Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal and the Bloomberg Business App.
Speaker 2: It's Stuart Kaiser, City and Official. Welcome to the program. Listen,
Speaker 2: thank you for the merch. We appreciate it. Let's just
Speaker 2: start with your note that came out yesterday evening, and
Speaker 2: just begin with the performance You went through Equal Wight
Speaker 2: S and P the Nastac, the headline S and P
Speaker 2: five hundred the Russell. What do all those different performance
Speaker 2: figures over the last three months, towny, what's the over
Speaker 2: overatching story?
Speaker 3: I think I think it tells you people are just
Speaker 3: pretty conservatively positioned. Frankly, it's it's large cap tech leadership,
Speaker 3: high quality stocks, low risk stocks that are really driving
Speaker 3: the market higher. And that just tells you, you know
Speaker 3: that people, if they're going to be in equity markets,
Speaker 3: need to have a reason to be So you need
Speaker 3: a story or a theme or a high quality stock
Speaker 3: that gets you out of a five percent cash yield
Speaker 3: into an equity market that's been highly volatile.
Speaker 1: I looked on a log SPX and I noticed three
Speaker 1: moving averages I use have converged to two tenths of
Speaker 1: a percent point two four percent of the s and
Speaker 1: P five hundred. You call it home on the painful range.
Speaker 1: What's the history to identify which way you go to
Speaker 1: get out of a painful range?
Speaker 3: I think I think it's a great question, Tom, especially
Speaker 3: right now, because it does feel like we're sort of
Speaker 3: bracketed in you know where we are right now. When
Speaker 3: you when you get up to that sort of forty
Speaker 3: two hundred range, you kind of run into evaluation friction
Speaker 3: where people aren't you know, comfortable on the equities at
Speaker 3: that level, particularly when they're clipping a five percent coupon
Speaker 3: in cash. And to the downside, you know, we're we're
Speaker 3: conservative positioned. As I mentioned, mutual funds are very low
Speaker 3: beta and expectations are so low right now that is
Speaker 3: kind of hard to surprise people, you know, to the downside.
Speaker 3: So you know, in terms of taking out of this range,
Speaker 3: I think you know, to the upside. It's going to
Speaker 3: have to be positioning driven. You know, maybe people get
Speaker 3: the follow the FED mentality and you get a bit
Speaker 3: of a positioning you know, squeeze to the upside and
Speaker 3: to the downside. Frankly, I think it's US growth and
Speaker 3: it's the debt ceiling. You know, the debt ceiling is
Speaker 3: more tactical and the US growth data. I think we
Speaker 3: really need to fall apart in pretty aggressive fashion. But
Speaker 3: I think that's what can break you out to the downside.
Speaker 3: Right now, before we.
Speaker 4: Get into some of those scenarios and the analysis that
Speaker 4: comes with it, I want to just sit on this
Speaker 4: range and you talk about how if you look at
Speaker 4: one measure, it's the most painful range going back to
Speaker 4: nineteen eighty or one of them. Can you talk about
Speaker 4: what the incentive is for anyone to do anything other
Speaker 4: than just sit in cash and get five percent if
Speaker 4: you're not going to get rewarded and the likelihood of
Speaker 4: getting you know, your face ripped off is pretty high.
Speaker 3: Look, I think that's that's one of the big challenges,
Speaker 3: right I mean, if you look at that. We did
Speaker 3: a quick survey of our investors and two thirds of
Speaker 3: people said they wouldn't put money into equity markets unless
Speaker 3: they had ten percent ten percent or more potential upside, right,
Speaker 3: So to get people in the market, you really need
Speaker 3: to offer them something. And so I think, you know,
Speaker 3: that's why we're run into this valuation limit around forty
Speaker 3: two hundred, because you had ten percent to forty two hundred,
Speaker 3: all of a sudden you're at forty six hundred, and
Speaker 3: a lot of people aren't kind of comfortable with, you know,
Speaker 3: with that type of upside level. So yet we're we're
Speaker 3: kind of bouncing into a ceiling out of floor effectively.
Speaker 3: And to Tom's point, it's really narrowed all of these technicals,
Speaker 3: which you could argue creates kind of a you know,
Speaker 3: a very uncomfortable moment from life.
Speaker 4: If there is more stability in the bond market, which
Speaker 4: we've seen, will that give the catalyst sort of the
Speaker 4: ability for stocks to find some sort of direction that
Speaker 4: has a little bit more conviction behind it.
Speaker 3: Definitely, at least I think that's actually been a big
Speaker 3: contributor this year. If you look at you know, bond
Speaker 3: volatility and also the volatility of economic data itself, that
Speaker 3: stuff has really started to narrow I think it's made
Speaker 3: the market more investible. As I mentioned, it's hard to
Speaker 3: surprise people. I mean, after what happened last year, it's
Speaker 3: kind of hard to come out with something really surprising.
Speaker 3: So yeah, I think bond volatility coming in a clearer path,
Speaker 3: you know, to Fed funds and inflation gives people more
Speaker 3: confidence to be in markets. But I think that's what
Speaker 3: got us from thirty eight hundred forty two hundred. You
Speaker 3: know what gets us that next step, I think is
Speaker 3: the bigger question.
Speaker 1: John John Stolfs just publishes at OpCo the same as Stuart,
Speaker 1: are the same as Gold and Sacks. The idea once
Speaker 1: again earnings of surprise people. Everybody had a gloom frame work.
Speaker 1: Guess what. It didn't happen.
Speaker 2: So what you mentioned the tactical cold around the debt
Speaker 2: ceiling and then talked about the longer time horizon. Does
Speaker 2: one inform the other? Does the debt ceiling negotiations ultimately
Speaker 2: mean slower growth in our future?
Speaker 3: I think only if it really disrupts financial markets from here.
Speaker 3: I think, you know, I think, you know, if this
Speaker 3: was something persistent that kind of impacted government spending and activity,
Speaker 3: then yeah, I think that would increase your recession risks.
Speaker 3: If this is more of a one to two week
Speaker 3: just kind of choppy market scenario, I don't think it'll
Speaker 3: have a huge impact on the growth outlook. I think
Speaker 3: the big wildcard in the growth outlook is the credit channel.
Speaker 3: You know, did we really disrupt lending or not? And
Speaker 3: I think that's why people are a little bit sort
Speaker 3: of on edge, particularly because the FED doesn't control the
Speaker 3: lending channel, right, so that if that tightens meaningfully, it's
Speaker 3: sort of outside of the fed's control and you could
Speaker 3: actually get an overtightening that the FED didn't really want initially.
Speaker 1: Can our radio and TV listeners sho and how should
Speaker 1: they own shares of Apple Computer? How do you comfortably
Speaker 1: own something that elevated that dominant.
Speaker 3: I think that I think Apple, would you call it?
Speaker 3: The big sort of five to ten stocks in the
Speaker 3: market are giving people a lot of angst just for
Speaker 3: that reason. I mean, if you're in Apple right now,
Speaker 3: I think it's a because you love the products and
Speaker 3: be because they probably have negative net debt on balance
Speaker 3: sheet and relatively strong earnings growth. So I think if
Speaker 3: you're in those stocks, it's because it's something you're comfortable owning. Now,
Speaker 3: if you look at your to date, we've seen basically
Speaker 3: inflow into three sectors, healthcare, industrials, and tech. And I
Speaker 3: think you would argue both industrials and tech have really
Speaker 3: strong kind of investment thematics behind them that people are
Speaker 3: like comfortable owning just despite recessionary risks.
Speaker 1: Yeah.
Speaker 3: I think if you're an Apple, it's because you believe
Speaker 3: in kind of the medium to long term trend of
Speaker 3: the stock and in the near term you're comfortable based
Speaker 3: on you know, kind of the size and quality.
Speaker 1: And how do you adapt to the zeitgeist which shows
Speaker 1: everybody's scared stiff any number of different you know the
Speaker 1: metrics better than me, but the answer is everybody's scared stiff.
Speaker 1: How do you adapt to that?
Speaker 3: Well, I think I think the scared stiff is why,
Speaker 3: you know, cash positions are high, It's why mutual fundatas
Speaker 3: are low. So I think, to me, what that's actually
Speaker 3: done is it's raised the floor to the market a
Speaker 3: little bit because there's not much left to sell. But yeah,
Speaker 3: I mean, this is the big question is how do
Speaker 3: you tempt people out of, to your point, high yield
Speaker 3: bond market, you know, higher yielding, you know, cash markets
Speaker 3: into equity markets, and I think the answer there is
Speaker 3: you need to have a single stock story, you need
Speaker 3: to have like a macro thematic like the Inflation Reduction
Speaker 3: Act creating a huge amount of spending, or you need
Speaker 3: the FED to stop and to get this kind of
Speaker 3: FOMO follow the FED rally. That's not our base case
Speaker 3: nor something we necessarily endorse, but it's certainly something that
Speaker 3: I think people are teeing themselves up for.
Speaker 2: You'll put in the credit channel is so important. We
Speaker 2: either find out the fed'sre over tightened or under tightened
Speaker 2: based on what develops that. Damn't we Is it that simple?
Speaker 1: I think so.
Speaker 3: I mean what we've said, everybody's saying, oh, this is
Speaker 3: great news. The market is going to do some of
Speaker 3: the tightening for the FED. We actually kind of disagree
Speaker 3: with that. I think if you thought the FED needed
Speaker 3: to do ten units of tightening and now they're going
Speaker 3: to do eight outsourced two to the market, well, they
Speaker 3: don't control that too, right, That too could be zero,
Speaker 3: it could be six. So from our perspective, it actually
Speaker 3: adds more uncertainty to the growth outlook that you're quote
Speaker 3: unquote allowing the market and getting help from the market
Speaker 3: to do the tightening. So I actually think what that's
Speaker 3: done is it's helped the raid aspect of it, but
Speaker 3: it's actually added more uncertainty to the growth aspect in
Speaker 3: my opinion.
Speaker 2: Seth commenter and Morgan Stanley said a similar thing. He said,
Speaker 2: the calibration of all of this gets so much harder
Speaker 2: when you outsource it to the credit channel in the
Speaker 2: way that it has been done because of the banking
Speaker 2: stress in the last couple of months. Show this was fun,
Speaker 2: this was great, Let's do it again. Sea fours Lindsay
Speaker 2: Pax wanking on the Fed's path forward, saying this tom
Speaker 2: the Committee has indicated a willingness to move to the
Speaker 2: sidelines in June, and still may do so. However, the
Speaker 2: latest price data does not make the case for the FED. Rather,
Speaker 2: any decision to pause would be made in spite of
Speaker 2: the latest still elevated inflation data.
Speaker 1: Still elevated. It came in a little bit and the
Speaker 1: vectors are in the right direction. But yeah, still elevated.
Speaker 1: Is abs at where we are, Lindsay Paxit joins us
Speaker 1: now chief economist is Stiffel Lindsay, just simple, I'm exhausted
Speaker 1: by it on a boring Monday in May where we're
Speaker 1: trying to sort out eight, nine, ten different threads. How
Speaker 1: close are we to recession?
Speaker 5: I think the feed has done a very good job
Speaker 5: of continuing to support the economy while raising rates and
Speaker 5: trying to tame inflation. And so this delicate balance has
Speaker 5: allowed I think the consumer to continue to stay afloat,
Speaker 5: which pushes out our recession call to the end of
Speaker 5: the year. Now, we do expect a downturn, but that
Speaker 5: being said, with the resilience of the consumer, Q two
Speaker 5: GDP could actually surprise to the upside, leading the first
Speaker 5: half of the year well above earlier expectations, much more
Speaker 5: robust than expected off setting even if we do see
Speaker 5: some of that downturn then in the second second half
Speaker 5: of the year.
Speaker 1: So if we get a two point x percent economy, fine,
Speaker 1: how much of it is how much of America is
Speaker 1: advantaged by that? And how much of America is really
Speaker 1: struggling right now? Because I got all sorts of studies
Speaker 1: from Bloomberg and others to say there's a lot of
Speaker 1: people out there struggling, including bankruptcy levels. How narrow is
Speaker 1: this prosperity?
Speaker 5: I think it is pretty narrow because when we isolate
Speaker 5: the consumer and look at how the consumer is spending,
Speaker 5: much of the factors that are supporting this still positive,
Speaker 5: albeit significantly reduced level of expenditures are very temporary factors.
Speaker 5: It's because consumers are increasingly willing to draw down savings,
Speaker 5: because they're still relying on that last sputtering of state
Speaker 5: and local stimulus, because they're increasingly turning to credit card
Speaker 5: debt to supplement their spending. So it's very clear that
Speaker 5: the consumer is on fragile footing, but they're proving resilient,
Speaker 5: at least temporarily. And because of that resilience, businesses that
Speaker 5: were arguably overly optimistic in the first quarter are going
Speaker 5: to have to reverse course and increase production in Q two,
Speaker 5: significantly contributing to top line growth. Or if they don't
Speaker 5: and we see a growing disconnect between demand and supply,
Speaker 5: that will slow the level of disinflation that we've seen
Speaker 5: in this economy thus far. In either case, this puts
Speaker 5: pressure on the FED to continue raising rates.
Speaker 4: Why is it bad, lindsay, to see a slower disinflation
Speaker 4: and strong growth If that disinflation gets us back to
Speaker 4: that two percent level, well.
Speaker 5: It's not, but it's predicated on the second part of
Speaker 5: your argument, if it gets us back to that two
Speaker 5: percent level. The problem is the level of momentum. That
Speaker 5: disinflation momentum is very very minimal, well under what the
Speaker 5: FED had anticipated at this point in the cycle. And
Speaker 5: if in fact the FED stops or moves to the
Speaker 5: sideline and allows inflation expectations to pick up, as we
Speaker 5: saw in the latest umished survey, that could reverse some
Speaker 5: of this improvement. And so the pace of disinflation is
Speaker 5: not necessarily quite as important as the market buying into
Speaker 5: the Fed's resolved to continue along the pathway, so though,
Speaker 5: as so that that level of disay inflation leads us
Speaker 5: back to two percent target.
Speaker 4: Lindsay I was really struck by a lot of the
Speaker 4: retailers reports, not the ones that we're going to get
Speaker 4: this week, obviously, but the ones that have already reported,
Speaker 4: and how much of the price increase they're passing along
Speaker 4: to consumers. They're actually increasing their profits, the profit margins
Speaker 4: for the first time at about a year and a half.
Speaker 4: If you take a look at what's reported so far
Speaker 4: in the S and P. Five hundred, does this seem sustainable?
Speaker 4: To you that basically consumers are not pushing back and
Speaker 4: that pricing power is so extreme for some of these
Speaker 4: companies that they can keep just jacking prices up even
Speaker 4: well beyond what their production costs are.
Speaker 5: Well, it's interesting because when we look at the producer
Speaker 5: price increases, we see that costs, yes, of materials, inputs
Speaker 5: are still going up, but to your point, businesses are
Speaker 5: passing on that and more to consumers. Now again, consumers
Speaker 5: are proving resilient. They are able to tap into some
Speaker 5: stored wealth, allowing businesses to pass on that cost increase.
Speaker 5: And if you look at the surveys, consumers are increasingly
Speaker 5: willing and accepting of that level of inflation. But going forward,
Speaker 5: it is all going to come down to that stockpile
Speaker 5: of wealth and the ability for the consumer to make
Speaker 5: purchases in the marketplace. At some point, those savings that
Speaker 5: wealth runs out and businesses won't be able to pass
Speaker 5: on that cost increase without a significant loss of market share.
Speaker 1: So translate that into retail sales tomorrow. Take it right
Speaker 1: down to the acuity of what we're going to see
Speaker 1: tomorrow on retail sales.
Speaker 5: Well, when we look at this on a monthly basis.
Speaker 5: What we've seen is that consumer spending is increasingly volatile.
Speaker 5: Consumers are dramatically shifting the goods and services in their basket,
Speaker 5: something that they do when they're increasingly concerned about their
Speaker 5: financial footing, and so we do expect that volatility to
Speaker 5: be maintained going forward. Albeit for this week's report, we
Speaker 5: do expect an uptick of a positive monthly increase. But again,
Speaker 5: looking at this on a year over year basis, excuse me,
Speaker 5: we have seen a significant loss of momentum from double
Speaker 5: digit growth in the aftermath of the pandemic now down
Speaker 5: to a very minimal but welcomed two level.
Speaker 1: So finally, lindsay, what's your run rate on real GDP
Speaker 1: and nominal GDP sort of through the summer and into autumn?
Speaker 1: Are you running a two percent statistic, maybe a five
Speaker 1: percent nominal GDP?
Speaker 5: I think Q two we absolutely could get a two
Speaker 5: handle again if we see a rebuilding of those inventories,
Speaker 5: businesses stepping back up their production in response to the
Speaker 5: resilient consumer. It's very realistic to see a two handle
Speaker 5: in Q two. However, as we move into the second
Speaker 5: half of the year, that's where the FED tightening really
Speaker 5: chokes off top line GDP and we could see a
Speaker 5: sub one percent and perhaps the first negative print by
Speaker 5: the end of the year.
Speaker 2: And Lindsay, thank you for the client pund through the
Speaker 2: rest of the sea. Lindsay, pxident a stay four.
Speaker 1: Kirby, it's so successful United at Nework that they don't
Speaker 1: have enough gates. So it's like Zurich. They got planes
Speaker 1: way out. You could wave to Pennsylvania.
Speaker 2: Get very upset when I land in Europe and you've
Speaker 2: got to get the bus. You know, the bus, the bus,
Speaker 2: the bus busting. Trust me, not's.
Speaker 1: Fallowness Oscar Mins. It's his faults, his fault. This on
Speaker 1: set the former United Airlines CEO set the table for
Speaker 1: mister Kirby, author of Turnaround Time, United an airline and
Speaker 1: its employees in the friendly and sometimes not so friendly skys.
Speaker 1: Good morning, sir, Thank you so much for.
Speaker 6: Job with that kind of leading boy.
Speaker 1: Nobody's no life is you know, we talked. Jamie Diamond
Speaker 1: was on the other day with Bloomberg and he had
Speaker 1: a cancer scare. You lived, You lived in real time
Speaker 1: a medical issue at United Airlines and many people say
Speaker 1: you handled it better than anybody. First CEOs out there.
Speaker 1: What was a lesson you learned after a horrific cardiac
Speaker 1: event while you were on the tour duty? What'd you
Speaker 1: learn there?
Speaker 5: For me?
Speaker 7: I learned since had only been on the job for
Speaker 7: thirty seven days before that occurred.
Speaker 6: But I had had chance to connect with all my
Speaker 6: employees or many of them.
Speaker 7: And the outpouring of affection and support was amazing, And
Speaker 7: it just confirmed that the organization, the group, the employees
Speaker 7: in that united family were ready for a set of
Speaker 7: directions and guidance that would lead us back to where
Speaker 7: we are today.
Speaker 1: The airlines today have recovered. I believe they got a
Speaker 1: massive bailout in the middle of the pandemic. Have they
Speaker 1: paid back to the government, to the people that massive bailout?
Speaker 6: So if I could take just little contention with the
Speaker 6: term bailout.
Speaker 1: It's Monday, it's a slow news day. I'm trying to
Speaker 1: get it going.
Speaker 7: No, I was not a valid The airline industry was
Speaker 7: in its the best state ever, I think, in its history,
Speaker 7: and we had our revenue dropped ninety three percent, So
Speaker 7: it was a significant issue to keep the airline working
Speaker 7: and going to the economy good return is where we
Speaker 7: did get loans and the loans are being repaid over
Speaker 7: a five or six year period, and in that interim
Speaker 7: period you're not allowed to do repurchases. You're not allowed
Speaker 7: to increase comp of your senior executive. So still working through.
Speaker 2: It did plenty of repurchases going into the mess, though,
Speaker 2: of course much of that mess unforeseen. There has been
Speaker 2: some public pushback about whether you should have received any
Speaker 2: government loans whatsoever based on that. Do you think we
Speaker 2: are in a position now where shareholders of United get
Speaker 2: to own the upside and perhaps you can't talk directly
Speaker 2: about the company, but shareholders of the industry group get
Speaker 2: to own the upside, and perhaps the government doesn't in
Speaker 2: quite the same way.
Speaker 7: Well, we negotiated fairly and and I think everyone is
Speaker 7: going to come out okay at the end of this.
Speaker 7: I don't think there's anybody that's going to be unfairly advantaged,
Speaker 7: at least from our perspective. The airline has taken a
Speaker 7: lot of a lot of its tolls. We'll appreciate the
Speaker 7: funds from the US government came in a very perfect time,
Speaker 7: but it was not free. Steve Manuchin was a a
Speaker 7: sec A finance er, was there, and we had some
Speaker 7: really good conversations in details about what it would look
Speaker 7: like four or five years later and whether or not
Speaker 7: it would indeed be fair.
Speaker 6: So I would say no.
Speaker 4: Meanwhile, when you talk about what it looks like, the
Speaker 4: airline industry looks a little different now than it did
Speaker 4: before the pandemic. And we were just talking about how
Speaker 4: the front of the cab is off first class and
Speaker 4: business class and then comfort Plus, and then there are
Speaker 4: like three seats in the back that you can try
Speaker 4: to get for some kind of high price that you
Speaker 4: can jam your family into if you're in economy. Is
Speaker 4: this the future of flying?
Speaker 7: It is not, because it's not probably the best representation
Speaker 7: of what we have today. Yeah, there are multiple classes
Speaker 7: for different budgets, and you try to do as much
Speaker 7: as you can. I think that United we've tried to
Speaker 7: put a lot of amenities in the back so you're
Speaker 7: not sitting in the back huddled, and there's plenty of
Speaker 7: there's plenty of entertainment and such, and again, you know,
Speaker 7: different budgets require different different seating arrangements, and as we've talked,
Speaker 7: real estate and side an aircraft is very expensive. I
Speaker 7: think in the book, I try to demystify some of
Speaker 7: those things, sort of to build a bridge between the
Speaker 7: chasm of understanding by the general flying public and how
Speaker 7: we run a business. We really aren't in the business
Speaker 7: of trying to make you uncomfortable late and all those things.
Speaker 7: Really there's a ton of it for point to not
Speaker 7: make it so.
Speaker 4: And understood, And definitely you can sense that there is
Speaker 4: this feeling though that there is no better example of
Speaker 4: wealth and equality than flying, because you go and it's like,
Speaker 4: if you pay enough, you can go first, and then
Speaker 4: you get these extra things, and it's basically you've got
Speaker 4: to walk past them to get to the back of
Speaker 4: the cab to sit in your little seat. I'm just
Speaker 4: wondering if that's going to be sort of even unsteroids,
Speaker 4: because those are so much more profitable now and actually,
Speaker 4: relatively speaking, the most profitable possibly ever, those seats in
Speaker 4: the front of the cab rather than the back.
Speaker 7: Well, I don't think we'reas most profitable ever. I think
Speaker 7: right before the pandemic was the most profitable time in
Speaker 7: airline history, and it was a nice array of the front,
Speaker 7: first class product economy, economy pluss and of course the
Speaker 7: basic economy at the end and through an increased flying
Speaker 7: taking people from everywhere they wanted to go to where
Speaker 7: they needed to go. That combination with volume demand and
Speaker 7: a good level of supply and customer service was really
Speaker 7: what was creating the revenue generation and the profits. But
Speaker 7: againfits aren't the best in this industry and feels always volatile,
Speaker 7: so the equities are always going to be affected by that.
Speaker 1: Regard your parachuting to Pepperdine to do a victory lap,
Speaker 1: and I want you to address right now something really emotional.
Speaker 1: A lot of our listeners particularly say this is the
Speaker 1: coughing side of the table. You're allowed to cough over here.
Speaker 1: They don't cough over there. We cough over here. I
Speaker 1: want you to talk about chairman and chief executive officer
Speaker 1: like you're on the board at Salesforce with mister Benioff.
Speaker 1: Benioff handles a number of duties as well. What's the
Speaker 1: experience you have of the efficacy of a chairman's CEO
Speaker 1: being one person?
Speaker 7: You know, I think it depends on the company in
Speaker 7: the industry. I've seen it work both ways. It's just fine,
Speaker 7: And I don't know that there is a degree of
Speaker 7: we tend to depending on our feeling for it, we
Speaker 7: tend to lean one way or the other. Again, having
Speaker 7: been both at one time and having been separate from
Speaker 7: my perspective going forward, I think the separation makes sense
Speaker 7: because governance and the things that we face as public
Speaker 7: companies are pretty significant, and it's good to have sort
Speaker 7: of a division of authority.
Speaker 2: Can we talk about lessons and can we go back
Speaker 2: to spring of twenty seventeen, and you obviously know where
Speaker 2: I'm going that day that passenger was dragged off the plane,
Speaker 2: how you responded to it at the time, oschool, When
Speaker 2: you look back, what were the lessons learned for you
Speaker 2: personally and for anyone that might find themselves in a
Speaker 2: similar position in years to come.
Speaker 7: Yeah, I think and I talk about it all the
Speaker 7: time because it was a dark point and our tenure there,
Speaker 7: I think probably the biggest lesson it's never too late
Speaker 7: to do the right thing. I think our initial response,
Speaker 7: my initial response for a lot of different reasons, mostly
Speaker 7: that it wasn't United Airlines actually involved in any of
Speaker 7: that you saw, but it was indeed our response, my
Speaker 7: response that created the.
Speaker 6: Issue, and it blew up.
Speaker 7: And I think we're probably one of the first global
Speaker 7: brands to have a viral social media issue, and we
Speaker 7: tried to find someone else, but I think we may
Speaker 7: be the ones. And then you know, going on TV
Speaker 7: a couple of days later, and you know, taking them
Speaker 7: on personally.
Speaker 2: When did you realize what the right thing is? I
Speaker 2: mean behindsight you and I could sit here now and
Speaker 2: I could say this was the right thing, Oscar, Why
Speaker 2: didn't you do it? When did you know we've got
Speaker 2: this wrong?
Speaker 6: Aman?
Speaker 2: It's right? Course, pretty quickly.
Speaker 7: The middle of the night before I went on National
Speaker 7: TV again in the Hut. In the book, I highlight
Speaker 7: sort of my upbringing, my heritage, and all the things
Speaker 7: that influence us are the formative years. We're all parts
Speaker 7: of people we've met, as Tennyson says, And I think
Speaker 7: in the middle of the night I sort of looked
Speaker 7: upstairs for some guidance, and I felt the calms. I
Speaker 7: knew I wasn't going to try to blame the Express
Speaker 7: or somebody out the Express carrier or other Folks.
Speaker 1: Tell me about International United Airlines now is in We
Speaker 1: got three airports in New York. Folks, you own Newark,
Speaker 1: I get that your box dot of JFK. Kirby's age
Speaker 1: dealing with US as well. Is this the future of
Speaker 1: America of United States airlines and that everybody's going to
Speaker 1: be fighting for a shortage of gates.
Speaker 7: Well, there are methods and procedures and policies that can
Speaker 7: be implemented if we're all willing to do that, that
Speaker 7: would not rectify, but certainly modify some of those issues.
Speaker 1: Uh.
Speaker 7: You know, a w R is not someplace we own
Speaker 7: at United for It's one of the most difficult places
Speaker 7: to operate, and you've seen big airlines come in and
Speaker 7: out of there.
Speaker 6: Because of that.
Speaker 7: There's concept of slot control, there's plans oversight, and then
Speaker 7: there's air traffic control and it's modern.
Speaker 1: Would you just he needs more flights to Italy? Can
Speaker 1: you talk to Kirby and.
Speaker 2: Make that they flight right to night pots.
Speaker 6: And we can go on international flights.
Speaker 2: Very expensive thing, the F one race.
Speaker 1: Cut your pepe. That's where it is.
Speaker 2: Weekend.
Speaker 1: We are going to focus now, and for those of
Speaker 1: you internationally and national, this is coming to a city
Speaker 1: near you. We're going to focus on New York City
Speaker 1: in the five bureaus. Let me get your attention. There
Speaker 1: are seven hundred and eighty nine bridges in New York City.
Speaker 1: I can't believe I'm saying that, but that's the number.
Speaker 1: There's twenty four movable bridges. Maybe there's four tunnels, y'all know.
Speaker 1: Liebers with us right now. General, thank you so much
Speaker 1: for joining us Chair chief executive Officer the MTA in
Speaker 1: charge of all this headache. I'm just going to go
Speaker 1: to one incident, and Lisa Bramwooz is going to bring
Speaker 1: up others as well. I can't get up Madison Avenue anymore.
Speaker 1: When does the congestion end?
Speaker 8: Well, you know you said exactly right, Tom, congestion is
Speaker 8: we got to do something about it. There's no choice.
Speaker 8: We can't have ambulances, can't get to hospitals. Yeah, we
Speaker 8: can't take times in progress. It's out of control.
Speaker 1: Okay.
Speaker 8: What New York is doing is we're leading the nation.
Speaker 8: We're saying it's time to do something about it. We've
Speaker 8: got a congestion pricing plan. It's been tried all over
Speaker 8: the western world Stockholm, London, Singapore, and we're going to
Speaker 8: put it into effect. We don't have a choice. It's
Speaker 8: time to, you know, start doing aggressive action to deal
Speaker 8: with congestion and also to save the planet. We all
Speaker 8: know that's on the agenda general.
Speaker 1: It's so important here and I really bring this up.
Speaker 1: Folks living up near Mount Sign are the privilege of
Speaker 1: living near Mount signa where the ambulances can't get to
Speaker 1: the one hundred and first Street emergency room. Let's I
Speaker 1: want to go to the rapidity of this. London fixed this.
Speaker 1: Other cities have dealt with that. It's been a failure.
Speaker 1: Saying in Mexico City or Manila, how fast can you
Speaker 1: free up the congestion in this marvelous city.
Speaker 8: It's a good question. We've got the federal approval almost
Speaker 8: almost done. We've been at this for a couple of years. Now, Trump,
Speaker 8: the Trump administration wouldn't let us deal with the environmental process.
Speaker 8: The federal law requires. Biden administration let us get started
Speaker 8: two years ago. We've hit the milestones. Now are going
Speaker 8: to be implementing. We're literally going to start building out
Speaker 8: the infrastructure, the cameras, the sensors, to do it all
Speaker 8: in about a year and then Tom, you and I
Speaker 8: will watch as it starts to take effect on congestion,
Speaker 8: hopefully to open up the roads.
Speaker 1: Lisa, my amateur taken on this, and I mean amateurs,
Speaker 1: he said, the camera's word, and that's the word. Nobody
Speaker 1: London is cameras driven. New York is not. That's my
Speaker 1: guesstimate of how we begin to get there.
Speaker 4: Jenna, how much is this really an effort to try
Speaker 4: to bail out a subway system that has struggled through
Speaker 4: a pandemic and really still is not seeing its ridership
Speaker 4: come back.
Speaker 8: Well, you know they are operating budget. We have like
Speaker 8: an eighteen billion dollar operating budget, Lisa. We actually dealt
Speaker 8: with that with the Governor's leadership in the current budget year.
Speaker 8: We've actually dealt with it for a four year plan period.
Speaker 8: So kudos to Governor Hockel and the New York State Legislature.
Speaker 8: Unlike many other places, we know that mass transit is
Speaker 8: the lifeblood of our city and our region, and it's
Speaker 8: for New It's like air and water. We can't survive
Speaker 8: without it. The governor and the state legislatures stepped up
Speaker 8: the money from congestion pricing, by contrast, is going to
Speaker 8: go to our capital budget, which allows us to maintain
Speaker 8: this one hundred year old plus system. Stuff that's that
Speaker 8: old wants to fall apart. You got to invest in
Speaker 8: it like any business would it's a trillion dollar asset,
Speaker 8: and we need the money to maintain it and to
Speaker 8: improve it.
Speaker 4: How is the infrastructure changing and the allocations of that budget, Jenne.
Speaker 4: Given that writership hasn't come back to its pre pandemic
Speaker 4: level just yet, there's a question about whether it will
Speaker 4: in the same at least in the near future, as
Speaker 4: a result of the work from home trends and the
Speaker 4: emptying out in certain parts of the office space. How
Speaker 4: do you allocate to a system that is the lifeblood
Speaker 4: and is struggling with a lot of issues right now,
Speaker 4: whether it's elevated crime, whether it's just the general kind
Speaker 4: of build up of filth. I'm sorry, I'm a native
Speaker 4: New Yorker, so this is something that I have seen
Speaker 4: over the years. How much are you going to try
Speaker 4: to remedy that?
Speaker 8: Well, Listen, first of all, let's let's get straight on
Speaker 8: the safety issue. A crime in the subway system is
Speaker 8: down like ten percent since last year, and given the
Speaker 8: rise and ridership over the same period, it's really down overall.
Speaker 8: We're back where we were roughly before the pandemic began
Speaker 8: in terms of the risk of being a victim of crime.
Speaker 8: They're like, you know, five to eight crimes on the
Speaker 8: subway system every day with a population four million right now,
Speaker 8: that's the size of the city of Los Angeles. So
Speaker 8: we're not ashamed of our safety record at all. It's
Speaker 8: actually pretty good. But Lisa's question is on the money,
Speaker 8: how do you get people back to normal life. Interestingly,
Speaker 8: if you go apples to apples with pre COVID, we're
Speaker 8: about close to eighty percent. Work from home is a factor.
Speaker 8: It's what's you know, pushed us down in terms of ridership.
Speaker 8: But there's so many people who use the subway system
Speaker 8: to go to school, to go you know, to go
Speaker 8: to medical appointments, just to live their lives. Same with
Speaker 8: the bus system that we're on the move. We are
Speaker 8: very much and rising and we've had four million rider
Speaker 8: days again and again in the last couple of weeks.
Speaker 8: It is headed in a good direction.
Speaker 1: Jenno, this is a personal mission for me. I sit
Speaker 1: on Fifth Avenue and it's a privilege to sit on
Speaker 1: Fifth Avenue, and I count the number of people on
Speaker 1: theer city buses. Sometimes they see four people, sometimes they
Speaker 1: see twelve people, but many of those buses are empty.
Speaker 1: How do we fund free bus riding so that the
Speaker 1: bottom quintile people in New York City can service the
Speaker 1: upper quintile. It's an outrage that we don't fix the
Speaker 1: transportation system of the poorest people in New York City.
Speaker 1: How do we do it?
Speaker 8: And you know, Tom that the key is to have
Speaker 8: transit remain affordable. I think you're right. I don't know
Speaker 8: if free everything is the right answer, but transit is
Speaker 8: one of the few things that makes New York City affordable.
Speaker 8: It is literally like ten percent the cost of owning
Speaker 8: an automobile. So we're really proud of that. It is
Speaker 8: one of the things that allows us to support our
Speaker 8: great you know, working in middle class New York community.
Speaker 8: You know the buses in midtime that you're seeing a
Speaker 8: lot of that is people can walk faster than they
Speaker 8: can than the bus can go because of that congestion.
Speaker 8: I'm convinced I grew up riding the bus. I'm convinced
Speaker 8: people are going to come back when we pick up
Speaker 8: the speed, congestion, pricing, bus lanes, bus camera enforcement are
Speaker 8: going to do that.
Speaker 1: What do you know about Lincoln Tunnel For those of
Speaker 1: you internationally and worldwide, the tunnel system in New York
Speaker 1: city is in an outrage some of the hours of
Speaker 1: the day when I'm getting older watching this, General, when
Speaker 1: do we get another tunnel to relieve the burden? What
Speaker 1: can you do about it? What can the mayor do
Speaker 1: about it?
Speaker 8: You know, honestly, Tom, I don't want to disappoint you,
Speaker 8: but I'm not here to advocate for expanding the access
Speaker 8: of automobiles and trucks into our central business district. Every
Speaker 8: time we build new capacity and that respect, it just
Speaker 8: fills up. So what we have to do is to
Speaker 8: build more and better mass transit. It's the way that
Speaker 8: we can continue to grow our economy in the population
Speaker 8: of our central business district, both workers and residents, without
Speaker 8: environmental consequences. And that's where we're headed. We're making those
Speaker 8: investments and.
Speaker 1: Update and an experiment for all the cities of the world.
Speaker 1: General levers with the MTA in New York City's saving
Speaker 1: us as Greg Valuer, chief US policy strusses at AGF Investments,
Speaker 1: who breeze us on Washington this morning. Greg, you and
Speaker 1: I within the five six stories, and yes, doctor Brainer
Speaker 1: talking there about the debt ceiling. You and I were
Speaker 1: looking at Ukraine and maybe the most important week for
Speaker 1: mister Putin since February of a year ago. Putin's fighting
Speaker 1: is military. Putin is fighting the so called mercenaries assistant him,
Speaker 1: and it's all happening in a battle which feels like
Speaker 1: the Battle of the Bulgian World War II.
Speaker 9: It's quite a story, Tom. This weekend Zelenski got assurances
Speaker 9: of more military aid from Western Europe. As you say,
Speaker 9: he's fighting with the Wagner mercenaries. But I think the
Speaker 9: big story is back Mout, which is this horrible, bloody
Speaker 9: fighting that's gone on for months. I think is now
Speaker 9: leading to some advances by the Ukrainian forces. What struck
Speaker 9: me over the weekend, Tom was film of Russian soldiers fleeing,
Speaker 9: maybe like nineteen seventeen, nineteen eighteen when they fled Europe
Speaker 9: at the end of World War One. If the Russian
Speaker 9: troops are fleeing, that's a really dramatic story.
Speaker 1: Bring it back to domestic politics here and that there
Speaker 1: is a theme for Ukraine against Ukraine. Is that an
Speaker 1: election issue or does that drift away towards November of
Speaker 1: two thousand twenty four.
Speaker 9: It's a long way away, obviously, But and Trump inflamed
Speaker 9: things on many fronts in the CNN interview, but one
Speaker 9: of the things Trump inflamed on was, of course, his
Speaker 9: lack of support for a Ukraine I think that will
Speaker 9: run into significant resistance among most Republicans.
Speaker 5: Greg.
Speaker 4: I just want to build on what you were talking about,
Speaker 4: that this could be one of the most significant developments,
Speaker 4: the most important stories out there. If Russian troops really
Speaker 4: are pantiting ship. Do you feel like there has been
Speaker 4: a material shift in this war where Ukraine is making
Speaker 4: headaway that perhaps is underappreciated in the market.
Speaker 1: Could be hard to say.
Speaker 9: What's the old saying the first casualty of war is
Speaker 9: the truth, so it's hard to say who's telling the truth.
Speaker 9: But I do sense a dramatic drop of morale, not
Speaker 9: just in the mercenaries from Wagner, but I think among
Speaker 9: Russian troops in general.
Speaker 4: We're going to be watching this really closely, especially given
Speaker 4: the potential shift over in Turkey and what that means
Speaker 4: for Ukraine's potential NATO membership. Back in the US, we
Speaker 4: have been talking about the debt sealing limit, and I
Speaker 4: know that people don't really want to talk about it
Speaker 4: because there's not really a new angle on it. But
Speaker 4: what do you make of this timeline that we have
Speaker 4: where President Biden has to get something together before he
Speaker 4: heads off to G seven and we're kind of shifting
Speaker 4: forward the timeframe base and a lack of tax or
Speaker 4: seats received by the US government.
Speaker 9: Well, I tell you, Lisa, there's a risk of a
Speaker 9: fake out here, of getting too optimistic. Everybody this morning
Speaker 9: is saying they had a good weekend. I think there
Speaker 9: is agreement on certain big concepts, like a cap on spending,
Speaker 9: clawing back some money from COVID. That's encouraging to see,
Speaker 9: but these are complicated issues that could take weeks to
Speaker 9: fully resolve. So I think that there won't be a
Speaker 9: deal on Tuesday. That's out of the question. Maybe a
Speaker 9: comment that they're getting closer, but after Biden comes back
Speaker 9: from aization trip, it could still take a few weeks
Speaker 9: to iron out all the details. Therefore, I think they
Speaker 9: have to have an extension.
Speaker 1: Just as one example, Greg away from the public program,
Speaker 1: social security and all that. Everybody's focused on. What does
Speaker 1: all this ballet mean for the Pentagon.
Speaker 9: I think they're still going to get an increase. You know,
Speaker 9: they got almost ten percent and this new fiscal year
Speaker 9: that started on October one. I don't think they're going
Speaker 9: to get ten percent in the next year's budget. Maybe
Speaker 9: five or six percent, but I don't see them getting
Speaker 9: a big haircut. And one of the reasons, of course,
Speaker 9: is Biden's desire to spend more money on Ukraine.
Speaker 1: Well, it seems to be everybody's desire to spend it.
Speaker 1: And yet there's this narrow part of I'm going to say,
Speaker 1: a Republican party, maybe joined by the left as well,
Speaker 1: that wants to be isolationist. I mean, we've been We've
Speaker 1: dealt with this for our entire lives. Does it ever
Speaker 1: get any traction in America? Witness through the Pentagon budget.
Speaker 9: I think the center holes on this. You've got a
Speaker 9: lot of Republicans, not just Lindsey Graham and Mitt Romney.
Speaker 9: You've got a lot of Republicans who want to keep
Speaker 9: up the defense spending, and with Joe Biden enough Democrats.
Speaker 9: So I think the center holes on this.
Speaker 2: And Greg, we're trying to work out whether spending cuts
Speaker 2: might come from to make a forecast on what the
Speaker 2: economy might look like. Greg, if you got any kind
Speaker 2: of base case whatsoever, from where they might come from,
Speaker 2: how big they might be, and what it might mean
Speaker 2: for growth.
Speaker 9: Yeah, John, I think you're going to see a cap
Speaker 9: on spending. I think that's very likely. They're just arguing
Speaker 9: over how much. Is it two four percent or is
Speaker 9: it zero. I don't think it's going to be zero.
Speaker 9: There will be some kind of a cap. They'll clawback
Speaker 9: on covid Aid. There are several other things that are
Speaker 9: on the table now, including if you want food stamps
Speaker 9: for federal benefits, you have to be willing to work,
Speaker 9: so I think you get it. Overall for the macro economy,
Speaker 9: I think it will be a slight headwind.
Speaker 2: Greg fam Jeff Investments. Greg, thank you.
Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and
Speaker 1: anywhere else you get your podcasts. Listen live every weekday
Speaker 1: starting at seven am Eastern on Bloomberg dot Com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg busines This up.
Speaker 1: You can watch us live on Bloomberg Television and always.
Speaker 1: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen,
Speaker 1: and this is Bloomberg