1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,360 Speaker 1: international relations. Find Bloomberg Surveillance on Apple, Podcast, SoundCloud, Bloomberg 5 00:00:23,360 --> 00:00:29,040 Speaker 1: dot Com, and of course on the Bloomberg Terminal. We 6 00:00:29,120 --> 00:00:33,360 Speaker 1: now have a Bloomberg exclusive with Venezuela's President Nicholas Maduro UH, 7 00:00:33,400 --> 00:00:36,879 Speaker 1: speaking with Mr Shatsker in Caracas. The focus is on 8 00:00:37,000 --> 00:00:40,000 Speaker 1: normalizing relations with the US, but this does fit into 9 00:00:40,040 --> 00:00:42,040 Speaker 1: the broader theme that we've been talking about all week 10 00:00:42,320 --> 00:00:45,720 Speaker 1: of the Great American reset of international relations as President 11 00:00:45,760 --> 00:00:49,199 Speaker 1: Biden took a tour of Europe. The idea here is 12 00:00:49,400 --> 00:00:53,560 Speaker 1: that Maduro would like to see relationships UH normalize with 13 00:00:53,600 --> 00:00:56,800 Speaker 1: the United States, some of the harsh sanctions lifted, and 14 00:00:56,880 --> 00:01:03,400 Speaker 1: take a listen to what Maduro had to say. We 15 00:01:03,480 --> 00:01:06,639 Speaker 1: always have to remember, Eric, that we faced four years 16 00:01:06,640 --> 00:01:09,880 Speaker 1: of the Trump administration, which were four years of direct 17 00:01:09,880 --> 00:01:14,600 Speaker 1: aggression of cruel sanctions, very cruel and have damage to 18 00:01:14,640 --> 00:01:19,399 Speaker 1: the Venezuelan economy and society. The politics that Donald Trump 19 00:01:19,400 --> 00:01:23,839 Speaker 1: installed and left his legacy against Venezuela are extremist politics, 20 00:01:24,120 --> 00:01:29,440 Speaker 1: irrational right that caused a complete rupture between the United 21 00:01:29,480 --> 00:01:35,800 Speaker 1: States and Venezuela is the joy Biden. President Joe Biden 22 00:01:35,840 --> 00:01:39,400 Speaker 1: has arrived making a proposal to the world. His first 23 00:01:39,400 --> 00:01:42,959 Speaker 1: speech on January he said that we don't have to 24 00:01:43,000 --> 00:01:47,640 Speaker 1: demonize anybody in politics. I would say to President Joe 25 00:01:47,680 --> 00:01:51,080 Speaker 1: Biden to stop from the White House, from the Department 26 00:01:51,120 --> 00:01:55,760 Speaker 1: of State, the demonization of Venezuela, the demonization of the 27 00:01:55,800 --> 00:02:01,360 Speaker 1: Bolvarian Revolution, the demonization of President Nicolas Badu Row, and 28 00:02:01,440 --> 00:02:05,440 Speaker 1: that hopefully we can find paths of reconciliation, of respect, 29 00:02:08,080 --> 00:02:11,480 Speaker 1: paths of mutual benefit and pass that allow us to 30 00:02:11,560 --> 00:02:20,360 Speaker 1: normalize relations between the United States and Venezuela. Have you 31 00:02:20,440 --> 00:02:26,720 Speaker 1: seen any signals, wanna that suggests Joe Biden has a 32 00:02:26,760 --> 00:02:33,680 Speaker 1: different posture, especially especially as it concerns the Venezuela question, 33 00:02:36,919 --> 00:02:43,160 Speaker 1: do you want me to be sincere very? Sincere there 34 00:02:43,160 --> 00:02:47,840 Speaker 1: hasn't been a single positive sign none. It's five months 35 00:02:47,880 --> 00:02:52,079 Speaker 1: where Okay, they're settling into power. The only different thing, 36 00:02:52,800 --> 00:02:55,040 Speaker 1: the only different thing that might be heard from some 37 00:02:55,160 --> 00:02:58,320 Speaker 1: spokespeople of the White House and of the Department of State, 38 00:02:59,120 --> 00:03:02,480 Speaker 1: is that they agree with a political dialogue between Venezuelans 39 00:03:03,080 --> 00:03:08,800 Speaker 1: without intervention, to look for democratic political changes in the country. 40 00:03:09,639 --> 00:03:14,080 Speaker 1: That's the only thing. They must abandoned the demonization that 41 00:03:14,120 --> 00:03:19,560 Speaker 1: they make of Venezuela, of our revolution, democratic, constitutional, pacific, 42 00:03:19,760 --> 00:03:26,519 Speaker 1: and of President Nicolas Maduro, to create real foundations, objective, credible, verifiable, 43 00:03:26,600 --> 00:03:30,639 Speaker 1: of a process of negotiation, to regularize the relations between 44 00:03:30,639 --> 00:03:33,520 Speaker 1: the two countries in terms of win win, which is 45 00:03:33,560 --> 00:03:36,400 Speaker 1: what we aspire to since a long time ago. A 46 00:03:36,520 --> 00:03:41,960 Speaker 1: win win is possible. In your opinion, absolutely, we've already 47 00:03:41,960 --> 00:03:44,720 Speaker 1: shown that. Of course it's possible to win win. They 48 00:03:44,760 --> 00:03:47,640 Speaker 1: know it. In the financial sector, the bondholders with whom 49 00:03:47,680 --> 00:03:50,680 Speaker 1: we had an impeccable relationship, and they know it's possible 50 00:03:50,720 --> 00:03:53,760 Speaker 1: to invest in Venezuela and win win as long as 51 00:03:53,800 --> 00:03:57,080 Speaker 1: this whole persecution and the sanctions aren't there. The oil 52 00:03:57,160 --> 00:04:00,600 Speaker 1: sector knows it. Who has invested in Venezuela uh and 53 00:04:00,640 --> 00:04:04,760 Speaker 1: who still maintains investments in Venezuela that we can advance 54 00:04:04,920 --> 00:04:09,240 Speaker 1: much more. The cultural sector knows it, the social sector, 55 00:04:09,960 --> 00:04:15,280 Speaker 1: the political sectors know it. Bloombergs Eric Shatzker just returning 56 00:04:15,480 --> 00:04:17,920 Speaker 1: from Caracas. He is here with us. I did not 57 00:04:18,080 --> 00:04:21,320 Speaker 1: know that you could speak Spanish. Eric Uh, congratulations on 58 00:04:21,400 --> 00:04:24,240 Speaker 1: the interview. I am curious before we get into the 59 00:04:24,279 --> 00:04:27,640 Speaker 1: substance of what it was like in Caracas, given the 60 00:04:28,360 --> 00:04:31,200 Speaker 1: COVID pandemic and how hard that region has been hit, 61 00:04:31,480 --> 00:04:34,600 Speaker 1: and given the exodus of residents as a result of 62 00:04:34,640 --> 00:04:37,680 Speaker 1: some of the financial crisis issues that this nation has 63 00:04:37,720 --> 00:04:41,600 Speaker 1: been facing. Lisa, it shouldn't surprise anybody that Caracas and 64 00:04:41,680 --> 00:04:46,240 Speaker 1: Venezuela as a country are a shadow of their former selves. 65 00:04:46,279 --> 00:04:49,640 Speaker 1: Don't forget Venezuela with South America's richest country. At one 66 00:04:49,680 --> 00:04:52,160 Speaker 1: point in the nine nineties, it used to produce three 67 00:04:52,200 --> 00:04:55,279 Speaker 1: and a half million barrels a day of oil. Last 68 00:04:55,360 --> 00:04:57,919 Speaker 1: year that was down to four d and ten thousand, 69 00:04:58,080 --> 00:05:02,039 Speaker 1: the lowest in about a century. And of course that's 70 00:05:02,120 --> 00:05:05,080 Speaker 1: visible on the streets of karakas. The country doesn't have 71 00:05:05,640 --> 00:05:09,560 Speaker 1: any money. First of all, you could argue persuasively that 72 00:05:09,600 --> 00:05:13,440 Speaker 1: it was mismanaged by the socialist nationalist government of Hugo 73 00:05:13,520 --> 00:05:17,520 Speaker 1: Chavs and subsequently Nicolas Maduro. But there's also these U 74 00:05:17,560 --> 00:05:21,040 Speaker 1: S sanctions in force. They don't allow Venezuela to sell 75 00:05:21,120 --> 00:05:24,599 Speaker 1: any oil. They don't allow Venezuela access to debt capital markets. 76 00:05:25,040 --> 00:05:29,159 Speaker 1: The country has no money, it's in default, it's bankrupt, 77 00:05:29,160 --> 00:05:31,600 Speaker 1: the infrastructure is crumbling. All of this is visible to 78 00:05:31,640 --> 00:05:34,559 Speaker 1: the naked eye, but I will point out that there 79 00:05:34,880 --> 00:05:39,800 Speaker 1: is call them green shoots. Venezuela has relaxed some of 80 00:05:39,839 --> 00:05:43,920 Speaker 1: its economic restrictions and it is fascinating, candidly fascinating. I 81 00:05:43,920 --> 00:05:47,680 Speaker 1: don't want to downplay the poverty, which is extreme, but 82 00:05:47,760 --> 00:05:51,159 Speaker 1: to see these flickers of entrepreneurialism in a country that 83 00:05:51,200 --> 00:05:55,680 Speaker 1: has been forced to loosen these strictures, uh to try 84 00:05:55,760 --> 00:05:58,960 Speaker 1: and find some way out of its desperate economic situation. 85 00:05:59,200 --> 00:06:02,159 Speaker 1: What eric is the path forward, what is the realistic 86 00:06:02,240 --> 00:06:05,120 Speaker 1: in your conversations with him, a path forward to a 87 00:06:05,240 --> 00:06:08,440 Speaker 1: loosening of sanctions, getting that oil back for the country. 88 00:06:10,120 --> 00:06:13,560 Speaker 1: Let's not forget that the Trump administration was pursuing a 89 00:06:14,040 --> 00:06:17,800 Speaker 1: policy of regime change. It was trying to drive Madudo 90 00:06:17,920 --> 00:06:20,359 Speaker 1: out of office, and as far as the US government 91 00:06:20,360 --> 00:06:23,640 Speaker 1: was concerned, there were good reasons to do that. Um 92 00:06:23,800 --> 00:06:29,680 Speaker 1: drug trafficking, rigged elections, corruption, all kinds of accusations and 93 00:06:29,760 --> 00:06:33,920 Speaker 1: allegations for which there's much evidence against the Madudo regime. 94 00:06:34,520 --> 00:06:38,599 Speaker 1: The Biden administration has taken a different approach. Tony blankin 95 00:06:38,800 --> 00:06:43,360 Speaker 1: the Secretary of State has talked about free and fair elections. 96 00:06:43,400 --> 00:06:47,440 Speaker 1: That's the path forward. That's what the negotiations are moving toward. 97 00:06:48,520 --> 00:06:51,760 Speaker 1: The United States. What remains to be seen clearly Madudo 98 00:06:51,920 --> 00:06:54,560 Speaker 1: is extending something of an olive branch. He wants a deal, 99 00:06:54,640 --> 00:06:58,000 Speaker 1: he wants talks. He wants the United States to sponsor, 100 00:06:58,560 --> 00:07:02,040 Speaker 1: along with the Norwegians, UH, some kind of a dialogue 101 00:07:02,040 --> 00:07:05,919 Speaker 1: with the opposition that moves the country forward such that 102 00:07:06,000 --> 00:07:09,279 Speaker 1: these free and fair elections take place. People can, I guess, 103 00:07:09,320 --> 00:07:12,720 Speaker 1: confidence can return to Venezuela, and ultimately the government feels 104 00:07:12,760 --> 00:07:16,120 Speaker 1: as though the situation is stable enough and fair enough 105 00:07:16,520 --> 00:07:18,720 Speaker 1: that it is willing to relieve at least some of 106 00:07:18,760 --> 00:07:22,240 Speaker 1: these sanctions. And if that happens, I'm not in the 107 00:07:22,280 --> 00:07:25,560 Speaker 1: business of making predictions that if Venezuela is allowed to 108 00:07:25,600 --> 00:07:29,400 Speaker 1: start selling oil again on international markets, and if investors 109 00:07:29,440 --> 00:07:31,600 Speaker 1: are allowed to bring money to the country and pump 110 00:07:31,600 --> 00:07:36,280 Speaker 1: it into sectors like petrochemicals, it might be quite amazing 111 00:07:36,720 --> 00:07:39,280 Speaker 1: the kind of growth we would see in the Venezuela economy, 112 00:07:39,320 --> 00:07:43,040 Speaker 1: because it has over the past eight years shrunk by 113 00:07:43,600 --> 00:07:47,560 Speaker 1: it's hard to believe. It's been shocking. Eric Schatska, thank 114 00:07:47,600 --> 00:07:50,640 Speaker 1: you so much for going down there and doing this 115 00:07:50,800 --> 00:07:53,760 Speaker 1: and joining us today. Are on the heels of your trip. 116 00:08:00,640 --> 00:08:04,440 Speaker 1: The great reflation turns into the great unwind. Jay Bryson, 117 00:08:04,480 --> 00:08:08,360 Speaker 1: Wells Fargo chief economist has been tracking the data. Unclear 118 00:08:08,360 --> 00:08:11,920 Speaker 1: what the data actually says. Jay Bryson, based on the data, 119 00:08:12,160 --> 00:08:16,120 Speaker 1: do we have any indication that, yes, this economic recovery 120 00:08:16,200 --> 00:08:18,640 Speaker 1: is starting to stall out or give hints of having 121 00:08:18,720 --> 00:08:23,240 Speaker 1: already reached its peak and poised for only disappointment going forward. Well, 122 00:08:23,280 --> 00:08:26,280 Speaker 1: I don't know, Lisa, if I would say disappointment going forward, 123 00:08:26,320 --> 00:08:30,200 Speaker 1: I mean, are we at peak growth right now? Yes? Probably. 124 00:08:30,280 --> 00:08:32,480 Speaker 1: You know, in the second quarter you're looking at a 125 00:08:32,520 --> 00:08:36,440 Speaker 1: growth raith that's probably going to be annually that's clearly 126 00:08:36,440 --> 00:08:39,920 Speaker 1: not sustainable. And if you slow down in the second 127 00:08:39,920 --> 00:08:42,080 Speaker 1: half of the year to what we think will be 128 00:08:42,320 --> 00:08:46,760 Speaker 1: six seven maybe eight percent less is a very very 129 00:08:46,800 --> 00:08:50,199 Speaker 1: strong growth rate. So again, peak growth right now? You 130 00:08:50,280 --> 00:08:54,680 Speaker 1: can't all right, Well, there's a question here about whether 131 00:08:54,720 --> 00:08:58,240 Speaker 1: we can infer anything from the labor market data that 132 00:08:58,280 --> 00:09:00,800 Speaker 1: we've been getting. The idea that we got a disappointment 133 00:09:00,840 --> 00:09:03,400 Speaker 1: in the initial jobless claims. We've got disappointments on the 134 00:09:03,440 --> 00:09:06,680 Speaker 1: monthly jobs reports that we've gotten out of the federal government. 135 00:09:07,040 --> 00:09:09,160 Speaker 1: Are we gleaning anything from that or is it still 136 00:09:09,200 --> 00:09:13,280 Speaker 1: too early to do anything with that information? You know, 137 00:09:13,320 --> 00:09:15,200 Speaker 1: at least I think it still isn't very a little 138 00:09:15,240 --> 00:09:18,840 Speaker 1: bit too early to really make hard decisions about what's 139 00:09:18,880 --> 00:09:21,400 Speaker 1: coming out of the labor market right now. I mean, 140 00:09:21,440 --> 00:09:24,840 Speaker 1: it's still being affected by concerns about COVID if you 141 00:09:24,880 --> 00:09:27,880 Speaker 1: look at surveys when people say why aren't you working 142 00:09:27,960 --> 00:09:31,040 Speaker 1: right now? Concerns about going back to the workplace or 143 00:09:31,200 --> 00:09:34,800 Speaker 1: up there. You know, there's still these extended unemployment benefits 144 00:09:34,840 --> 00:09:37,800 Speaker 1: at least in some states, um that may be keeping 145 00:09:37,840 --> 00:09:40,400 Speaker 1: some people along the sidelines. So I think we really 146 00:09:40,520 --> 00:09:43,840 Speaker 1: need to give it, unfortunately, you know, another few months 147 00:09:44,120 --> 00:09:46,679 Speaker 1: to see when to smoke clears, to see how we're 148 00:09:46,720 --> 00:09:49,959 Speaker 1: doing in the flaw if people are actually coming back 149 00:09:50,000 --> 00:09:52,800 Speaker 1: to the labor market at that point. So at this point, 150 00:09:52,880 --> 00:09:54,600 Speaker 1: there's still I think a lot of noise, a lot 151 00:09:54,640 --> 00:09:57,160 Speaker 1: of things going on in the labor market that are 152 00:09:57,280 --> 00:10:00,920 Speaker 1: that are keeping a little bit made depressed. Are you 153 00:10:00,960 --> 00:10:04,800 Speaker 1: at all concerned about a price wage spiral? J I 154 00:10:04,840 --> 00:10:09,480 Speaker 1: know it's something that economists fear normally, but as Lisa said, 155 00:10:09,480 --> 00:10:14,080 Speaker 1: we've gone through a real paradigm shift. So Matt used 156 00:10:14,080 --> 00:10:18,080 Speaker 1: the word spiral. Now I'm not really concerned about spiral, 157 00:10:18,120 --> 00:10:19,920 Speaker 1: but it's like, so, you know what I think wages 158 00:10:19,960 --> 00:10:22,360 Speaker 1: price spirals. I think what we saw back in the 159 00:10:22,440 --> 00:10:26,080 Speaker 1: nineteenth seven and back then what you had was a 160 00:10:26,160 --> 00:10:29,079 Speaker 1: fair amount of people had wages that were in dept 161 00:10:29,200 --> 00:10:33,400 Speaker 1: to inflation. So you had the OPEC shocks that pushed 162 00:10:33,480 --> 00:10:36,839 Speaker 1: up prices, then that fed into wages automatically fed back 163 00:10:36,880 --> 00:10:40,120 Speaker 1: into prices again in spiraled up. You don't have that 164 00:10:40,200 --> 00:10:43,360 Speaker 1: slight sort of thing today in terms of that, I mean, 165 00:10:43,360 --> 00:10:45,640 Speaker 1: I think what's it would be interesting or what we're 166 00:10:45,760 --> 00:10:49,040 Speaker 1: keeping a close eyele on is inflation expectations. If they 167 00:10:49,120 --> 00:10:52,000 Speaker 1: really start to become a moored here, people really do 168 00:10:52,200 --> 00:10:55,400 Speaker 1: start to expect firing and hired inflation going forward, then 169 00:10:55,440 --> 00:10:58,160 Speaker 1: that does become a little bit of concern. And I 170 00:10:58,160 --> 00:10:59,800 Speaker 1: think the data is mixed there. When you look at 171 00:10:59,800 --> 00:11:03,480 Speaker 1: more good indicators of inflation expectations since the FED media, 172 00:11:03,520 --> 00:11:07,000 Speaker 1: they've come down significantly. Um, you know, now the you know, 173 00:11:07,040 --> 00:11:10,480 Speaker 1: the personal expectations like what you capture in the University 174 00:11:10,480 --> 00:11:13,000 Speaker 1: of Michigan. We'll see how that all plays out. But 175 00:11:13,120 --> 00:11:15,120 Speaker 1: for me, that's the big key is what happens to 176 00:11:17,480 --> 00:11:21,400 Speaker 1: you know, j from UH in your career, from Johns 177 00:11:21,440 --> 00:11:26,000 Speaker 1: Hopkins to Georgetown to the University of Alabama, You've been 178 00:11:26,120 --> 00:11:31,000 Speaker 1: the entire time inside this kind of Reaganomics bubble. Right. 179 00:11:31,080 --> 00:11:34,960 Speaker 1: We've had this supply side economics narrative for the last 180 00:11:35,000 --> 00:11:38,160 Speaker 1: forty years, and that seems to have changed with this 181 00:11:38,360 --> 00:11:41,880 Speaker 1: pandemic and with this um well, I guess the last 182 00:11:41,880 --> 00:11:45,120 Speaker 1: administration was was a big spender as well, but all 183 00:11:45,160 --> 00:11:49,960 Speaker 1: of a sudden, modern monetary theory seems to have won 184 00:11:50,040 --> 00:11:54,240 Speaker 1: the day. How difficult does that make your job? Well, 185 00:11:54,400 --> 00:11:56,800 Speaker 1: you know, you guys have been using the word paradigm chef, 186 00:11:56,960 --> 00:12:00,520 Speaker 1: you know, and so it's it's clearly is that where 187 00:12:00,559 --> 00:12:02,400 Speaker 1: are we right now in terms of what's what's the 188 00:12:02,480 --> 00:12:05,760 Speaker 1: closest um of analog that you could look at, you know, 189 00:12:05,800 --> 00:12:09,720 Speaker 1: I think it would be the ninth the guns and 190 00:12:09,760 --> 00:12:12,880 Speaker 1: butter Um, And we did get some inflation out of that. Now, 191 00:12:12,920 --> 00:12:15,920 Speaker 1: it was really the the opec shots um of the 192 00:12:15,960 --> 00:12:19,120 Speaker 1: seventies that really got inflations and starting to higher so 193 00:12:19,160 --> 00:12:21,320 Speaker 1: that's kind of where we are right now. And what 194 00:12:21,360 --> 00:12:24,880 Speaker 1: I would say though, is it's a political decision going forward. 195 00:12:24,960 --> 00:12:27,440 Speaker 1: You know, are we going to get all this infrastructure spending. 196 00:12:27,640 --> 00:12:30,520 Speaker 1: Are we going to get this American Family's plan tasked 197 00:12:30,640 --> 00:12:33,480 Speaker 1: or not? That still remains to be seen. We still 198 00:12:33,520 --> 00:12:36,600 Speaker 1: have a very very split congress um, and even with 199 00:12:36,720 --> 00:12:41,839 Speaker 1: among the fifty senators Democratic senators, there's not unity there either. 200 00:12:42,320 --> 00:12:45,640 Speaker 1: So it does make our job the politics right now, 201 00:12:45,760 --> 00:12:49,000 Speaker 1: I think it is complicates what we're trying to figure 202 00:12:49,000 --> 00:12:52,680 Speaker 1: out going forward. How are you thinking within this big 203 00:12:52,720 --> 00:12:56,080 Speaker 1: paradigm shift that we talk about, the models that we 204 00:12:56,120 --> 00:12:59,680 Speaker 1: traditionally look at a Phillips curve, let's say it, the 205 00:12:59,679 --> 00:13:03,840 Speaker 1: way that we're measuring inflation, the basket of which we're measuring, 206 00:13:04,200 --> 00:13:08,320 Speaker 1: are those tools still intact well in terms of the 207 00:13:08,400 --> 00:13:10,360 Speaker 1: you know, the Phillips curve, I think that has been 208 00:13:10,520 --> 00:13:13,240 Speaker 1: was put to rest pretty much during the last expansion. 209 00:13:13,559 --> 00:13:16,080 Speaker 1: You know, we got down to an unemployment rate that 210 00:13:16,120 --> 00:13:19,080 Speaker 1: was at three and a half percent. Productional Phillips curves 211 00:13:19,080 --> 00:13:21,120 Speaker 1: would have told you you would have had a lot 212 00:13:21,160 --> 00:13:23,720 Speaker 1: more wage inflation than we did it. So that's kind 213 00:13:23,720 --> 00:13:28,000 Speaker 1: of about the out the window right now. So, yes, 214 00:13:28,080 --> 00:13:31,120 Speaker 1: we are in kind of uncharted territory right now, not 215 00:13:31,200 --> 00:13:34,240 Speaker 1: only with what's going on with the pandemic, but as 216 00:13:34,280 --> 00:13:37,439 Speaker 1: well as as way the the economy is responding to them. 217 00:13:37,679 --> 00:13:40,160 Speaker 1: So when we think about the future, when we're looking 218 00:13:40,160 --> 00:13:43,560 Speaker 1: at our forecast, when there's always a confidence interval around that, 219 00:13:43,880 --> 00:13:47,640 Speaker 1: Unfortunately that confidence interval right now is wider than what 220 00:13:47,960 --> 00:13:51,520 Speaker 1: voice historically has been. What about the level of divergence 221 00:13:51,520 --> 00:13:53,439 Speaker 1: and thinking on a global basis, A lot of the 222 00:13:53,480 --> 00:13:57,040 Speaker 1: guests yesterday we're hinting that the FED has now diverged 223 00:13:57,080 --> 00:14:00,400 Speaker 1: from other global central banks and thinking about where we are, 224 00:14:00,400 --> 00:14:03,760 Speaker 1: how further ahead we are are you see the divergence 225 00:14:03,960 --> 00:14:09,360 Speaker 1: of the US versus other central banks. It's clearly up 226 00:14:09,440 --> 00:14:12,520 Speaker 1: until say Wednesday, there wasn't a doubled. It seemed like 227 00:14:12,600 --> 00:14:16,360 Speaker 1: other major central banks were leaning a little bit more 228 00:14:16,400 --> 00:14:20,360 Speaker 1: towards starting to remove some policy accommodation, you know, defend 229 00:14:20,480 --> 00:14:23,000 Speaker 1: wasn't there yet. Now. I think what they hinted with 230 00:14:23,080 --> 00:14:26,680 Speaker 1: the dot plot on Wednesday was maybe we're getting a 231 00:14:26,720 --> 00:14:28,880 Speaker 1: little bit closer to that than than what we thought. 232 00:14:28,960 --> 00:14:30,960 Speaker 1: So I would say the FED at this point is 233 00:14:31,000 --> 00:14:35,680 Speaker 1: still lagging a little bit behind some of its international counterparts. Um. 234 00:14:35,680 --> 00:14:39,120 Speaker 1: But clearly there's been a reaction function ship that seems 235 00:14:39,200 --> 00:14:44,320 Speaker 1: like they have, uh, what they've elevated is a maximum 236 00:14:44,360 --> 00:14:48,040 Speaker 1: employment at the expense of inflation. But now that it 237 00:14:48,080 --> 00:14:50,160 Speaker 1: may be starting to change a little bit as well, 238 00:14:50,280 --> 00:14:51,800 Speaker 1: So the FED is starting to catch up to some 239 00:14:51,880 --> 00:14:54,760 Speaker 1: of those major central banks. We're speaking with Jay Bryson 240 00:14:54,800 --> 00:14:57,880 Speaker 1: and Wells Fargo chief economists and Jay every day on 241 00:14:57,920 --> 00:15:00,360 Speaker 1: Thursday at four thirty pm, I take a look at 242 00:15:00,360 --> 00:15:02,960 Speaker 1: the FED balance sheet. It's when they release the latest outstandings. 243 00:15:03,320 --> 00:15:06,920 Speaker 1: And yesterday the balance sheet increased by the most going 244 00:15:06,960 --> 00:15:09,840 Speaker 1: back three months, and it rose to the highest level 245 00:15:09,880 --> 00:15:12,520 Speaker 1: ever of more than eight trillion dollars, crossing that line 246 00:15:12,560 --> 00:15:15,240 Speaker 1: for the first time. They are talking about tapering perhaps, 247 00:15:15,680 --> 00:15:18,320 Speaker 1: and people are talking about tapering, but they're doing anything. 248 00:15:18,480 --> 00:15:21,960 Speaker 1: But I mean, honestly, how much support is this giving 249 00:15:22,000 --> 00:15:25,040 Speaker 1: to the economy at this point and how much support 250 00:15:25,120 --> 00:15:28,240 Speaker 1: is this given to bond yields where people getting increasingly 251 00:15:28,280 --> 00:15:30,560 Speaker 1: sanguine that they will stay as low as they are 252 00:15:32,160 --> 00:15:35,200 Speaker 1: so right, I mean, the FED is taking down roughly 253 00:15:35,280 --> 00:15:39,000 Speaker 1: half of the treasury supply UM right now. I don't 254 00:15:39,040 --> 00:15:42,040 Speaker 1: have a point estimate for how much that's worth on 255 00:15:42,160 --> 00:15:44,920 Speaker 1: the ten year yield. But you know it's clearly bringing 256 00:15:44,960 --> 00:15:48,000 Speaker 1: that that yield down. If the Fed tomorrow says we're 257 00:15:48,040 --> 00:15:50,680 Speaker 1: going to start the paper, what do you think happens 258 00:15:50,720 --> 00:15:53,320 Speaker 1: to the tenure yield? Is home a snap fire, and 259 00:15:53,400 --> 00:15:55,560 Speaker 1: I think they are very concerned about that. They look 260 00:15:55,600 --> 00:15:58,600 Speaker 1: back at the paper tantrum back in two thousand thirteen 261 00:15:58,640 --> 00:16:02,240 Speaker 1: when the yield on the tenure stepped up fifty basis 262 00:16:02,320 --> 00:16:04,640 Speaker 1: points over you know a number of leads, and I 263 00:16:04,640 --> 00:16:06,680 Speaker 1: don't think they want to go back to that. Yeah, 264 00:16:06,840 --> 00:16:10,480 Speaker 1: and so we do expect that, you know, later this summer, 265 00:16:10,560 --> 00:16:13,360 Speaker 1: maybe early fall, the Fed will start to hit about 266 00:16:13,480 --> 00:16:15,640 Speaker 1: the tapering. And when they start to really do that, 267 00:16:15,920 --> 00:16:18,240 Speaker 1: we will see yield start to move up. I wouldn't 268 00:16:18,240 --> 00:16:21,120 Speaker 1: expect them to start to really dial back their case 269 00:16:21,200 --> 00:16:24,560 Speaker 1: of purchases and late this year and probably more likely 270 00:16:24,640 --> 00:16:28,240 Speaker 1: early next year. Jay Brayson, it Wells Fargo chief Economist, 271 00:16:28,400 --> 00:16:36,440 Speaker 1: Thank you so much. A lot of folks really have 272 00:16:36,520 --> 00:16:39,280 Speaker 1: to assess what happened on Wednesday and what could happen 273 00:16:39,640 --> 00:16:42,040 Speaker 1: going forward. Of Course, all the big head honchos over 274 00:16:42,080 --> 00:16:43,800 Speaker 1: at black Rock when they want to get a sense 275 00:16:44,040 --> 00:16:46,000 Speaker 1: of what's happening in the market. Of course, they turned 276 00:16:46,360 --> 00:16:49,880 Speaker 1: to Way Lee, chief Global Chief Investment Strategists over at 277 00:16:49,880 --> 00:16:52,240 Speaker 1: the black Rock Investment Institute, and I'm pleased to say 278 00:16:52,600 --> 00:16:54,840 Speaker 1: Way joins us right now to talk a little bit 279 00:16:54,840 --> 00:16:58,080 Speaker 1: more here. Way about this shift in tone that we 280 00:16:58,160 --> 00:17:00,160 Speaker 1: got out of the fit and I'm wondering if this 281 00:17:00,360 --> 00:17:05,400 Speaker 1: requires a meaningful shift in tone out of the markets. Well, 282 00:17:05,440 --> 00:17:10,199 Speaker 1: we actolutely see what the FED announced this week in 283 00:17:10,320 --> 00:17:15,600 Speaker 1: line with its new policy framework service bring forward the 284 00:17:15,680 --> 00:17:20,520 Speaker 1: lead too, as well as adjusting inflation expectations higher, especially 285 00:17:20,640 --> 00:17:23,240 Speaker 1: for this year. We also see this adding to the 286 00:17:23,320 --> 00:17:27,360 Speaker 1: credibility of of its framework because everything that's happened so far, 287 00:17:27,480 --> 00:17:30,520 Speaker 1: what they have put out is still in line with 288 00:17:30,720 --> 00:17:33,639 Speaker 1: what we call the new nominal theme, which is that 289 00:17:33,960 --> 00:17:37,639 Speaker 1: the rate path will be a lot slower in this 290 00:17:37,840 --> 00:17:40,800 Speaker 1: cycle in comparison with previous cycles. So if you think 291 00:17:40,840 --> 00:17:43,520 Speaker 1: about back in twenty fifteen, or we're looking at FED 292 00:17:43,640 --> 00:17:48,040 Speaker 1: right high co PC was just above one and now 293 00:17:48,040 --> 00:17:51,159 Speaker 1: we're talking about a lot higher levels and at the 294 00:17:51,240 --> 00:17:57,080 Speaker 1: same time leadoff not in not until twenty twenty three 295 00:17:57,119 --> 00:18:00,600 Speaker 1: by Feds on estimate. So we still see their new 296 00:18:00,680 --> 00:18:05,640 Speaker 1: policy framework very much intact, and that under cleans our 297 00:18:06,480 --> 00:18:10,080 Speaker 1: pro risk view. So just to underscore what you may 298 00:18:10,160 --> 00:18:12,600 Speaker 1: be saying here, is it just that you have not 299 00:18:12,760 --> 00:18:15,960 Speaker 1: changed anything about your investment thesis post the FED meeting 300 00:18:15,960 --> 00:18:19,760 Speaker 1: that a lot of people thought was a pivotal shift. Well, 301 00:18:19,800 --> 00:18:22,960 Speaker 1: I would say that there are specific kind of views around, 302 00:18:22,960 --> 00:18:25,480 Speaker 1: for example, where the dollar could go from here on, 303 00:18:26,200 --> 00:18:28,359 Speaker 1: at least in the near term, and that has beat 304 00:18:28,400 --> 00:18:31,440 Speaker 1: across the immersion market sentiment, which we are reviewing very 305 00:18:31,520 --> 00:18:35,639 Speaker 1: very closely and more broadly that the view around curve 306 00:18:36,160 --> 00:18:41,600 Speaker 1: steepening after this this week's annasmal have seen reversal of that. 307 00:18:41,760 --> 00:18:44,960 Speaker 1: So so so there are under the surface and nuances 308 00:18:45,040 --> 00:18:48,760 Speaker 1: that we're working through, but the overall stay invested in 309 00:18:48,840 --> 00:18:53,119 Speaker 1: market pro risk that is intact because we still see 310 00:18:53,280 --> 00:18:56,000 Speaker 1: even though it came as a bit of a hawkish surprise, 311 00:18:56,400 --> 00:18:59,679 Speaker 1: the the the changes and the announcement in line with 312 00:19:00,080 --> 00:19:03,600 Speaker 1: the new policy framework of that effect in battle. How 313 00:19:03,600 --> 00:19:07,040 Speaker 1: are you thinking though about the rotation sort of back 314 00:19:07,160 --> 00:19:10,159 Speaker 1: into growth out of value. How much of that was 315 00:19:10,200 --> 00:19:13,520 Speaker 1: maybe just some recent under performance that we have seen, 316 00:19:13,960 --> 00:19:16,600 Speaker 1: how much of that is more fundamental that long term 317 00:19:16,640 --> 00:19:20,240 Speaker 1: growth expectations might be lower than some of our early 318 00:19:20,320 --> 00:19:24,960 Speaker 1: lofty projections. I would say yes, very interesting indeed, that 319 00:19:25,000 --> 00:19:27,680 Speaker 1: we're seeing a bit of our rotation back into the 320 00:19:28,040 --> 00:19:31,840 Speaker 1: growth fee names that came a bit more under pressure 321 00:19:32,119 --> 00:19:35,120 Speaker 1: earlier on in the year in our review, for example, 322 00:19:35,200 --> 00:19:38,760 Speaker 1: the typical growth fee names tech. There is always a 323 00:19:38,760 --> 00:19:41,919 Speaker 1: place for technology in portfolio, especially when you look at 324 00:19:41,920 --> 00:19:44,400 Speaker 1: it from a longer term perspective. If you think about 325 00:19:44,440 --> 00:19:47,399 Speaker 1: some of the structural challenges that we've got to tackle, 326 00:19:47,720 --> 00:19:52,159 Speaker 1: aging demographics, the global grain transition, technology will play a 327 00:19:52,160 --> 00:19:55,280 Speaker 1: big growth there. Earnings a goose and they have continued 328 00:19:55,280 --> 00:19:58,440 Speaker 1: to deliver, and we actually have been talking about kind 329 00:19:58,440 --> 00:20:02,680 Speaker 1: of earlier year on the performance as interesting entry point 330 00:20:02,720 --> 00:20:05,520 Speaker 1: to view that position to the longer term case for growth. 331 00:20:05,600 --> 00:20:10,000 Speaker 1: The title names and especially Technology Review stays intact. But 332 00:20:10,119 --> 00:20:12,919 Speaker 1: in the Newton we still see there being more to 333 00:20:13,040 --> 00:20:16,320 Speaker 1: go in this restart narrative. If you think about kind 334 00:20:16,320 --> 00:20:19,600 Speaker 1: of the restarted that started earlier this year in the US, 335 00:20:19,640 --> 00:20:23,520 Speaker 1: now broadening out to Europe and then also broadening out 336 00:20:23,520 --> 00:20:26,399 Speaker 1: of Japan, I do see that there being more to 337 00:20:26,520 --> 00:20:29,199 Speaker 1: go for the sickly control to go a bit longer. Well, 338 00:20:29,240 --> 00:20:30,960 Speaker 1: let's talk a little bit more about some of the 339 00:20:30,960 --> 00:20:34,000 Speaker 1: growth prospects in Europe. Right now, we are getting headlines 340 00:20:34,320 --> 00:20:37,399 Speaker 1: from the Italian Prime Minister Mario dragging Uh saying the 341 00:20:37,440 --> 00:20:41,359 Speaker 1: economic forecast there will be revised up significantly. He's also 342 00:20:41,400 --> 00:20:44,760 Speaker 1: talking up the need and his desire here for additional 343 00:20:44,800 --> 00:20:48,199 Speaker 1: economic stimulus here kind of on the same note that 344 00:20:48,240 --> 00:20:50,960 Speaker 1: we've heard from drag for quite some time. But we've 345 00:20:50,960 --> 00:20:53,840 Speaker 1: seen better data starting to come out of Italy and 346 00:20:53,920 --> 00:20:56,480 Speaker 1: some of the other European nations here that I think 347 00:20:56,560 --> 00:21:00,720 Speaker 1: would be encouraging. Way indeed, for we have seen so 348 00:21:00,840 --> 00:21:05,000 Speaker 1: far is that the momentum of restarts, the botton is 349 00:21:05,000 --> 00:21:09,160 Speaker 1: getting passed on from the US to the laggers, previous 350 00:21:09,280 --> 00:21:13,600 Speaker 1: laggas including Europe and in our review Japan. And that's 351 00:21:13,720 --> 00:21:17,600 Speaker 1: very much under king our preference to potentially broaden out 352 00:21:17,640 --> 00:21:21,600 Speaker 1: our previously very kind of strong conviction in US apputies 353 00:21:21,640 --> 00:21:24,880 Speaker 1: and consider some of the laggers, including Japan and including 354 00:21:25,119 --> 00:21:27,680 Speaker 1: Europe that that you just you just spoke to. One 355 00:21:27,680 --> 00:21:30,480 Speaker 1: thing I would say, though, is that the restart is 356 00:21:30,640 --> 00:21:34,280 Speaker 1: very different from a typical recovery. So as we see 357 00:21:34,320 --> 00:21:37,720 Speaker 1: these very strong incoming growth numbers, we have to take 358 00:21:37,760 --> 00:21:39,240 Speaker 1: it with a pinch of salt as well. In this 359 00:21:39,640 --> 00:21:44,680 Speaker 1: we cannot extrapolate this momentum indefinitely, so we're cautioned against 360 00:21:44,720 --> 00:21:48,480 Speaker 1: extrapolating the very strong momentum that we're seen right now. 361 00:21:48,600 --> 00:21:51,840 Speaker 1: But we do see that we start brosening out, benefiting 362 00:21:51,880 --> 00:21:55,280 Speaker 1: secico assets such as Europe and Japan. For the matter, 363 00:21:55,400 --> 00:21:57,520 Speaker 1: wait before we let you go just twenty seconds here, 364 00:21:57,600 --> 00:21:59,600 Speaker 1: do you think that the dollar will continue to strengthen 365 00:22:00,040 --> 00:22:03,400 Speaker 1: after five straight days the greatest strengthening streak going back 366 00:22:03,440 --> 00:22:09,119 Speaker 1: to well, we actually see dollar kind of range found. 367 00:22:09,240 --> 00:22:12,960 Speaker 1: The recent kind of strengthening trend came off the back 368 00:22:13,000 --> 00:22:16,320 Speaker 1: of a period of weakening, right, so this is earlier 369 00:22:16,359 --> 00:22:18,920 Speaker 1: at the beginning of the year because of the US exceptionalism. 370 00:22:18,920 --> 00:22:21,280 Speaker 1: We see dollar strengthening, and then we see that coming back, 371 00:22:21,359 --> 00:22:23,359 Speaker 1: and now it's rebounding that a little bit. We see 372 00:22:23,359 --> 00:22:27,720 Speaker 1: it range found, not breaking out of the current range 373 00:22:27,760 --> 00:22:30,800 Speaker 1: and not particularly hurting really sentiment, but in a near 374 00:22:30,840 --> 00:22:33,320 Speaker 1: top giving post strong. It's rebounded, but we definitely keep 375 00:22:33,320 --> 00:22:35,840 Speaker 1: a close eye on res market because of that. Really 376 00:22:36,000 --> 00:22:43,240 Speaker 1: of black rock, thank you so much for that. Right now, 377 00:22:43,280 --> 00:22:45,320 Speaker 1: we are so lucky to have Congressman Shawn cast In, 378 00:22:45,640 --> 00:22:49,120 Speaker 1: a Democrat from Illinois joining us on the drum beat 379 00:22:49,160 --> 00:22:52,640 Speaker 1: to infrastructure, the drum bread to cleaner energy. Congressman, I'd 380 00:22:52,640 --> 00:22:54,399 Speaker 1: love to start with this idea that there seems to 381 00:22:54,400 --> 00:22:57,199 Speaker 1: be more of a consensus forming and some sort of 382 00:22:57,320 --> 00:23:02,000 Speaker 1: bipartisan infrastructure bill. What's your sense of the shift that's 383 00:23:02,000 --> 00:23:05,880 Speaker 1: allowed a greater consensus and perhaps more optimism around something 384 00:23:05,960 --> 00:23:10,320 Speaker 1: getting done. Um, you know, I hope you're right. We 385 00:23:10,480 --> 00:23:15,280 Speaker 1: desperately need to upgrade our infrastructure. The I don't think 386 00:23:15,280 --> 00:23:17,680 Speaker 1: it's surprising every member of Congress would like to see 387 00:23:17,680 --> 00:23:20,919 Speaker 1: infrastructure projects to their district. I think the challenge that 388 00:23:20,960 --> 00:23:22,520 Speaker 1: we have in this moment is to make sure that 389 00:23:22,560 --> 00:23:25,439 Speaker 1: we do not forget about the critical importance of climate 390 00:23:25,480 --> 00:23:28,560 Speaker 1: infrastructure in this piece, because as long as the red state, 391 00:23:28,600 --> 00:23:32,640 Speaker 1: blue state, red district blue district divide tracks so closely 392 00:23:32,680 --> 00:23:35,240 Speaker 1: to where people live and where land is, that means 393 00:23:35,280 --> 00:23:37,760 Speaker 1: that this huge win win of clean energy, that is 394 00:23:37,800 --> 00:23:41,520 Speaker 1: a wealth transfer from energy producers energy consumers, has a 395 00:23:41,600 --> 00:23:43,720 Speaker 1: partisan tinge, and we just have to make sure not 396 00:23:43,800 --> 00:23:46,439 Speaker 1: to let that quest for by partisanship get in the 397 00:23:46,440 --> 00:23:47,919 Speaker 1: way of doing what we have to do both for 398 00:23:47,960 --> 00:23:51,000 Speaker 1: the environment and for our wallets. Yeah. Well, the partisan tinge, 399 00:23:51,000 --> 00:23:53,240 Speaker 1: of course, has been a huge roadblock of for a 400 00:23:53,280 --> 00:23:56,880 Speaker 1: lot of efforts out there to address some of these issues. Congressman, 401 00:23:57,320 --> 00:24:00,280 Speaker 1: you have three proposals out there, at least three, uh 402 00:24:00,280 --> 00:24:02,520 Speaker 1: that I'm aware of here to address some of those 403 00:24:02,760 --> 00:24:05,000 Speaker 1: climate change issues. I'm weathering whether you can talk a 404 00:24:05,040 --> 00:24:07,679 Speaker 1: little bit specifically about the one that's supposed to address 405 00:24:07,680 --> 00:24:10,120 Speaker 1: some of the financial risk that you see out there. 406 00:24:11,200 --> 00:24:12,800 Speaker 1: Sure well as the light had we just passed on 407 00:24:12,840 --> 00:24:16,560 Speaker 1: the floor this week my my Climate Change Financial Risk 408 00:24:16,600 --> 00:24:20,560 Speaker 1: Disclosure Act, which essentially just says that the sec UM 409 00:24:20,680 --> 00:24:24,359 Speaker 1: is obligated to require all companies, on a mandatory and 410 00:24:24,440 --> 00:24:28,560 Speaker 1: consistent basis to report both their contributions to global warming 411 00:24:28,600 --> 00:24:31,720 Speaker 1: in their exposure US as I'm sure you know in 412 00:24:32,359 --> 00:24:36,159 Speaker 1: the SEC developed voluntary disclosure and last year that the 413 00:24:36,160 --> 00:24:40,480 Speaker 1: Trump led CFTC said that those disclosures were insufficient. We're 414 00:24:40,480 --> 00:24:43,000 Speaker 1: not providing investors what they need, and so the idea 415 00:24:43,000 --> 00:24:44,440 Speaker 1: is to get this out here to level of playing 416 00:24:44,480 --> 00:24:46,520 Speaker 1: field again. That one we just passed on the floor 417 00:24:46,600 --> 00:24:49,639 Speaker 1: this week and we will send off to the Senate. 418 00:24:50,359 --> 00:24:54,960 Speaker 1: The the other proposals that we have are essentially follow 419 00:24:55,080 --> 00:24:59,000 Speaker 1: from that, saying we need to understand the systemic risk 420 00:24:59,200 --> 00:25:02,320 Speaker 1: that climate change poses to our financial system. Swiss Rey 421 00:25:02,400 --> 00:25:04,400 Speaker 1: has said that on the course we're on, we're looking 422 00:25:04,440 --> 00:25:08,639 Speaker 1: at an eighteen percent reduction in global GDP from climate change. 423 00:25:08,760 --> 00:25:10,640 Speaker 1: That's the business as usual case. Even if we meet 424 00:25:10,640 --> 00:25:13,159 Speaker 1: the Paris goals, it's a four percent reduction in global GDP. 425 00:25:13,800 --> 00:25:16,320 Speaker 1: CFTC has more or less matched those predictions for the 426 00:25:16,400 --> 00:25:20,119 Speaker 1: United States, and some of that is negative loss, you know, 427 00:25:20,160 --> 00:25:23,240 Speaker 1: what happens to low lying coastal areas and properties that 428 00:25:23,240 --> 00:25:26,520 Speaker 1: are associate that are there from hurricanes, from wildfires, etcetera. 429 00:25:27,160 --> 00:25:31,480 Speaker 1: But a big part of it is transitional because everything 430 00:25:31,600 --> 00:25:35,040 Speaker 1: every clean energy technology we build lowers the cost of energy, 431 00:25:35,359 --> 00:25:39,000 Speaker 1: solar panels, electric vehicles, geothermal efficiency. It leaves more money 432 00:25:39,000 --> 00:25:43,400 Speaker 1: in people's pockets. But that's really disruptive to certain regions 433 00:25:43,440 --> 00:25:45,760 Speaker 1: of the country. And you know, as I tell my colleagues, 434 00:25:46,680 --> 00:25:50,280 Speaker 1: rising tides sometimes lift all boats. Tsunami is that away 435 00:25:50,280 --> 00:25:52,960 Speaker 1: of swamping some out. And so we're creating a tremendous 436 00:25:52,960 --> 00:25:55,080 Speaker 1: amount of wealth, but where is it going to be 437 00:25:55,160 --> 00:25:58,080 Speaker 1: isolated in our economy from it? So these other bills 438 00:25:58,080 --> 00:26:00,479 Speaker 1: are designed to say, let's have the let's have our 439 00:26:00,480 --> 00:26:04,600 Speaker 1: pudential regulators understand where those systemic risks sit and then 440 00:26:04,640 --> 00:26:08,200 Speaker 1: put appropriate guard rails to protect investors when those movements 441 00:26:08,480 --> 00:26:12,160 Speaker 1: inevitably start to come is indeed they already are. Congressman 442 00:26:12,200 --> 00:26:14,520 Speaker 1: Shawn Casting of Illinois, thank you so much for being 443 00:26:14,520 --> 00:26:16,480 Speaker 1: with us, too short. We'll get you on more next time. 444 00:26:24,480 --> 00:26:27,760 Speaker 1: There is no better person to discuss travel than Brian Kelly. 445 00:26:27,760 --> 00:26:30,160 Speaker 1: Of course we know him as the points guy. I'm 446 00:26:30,160 --> 00:26:34,360 Speaker 1: a huge fan on Instagram following you, and of course 447 00:26:34,400 --> 00:26:36,400 Speaker 1: some of the big headlines this morning that the EU 448 00:26:36,560 --> 00:26:39,840 Speaker 1: sort of fully trying to reopen to US visitors. But 449 00:26:39,880 --> 00:26:42,080 Speaker 1: I guess the big questions can I still afford a 450 00:26:42,119 --> 00:26:44,879 Speaker 1: flight or my flights now priced out of my price 451 00:26:45,000 --> 00:26:48,159 Speaker 1: range to Europe? You know what, Taylor, The best deals 452 00:26:48,160 --> 00:26:51,080 Speaker 1: this summer are to Europe. We're seeing thousand dollar one 453 00:26:51,119 --> 00:26:54,280 Speaker 1: way business class fairs to Europe. And it's also a 454 00:26:54,280 --> 00:26:56,400 Speaker 1: great time to use those frequent Flyer miles. So many 455 00:26:56,400 --> 00:26:59,320 Speaker 1: of us have them. We're hoarding them because we haven't 456 00:26:59,320 --> 00:27:02,760 Speaker 1: traveled that so they use them now, especially because you 457 00:27:02,800 --> 00:27:05,120 Speaker 1: can cancel your freaking flyer midel tickets and get them 458 00:27:05,160 --> 00:27:07,640 Speaker 1: all back and all your taxes and fees back, which 459 00:27:07,680 --> 00:27:09,720 Speaker 1: is much better than getting a voucher if you pay 460 00:27:09,760 --> 00:27:12,359 Speaker 1: for a ticket. Interesting, I mean you mentioned business class. 461 00:27:12,359 --> 00:27:15,040 Speaker 1: There where are we in terms of the return of 462 00:27:15,080 --> 00:27:17,919 Speaker 1: the business customer. We have heard that those are the 463 00:27:17,920 --> 00:27:20,880 Speaker 1: big ticket items, but that is nowhere coming back from 464 00:27:20,920 --> 00:27:24,359 Speaker 1: the corporate side. Is this all leisure still? At this moment, 465 00:27:25,320 --> 00:27:28,399 Speaker 1: it's mostly leisure travel, although every major CEO of an 466 00:27:28,400 --> 00:27:30,320 Speaker 1: airline that I've talked to you says that business travels 467 00:27:30,359 --> 00:27:33,600 Speaker 1: coming back much quicker than they anticipated. As we know, 468 00:27:33,720 --> 00:27:35,560 Speaker 1: the big banks are going to be calling people back 469 00:27:35,600 --> 00:27:38,679 Speaker 1: to the office usually after labor day um, and business 470 00:27:38,680 --> 00:27:40,480 Speaker 1: travel is going to come back in a different form. 471 00:27:40,600 --> 00:27:42,439 Speaker 1: I know at my company, we're not going to be 472 00:27:42,480 --> 00:27:45,080 Speaker 1: doing senseless meetings that we could do a resume, but 473 00:27:45,119 --> 00:27:49,160 Speaker 1: we're gonna have longer, more impactful team building meetings at resorts. 474 00:27:49,520 --> 00:27:51,680 Speaker 1: So I think it's gonna be it's gonna come back 475 00:27:51,720 --> 00:27:53,960 Speaker 1: a lot quicker than we thought, but it's gonna look 476 00:27:54,000 --> 00:27:57,720 Speaker 1: different that Monday to Thursday grind might change a little bit. Yeah, 477 00:27:57,800 --> 00:27:59,840 Speaker 1: you know, it's interesting you bring that up. I was actually, 478 00:28:00,119 --> 00:28:02,479 Speaker 1: you know, with the CEO of Marriott International yesterday as well, 479 00:28:02,480 --> 00:28:04,680 Speaker 1: as the CEO of trip dot Com, and they talked 480 00:28:04,720 --> 00:28:07,560 Speaker 1: about this idea of sort of I guess hybrid type 481 00:28:07,560 --> 00:28:09,879 Speaker 1: travel where you're gonna see much more of a blend 482 00:28:09,920 --> 00:28:13,480 Speaker 1: between that leisure and business customer here. How does that 483 00:28:13,560 --> 00:28:16,080 Speaker 1: sort of change at all? I guess the way that 484 00:28:16,160 --> 00:28:18,800 Speaker 1: some of the airlines and the hotels sort to price 485 00:28:18,840 --> 00:28:21,120 Speaker 1: their offerings and I guess, uh sort of adjust their 486 00:28:21,119 --> 00:28:24,679 Speaker 1: offerings to deal with those types of customers. Yeah, you know, 487 00:28:24,800 --> 00:28:27,919 Speaker 1: their first claims are full these days, there's still you know, 488 00:28:28,040 --> 00:28:30,879 Speaker 1: upgrading people in the first class. You know, the business 489 00:28:30,880 --> 00:28:33,560 Speaker 1: class total fares are down. I think we're gonna see 490 00:28:33,560 --> 00:28:38,480 Speaker 1: a return to profitability are not stemming the losses this 491 00:28:38,560 --> 00:28:40,840 Speaker 1: quarter for most of the airlines, but they're not those 492 00:28:40,840 --> 00:28:43,760 Speaker 1: big ticket bears, the ten thousand dollar business class fairs 493 00:28:43,840 --> 00:28:48,040 Speaker 1: to Shanghai, right, So definitely the airlines are looking for 494 00:28:48,080 --> 00:28:50,120 Speaker 1: more ways to raise revenue. A key way they did 495 00:28:50,120 --> 00:28:52,880 Speaker 1: that during the pandemic was selling billions of dollars worth 496 00:28:52,960 --> 00:28:55,719 Speaker 1: of frequent fire miles to the credit card companies. And 497 00:28:55,760 --> 00:28:58,320 Speaker 1: what we're seeing is huge offers for consumers in the 498 00:28:58,320 --> 00:29:01,080 Speaker 1: credit card market. You know, we're looking hundred thousand mile 499 00:29:01,200 --> 00:29:03,200 Speaker 1: offers to get a single credit card. I think there's 500 00:29:03,240 --> 00:29:05,840 Speaker 1: seven different cards offering that. So I think we're seeing 501 00:29:05,840 --> 00:29:08,240 Speaker 1: a shift in the way they're accounting for the revenue, 502 00:29:08,280 --> 00:29:10,840 Speaker 1: but making it up through Cobram partnerships is a key 503 00:29:10,920 --> 00:29:13,160 Speaker 1: way to do that. Do you think we'll get back 504 00:29:13,200 --> 00:29:16,480 Speaker 1: to a stage anytime soon where we will see some 505 00:29:16,560 --> 00:29:18,800 Speaker 1: of those offers dangled a little bit more out there? 506 00:29:18,840 --> 00:29:21,120 Speaker 1: I mean, I hear a lot about past issues with 507 00:29:21,160 --> 00:29:23,400 Speaker 1: a lot of these companies. They're obviously having to pay 508 00:29:23,560 --> 00:29:25,880 Speaker 1: a little bit more for workers here. Uh, and there's 509 00:29:25,920 --> 00:29:28,200 Speaker 1: this idea here that in order to protect their margins, 510 00:29:28,360 --> 00:29:30,320 Speaker 1: that means they can't offer the same type of discounts 511 00:29:30,360 --> 00:29:32,840 Speaker 1: that they did in the past. Absolutely, we're going to 512 00:29:32,880 --> 00:29:35,959 Speaker 1: see more ancillary fees. Even though the airlines did you know, 513 00:29:36,160 --> 00:29:38,680 Speaker 1: get rid of change fees over the pandemic, We've already 514 00:29:38,680 --> 00:29:40,840 Speaker 1: seen them start to roll that back, right And nay, 515 00:29:40,880 --> 00:29:43,360 Speaker 1: most airlines now won't give you that free change if 516 00:29:43,360 --> 00:29:46,480 Speaker 1: you book basic economy, which is what most leisure travelers 517 00:29:46,520 --> 00:29:49,840 Speaker 1: are booking that cheapest fair. We've also seen some bogus 518 00:29:49,840 --> 00:29:54,240 Speaker 1: fees from hotels for service fees, cleaning fees. Uh. Certainly 519 00:29:54,240 --> 00:29:58,120 Speaker 1: in the car rental space. We're seeing exorbitant rates and fees, 520 00:29:58,200 --> 00:30:01,000 Speaker 1: so travel prices are for eping up. You know, this 521 00:30:01,000 --> 00:30:03,920 Speaker 1: summer is not the summer of forty dollar affairs across 522 00:30:03,960 --> 00:30:06,880 Speaker 1: the country like we saw a year ago. So uh yeah, 523 00:30:06,920 --> 00:30:09,479 Speaker 1: I think the airlines are very smart at coming up 524 00:30:09,480 --> 00:30:12,800 Speaker 1: with ways to to bring in that ancillary revenue quickly. Here, Brian, 525 00:30:13,040 --> 00:30:16,480 Speaker 1: where's the hot spot to go this summer? I mean 526 00:30:16,480 --> 00:30:21,280 Speaker 1: we're still looking domestic. Key West Miami y is through 527 00:30:21,320 --> 00:30:23,600 Speaker 1: the roof. You know, so many people just want to travel, 528 00:30:23,600 --> 00:30:25,840 Speaker 1: and even though Europe is opening, I'm excited to go 529 00:30:25,960 --> 00:30:28,520 Speaker 1: next month. It's been really confusing to figure out what 530 00:30:28,560 --> 00:30:32,800 Speaker 1: the rules are EU rules versus individual country rules. Certain 531 00:30:32,840 --> 00:30:35,480 Speaker 1: countries will release information on Facebook and it's you know, 532 00:30:35,560 --> 00:30:37,480 Speaker 1: luckily at the Points Guy, we break this all down 533 00:30:37,520 --> 00:30:40,280 Speaker 1: for our readers, but the average consumer it's still way 534 00:30:40,280 --> 00:30:43,160 Speaker 1: too confusing to go abroad. So uh and we're seeing 535 00:30:43,280 --> 00:30:47,320 Speaker 1: huge amounts of capacity added to the Caribbean for Q three, 536 00:30:47,360 --> 00:30:50,440 Speaker 1: actually more than Q three, so people are headed to 537 00:30:50,480 --> 00:30:54,080 Speaker 1: the beach. We'll need a break. You and me vote 538 00:30:54,120 --> 00:30:56,800 Speaker 1: the Points Guy, Brian Kelly, thank you so much for 539 00:30:56,920 --> 00:31:00,960 Speaker 1: joining us. This is the Bloomberg Surveillance Podcast. Thanks for listening. 540 00:31:01,320 --> 00:31:04,680 Speaker 1: Join us live weekdays from seven to ten am Eastern 541 00:31:04,920 --> 00:31:09,000 Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from 542 00:31:09,040 --> 00:31:14,280 Speaker 1: six to nine am for insight from the best in economics, finance, investment, 543 00:31:14,440 --> 00:31:19,440 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 544 00:31:19,520 --> 00:31:23,320 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 545 00:31:23,440 --> 00:31:27,640 Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg