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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.

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Speaker 2: Bromoids, along with Tom Keen and Jonathan Ferrow. Join us

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Speaker 2: each day for insight from the best in economics, geopolitics,

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Speaker 2: finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance.

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Speaker 2: On demand on Apple, Spotify and anywhere you get your podcasts,

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Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and

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Speaker 2: the Bloomberg Business App. Tony Capolano, President and CEO of

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Speaker 2: Maria International, things have been pretty uppy. Does it continue

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Speaker 2: or does it sort of see an end date? Do

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Speaker 2: people start pushing back against the cost?

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Speaker 3: I don't think so. I mean, what we've really seen

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Speaker 3: the last couple of years is the resilience of travel,

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Speaker 3: and we've seen it across segments and across borders. When

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Speaker 3: we reported earnings at the end of the first quarter,

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Speaker 3: we saw recovery across every segment. Of course, leisure continued

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Speaker 3: to be strong. It was the leisure segment that brought

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Speaker 3: us out of the pandemic. But group has been remarkably strong.

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Speaker 3: In fact, when we look at the remaining three quarters

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Speaker 3: of the year, we're up twenty six percent year over

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Speaker 3: year in group revenue and business transient Many had predicted

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Speaker 3: sort of the demise of business travel, but you made

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Speaker 3: the point. Increasingly folks are recognizing or reminding themselves of

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Speaker 3: the power of getting in front of their clients, the

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Speaker 3: importance of immersing new employees in their company culture. And

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Speaker 3: as a result, we're seeing steady quarter over quarter improvement

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Speaker 3: in business transient demand as well.

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Speaker 2: Is it everywhere for business or places like say San

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Speaker 2: Francisco not seeing any kind of revival because of some

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Speaker 2: of the outflow there.

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Speaker 3: Well, certainly markets like San Francisco are seeing slower recovery,

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Speaker 3: but even there, I was listening during the break to

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Speaker 3: Scott Kirby's comments. This phenomenon of blended trip purpose I

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Speaker 3: think serves markets like San Francisco really well, This idea

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Speaker 3: that through the pandemic, more and more travelers learned they

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Speaker 3: can work from almost anywhere where. We really saw this

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Speaker 3: in the datas we look at recovery by day of

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Speaker 3: the week, and what was remarkable was the two days

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Speaker 3: of the week that recovered most rapidly were Sunday and Thursday,

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Speaker 3: which pre pandemic were really shoulder days. And what that

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Speaker 3: tells us is with increasing frequency is business and group

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Speaker 3: travelers are tacking on a couple leisure days pre and

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Speaker 3: or post trip, and that really has the potential to

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Speaker 3: help markets even like San Francisco, which have some leisure appeal.

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Speaker 2: Peter, I see you nodding if you do that too, Yeah.

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Speaker 4: I think that makes perfect sense. I mean I try

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Speaker 4: not to quote unquote take many days off because you

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Speaker 4: can work from your hotel room for an hour or two.

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Speaker 4: We've done some Bloomberg interviews from hotel rooms on the road,

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Speaker 4: so you can do a lot.

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Speaker 5: I thinking.

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Speaker 4: You set up and you get these extended days, and

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Speaker 4: especially with the air travel, as you point out earlier,

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Speaker 4: sometimes is a bit painful. It's much easier if you're

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Speaker 4: going to go somewhere for four nights instead of just

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Speaker 4: two nights or these day trips. So we try and

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Speaker 4: do it much of that. I think it makes perfect sense.

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Speaker 4: And I was interesting with the Sundays and Thursdays.

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Speaker 2: Well, but how much are you able to increase pricing then,

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Speaker 2: based on the cost all in of traveling, which has gotten.

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Speaker 3: Increazy, So I mean compression drives pricing. And so what

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Speaker 3: we see is in leisure destinations and some of the

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Speaker 3: urban destinations that have a strong leisure orientation like New York,

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Speaker 3: we see a lot of compression, and as a result

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Speaker 3: of that compression, we see strong pricing power. In a

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Speaker 3: market like a Chicago or a San Francisco, where there's

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Speaker 3: less compression, the pricing power is not as strong.

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Speaker 2: Are there markets that you're seeing expand much more dramatically?

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Speaker 2: I know that we were talking about, for example, in Florida,

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Speaker 2: how much hotel prices, And I know experience from experience

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Speaker 2: that when I've tried to go visit family down there,

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Speaker 2: it's a new experience when it comes to the cost

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Speaker 2: of it. I'm wondering, though, is that continuing? Are you

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Speaker 2: starting to see in leveling off there?

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Speaker 3: You're seeing a bit of leveling off, but to the

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Speaker 3: benefit of some of the international destinations. So just this

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Speaker 3: morning I was reading some statistics. If you look at

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Speaker 3: outbound US to Europe airline bookings for the summer, they're

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Speaker 3: up nearly fifty fifty percent year over year. And what

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Speaker 3: that suggests is a lot of US travelers who might

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Speaker 3: have gone to destinations like South Florida or southern California

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Speaker 3: last summer, with increasing frequency, they're going to France and

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Speaker 3: Italy and Greece, and so that's maybe eliminating a little

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Speaker 3: of that compression pressure in South Florida, which will moderate

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Speaker 3: pricing a bit.

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Speaker 2: How much you're trying to cater to the high end,

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Speaker 2: which has been perhaps recovering even more.

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Speaker 3: So, luxury has been exceedingly strong. But we have a

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Speaker 3: portfolio of thirty one brands across multiple price tiers and

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Speaker 3: price points. So in the luxury tier we continue to

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Speaker 3: see pretty strong pricing power. But that's just one tier

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Speaker 3: that we operate in. In fact, just last month we

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Speaker 3: acquired a brand called City Express, which signaled our entry

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Speaker 3: into mid scale for the first time, which is now

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Speaker 3: the lowest price tier that we operate in.

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Speaker 2: Peter, I'm wondering from your perspective if you've been seeing

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Speaker 2: a drop off with perspective to the housekeeping some of

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Speaker 2: the other amenities around the experience of staying.

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Speaker 5: I have not.

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Speaker 4: Actually, I've really enjoyed it. I think we'll continue. I

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Speaker 4: had a great trip down in Argentina. We did stay

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Speaker 4: at one of your hotels on those other places.

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Speaker 1: And did pay him off before coming in.

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Speaker 4: What does strike mean we've been talking about, is are

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Speaker 4: you seeing resurgents in Asia? Travel to or travel to Asia.

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Speaker 4: That's something I've been hearing a little bit about.

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Speaker 3: Yeah, we are the and you almost have to look

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Speaker 3: at it. China and the balance of Asia. Mainland China

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Speaker 3: is fully recovered, but again driven largely by domestic Chinese travel.

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Speaker 3: International airline seats into mainland China are only about forty

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Speaker 3: percent recovered to where they were pre pandemic, But the

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Speaker 3: balance of Asia Pacific, particularly markets like Japan Thailand, are

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Speaker 3: booming right now. In fact, I was looking at some statistics.

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Speaker 3: Somebody asked me a question about what are the most

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Speaker 3: popular destinations and the list that I looked at some

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Speaker 3: of the destinations you would expect Italy, France, Greece, but

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Speaker 3: Japan was in the top five.

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Speaker 1: Are there any markets you're getting out.

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Speaker 3: Of, Well, we suspended all our operations in Russia a

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Speaker 3: couple of years ago, but other than extreme circumstances like that, no,

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Speaker 3: we operate in one hundred and thirty eight countries today

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Speaker 3: and in our five hundred thousand room pipeline there are

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Speaker 3: another twenty new countries to build.

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Speaker 2: On Peter's question, there is this issue of doing business

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Speaker 2: in China, and we talked to every executive about how complicated.

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Speaker 2: That is, as an American company going into the biggest

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Speaker 2: rival right now economically, how much can you operate freely there?

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Speaker 2: How much conviction do you have in the fact that

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Speaker 2: the Chinese Communist Party will allow you to do your business?

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Speaker 3: So our business model I think serves us well. There.

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Speaker 3: We have eighty five hundred hotels globally, we only own

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Speaker 3: twenty of those physical assets. So our business model is

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Speaker 3: one of principally managed, enfranchising hotels. Of the roughly five

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Speaker 3: hundred hotels we have in China today, almost the entirety

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Speaker 3: of that portfolio is owned by Chinese companies, And so

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Speaker 3: I think that serves us well, even against the backdrop

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Speaker 3: of some of the complexities of doing business.

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Speaker 2: Before we let you go, how much longer can this

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Speaker 2: trend of yolo and let's travel around the world really last?

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Speaker 3: You know, I don't see it ending anytime soon. I

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Speaker 3: think there was pre pandemic, a shift away from consumption

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Speaker 3: of hard goods towards investment and experiences, and if anything,

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Speaker 3: the pandemic served as an accelerant and caused that trend

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Speaker 3: to spread. A call across generations.

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Speaker 2: Tony Capouano of Marriott, thank you so much for being

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Speaker 2: with us.

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Speaker 1: I really appreciate it.

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Speaker 2: Be back. Meg of America is Michael gapen weigh in

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Speaker 2: on the Fed's path forward, writing quote, the Main Jobs

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Speaker 2: report is a particularly difficult one for the FED to

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Speaker 2: parse coming out of the May meeting. We argue that

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Speaker 2: the FED was inclined to stay on hold in June,

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Speaker 2: and the onus would be on the Hawks to justify

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Speaker 2: a hike. We think the Main Jobs Report is just

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Speaker 2: soft enough to justify a hold, but perhaps not just

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Speaker 2: soft enough to justify staying on hold for a long

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Speaker 2: period of time. Michael Gapen, u as economist at Bank

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Speaker 2: of America Securities, joins the table of economists here. So

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Speaker 2: can you give us a sense of what the threshold

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Speaker 2: is now for them to stay on hold?

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Speaker 6: Well, I think you need to see some material softening

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Speaker 6: in the data. I think they've certainly communicated they'd prefer

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Speaker 6: to skip, and yes, I think that there was enough

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Speaker 6: mixed messages in the employment report where they could do

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Speaker 6: that if they want to. Personally, I think the Establishment

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Speaker 6: report still gives the better signal, and there's probably some

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Speaker 6: sampling error in that household survey, but there's resilience in

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Speaker 6: the labor market as you mentioned, the resilience and the

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Speaker 6: consumer as you mentioned, and some stickiness and inflation, and

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Speaker 6: if the risk backdrop is diminishing and bank stresses more

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Speaker 6: or less in stasis, then their communication should shift back

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Speaker 6: in the direction of pushing the policy rate higher. That's

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Speaker 6: probably the debate that they will be having next week.

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Speaker 2: And I know that Laura is going to jump in

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Speaker 2: here with a number of questions, But I'm curious how

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Speaker 2: high they can go, whether the market is accurately reflecting that.

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Speaker 2: Perhaps it's another quarter basis point hike, but it's not

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Speaker 2: going to be that significant. It's not going to materially

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Speaker 2: change the outlook in terms of the benchmark for the FED.

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Speaker 7: Well.

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Speaker 6: I do think back in March, before we had the

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Speaker 6: banks stress pop up, I do think that they were

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Speaker 6: going to guide markets to five four or five six

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Speaker 6: on the terminal. That's probably the direction we're going back to.

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Speaker 6: Could we get to six or above, you know, yeah,

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Speaker 6: it's possible, but I think somewhere between here and say

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Speaker 6: five seventy five to six will be sufficiently restrictive. Certainly,

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Speaker 6: we are seeing evidence that past hikes are working on

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Speaker 6: at least parts of the economy, and so I'm not

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Speaker 6: convinced that they need to kind of really ram things

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Speaker 6: back up. But yes, we're essentially saying if some of

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Speaker 6: the bank's dress and other issues have dissipated, then the

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Speaker 6: Fed should fill that gap. Two or three months ago,

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Speaker 6: they thought that gap would be somewhere around five and

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Speaker 6: a half, maybe a little above. I think that still holds.

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Speaker 8: I think something that has really been unique about this cycle,

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Speaker 8: clearly as inflation and the disinflationary process is happening. But

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Speaker 8: I like to say it's a lot easier to get

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Speaker 8: from nine percent down to five percent than from five

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Speaker 8: percent back to two percent. And I think one of

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Speaker 8: the things that really has come out of the recent

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Speaker 8: tsunami of Fed speak is markets pricing out the rate cuts.

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Speaker 8: And I know this is really looking around the corner

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Speaker 8: right now, But when you think about the FED rate

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Speaker 8: hike cycle kind of winding down clearly as it ends,

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Speaker 8: I feel like market's rushed to price in the next

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Speaker 8: leg down in the FED funds rate. To me, this

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Speaker 8: is looking like it would be a very different process.

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Speaker 8: It wouldn't be the elevator down that they usually take

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Speaker 8: with rates. Do you have any thoughts about how that

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Speaker 8: could even well.

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Speaker 6: I think that's right. So some the balance leaves between

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Speaker 6: the how high and the how long. I think you

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Speaker 6: know both of that is is in this discussion, And

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Speaker 6: I think you're right that maybe markets didn't baseline expect

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Speaker 6: cuts this year, but in distributions of outcomes you had

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Speaker 6: to put a lot more weight on that hard landing,

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Speaker 6: and if the external risk backdrop is improving, those cuts

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Speaker 6: come out as a result. So yeah, I think if

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Speaker 6: you're not, you know, if they're looking to kind of

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Speaker 6: fine tune where the policy stands is some of that

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Speaker 6: is the how long, and I think markets have done

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Speaker 6: it correctly in the sense of first you price out

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Speaker 6: those cuts, will debate on how high things go, So

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Speaker 6: the cycle could be a little different one where you're

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Speaker 6: right that getting inflation down to the mid forest has

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Speaker 6: been relatively easy. They've gotten help from other spaces. How

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Speaker 6: we get that down to two is still in front

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Speaker 6: of us.

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Speaker 1: So do you think that good news is still good news?

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Speaker 1: As Peter she was saying, No, I.

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Speaker 6: Think good news is back to being bad news because

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Speaker 6: good news if you include the risk backdrop mean less risk,

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Speaker 6: then you should in theory get more fed hikes so

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Speaker 6: I think we're back to the good news is bad

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Speaker 6: news world.

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Speaker 8: Laura, how much do you There's been a lot made

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Speaker 8: about obviously, corporate margins have been relatively healthy throughout this period,

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Speaker 8: and they're starting to narrow somewhat. There's been talk that

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Speaker 8: that is now one of the factors that's adding to inflation,

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Speaker 8: the fact that companies are being a little bit greedy

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Speaker 8: about not wanting to clearly, you know, as would make

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Speaker 8: sense for their own shareholder value, not wanting to give

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Speaker 8: up that margin. How much is that now a driver

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Speaker 8: of inflation or is it still a reaction to the

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Speaker 8: strong economy.

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Speaker 6: I think it's a little. I think it's fair to

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Speaker 6: say it's both. And what I would say is what

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Speaker 6: has surprised us most about the inflation forecast is how

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Speaker 6: little goods prices have come down. I think we are

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Speaker 6: all kind of on the shelter story, and that passed

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Speaker 6: through seems to be happening as we would have expected.

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Speaker 6: But to me, the big shock is you have these

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Speaker 6: big durables items new cars, use cars, household of alliances,

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Speaker 6: and so forth. They've been basically flat. And I think

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Speaker 6: that's what you're seeing is that you know, margins have

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Speaker 6: been getting squeezed and then then they got widened out,

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Speaker 6: and I think corporate corporations are deciding, well, what is

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Speaker 6: the elasticity of a price cut at this point in time.

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Speaker 6: So I think the strong economy has meant goods prices

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Speaker 6: have not come down as much as we had expected. Conversely,

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Speaker 6: to open up room for goods prices to come down

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Speaker 6: and for inflation to get back to two, you do

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Speaker 6: have to moderate demand. And that's why I think good

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Speaker 6: news is bad news.

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Speaker 9: I have a question for both of you guys, since

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Speaker 9: you both have traders at your offices. The anecdotal information

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Speaker 9: I get is that, yeah, FED Fund's futures have been

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Speaker 9: very volatile, that have been up and down about cuts

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Speaker 9: and things like that, but traders have not. The expectation

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Speaker 9: on the desks is that the FED is going to

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Speaker 9: stay high and maybe even raise rates again. So we're

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Speaker 9: getting conflicting signals from the trade guests and from the

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Speaker 9: FED fund's futures.

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Speaker 6: I think that's fair. I think, you know, there's some

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Speaker 6: people who will play that game more than others, and

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Speaker 6: some have different time horizons. I'd say the majority of

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Speaker 6: investors that I meet with, so let's say two out

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Speaker 6: of three are on board with the higher for longer

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Speaker 6: and likely no cuts this year out of the FED. However,

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Speaker 6: there's a group of investors I meet with who are

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Speaker 6: very concerned about bank stress and see that as being

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Speaker 6: more material and people like me are too complacent about it,

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Speaker 6: and they say, well, the lags are going to hit

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Speaker 6: later this year and the game is up in effect,

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Speaker 6: and we'll know it when when we see it. But

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Speaker 6: I would say, yes, more, there are more than not

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Speaker 6: saying higher for longer seems to be where we're going.

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Speaker 8: I would say the same thing. I think that on

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Speaker 8: our desk there's, you know, a mix that reflects the

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Speaker 8: future's curve, and there are there's a vocal group that

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Speaker 8: is perhaps smaller in number, that really feels like the

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Speaker 8: Fed's raising rates, they're going to break something, going to

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Speaker 8: see yields come down very sharply should the economy slow.

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Speaker 1: And I think that's.

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Speaker 8: One of the reasons why we have this sort of

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Speaker 8: fight in the sort of one year ahead FED rate expectations.

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Speaker 8: But a lot of us are still in kind of

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Speaker 8: I think a camp that they're not going to have

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Speaker 8: the room for that.

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Speaker 1: In the past three weeks.

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Speaker 2: It seems like there has been a shifting tone where

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Speaker 2: a soft landing has suddenly become more likely that it

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Speaker 2: had been.

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Speaker 5: It's back.

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Speaker 1: How long is it going to stay back?

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Speaker 2: Mike?

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Speaker 6: Until we get guidance that the funds rates going closer

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Speaker 6: to six.

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Speaker 1: You think'st break it? You think that that's well.

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Speaker 6: No, I mean I think the soft landing can't be

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Speaker 6: ruled out. I don't think it's ever been able to

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Speaker 6: be ruled out entirely. I just think is as you

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Speaker 6: mentioned in the lead in history suggests it's more likely

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Speaker 6: than not. When the FED moves this quickly into counter inflation,

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Speaker 6: you do have to pay a price at some point.

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Speaker 6: So I think we're all in the You know, okay

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Speaker 6: that that outcomes more likely than not, but it's a

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Speaker 6: very different cycle, and I don't think we can entirely

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Speaker 6: rule out that they kind of hit it just right.

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Speaker 6: So it is back on the table at the moment

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Speaker 6: because the risk backdrop has has improved. Now we'll see

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Speaker 6: about the other direction.

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Speaker 8: I feel like it always looks like a soft landing

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Speaker 8: until all of a sudden, you're face.

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Speaker 6: I mean, we're in a recession forecast, so I can't

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Speaker 6: I'm not going to talk away from what the view is. Yeah,

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Speaker 6: but I just just you know, Yeah, So I still

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Speaker 6: think in the end it's more likely than not we'll

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Speaker 6: have to, you know, pay some price to bring inflation down.

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Speaker 6: And given what I said about goods prices being firm

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Speaker 6: and the consumer being resilient, you have to lean against that.

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Speaker 9: Will Halloween have a recession is you know, when your

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Speaker 9: neighbor loses its jobs. A depression is when you lose

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Speaker 9: your right And I guess the soft landing is when

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Speaker 9: bonuses are cut on Wall Street, Michael.

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Speaker 2: Cape It and Bank of America Securities, Thank you so much,

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Speaker 2: Ellen Wall Senior fellow at the Atlantic Council and author

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Speaker 2: of Saudi Inc.

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Speaker 1: After that one million.

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Speaker 2: Barrel cut that Saudi Arabia agreed to unilaterally go through with,

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Speaker 2: even though the United Era Emirates most notably came out

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Speaker 2: and didn't have to make a similar cut, Ellen, what

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Speaker 2: do you make of this announcement and frankly, the sort

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Speaker 2: of lackluster response in markets.

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Speaker 10: Yeah, I'm not surprised by the somewhat lackluster response, especially

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Speaker 10: because a one million barrel of day cut across the

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Speaker 10: board from OPEK plus was being tossed around over the weekend,

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Speaker 10: and so the fact that that didn't come through and

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Speaker 10: instead we've got this Saudi lollipop of a one million

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Speaker 10: barrel of day cut unilaterally on their part for the

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Speaker 10: month of July.

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Speaker 5: I think that the.

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Speaker 10: Market sees that as as less significant than a across

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Speaker 10: the board OPEC plus cut extended maybe for six months.

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Speaker 10: I do think though, that the market is a bit

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Speaker 10: downplaying the significance of the deal that renegotiated the baseline

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Speaker 10: production levels, because starting in twenty twenty four, these are

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Speaker 10: going to come into effect, and that's really going to

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Speaker 10: bring more clarity to the market because one of the

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Speaker 10: issues that we've seen with OPEC is that they push

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Speaker 10: through a one million barrel a day cut, but it's

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Speaker 10: not actually going to be one million barrels a day

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Speaker 10: because a lot of the countries that are participating are

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Speaker 10: not actually producing up to.

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Speaker 5: Their max level.

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Speaker 10: Their capacity is down because their production quotas are back

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Speaker 10: from twenty sixteen and now it's twenty twenty three and

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Speaker 10: things are really different. So I think that once these

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Speaker 10: new baselines come into effect, OPEX production rates will actually

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Speaker 10: be more reflective of what's actually on the market, and

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Speaker 10: the market will appreciate that clarity.

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Speaker 2: Do we have a sense ellen of just how much

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Speaker 2: demand has actually fallen off versus the forward look of

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Speaker 2: demand potentially falling off?

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Speaker 1: Is there if there's a recession.

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Speaker 2: In other words, our price is accurately reflecting the slowdown

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Speaker 2: that some people are saying is transpiring in China.

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Speaker 10: In other places, prices are reflecting the fear of the

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Speaker 10: slowdown much more than what any actual slowdown is, mostly

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Speaker 10: because we're not really sure what that slowdown is going

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Speaker 10: to be. We also don't know how China is going

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Speaker 10: to react to this. Is China going to push through

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Speaker 10: some kind of big manufacturing stimulus that will push up demand.

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Speaker 10: Plus there's always this kind of fake I don't want

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Speaker 10: to say it's fake, but China tends to buy more

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Speaker 10: crude oil when it's cheap, to put into storage, maybe

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Speaker 10: for rainy days or whatnot, or just to resell, to

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Speaker 10: process and resell around to Asia. And so there's a

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Speaker 10: lot of cheap crud available on the market. Now. Russia

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Speaker 10: is a huge purveyor of it. But also there's you know,

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Speaker 10: Iranian and Venezuela imprud that China can get, and so

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Speaker 10: they may actually be buying more crude oil than they're using,

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Speaker 10: and that's kind of papering over any kind of demand

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Speaker 10: issues that we're seeing.

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Speaker 4: Yeah, one big wildcar I've been wondering about, and maybe

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Speaker 4: you've got some good color on, is what's going on

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Speaker 4: with the Strategic Petroleum Reserve. Where do we stand? What

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Speaker 4: are you hearing about us trying to rebuild that, because

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Speaker 4: to me, it's a bit concerning that it got so

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Speaker 4: low and it's staying this low and we're not really

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Speaker 4: taking advantage of lower oil prices.

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Speaker 10: Yeah, that's that's a big issue. I think part of

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Speaker 10: it is that maintenance needs to be done in some

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Speaker 10: of the storage facilities, and so the government is hesitant

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Speaker 10: to start making purchases before it's completed those those maintenance things,

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Speaker 10: which you know is an issue and.

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Speaker 5: I do think needs to be addressed.

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Speaker 10: But I don't think that. I do think that they

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Speaker 10: can purchase more than they are, and the fact that

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Speaker 10: they're not, particularly when prices are in a good spot,

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Speaker 10: is concerning. I also think that when they do start

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Speaker 10: to purchase finally, which I do believe they will, whether

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Speaker 10: it's this particularly government or you know, another administration, we

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Speaker 10: are going to see a big bump in demand, and

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Speaker 10: that's going to push prices up because this is going

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Speaker 10: to be a lot of food purchases. And I don't

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Speaker 10: think that there are prepared to do this, and I

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Speaker 10: also think that Opek is kind of waiting for this

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Speaker 10: to happen. They got very upset when the government, basically,

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Speaker 10: when the Biden Ministry is basically said hey, we're going

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Speaker 10: to start purchasing when it hits this level, and then

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Speaker 10: they didn't. And Opek was like, well, we were expecting

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Speaker 10: this demand bump. Now we're going to have to cut supply.

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Speaker 10: And I think they were burned and a bit upset

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Speaker 10: about that.

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Speaker 1: Interesting. Ellen Waald to the Atlantic Council.

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Speaker 9: Thank you.

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Speaker 2: At Mills, Washington policy atalyst at Raymond Jane's joining us.

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Speaker 10: Now.

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Speaker 2: That is a good question the momentum the Republicans may

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Speaker 2: have from the debt sealing resolution as it were, even

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Speaker 2: if the President, as he is right now, trying to

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Speaker 2: take credit for coming up with some sort of bipartisan agreement.

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Speaker 7: I would actually argue what you saw out of this

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Speaker 7: that's under reported, Lisa, is that what was the big

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Speaker 7: part of this from a DC perspective is there were

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Speaker 7: a number of different land mines that could have gone

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Speaker 7: off between now and the election that got diffused. I

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Speaker 7: think some of those are going to be beneficial to Republicans,

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Speaker 7: but arguably more beneficial to President Biden.

442
00:22:12,000 --> 00:22:14,120
Speaker 5: The threat of a government shutdown has come down.

443
00:22:14,440 --> 00:22:17,840
Speaker 7: What they did was pull forward the discussion of exactly

444
00:22:17,880 --> 00:22:21,040
Speaker 7: how much should defense get, how much should non defense get.

445
00:22:21,400 --> 00:22:25,560
Speaker 7: They defuse the issue on IRS kind of budgets and

446
00:22:25,760 --> 00:22:29,680
Speaker 7: audits that could have been a huge presidential issue next year.

447
00:22:30,000 --> 00:22:32,040
Speaker 5: They diffuse the issue of student loans. Now.

448
00:22:32,040 --> 00:22:34,719
Speaker 7: We could talk about the market impact of people starting

449
00:22:34,760 --> 00:22:38,080
Speaker 7: to repay their student loans come September, but I would argue,

450
00:22:38,119 --> 00:22:41,440
Speaker 7: kind of, yes, McCarthy comes out of this arguably stronger.

451
00:22:41,840 --> 00:22:44,480
Speaker 7: But the Biden team was looking at the next couple

452
00:22:44,560 --> 00:22:47,000
Speaker 7: of months, the next two years and saying, what are

453
00:22:47,000 --> 00:22:49,520
Speaker 7: some of the things that could be really problematic for us,

454
00:22:49,800 --> 00:22:51,879
Speaker 7: and could we get it as part of this deal

455
00:22:52,240 --> 00:22:55,280
Speaker 7: as little as possible that we'd have to give to

456
00:22:55,440 --> 00:22:57,880
Speaker 7: fuse those future time bombs. And I think that's why

457
00:22:57,960 --> 00:22:59,840
Speaker 7: they think this is truly a big win for them.

458
00:23:00,000 --> 00:23:02,960
Speaker 2: The problem for President Biden is that the Washington Eco

459
00:23:03,080 --> 00:23:05,520
Speaker 2: Chamber right now and the political sort of talk shows

460
00:23:05,760 --> 00:23:08,399
Speaker 2: are focusing more on his age than they are about

461
00:23:08,720 --> 00:23:11,160
Speaker 2: coming to some sort of bipartisan agreement. And he's trying

462
00:23:11,160 --> 00:23:12,960
Speaker 2: to say, look, I'm the one who can get these

463
00:23:12,960 --> 00:23:15,800
Speaker 2: things across. Why can't you give me credit? And mail say, well,

464
00:23:15,800 --> 00:23:17,520
Speaker 2: you chipped over a sandbag. How is he going to

465
00:23:17,520 --> 00:23:18,280
Speaker 2: get out from under that?

466
00:23:18,480 --> 00:23:21,560
Speaker 5: I don't know, Lisa. I mean, his age is his age.

467
00:23:21,720 --> 00:23:23,639
Speaker 7: I think what he is trying to do and what

468
00:23:23,680 --> 00:23:27,159
Speaker 7: the Biden team continues to kind of focus on is

469
00:23:27,200 --> 00:23:31,240
Speaker 7: his accomplishments, and that what was the other big winner

470
00:23:31,320 --> 00:23:34,800
Speaker 7: out of this debt sailing debate was the middle held.

471
00:23:35,320 --> 00:23:37,400
Speaker 5: What we have seen kind of through.

472
00:23:37,280 --> 00:23:41,640
Speaker 7: Legislative success under the Biden administration is that not necessarily

473
00:23:41,760 --> 00:23:44,720
Speaker 7: the extremes win kind of the last couple of years,

474
00:23:44,720 --> 00:23:47,760
Speaker 7: it was Joe Manchin moving the party more to the

475
00:23:47,800 --> 00:23:50,399
Speaker 7: center to the extent he had possible. And then with

476
00:23:50,560 --> 00:23:54,000
Speaker 7: this he's saying, look, the reason why you try to

477
00:23:54,119 --> 00:23:57,960
Speaker 7: keep him as president, His argument would be is that

478
00:23:58,000 --> 00:24:00,199
Speaker 7: you get the middle, which is where most of the

479
00:24:00,200 --> 00:24:03,639
Speaker 7: country is, to get those wins. And he put points

480
00:24:03,640 --> 00:24:06,760
Speaker 7: to the bipartisan Infrastructure Bill, the Chips and Science Act

481
00:24:07,000 --> 00:24:08,879
Speaker 7: in that kind of fight with US and China.

482
00:24:09,080 --> 00:24:11,040
Speaker 5: I do think that the next thing that they.

483
00:24:10,880 --> 00:24:14,080
Speaker 7: Want to do is something on energy permitting reform more

484
00:24:14,119 --> 00:24:16,639
Speaker 7: than what they just did in a real focus on

485
00:24:16,760 --> 00:24:20,200
Speaker 7: critical minerals as well as supply chains as the top

486
00:24:20,240 --> 00:24:22,360
Speaker 7: part of their agenda, trying to see if they can

487
00:24:22,359 --> 00:24:24,399
Speaker 7: can build on those bipartisan wins.

488
00:24:25,119 --> 00:24:27,679
Speaker 11: So Ed I thought that was really interesting analysis about

489
00:24:27,720 --> 00:24:30,000
Speaker 11: avoiding the land minds and kind of diffusing some of

490
00:24:30,000 --> 00:24:32,040
Speaker 11: those over the next two years. But one of the

491
00:24:32,040 --> 00:24:34,120
Speaker 11: things that struck me is that throughout this whole debt

492
00:24:34,119 --> 00:24:37,600
Speaker 11: sealing drama, Biden's on popularity in the polling data rose.

493
00:24:37,640 --> 00:24:40,399
Speaker 11: So I come back to the issue all these things

494
00:24:40,400 --> 00:24:44,639
Speaker 11: that he's accomplished legislatively, how syllable are those to the

495
00:24:44,680 --> 00:24:46,840
Speaker 11: American public? How well is he going to be able

496
00:24:46,840 --> 00:24:48,080
Speaker 11: to actually campaign on those?

497
00:24:48,960 --> 00:24:50,000
Speaker 5: Laurie, It's a good question.

498
00:24:50,080 --> 00:24:52,520
Speaker 7: I think that one of the things that we are

499
00:24:52,560 --> 00:24:54,840
Speaker 7: looking at and polling data here at Raymond James is

500
00:24:54,880 --> 00:24:59,440
Speaker 7: that in our current environment, any political figure out there

501
00:25:00,080 --> 00:25:02,879
Speaker 7: as a ceiling not much more than fifty percent, So

502
00:25:02,920 --> 00:25:04,919
Speaker 7: we don't look at it in the past, where we

503
00:25:05,000 --> 00:25:08,520
Speaker 7: had presidents with sixty seventy percent approval ratings. That's kind

504
00:25:08,520 --> 00:25:12,800
Speaker 7: of a bygone error where we saw the downdraft in

505
00:25:12,920 --> 00:25:16,800
Speaker 7: his polling numbers largely came from some of his supporters.

506
00:25:17,600 --> 00:25:21,639
Speaker 7: Now that there is an accomplishment, a deal sign something averted,

507
00:25:22,440 --> 00:25:25,280
Speaker 7: we would expect that probably to tick up where it

508
00:25:25,359 --> 00:25:28,920
Speaker 7: goes from here. I can't predict the future in that regard,

509
00:25:29,760 --> 00:25:33,399
Speaker 7: but the key for Republicans is getting some of the

510
00:25:33,440 --> 00:25:36,040
Speaker 7: folks that supported Joe Biden in twenty twenty to come

511
00:25:36,119 --> 00:25:40,480
Speaker 7: over to their camp. We will try to see kind

512
00:25:40,480 --> 00:25:43,720
Speaker 7: of if anyone can do that. But ultimately, what Joe

513
00:25:43,760 --> 00:25:45,920
Speaker 7: Biden always says is, don't compare me to the almighty,

514
00:25:45,920 --> 00:25:49,560
Speaker 7: compare me to the alternative. Ultimately, this is going to

515
00:25:49,600 --> 00:25:52,840
Speaker 7: be about a choice, and so it's as much about

516
00:25:52,920 --> 00:25:56,439
Speaker 7: Joe Biden as it is who Republicans choose and or

517
00:25:56,480 --> 00:25:58,120
Speaker 7: if there's a third party candidate.

518
00:25:58,160 --> 00:26:00,720
Speaker 5: So the twenty twenty four election and is going.

519
00:26:00,560 --> 00:26:03,480
Speaker 7: To be a big wildcard for the market for the

520
00:26:03,480 --> 00:26:05,960
Speaker 7: rest of this year and especially obviously next year.

521
00:26:06,160 --> 00:26:08,440
Speaker 2: Just real quick here ed over the weekend talking about

522
00:26:08,440 --> 00:26:11,080
Speaker 2: who he's going to run against. Eight candidates, went to

523
00:26:11,080 --> 00:26:14,199
Speaker 2: this Iowa State Fair, and we're trying to appeal to

524
00:26:14,320 --> 00:26:19,119
Speaker 2: the Republican constituents eight potential Republican nominees President former President

525
00:26:19,160 --> 00:26:21,680
Speaker 2: Trump not among them. What did you make of that

526
00:26:21,760 --> 00:26:23,960
Speaker 2: he was not there in one of the sort of

527
00:26:24,040 --> 00:26:27,080
Speaker 2: lead ups to the announcements to just keep on coming.

528
00:26:27,440 --> 00:26:29,840
Speaker 7: I think that you look at the polling data and

529
00:26:30,440 --> 00:26:34,000
Speaker 7: form President Trump is in the lead. I think for

530
00:26:34,040 --> 00:26:37,639
Speaker 7: the time being, he's happy to kind of let that

531
00:26:37,840 --> 00:26:41,080
Speaker 7: be the case. What we are going to ultimately see

532
00:26:41,119 --> 00:26:44,040
Speaker 7: is how many other people get into this race and

533
00:26:44,160 --> 00:26:48,040
Speaker 7: does that diffuse the non Trump vote or is he

534
00:26:48,160 --> 00:26:51,800
Speaker 7: able to consolidate and keep that power and work. Probably

535
00:26:51,840 --> 00:26:54,919
Speaker 7: still several months out before we have any true inkling

536
00:26:55,000 --> 00:26:57,760
Speaker 7: as to where this Republican race is going to go.

537
00:26:58,160 --> 00:27:00,320
Speaker 1: Ed Mills and Raymond James, thank you so much.

538
00:27:00,359 --> 00:27:03,800
Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and

539
00:27:03,840 --> 00:27:07,280
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540
00:27:07,320 --> 00:27:09,879
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541
00:27:09,920 --> 00:27:12,199
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542
00:27:12,160 --> 00:27:13,320
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543
00:27:13,600 --> 00:27:16,920
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544
00:27:17,000 --> 00:27:18,040
Speaker 2: on the Bloomberg Terminal.

545
00:27:18,240 --> 00:27:19,080
Speaker 1: Thanks for listening.

546
00:27:19,160 --> 00:27:23,960
Speaker 2: I'm Lisa Abramowitz, and this is Bloomberg