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Speaker 1: This is the Bloomberg Surveillance Podcast.

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Speaker 2: I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz.

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Speaker 2: Join us each day for insight from the best an economics, geopolitics,

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Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple,

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Speaker 2: Spotify and anywhere you get your podcasts, and always on

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Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business app.

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Speaker 3: Christopherroun with us around a tay Bupana had a technical

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Speaker 3: of Matros Strategy strtig us a bad company. Chris good moins,

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Speaker 3: it's great to be here. Is it time to buy

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Speaker 3: that story?

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Speaker 4: In China, I would say this, I wouldn't be sure.

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Speaker 4: Think about how terrible the newsflow has been the last

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Speaker 4: three or four which probably the most barrett news out

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Speaker 4: of China I've seen since eight And what hasn't broken

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Speaker 4: down iron Ore come to your point, has knockne down?

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Speaker 4: Copper has not broken down. The Chinese two year yield

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Speaker 4: has stopped going down. So I think the price action

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Speaker 4: doesn't reflect the bearishness from the news. As someone who

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Speaker 4: tries to marry, how does price action first news interact

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Speaker 4: every day? It will be difficult for me to be

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Speaker 4: here short and comfortable with that when I've gotten every

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Speaker 4: piece of information in the direction of the bears, and

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Speaker 4: price won't break lower. So I think, at a minimum,

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Speaker 4: cover your shorts and open your imagination to the idea

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Speaker 4: that something might be changing there.

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Speaker 2: Chris, you and I are trend based analysis. There's a

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Speaker 2: stochastic catching a knife in the dark and getting on

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Speaker 2: a trend, staying on a trend. The trend you're most

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Speaker 2: interested in is oil. I link oil demand directly to

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Speaker 2: a Pacific rim recovery.

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Speaker 1: Am I right to do that?

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Speaker 4: I think we can link it to a number of

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Speaker 4: inputs that certainly being one of them limited supply. I

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Speaker 4: think the supply side of this is equally as important.

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Speaker 4: But at the end of the day, we've had this

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Speaker 4: just bearish onslaught of Russia news and of China news.

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Speaker 4: And what hasn't gone down is crude. Crud's bottomed. It's

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Speaker 4: positive in our trend work, I think brent on its

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Speaker 4: way to ninety. Here. Look how the energy stocks, after

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Speaker 4: a pretty meaningful consolidation or pause this year, have just

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Speaker 4: regained the flag of leadership. When I look sector bisector,

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Speaker 4: there's not another group that has say ninety percent of

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Speaker 4: issues of the two hundred day, that has relative leadership.

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Speaker 4: Inflecting again that the energy you have.

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Speaker 2: A sex sound just as one example, what is xomb

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Speaker 2: I mean basically it hasn't gone down as oil went

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Speaker 2: from one twenty to seventy whatever back up to eighty

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Speaker 2: as well. Is oil catching up to the equity stocks

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Speaker 2: or do the oil stocks surge ahead of a recovering oil?

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Speaker 4: Yeah, Tom, I think one of the things we try

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Speaker 4: to do in our work is understand the regime we're in,

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Speaker 4: and therefore we know what rules to play by. I

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Speaker 4: think for so many years, every single rally in crude

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Speaker 4: was one you could sell. Every time the energy stocks bounced,

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Speaker 4: you should sell them. This is a different regime. We've

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Speaker 4: had six months of a benign consolidation and energy and

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Speaker 4: now it's reasserting itself to the point on exon. What

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Speaker 4: I'm encouraged by is a lot of the return to

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Speaker 4: leadership from energy has come without the major integrators doing

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Speaker 4: a whole heck of a lot here. This has been

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Speaker 4: the service names, this has been the EP names. Look

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Speaker 4: at some of the big global names here as well,

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Speaker 4: which have all really reignited in terms of a leadership story.

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Speaker 5: Okay, what about elsewhere in cyclicals? Financial stocks in particular.

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Speaker 5: I know you're looking at some of the banks. We

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Speaker 5: were just talking about how we're continuing to see the

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Speaker 5: ramifications of the failures we've seen this year. What's happening

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Speaker 5: in those guys.

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Speaker 4: I think if you told me that the Bank index

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Speaker 4: would be down fifteen percent year to day, I wouldn't

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Speaker 4: guess the SMP would be up fifteen percent year to day.

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Speaker 4: We went back yesterday and looked at every major SMP

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Speaker 4: low over the last hundred years. This would be the

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Speaker 4: first time in one hundred years where you're nearly a

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Speaker 4: year off the low last October, where SMP's up some

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Speaker 4: number and banks are actually down. It would be more

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Speaker 4: normal if banks were up seventy percent. Here they're down

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Speaker 4: fifteen from where they were last October. You name by name.

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Speaker 4: It's just odd to me that city group was back

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Speaker 4: on the loads. Big of America's right there. Goldman and

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Speaker 4: Morgan Stanley look weak, and we know the regionals have rolled.

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Speaker 4: I think it's difficult to entirely dismiss that. I think

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Speaker 4: the benign explanation is listen, fifty percent of the S

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Speaker 4: and p's above, the two hundred and fifty percent is below.

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Speaker 4: It's a very very split tape. What I don't like

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Speaker 4: is on the wrong side of the split tape, you

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Speaker 4: have some pretty important groups like banks.

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Speaker 3: So if you're saying we're too pessimistic on China, are

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Speaker 3: we too constructive on the United States?

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Speaker 6: Yeah?

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Speaker 4: I think we're probably first, probably too constructive on Europe,

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Speaker 4: which I think is deteriorating right now. Like look at

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Speaker 4: three month low German d acts, three month low French

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Speaker 4: CAC and you know what drove a lot of those

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Speaker 4: markets where European luxury names, those have all rolled here,

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Speaker 4: European discretionary has rolled. So you know, in a way,

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Speaker 4: go back fourteen to fifteen months ago, Europe was kind

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Speaker 4: of first to bottom and turn up and lead. That

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Speaker 4: seems to be flagging here. So I think before you

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Speaker 4: talk about US at major risk, I think there's a

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Speaker 4: change going on in Europe. You see in euro usdcross

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Speaker 4: as well, which has come in sharply as US German

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Speaker 4: rate differentials have changed.

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Speaker 3: So what am I positioning for Donna strengths? What are

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Speaker 3: you looking for? Why do your positions take advantage of that.

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Speaker 4: You know what's funny is I think it's interesting how

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Speaker 4: consensus short dollar is yet dollars really not going down

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Speaker 4: almost against anything I pair it against in a way

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Speaker 4: time it actually makes energies resilience here even more noted

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Speaker 4: that it's happened even as dollar has firm, but dollars

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Speaker 4: firm against end, it's firm against Euro, it's firm against Stirling,

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Speaker 4: it's firm against C and H. So hard for me

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Speaker 4: to really embrace the short dollar call when it's just

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Speaker 4: not on the charts.

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Speaker 2: And I'm looking at BBDXY, which is a blended bank

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Speaker 2: index which includes a lot of emerging market in China

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Speaker 2: as well, and to be kind, it's well behaved and

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Speaker 2: centered trend on the trading level of two standard deviations

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Speaker 2: as well. You suggest that break stronger.

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Speaker 4: I think if you look pair by pair, it's hard

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Speaker 4: to come up with a really compelling short dollar call here.

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Speaker 4: I mean, even like also USD, right, that's been soft.

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Speaker 4: I think the pair you ought to focus on here

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Speaker 4: is actually EUROCNH. Euro has been so strong versus C

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Speaker 4: and H for the better part of the last year

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Speaker 4: that actually seems to be changing here. And I think

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Speaker 4: it's in step with this idea that something's changing with China.

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Speaker 4: Perhaps a stronger CNH relative to euro is one more

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Speaker 4: sign in that direction.

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Speaker 3: You've got a call for lagat next month, September fourteenth.

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Speaker 4: You know, when I look at say German rates is

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Speaker 4: kind of our barometer here. They've effectively been in this

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Speaker 4: range for the last six or seven months. My experience

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Speaker 4: in this business has always surprises break in the direction

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Speaker 4: of the trend, and I think the trending global rate

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Speaker 4: is still up. So I think if there's a surprise,

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Speaker 4: its rates have one more or last push in them.

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Speaker 4: That would be our.

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Speaker 3: Guest, Chris. This was awesome. Thank you, by thank you,

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Speaker 3: Thank you, Chris around mister to take us there. If

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Speaker 3: you want to call on the FX market, Goldman Sachs

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Speaker 3: out with the call on the FX market six month

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Speaker 3: call dolly n. They were looking for one thirty five,

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Speaker 3: they're now looking for one fifty five on dolly En.

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Speaker 3: They've gone back to the nineteen nineties on the Japanese end.

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Speaker 2: Governor, you had to have the chance to clear the

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Speaker 2: air at Jackson Hall. From what I can tell, he

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Speaker 2: did not. There's a huge uncertainty there and here what

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Speaker 2: you said, John, one thirty five in the Golden Sex,

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Speaker 2: cause what.

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Speaker 3: They're looking for one fifty five? The co what's one.

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Speaker 1: Forty seven right now?

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Speaker 2: And I would say kid Jukes and others are really

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Speaker 2: heightened here at one forty seven. I don't know where

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Speaker 2: you break through one fifty, but I'm sorry. The Bank

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Speaker 2: of Japan, the Ministry of Finance will defend the yen

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Speaker 2: on the path to one fifty five.

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Speaker 3: You got a level of mind there, Chris. But when

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Speaker 3: that happens for the bijah high higher? How much higher?

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Speaker 1: Weaker?

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Speaker 7: Ye?

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Speaker 4: I'm drawn to the fifty five number. It's an important

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Speaker 4: Fibinac number actually if you look at kind of the

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Speaker 4: long term dollary en charp. But you kind of can't

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Speaker 4: have both ways. You're either going to defend the bond

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Speaker 4: market or you're going to defend the end, and I

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Speaker 4: don't think you can do both. The big winner, though,

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Speaker 4: I think is domestic Japanese assets, if they're doing everything

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Speaker 4: they can to keep money at home. I think Japanese

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Speaker 4: bank stocks reflect that did the strongest bank stocks anywhere

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Speaker 4: in the world. I don't think that's an accident.

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Speaker 3: Chris Farrean go to Thank you twice.

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Speaker 1: What a joy to get.

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Speaker 2: A brief summary from Jay Brice and chief economist at

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Speaker 2: Wills Fargo.

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Speaker 1: I love, love, love Jay.

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Speaker 2: The two sentences in your report on a real yield

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Speaker 2: and inflation adjusted ten year yield that will quote drift

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Speaker 2: through two percent. What's the ramification to our viewers and

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Speaker 2: listeners of a two point one or a two point

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Speaker 2: two percent real rate?

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Speaker 7: Well, so, I think the ramification is that exerts significant

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Speaker 7: headwinds on the US economy. I mean, what you look

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Speaker 7: at with the real rate, and Mike was kind of

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Speaker 7: talking about this before, is that's what matters for the

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Speaker 7: real US economy. And if the potential growth rate of

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Speaker 7: the US economy, no one really knows exactly where that.

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Speaker 6: Is, but let's call it roughly two percent.

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Speaker 7: I mean, you kind of want, you know, a real

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Speaker 7: FED funds rate, you know, at that or maybe even

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Speaker 7: a little bit below that would be neutral. You get

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Speaker 7: north of two percent, then you're putting some real restraint

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Speaker 7: on the economy. Whether it's enough to actually cause you know,

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Speaker 7: a technical downturn, technical recession, that kind of remains to

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Speaker 7: be seen. But even if it's not enough, it certainly

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Speaker 7: puts headwinds on the economy.

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Speaker 6: It slows growth in the US economy.

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Speaker 2: I mean, jee, I've got a Bloomberg Financial Conditions Index

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Speaker 2: a positive.

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Speaker 1: Point three one. Folks.

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Speaker 2: All you need to know in the mathiness of it

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Speaker 2: is it screams accommodation to me, how many rate rises

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Speaker 2: do we need to get truly restrictive?

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Speaker 7: Well, so, Tom, the index that you're referring to, and

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Speaker 7: just for your viewers, it comes up with like there's

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Speaker 7: ten different variables beneath it, okay, And one would be

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Speaker 7: credit spreads on corporate bonds, one would be volatility and

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Speaker 7: markets things of that nature. Those are the big, the

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Speaker 7: big sort of things. And so how do you how

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Speaker 7: do you get it more restrictive? I guess it would

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Speaker 7: be if the Fed were to become really more hawkish

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Speaker 7: here and so you start to price in some more rate.

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Speaker 6: Hikes in there.

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Speaker 7: That leads to volatility in the stock market, that pushes

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Speaker 7: bond spreads wider.

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Speaker 6: All those things.

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Speaker 7: Really matter for you know, for the real economy as well.

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Speaker 7: And right now markets you know, are looking at markets

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Speaker 7: have been I would say, very accommodative. Recently, bond spreads

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Speaker 7: have narrowed, you know, the stock markets holding in there.

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Speaker 7: But you know, if we get let's say we got

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Speaker 7: a bad PCEE print, you know tomorrow, or or you know,

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Speaker 7: a really strong labor market number, and people start to believe, okay,

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Speaker 7: there's even more tightening coming in there. You'll start to

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Speaker 7: see that tightening in terms of the financial markets.

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Speaker 5: But but the question is, you know when that tightening

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Speaker 5: will come. Even if we do get those things this week,

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Speaker 5: If we get a blowout jobs report, if there's more

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Speaker 5: inflation pressure, then perhaps the Fed would like to see

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Speaker 5: would that actually result in a hike in September. We

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Speaker 5: were discussing earlier how the bar for next seems quite high.

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Speaker 5: Would they still not pause, wait to see the lagged defects,

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Speaker 5: perhaps kicking in more than make a call on November?

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Speaker 6: Yeah, Kelly, we agree. I agree with your sentiment there.

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Speaker 7: I mean, I think that, as you said, the bar

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Speaker 7: for a rate hike in September, I think is pretty

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Speaker 7: high at this point. I think, you know, my sense

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Speaker 7: is where the consensus on the FOMC is right now

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Speaker 7: is we want to see a.

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Speaker 6: Little bit more data.

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Speaker 7: And so if you do get a blowout jobs report,

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Speaker 7: if you do get a bad PCEE print. I think

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Speaker 7: what happens in terms of markets is that pushes the

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Speaker 7: probability of rate hike in November up.

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Speaker 6: But that would also, I think lead to some volatility

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Speaker 6: in markets.

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Speaker 2: Jay question, with immense respect for what Wills Fargo's done

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Speaker 2: on labor economics for decades, is our job market accountable

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Speaker 2: or are we going to be surprised every job's day forever?

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Speaker 2: Where we really guys like you sort of don't in

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Speaker 2: your great team, don't really have a handle on the

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Speaker 2: accountability of the two surveys.

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Speaker 7: Well, so you know, when we look at our model,

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Speaker 7: we look at the you know, the error bands around

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Speaker 7: that are estimate. You know, the arab bands around our

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Speaker 7: estimates are you know, similar, like plus or minus seventy thousand.

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Speaker 7: So you know, in some sense you're you are throwing

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Speaker 7: a little bit of a dart with that, and and so,

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Speaker 7: and then that gets magnified in terms of the of

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Speaker 7: the pandemic because that just puts so much volatility into

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Speaker 7: the underlying numbers that you're using to try to come

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Speaker 7: up with a prediction. So as the pandemic stuff starts

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Speaker 7: to fade away over time, I think those aerror bands

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Speaker 7: will start to narrow, but it's always at the end

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Speaker 7: of the day, you know, a little bit of a

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Speaker 7: guessing game as it relates to the labor market.

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Speaker 5: Yeah, and as it relates to you know, the headline

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Speaker 5: figures on non farm payrolls. But when we think about

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Speaker 5: some of the other components of the labor market data,

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Speaker 5: specifically the pressure, the upward pressure perhaps on wages. We

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Speaker 5: were speaking with City earlier on in the show about

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Speaker 5: what we're seeing in terms of strike activity and union

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Speaker 5: activity and the power of labor and in pushing for

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Speaker 5: higher compensation. How should we be thinking about that and

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Speaker 5: how it relates to the FEDS fight against inflation.

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Speaker 7: So you get a lot of headlines in terms of

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Speaker 7: you know, unions and things of that nature. I want

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Speaker 7: to say that I don't remember the number off the

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Speaker 7: exact top of my head, but I want to say,

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Speaker 7: the percent of the labor force that's unionized today, it's

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Speaker 7: only like six percent. I mean, we're not talking the

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Speaker 7: nineteen fifties or nineteen sixties here. It's a much smaller

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Speaker 7: sort of a piece of that. And so it's you know,

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Speaker 7: there's gets a lot of headlines, but at the end

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Speaker 7: of the day, it's a marginal sort of effects in

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Speaker 7: terms of wages.

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Speaker 5: And sorry to interrupt, but the thesis, the thinking from

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Speaker 5: City says that this is more just an indication of

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Speaker 5: the supply problems we are still seeing in labor, which

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Speaker 5: is why workers feel empowered to ask for more and

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Speaker 5: in theory that goes beyond beyond unions.

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Speaker 6: Yeah, that's a good point.

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Speaker 7: I mean, obviously, the labor market is very very tight

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Speaker 7: right now. You know, to push for higher, higher wage gains.

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Speaker 7: That's easier when you are unionized, when you have collective

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Speaker 7: bargaining than if you're just out there independently doing it.

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Speaker 7: But know, the point is that the labor market is tight.

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Speaker 7: But you know, anything that we've seen right now, whether

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Speaker 7: you're looking at the ECI, whether you're looking at the

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Speaker 7: employment cost Index, whether you're looking at average hourly earnings,

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Speaker 7: all of those things showed there has been some deceleration

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Speaker 7: in terms of wages. Now we're probably still above where

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Speaker 7: we need to be to be consistent with a two

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Speaker 7: percent inflation rates. But that said, it's it's we're not

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Speaker 7: getting the same sort of upward pressure on wages that

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Speaker 7: we were, say last year at this time.

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Speaker 2: Jay personal income, personal spending, are they acting in a

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Speaker 2: normal way?

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Speaker 7: Personal yes, I mean, given it's given as tight as

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Speaker 7: the labor market is right now, personal income is acting

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Speaker 7: in the normal way if you look at the last

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Speaker 7: the last I don't know, ten eleven out eleven months,

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Speaker 7: we've had positive real disposable income growth because wages are

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Speaker 7: growing faster than what prices are going up.

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Speaker 2: Right now, J Brison, thank you so much. Doctor Bryson

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Speaker 2: is with Wells Fargo to.

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Speaker 1: Joining us now.

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Speaker 2: Smartest guy in a block, John Ovallo, US homebuilders analyst

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Speaker 2: at UBS. Did you see this coming?

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Speaker 7: Like?

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Speaker 2: Were you like pounding the table Ubs strong by back

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Speaker 2: when everybody said they're all going to die and they didn't.

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Speaker 8: I'll tell you we came out of the gates pretty

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Speaker 8: bullish when we when we launched about a year and

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Speaker 8: a half ago, and we did not expect this to

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Speaker 8: play out the way it did.

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Speaker 4: However, we your thumb up.

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Speaker 1: You were a thumb up at the time.

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Speaker 8: One hundred percent. And I mean we were looking at

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Speaker 8: stocks that were trading at a fraction of book value

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Speaker 8: right when we saw very little risk to book value.

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Speaker 2: Now, what I mean a DH hort and venerable company,

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Speaker 2: are they all the executives all unload and shares and

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Speaker 2: and that on a log basis, it's a log convex

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Speaker 2: to say the least are going to call it a moonshot.

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Speaker 1: Now, what for the homebuilders, we're still bullish.

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Speaker 8: I think that it's an incredibly interesting dynamic that's playing

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Speaker 8: out right now where there is just very very little

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Speaker 8: existing home inventory three point two months to be exact,

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Speaker 8: that's about half of what it should And so you

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Speaker 8: couple that with the fact that demand out there is

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Speaker 8: still resilient, regardless of the fact that rates are at

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Speaker 8: seven and a half percent, and the demand is all

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Speaker 8: being funnel towards these public homebuilders.

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Speaker 5: I just wonder how long that could last. John. If

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Speaker 5: we're north of seven already on the approach to eight percent,

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Speaker 5: that's got to hit demand at some point, even for

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Speaker 5: people who are trying to.

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Speaker 8: Buy new one hundred percent. But the beauty of being

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Speaker 8: a public home builder is that you have arrows in

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Speaker 8: your quiver. What they can do that the existing incentives incentives,

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Speaker 8: so they can buy down mortgage rates, and not only that,

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Speaker 8: they can build smaller footprints, they can build a little

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Speaker 8: further away from the city center, so there's optionality that

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Speaker 8: the existing home market doesn't have. You can't pick up

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Speaker 8: the home and move it, and so there's a lot

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Speaker 8: of things that are favoring being a builder at this point.

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Speaker 3: So John, in the UK, this can slowly correct because

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Speaker 3: they fixed rate mortgage over there is maybe an agreement

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Speaker 3: for two, three, four, five years, some even on floating.

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Speaker 3: Right the US mortgage market thirty you're fixed. I'm trying

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Speaker 3: to work out, johnni we're facing something generational here. Is

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Speaker 3: this something that goes over the next decade, twenty years?

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Speaker 3: How are you thinking about that? Just what kind of

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Speaker 3: time arison have you got for this to play out.

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Speaker 8: I think that there's a long, long runway here in

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Speaker 8: the US housing market. You have, first of all, a

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Speaker 8: massive generational wealth transfer sixty eight trillion dollars being funneled

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Speaker 8: from baby boomers to millennials in Gen X, And you

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Speaker 8: have an underbuilt housing market in the US and a

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Speaker 8: lot of millennials that are coming to the market right

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Speaker 8: now that have been kind of shut out of the

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Speaker 8: market for fifteen years, and all of a sudden they're saying, well,

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Speaker 8: you know what, I think we do want to own

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Speaker 8: a home. They're a little bit wealthier than prior, prior generations,

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Speaker 8: they have the ability to borrow from parents and so forth,

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Speaker 8: and so that capacity and ability to buy is actually there.

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Speaker 8: And he adds to the fact that.

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Speaker 2: So our housing market is based on rich parents giving

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Speaker 2: money to kids.

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Speaker 8: That's part of it for sure. But I would say

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Speaker 8: that the generation that's coming through right now as the

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Speaker 8: first time home buyer is a little bit better healed

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Speaker 8: than prior generations because they're a little bit older, they're

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Speaker 8: doing things a little bit later in life. So there

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Speaker 8: is wealth that has been been accumulated. And this is

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Speaker 8: a need based player, right.

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Speaker 2: Okay, the fancy people you follow have I mean, Granted's

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Speaker 2: out now writing kitchens.

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Speaker 1: You don't do.

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Speaker 2: Granted courts now courts Thanks Katie Lin's on top of that.

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Speaker 2: Everybody you talk to who's got courts kitchens. Why can't

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Speaker 2: we build a starter home that's respectful.

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Speaker 1: Why can't we do that?

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Speaker 8: It's a great question, Tom. I mean, the one thing

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Speaker 8: that this industry has not done over the years is

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Speaker 8: really sort of adopted technology like other like other industries have.

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Speaker 8: Think about the automotive industry, right, they're building a home

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Speaker 8: today exactly the same way was built one hundred years ago,

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Speaker 8: So there needs to be technology infusion into this industry.

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Speaker 8: There are a lot of players that are working on this.

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Speaker 2: I mean, John, we had an ice drink in the

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Speaker 2: backyard and the ice skates to the refrigerator, cuts through

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Speaker 2: the linoleum floor and nobody cared. And now you know

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Speaker 2: it's a courtz counter right.

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Speaker 6: Yeah.

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Speaker 5: Well, but on the subject of and of the tools

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Speaker 5: that are actually being used to build this home or

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Speaker 5: these homes, part of the issue with rates being so

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Speaker 5: high is because there's a fight to get inflation down

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Speaker 5: and a lot of that inflation was actually just driven

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Speaker 5: by supply chain challenges. Are builders still contending with that?

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Speaker 5: Are there any supply issues that still are being worked out?

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Speaker 8: The supply chain has gotten much much better. I mean,

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Speaker 8: there are still some hang ups on electrifying communities, so transformers,

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Speaker 8: things of that nature, but in general, the supply chain

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Speaker 8: is getting a lot better than it was. And I

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Speaker 8: would say, you know, the biggest sort of headwind, if

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Speaker 8: you will, would be labor and we're just you know,

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Speaker 8: in a labor constrained market. But the public builders, given

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Speaker 8: their size and scale, have the ability to attract and

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Speaker 8: retain better than the smaller builders.

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Speaker 5: Okay, So as we're talking about the different public builders

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Speaker 5: and of the different to Tom's point, you know, a

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Speaker 5: starter home versus elsewhere in the new build landscape, between

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Speaker 5: like a luxury player, more luxury oriented player, or one

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Speaker 5: that is more for that base consumer. Who fares better

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Speaker 5: in environment? Is it the luxury end.

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Speaker 8: It's a really good question. We still actually favor the

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Speaker 8: entry level first time buyer. And that's so that would

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Speaker 8: be a d R.

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Speaker 4: Horton.

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Speaker 8: And that's because this is a very need based, life

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Speaker 8: driven buyer. So marriage, children, things of that nature that

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Speaker 8: require more space, and so to the extent that that

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Speaker 8: person can make the math work, they're going to make

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Speaker 8: it work. And you know what, the public home builders

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Speaker 8: are going to help them make that math work. Now

439
00:20:22,640 --> 00:20:24,640
Speaker 8: to your question, though, we like the other side too,

440
00:20:24,680 --> 00:20:27,040
Speaker 8: so sort of a Barbell approach. We're a Toll Brothers

441
00:20:27,080 --> 00:20:29,800
Speaker 8: of the World, for instance, who just reported a massive

442
00:20:29,880 --> 00:20:33,800
Speaker 8: quarter that buyer is a little bit more shielded from

443
00:20:33,800 --> 00:20:35,879
Speaker 8: interest rates. We have twenty five to thirty percent that

444
00:20:35,920 --> 00:20:37,680
Speaker 8: are buying with cash, for instance.

445
00:20:37,800 --> 00:20:40,000
Speaker 3: How disciplined are these home builders bank? That's what we're

446
00:20:40,000 --> 00:20:42,280
Speaker 3: really trying to get at here. When you are able

447
00:20:42,320 --> 00:20:47,360
Speaker 3: to construct really bullish thesis for things like home builders,

448
00:20:47,440 --> 00:20:48,879
Speaker 3: where we can sit here and say this might be

449
00:20:48,920 --> 00:20:51,320
Speaker 3: a ten to twenty year runway for these guys. If

450
00:20:51,359 --> 00:20:53,119
Speaker 3: I'm listening to that, I'm just like, let's build, let's go,

451
00:20:53,200 --> 00:20:55,920
Speaker 3: let's go, let's go. How disciplined are they being right now?

452
00:20:56,400 --> 00:20:59,120
Speaker 8: It's a great question, and it's really what has changed

453
00:20:59,240 --> 00:21:03,400
Speaker 8: between two day and maybe pre financial crisis, that there's

454
00:21:03,440 --> 00:21:05,600
Speaker 8: been a lot of discipline instilled in the market because

455
00:21:05,640 --> 00:21:08,480
Speaker 8: of the pain from the past. But maybe just as importantly,

456
00:21:08,800 --> 00:21:12,119
Speaker 8: there are some capacity constraints, particularly on the labor front,

457
00:21:12,400 --> 00:21:14,679
Speaker 8: that will not allow them to overbuild. So even to

458
00:21:14,720 --> 00:21:17,600
Speaker 8: the extent that the industry wanted to overbuild, they wouldn't

459
00:21:17,640 --> 00:21:20,280
Speaker 8: be able to. So there's natural governors to the growth,

460
00:21:20,280 --> 00:21:21,359
Speaker 8: which I think are very healthy.

461
00:21:21,400 --> 00:21:23,160
Speaker 3: I can't wait for these high prices for the rest

462
00:21:23,160 --> 00:21:26,160
Speaker 3: of our lives. Tom Seclarly, that's the story right now.

463
00:21:26,400 --> 00:21:28,280
Speaker 3: That can change. When you say things like that in

464
00:21:28,320 --> 00:21:30,880
Speaker 3: the house in market, you just wonder how quickly things

465
00:21:30,880 --> 00:21:33,640
Speaker 3: can change. John, Thank you, John Levelo that the GBS.

466
00:21:38,440 --> 00:21:41,159
Speaker 2: This is a joy because he is the one who

467
00:21:41,240 --> 00:21:45,080
Speaker 2: has been right, and also he's the one who's been responsible.

468
00:21:45,200 --> 00:21:49,200
Speaker 2: Andersliman joins us right now with Morgan Stanley, Managing director

469
00:21:49,480 --> 00:21:54,400
Speaker 2: of Fear, senior portfolio manager at Wrigley Field in Chicago,

470
00:21:54,560 --> 00:21:58,640
Speaker 2: Andrew flying over Wrigleyfield. I'm sorry going into oh here

471
00:21:58,720 --> 00:22:01,360
Speaker 2: there and look him down at Wrigley Field. It's God's country.

472
00:22:02,000 --> 00:22:04,600
Speaker 2: You are in the market. How do you find the

473
00:22:04,760 --> 00:22:06,720
Speaker 2: courage to be in the market now?

474
00:22:08,600 --> 00:22:12,639
Speaker 9: Well, I think really the story of this year is,

475
00:22:13,040 --> 00:22:16,240
Speaker 9: you know, it's a tragic story in many ways, which

476
00:22:16,280 --> 00:22:19,760
Speaker 9: is stocks looked forward. But as Warren Buffett said, people

477
00:22:20,160 --> 00:22:22,879
Speaker 9: use the rear view mirror to frame their viewpoint, and

478
00:22:22,920 --> 00:22:25,920
Speaker 9: we had a terrible market last year, and that's when

479
00:22:25,920 --> 00:22:28,600
Speaker 9: you're supposed to get more bullish after a down year.

480
00:22:29,400 --> 00:22:31,840
Speaker 9: People looked in the rearview mirror and saw down here

481
00:22:31,880 --> 00:22:35,239
Speaker 9: and got more pessimistic. So it was a you know,

482
00:22:35,280 --> 00:22:37,840
Speaker 9: in hindsight, it was pretty in my opinion, you had

483
00:22:37,880 --> 00:22:39,880
Speaker 9: to put the chips in because we had a bad

484
00:22:39,960 --> 00:22:43,760
Speaker 9: year last year. And what I see now is all

485
00:22:43,800 --> 00:22:48,080
Speaker 9: that money that washed out of the market hasn't capitulated

486
00:22:48,200 --> 00:22:51,680
Speaker 9: back in. Sentiment has gone up, but flows have in

487
00:22:51,800 --> 00:22:56,680
Speaker 9: turned positive. And I've never seen a bull market where

488
00:22:56,800 --> 00:23:02,239
Speaker 9: ultimately people reverse and flow back into the market. It

489
00:23:02,320 --> 00:23:06,400
Speaker 9: happened in twenty twenty one. I think money market yields

490
00:23:06,440 --> 00:23:09,320
Speaker 9: being where they are are keeping people on the sidelines.

491
00:23:09,800 --> 00:23:13,520
Speaker 9: But I just refuse to believe that ultimately this cycle

492
00:23:13,640 --> 00:23:15,800
Speaker 9: won't end the same way, which is, we got to

493
00:23:15,840 --> 00:23:18,440
Speaker 9: get everyone in before the boat sinks.

494
00:23:18,480 --> 00:23:21,399
Speaker 2: How do you identify a second leg of the bull market?

495
00:23:21,480 --> 00:23:24,040
Speaker 2: You and I know the pop off seventy four, first

496
00:23:24,119 --> 00:23:28,200
Speaker 2: leg up of that mess was amazing, and then shock

497
00:23:28,280 --> 00:23:28,800
Speaker 2: of shocks.

498
00:23:28,840 --> 00:23:31,159
Speaker 1: I believe it was January of seventy five. We had

499
00:23:31,200 --> 00:23:35,200
Speaker 1: a moonshot out eighteen months. How do you figure out

500
00:23:35,440 --> 00:23:37,200
Speaker 1: your beginning a second leg?

501
00:23:38,480 --> 00:23:40,960
Speaker 9: Well, I think there's you know, in terms of from

502
00:23:41,119 --> 00:23:43,679
Speaker 9: now to year in and then looking further out. I

503
00:23:43,680 --> 00:23:46,480
Speaker 9: think we're in a pause period now, but I suspect

504
00:23:46,520 --> 00:23:49,480
Speaker 9: we'll have a strong fourth order for a three simple reasons.

505
00:23:49,560 --> 00:23:51,680
Speaker 9: Number one is what I said is you know, and

506
00:23:51,800 --> 00:23:54,359
Speaker 9: Jonathan's actually quoted me on this, which is the pain

507
00:23:55,000 --> 00:23:57,320
Speaker 9: of being out of the market is going to become

508
00:23:57,640 --> 00:24:01,000
Speaker 9: more cute as we get in the four reporter knowing

509
00:24:01,040 --> 00:24:04,160
Speaker 9: that you got to go see clients and report, you know,

510
00:24:04,240 --> 00:24:07,040
Speaker 9: how they've done relatives to the market. That's first. Number

511
00:24:07,040 --> 00:24:10,240
Speaker 9: two is earnings are actually earnings growth rate is going

512
00:24:10,320 --> 00:24:14,400
Speaker 9: to inflect from negative year over year to positive later

513
00:24:14,480 --> 00:24:17,360
Speaker 9: this year. And thirdly, and this is I don't think

514
00:24:17,359 --> 00:24:21,160
Speaker 9: this gets enough focus. The amount of money that the

515
00:24:21,200 --> 00:24:25,720
Speaker 9: government is going to unleash in the Chips Act, Infrastructure Act,

516
00:24:26,080 --> 00:24:29,800
Speaker 9: IRA Act, all coming starting the fourth quarter is huge,

517
00:24:30,040 --> 00:24:33,200
Speaker 9: and that is going to invert the M two positive.

518
00:24:33,600 --> 00:24:36,120
Speaker 9: That's another reason. So all those I think will drive

519
00:24:36,160 --> 00:24:39,720
Speaker 9: the market higher. What I struggle with, and you guys

520
00:24:39,760 --> 00:24:42,159
Speaker 9: have already touched on this, is how are we going

521
00:24:42,240 --> 00:24:46,000
Speaker 9: to get back to two percent target? Which is what

522
00:24:46,160 --> 00:24:49,080
Speaker 9: Jerome Powell told this last week. He's still targeting with

523
00:24:49,400 --> 00:24:55,240
Speaker 9: wage pressures, all this public works spending coming, I just

524
00:24:55,320 --> 00:24:59,120
Speaker 9: don't see that, and that worries me about next year.

525
00:24:59,680 --> 00:25:02,760
Speaker 9: But I think this year it's a good set.

526
00:25:02,840 --> 00:25:04,760
Speaker 5: Okay, well, but to expand on that point, and we

527
00:25:04,800 --> 00:25:07,639
Speaker 5: actually were just getting headlines out from President Biden related

528
00:25:07,680 --> 00:25:11,359
Speaker 5: to the Medicare drug negotiation part of the Inflation Reduction

529
00:25:11,440 --> 00:25:13,440
Speaker 5: Act to what you were just referring trying to lower

530
00:25:13,680 --> 00:25:15,840
Speaker 5: healthcare costs. But to your point on all of this

531
00:25:15,920 --> 00:25:20,239
Speaker 5: fiscal stimulus an impulse that kick in later on this

532
00:25:20,359 --> 00:25:24,280
Speaker 5: year and going forward, Does that good thing then become

533
00:25:24,320 --> 00:25:26,399
Speaker 5: a bad thing when you're talking about more money being

534
00:25:26,440 --> 00:25:29,040
Speaker 5: pumped into the economy and potentially what the FED is

535
00:25:29,080 --> 00:25:31,320
Speaker 5: going to have to do to counteract that force.

536
00:25:32,119 --> 00:25:36,280
Speaker 9: Sure, but absolutely it's a long term negative. But look

537
00:25:36,320 --> 00:25:39,320
Speaker 9: what happened COVID. You know, we pumped a ton of

538
00:25:39,320 --> 00:25:43,520
Speaker 9: money into the market, into the economy, and the market

539
00:25:43,680 --> 00:25:48,720
Speaker 9: responded positively. So I think there's a positive response to

540
00:25:48,800 --> 00:25:51,680
Speaker 9: that spending money, and we hear it from the companies

541
00:25:51,680 --> 00:25:53,679
Speaker 9: and one of the reason why I like the industors.

542
00:25:53,680 --> 00:25:56,440
Speaker 9: We're hearing these companies say the money is coming, We've

543
00:25:56,440 --> 00:25:57,800
Speaker 9: got projects set up to do.

544
00:25:57,880 --> 00:25:57,960
Speaker 6: So.

545
00:25:58,000 --> 00:26:02,040
Speaker 9: I think this will dry part of the economy and earnings,

546
00:26:03,160 --> 00:26:07,640
Speaker 9: but it's going to extend this inflation fight longer than

547
00:26:07,720 --> 00:26:10,200
Speaker 9: I think many expect.

548
00:26:10,359 --> 00:26:13,720
Speaker 2: Inside Baseball question, Jeff Curry at Goldbin Sachs, retiring there

549
00:26:13,720 --> 00:26:16,680
Speaker 2: out of the oil racket, talked about how the new

550
00:26:16,760 --> 00:26:19,439
Speaker 2: yield structure getting us back to pre two thousand and

551
00:26:19,440 --> 00:26:24,320
Speaker 2: seven makes inventory management and the hydrocarbons completely different. I

552
00:26:24,320 --> 00:26:31,160
Speaker 2: would suggest across America we underestimate what inventory management, given

553
00:26:31,200 --> 00:26:35,040
Speaker 2: a real yield, how it changes corporate behavior. I would

554
00:26:35,080 --> 00:26:41,200
Speaker 2: suggest corporations will begin to adjust viscerally to these new yields.

555
00:26:41,200 --> 00:26:44,720
Speaker 9: Do you agree, Well, there's no question a rising ye'll

556
00:26:44,840 --> 00:26:49,520
Speaker 9: curve creates a higher cost of capital, and eventually that's why,

557
00:26:50,640 --> 00:26:54,439
Speaker 9: you know, rates going up causes a recession. And I

558
00:26:54,480 --> 00:26:58,960
Speaker 9: don't question that. Inverted you'll curve is also suggesting that

559
00:26:59,240 --> 00:27:02,960
Speaker 9: the question is when, and it's not very good at predicting,

560
00:27:03,200 --> 00:27:06,760
Speaker 9: And I think what is really going on here is

561
00:27:06,920 --> 00:27:10,560
Speaker 9: that actually, for most of the companies in the S

562
00:27:10,600 --> 00:27:15,480
Speaker 9: and P five hundred, higher yields is a net positive

563
00:27:15,840 --> 00:27:18,960
Speaker 9: because they've locked in fixed rates, but they're making more

564
00:27:19,160 --> 00:27:23,359
Speaker 9: on their cash. So right now, right now, it's not

565
00:27:23,520 --> 00:27:27,879
Speaker 9: a negative. But certainly as that as that debt comes due,

566
00:27:28,040 --> 00:27:31,520
Speaker 9: the cost of capital will increase. The other thing that

567
00:27:31,560 --> 00:27:37,280
Speaker 9: it will slow is ultimately capex spending because projects are

568
00:27:37,359 --> 00:27:40,800
Speaker 9: harder to justify at higher yields. I think that's all

569
00:27:40,920 --> 00:27:44,399
Speaker 9: to come. I just don't think it is this year

570
00:27:44,880 --> 00:27:45,720
Speaker 9: or early next year.

571
00:27:45,720 --> 00:27:48,240
Speaker 3: Andrew isn't a negative for the banks.

572
00:27:50,800 --> 00:27:53,720
Speaker 9: Yeah, you know, again, it's the cost of capital. So

573
00:27:53,880 --> 00:27:57,800
Speaker 9: I think that that that they're the spread, the margins

574
00:27:57,840 --> 00:28:01,080
Speaker 9: remain higher. What I've want worry about will we have

575
00:28:01,280 --> 00:28:05,640
Speaker 9: another SVB crisis out there. It doesn't look that way.

576
00:28:05,720 --> 00:28:08,400
Speaker 9: We've watched the bar at the window. It doesn't look

577
00:28:08,440 --> 00:28:12,920
Speaker 9: that way to us. But ultimately, is there are there

578
00:28:12,960 --> 00:28:17,359
Speaker 9: other banks that have a duration issue. That's a tough,

579
00:28:17,720 --> 00:28:18,800
Speaker 9: tough question to answer.

580
00:28:18,880 --> 00:28:20,760
Speaker 3: They've just not tried it well over the last month.

581
00:28:20,840 --> 00:28:23,360
Speaker 3: Tak the financial it's been a tough one.

582
00:28:25,320 --> 00:28:28,640
Speaker 9: The other areas in value I would search.

583
00:28:28,480 --> 00:28:30,520
Speaker 3: For, Andrew, do you want to finish that? You've got

584
00:28:30,520 --> 00:28:34,240
Speaker 3: about fifteen seconds if you want it, well, there is sure.

585
00:28:34,359 --> 00:28:37,560
Speaker 9: I think the industrials look very attractive because i think

586
00:28:38,600 --> 00:28:42,640
Speaker 9: with this public work spending coming, I'm very comfortable that

587
00:28:42,680 --> 00:28:46,160
Speaker 9: these companies are going to make or beat the numbers,

588
00:28:46,200 --> 00:28:51,080
Speaker 9: whether it's materials, industrial companies or with this spending that's

589
00:28:51,160 --> 00:28:54,160
Speaker 9: that's already been approved. So this has already been approved.

590
00:28:54,640 --> 00:28:59,880
Speaker 9: I think that's a cleaner area than financials.

591
00:28:59,360 --> 00:29:01,760
Speaker 3: Right now, Drew, thank you, sir, Andrew Slim and there

592
00:29:01,840 --> 00:29:02,719
Speaker 3: of more good standing.

593
00:29:13,160 --> 00:29:16,880
Speaker 2: This is a joy on your biggest headache besides what

594
00:29:16,880 --> 00:29:20,040
Speaker 2: we've said on housing and all today.

595
00:29:19,840 --> 00:29:22,160
Speaker 1: And that is never an always airline.

596
00:29:22,240 --> 00:29:25,560
Speaker 2: Sheila kahou joins US right now, Senior Equity Research channalysts

597
00:29:25,960 --> 00:29:30,320
Speaker 2: at Jeffries and once she dabbled in leveraged finance, so

598
00:29:30,360 --> 00:29:36,080
Speaker 2: she's got a really twisted financial understanding of this crazy business. Sheila,

599
00:29:36,120 --> 00:29:40,640
Speaker 2: My arch question is do you change your bag? What

600
00:29:40,840 --> 00:29:45,080
Speaker 2: is the behavior of senior managers? Are the senior managers

601
00:29:45,160 --> 00:29:49,880
Speaker 2: now at United Delta Southwest all of them? Are they

602
00:29:49,960 --> 00:29:53,960
Speaker 2: not like one or two generations ago where they're actually

603
00:29:54,000 --> 00:29:56,680
Speaker 2: going to deliver a more persistent free cash flow.

604
00:29:58,800 --> 00:30:01,520
Speaker 10: Thanks Tommy giving me a lot of it. At Jefferies,

605
00:30:01,520 --> 00:30:05,080
Speaker 10: I focus on equity coverage covering aerospace, defense, and airlines,

606
00:30:05,120 --> 00:30:07,480
Speaker 10: so I get the benefit of covering, you know, three

607
00:30:07,520 --> 00:30:10,160
Speaker 10: segments of the market. And we're quite negative on the

608
00:30:10,200 --> 00:30:14,240
Speaker 10: airlines just having our other coverage with the OEMs, mainly

609
00:30:14,320 --> 00:30:16,880
Speaker 10: because of pricing and what we're seeing the low cost

610
00:30:16,920 --> 00:30:19,440
Speaker 10: carriers doing. But we do think the network carriers are

611
00:30:19,520 --> 00:30:22,440
Speaker 10: better positioned, like the Deltas and the Uniteds of the

612
00:30:22,440 --> 00:30:27,920
Speaker 10: world that are getting that premium customer base versus the

613
00:30:27,960 --> 00:30:31,920
Speaker 10: network carriers versus the low cost carriers that might see

614
00:30:31,960 --> 00:30:36,880
Speaker 10: a little bit more pricing softness potentially as people's pockets move.

615
00:30:37,440 --> 00:30:39,760
Speaker 5: Okay, so to that point, we're starting to see a

616
00:30:39,760 --> 00:30:42,200
Speaker 5: little bit of a deterioration in the pricing power of

617
00:30:42,240 --> 00:30:45,280
Speaker 5: some of these airlines. Is that to suggest that travel

618
00:30:45,360 --> 00:30:48,240
Speaker 5: demand post summer, now that it's winding down, isn't going

619
00:30:48,280 --> 00:30:49,360
Speaker 5: to look as great.

620
00:30:51,240 --> 00:30:52,400
Speaker 9: I think that's the question.

621
00:30:53,000 --> 00:30:54,280
Speaker 10: I don't think you know.

622
00:30:54,920 --> 00:30:55,800
Speaker 9: First of all, I think.

623
00:30:55,600 --> 00:30:58,880
Speaker 10: Corporate is stagnating at eighty five percent ninety percent, and

624
00:30:58,920 --> 00:31:01,680
Speaker 10: some of the meetings are getting replaced by Zoom permanently,

625
00:31:01,800 --> 00:31:04,840
Speaker 10: so we haven't seen corporate improve and across the airlines,

626
00:31:04,920 --> 00:31:08,880
Speaker 10: nobody's really calling for a massive improvement here. International has

627
00:31:08,920 --> 00:31:12,320
Speaker 10: been recovering and is doing really well, and that's where

628
00:31:12,320 --> 00:31:14,840
Speaker 10: we're seeing the pricing momentum, and that's why United and

629
00:31:14,880 --> 00:31:18,960
Speaker 10: Delta are really benefiting, prices up twenty five percent plus.

630
00:31:19,520 --> 00:31:23,920
Speaker 10: On the US domestic side, US domestic flights are still

631
00:31:24,040 --> 00:31:26,960
Speaker 10: up year over year like down ten percent below twenty

632
00:31:27,040 --> 00:31:31,360
Speaker 10: nineteen levels, and we're seeing pricing stagnate there. So it's

633
00:31:31,760 --> 00:31:35,640
Speaker 10: is the wallet moving to international or are we seeing

634
00:31:35,640 --> 00:31:38,240
Speaker 10: some customer softness there. That's the question that remains to

635
00:31:38,240 --> 00:31:40,840
Speaker 10: be seen for twenty twenty four. But the fight that

636
00:31:40,920 --> 00:31:43,680
Speaker 10: we a few weeks ago we downgraded Southwest Airlines to

637
00:31:43,880 --> 00:31:46,880
Speaker 10: an underperform rating first and to perform on the stock

638
00:31:47,760 --> 00:31:50,720
Speaker 10: basically because we think that they have to change their network.

639
00:31:50,800 --> 00:31:53,880
Speaker 10: They announced a five hundred million network optimization plan that's

640
00:31:53,880 --> 00:31:55,880
Speaker 10: going to go through the first half the next year.

641
00:31:56,440 --> 00:31:58,680
Speaker 5: Okay, So if we're talking about some of that pricing

642
00:31:58,720 --> 00:32:01,160
Speaker 5: power going away, the pricing not being as strong on

643
00:32:01,560 --> 00:32:03,840
Speaker 5: the input kind of side, then it's also the question

644
00:32:03,880 --> 00:32:06,880
Speaker 5: of output and costs, especially in light of the deal

645
00:32:06,920 --> 00:32:09,800
Speaker 5: for example, American agreed to with its pilot some of

646
00:32:09,800 --> 00:32:11,840
Speaker 5: the cost pressures on the labor side. Also what we're

647
00:32:11,840 --> 00:32:15,479
Speaker 5: seeing in terms of energy and fuel costs. What's going

648
00:32:15,520 --> 00:32:17,600
Speaker 5: to happen to the profitability of these airlines if they

649
00:32:17,600 --> 00:32:19,800
Speaker 5: have those two dynamics happening simultaneously.

650
00:32:21,000 --> 00:32:22,720
Speaker 10: I think that's the concern here. How much does the

651
00:32:22,760 --> 00:32:26,080
Speaker 10: profitability shrink if pricing is going down, fuels going up,

652
00:32:26,280 --> 00:32:29,240
Speaker 10: salaries are going up. American two weeks ago announce that,

653
00:32:29,360 --> 00:32:33,520
Speaker 10: you know, their their pilot agreement. They didn't change the

654
00:32:33,600 --> 00:32:36,880
Speaker 10: fulllier guidance. Because they change they took down some other expenses,

655
00:32:36,920 --> 00:32:40,120
Speaker 10: and they were pretty ambiguous on what those other expenses were.

656
00:32:40,640 --> 00:32:43,360
Speaker 10: So how does that now affect twenty twenty four costs?

657
00:32:43,560 --> 00:32:45,680
Speaker 10: And how does that strength them Morgin profile at the

658
00:32:45,800 --> 00:32:48,720
Speaker 10: corporate of these airlines, and that's really why we're to

659
00:32:48,720 --> 00:32:51,320
Speaker 10: live on the center as we think, you know, pricing

660
00:32:51,400 --> 00:32:54,840
Speaker 10: although fifteen percent above twenty nineteen levels probably stagnates here.

661
00:32:55,720 --> 00:32:57,920
Speaker 10: We'll see what international pricing does next year, but we

662
00:32:57,920 --> 00:32:59,280
Speaker 10: don't think domestic improves.

663
00:32:59,520 --> 00:33:03,120
Speaker 2: Sure, their planes are packed, that's my amateur observation. They're

664
00:33:03,160 --> 00:33:06,840
Speaker 2: absolutely ridiculously packed. Every seat's taken. It scenes. I remember

665
00:33:06,840 --> 00:33:10,720
Speaker 2: when they were seventy four seventy six percent capacity, and

666
00:33:10,800 --> 00:33:13,680
Speaker 2: yet I keep getting emails telling me that they're putting

667
00:33:13,720 --> 00:33:19,280
Speaker 2: on flights internationally and particularly across the Pacific. Are those

668
00:33:19,320 --> 00:33:23,360
Speaker 2: planes going to be full? Are those proven add ons?

669
00:33:23,920 --> 00:33:25,400
Speaker 9: So I think that's.

670
00:33:25,240 --> 00:33:27,960
Speaker 10: Where you're seeing the issue. You know, load factors is

671
00:33:27,960 --> 00:33:31,160
Speaker 10: what we call them. They like you said, Tom, they

672
00:33:31,240 --> 00:33:34,160
Speaker 10: used to be normalized in the high seventies, and now

673
00:33:34,200 --> 00:33:37,400
Speaker 10: the high eighties are the new normal. But Southwest saw

674
00:33:37,400 --> 00:33:40,080
Speaker 10: eighty three percent, I believe in the second quarter, which

675
00:33:40,120 --> 00:33:44,200
Speaker 10: was relatively low for the highest trapical season. So it

676
00:33:44,280 --> 00:33:47,440
Speaker 10: depends it's on certain markets. One of the examples they

677
00:33:47,480 --> 00:33:49,880
Speaker 10: cited is certain cities in the US there are more

678
00:33:49,920 --> 00:33:53,160
Speaker 10: work from home, so you don't need that connecting flight

679
00:33:53,240 --> 00:33:55,440
Speaker 10: to a major hub. So that's where you're seeing the softness.

680
00:33:55,440 --> 00:33:58,600
Speaker 10: But I think international demands and capacity is still well

681
00:33:58,640 --> 00:34:02,680
Speaker 10: below twenty nineteen level. Sorry's national community and that's driving

682
00:34:02,680 --> 00:34:03,800
Speaker 10: the demand in the person, Marrea.

683
00:34:03,840 --> 00:34:05,680
Speaker 2: I don't know if you've seen this story, Sheila, but

684
00:34:05,880 --> 00:34:09,560
Speaker 2: Alex Milson here for Bloomberg were the only story that

685
00:34:09,760 --> 00:34:14,120
Speaker 2: matters today. There's going to be an adult and child

686
00:34:14,400 --> 00:34:21,080
Speaker 2: section on airplanes. You gotta be kidnaping, Sheila, LaGuardia to DFW.

687
00:34:21,400 --> 00:34:26,600
Speaker 2: There's going to be a children's section on the airline.

688
00:34:26,400 --> 00:34:28,520
Speaker 10: I messed and missed it.

689
00:34:29,560 --> 00:34:33,240
Speaker 5: Okay, Sheila, here's here's your context. This is one European airline,

690
00:34:33,360 --> 00:34:36,760
Speaker 5: Corndon Airlines, is going to pilot a no kid area

691
00:34:37,160 --> 00:34:39,800
Speaker 5: on a ten hour flight just between Amsterdam and Currosol.

692
00:34:39,840 --> 00:34:41,600
Speaker 5: You can pay forty nine dollars to sit in the

693
00:34:41,600 --> 00:34:43,960
Speaker 5: expori adult only zone.

694
00:34:44,120 --> 00:34:45,440
Speaker 1: What do you think, Sheila.

695
00:34:46,160 --> 00:34:48,320
Speaker 10: I didn't know that was a coveted route that needed

696
00:34:48,320 --> 00:34:52,839
Speaker 10: a specialized section. But good for them if they think

697
00:34:52,840 --> 00:34:54,640
Speaker 10: that's a niche market, Sheila.

698
00:34:54,760 --> 00:34:57,719
Speaker 1: Thank you, Sheila. Call with this with Jeffreys here.

699
00:34:58,280 --> 00:35:01,960
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700
00:35:02,040 --> 00:35:06,480
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701
00:35:06,719 --> 00:35:10,239
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702
00:35:10,360 --> 00:35:12,720
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703
00:35:12,880 --> 00:35:14,320
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704
00:35:14,760 --> 00:35:18,440
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705
00:35:18,800 --> 00:35:22,680
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706
00:35:22,880 --> 00:35:24,640
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