Speaker 1: Welcome to the Bloombergs Surveillance Podcast Hometown Keene. Along with
Speaker 1: the Jonathan Feral and Lisa Brownwitz. Jaylie, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international
Speaker 1: Johnson something else. And if you're talking to friends and family,
Speaker 1: they're thinking about other things through the summer too. Absolutely,
Speaker 1: everybody's trying to figure out exactly how they're going to
Speaker 1: get away for some sort of a vacation holiday throughout
Speaker 1: the summer, John, And it's interesting you listen to what
Speaker 1: the CDC is saying, and it's a similar thing over
Speaker 1: here in the UK as well. The scientists incredibly cautious
Speaker 1: about traveling. Certainly here in the UK, that is the narrative,
Speaker 1: but John, investors just don't see it that way. Bring
Speaker 1: up the chart of Ryanair from the beginning of we're
Speaker 1: back to the same levels that we came in to at.
Speaker 1: Basically the stock has completely rebound I did, as you
Speaker 1: can see during that period. Actually we're up by seven
Speaker 1: and a half percent, So investors certainly see a reopening.
Speaker 1: As you pointed out with Lisa just before the break,
Speaker 1: a lot of volatility though in the stock over the
Speaker 1: last few days as we've seen the equivocation from the
Speaker 1: UK and the case counts climbing within the EU, the
Speaker 1: health situation getting worse and worse. UM, let's bring in
Speaker 1: Michael O'Leary, he's the Ryanair CEO to talk about this. Michael,
Speaker 1: good morning. You were talking about the idea on a
Speaker 1: call a little earlier on that you're gonna be flying
Speaker 1: eight of the schedule that you would normally fly kind
Speaker 1: of July to September. What's your degree of confidence in
Speaker 1: that number? Yeah, good morning, Guide my John think there's
Speaker 1: a reasonably hydree of campers at this point in time
Speaker 1: that short order flying with significantly recover. I think through
Speaker 1: the peak summer months of July, August and September. That's
Speaker 1: drum amount the success of the vaccine program in the
Speaker 1: UK fifty percent of the UK population that has now
Speaker 1: been vaccinated by the end of May, that would be
Speaker 1: an easy percent. Europe will catch up. I can go
Speaker 1: over that period of time with think of the UK
Speaker 1: adult population with actually by the end of May they
Speaker 1: say seventy by the end of June, and then I
Speaker 1: think you will see a pretty rapid recovery of short
Speaker 1: haul holiday travel between the UK and the European Union
Speaker 1: through the summer. Already, the Portuguese, the Spanish, the Greek
Speaker 1: and the Cypriot governments have said they're going to welcome
Speaker 1: vaccinated UK travelers from the seventeenth of May onwards. So
Speaker 1: you know, it's still certain, but I think there's a
Speaker 1: reasonable grounds for optimism that once the school holidays arrived June, July, August,
Speaker 1: that we will see I think quite significant recovery of
Speaker 1: shorthold travel within Europe. You won't see longhold recover this summer,
Speaker 1: but again, a lot of people who would normally have
Speaker 1: gone long hold for their holidays to the States or
Speaker 1: to Asia will holiday at home in Europe. But we
Speaker 1: think Ryan there will be the beneficiary of that. You
Speaker 1: sound confidence, you think it's going to happen later on
Speaker 1: in the year, but but the date keeps getting pushed
Speaker 1: to the rights and certain the noises out of the
Speaker 1: UK over the last few days have been less than optimistic. Michael,
Speaker 1: you said this morning that that you could survive if
Speaker 1: we don't have a summer season. My question to you
Speaker 1: is how. But we're very strong balance sheet. You know,
Speaker 1: we're sitting on more than three and a half billion
Speaker 1: of cash At the moment, we have a very small
Speaker 1: cash outflow. Most of our aircraft are grounded at the moment,
Speaker 1: most of our plastic cameracrew are on furlough, paced schemes, etcetera.
Speaker 1: So we can survive. We don't want to survive. We
Speaker 1: do want to see people return to travel. And I
Speaker 1: would put the question back to those UK governments if,
Speaker 1: as the UK government has you vaccinatedent of the adult
Speaker 1: population by the end of May, why are you restricting
Speaker 1: their movement? You know they are there are very little risk.
Speaker 1: I mean, the one thing we know from the vaccines,
Speaker 1: the experience in Israel and in other countries essay, as
Speaker 1: you begin to vaccinate large proportions of the population, the
Speaker 1: risk of serious illness, the risk of hospitalizations, and the
Speaker 1: risk of death fatalities almost collapses, certainly falls to very
Speaker 1: low levels. Now we're only locking up at the moment
Speaker 1: not to limit the spread of cod it, but actually
Speaker 1: to eliminate the risk that COVID cases will overwhelm the
Speaker 1: hospital service and health systems which beliminate that risk with vaccinations. Frankly,
Speaker 1: I think people are going to rebel. They're not good
Speaker 1: to be willing to be locked up. Those kids are
Speaker 1: not going to stay home from school. Life will return
Speaker 1: to normal, and I think COVID will be comm I mean,
Speaker 1: it will still be with us, but it would be
Speaker 1: much more. I think similar to the annual flu, the
Speaker 1: annual cold. Because of the success and vaccinations. Well, Michael,
Speaker 1: as you know, they might rebel, but right now it's
Speaker 1: illegal to go on holiday. So and still that's lifted.
Speaker 1: We've got a problem. So my question to you would
Speaker 1: be how hard are you lobbying on a vaccine passport
Speaker 1: issue and how close our way to a breakthrough? Well,
Speaker 1: I mean, as you know, Johnason league to drive over
Speaker 1: the speed limit, but lots of people do it too.
Speaker 1: You know, again you're telling me that your summer is
Speaker 1: reliant upon people rebelling and getting on the plane and
Speaker 1: breaking the law. No, I mean I was going to
Speaker 1: move on to say, you know, sure, be long hole
Speaker 1: travel will be much more restricted, but you have free
Speaker 1: movement of Pepe within the European Union and in large
Speaker 1: amation between the UK and Europe as well. Now I
Speaker 1: think there's finding a time to get to the end
Speaker 1: of mayor in the June. You have all of the
Speaker 1: high risk categories, the elderly, the obese, the infirm have
Speaker 1: been vaccinated. Eighty percent of the annual population have been vaccinated.
Speaker 1: The children had a lower rate of catching code, but
Speaker 1: don't suffer serious illness anyway. What would be the base
Speaker 1: on with UK governments would be finding people moving around Europe,
Speaker 1: where by we're intacted to the free movement of people,
Speaker 1: so again, be careful. I think short Hauld domestically within
Speaker 1: the US will be there will be the very few
Speaker 1: restrictions this summer, and short Hall, I would say within
Speaker 1: the European unions there would be very few restrictions. Michael,
Speaker 1: long Hole will continue to be restrictions. Yes, guys, Sorry Michael.
Speaker 1: You're clearly focused on the summer season, which is going
Speaker 1: to be the holiday for the kids. But nevertheless, short
Speaker 1: Hole is driven by younger demographics and they are going
Speaker 1: to be the last to get the vaccines. Is that
Speaker 1: going to be a problem. No, I mean again, a
Speaker 1: summer holidays tend to be driven by families. You know,
Speaker 1: it's the school holidays across eurotypically start through June, July August.
Speaker 1: That's when the schools are off, That's when families are moving.
Speaker 1: The young people are generally working at that point in time, generally,
Speaker 1: hopefully in the hospitality of jurism industry. I think that's
Speaker 1: what we'll drive the recovery. And then, you know, everybody
Speaker 1: predicts that Europe will be a washed with drag scenes
Speaker 1: through May June July, and we're not about sure what
Speaker 1: the date will actually be. And I do accept that
Speaker 1: the date has moved backwards, but we still see that
Speaker 1: there's sufficient time and sufficient vaccination room left run. You know,
Speaker 1: we still have April, May and June to go to
Speaker 1: allow us to recover the holiday season in Europe through
Speaker 1: July Augus and the general Michael, let's make some producers nervous.
Speaker 1: We've got forty five seconds left play with me, just
Speaker 1: for a moment. Chancellor Miracle says she's made a mistake,
Speaker 1: just backing down from that East of lockdown. Your response
Speaker 1: to that this morning, I mean, I try not to
Speaker 1: respond to the instantaneous comments of politicians. We're planning. We
Speaker 1: announced new rooms this morning from the UK for the
Speaker 1: European Peak. We extract to run most of the changes
Speaker 1: through July over September, where reason to be content with
Speaker 1: that kind of overlook. Michael, comeback soon, stay close it's
Speaker 1: always greater catch Larry. Good to see you, sir, Ryan
Speaker 1: s CEO greased to say we can head down to
Speaker 1: Washington now to catch up with Congressman Don Buyer, Democrat
Speaker 1: from Virginia and chair of the Joint Economic Committee. Congressman,
Speaker 1: great to catch up with you, sir. I want to
Speaker 1: stablish as the last twenty four hours of we can,
Speaker 1: there was supposed to be a hearing just to go
Speaker 1: through some of the priorities for a bipartisan infrastructure proposal,
Speaker 1: which Republicans didn't want to take part in. And I
Speaker 1: want to read a quote from Republican Kevin Brady who
Speaker 1: said the following. In our view, today's hearing is nothing
Speaker 1: more than another partisan exercise so the Democrat House leadership
Speaker 1: can set up yet another multi trillion dollar, one sided
Speaker 1: spending bill. Congressman, can you tell us why it's more
Speaker 1: sincere than that. I was really disappointed in Ranking Member
Speaker 1: Brady's comments because it didn't seem to have any connection
Speaker 1: to reality. We invited all the Democrats and all the
Speaker 1: Republicans to come tell us what their priorities should be
Speaker 1: in this next infrastructure bill, and I think Kevin Brady
Speaker 1: knows that there are many Democrats, including me, that hope
Speaker 1: that this bill is mostly are largely paid for. So
Speaker 1: this is you know, this is a once in a
Speaker 1: generation infrastructure bill that we love to have everybody's input for.
Speaker 1: By the way, it's gonna affect all those Republican districts
Speaker 1: to it early major ways. Let's talk about what's happened
Speaker 1: previously in the last couple of months. Do you think
Speaker 1: they have been conditioned by the approach to the one
Speaker 1: point nine trillion dollar bill where many Republicans found totally
Speaker 1: frozen out of the process. Yeah, although I kind I
Speaker 1: don't think they were frozen out of the process. There
Speaker 1: were extensive markups on this. You know that the most
Speaker 1: controversial part for them was the four dollars which came
Speaker 1: from their president, Donald Trump. And by the way, is
Speaker 1: affecting all their folks. We have the there's a big piece.
Speaker 1: They were against the state and local government funding. The
Speaker 1: best of my knowledge, no Republican governor, Republican or has
Speaker 1: refused to accept these funds to strengthen their communities. It
Speaker 1: was again, it was a wildly popular bill, is a
Speaker 1: wildly popular bill among all Americans, including Republican Americans. Just
Speaker 1: not their elected officials in Washington, Congressman, you said that
Speaker 1: they were presented with a bill that was mostly or
Speaker 1: largely paid for, But isn't that the issue? The way
Speaker 1: that it's being paid for through tax hikes on wealthier
Speaker 1: individuals and on corporations is something that Republicans have said
Speaker 1: is a no go for them, that they don't want
Speaker 1: to do. How are you going to reconcile that issue? Well, yeah,
Speaker 1: I don't know how we're going to reconcile, and I
Speaker 1: think we just have to come after with the facts.
Speaker 1: At least we did a hearing before the pandemic on
Speaker 1: infrastructure in ways of means, we're virtually every Democrat and
Speaker 1: Republicans said we need to have a way to pay
Speaker 1: for this and needs to be sustainable. Well, we know
Speaker 1: that the gas tax is a is a no starter
Speaker 1: for many different reasons. But we also saw yesterday that
Speaker 1: US corporate affective tax rate last year was seven point
Speaker 1: eight percent after the j c T A that had
Speaker 1: the top one percent had their networth increased by four
Speaker 1: trillion dollars or or just the New York Times editorial
Speaker 1: on Sunday about how you know personal income is almost
Speaker 1: all reported in tax but a huge part of business
Speaker 1: income is not to the tune of six fifty billion
Speaker 1: dollars or one point six trillion dollars a year I
Speaker 1: think was the New York Times number. There's a lot
Speaker 1: of low hanging for it out there that wouldn't affect
Speaker 1: the economy. Congressmen, and these are points that are widely
Speaker 1: accepted among Democrats. However, there are Republicans that come back
Speaker 1: and they say, look, you're going to prevent a certain
Speaker 1: amount of dynamism investment in things like infrastructure just by
Speaker 1: the corporations themselves if they have to pay higher taxes.
Speaker 1: And we can debate that till the cows come home.
Speaker 1: But the question really here is is there any wiggle
Speaker 1: room to negotiate and higher taxes with Republicans or is
Speaker 1: it going to have to be done without any of
Speaker 1: their support. Well, I wish there were wiggle room. I
Speaker 1: think one place Lisa that might be fruitful is looking
Speaker 1: at carbon pricing. And now that the American Patroleum Institute,
Speaker 1: along with Exxon Mobile and others, and the Business round
Speaker 1: Table and the Use Chamber, we've all said that carbon
Speaker 1: pricing should be on the table, maybe we can get
Speaker 1: Republicans to do that and at a minimum pay for
Speaker 1: you know, the roads and bridges and asphalt and stuff
Speaker 1: that they really like. In conversement, what do you think
Speaker 1: the ultimate approach now is then? Do you think it
Speaker 1: is a series of smaller bills or still one launch bill? Jonathan?
Speaker 1: I prefer one large bill, But I'm a I'm agnostic
Speaker 1: whatever it takes to get the job done. I know
Speaker 1: drifting around is the idea that you take things you
Speaker 1: could get Republicans on board with, like highways and roads, bridges,
Speaker 1: and do that with their votes, and then the other
Speaker 1: more controversial things. Although why odd band and electrical grid
Speaker 1: modernization should be controversial? Uh, you may have to do
Speaker 1: that through through reconciliation. You are one other bite at
Speaker 1: the reconciliation apple this year Congress. Before we let you go,
Speaker 1: I want to ask you about bitcoin. We've got Tesla
Speaker 1: now accepting bitcoin is a form of payment. What's the
Speaker 1: regulatory front when it comes to that crypto asset, Lisa,
Speaker 1: We're about to dive into that deeply. I think there
Speaker 1: needs to be when you get a completely unregulated currency.
Speaker 1: While it's exciting and interesting, um, the possibilities for yeah,
Speaker 1: everybody from terrorists to to uh international mafia type things
Speaker 1: using it or people just avoiding taxes on a large
Speaker 1: scale are very real. So I can't tell you what
Speaker 1: the regulation is going to be, but it's worth very
Speaker 1: deep dives this year by congress A. Comressman. If I
Speaker 1: shout walks, do we create some trouble there in your house?
Speaker 1: The duck out? He really does want to go outside?
Speaker 1: You I can tell. Let you go, sir, Congressman. It's
Speaker 1: good to see you. Stay close. It's going to catch up.
Speaker 1: Congressman's on via there, Virginia. Thank you. Let's turn to
Speaker 1: Mind Mahajan, now the Nsclobe and Investors US investment strategist.
Speaker 1: She joins, US might a great to catch up. As
Speaker 1: you've said, we started to see some fatigue in the
Speaker 1: big winners through the last year, going back to late
Speaker 1: October as well. I'm trying to understand how you approach
Speaker 1: your market like this one right now, huge rip since
Speaker 1: the end of October, you start to see fatigue. How
Speaker 1: do you approach what you see on the screen. Yeah. Absolutely, Look,
Speaker 1: I think it's been a phenomenal market since really last
Speaker 1: March of UM this year one has really been a
Speaker 1: story of the reopening trade, that value trade, the rotation
Speaker 1: into value into the reopening stories, and out of really
Speaker 1: that growth in some of those large cap COVID winners
Speaker 1: from last year. Of course, over the last few days
Speaker 1: you've seen a bit of reversal of that because rates
Speaker 1: have started to come down a little. Maybe there's some
Speaker 1: questions around the reopening, given new of variants, given news
Speaker 1: of some states seeing rising cases, clearly given what's happening
Speaker 1: in Europe, so we're starting to see a little bit
Speaker 1: of pause around that reopening value cyclical trade. Um what
Speaker 1: we're thinking about, of course is as we're heading to
Speaker 1: this summer of really that real unleashing of pent up
Speaker 1: demand by the consumer and perhaps the real unleashing of
Speaker 1: the stimulus really flowing through the system, we may see
Speaker 1: this value cyclical rally have one more leg or maybe
Speaker 1: some legs through the summer. But what we're really thinking
Speaker 1: about then towards the second half of this year are
Speaker 1: some of the risks on the horizon, and those include one,
Speaker 1: you know, peak reopening. At some point you're going to
Speaker 1: get a peak growth rate. Maybe it's two q maybe
Speaker 1: it's three q UM, but that at that point the
Speaker 1: second relative starts to to slow again in terms of
Speaker 1: GDP growth. The second, of course is we do think
Speaker 1: that yields have you know, can continue to grind higher. UM.
Speaker 1: We do think that the two handle on the tenure
Speaker 1: is feasible this year, and so that will cause some
Speaker 1: additional volatility and pressure. And then finally and thirdly of course,
Speaker 1: is a FED who has been quite accommodated thus far.
Speaker 1: We think that continues for most of this year, but
Speaker 1: at some point they're going to have to come off
Speaker 1: this crisis level accommodation that they've been writing. So this
Speaker 1: was really rates at the zero bound unlimited queue to
Speaker 1: some extent to really help at the heart of the pandemic.
Speaker 1: We're now clearly trying to re emerge from that. So,
Speaker 1: you know, some things you're thinking about. A lot of
Speaker 1: the good news, a lot of the reopening story, a
Speaker 1: lot of this value trade is starting to get priced
Speaker 1: in UM. So keep in mind, if you haven't yet,
Speaker 1: you do have an opportunity to to you know, tactically
Speaker 1: layer in sencyclicality, but just be mindful. Then as you're
Speaker 1: heading towards the second half of the here money you've
Speaker 1: gone through a lot of issues there. Everyone's got their
Speaker 1: own approach, their own process to work through. A lot
Speaker 1: of people talk about where we are in the cycle.
Speaker 1: The early trade is the early cycle playbook still with us?
Speaker 1: Is that going to last another few months, maybe another
Speaker 1: quarter or another few quarters? Morgan Stanley think we've already
Speaker 1: seen the early cycle move. Do you use the same
Speaker 1: approach Mona? Do you have that early cycle playbook? And
Speaker 1: when the cycle do you think were on this market? Yeah? Absolutely,
Speaker 1: I think we are re emerging from a recessionary environment.
Speaker 1: And of course this recession is is different from some
Speaker 1: of the others, which are more you know, rates driven
Speaker 1: or more consumer driven. This was a pandemic and a
Speaker 1: health crisis, but we're clearly re emerging from it, and
Speaker 1: that that playbook actually came to fruition in a very
Speaker 1: real way this year. So certainly areas like energy, financials, industrial,
Speaker 1: specilical stocks, the reopening place, uh, those all took a
Speaker 1: nice light higher and so a lot of you know,
Speaker 1: what they call the easy money perhaps has been made.
Speaker 1: But that being said, you know, we do think that
Speaker 1: um the earnings growth environment, there's still upside to some
Speaker 1: of the numbers that we're seeing at there especially on UM.
Speaker 1: Some of these sectors like financials, like energy, like industrials,
Speaker 1: some of the areas that do well as rates continue
Speaker 1: to grind higher. Of course, financials, especially with a steeper
Speaker 1: year field curve. UM. We think areas like industrials may
Speaker 1: have some legs given the infrastructure package that we think
Speaker 1: will start to come to the forefront in the weeks ahead.
Speaker 1: Even areas like clean energy, which has been a real
Speaker 1: focus of the Biden administration and has now sold off
Speaker 1: as the NAZAC has sold off. As a lot of
Speaker 1: the growth stories have sold off, UM could have another lead.
Speaker 1: We think that's a secular growth theme that that if
Speaker 1: you haven't yet had explored, which was it's an interesting
Speaker 1: one here. So UM certainly we're looking at it more
Speaker 1: from now, a more active approach, taking a sector you know,
Speaker 1: by sector positioning approach rather than a broad market approach.
Speaker 1: And so I think, you know, at this point in
Speaker 1: the cycle, after we've had this reopening rally, we have
Speaker 1: to really be more selective going forward. Just to be clear, Mona,
Speaker 1: is the reopening rally done. If we reached a plateau
Speaker 1: and we're just going to fluctuate from here, is that
Speaker 1: what you're saying, you know, I think that that there
Speaker 1: is one like higher and you know, if you think
Speaker 1: about seasonality, sometimes it's sell in May and go away,
Speaker 1: but generally this year, I think, um, you know, when
Speaker 1: you look anecdotally, those summer months are really when we're
Speaker 1: going to see um, that pent up demand on leach.
Speaker 1: So you know, the consumers will hopefully have the next
Speaker 1: round of stimulus checks in their pockets. Uh, the vaccination
Speaker 1: program here in the US will be more fully rolled out,
Speaker 1: and so you'll really see them that demand for areas
Speaker 1: like travel like um, you know, going back indoors, perhaps
Speaker 1: even two restaurants, going to sporting events. And so I
Speaker 1: think that when when the economy really is going through
Speaker 1: that hyper demand phase, we'll see the market actually react
Speaker 1: to that. But that's when you have to start thinking about, well,
Speaker 1: after that, what happens are we at peak reopening? And
Speaker 1: so I think, you know, you probably have a little
Speaker 1: bit of steam left in this rally, um, but it's
Speaker 1: it's probably time to start thinking about being a little
Speaker 1: bit more neutral or cautious as we had passed the
Speaker 1: summer months. You used one line in this conversation that
Speaker 1: always pops out jumps out to me when people say
Speaker 1: the easy money monitor, and you know I always pick
Speaker 1: up on it, so forgive me for doing so. Did
Speaker 1: it ever feel easy? You know? Ever since March of
Speaker 1: last year, it's felt a little bit tough, and so
Speaker 1: I think, you know that the whole dichotomy between Main
Speaker 1: Street and Wall Street has always been a tough point
Speaker 1: to to follow. But I certainly think in this case,
Speaker 1: the markets have been very forward looking, and perhaps they
Speaker 1: were really since last year looking towards the second half
Speaker 1: of one, and so they were very astute in realizing
Speaker 1: that at some point we will have a program in
Speaker 1: place that will help us get through the pandemic to
Speaker 1: reopen fully um And and interestingly, the retail investor last
Speaker 1: year played a very large role in that. So you know,
Speaker 1: the util investor in some way was the winner in
Speaker 1: really kind of kept you know, kept that optimistic outlook
Speaker 1: throughout the year, and so they really benefited from that. So, yes,
Speaker 1: we've had an optimistic reopening trade, you could argue since
Speaker 1: perhaps March April of last year. So hopefully, you know,
Speaker 1: most investors participated in some way, and that the good
Speaker 1: news was last year, if you had the growth stocks
Speaker 1: um this year you could actually have some opportunities in
Speaker 1: the value stocks, and so that's why we think there
Speaker 1: is still a little bit more catch up and perhaps
Speaker 1: a little bit more rebound to to go in that sector.
Speaker 1: If you think about a lot of these value names
Speaker 1: like financials, energy industrials, they are still slightly up to
Speaker 1: March of last year, and so they have some catch
Speaker 1: up to do to the NAZAC, which is up from
Speaker 1: its February highs. So UM interesting markets still one where
Speaker 1: you know, again you know, just be selective, be active,
Speaker 1: but you still have some opportunities to go. It's never
Speaker 1: easy catch up, you know, it's never exactly. Aliance Global
Speaker 1: Investors US investment strategist, let's bring in Toasten Slock, Apollo
Speaker 1: Global Management chief economist, Torsten. You've seen your old colleagues,
Speaker 1: your old peers put out their forecast for growth for
Speaker 1: GDP for one six handles, seven handles, big numbers. Can
Speaker 1: we just start with the deceleration you anticipate from twenty
Speaker 1: one to twenty two and beyond absolutely, John that I
Speaker 1: think that the number we just got is a very
Speaker 1: important data point because it does to us that it
Speaker 1: is premature to talk about overheating. We have seen, of
Speaker 1: course the reopening trade do will. But as j Pal
Speaker 1: has said yesterday and he's probably sure you're also going
Speaker 1: to say today, is that we are still almost tenderent
Speaker 1: jobs behind creatives that we were in total employment in
Speaker 1: February of two thousands winning. So the bottom line is
Speaker 1: that we will have a very strong growth numbers over
Speaker 1: the next few quarters as the reopening begins to play out,
Speaker 1: as the fiscal stimulus supports, and also both households and
Speaker 1: corporates have a lot of cash on the energies that
Speaker 1: they're going to spend. So these three tail winds will
Speaker 1: give quite a boost to GDP growth. But the key
Speaker 1: word here, as you're saying, Jonathan, is the deceleration and
Speaker 1: growth is important. Naming for marketing becomes critical to figure
Speaker 1: out the timing and when is the peak and growth,
Speaker 1: and we will begin to see the numbers begin to
Speaker 1: slow down. We often speak as growth and inflation sort
Speaker 1: of in tandem, and yet there are distinct aspects of
Speaker 1: this economy. Could we see a situation where we have
Speaker 1: very robust growth and inflation that still remains within the
Speaker 1: range that the FED is expecting, which is pretty low. Absolutely.
Speaker 1: I mean there's a number of one all factors, including
Speaker 1: base effects, commodity prices. You also have some health pricing
Speaker 1: issues that go into inflation and all those things. It
Speaker 1: really is correct what the Pole is saying. It is
Speaker 1: all temporary. And for the FT to think about inflation,
Speaker 1: they always keep on emphasizing it has to be persistent.
Speaker 1: It has to really be a situation where the whole
Speaker 1: economy is boiling over where the overheating really is very
Speaker 1: significant everywhere, and we're just nowhere near that point. At
Speaker 1: this stage, it is clear that we will have strong growth,
Speaker 1: So okay, we can start talking about that, but why
Speaker 1: don't we create the tabulart jobs first that we have
Speaker 1: behind red Tip Toper of two thousand twenty. Then we
Speaker 1: can have a discussion about persistent inflation problems. And that's
Speaker 1: definitely not this year towards. And there are a lot
Speaker 1: of strong man arguments being made against the nineteen seventies
Speaker 1: type of inflation and how we're not going to see that.
Speaker 1: That seems likely that we're not going to go back
Speaker 1: to that kind of rapid inflation nary environment. However, there
Speaker 1: is this idea that not only have we printed all
Speaker 1: this money that's about to be unleashed into the economy
Speaker 1: when people can go out and spend more aggressively. But
Speaker 1: there are also are these supply chain kinks. We have
Speaker 1: people companies bringing supply chains back home. These are all
Speaker 1: frictions as China gets less of a dominant place in
Speaker 1: the global important export field, these are all frictions that
Speaker 1: could add to inflation. How do you account for that?
Speaker 1: That's absolutely correct. But if you think about transportation costs,
Speaker 1: even if you think about commodity prices more generally, how
Speaker 1: big a share is that of total costs for companies?
Speaker 1: I mean, as a starting point, about two thirds of
Speaker 1: cost for companies is labor. So that's the first a
Speaker 1: discussion about if you really want an overheating economy, you
Speaker 1: really need to see much more awkward pressure on wages,
Speaker 1: and that you will not have that in a situation
Speaker 1: where the labor market still is again about tenderland jobs behind.
Speaker 1: Now you could say that if you look at the
Speaker 1: n f I B, there are some signs that the
Speaker 1: small businesses are saying that the biggest problem out is
Speaker 1: that they can't find the right workers. They can't find
Speaker 1: the right quality of labor. So there could be some
Speaker 1: pieces of evidence that maybe in some corners of the
Speaker 1: labor market you could have some weight to pressure. But
Speaker 1: very broadly, speaking to your question, Leaser, it is true that, yes,
Speaker 1: there are some problems in the supply chain, and there's
Speaker 1: certainly some issues that could live things in, particularly because
Speaker 1: of commodity prizes, But the biggest scheme of things you
Speaker 1: think about the total cost base for corporate America, it
Speaker 1: is still the case that commodity prizes and supply chain
Speaker 1: issues are still a relatively modest amount of problems are
Speaker 1: compared to at least some of the other things that
Speaker 1: we need to see to have a nowhere here. So Toasting,
Speaker 1: let's talk about labor. If this was two thousand and
Speaker 1: nine and we were talking about ten million jobs short,
Speaker 1: we have a problem, and we did have a problem,
Speaker 1: and it took a long long time to recover from that.
Speaker 1: But this is not two thousand and nine. This is
Speaker 1: one and companies of shot because of policy by decision,
Speaker 1: governments are telling them they've got to stay shut in
Speaker 1: certain parts of the world, particularly at Sound of America
Speaker 1: at the moment in Europe. So but that in mind, Toasting,
Speaker 1: I just how relevant that ten million number is it's
Speaker 1: certainly relevant if you are one of them. It's a struggle,
Speaker 1: and we've talked about the pain in this labor market
Speaker 1: right now. But where the optimistic tone and the hope
Speaker 1: comes from is that as soon as you take these
Speaker 1: restrictions off, a lot of that's gonna come back and
Speaker 1: come back quickly. So when we wake up in a
Speaker 1: summer toss and I want to understand from your perspective
Speaker 1: exactly where we are in this cycle, because it's not
Speaker 1: going to be the same as what we saw coming
Speaker 1: out of OH nine. You're right, I mean, in some
Speaker 1: sense say that the energy is that we turn off
Speaker 1: the lights, and the question is can the lights just
Speaker 1: to be turned on now? Can we just restart their
Speaker 1: simply lines can get the smoke out of the chimneys
Speaker 1: of the factories that have been on hold while we
Speaker 1: have been in the pandemic. The issue here is, if
Speaker 1: you think about this in practical terms, you need to
Speaker 1: get airline capacity back to where it was before. You
Speaker 1: need to get people to stay at hotels, used to
Speaker 1: get people who go to restaurants. You need to get
Speaker 1: people to go to sporting events, concerts, or their face
Speaker 1: to face consumer services industries. It's a little bit difficult
Speaker 1: to just see that as we're just turning off and
Speaker 1: turning on the switch here again and say well, now
Speaker 1: everyone just go out and do these things. I still
Speaker 1: think it will take some time before those things get
Speaker 1: back to the levels where we were in February of
Speaker 1: two thousands twenty. But you're right, the upside risk could
Speaker 1: being that employment comes back fast. But still ten million
Speaker 1: is a pretty pretty big number when you think about
Speaker 1: where we are today. So I think Jay Powell and
Speaker 1: the message will get from him again today Je Paul
Speaker 1: will say and continue to emphasize, yes, yes, it's true
Speaker 1: that there are some very significant TiAl wins here. But
Speaker 1: then why do we wait a little bit longer before
Speaker 1: we take the champagne bottle out and celebrate and say
Speaker 1: that now we have declared victory over I maybe it
Speaker 1: is going to take quite some time still before we
Speaker 1: get to the point of full employment. Or Jane Jillen
Speaker 1: said yesterday, we'll probably have to get least into next
Speaker 1: year before we get back to full employment in the economy. Again,
Speaker 1: this phrase tost and let's just finish on this phrase
Speaker 1: full employment. We hear it so much from economists, from you,
Speaker 1: from others too. I talk about it as well. I
Speaker 1: just don't know what it means anymore, torst them. What
Speaker 1: does it mean for you? What are you looking for?
Speaker 1: What's the data point that says, sure, we're that we've
Speaker 1: made it? Yes, so that's right. So that's why I'm
Speaker 1: watching the dots in the dot from the FAT podcast
Speaker 1: that it be the summer if you can projections is
Speaker 1: quite important, at least as a guide post for saying, hey,
Speaker 1: maybe we had difficulties in markets quantifying this, but at
Speaker 1: least what is the FATS saying is the unemployer rate
Speaker 1: that we need to get down to, And they're saying
Speaker 1: that they we need to get down to an employre
Speaker 1: rate more close to around fall if we get a
Speaker 1: fall handle, and then we may begin to see more
Speaker 1: upper pressure on wages and therefore, in their view, also
Speaker 1: more upper pressure on inflation. And given where we are
Speaker 1: now with an employing rate today of more than six,
Speaker 1: we still have quite a ways to go. But you're right, Jonathan,
Speaker 1: it could also be that some parts of the label
Speaker 1: market could be a bit stronger. But it is critical
Speaker 1: this question of how far we are away from full employment.
Speaker 1: But it's pretty clear that and this is again what
Speaker 1: Yellen was saying yesterday, then we're probably not going to
Speaker 1: get to full employment in two thousand twenty one. They
Speaker 1: toast and gonna catch out, Gonna see you. Important conversation,
Speaker 1: No doubt, we'll have another one very soon, Toasting Slot
Speaker 1: Apollo Global Management, Chief Economists A teen museums successful because
Speaker 1: I was a kid three afternoons at a five after school.
Speaker 1: If I wasn't doing something else, I was in a
Speaker 1: museum looking at things, and I love museums, and I
Speaker 1: wanted to make it a greatly greater and greater. That
Speaker 1: was Leonard A. Lauder. He is est A Lauder Chairman
Speaker 1: emeritus as well as the former chief executive officer and
Speaker 1: also the son of a number of the two people
Speaker 1: who founded this company, David Rubinstein Uh. He interviewed him
Speaker 1: on a Peer to Peer Conversations that set to air
Speaker 1: in the upcoming days. David Rubinstein joining us now the
Speaker 1: host of Peer to Peer Conversations as well as uh
Speaker 1: the founder of Carlisle Group joining us here, David Fantastic
Speaker 1: Rags to Riches Story, one of the most storied makeup
Speaker 1: companies in the United states Esta Lauder. What was the
Speaker 1: biggest standout message from this interview. Well, the company started
Speaker 1: very modestly. We now know it as a spectacular company.
Speaker 1: And Leonard Louder often has said, well, you join your
Speaker 1: mother's big company, Esta Lauder. But actually when he joined
Speaker 1: it was at eight hundred thousand of revenue, so it
Speaker 1: was a modest company, and he really helped build it.
Speaker 1: He made his mother into the face of the company.
Speaker 1: She wasn't the business person per se. That was Leonard
Speaker 1: and he really did an incredible job of building into
Speaker 1: one of the most successful companies in the country. I
Speaker 1: when you talk about the modest inception of this company
Speaker 1: to where it is now, you asked him about a
Speaker 1: modern entrepreneur trying to get into the game in the
Speaker 1: same kind of way and launching a brand. What was
Speaker 1: his insight and how things have changed now versus then.
Speaker 1: It's more competition harder in those days. Uh, it was
Speaker 1: easier to kind of sneak up on competition. But he
Speaker 1: had a big competitor named Charles Revson who built Revlon
Speaker 1: and Revlon was the eight hundred pound gerrilla then and
Speaker 1: Revlon once tried to buy Esta Lauder for a million
Speaker 1: dollars um and his mother ultimately decided not to do it.
Speaker 1: Had they done so, we wouldn't have heard of est
Speaker 1: Lauder probably, But it shows you can overcome gigantic UH
Speaker 1: competitors if you're really persistent and really smart and and
Speaker 1: Leonard was. Leonard really was the genius behind this branding
Speaker 1: of a company, and the business of the company's mother
Speaker 1: was a terrific symbol though, of a company. I feel
Speaker 1: like we can't talk to corporate leaders right now without
Speaker 1: talking about the pandemic and how it's affected their business
Speaker 1: and the way they operate in offices and beyond. How
Speaker 1: has the idea that people are working from home and
Speaker 1: aren't socializing as much affected the landscape for a makeup company.
Speaker 1: That has to do with perception. I mean, has it
Speaker 1: been enhanced through the ideas of Instagram or has it
Speaker 1: been taken away from just because people are not going
Speaker 1: out and being with their friends as much. Well, I
Speaker 1: think people are putting makeup on when I go do
Speaker 1: their zoom calls and other things, so I don't think
Speaker 1: it's adversely affected UH the industry completely, but but surely
Speaker 1: when people are not doing as much socializing as before,
Speaker 1: It's probably not as as favorable, but I do think
Speaker 1: the company has incredible brand and it now has something
Speaker 1: like twenty eight different brands. It just Estate Lauder is
Speaker 1: the main brand, the name of the company, but they
Speaker 1: have bought many other brands over the years and built
Speaker 1: some like Finigue, for example. So since you yourself are
Speaker 1: co chair and co founder of Carlisle Group, I do
Speaker 1: want to ask you about the pandemic and how it's
Speaker 1: affected some of the morale. We've heard from city groups
Speaker 1: Jane Fraser about how they plan to boost morale for
Speaker 1: companies that have Zoom, for individuals that have Zoom burnout,
Speaker 1: and we are from another group of Wall Street firms
Speaker 1: that they're they're come there there. Their employees are struggling
Speaker 1: at home after working with kids, after having a very
Speaker 1: little break between home and work. What's your response to
Speaker 1: that and how much have you observed this zoom fatigue
Speaker 1: among your employees. I think zoom fatigue is everywhere. It's
Speaker 1: been over a year now and I've been living essentially
Speaker 1: in this house for about a year, house that I've
Speaker 1: lived in for thirty some years, but I hadn't really
Speaker 1: spent much time and it compared to the last year.
Speaker 1: But I do think that ultimately the businesses that are
Speaker 1: right of distuildings will go back. I doubt though, that
Speaker 1: people will go back and work five days a week,
Speaker 1: you know, ten hours a day in their office. I
Speaker 1: think people will increasingly want to spend some time working remotely,
Speaker 1: and I think that's not a bad idea. Like I
Speaker 1: do believe that people would like to get back to
Speaker 1: work when they believe it's safe and they have to
Speaker 1: make certain that there's not going to be any chance
Speaker 1: of catching a virus. But I think it's going to
Speaker 1: take another six before that happens. Have you observed, though,
Speaker 1: that that productivity is starting to decrease around the edges
Speaker 1: among employees who are struggling with this work home balance
Speaker 1: that has gotten up ended by the pandemic. Well, in
Speaker 1: the private equity world, it's hard to say that because
Speaker 1: of the private equity world has adopted to zoom quite well,
Speaker 1: and we've been doing deals, raising money and exiting deals
Speaker 1: at a quite good pace, so I can't say that
Speaker 1: productivity has gone down. I do think everybody would like
Speaker 1: to get back to is what has used to be
Speaker 1: considered normal. But I do think that normal in the
Speaker 1: future will consider it will be considered to have have
Speaker 1: some work unremotely. I don't think people will travel as
Speaker 1: much as they used to. Um I used to fly
Speaker 1: halfway around the world for an hour meeting, and I
Speaker 1: don't think that people like me will do that again.
Speaker 1: That's actually been a debate that we've been harping on
Speaker 1: this morning, the idea of business travel returning and how much.
Speaker 1: And my colleague John Farrow made a really good point
Speaker 1: that if if I can bring you a bottle of
Speaker 1: wine and see you face to face, I'm more likely
Speaker 1: to win the deal versus not. So business travel will return.
Speaker 1: Where will it return and where won't it return? From
Speaker 1: your perspective in your world, David, I think travel that
Speaker 1: is global, where you have to travel halfway around the
Speaker 1: world for a meeting, that will be slow to come back.
Speaker 1: But if it's going from Washington, New York, or New
Speaker 1: York to Boston or Philadelphia, New York, that's relatively easier
Speaker 1: to do. So I think shorter distances will probably still
Speaker 1: see a lot of meetings, But if you have to
Speaker 1: travel an enormous long time to get somewhere, that will
Speaker 1: be harder to get done. I do think that will
Speaker 1: be some of that, for sure, some businesses require you
Speaker 1: to do that, but I do think it will come
Speaker 1: back more slowly than than we would like. Just going
Speaker 1: forward right now at the theme of the morning has
Speaker 1: been peak optimism, peak reopening, and we have felt that
Speaker 1: a lot of the forward action of the earnings that
Speaker 1: we are going to see has already been priced into
Speaker 1: the markets. From your vantage point, as far as deals
Speaker 1: getting done, do you see things starting to slow as
Speaker 1: people believe that the window is kind of up for
Speaker 1: sort of peak perfection in markets as the economy now
Speaker 1: has to catch up. Well. Predicting what's going to happen
Speaker 1: in the market's always a dangerous kind of uh undertaking.
Speaker 1: But I do think that as long as interest rates
Speaker 1: stay low, I do think that you'll see a fair
Speaker 1: amount of deal is getting done. And I don't think
Speaker 1: I've see a real slowdown. I do think that the
Speaker 1: spack market probably has slowed down a little bit of late.
Speaker 1: I mean, it has been very robust. It couldn't keep
Speaker 1: going on at that pace forever, and I do think
Speaker 1: some spack prices have come down, But generally, I think
Speaker 1: SPACs are probably here to stay for a while. At
Speaker 1: least at some level. I do think that the financing
Speaker 1: markets are still relatively robust and and I don't think
Speaker 1: a slowdown is imminent, in large part because the one
Speaker 1: nine trillion dollar stimules Phil is going to keep the
Speaker 1: economy in reasonable shape for a while. David Rubinstein, thank
Speaker 1: you so much for being with us, and the interview
Speaker 1: is phenomenal. I recommend that everybody watch it. That was
Speaker 1: David Rubinstein, coach, hair and co founder of the Carlisle Group,
Speaker 1: as well as the host of peer to peer conversations.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
Speaker 1: us live weekdays from seven to ten am Eastern on
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six
Speaker 1: to nine am for insight from the best in economics, finance, investment,
Speaker 1: and international relations. And subscribe to the Surveillance podcast on Apple, podcast, SoundCloud,
Speaker 1: Bloomberg dot com, and of course on the terminal. I'm
Speaker 1: Tom Keene and this is Bloomberg