touched on a variety of topics that, of 0:15:23.560 --> 0:15:26.760 course are interesting to our listeners and around the world. 0:15:26.920 --> 0:15:29.080 Jack Divine is the founding partner and president of the 0:15:29.200 --> 0:15:32.520 ark And Group, and he is the author of Good Hunting, 0:15:32.720 --> 0:15:36.320 a Spy Master's Story. And he of course is also 0:15:36.360 --> 0:15:39.760 a former acting head of an associate director of the 0:15:39.760 --> 0:15:57.920 CIA Central Intelligence Agency. Right now, I want to turn 0:15:57.920 --> 0:16:00.280 our attention to airlines we talked about them a little 0:16:00.280 --> 0:16:04.680 bit earlier. United shares down wow, oh my goodness, in 0:16:04.720 --> 0:16:08.400 the past two days, down more than fourteen per cent, 0:16:08.840 --> 0:16:13.640 the most for two days going back to June. Here 0:16:13.640 --> 0:16:16.720 to talk about it is George Ferguson, Bloomberg Senior Aerospace, 0:16:16.760 --> 0:16:21.760 Defense and Airline analyst for Bloomberg Intelligence. Uh, George, what 0:16:21.920 --> 0:16:23.360 happened here? Can you just give us a lay of 0:16:23.400 --> 0:16:27.640 the land? Yeah? So, investors very focused right now on 0:16:27.680 --> 0:16:30.520 the amount of capacity coming to the airline market, especially 0:16:31.040 --> 0:16:35.160 the domestic US market. Uh. And uh, you know, United 0:16:35.360 --> 0:16:38.320 a big participant in that market, and so anything that 0:16:38.400 --> 0:16:41.680 was well above GDP was going to concern investors that 0:16:41.840 --> 0:16:45.720 they were going to dilute fairs, push push fairs, just 0:16:45.800 --> 0:16:47.880 to be clear about what capacity is. In other words, 0:16:48.160 --> 0:16:52.280 they are expanding the locations that they're serving. Correct. Oh, yeah, Well, 0:16:52.320 --> 0:16:55.520 so United is trying to serve their hubs better. United 0:16:55.520 --> 0:16:57.680 has a lot of great hubs in the US and 0:16:57.720 --> 0:16:59.880 they want more frequency. They want more flights in and 0:17:00.000 --> 0:17:03.960 out of those hubs, um so that they can. They've 0:17:04.000 --> 0:17:06.439 basically had peeled back some of that service over the 0:17:06.520 --> 0:17:09.240 last decade or so, and so they want they want 0:17:09.240 --> 0:17:11.400 to expand that service. They want more of a domestic 0:17:11.520 --> 0:17:14.399 US footprint. I think it's what it all boils down to. 0:17:15.119 --> 0:17:18.600 Because domestic US yields, which is the price of a 0:17:18.600 --> 0:17:21.880 customer pace per mile they're flown, are higher than any 0:17:21.880 --> 0:17:25.679 other market in the world. Uniteds are lower in the 0:17:25.800 --> 0:17:29.959 US and their peers over at Delta, and so they 0:17:30.000 --> 0:17:31.760 want to change that. They want to get yields from 0:17:31.800 --> 0:17:34.400 the US that are as good as Delta, and they 0:17:34.400 --> 0:17:37.000 see that as their avenue to getting profitability as good 0:17:37.000 --> 0:17:41.399 as Delta. So they're expanding capacity into their hubs. Hey, George, 0:17:41.600 --> 0:17:43.760 do the airlines have a mismatch when it comes to 0:17:43.760 --> 0:17:46.480 the actual equipment the aircraft that they're using on the 0:17:46.560 --> 0:17:49.720 roots that they want to expand? Uh, you know, I 0:17:50.280 --> 0:17:53.520 don't know. I don't know if they have a mismatch, 0:17:53.560 --> 0:17:54.960 you know. I think one of the interesting things about 0:17:55.080 --> 0:17:56.919 United is if you look at some of their service 0:17:56.960 --> 0:18:00.199 in the United States as part of this expansion for 0:18:01.000 --> 0:18:04.440 more US market share, you'll see them flying triple sevens 0:18:04.480 --> 0:18:06.760 coast to coast into l A and things like that. 0:18:07.400 --> 0:18:11.360 You don't see that out of their competitors. I mean, 0:18:11.359 --> 0:18:13.480 I think, you know, United is flying a lot of 0:18:13.520 --> 0:18:16.920 business between their major hubs, and there's a lot of 0:18:17.040 --> 0:18:19.920 traffic back and forth between places like Newark and l 0:18:20.000 --> 0:18:22.560 a UM Actually LA is not their hubs, or in 0:18:22.560 --> 0:18:27.160 Newark and San Francisco, h Newark in Chicago and and 0:18:27.160 --> 0:18:29.600 and into Houston. So they're flying some bigger gauges and 0:18:29.600 --> 0:18:32.200 I think that's part of the problem as United wants 0:18:32.240 --> 0:18:35.320 to be servicing some of the smaller markets. You know, 0:18:35.560 --> 0:18:37.480 I don't know right well, that's where I was going 0:18:37.520 --> 0:18:40.120 because I mean, I was listening to comments from the 0:18:40.400 --> 0:18:45.560 business from the commercial jet head of embra Air, and 0:18:45.600 --> 0:18:47.760 I know embra Air and Boeing, you know, they're talking 0:18:47.760 --> 0:18:50.160 about some kind of type. But they were saying that 0:18:50.200 --> 0:18:54.080 the reason that Boeing is interested in Embra Air is 0:18:54.119 --> 0:18:58.280 because Boeing and air Bus have more difficulty shrinking the 0:18:58.400 --> 0:19:01.960 size of their equi in order to meet the right 0:19:02.040 --> 0:19:05.960 size demand, and it's better to actually focus on smaller 0:19:06.000 --> 0:19:09.520 aircraft that might have to be expanded. And that depends 0:19:09.520 --> 0:19:11.320 what market you're going into. So as I was about 0:19:11.320 --> 0:19:13.600 to say, if you're going into Rochester, Minnesota, which I 0:19:13.600 --> 0:19:16.280 think is one of the examples we heard the other day, yeah, 0:19:16.320 --> 0:19:18.720 you might want a hundred seeds or a hundred thirty 0:19:18.760 --> 0:19:23.159 seed and that looks like an Umbrera, that looks like 0:19:23.280 --> 0:19:26.320 a Bombardier C series. We heard in the jet Blue 0:19:26.359 --> 0:19:29.960 call today. Jet Blue said they're sort of rethinking their 0:19:30.040 --> 0:19:36.080 embraer onet and given the Airbus and Bombardier joint venture 0:19:36.119 --> 0:19:39.240 with C series, they see new opportunities. They are very 0:19:39.280 --> 0:19:42.840 air Bus focus shop. So that's an example where you 0:19:42.880 --> 0:19:44.800 know an airline is looking for the right gauge to 0:19:44.840 --> 0:19:48.440 get into those smaller markets, the right side. What's the 0:19:48.520 --> 0:19:52.399 rational of United and why do they think it's going 0:19:52.440 --> 0:19:54.199 to be good for their business and why is it 0:19:54.200 --> 0:19:58.000 being taken exactly the opposite by the market. Yeah, so 0:19:58.480 --> 0:20:00.680 you know they're they're adding a lot of capa looking 0:20:00.720 --> 0:20:03.280 at four to six percent more capacity this year, which 0:20:03.320 --> 0:20:07.280 is well above GDP growth, which is typically dilete of affairs. 0:20:07.880 --> 0:20:10.680 And what they want to do is they they're trying 0:20:10.680 --> 0:20:12.919 to go after these better fairs that they see in 0:20:12.920 --> 0:20:16.440 the US at Delta an American have captured over the 0:20:16.520 --> 0:20:20.000 last decade or so, going into those smaller markets like 0:20:20.160 --> 0:20:23.760 Rochester and connecting Rochester into a major hub. Because if 0:20:23.800 --> 0:20:27.000 you're if your service, you know there's one or two 0:20:27.040 --> 0:20:31.479 airlines servicing a small market, there's less competition for that flyer. 0:20:31.560 --> 0:20:35.240 That flyer pays more money. United let that go to 0:20:35.280 --> 0:20:38.960 their competitors, and now they want it back because US 0:20:39.119 --> 0:20:41.400 fairs are better than the rest of the world. That's 0:20:41.400 --> 0:20:43.840 going to create a market share battle that's going to 0:20:43.960 --> 0:20:47.679 cost everybody. Uh, you know the fair price. You have 0:20:47.720 --> 0:20:50.520 to push the fair price lower to fill those airplanes. 0:20:51.000 --> 0:20:54.200 Thanks very much, George Ferguson, our senior aerospace, defense and 0:20:54.280 --> 0:21:12.280 airlines analysts for Bloomberg Intelligence. It's a big day to day. Uh. 0:21:12.359 --> 0:21:16.000 In currency markets, I'm looking at the dollar spot right 0:21:16.040 --> 0:21:21.480 now at the weakest level since December fourteen, the euro 0:21:21.760 --> 0:21:26.040 strengthening against the US dollar that has reached the strongest 0:21:26.240 --> 0:21:31.240 levels since twent sixteen. Have we reached a tipping point? 0:21:31.680 --> 0:21:34.119 Steve England are joins us now. He is head of 0:21:34.160 --> 0:21:37.680 research and strategy at Raffiki Capital Management. He is also 0:21:38.200 --> 0:21:42.359 a Bloomberg profit Stephen, thank you so much for being 0:21:42.520 --> 0:21:45.040 with us. So are we are we at some kind 0:21:45.200 --> 0:21:49.119 of threshold of a bigger move? Is this a capitulation? 0:21:49.440 --> 0:21:53.040 Is this sort of the calm before a bigger storm? Look, 0:21:53.400 --> 0:21:57.199 the euro has moved the dollars moved a certain amount, 0:21:57.520 --> 0:22:00.159 and I think to some degree, the questions go to 0:22:00.240 --> 0:22:04.200 be how the FED responds to this. Um. I think 0:22:04.240 --> 0:22:07.760 if they show any kind of tolerance for inflation drifting 0:22:07.840 --> 0:22:10.840 and you know, staying temporarily above two percent, the dollars 0:22:10.880 --> 0:22:14.280 got much further to go. Um. You already see that 0:22:14.480 --> 0:22:17.399 in that US real interest rates haven't gone up despite 0:22:17.440 --> 0:22:20.480 the upward movement inflation expectations, so the market doesn't really 0:22:20.480 --> 0:22:23.919 see that much hawkishness there. Um. You know, if they 0:22:24.000 --> 0:22:26.000 come up and they say, look, two percent is two percent, 0:22:26.119 --> 0:22:28.879 and that's our target, then then what probably see the 0:22:28.920 --> 0:22:31.240 dollars stabilized within a couple of percent of where we 0:22:31.280 --> 0:22:35.639 are right now. Stephen England, could you comment on China, 0:22:35.840 --> 0:22:41.240 It's US treasury holdings and what you see for the future. Yeah, look, 0:22:41.280 --> 0:22:45.919 you know, I think that the UM. I think conventional 0:22:45.960 --> 0:22:48.080 thinking is that they have the US over a barrel 0:22:48.119 --> 0:22:51.440 because they hold so many treasuries. Um. You know, I 0:22:51.800 --> 0:22:54.200 think correct thinking is that their U S has them 0:22:54.200 --> 0:22:56.439 over a barrel. Both ways. One is that they're very 0:22:56.520 --> 0:22:59.160 much dependent on trade with the US. Obviously they ship 0:22:59.680 --> 0:23:01.840 a lot more to the U S and the U 0:23:01.880 --> 0:23:04.000 S ships to them. So if there's a full fledged 0:23:04.000 --> 0:23:06.440 trade ward, there's a lot more Chinese factories and jobs 0:23:06.440 --> 0:23:08.879 are going to be lost in US jobs. And the 0:23:08.960 --> 0:23:11.520 second is that, yeah, they can fire a cannonball through 0:23:11.520 --> 0:23:13.760 the U. S. Treasury market, but that cannonball is going 0:23:13.800 --> 0:23:16.119 to do a boomerang and go right through them because 0:23:16.119 --> 0:23:17.880 they own so many of it and it's really hard 0:23:17.920 --> 0:23:20.640 to sell. So I think that right now they would 0:23:20.640 --> 0:23:22.600 love to be in a different position, but they're they're 0:23:22.600 --> 0:23:25.120 actually kind of on the weaker side. I think of 0:23:25.160 --> 0:23:28.199 these uh, you know, trade issues. Okay, So having said that, 0:23:28.400 --> 0:23:31.400