WEBVTT - Surveillance: Painful Range with Kaiser 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.319 with Jonathan Farrell and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best and economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.880 the Bloomberg Terminal and the Bloomberg Business App. 0:00:29.960 --> 0:00:34.440 It's Stuart Kaiser, City and Official. Welcome to the program. Listen, 0:00:34.560 --> 0:00:36.640 thank you for the merch. We appreciate it. Let's just 0:00:36.640 --> 0:00:39.199 start with your note that came out yesterday evening, and 0:00:39.240 --> 0:00:41.400 just begin with the performance You went through Equal Wight 0:00:41.520 --> 0:00:43.559 S and P the Nastac, the headline S and P 0:00:43.680 --> 0:00:46.720 five hundred the Russell. What do all those different performance 0:00:46.720 --> 0:00:48.600 figures over the last three months, towny, what's the over 0:00:48.920 --> 0:00:49.840 overatching story? 0:00:50.280 --> 0:00:51.720 I think I think it tells you people are just 0:00:51.760 --> 0:00:55.360 pretty conservatively positioned. Frankly, it's it's large cap tech leadership, 0:00:55.400 --> 0:00:57.800 high quality stocks, low risk stocks that are really driving 0:00:57.800 --> 0:01:00.560 the market higher. And that just tells you, you know 0:01:00.600 --> 0:01:02.520 that people, if they're going to be in equity markets, 0:01:02.840 --> 0:01:04.440 need to have a reason to be So you need 0:01:04.480 --> 0:01:06.720 a story or a theme or a high quality stock 0:01:06.800 --> 0:01:08.800 that gets you out of a five percent cash yield 0:01:09.400 --> 0:01:11.440 into an equity market that's been highly volatile. 0:01:11.520 --> 0:01:13.759 I looked on a log SPX and I noticed three 0:01:13.760 --> 0:01:16.840 moving averages I use have converged to two tenths of 0:01:16.840 --> 0:01:20.000 a percent point two four percent of the s and 0:01:20.040 --> 0:01:23.680 P five hundred. You call it home on the painful range. 0:01:24.080 --> 0:01:29.000 What's the history to identify which way you go to 0:01:29.080 --> 0:01:31.000 get out of a painful range? 0:01:31.360 --> 0:01:33.120 I think I think it's a great question, Tom, especially 0:01:33.160 --> 0:01:35.039 right now, because it does feel like we're sort of 0:01:35.080 --> 0:01:37.280 bracketed in you know where we are right now. When 0:01:37.319 --> 0:01:38.800 you when you get up to that sort of forty 0:01:38.840 --> 0:01:41.360 two hundred range, you kind of run into evaluation friction 0:01:41.480 --> 0:01:43.600 where people aren't you know, comfortable on the equities at 0:01:43.600 --> 0:01:46.040 that level, particularly when they're clipping a five percent coupon 0:01:46.120 --> 0:01:49.640 in cash. And to the downside, you know, we're we're 0:01:49.640 --> 0:01:52.360 conservative positioned. As I mentioned, mutual funds are very low 0:01:52.400 --> 0:01:55.720 beta and expectations are so low right now that is 0:01:55.800 --> 0:01:58.680 kind of hard to surprise people, you know, to the downside. 0:01:58.720 --> 0:02:00.960 So you know, in terms of taking out of this range, 0:02:01.000 --> 0:02:02.800 I think you know, to the upside. It's going to 0:02:02.840 --> 0:02:05.200 have to be positioning driven. You know, maybe people get 0:02:05.240 --> 0:02:07.040 the follow the FED mentality and you get a bit 0:02:07.080 --> 0:02:09.359 of a positioning you know, squeeze to the upside and 0:02:09.600 --> 0:02:11.640 to the downside. Frankly, I think it's US growth and 0:02:11.680 --> 0:02:13.200 it's the debt ceiling. You know, the debt ceiling is 0:02:13.240 --> 0:02:16.359 more tactical and the US growth data. I think we 0:02:16.600 --> 0:02:19.360 really need to fall apart in pretty aggressive fashion. But 0:02:19.400 --> 0:02:21.120 I think that's what can break you out to the downside. 0:02:21.200 --> 0:02:21.880 Right now, before we. 0:02:21.880 --> 0:02:23.800 Get into some of those scenarios and the analysis that 0:02:23.840 --> 0:02:25.360 comes with it, I want to just sit on this 0:02:25.520 --> 0:02:27.880 range and you talk about how if you look at 0:02:27.880 --> 0:02:30.120 one measure, it's the most painful range going back to 0:02:30.200 --> 0:02:32.480 nineteen eighty or one of them. Can you talk about 0:02:32.520 --> 0:02:35.600 what the incentive is for anyone to do anything other 0:02:35.680 --> 0:02:37.640 than just sit in cash and get five percent if 0:02:37.680 --> 0:02:39.760 you're not going to get rewarded and the likelihood of 0:02:39.800 --> 0:02:42.320 getting you know, your face ripped off is pretty high. 0:02:42.360 --> 0:02:44.280 Look, I think that's that's one of the big challenges, 0:02:44.360 --> 0:02:45.600 right I mean, if you look at that. We did 0:02:45.600 --> 0:02:47.639 a quick survey of our investors and two thirds of 0:02:47.680 --> 0:02:50.280 people said they wouldn't put money into equity markets unless 0:02:50.280 --> 0:02:53.480 they had ten percent ten percent or more potential upside, right, 0:02:53.520 --> 0:02:55.320 So to get people in the market, you really need 0:02:55.360 --> 0:02:57.680 to offer them something. And so I think, you know, 0:02:57.680 --> 0:03:00.280 that's why we're run into this valuation limit around forty 0:03:00.320 --> 0:03:02.600 two hundred, because you had ten percent to forty two hundred, 0:03:02.600 --> 0:03:04.160 all of a sudden you're at forty six hundred, and 0:03:04.240 --> 0:03:06.640 a lot of people aren't kind of comfortable with, you know, 0:03:06.720 --> 0:03:08.880 with that type of upside level. So yet we're we're 0:03:08.919 --> 0:03:12.080 kind of bouncing into a ceiling out of floor effectively. 0:03:12.120 --> 0:03:14.680 And to Tom's point, it's really narrowed all of these technicals, 0:03:14.800 --> 0:03:16.800 which you could argue creates kind of a you know, 0:03:16.840 --> 0:03:18.240 a very uncomfortable moment from life. 0:03:18.240 --> 0:03:20.119 If there is more stability in the bond market, which 0:03:20.120 --> 0:03:22.600 we've seen, will that give the catalyst sort of the 0:03:22.639 --> 0:03:26.040 ability for stocks to find some sort of direction that 0:03:26.120 --> 0:03:27.880 has a little bit more conviction behind it. 0:03:28.240 --> 0:03:29.919 Definitely, at least I think that's actually been a big 0:03:29.960 --> 0:03:31.960 contributor this year. If you look at you know, bond 0:03:32.000 --> 0:03:35.320 volatility and also the volatility of economic data itself, that 0:03:35.360 --> 0:03:37.480 stuff has really started to narrow I think it's made 0:03:37.480 --> 0:03:40.120 the market more investible. As I mentioned, it's hard to 0:03:40.120 --> 0:03:42.320 surprise people. I mean, after what happened last year, it's 0:03:42.400 --> 0:03:44.320 kind of hard to come out with something really surprising. 0:03:44.320 --> 0:03:47.200 So yeah, I think bond volatility coming in a clearer path, 0:03:47.280 --> 0:03:49.600 you know, to Fed funds and inflation gives people more 0:03:49.600 --> 0:03:51.960 confidence to be in markets. But I think that's what 0:03:52.080 --> 0:03:54.320 got us from thirty eight hundred forty two hundred. You 0:03:54.320 --> 0:03:55.840 know what gets us that next step, I think is 0:03:55.840 --> 0:03:56.440 the bigger question. 0:03:56.600 --> 0:03:59.800 John John Stolfs just publishes at OpCo the same as Stuart, 0:04:00.240 --> 0:04:02.880 are the same as Gold and Sacks. The idea once 0:04:02.920 --> 0:04:07.120 again earnings of surprise people. Everybody had a gloom frame work. 0:04:07.240 --> 0:04:08.520 Guess what. It didn't happen. 0:04:08.720 --> 0:04:10.880 So what you mentioned the tactical cold around the debt 0:04:10.920 --> 0:04:13.880 ceiling and then talked about the longer time horizon. Does 0:04:13.920 --> 0:04:16.960 one inform the other? Does the debt ceiling negotiations ultimately 0:04:17.000 --> 0:04:18.720 mean slower growth in our future? 0:04:19.720 --> 0:04:23.839 I think only if it really disrupts financial markets from here. 0:04:23.880 --> 0:04:25.440 I think, you know, I think, you know, if this 0:04:25.560 --> 0:04:28.520 was something persistent that kind of impacted government spending and activity, 0:04:28.560 --> 0:04:31.200 then yeah, I think that would increase your recession risks. 0:04:31.360 --> 0:04:32.920 If this is more of a one to two week 0:04:33.040 --> 0:04:35.120 just kind of choppy market scenario, I don't think it'll 0:04:35.120 --> 0:04:37.800 have a huge impact on the growth outlook. I think 0:04:37.800 --> 0:04:40.320 the big wildcard in the growth outlook is the credit channel. 0:04:40.520 --> 0:04:43.760 You know, did we really disrupt lending or not? And 0:04:43.800 --> 0:04:45.560 I think that's why people are a little bit sort 0:04:45.560 --> 0:04:47.960 of on edge, particularly because the FED doesn't control the 0:04:48.000 --> 0:04:51.240 lending channel, right, so that if that tightens meaningfully, it's 0:04:51.279 --> 0:04:53.040 sort of outside of the fed's control and you could 0:04:53.040 --> 0:04:55.960 actually get an overtightening that the FED didn't really want initially. 0:04:56.400 --> 0:05:01.560 Can our radio and TV listeners sho and how should 0:05:01.560 --> 0:05:07.159 they own shares of Apple Computer? How do you comfortably 0:05:07.279 --> 0:05:10.400 own something that elevated that dominant. 0:05:10.600 --> 0:05:12.599 I think that I think Apple, would you call it? 0:05:12.640 --> 0:05:14.440 The big sort of five to ten stocks in the 0:05:14.440 --> 0:05:16.520 market are giving people a lot of angst just for 0:05:16.560 --> 0:05:18.440 that reason. I mean, if you're in Apple right now, 0:05:18.480 --> 0:05:20.080 I think it's a because you love the products and 0:05:20.160 --> 0:05:22.520 be because they probably have negative net debt on balance 0:05:22.520 --> 0:05:25.080 sheet and relatively strong earnings growth. So I think if 0:05:25.080 --> 0:05:28.599 you're in those stocks, it's because it's something you're comfortable owning. Now, 0:05:28.720 --> 0:05:30.520 if you look at your to date, we've seen basically 0:05:30.560 --> 0:05:34.599 inflow into three sectors, healthcare, industrials, and tech. And I 0:05:34.600 --> 0:05:36.960 think you would argue both industrials and tech have really 0:05:37.040 --> 0:05:40.320 strong kind of investment thematics behind them that people are 0:05:40.400 --> 0:05:43.560 like comfortable owning just despite recessionary risks. 0:05:43.640 --> 0:05:43.800 Yeah. 0:05:43.800 --> 0:05:45.480 I think if you're an Apple, it's because you believe 0:05:45.480 --> 0:05:47.160 in kind of the medium to long term trend of 0:05:47.200 --> 0:05:49.799 the stock and in the near term you're comfortable based 0:05:49.839 --> 0:05:51.279 on you know, kind of the size and quality. 0:05:51.279 --> 0:05:53.359 And how do you adapt to the zeitgeist which shows 0:05:53.360 --> 0:05:56.240 everybody's scared stiff any number of different you know the 0:05:56.279 --> 0:05:59.039 metrics better than me, but the answer is everybody's scared stiff. 0:05:59.040 --> 0:05:59.839 How do you adapt to that? 0:06:00.400 --> 0:06:03.040 Well, I think I think the scared stiff is why, 0:06:03.240 --> 0:06:05.840 you know, cash positions are high, It's why mutual fundatas 0:06:05.839 --> 0:06:07.760 are low. So I think, to me, what that's actually 0:06:07.760 --> 0:06:10.000 done is it's raised the floor to the market a 0:06:10.040 --> 0:06:13.839 little bit because there's not much left to sell. But yeah, 0:06:13.880 --> 0:06:15.479 I mean, this is the big question is how do 0:06:15.520 --> 0:06:18.000 you tempt people out of, to your point, high yield 0:06:18.040 --> 0:06:20.440 bond market, you know, higher yielding, you know, cash markets 0:06:20.480 --> 0:06:22.719 into equity markets, and I think the answer there is 0:06:22.760 --> 0:06:24.880 you need to have a single stock story, you need 0:06:24.920 --> 0:06:27.440 to have like a macro thematic like the Inflation Reduction 0:06:27.520 --> 0:06:30.400 Act creating a huge amount of spending, or you need 0:06:30.440 --> 0:06:33.279 the FED to stop and to get this kind of 0:06:33.360 --> 0:06:36.279 FOMO follow the FED rally. That's not our base case 0:06:36.360 --> 0:06:39.359 nor something we necessarily endorse, but it's certainly something that 0:06:39.360 --> 0:06:40.760 I think people are teeing themselves up for. 0:06:40.800 --> 0:06:43.120 You'll put in the credit channel is so important. We 0:06:43.160 --> 0:06:45.400 either find out the fed'sre over tightened or under tightened 0:06:45.640 --> 0:06:47.920 based on what develops that. Damn't we Is it that simple? 0:06:48.560 --> 0:06:48.919 I think so. 0:06:48.960 --> 0:06:51.120 I mean what we've said, everybody's saying, oh, this is 0:06:51.120 --> 0:06:52.560 great news. The market is going to do some of 0:06:52.560 --> 0:06:55.359 the tightening for the FED. We actually kind of disagree 0:06:55.400 --> 0:06:57.159 with that. I think if you thought the FED needed 0:06:57.160 --> 0:06:59.440 to do ten units of tightening and now they're going 0:06:59.480 --> 0:07:02.080 to do eight outsourced two to the market, well, they 0:07:02.120 --> 0:07:04.760 don't control that too, right, That too could be zero, 0:07:04.800 --> 0:07:07.239 it could be six. So from our perspective, it actually 0:07:07.320 --> 0:07:10.000 adds more uncertainty to the growth outlook that you're quote 0:07:10.040 --> 0:07:12.560 unquote allowing the market and getting help from the market 0:07:12.560 --> 0:07:14.120 to do the tightening. So I actually think what that's 0:07:14.120 --> 0:07:16.560 done is it's helped the raid aspect of it, but 0:07:16.600 --> 0:07:18.920 it's actually added more uncertainty to the growth aspect in 0:07:18.960 --> 0:07:19.360 my opinion. 0:07:19.560 --> 0:07:22.120 Seth commenter and Morgan Stanley said a similar thing. He said, 0:07:22.120 --> 0:07:24.239 the calibration of all of this gets so much harder 0:07:24.520 --> 0:07:26.560 when you outsource it to the credit channel in the 0:07:26.600 --> 0:07:28.000 way that it has been done because of the banking 0:07:28.040 --> 0:07:30.120 stress in the last couple of months. Show this was fun, 0:07:30.200 --> 0:07:37.040 this was great, Let's do it again. Sea fours Lindsay 0:07:37.040 --> 0:07:39.680 Pax wanking on the Fed's path forward, saying this tom 0:07:39.920 --> 0:07:42.240 the Committee has indicated a willingness to move to the 0:07:42.280 --> 0:07:45.600 sidelines in June, and still may do so. However, the 0:07:45.680 --> 0:07:48.760 latest price data does not make the case for the FED. Rather, 0:07:48.880 --> 0:07:52.000 any decision to pause would be made in spite of 0:07:52.040 --> 0:07:55.040 the latest still elevated inflation data. 0:07:55.240 --> 0:07:56.920 Still elevated. It came in a little bit and the 0:07:57.000 --> 0:07:59.480 vectors are in the right direction. But yeah, still elevated. 0:07:59.520 --> 0:08:02.840 Is abs at where we are, Lindsay Paxit joins us 0:08:02.880 --> 0:08:06.520 now chief economist is Stiffel Lindsay, just simple, I'm exhausted 0:08:06.560 --> 0:08:08.840 by it on a boring Monday in May where we're 0:08:08.840 --> 0:08:11.840 trying to sort out eight, nine, ten different threads. How 0:08:11.880 --> 0:08:13.120 close are we to recession? 0:08:14.640 --> 0:08:16.840 I think the feed has done a very good job 0:08:16.960 --> 0:08:20.600 of continuing to support the economy while raising rates and 0:08:20.640 --> 0:08:24.120 trying to tame inflation. And so this delicate balance has 0:08:24.160 --> 0:08:27.840 allowed I think the consumer to continue to stay afloat, 0:08:27.840 --> 0:08:30.440 which pushes out our recession call to the end of 0:08:30.520 --> 0:08:33.360 the year. Now, we do expect a downturn, but that 0:08:33.520 --> 0:08:37.079 being said, with the resilience of the consumer, Q two 0:08:37.200 --> 0:08:40.679 GDP could actually surprise to the upside, leading the first 0:08:40.679 --> 0:08:44.480 half of the year well above earlier expectations, much more 0:08:44.600 --> 0:08:47.920 robust than expected off setting even if we do see 0:08:47.960 --> 0:08:50.560 some of that downturn then in the second second half 0:08:50.600 --> 0:08:51.000 of the year. 0:08:51.200 --> 0:08:55.239 So if we get a two point x percent economy, fine, 0:08:55.840 --> 0:08:58.160 how much of it is how much of America is 0:08:58.320 --> 0:09:01.959 advantaged by that? And how much of America is really 0:09:02.000 --> 0:09:04.840 struggling right now? Because I got all sorts of studies 0:09:04.840 --> 0:09:07.320 from Bloomberg and others to say there's a lot of 0:09:07.360 --> 0:09:11.760 people out there struggling, including bankruptcy levels. How narrow is 0:09:11.800 --> 0:09:12.760 this prosperity? 0:09:13.640 --> 0:09:15.880 I think it is pretty narrow because when we isolate 0:09:16.000 --> 0:09:18.280 the consumer and look at how the consumer is spending, 0:09:18.600 --> 0:09:21.440 much of the factors that are supporting this still positive, 0:09:21.520 --> 0:09:26.199 albeit significantly reduced level of expenditures are very temporary factors. 0:09:26.480 --> 0:09:29.920 It's because consumers are increasingly willing to draw down savings, 0:09:30.200 --> 0:09:33.080 because they're still relying on that last sputtering of state 0:09:33.120 --> 0:09:37.040 and local stimulus, because they're increasingly turning to credit card 0:09:37.080 --> 0:09:40.600 debt to supplement their spending. So it's very clear that 0:09:40.600 --> 0:09:44.960 the consumer is on fragile footing, but they're proving resilient, 0:09:45.040 --> 0:09:49.120 at least temporarily. And because of that resilience, businesses that 0:09:49.160 --> 0:09:52.559 were arguably overly optimistic in the first quarter are going 0:09:52.600 --> 0:09:55.720 to have to reverse course and increase production in Q two, 0:09:56.160 --> 0:09:59.560 significantly contributing to top line growth. Or if they don't 0:10:00.080 --> 0:10:03.160 and we see a growing disconnect between demand and supply, 0:10:03.760 --> 0:10:06.679 that will slow the level of disinflation that we've seen 0:10:06.720 --> 0:10:10.120 in this economy thus far. In either case, this puts 0:10:10.160 --> 0:10:13.200 pressure on the FED to continue raising rates. 0:10:13.360 --> 0:10:16.240 Why is it bad, lindsay, to see a slower disinflation 0:10:16.679 --> 0:10:19.680 and strong growth If that disinflation gets us back to 0:10:19.760 --> 0:10:21.720 that two percent level, well. 0:10:21.600 --> 0:10:23.599 It's not, but it's predicated on the second part of 0:10:23.640 --> 0:10:25.800 your argument, if it gets us back to that two 0:10:25.880 --> 0:10:29.160 percent level. The problem is the level of momentum. That 0:10:29.240 --> 0:10:34.240 disinflation momentum is very very minimal, well under what the 0:10:34.280 --> 0:10:37.440 FED had anticipated at this point in the cycle. And 0:10:37.559 --> 0:10:40.520 if in fact the FED stops or moves to the 0:10:40.559 --> 0:10:44.200 sideline and allows inflation expectations to pick up, as we 0:10:44.240 --> 0:10:47.960 saw in the latest umished survey, that could reverse some 0:10:48.040 --> 0:10:51.320 of this improvement. And so the pace of disinflation is 0:10:51.360 --> 0:10:54.840 not necessarily quite as important as the market buying into 0:10:54.840 --> 0:10:58.640 the Fed's resolved to continue along the pathway, so though, 0:10:58.760 --> 0:11:01.560 as so that that level of disay inflation leads us 0:11:01.600 --> 0:11:02.720 back to two percent target. 0:11:02.960 --> 0:11:04.880 Lindsay I was really struck by a lot of the 0:11:04.920 --> 0:11:06.760 retailers reports, not the ones that we're going to get 0:11:06.760 --> 0:11:08.880 this week, obviously, but the ones that have already reported, 0:11:08.960 --> 0:11:12.080 and how much of the price increase they're passing along 0:11:12.120 --> 0:11:16.640 to consumers. They're actually increasing their profits, the profit margins 0:11:16.640 --> 0:11:18.360 for the first time at about a year and a half. 0:11:18.480 --> 0:11:20.120 If you take a look at what's reported so far 0:11:20.160 --> 0:11:23.160 in the S and P. Five hundred, does this seem sustainable? 0:11:23.160 --> 0:11:25.800 To you that basically consumers are not pushing back and 0:11:25.880 --> 0:11:28.640 that pricing power is so extreme for some of these 0:11:28.720 --> 0:11:31.520 companies that they can keep just jacking prices up even 0:11:31.640 --> 0:11:33.600 well beyond what their production costs are. 0:11:34.559 --> 0:11:36.560 Well, it's interesting because when we look at the producer 0:11:36.600 --> 0:11:39.920 price increases, we see that costs, yes, of materials, inputs 0:11:39.920 --> 0:11:43.040 are still going up, but to your point, businesses are 0:11:43.040 --> 0:11:47.040 passing on that and more to consumers. Now again, consumers 0:11:47.080 --> 0:11:49.760 are proving resilient. They are able to tap into some 0:11:49.920 --> 0:11:54.120 stored wealth, allowing businesses to pass on that cost increase. 0:11:54.440 --> 0:11:57.199 And if you look at the surveys, consumers are increasingly 0:11:57.520 --> 0:12:01.640 willing and accepting of that level of inflation. But going forward, 0:12:01.640 --> 0:12:03.679 it is all going to come down to that stockpile 0:12:03.720 --> 0:12:06.400 of wealth and the ability for the consumer to make 0:12:06.480 --> 0:12:10.080 purchases in the marketplace. At some point, those savings that 0:12:10.160 --> 0:12:13.320 wealth runs out and businesses won't be able to pass 0:12:13.320 --> 0:12:16.959 on that cost increase without a significant loss of market share. 0:12:17.080 --> 0:12:19.800 So translate that into retail sales tomorrow. Take it right 0:12:19.840 --> 0:12:22.480 down to the acuity of what we're going to see 0:12:22.480 --> 0:12:23.720 tomorrow on retail sales. 0:12:24.200 --> 0:12:26.160 Well, when we look at this on a monthly basis. 0:12:26.200 --> 0:12:29.480 What we've seen is that consumer spending is increasingly volatile. 0:12:29.760 --> 0:12:33.400 Consumers are dramatically shifting the goods and services in their basket, 0:12:33.800 --> 0:12:37.000 something that they do when they're increasingly concerned about their 0:12:37.040 --> 0:12:40.320 financial footing, and so we do expect that volatility to 0:12:40.720 --> 0:12:44.040 be maintained going forward. Albeit for this week's report, we 0:12:44.080 --> 0:12:47.720 do expect an uptick of a positive monthly increase. But again, 0:12:47.800 --> 0:12:51.000 looking at this on a year over year basis, excuse me, 0:12:51.320 --> 0:12:54.600 we have seen a significant loss of momentum from double 0:12:54.640 --> 0:12:57.720 digit growth in the aftermath of the pandemic now down 0:12:57.760 --> 0:13:01.160 to a very minimal but welcomed two level. 0:13:01.360 --> 0:13:04.720 So finally, lindsay, what's your run rate on real GDP 0:13:04.840 --> 0:13:07.959 and nominal GDP sort of through the summer and into autumn? 0:13:08.240 --> 0:13:11.320 Are you running a two percent statistic, maybe a five 0:13:11.360 --> 0:13:12.680 percent nominal GDP? 0:13:13.400 --> 0:13:15.720 I think Q two we absolutely could get a two 0:13:15.720 --> 0:13:18.760 handle again if we see a rebuilding of those inventories, 0:13:18.840 --> 0:13:22.480 businesses stepping back up their production in response to the 0:13:22.520 --> 0:13:25.960 resilient consumer. It's very realistic to see a two handle 0:13:26.000 --> 0:13:28.520 in Q two. However, as we move into the second 0:13:28.520 --> 0:13:31.400 half of the year, that's where the FED tightening really 0:13:31.520 --> 0:13:34.760 chokes off top line GDP and we could see a 0:13:34.800 --> 0:13:37.760 sub one percent and perhaps the first negative print by 0:13:37.760 --> 0:13:38.400 the end of the year. 0:13:38.520 --> 0:13:40.720 And Lindsay, thank you for the client pund through the 0:13:40.720 --> 0:13:43.280 rest of the sea. Lindsay, pxident a stay four. 0:13:52.880 --> 0:13:56.080 Kirby, it's so successful United at Nework that they don't 0:13:56.080 --> 0:13:58.480 have enough gates. So it's like Zurich. They got planes 0:13:58.800 --> 0:14:01.320 way out. You could wave to Pennsylvania. 0:14:01.400 --> 0:14:03.079 Get very upset when I land in Europe and you've 0:14:03.080 --> 0:14:05.240 got to get the bus. You know, the bus, the bus, 0:14:05.360 --> 0:14:09.760 the bus busting. Trust me, not's. 0:14:08.160 --> 0:14:14.320 Fallowness Oscar Mins. It's his faults, his fault. This on 0:14:14.480 --> 0:14:17.560 set the former United Airlines CEO set the table for 0:14:17.679 --> 0:14:21.520 mister Kirby, author of Turnaround Time, United an airline and 0:14:21.520 --> 0:14:25.640 its employees in the friendly and sometimes not so friendly skys. 0:14:25.680 --> 0:14:27.360 Good morning, sir, Thank you so much for. 0:14:27.360 --> 0:14:28.920 Job with that kind of leading boy. 0:14:29.760 --> 0:14:33.640 Nobody's no life is you know, we talked. Jamie Diamond 0:14:33.680 --> 0:14:36.560 was on the other day with Bloomberg and he had 0:14:36.560 --> 0:14:39.080 a cancer scare. You lived, You lived in real time 0:14:39.240 --> 0:14:42.120 a medical issue at United Airlines and many people say 0:14:42.120 --> 0:14:45.800 you handled it better than anybody. First CEOs out there. 0:14:45.840 --> 0:14:49.960 What was a lesson you learned after a horrific cardiac 0:14:50.000 --> 0:14:52.040 event while you were on the tour duty? What'd you 0:14:52.120 --> 0:14:52.560 learn there? 0:14:53.320 --> 0:14:53.600 For me? 0:14:53.800 --> 0:14:55.560 I learned since had only been on the job for 0:14:55.680 --> 0:14:57.280 thirty seven days before that occurred. 0:14:57.760 --> 0:14:59.480 But I had had chance to connect with all my 0:14:59.520 --> 0:15:01.240 employees or many of them. 0:15:01.480 --> 0:15:04.040 And the outpouring of affection and support was amazing, And 0:15:04.080 --> 0:15:07.480 it just confirmed that the organization, the group, the employees 0:15:07.520 --> 0:15:09.920 in that united family were ready for a set of 0:15:09.920 --> 0:15:12.240 directions and guidance that would lead us back to where 0:15:12.240 --> 0:15:12.840 we are today. 0:15:13.360 --> 0:15:17.760 The airlines today have recovered. I believe they got a 0:15:17.800 --> 0:15:21.880 massive bailout in the middle of the pandemic. Have they 0:15:22.040 --> 0:15:25.720 paid back to the government, to the people that massive bailout? 0:15:26.000 --> 0:15:28.320 So if I could take just little contention with the 0:15:28.400 --> 0:15:29.720 term bailout. 0:15:29.760 --> 0:15:31.640 It's Monday, it's a slow news day. I'm trying to 0:15:31.640 --> 0:15:32.040 get it going. 0:15:32.640 --> 0:15:34.920 No, I was not a valid The airline industry was 0:15:34.960 --> 0:15:37.280 in its the best state ever, I think, in its history, 0:15:37.480 --> 0:15:42.000 and we had our revenue dropped ninety three percent, So 0:15:42.120 --> 0:15:45.000 it was a significant issue to keep the airline working 0:15:45.040 --> 0:15:47.280 and going to the economy good return is where we 0:15:47.280 --> 0:15:50.480 did get loans and the loans are being repaid over 0:15:50.520 --> 0:15:52.560 a five or six year period, and in that interim 0:15:52.600 --> 0:15:55.160 period you're not allowed to do repurchases. You're not allowed 0:15:55.160 --> 0:15:58.480 to increase comp of your senior executive. So still working through. 0:15:58.280 --> 0:16:00.800 It did plenty of repurchases going into the mess, though, 0:16:00.920 --> 0:16:03.600 of course much of that mess unforeseen. There has been 0:16:03.600 --> 0:16:06.000 some public pushback about whether you should have received any 0:16:06.040 --> 0:16:09.600 government loans whatsoever based on that. Do you think we 0:16:09.640 --> 0:16:12.600 are in a position now where shareholders of United get 0:16:12.640 --> 0:16:15.000 to own the upside and perhaps you can't talk directly 0:16:15.000 --> 0:16:18.520 about the company, but shareholders of the industry group get 0:16:18.600 --> 0:16:21.880 to own the upside, and perhaps the government doesn't in 0:16:21.960 --> 0:16:22.720 quite the same way. 0:16:23.440 --> 0:16:29.640 Well, we negotiated fairly and and I think everyone is 0:16:29.640 --> 0:16:31.320 going to come out okay at the end of this. 0:16:31.400 --> 0:16:34.760 I don't think there's anybody that's going to be unfairly advantaged, 0:16:35.000 --> 0:16:37.720 at least from our perspective. The airline has taken a 0:16:37.720 --> 0:16:39.920 lot of a lot of its tolls. We'll appreciate the 0:16:40.920 --> 0:16:43.160 funds from the US government came in a very perfect time, 0:16:43.360 --> 0:16:46.480 but it was not free. Steve Manuchin was a a 0:16:46.560 --> 0:16:50.520 sec A finance er, was there, and we had some 0:16:50.600 --> 0:16:53.320 really good conversations in details about what it would look 0:16:53.360 --> 0:16:55.280 like four or five years later and whether or not 0:16:55.320 --> 0:16:56.320 it would indeed be fair. 0:16:56.640 --> 0:16:57.440 So I would say no. 0:16:58.200 --> 0:17:00.320 Meanwhile, when you talk about what it looks like, the 0:17:00.360 --> 0:17:03.120 airline industry looks a little different now than it did 0:17:03.240 --> 0:17:05.560 before the pandemic. And we were just talking about how 0:17:05.760 --> 0:17:07.800 the front of the cab is off first class and 0:17:07.840 --> 0:17:10.040 business class and then comfort Plus, and then there are 0:17:10.040 --> 0:17:11.520 like three seats in the back that you can try 0:17:11.600 --> 0:17:14.040 to get for some kind of high price that you 0:17:14.080 --> 0:17:16.800 can jam your family into if you're in economy. Is 0:17:16.800 --> 0:17:17.840 this the future of flying? 0:17:18.280 --> 0:17:21.280 It is not, because it's not probably the best representation 0:17:21.520 --> 0:17:23.760 of what we have today. Yeah, there are multiple classes 0:17:23.760 --> 0:17:25.880 for different budgets, and you try to do as much 0:17:25.920 --> 0:17:28.600 as you can. I think that United we've tried to 0:17:28.640 --> 0:17:30.240 put a lot of amenities in the back so you're 0:17:30.280 --> 0:17:32.720 not sitting in the back huddled, and there's plenty of 0:17:32.920 --> 0:17:36.879 there's plenty of entertainment and such, and again, you know, 0:17:37.080 --> 0:17:41.320 different budgets require different different seating arrangements, and as we've talked, 0:17:41.880 --> 0:17:44.440 real estate and side an aircraft is very expensive. I 0:17:44.480 --> 0:17:46.600 think in the book, I try to demystify some of 0:17:46.640 --> 0:17:49.520 those things, sort of to build a bridge between the 0:17:49.600 --> 0:17:52.480 chasm of understanding by the general flying public and how 0:17:52.480 --> 0:17:54.679 we run a business. We really aren't in the business 0:17:54.720 --> 0:17:58.359 of trying to make you uncomfortable late and all those things. 0:17:58.480 --> 0:18:00.480 Really there's a ton of it for point to not 0:18:00.560 --> 0:18:01.000 make it so. 0:18:01.280 --> 0:18:04.639 And understood, And definitely you can sense that there is 0:18:04.680 --> 0:18:08.240 this feeling though that there is no better example of 0:18:08.520 --> 0:18:10.960 wealth and equality than flying, because you go and it's like, 0:18:11.000 --> 0:18:12.600 if you pay enough, you can go first, and then 0:18:12.640 --> 0:18:14.680 you get these extra things, and it's basically you've got 0:18:14.680 --> 0:18:16.200 to walk past them to get to the back of 0:18:16.240 --> 0:18:18.479 the cab to sit in your little seat. I'm just 0:18:18.560 --> 0:18:21.680 wondering if that's going to be sort of even unsteroids, 0:18:21.680 --> 0:18:24.600 because those are so much more profitable now and actually, 0:18:24.640 --> 0:18:28.480