WEBVTT - Surveillance: US GDP Exceeds Forecast 0:00:05.120 --> 0:00:08.440 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.480 --> 0:00:12.320 with Jonathan Faroll and Lisa Abramowitz. Join us each day 0:00:12.360 --> 0:00:16.840 for insight from the best and economics, geopolitics, finance and investment. 0:00:17.239 --> 0:00:22.079 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.239 --> 0:00:26.479 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.600 --> 0:00:30.320 the Bloomberg Terminal and the Bloomberg Business app. On This 0:00:30.440 --> 0:00:34.760 American Economy, Lindsay peggs it joins US chief economist is Stephile. Lindsay, 0:00:34.840 --> 0:00:38.840 are we near recession? I think we are teetering towards 0:00:38.880 --> 0:00:41.400 a recession now. Of course, the fourth quarter number does 0:00:41.440 --> 0:00:44.560 look pretty good, particularly against the backdrop of an even 0:00:44.600 --> 0:00:47.640 stronger rise in the third quarter, But when we look 0:00:47.640 --> 0:00:50.600 at what's happening with the consumer, which is the backbone 0:00:50.720 --> 0:00:54.280 of the US economy, we are seeing a clear loss 0:00:54.320 --> 0:00:57.720 of momentum. And without the consumer happy and healthy out 0:00:57.720 --> 0:01:01.840 in the marketplace, we simply cannot expect to maintain positive growth, 0:01:01.960 --> 0:01:04.600 let alone more robust growth similar to what we saw 0:01:04.640 --> 0:01:06.960 this morning. So I do think that as the Fed 0:01:07.040 --> 0:01:10.720 continues to raise rates, savings are depleted, real income remains 0:01:10.800 --> 0:01:14.680 negative fiscal support fades, there is going to be an 0:01:14.680 --> 0:01:18.160 additional burden on the consumer that leads us into or 0:01:18.720 --> 0:01:21.880 near negative growth. Lindsay Long, you're going far away under 0:01:21.880 --> 0:01:23.880 the religion and the kool ai of Peter Lynch of 0:01:23.920 --> 0:01:28.720 Fidelity Domestic final sales reign Supreme. Michael McKee just mentioned 0:01:28.720 --> 0:01:32.360 that that trend, that tendency there away from the back 0:01:32.360 --> 0:01:35.640 and forth of imports, exports and the rest is a 0:01:35.640 --> 0:01:37.920 pretty Mouldi number. Do you have a belief here that 0:01:38.000 --> 0:01:41.759 a slowdown in domestic final sales brings on the reality 0:01:41.880 --> 0:01:45.120 of recession. It certainly does, because just like when we 0:01:45.120 --> 0:01:47.960 look at inflation, we strip out the more volatile components 0:01:47.960 --> 0:01:50.240 of food and energy. That's what we're doing when we 0:01:50.280 --> 0:01:55.000 look at that real final sales number to domestic purchasers, 0:01:55.280 --> 0:01:58.120 were stripping out the volatility of inventory. We're stripping out 0:01:58.120 --> 0:02:00.840 the volatility of trade. And what we see is a 0:02:00.880 --> 0:02:05.160 more clear defined downward trajectory of growth slowing from up 0:02:05.200 --> 0:02:07.680 near four percent to down here one percent at the 0:02:07.760 --> 0:02:10.880 end of the year. Again, still there was enough resilience 0:02:10.880 --> 0:02:15.079 in the US economy to maintain positive momentum in Q four. 0:02:15.400 --> 0:02:17.800 But the bigger question is are we able to maintain 0:02:17.880 --> 0:02:20.920 that momentum as we turn the calendar page, and most 0:02:20.960 --> 0:02:23.160 of the data suggests that we do not lendy? Do 0:02:23.160 --> 0:02:24.880 you think that the market is wrong because we are 0:02:24.919 --> 0:02:28.160 seeing consumer stocks do really well as they look forward. 0:02:29.000 --> 0:02:33.320 I think the market is severely under appreciating the amount 0:02:33.400 --> 0:02:35.720 of tightening that the FED is going to have to 0:02:35.760 --> 0:02:39.680 embark on in order to reinstate price stability, and thus 0:02:39.800 --> 0:02:43.000 under appreciating the amount of pressure that is going to 0:02:43.040 --> 0:02:46.400 be put on consumers and businesses and the overall economy. 0:02:46.520 --> 0:02:48.280 When do you start to see the data to actually 0:02:48.400 --> 0:02:51.239 prove that before thinking, well, maybe the FED is going 0:02:51.240 --> 0:02:52.919 to be on the side, you do you see inflation 0:02:52.960 --> 0:02:54.799 coming down and we're going to get that soft landing 0:02:54.800 --> 0:02:57.800 that everybody is talking about. I think we're already seeing 0:02:57.840 --> 0:02:59.920 it in the data when we look at retail sales 0:03:00.360 --> 0:03:05.000 negative in November, negative in December, consumer spending still positive. 0:03:05.520 --> 0:03:08.040 But when we look at overall goods and services, that 0:03:08.080 --> 0:03:12.519 too is trending down. Production now in in contractionary territory 0:03:12.840 --> 0:03:17.080 housing taking a sizeable hit. There are multiple, multiple data 0:03:17.120 --> 0:03:19.600 points that are suggesting the U S economy is not 0:03:19.760 --> 0:03:22.640 going to be able to maintain this momentum in the 0:03:22.680 --> 0:03:25.400 new year, and Lindsey, thank you so much. Lindsay with 0:03:25.480 --> 0:03:31.799 stiff step right to it now as we speak to 0:03:31.840 --> 0:03:34.400 liz Ane Saunders about the reality of the equity markets, 0:03:34.440 --> 0:03:37.960 would take a broader view with Philip Camporel portfolio Manager, 0:03:38.040 --> 0:03:40.960 JP Morgan Asset Management this morning, I love, love, love 0:03:41.000 --> 0:03:45.920 your notes, single sentences, observations, weaving it together. And your 0:03:46.000 --> 0:03:48.720 major weave is the epsilon in the back of the equation. 0:03:48.880 --> 0:03:52.400 Uncertainty is going to be less uncertain and we're gonna 0:03:52.440 --> 0:03:55.920 get to certainty. When does J. Powell have certainty? He 0:03:56.000 --> 0:03:58.360 has it right now, Tom, I and I think the 0:03:59.080 --> 0:04:02.960 key to our view is, first of all, good riddance 0:04:03.160 --> 0:04:06.680 to two thousand twenty two. Because as an ascid allocator, Tom, 0:04:06.720 --> 0:04:11.440 what Powell and his friends did last year was create really, 0:04:11.520 --> 0:04:15.600 really tough ways to manage risk. As an ascid allocator, 0:04:16.000 --> 0:04:18.200 we love that if stocks go down, you better have 0:04:18.240 --> 0:04:20.200 bonds as your defense on the other side. And the 0:04:20.240 --> 0:04:24.120 most risky balanced funds last year were the more conservative ones. 0:04:24.200 --> 0:04:25.960 And when do we ever say that? Right? So, the 0:04:26.000 --> 0:04:28.040 thirteen percent draw down in the Barkley's a glad The 0:04:28.040 --> 0:04:30.880 Bloomberg gagery and I'm sorry, was was the was the 0:04:30.960 --> 0:04:33.720 worst to hear that we've ever had. Now going forward, 0:04:33.920 --> 0:04:36.000 you asked me the question when does Powell have certainty? 0:04:36.000 --> 0:04:38.160 It's right now because they're going twenty five basis points 0:04:38.160 --> 0:04:40.520 in February one, and we have been able to say 0:04:40.520 --> 0:04:44.080 that for a long shirt that Lisa showed there, i'm 0:04:44.160 --> 0:04:49.359 PC inflation. We see that as we see that, I'm sorry, 0:04:49.880 --> 0:04:54.120 magnificently shows the one off of this pandemic. Ye does 0:04:54.200 --> 0:04:58.320 JP Morgan across all your platforms suggest we are beyond 0:04:58.600 --> 0:05:02.240 the pandemic or be on the pandemic highs and inflation 0:05:02.320 --> 0:05:05.360 for sure? Right, So that's why we're going to this 0:05:05.440 --> 0:05:08.240 step down in the aggressive in the aggressive tightening sense. Tom. 0:05:08.320 --> 0:05:09.880 Last time I was here, it was at the end 0:05:09.920 --> 0:05:11.839 of you know, the at the end of the third quarter, 0:05:11.960 --> 0:05:13.479 and I told you we had a record high in 0:05:13.480 --> 0:05:16.000 our fund in cash. That is not the case anymore. 0:05:16.040 --> 0:05:18.240 We are putting money to work all over the world. 0:05:18.279 --> 0:05:20.719 We only have two percent in cash right now. We're 0:05:20.760 --> 0:05:22.440 stopping short of saying that we're going to see an 0:05:22.480 --> 0:05:25.960 earnings acceleration or or reign every ignition of the cycle, 0:05:26.440 --> 0:05:29.400 but we are putting money to work in the U S. Specifically, 0:05:29.440 --> 0:05:32.360 we have a twenty percent allocation to invest in great 0:05:32.400 --> 0:05:35.440 corporate bonds. That's the most we've ever had in our portfolio. 0:05:35.520 --> 0:05:38.040 And we have about a nine percent relative value trade 0:05:38.320 --> 0:05:41.640 between US stocks and non U S stocks and we 0:05:41.640 --> 0:05:44.240 we haven't had that since two thousand seventeen. Tom like, 0:05:44.400 --> 0:05:47.320 this is about being active and taking advantage of opportunities. Again, 0:05:47.360 --> 0:05:49.320 after last year, invest in great bonds in the US 0:05:49.440 --> 0:05:51.599 have gained about four percent so far this year. That 0:05:51.720 --> 0:05:54.200 is akin to what we've seen in the SMP five hundred. 0:05:54.240 --> 0:05:56.360 At what point do you know the trade is up, 0:05:56.560 --> 0:05:59.400 that the gains are in that basically you've been on it, 0:05:59.480 --> 0:06:02.560 You've written a good ride, it's over. Yeah, So Lisa, 0:06:02.640 --> 0:06:05.360 we are we are looking for it more for carry. 0:06:05.400 --> 0:06:07.720 What does that mean? It means a yield story. If 0:06:07.760 --> 0:06:09.880 we were really optimistic about the US, we would be 0:06:09.880 --> 0:06:11.640 in the US equity market because we have that option 0:06:11.720 --> 0:06:14.200 as a balanced portfolio manager, rather than in invest in 0:06:14.240 --> 0:06:16.719 grade credits. So the credit story, Lisa, is to get 0:06:16.800 --> 0:06:19.400 us more yield than our index. What I'd say where 0:06:19.400 --> 0:06:21.680 we're trying to get total return is the non US 0:06:21.839 --> 0:06:24.159 equity equity market, So the way that we would go 0:06:24.200 --> 0:06:27.120 back into US equity would be Okay, core PC is 0:06:27.120 --> 0:06:29.760 falling like a rock. The federal funds rate doesn't need 0:06:29.800 --> 0:06:31.560 to be a five percent anymore. And what the FETE 0:06:31.600 --> 0:06:34.200 is saying for two twenty four is going to happen 0:06:34.200 --> 0:06:35.760 in the back half of this year. That is not 0:06:35.839 --> 0:06:37.880 what we're saying. Does that mean that in the US 0:06:38.000 --> 0:06:40.839 when people do start going back, energy is going to 0:06:40.880 --> 0:06:44.200 be the leadership continue to uh sort of reductive last 0:06:44.279 --> 0:06:47.080 year because that is also a yield story that is 0:06:47.160 --> 0:06:50.440 also a dividend play. Yeah. So, um, I think if 0:06:50.440 --> 0:06:52.279 people were to go back into the US equity market, 0:06:52.360 --> 0:06:54.240 it wouldn't be in those yield places. It would be 0:06:54.240 --> 0:06:56.719 in the total return beta stories. You know that the 0:06:56.760 --> 0:06:59.600 growth stories that were played last year, which interest rates 0:06:59.600 --> 0:07:01.760 moving high here. So when people continue to go back 0:07:01.800 --> 0:07:03.880 into the US equity market, I think it will be 0:07:03.920 --> 0:07:07.320 at a time when growth stocks are back, because we're 0:07:07.320 --> 0:07:09.520 not again we're not talking about a re acceleration of growth. 0:07:09.840 --> 0:07:12.760 We're talking about a more subdued growth environment. And then 0:07:12.760 --> 0:07:14.840 in that environment, I think to make keptech stocks can 0:07:14.840 --> 0:07:17.160 do pretty well. You talk about core PC dropping like 0:07:17.200 --> 0:07:20.000 a stone, and there was a mantra or the past decade, 0:07:20.040 --> 0:07:22.440 don't fight the FED. This year it's fight the FED 0:07:22.480 --> 0:07:25.080 because the Fed is wrong. Do you buy that they're 0:07:25.080 --> 0:07:27.720 not wrong? I think they go another fifty basis points 0:07:27.720 --> 0:07:29.880 and then they go on hold right so that they 0:07:29.920 --> 0:07:31.320 cut rates by the end of this year, which is 0:07:31.320 --> 0:07:33.160 what we're seeing. So we're not willing to say that 0:07:33.240 --> 0:07:35.400 yet least. I think that's a little premature, and I 0:07:35.480 --> 0:07:37.560 think Jerome Powell, to your question earlier, Tom, I think 0:07:37.600 --> 0:07:40.480 Jerome Powell may push back on that with open mouth 0:07:40.520 --> 0:07:44.160 operations on February one, which could be a risk, which, again, Lisa, 0:07:44.240 --> 0:07:46.400 is about why we're more in the I G credit 0:07:46.480 --> 0:07:49.920 side than in US equity. The opportunity for equity is overseas. 0:07:49.960 --> 0:07:52.400 There's a constant theme of the people that we have 0:07:52.480 --> 0:07:56.880 conversation with that the market is out front of the FED. 0:07:57.560 --> 0:08:01.280 What are JP Morgan clients ex really doing? Are they 0:08:01.280 --> 0:08:03.800 are they telling you they want to be in the market, 0:08:04.160 --> 0:08:08.000 or are they, as a generalization scared stiff. Tom. Every 0:08:08.080 --> 0:08:11.280 conversation that I'm having right now is about should I 0:08:11.280 --> 0:08:15.440 be looking outside the US? And it's like it's like 0:08:15.640 --> 0:08:18.160 zone because We've been asking people to do that for 0:08:18.200 --> 0:08:20.640 a long time, and right now I think the opportunity 0:08:20.720 --> 0:08:23.600 is listen. As Yogi Bearras said, you'd rather be lucky 0:08:23.680 --> 0:08:26.480 than good. And in Europe they have a three standard 0:08:27.240 --> 0:08:31.920 professor at for when you come to the road exactly. 0:08:32.160 --> 0:08:35.239 So Europe at TOM you had a three standard deviation 0:08:35.360 --> 0:08:37.840 warm winner. This is the warmest winner they've had a decade. 0:08:38.000 --> 0:08:39.360 You mentioned that, and you know we just did with 0:08:39.440 --> 0:08:43.360 Damian says are e M commodities, copper, Chili and paces out. 0:08:43.400 --> 0:08:47.040 It's a three standard deviation move negative to standard deviation, 0:08:47.120 --> 0:08:50.240 strong dollar week, Chile and pay so bombing through to 0:08:50.360 --> 0:08:53.000 a plus one? Does e M pause here or is 0:08:53.000 --> 0:08:55.640 there an urgency to get on board e M and international? 0:08:55.960 --> 0:08:59.760 So listen. E M is the most volatile asset class 0:08:59.800 --> 0:09:03.000 on planet right that we deal with, So I think 0:09:03.040 --> 0:09:05.880 the ways that you manage risk in EM we're just 0:09:05.960 --> 0:09:08.480 buying calls on the index. So if it goes up 0:09:08.520 --> 0:09:10.760 like it did this year, we're going up with the market. 0:09:10.800 --> 0:09:12.560 But if the market tanks, then we're gonna we have 0:09:12.720 --> 0:09:14.720 we have a limited downside without premium, so we're buying 0:09:14.760 --> 0:09:16.440 calls on the That's the way that we're controlling for 0:09:16.480 --> 0:09:19.679 near term volatility. But remember in two thousand one, when 0:09:19.800 --> 0:09:22.640 everybody was talking about how great the equity market was doing, 0:09:22.760 --> 0:09:26.080 e M got crushed in two So there's still even 0:09:26.120 --> 0:09:29.040 with the rally of value, a longer term valuation component 0:09:29.120 --> 0:09:30.280 run out of time. I want to talk to you 0:09:30.320 --> 0:09:32.679 about Toyota and investment in Japan. You gotta come back 0:09:32.720 --> 0:09:35.440 and do that, you know, you know, bring you a 0:09:35.480 --> 0:09:40.360 Jampan his team in Toyota, Lisa Toyota down in US 0:09:40.440 --> 0:09:43.520 dollar terms from the beginning of last year, like twelve 0:09:43.520 --> 0:09:47.000 months train we can talk about him coming up because 0:09:47.040 --> 0:09:50.520 bank in Japan is even moving phil temporally. Thank you 0:09:50.600 --> 0:09:52.560 so much that j people. We're going to asset management 0:10:02.960 --> 0:10:06.120 wanting you about this one episode. I think European effect 0:10:06.160 --> 0:10:12.199 strategy city you do that for cilious. Let's talk about effects, 0:10:12.240 --> 0:10:14.920 and let's talk about a difference right now between people 0:10:14.960 --> 0:10:17.480 constructive on the U S economy and people who are 0:10:17.559 --> 0:10:19.800 less so. The people who are less so are clinging 0:10:19.800 --> 0:10:22.400 to sub fifty pm mice the people who are constructive. 0:10:22.640 --> 0:10:24.400 Look at a jobless claims data which comes out in 0:10:24.440 --> 0:10:26.880 about two AUS thirty minutes, which is in and around 0:10:26.920 --> 0:10:30.880 two hundred thousand. Which one is it? Well, I think, 0:10:30.880 --> 0:10:34.480 as it frequently is the situation, we're somewhere in between. 0:10:34.520 --> 0:10:36.520 There is a slowing in the U. S. Economy, and 0:10:36.840 --> 0:10:40.920 there's definite that's definitely visible in the manufacturing sector, especially 0:10:41.000 --> 0:10:43.320 as you mentioned in the soft surday they did. But 0:10:43.360 --> 0:10:46.679 then again one has to contrast this with an extremely 0:10:46.720 --> 0:10:51.200 tight and a historically tight labor market. So therefore this 0:10:51.280 --> 0:10:54.840 is not going to be an easy one for the FED. 0:10:55.040 --> 0:10:57.360 I mean, currently the market is pricing four point nine percent, 0:10:57.480 --> 0:11:02.240 it's called it five ternal rate. I think we could 0:11:02.280 --> 0:11:06.000 reprise a bit higher um, but to the extent that 0:11:06.040 --> 0:11:10.840 we only reprice modestly higher. I don't think that, say, 0:11:10.880 --> 0:11:13.120 twenty five basis points of repricing higher. It's going to 0:11:13.160 --> 0:11:15.920 be neither here nor there for the dollar. Because I 0:11:15.960 --> 0:11:20.520 think we've switched regime. The fair has become a far 0:11:20.559 --> 0:11:23.640 maturing theme. We're getting close to the peak. And now 0:11:23.679 --> 0:11:26.800 the driving sayies global growth expectations, and this has been 0:11:27.040 --> 0:11:29.960 you know, reignited by the Chinese reopening, and this is 0:11:29.960 --> 0:11:32.800 what is driving the markets. If you if you approach 0:11:32.880 --> 0:11:36.040 this statistically, you can actually say that during the first quarter, 0:11:36.160 --> 0:11:40.199 the first three quarters of twenty two US yields explained 0:11:40.240 --> 0:11:45.000 around the dollar variation. Right now they explain about fifteen percent, 0:11:45.679 --> 0:11:48.520 whereas if you go back and you look at underlying 0:11:48.559 --> 0:11:52.760 fundamental surveys, they are now in the lead. And that's 0:11:53.320 --> 0:11:57.280 because expectations are being related higher. So I'm not trieding 0:11:57.360 --> 0:12:00.360 rights anymore on treading copper. Is that a fair wealth again? 0:12:00.920 --> 0:12:03.920 I think, well, there's certain extent. Yes, I think there's 0:12:03.920 --> 0:12:07.160 definitely going to be some increased demand for commodities. I 0:12:07.200 --> 0:12:11.600 mean it will vary from um one commodity to another. 0:12:11.679 --> 0:12:14.360 But but the bottom line is that we are talking 0:12:14.400 --> 0:12:16.559 about a country who has been shut from the rest 0:12:16.600 --> 0:12:18.920 of the world. Were about for more than one thousand days. 0:12:19.800 --> 0:12:23.120 Of course there was trade going on, But right now 0:12:23.600 --> 0:12:26.480 I think there's going to be some significant aspects of 0:12:26.520 --> 0:12:29.000 pentempt demand that are going to start showing, and therefore 0:12:29.320 --> 0:12:33.199 Chinese imports and therefore upside pressure on commodities is going 0:12:33.240 --> 0:12:36.120 to manifest. This is the third year of pandemic economics. 0:12:36.160 --> 0:12:37.760 That's what Tom Das and I have been sold about 0:12:37.800 --> 0:12:40.120 now for the last couple of weeks. Every single year 0:12:40.160 --> 0:12:42.920 of those three years, particularly the last two, we've got 0:12:43.000 --> 0:12:46.120 rank the consensus to you has been terribly of course, 0:12:46.240 --> 0:12:48.320 can you tell me what you think we're under pricing 0:12:48.520 --> 0:12:54.080 right now with regards to Chin to reopening? Well, I could, 0:12:54.200 --> 0:12:56.840 I could see both ways. I don't think right now 0:12:56.920 --> 0:12:59.600 if you look in the currency market that we have 0:12:59.720 --> 0:13:07.120 reached levels that pricing fully relatively smooth Chinese reopening. For example, 0:13:07.200 --> 0:13:09.959 if I look at the euro dollar market, arrestimates fair 0:13:10.040 --> 0:13:14.800 value between one seventeen where one or nine, very important level. 0:13:14.920 --> 0:13:20.440 I suspect if, sorry when more than if we break it, 0:13:21.040 --> 0:13:23.360 we're going to see a lot of real money demand 0:13:23.480 --> 0:13:25.600 and demand from corporates as well. It's going to push 0:13:25.600 --> 0:13:28.000 it higher. And historically what you tend to see is 0:13:28.040 --> 0:13:32.400 that when you are in periods of a significant undervaluation 0:13:33.240 --> 0:13:35.640 and then you start correct towards fair value, you don't 0:13:35.679 --> 0:13:38.480 just correct there and you sit there. We typically overstood it. 0:13:39.320 --> 0:13:42.520 So my point here is that I think we still 0:13:42.559 --> 0:13:45.880 have some way to go in order to reprice um 0:13:46.200 --> 0:13:48.959 the Chinese reopening. How much of an imflationery impulse do 0:13:49.040 --> 0:13:51.920 we import from China? And see another states this is 0:13:52.320 --> 0:13:56.640 uh in China. I think China is going to be 0:13:56.960 --> 0:14:01.000 much more relevant for Europe compared to for example, the 0:14:01.000 --> 0:14:04.400 the US. But I think this is an element about 0:14:04.400 --> 0:14:06.920 the upside pressure on commodity price and therefore inflation that 0:14:06.960 --> 0:14:09.920 has come up very frequently with clients. And my only 0:14:09.960 --> 0:14:13.480 observation to this is that what is driving inflation is 0:14:13.520 --> 0:14:18.040 extremely important. So um in twenty one and parts of 0:14:18.120 --> 0:14:22.280 two it will supply side driven. So you had muted 0:14:22.480 --> 0:14:27.520 domestic activity and you had inflation squeezing and already damaged 0:14:27.560 --> 0:14:30.960 the economy. But this time around, if inflation is being 0:14:31.040 --> 0:14:34.200 driven by the demand side of the economy, by Chinese imports, 0:14:34.720 --> 0:14:39.080 then it will still create challenges for central banks. But 0:14:39.240 --> 0:14:42.960 it's not the same gameplay. It's a more traditional way 0:14:42.960 --> 0:14:46.640 of dealing with inflation. You have increased demand and therefore 0:14:46.880 --> 0:14:51.000 you have some side pressures on prices and that prompts 0:14:51.000 --> 0:14:54.440 central bank response, but not to the extent that it 0:14:54.480 --> 0:14:58.800 will squeeze incomes as it did during the course of 0:14:59.520 --> 0:15:01.800 should lead to stronger currency in Europe. So you're at 0:15:01.880 --> 0:15:03.440 all right now one or nine? Can you run me 0:15:03.480 --> 0:15:05.280 through some numbers what you're thinking about it in the 0:15:05.280 --> 0:15:07.040 next three six months? Right? So I think one or 0:15:07.120 --> 0:15:09.280 nine is, as I said before, is very important. I 0:15:09.320 --> 0:15:11.680 think potentially next week is going to be a catalyst 0:15:11.720 --> 0:15:15.800 for the euro to break invincingly higher. And I say 0:15:15.840 --> 0:15:18.520 this because I expect this bit to be hawkish, and 0:15:18.600 --> 0:15:20.760 I think the Fed will deliver twenty five basis points, 0:15:20.800 --> 0:15:24.080 although there are some focus risks into that meeting as well. 0:15:24.720 --> 0:15:27.400 Um and if we break that, it will become particularly 0:15:27.480 --> 0:15:29.920 painful for a really money account of corporates who have 0:15:30.040 --> 0:15:33.680 not participated UM in the big move to chase the 0:15:33.840 --> 0:15:37.560 currency higher. And I think then you know, we could 0:15:37.600 --> 0:15:41.800 converge to one fifteen and even potentially higher, absent of 0:15:41.880 --> 0:15:43.920 course black swans. I mean, there are a lot of 0:15:44.000 --> 0:15:46.760 risks into that sun. Outside the studios, this was great. 0:15:46.800 --> 0:15:48.800 The sarchin act is there? What are nine looking for 0:15:48.840 --> 0:15:50.760 a break that potentially Tom Gun it's the e CP 0:15:50.920 --> 0:15:57.960 next week. Hawaen Becker is where the senior research Analystic 0:15:58.040 --> 0:16:01.280 cow And Bureau describes it. She and Kivan Rumor owned 0:16:01.360 --> 0:16:04.600 the franchise for decades of cow And and she provides 0:16:04.720 --> 0:16:08.800 leadership forward. Helloine, I've got an answer. I use as 0:16:08.840 --> 0:16:12.720 a proxy New York to Paris. But even that price 0:16:12.840 --> 0:16:15.800 is down from the insanity of six months or eight 0:16:15.920 --> 0:16:20.360 months ago. It's still stupid money, but it's less stupid? 0:16:20.960 --> 0:16:26.920 Is international starting to rationalize in the aviation business, we're 0:16:26.960 --> 0:16:33.360 seeing um tom very strong international business travel um less 0:16:33.440 --> 0:16:38.360 so maybe on the leisure but I suspect leisure travel 0:16:38.440 --> 0:16:43.480 will pick up um mid February and then increased through 0:16:43.560 --> 0:16:47.120 the summer months. The demand is still very strong, and 0:16:47.200 --> 0:16:51.320 the further we get away from the more comfortable people 0:16:51.400 --> 0:16:54.560 feel about going outside the country. Elline, how much is 0:16:54.600 --> 0:16:58.120 this a story of international travel just to compensate for 0:16:58.160 --> 0:17:01.080 what we saw versus a whole l returned to the 0:17:01.160 --> 0:17:04.639 way it used to be. Yeah, I think, um so. 0:17:05.000 --> 0:17:07.280 I think there are two things going on here. The 0:17:07.359 --> 0:17:11.440 first is with respect to supply chain. Are supply chain 0:17:11.560 --> 0:17:16.440 issues right from from Boeing and Airbus being delayed on 0:17:16.560 --> 0:17:19.520 delivering aircraft so you don't have a lot of capacity 0:17:19.640 --> 0:17:23.520 coming in, which props up price. But then on on 0:17:24.040 --> 0:17:28.359 international business travel, um after all these zoom calls and 0:17:28.560 --> 0:17:31.720 people taking calls at midnight or one in the morning, 0:17:31.800 --> 0:17:34.440 I did a call with a client earlier this week 0:17:34.920 --> 0:17:37.560 and it was midnight in his time zone. I don't 0:17:37.680 --> 0:17:41.400 think that can continue indefinitely. And I think you're going 0:17:41.520 --> 0:17:46.120 to see an increase in international business travel this year 0:17:46.640 --> 0:17:51.440 and especially you know, as more people feel comfortable traveling 0:17:51.800 --> 0:17:55.159 and COVID becomes people continue to think of it as 0:17:55.240 --> 0:17:57.840 being more endemic. So Helen, what is the new model? 0:17:57.920 --> 0:18:00.359 Is it basically having half the plane is business travel 0:18:00.440 --> 0:18:03.000 and the rest sandwiched into the back as you try 0:18:03.040 --> 0:18:06.760 to get some sort of profitability overseas and then domestic 0:18:06.800 --> 0:18:09.720 travel just the ongoing mess that it has been. Yeah, 0:18:09.880 --> 0:18:12.960 so I think, um to your point, I think the 0:18:13.040 --> 0:18:15.359 front of the cabin is going to get bigger in 0:18:15.840 --> 0:18:18.919 the sense of business travel that that cabin, and then 0:18:18.960 --> 0:18:22.600 you're going to get a bigger premium economy. And when 0:18:22.640 --> 0:18:27.320 you're thinking about long haul, it's the old lean back seats, 0:18:27.359 --> 0:18:30.600 the reclining seats versus the life flats um and then 0:18:30.600 --> 0:18:32.800 you're going to get a smaller section in main cabin 0:18:33.040 --> 0:18:35.520 And what we're seeing in terms of pricing, to Tom's 0:18:35.600 --> 0:18:39.359 earlier point is the prices that would have been in 0:18:39.480 --> 0:18:46.119 main cabin um before pre pandemic are seemed to be 0:18:46.160 --> 0:18:49.359 a little lower, but prices in premium economy seem to 0:18:49.400 --> 0:18:52.920 be equal to what business travel prices used to be, 0:18:53.560 --> 0:18:56.160 and business seems to be more like the old first 0:18:56.160 --> 0:18:58.679 class pricing. So I feel like the price points are 0:18:58.720 --> 0:19:02.560 going up and um and the mix of shifting, which 0:19:03.000 --> 0:19:06.320 is good, Helene, you're killing me. True story. My father 0:19:06.560 --> 0:19:09.480 died on a twelve hour notice. I had to get 0:19:09.560 --> 0:19:12.320 on a plane and I flew economy for the first 0:19:12.400 --> 0:19:16.440 time since time began. The seat was so small. I 0:19:16.680 --> 0:19:22.200 flew Hallane to Portland, Oregon NonStop, sitting on the edge 0:19:22.240 --> 0:19:26.760 of my seat. But the whole So then there's this issue, right, 0:19:26.840 --> 0:19:30.000 I've travel economy all the time, and there's the economy, 0:19:30.040 --> 0:19:31.560 and then there's the economy where you have to bi 0:19:31.600 --> 0:19:33.000 a soda for your kids if you want them to 0:19:33.040 --> 0:19:35.160 have any sort of drink on a four hour flight. 0:19:35.200 --> 0:19:38.400 I'm just wondering, Helene, for the discounters, whether it's Jet Blue, 0:19:38.440 --> 0:19:41.440 which is traditionally the front of that, or Frontier, which 0:19:41.440 --> 0:19:44.399 I was talking about, what's the future for them if 0:19:44.480 --> 0:19:47.639 the prospects of domestic travel seemed to be diminishing with 0:19:47.840 --> 0:19:52.040 the economic cycle. Yeah, so so, Tom, I'm sorry about 0:19:52.040 --> 0:19:54.200 your dad first. But the other thing, in terms of 0:19:54.320 --> 0:19:58.760 the the outlook for for those guys, Um, they're gonna 0:19:58.840 --> 0:20:01.520 slow their growth. They're gonna have no choice. They're not able. 0:20:02.320 --> 0:20:05.400 It's it's not that the hiring part. It's the retention 0:20:05.520 --> 0:20:08.320 part that's an issue. And then the aircraft. They have 0:20:08.480 --> 0:20:10.920 to keep growing UM and they can't get the aircraft. 0:20:11.160 --> 0:20:13.600 So I think there's always going to be a market 0:20:13.640 --> 0:20:15.840 for a deep discounter, right, there's some market if you 0:20:15.920 --> 0:20:18.440 think about hotel change, there's the market for Ritz and 0:20:18.520 --> 0:20:22.320 there's a market for Motel six UM, and so I 0:20:22.400 --> 0:20:24.680 think you're always going to have that differential. And I 0:20:24.720 --> 0:20:27.400 think people will who have got used to traveling will 0:20:27.440 --> 0:20:31.320 continue to want to travel because that's UM, that's what 0:20:31.800 --> 0:20:35.160 they do m versus buying lots and lots of things 0:20:35.359 --> 0:20:38.240 that they don't really need anymore. So I think we're 0:20:38.440 --> 0:20:40.239 I think those guys will be okay. I just think 0:20:40.280 --> 0:20:42.879 the growth will slow and I think American, Delta and 0:20:43.000 --> 0:20:46.119 United are going to see very strong international growth and 0:20:46.280 --> 0:20:49.359 growth in business this year. And I would just pivot 0:20:49.480 --> 0:20:52.640 as I'm thinking about investments to those names. Holding Becker 0:20:52.680 --> 0:20:54.720 with his folks on radio and television, thrilled they have 0:20:54.840 --> 0:20:57.240 you here on a big, big earnings day. She is 0:20:57.320 --> 0:21:00.360 with count Helene. Just for the record, I keep track 0:21:00.440 --> 0:21:03.119 of the business to economy ratio of a given flight 0:21:03.520 --> 0:21:05.440 from l A. It was nine to one which I 0:21:05.560 --> 0:21:08.560 never thought i'd see nine dollars of business ticket for 0:21:08.720 --> 0:21:11.920 one dollar of economy. It's down to six point three 0:21:12.000 --> 0:21:16.120 to one right now. Is my busy con ratio. That's 0:21:16.560 --> 0:21:19.800 Newark to to U L A X and everybody else 0:21:19.840 --> 0:21:23.440 has their other ratios. With that said, what is the 0:21:23.560 --> 0:21:28.320 domestic constraint for Kirby, for Bastion and the rest is there? 0:21:28.600 --> 0:21:32.920 Is there constraint. Gates is a new airports like the 0:21:33.000 --> 0:21:37.679 magnificent New LaGuardia. What's their biggest headache to get us 0:21:37.720 --> 0:21:41.600 back to some kind of normal thirty six months from now. Yeah, 0:21:41.960 --> 0:21:45.399 So the biggest one is infrastructure issues and the fact 0:21:45.720 --> 0:21:48.680 that at the busiest airports there's just no space physically 0:21:48.760 --> 0:21:51.480 to put more aircraft and we're not building more runways 0:21:51.560 --> 0:21:53.439 that you know, look at you look at Newark Airport, 0:21:54.080 --> 0:21:57.320