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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. We begin with our

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Speaker 2: top story, stock setting fresh record highs as investor, as

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Speaker 2: a wait, FED shared Jaypouse testimony Academy's Peter Cheer right.

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Speaker 2: In this we have argued quite aggressively that the FED

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Speaker 2: should make their first cut in July, partly because the

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Speaker 2: economic data supports it, but also taking the spotlight off

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Speaker 2: of the FED in the heat of the election. Peter

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Speaker 2: joins us now for more pink and mornit. The reasons

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Speaker 2: once about the economy, the second about the politics. So

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Speaker 2: let's start with the second one, the politics. Why is

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Speaker 2: that an important consideration for this Federal Reserve?

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Speaker 3: Well, I'm going to start with the first one, which

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Speaker 3: but basically every guest has been on saying September looks

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Speaker 3: likely they should be doing, they should be acting sooner

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Speaker 3: than later. I completely agree, and if anything, I would

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Speaker 3: air to the side that they do it in July.

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Speaker 3: If you do this in September, I just in visional

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Speaker 3: world where this is going to blow up in social media. Clearly,

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Speaker 3: if they cut in September, say stocks rally three five percent,

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Speaker 3: you will see the Trump campaign aggressively go after the FED,

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Speaker 3: blame them for playing favorites. It won't be the case,

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Speaker 3: but that the reality doesn't mean anything anymore, right, It's

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Speaker 3: how these things play out in the social media narrative

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Speaker 3: is what's important. You do the first cut in July,

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Speaker 3: you'll get some flak, but it's Suly thirty first, no

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Speaker 3: one cares. It'll quiet down and you can move on

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Speaker 3: and you set up a September rate cut. I think

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Speaker 3: much easier. That's how I would play it. You know,

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Speaker 3: maybe you're not supposed to think that way, but to me,

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Speaker 3: it makes the most sense.

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Speaker 2: We've drowned to distinction, repeat today this morning, persuade what

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Speaker 2: they should do and what it will do. This is

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Speaker 2: what you think they should do, what do you think

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Speaker 2: they will do, and what do you expect to hit

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Speaker 2: d from Cham and Pound this morning.

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Speaker 3: I think they're going to set us up for September.

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Speaker 3: I think they're going to continue to look at the data.

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Speaker 3: I think the data is going to come in weak.

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Speaker 3: I'm hopeful that CPI comes in low enough. Maybe it

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Speaker 3: lets them squeeze towards July. But I think it's already

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Speaker 3: too late with the messaging. So I think we get

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Speaker 3: that September cut twenty five, then another twenty five in November,

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Speaker 3: and then twenty five in December, so we get seventy

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Speaker 3: five this year.

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Speaker 4: Some people would say that just because the Fed has

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Speaker 4: even signaled to cut, we've already gotten the easing and

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Speaker 4: financial conditions that have given a shot of stimulus to

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Speaker 4: the economy. Why is that not the case, as we

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Speaker 4: have just experienced the thirty five, thirty fifth record high

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Speaker 4: of this year.

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Speaker 3: Well, so, for example, I just pulled up the equal

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Speaker 3: weight to SMP, which month to data is down two

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Speaker 3: point two percent. Year to date is up three and

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Speaker 3: a half percent. So this market has been very narrow rally, right.

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Speaker 3: It's really all about AI. The AI story this transitional,

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Speaker 3: So I don't think we should set policy based on

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Speaker 3: the excitement over AI. Right, if AI is real, it

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Speaker 3: might still be undervalued. So when you look at the

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Speaker 3: broad market, you know, the Russell two thousand still done

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Speaker 3: poorly value stocks. So I think we get caught up

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Speaker 3: in the broad indices. You look below the surface, markets

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Speaker 3: are only doing okay. I think the job data is turning.

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Speaker 3: It's turning fairly quickly, and with inflation around two point

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Speaker 3: eight percent or somewhere in that neighborhood, you don't want

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Speaker 3: to risk a recession. Back when we were five percent,

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Speaker 3: the Fed could afford a risk a recession, right, inflation

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Speaker 3: was so bad, so painful, they could do that. Now

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Speaker 3: there's no reason to create a recession. So all those

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Speaker 3: reasons tell me cut now. Even if financial conditions look

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Speaker 3: pretty decent. And I've liked in the last week or so,

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Speaker 3: twos tens is widening, and I do think one thing

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Speaker 3: people are going to, you know, find mistake in this

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Speaker 3: time is even as the FED cuts, I don't think

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Speaker 3: tens and thirties are going to respond that much. I

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Speaker 3: think tens and thirties are going to focus on the deficit.

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Speaker 3: The supply, and you're going to see twos tens go

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Speaker 3: back to zero, maybe slightly, you know, even uninverted over time,

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Speaker 3: and you're going to see that four thirty to four

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Speaker 3: to fifty range on tens hold even when the Fed

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Speaker 3: begins cutting rates.

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Speaker 4: There's a lot to unpack there.

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Speaker 2: Let's go to the deficit.

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Speaker 4: I am curious about how much the politics of the moment.

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Speaker 2: You guys are.

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Speaker 4: I'm serious because this is something that people talk about.

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Speaker 4: We just had Kelsey barrow On saying by the time year, I.

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Speaker 2: Know you guys are lacking my obsession.

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Speaker 4: It is important at a time, especially when you have

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Speaker 4: all of the monoptions this week. How much are you

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Speaker 4: looking at that.

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Speaker 2: It's something that sort of takes away that.

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Speaker 4: The opportunity to really buy into weakness.

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Speaker 3: So again, I think that's why yields are going to

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Speaker 3: stay somewhat high, suddenly high at the long end. It

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Speaker 3: comes up in conversation after conversation, And what I try

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Speaker 3: and bring back is if you remember August and September

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Speaker 3: last year, where treasuries were sale every single day, I

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Speaker 3: think we went from four percent to five percent no

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Speaker 3: matter what the data was. Maybe we'd rally briefly treasuries

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Speaker 3: go for sale. There's a huge fixation on the deficit,

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Speaker 3: our willingness to kind of talk about not paying. You're

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Speaker 3: going to see episodes of that. It's not going to

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Speaker 3: be NonStop. It's not consistent, right because this deficit is

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Speaker 3: going to take time. But I would expect every year

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Speaker 3: or so you get that sort of noise. Even earlier

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Speaker 3: this year, right we went from three ninety to four seventy,

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Speaker 3: same sort of trend. So I think more and more

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Speaker 3: you're going to see these breaks to the upside on

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Speaker 3: yields because people fixate on the deficit and neither party

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Speaker 3: is going to change suse.

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Speaker 4: You don't buy those those SIPs in price, not until we.

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Speaker 3: Get not until we get high enough in that range.

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Speaker 3: Because I think everyone's comfortable with treasuries right now. I

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Speaker 3: think people position too long. So down here at four thirty,

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Speaker 3: I'm selling treasuries. You know, maybe they go to four twenty.

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Speaker 3: I think we get back to four fifty before long,

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Speaker 3: even with the FED cutting, I think that's going to be.

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Speaker 3: The realization is, yeah, whatever the Fed's doing at the

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Speaker 3: front end is great, but it doesn't solve the deficit problem.

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Speaker 3: It doesn't solve our long term debt problems, and this

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Speaker 3: overall supply is still real. So that's why I'm not

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Speaker 3: back comfort the long end.

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Speaker 5: Quick go back to the optics, the political optics of

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Speaker 5: a September cut. Take that a step further. It's not

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Speaker 5: just going to be that the Trump campaign would come

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Speaker 5: out and maybe say, you know, they're in the tank

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Speaker 5: for President Biden. If Trump is elected, does this give

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Speaker 5: him the excuse with his own party to go back

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Speaker 5: to that Wall Street Journal report, which is that they

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Speaker 5: want to blunt the independence of the FED?

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Speaker 6: Yeah.

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Speaker 3: I think if you over the last year or so, right,

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Speaker 3: there's a lot more both from Trump and others talking

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Speaker 3: about the Fed's independence, questioning you know, Congress, what Congress

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Speaker 3: says over the FED. I think if they cut in September,

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Speaker 3: it leaves them much more open to under a new

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Speaker 3: administration attack about what their mandate is, whether they have

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Speaker 3: to be rule followers, how much flexibility they have. Again,

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Speaker 3: I think all of that may play out one way

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Speaker 3: or the other. I think it's less likely if they

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Speaker 3: do this in July. And again, the data is there

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Speaker 3: for them to think about cutting, and you would argue, right,

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Speaker 3: I think other people have is this lag effect, why

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Speaker 3: not get a couple cuts in earlier. I just feel

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Speaker 3: it would be very prudent and better for the fed's

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Speaker 3: long term health and independence to get something done sooner

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Speaker 3: than later.

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Speaker 5: And does he need to signal that today.

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Speaker 3: I think he should be pretty strong about if we

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Speaker 3: get good enough date in the coming weeks, we could

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Speaker 3: cut sooner. And that kind of gives him a little

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Speaker 3: bit of like CPI I think will actually be a miss,

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Speaker 3: so it'll be lower than expected. So I don't know

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Speaker 3: whether that's not a mis or win anymore, and however

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Speaker 3: we want to interpret it, but I think we'll get

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Speaker 3: a lower CPI. Any problems with CPI will either be

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Speaker 3: one off things explainable, or to be housing related, which

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Speaker 3: everyone now knows is lagged effect. It's one reason the

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Speaker 3: FED looks at pc and I've been learning more and

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Speaker 3: more about this. But suppose it would take an act

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Speaker 3: of cong risk to change how CPI uses that, which

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Speaker 3: is why people go to cp You know, you look

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Speaker 3: at anything like Zillow or anything that's kind of contemporaneous

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Speaker 3: rent let's come way down, so it's artificially inflated. I

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Speaker 3: think those are the things that give him the leeway

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Speaker 3: between the jobs report and that to like put July

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Speaker 3: on the table.

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Speaker 2: It Councy Barrow is with us about ten to fifteen

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Speaker 2: minutes ago, and shade really through a distinction between cunning

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Speaker 2: interest rights to fine tune policy and response to disinflation

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Speaker 2: and cunning interest rights and response to a much weaker

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Speaker 2: labor market. Now I said that there were bearish right

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Speaker 2: cuts and bullish right cuts, I'd actually let your opinion

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Speaker 2: on that. Do barish rate cuts exist? Are there right

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Speaker 2: cuts that are bearish for this market?

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Speaker 7: You know?

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Speaker 3: I think it's all relative what's been priced in. So

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Speaker 3: right now, I think, yeah, if we had a really

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Speaker 3: you know, steep dropping employment, then we get a Barish

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Speaker 3: rate cut, and maybe equities couldn't keep up and couldn't

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Speaker 3: keep going. But as it stands right now, I think

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Speaker 3: everything's going to be really positive. I think we're all

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Speaker 3: sitting there trying to watch what triggers this breakout though

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Speaker 3: of the Rustle two thousand. The value the equal weighted

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Speaker 3: versus that still to me isn't clear.

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Speaker 2: Right.

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Speaker 3: It feels to me we've been on this path where

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Speaker 3: the data is good enough you should see the broad

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Speaker 3: economy doing well. The fed's accommodate enough, you should do that,

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Speaker 3: and those still aren't working.

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Speaker 2: We all remember November twenty sixteen, and we've talked about

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Speaker 2: this a few times. Small caps rallied almost eleven percent

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Speaker 2: in November twenty sixteen. On the Trump election. I think

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Speaker 2: a question we've all gone back to around the type

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Speaker 2: in the last couple of weeks. It's just how relevant

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Speaker 2: that playbook is this time around? Is it relevant at all?

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Speaker 3: You know, I'm kind of ignoring most of the election stuff.

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Speaker 3: I think, one, it's too clear what's going to go on,

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Speaker 3: who's going to be even representing? And I think we

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Speaker 3: see time and time again, right, whatever they say they're

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Speaker 3: going to do, the policies wind up coming.

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Speaker 7: Much more and narrow.

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Speaker 3: I've been a big fan of Mexico recently, right, there

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Speaker 3: was a lot of concern after the Mexican elections that

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Speaker 3: would change. You saw the Mexican takes all that's coming

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Speaker 3: back to normal. Right, Whatever you say to get elected

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Speaker 3: and whatever you wind up doing tend to be two

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Speaker 3: very different things. So I'm paying very little attention to

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Speaker 3: any other rhetoric. And I would say on top of

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Speaker 3: all of it is it feels that people are very

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Speaker 3: willing to put their own interpretations on it.

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Speaker 7: So if you're empty, if.

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Speaker 2: We get politically in chose dislocations in the markets through

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Speaker 2: this summer, you're a buyer.

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Speaker 7: A buyer, Yes, that's.

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Speaker 2: Exactly what Cassie Burrow said ten minutes ago, even.

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Speaker 4: Though her sense of what to buy was somewhat different.

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Speaker 4: So that's I guess my question to you, what are

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Speaker 4: you a buyer of during the silication?

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Speaker 3: So the one thing I would say, maybe slightly different,

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Speaker 3: is I do like energy, And I would say, when

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Speaker 3: you look at the world right now, you've got Pudin,

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Speaker 3: dictator g dictator Kim, dictator Kumane, effectively a dictator. They

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Speaker 3: have to be looking at what's going on here, and

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Speaker 3: they probably don't understand our political system, but they see

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Speaker 3: the leader of the free world, the commander in chief,

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Speaker 3: you know, internally focused facing all these questions. I think

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Speaker 3: the risk that someone takes some action and tries to

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Speaker 3: take advantage of that over the summer is much higher.

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Speaker 3: So I am looking for the potential for a geopolitical

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Speaker 3: risk that I would not fade, and that's why I

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Speaker 3: kind of want to own commodities ahead of that. I

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Speaker 3: think almost anything that gets done would affect energy prices

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Speaker 3: in particular. And on top of that, not quite even

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Speaker 3: in that same vein, we're sitting here all this internal focus.

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Speaker 3: Obon's traveling to Russia, right, Pudin and Modi met, the

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Speaker 3: rest of the world's moving on. Well, we're internally focused.

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Speaker 3: That I don't like for the future.

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Speaker 2: I got to squeeze this in. You're surrounded by generals

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Speaker 2: at academy. You just said take advantage. What does taking

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Speaker 2: advantage look like? What does that mean?

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Speaker 3: You know? I think if you watch what's going on right,

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Speaker 3: the last time we did funding for Ukraine, right, A

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Speaker 3: lot of this plays out in social media. How difficult

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Speaker 3: that was to get over the hurdle. You watch what's

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Speaker 3: been going on with Israel and Goza, where we're supposed

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Speaker 3: to support what we're not supposed to do. A lot

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Speaker 3: again plays out in social media. So we're having a

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Speaker 3: lot of activity around the second Thomas Shoal in the Philippines,

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Speaker 3: a couple hundred miles off the coast of Philippines. Would

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Speaker 3: anyone really care? What would we do if something like that?

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Speaker 7: So?

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Speaker 3: I think we're already stretched. We have engaged in two

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Speaker 3: wars neither of those. Are you going smoothly? Certainly by

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Speaker 3: any stretch of the imagination. So do you push the envelope?

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Speaker 3: Do you do something different? I think China could do

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Speaker 3: something maybe, you know North Korea has been extremely quiet.

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Speaker 3: Do you get weapons sales, something to just shake it

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Speaker 3: up where they view that one. We're stretched too. They

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Speaker 3: can use misinformation social media to push against us, and

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Speaker 3: the time frame is right for that, where we already

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Speaker 3: have enough questions without their misinformation.

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Speaker 2: Pete, we could do this all low. It's going to

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Speaker 2: see you. I know you've got to go. Pitch of

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Speaker 2: Academy Security, Democratic donor Troy Beck saying he would like

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Speaker 2: to see Biden drop out, try and police to say, John,

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Speaker 2: just now try wonderful to catch up with you, sir.

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Speaker 2: For people in the audience who aren't familiar with you,

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Speaker 2: can you just share with us how you've supported democratic

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Speaker 2: causes this president in years gone by and what changed

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Speaker 2: for you two thursdays ago.

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Speaker 8: So I've been a defender of President Biden as first

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Speaker 8: of all his presidency. I think by any objective measure,

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Speaker 8: he's done an extraordinary job. You know, he has passed

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Speaker 8: to infrastructure bills, one of them bipartisan chips bill, prescription drugs,

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Speaker 8: addressing you know, real issues for Americans.

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Speaker 7: And I think on a sort.

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Speaker 8: Of degree of difficulty adjusted basis, if you consider he's

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Speaker 8: facing an incredibly hostile opposition, one that in many cases

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Speaker 8: doesn't even recognize the you know, legitimacy of his clear

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Speaker 8: win in twenty twenty, right, that's the conditions in which

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Speaker 8: he's operating. I think he can make a case he's

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Speaker 8: the best Democratic president of my lifetime in terms of

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Speaker 8: what he has accomplished. I supported him in twenty twenty,

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Speaker 8: I supported him again in this cycle, and to be clear,

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Speaker 8: however this resolves, I will support him or whoever the

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Speaker 8: Democratic nominee is. And I think that's an important, an

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Speaker 8: important note. I think whatever happens with this you know,

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Speaker 8: inter family squabble, we're going to have to unify around

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Speaker 8: our candidate, and if that's Biden, I will get behind him.

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Speaker 7: I'll walk on glass for the guy.

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Speaker 8: What's changed is that the debate confirmed, you know, the

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Speaker 8: concerns that I think everybody had, and I think most

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Speaker 8: notably don't voters. I think the Biden campaign has very

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Speaker 8: understandably come out and shrewdly attacked this as sort of

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Speaker 8: a you know, a cabal led by elites or donors millionaires.

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Speaker 8: In that quote you just showed if I were them,

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Speaker 8: that's what i'd say too. But I think what's actually

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Speaker 8: happening here is that in a sense, donors and the

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Speaker 8: electeds who have come out and I've talked to elected

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Speaker 8: privately who share their concerns and would like to change,

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Speaker 8: but are not there yet to do it publicly, And

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Speaker 8: I understand some of the calculations there.

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Speaker 7: I think what's.

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Speaker 8: Happening is people are coming around to exactly the view

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Speaker 8: that voters have been expressing through polls for a year.

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Speaker 7: I think that's what's going on.

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Speaker 8: And so I think that what the debate confirmed, and

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Speaker 8: for that matter, the radio interview he did and the

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Speaker 8: Stephanopolis interview, they have confirmed the degree of impairment from age.

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Speaker 8: So it's true. Everyone knew that, you know, this was

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Speaker 8: an eighty one year old man running for president, and

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Speaker 8: that's hard. What we were hoping for was that he

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Speaker 8: was anomalous and that he would have the the stamina

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Speaker 8: and acuity to do this. And I think what a

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Speaker 8: lot of people are saying now is we need a

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Speaker 8: candidate who can express, who can make the case, you know,

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Speaker 8: with the vigor that this moment deserves, given the authoritarian

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Speaker 8: threat that we face in Trump and the administration that

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Speaker 8: he would install.

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Speaker 5: Trey is the concern with you and the people you're

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Speaker 5: speaking with about Biden winning in November or Biden's ability

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Speaker 5: to govern for the next four years.

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Speaker 7: I think the two are related, right.

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Speaker 8: So, historically Biden has represented a you know, a vote

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Speaker 8: for safety. In twenty twenty, he was you know, old

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Speaker 8: by the standards of somebody running for president, but he

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Speaker 8: was considered establishment.

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Speaker 7: He was coherent.

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Speaker 8: He was not saying crazy things and threatening authoritarian policies

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Speaker 8: like the alternative, which was Donald Trump. I think what

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Speaker 8: some voters are struggling with now is they already know Trump.

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Speaker 7: Is a bad guy.

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Speaker 8: They know he lies, they know he's literally a criminal,

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Speaker 8: He's a convicted criminal. They know he is threatening policy

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Speaker 8: implementation that they don't agree with, whether it's reproductive rights,

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Speaker 8: uh you know, uh, firing you know, much of the

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Speaker 8: civil service, and installing loyalists, using the the judiciary to

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Speaker 8: punish people. But they're struggling with this because they now

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Speaker 8: see a less vigorous Joe Biden and I don't blame

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Speaker 8: Joe Biden for this. I believe that the Biden campaign,

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Speaker 8: when they green lit this campaign, had a different candidate.

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Speaker 8: And I think what we've seen is uh is significant impairment.

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Speaker 8: I'm not a doctor, but I saw what I saw,

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Speaker 8: and others saw what they saw, and we need somebody

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Speaker 8: to make the case during the campaign and then, of course,

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Speaker 8: should we win, and I fervently hope we do. We

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Speaker 8: want someone with the vigor to do one of the

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Speaker 8: hardest jobs in the world. Now, I want to make

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Speaker 8: clear I don't have any substance of concerns about Biden's age.

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Speaker 8: You're not electing one person, You're electing a team. In

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Speaker 8: my mind and many many people I know understand this.

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Speaker 8: You're talking about an army of bureaucrats high and low.

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Speaker 8: And I know the team that Trump is assembling. I

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Speaker 8: know what he assembled previously and what he's talking about

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Speaker 8: doing now is worse and frightening. And I know that

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Speaker 8: Biden is surrounded by hyper competent people handling things domestically

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Speaker 8: and abroad. But you know, the way most voters see

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Speaker 8: it is they see two names on the ballot, or

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Speaker 8: in this case, maybe three or four, depending on the

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Speaker 8: state they live.

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Speaker 5: It's right, didn't his team around him do the American

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Speaker 5: people disservice by hiding a lot of these issues that

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Speaker 5: they have of the past few months that we saw

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Speaker 5: out full display for ninety minutes on CNN two thursdays ago.

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Speaker 7: You know a lot of people are making that case.

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Speaker 7: I don't know.

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Speaker 8: I don't know what the campaign sees, I don't know

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Speaker 8: what his staff sees on a day to day basis.

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Speaker 8: I'm not here to make that sort of allegation, you know,

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Speaker 8: of a cover up. What I'll say is, we did

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Speaker 8: see what we saw. I think we've seen things previously,

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Speaker 8: and people rightly say, well, haven't there been signs of

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Speaker 8: decline or physical impairment, you know, slower Gate, et cetera,

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Speaker 8: you know, prior to the debate. Absolutely, But I think

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Speaker 8: what we were hoping was that those were anomalous, and

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Speaker 8: I think when we saw on the biggest stage the

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Speaker 8: performance we saw, you know, it confirmed a lot of

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Speaker 8: people's concerns.

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Speaker 2: Yeah, well try.

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Speaker 4: There is also this issue of whether Joe Biden is

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Speaker 4: currently operating at the same playbook with the same playbook

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Speaker 4: in some ways, the Donald Trump is by just something

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Speaker 4: coming out and being defiant and saying people get in line.

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Speaker 7: Yeah.

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Speaker 8: So, on the one hand, I do find that dispiriting

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Speaker 8: that you know, he's describing you know, everyone as either

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Speaker 8: a cabala the lead or you know, acting in bad faith.

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Speaker 8: On the other hand, the positive of that is he's fighting,

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Speaker 8: and he's showing the sort of scrappy joe that got

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Speaker 8: him elected. His campaign has clearly mobilized and forced to

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Speaker 8: you know, enlist allies. Now a lot has been made

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Speaker 8: of those allies and saying, well, look the labor movement,

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Speaker 8: people of color who are historically you know, critical to

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Speaker 8: his political power, or lining up behind them.

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Speaker 7: I think that that's.

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Speaker 8: A very I think that's a very you know, good

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Speaker 8: political line of attack by them, But I don't think

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Speaker 8: it's substantively true. I think what you've seen is elites

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Speaker 8: from those you know, labor union leaders lining up behind them.

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Speaker 8: And by the way, privately, labor union leaders have expressed

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Speaker 8: grave concerns to me. I've also, you know, I can

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Speaker 8: cite any number of polls that show that people of

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Speaker 8: color are deeply concerned about Biden's age. You know, something

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Speaker 8: like sixty four percent of all voters would like Biden

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Speaker 8: replaced on the ticket, and that includes fifty five percent

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Speaker 8: of black voters.

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Speaker 7: So I think it's it's.

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Speaker 8: Substantively not true that the average person of color who's

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Speaker 8: a voter has no concerns at all about Biden's age.

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Speaker 2: Trey, appreciate your input today. We're going to have to

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Speaker 2: do this again soon. Trey Beck there, the Democratic donor,

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Speaker 2: on the latest with the president, how much things changed

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Speaker 2: for him two thursdays ago. Sticking with travel, the TSA

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Speaker 2: screening more than three million people on Sunday, rounding out

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Speaker 2: the July fourth holiday weekend. It's the first time that

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Speaker 2: many passengers have been screened in a single day in

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Speaker 2: the agency's history. Eight of the ten busiest screening days

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Speaker 2: have come this year, as travel demand top's pre pandemic levels.

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Speaker 2: To discuss this and a whole lot more, Helene Becker

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Speaker 2: of TD Cowen joins us. Helene, let's talk about this

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Speaker 2: super busy weekend at a time when bobbing is I've

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Speaker 2: been to build planes and United Airlines at least their

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Speaker 2: jets are strutting to hold onto the wheels. Helene, I'm

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Speaker 2: just wondering if things too busy.

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Speaker 1: Yeah, thanks for the question, John, Yeah, I mean, we've

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Speaker 1: never seen these kind of travel levels before. The system

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Speaker 1: has proven that it really is having a hard time

437
00:20:18,400 --> 00:20:22,040
Speaker 1: handling it, especially when there's bad weather and we have

438
00:20:22,200 --> 00:20:27,080
Speaker 1: huge delays and so on. It just cascades down through

439
00:20:27,080 --> 00:20:32,680
Speaker 1: the entire network, and so you're seeing bigger plane in

440
00:20:32,760 --> 00:20:37,760
Speaker 1: general rather than more service because there's only so much

441
00:20:37,800 --> 00:20:41,040
Speaker 1: that can be done. And we don't often, you know,

442
00:20:41,119 --> 00:20:43,359
Speaker 1: you and me and Lisa and the team, we always

443
00:20:43,359 --> 00:20:45,919
Speaker 1: talk about airline traffic. We don't talk about what's happening

444
00:20:45,960 --> 00:20:49,080
Speaker 1: at the airports. And the airports are having their own

445
00:20:49,160 --> 00:20:54,919
Speaker 1: issues with lack of parking, with the lack of in

446
00:20:54,960 --> 00:20:59,040
Speaker 1: some cases, lack of food options, and lack of seating,

447
00:20:59,280 --> 00:21:02,600
Speaker 1: especially at some of the older airports where people you know,

448
00:21:02,640 --> 00:21:05,440
Speaker 1: are asked to come early and then they have to wait.

449
00:21:06,040 --> 00:21:08,840
Speaker 1: There's no charging stations, and a lot of older airports

450
00:21:08,880 --> 00:21:12,520
Speaker 1: the charging stations and newer airports don't work. So, you know,

451
00:21:12,560 --> 00:21:16,159
Speaker 1: there's this whole ecosystem that was built around the smaller

452
00:21:16,800 --> 00:21:20,320
Speaker 1: level of population that travels, and now we're seeing so

453
00:21:20,480 --> 00:21:24,360
Speaker 1: many people travel on a regular basis. To your point,

454
00:21:24,720 --> 00:21:27,920
Speaker 1: eight of the ten busiest days have been this year,

455
00:21:28,520 --> 00:21:30,880
Speaker 1: and most of them have been in the last six weeks.

456
00:21:31,200 --> 00:21:33,960
Speaker 4: So do you think that, Helene, this is introducing a

457
00:21:34,040 --> 00:21:37,119
Speaker 4: problem that is just would have been the case even

458
00:21:37,560 --> 00:21:40,000
Speaker 4: pre pandemic, or do you think that it's been exacerbated

459
00:21:40,040 --> 00:21:43,160
Speaker 4: to a big degree because the personalitist isn't there after

460
00:21:43,240 --> 00:21:45,840
Speaker 4: a lot of the layoffs in twenty twenty in twenty

461
00:21:45,880 --> 00:21:48,240
Speaker 4: twenty one that have left a lot of senior people

462
00:21:48,560 --> 00:21:49,760
Speaker 4: no longer in the workforce.

463
00:21:50,680 --> 00:21:52,879
Speaker 1: Yeah, that's a great question, and the answer is yes.

464
00:21:53,520 --> 00:21:57,200
Speaker 1: I think this level of travel was coming anyway, because

465
00:21:57,240 --> 00:21:59,679
Speaker 1: you have an aging population and you have a lot

466
00:21:59,720 --> 00:22:02,880
Speaker 1: of peopleeople who have more time to travel, and they're

467
00:22:02,880 --> 00:22:05,280
Speaker 1: doing so right. They're doing a lot of bucketless trips

468
00:22:05,280 --> 00:22:07,639
Speaker 1: and so on. So you're seeing this huge increase in

469
00:22:07,880 --> 00:22:11,440
Speaker 1: international travel. For younger people, they got used to traveling

470
00:22:11,440 --> 00:22:13,639
Speaker 1: with their parents and they want to continue to travel

471
00:22:13,640 --> 00:22:17,200
Speaker 1: with their own families. So you're seeing a lot of that.

472
00:22:17,359 --> 00:22:20,439
Speaker 1: But to your point, we were expecting those kind of

473
00:22:20,440 --> 00:22:23,399
Speaker 1: travel numbers maybe a little bit later in the decade.

474
00:22:22,960 --> 00:22:25,159
Speaker 7: Not so much now.

475
00:22:25,760 --> 00:22:29,320
Speaker 1: And also, all those people who left, whether they were

476
00:22:29,400 --> 00:22:33,640
Speaker 1: furloughed or they chose early retirement, or they chose their

477
00:22:33,760 --> 00:22:37,520
Speaker 1: careers in the twenty twenty to let's say twenty one

478
00:22:38,119 --> 00:22:41,040
Speaker 1: mid twenty twenty two timeframe. The people who have come

479
00:22:41,080 --> 00:22:45,080
Speaker 1: in to replace them more or less experienced. The FAA

480
00:22:45,160 --> 00:22:48,600
Speaker 1: says were short about three thousand air traffic controllers. Congress

481
00:22:48,600 --> 00:22:51,800
Speaker 1: approves the new budget which allows for the hiring of more.

482
00:22:52,160 --> 00:22:54,560
Speaker 1: It also allows a path for those who have been

483
00:22:54,960 --> 00:22:58,439
Speaker 1: air traffic controllers in the military to come into the

484
00:22:58,520 --> 00:23:02,960
Speaker 1: network without going through the hire FA training academy. So

485
00:23:03,160 --> 00:23:05,919
Speaker 1: there is a way to increase that. But if the

486
00:23:05,960 --> 00:23:10,560
Speaker 1: busiest airports, the pay scales are still relatively low, so

487
00:23:10,680 --> 00:23:13,640
Speaker 1: people don't want to do that career. They don't want

488
00:23:13,640 --> 00:23:16,960
Speaker 1: that job because they have to live within I think

489
00:23:17,040 --> 00:23:19,359
Speaker 1: an hour an hour and a half of their base.

490
00:23:21,040 --> 00:23:23,280
Speaker 1: They don't It's very expensive to live in the New

491
00:23:23,359 --> 00:23:26,359
Speaker 1: York area, it's very expensive to live in Chicago area,

492
00:23:26,480 --> 00:23:29,679
Speaker 1: San Francisco, and so people don't want those jobs. And

493
00:23:29,720 --> 00:23:32,240
Speaker 1: the result is that we have this limitation on how

494
00:23:32,320 --> 00:23:35,320
Speaker 1: much capacity can grow, which is good for It should

495
00:23:35,480 --> 00:23:38,720
Speaker 1: eventually be good for airlines because they should make more money,

496
00:23:39,160 --> 00:23:42,320
Speaker 1: but for travelers it means they have to pay more

497
00:23:42,320 --> 00:23:43,280
Speaker 1: for airline tickets.

498
00:23:43,480 --> 00:23:45,840
Speaker 5: Can we talk about what happened yesterday with United the

499
00:23:45,840 --> 00:23:48,119
Speaker 5: most recent mishap when it comes to losing its wheel,

500
00:23:48,119 --> 00:23:50,560
Speaker 5: and John asked the question earlier that was the right one.

501
00:23:50,600 --> 00:23:52,440
Speaker 5: Do you think this is a United issue or do

502
00:23:52,480 --> 00:23:54,160
Speaker 5: you think this is a Boeing issue.

503
00:23:56,240 --> 00:23:58,440
Speaker 1: I think it's an issue. I think it's more of

504
00:23:58,480 --> 00:24:01,480
Speaker 1: a supply chain issue, and I think in this case

505
00:24:01,520 --> 00:24:03,800
Speaker 1: it was a unit probably a United issue, not a

506
00:24:03,800 --> 00:24:06,879
Speaker 1: Boeing issue. Aircraft come out of maintenance, they have to

507
00:24:06,880 --> 00:24:09,159
Speaker 1: be double check, triple check before they go back on

508
00:24:09,200 --> 00:24:11,560
Speaker 1: the line, and it's just a case with a wheel

509
00:24:12,119 --> 00:24:14,720
Speaker 1: falling off. This is not obviously the first time United

510
00:24:14,720 --> 00:24:17,040
Speaker 1: has had an issue. I don't want to disparage them

511
00:24:17,080 --> 00:24:19,680
Speaker 1: because they're a safe airline. I fly them a lot.

512
00:24:19,720 --> 00:24:21,359
Speaker 1: You guys probably fly them as fair them out and

513
00:24:21,400 --> 00:24:23,880
Speaker 1: being in the New York area, so I don't want

514
00:24:23,880 --> 00:24:25,920
Speaker 1: to say negative things about them. But yeah, I mean

515
00:24:26,080 --> 00:24:29,160
Speaker 1: every airline can be good or bad on any given day,

516
00:24:29,280 --> 00:24:32,040
Speaker 1: and they're just having this issue. And for them, this

517
00:24:32,160 --> 00:24:34,679
Speaker 1: was a seven five seven I think that you're talking about,

518
00:24:35,080 --> 00:24:37,879
Speaker 1: and that's an older plane that's been around for a

519
00:24:37,960 --> 00:24:40,119
Speaker 1: very long time with a really good safety record.

520
00:24:40,520 --> 00:24:43,359
Speaker 2: Aline, what do you like right now in the airline sector,

521
00:24:43,440 --> 00:24:45,560
Speaker 2: everyone seems they left out, so terminal four is a mess.

522
00:24:45,680 --> 00:24:47,720
Speaker 2: Just to throw that out again, Alan, what do you

523
00:24:47,840 --> 00:24:50,080
Speaker 2: like in the airline sector right now?

524
00:24:50,280 --> 00:24:53,120
Speaker 6: Well, Delta actually was our top pick for twenty twenty four,

525
00:24:53,280 --> 00:24:57,000
Speaker 6: so getting thrown under the bus there, but yeah, you know,

526
00:24:57,160 --> 00:25:00,639
Speaker 6: I think from a balance sheet perspective, from a traffic perspective,

527
00:25:01,200 --> 00:25:05,280
Speaker 6: growth opportunity. Their big advantage is that only pilots are

528
00:25:05,359 --> 00:25:06,520
Speaker 6: unionized on property.

529
00:25:06,520 --> 00:25:07,520
Speaker 7: Everybody else is.

530
00:25:07,480 --> 00:25:10,639
Speaker 1: Not unions, so they have the ability to make adjustments

531
00:25:10,680 --> 00:25:14,639
Speaker 1: without going through an entire big process. Unlike the other airlines.

532
00:25:14,680 --> 00:25:16,560
Speaker 1: If they want to make adjustments, they have to go

533
00:25:16,640 --> 00:25:19,560
Speaker 1: through the unions. So Delta is our top pic for

534
00:25:20,040 --> 00:25:22,439
Speaker 1: twenty twenty four. I think it still continues to be.

535
00:25:23,240 --> 00:25:28,760
Speaker 1: We also have Buys and United and Alaska Airs other ideas.

536
00:25:28,840 --> 00:25:29,399
Speaker 7: Copa.

537
00:25:29,600 --> 00:25:31,720
Speaker 1: I've talked to you guys a lot about Coca in

538
00:25:31,720 --> 00:25:34,760
Speaker 1: the past. It's one of our favorite names in the

539
00:25:34,760 --> 00:25:37,280
Speaker 1: mid cap airliance sector. So I think those are they

540
00:25:37,320 --> 00:25:38,280
Speaker 1: our top four or five.

541
00:25:38,440 --> 00:25:40,520
Speaker 2: Elaine, thanks for jumping on for us. I appreciate it.

542
00:25:40,520 --> 00:25:43,600
Speaker 2: A line back of the of td cown. This is

543
00:25:43,640 --> 00:25:48,000
Speaker 2: the Bloomberg Survenants podcast, bringing you the best in markets, economics,

544
00:25:48,000 --> 00:25:50,960
Speaker 2: angio politics. You can watch the show live on Bloomberg

545
00:25:51,000 --> 00:25:54,160
Speaker 2: TV weekday mornings from six am to nine am Eastern.

546
00:25:54,440 --> 00:25:57,800
Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else

547
00:25:57,840 --> 00:26:00,280
Speaker 2: you listen, and, as always, on the Bloomberg term nope

548
00:26:00,400 --> 00:26:06,000
Speaker 2: and look bloom bug business Sounds Yeah,