WEBVTT - Surveillance: Hawkish Fears with Morgan Stanley's Carpenter 0:00:05.120 --> 0:00:08.440 This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:08.480 --> 0:00:12.320 with Jonathan Farrell and Lisa Abramowitz. Join us each day 0:00:12.360 --> 0:00:16.840 for insight from the best and economics, geopolitics, financial investment. 0:00:17.239 --> 0:00:22.079 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.239 --> 0:00:26.520 anywhere you get your podcasts, and always I'm Bloomberg dot Com, 0:00:26.600 --> 0:00:30.479 the Bloomberg Terminal, and the Bloomberg Business App. We're gonna 0:00:30.480 --> 0:00:33.440 bring in a gentleman right now, Seth Carpenter, at least 0:00:33.440 --> 0:00:36.520 for this Friday, as global chief Economist at Morgan Stanley. 0:00:36.920 --> 0:00:39.080 He is extinguished. I looked at one of the beauty 0:00:39.120 --> 0:00:43.120 contests out there. He's sandwiched between Daily of San Francisco 0:00:43.560 --> 0:00:47.400 and Goldsby of Chicago. Seth, Um, I know I'm going 0:00:47.440 --> 0:00:50.599 to get the niceties from you here, but let us 0:00:50.640 --> 0:00:55.360 begin in the Derby to replace BRAINERD and a vice chairman. 0:00:56.160 --> 0:01:00.200 Explain to our audience what the vice chairman actually us. 0:01:01.720 --> 0:01:03.480 So when I was there on staff, it was a 0:01:03.560 --> 0:01:07.360 really important position. Worked very closely with the chair and 0:01:07.480 --> 0:01:09.760 the President of the New York Fed, who is the 0:01:09.880 --> 0:01:12.280 vice chair of the Federal of the Market Committee, and 0:01:12.360 --> 0:01:15.280 really helps to steer the strategy for policy, not just 0:01:15.360 --> 0:01:17.360 for the next meeting, but sort of over the course 0:01:17.400 --> 0:01:21.080 of the next few quarters. There are schools of thought here, 0:01:21.400 --> 0:01:23.600 and one of the things that's so important is the 0:01:23.680 --> 0:01:28.200 politics of Capitol Hill and the basic idea of Main Street, 0:01:28.319 --> 0:01:31.840 Wall Street and my I even add the academics of 0:01:31.880 --> 0:01:36.680 Princeton or Jason Furman's Harvard. He's on the list Goolsby Chicago. 0:01:37.240 --> 0:01:41.319 Have we politicized the FED in the last number of years? 0:01:41.480 --> 0:01:45.199 Is it different than when you studied at Princeton? Yeah? 0:01:45.920 --> 0:01:49.080 Uh so, I say the world goes in lots of cycles. 0:01:49.080 --> 0:01:53.280 There are very famous episodes back in the late sixtieson 0:01:53.320 --> 0:01:57.000 into the seventies and the interactions between President Johnson and 0:01:57.040 --> 0:01:59.440 the FED chair and whether it was appropriate to tighten 0:01:59.520 --> 0:02:02.720 policy while the US was fighting in Vietnam. So I 0:02:02.720 --> 0:02:06.600 think there have been uh periods where there's more politicization 0:02:06.720 --> 0:02:09.520 their periods where there's a bit less. I think the 0:02:09.560 --> 0:02:13.200 main thing from my personal experiences that the people inside 0:02:13.200 --> 0:02:16.200 the FED tend to be very, very focused on what 0:02:16.240 --> 0:02:18.320 their mandate is and they try to block out the 0:02:18.320 --> 0:02:22.040 political noise to the degree humanly possible. The mandate being 0:02:22.120 --> 0:02:25.160 to really bring inflation down to that two percent target, 0:02:25.240 --> 0:02:27.280 and that mandate is getting harder to wrap your head 0:02:27.280 --> 0:02:31.000 around right now because we don't understand the contours of inflation. 0:02:31.200 --> 0:02:33.839 If J Powell we're having his FED press conference right now, 0:02:34.160 --> 0:02:36.200 do you think that you had mentioned disinflation as John 0:02:36.240 --> 0:02:38.560 was mentioning earlier as many times as he did during 0:02:38.560 --> 0:02:42.520 that press conference. I had to say, the last data 0:02:42.560 --> 0:02:45.320 print does make things, you know, a little challenging to 0:02:45.400 --> 0:02:50.680 read exactly the fundamental story of some disinflation from core 0:02:50.760 --> 0:02:55.440 goods and some hopefully coming disinflation from housing that's generally 0:02:55.480 --> 0:02:58.400 in in in still intact, and you never want to 0:02:58.680 --> 0:03:01.640 fully change your worldview based on one month's worth of data. 0:03:01.800 --> 0:03:04.800 But there have been some surprises, and it wasn't just 0:03:05.160 --> 0:03:08.440 one data series. The non farm Perils report for January 0:03:08.639 --> 0:03:12.080 was strong, Uh, the CPI report had some surprises. The 0:03:12.080 --> 0:03:15.520 retail sales report was strong. Um, all of those have 0:03:15.680 --> 0:03:18.120 to make you wonder, you know, is there a little 0:03:18.160 --> 0:03:22.680 bit is there more resilience underlying resilience for the US economy. Now, 0:03:22.919 --> 0:03:25.239 we've had the view for a long time that we'd 0:03:25.280 --> 0:03:27.679 have a soft landing, that we would not go into 0:03:27.720 --> 0:03:31.359 recession this year Uh, that view was hard to hold 0:03:31.560 --> 0:03:34.280 six months ago, three months ago. Even now, I think 0:03:34.280 --> 0:03:37.480 the market is coming there, and the conversation is shifting. 0:03:37.720 --> 0:03:40.680 Are we actually getting a re acceleration instead of a 0:03:40.680 --> 0:03:43.480 slowdown at all? Can we get inflation back down to 0:03:43.520 --> 0:03:46.720 two if we don't get a recession? And this, to 0:03:46.800 --> 0:03:49.240 me is really the underlying question of a lot of 0:03:49.240 --> 0:03:52.320 what we're discussing, because yes, there is momentum, but this 0:03:52.400 --> 0:03:57.600 is only increasing the expectations for federate hikes. I mean, 0:03:57.720 --> 0:04:00.800 I my baseline view is yes, you and have inflation 0:04:00.840 --> 0:04:03.800 get back down to target without a recession, but it's 0:04:03.800 --> 0:04:06.560 a narrow path. It's pretty difficult. You need demand to 0:04:06.600 --> 0:04:10.720 be reined in so that there isn't consistently and for 0:04:10.720 --> 0:04:15.160 for continuing several quarters overall demand that exceeds the ability 0:04:15.200 --> 0:04:18.000 of the economy to produce. Now we know the U. 0:04:18.080 --> 0:04:22.640 S economy is still somewhat understaffed outside of tech um, 0:04:22.839 --> 0:04:25.320 and I think it's that residual sort of catchup and 0:04:25.400 --> 0:04:28.919 hiring that's giving some support to what's going on. But 0:04:29.000 --> 0:04:31.920 if we can get the economy to slow down fundamentally 0:04:32.839 --> 0:04:35.360 open up a bit of slack in the labor market 0:04:35.520 --> 0:04:38.840 without causing a recession. You know that's possible. Uh, it's 0:04:38.839 --> 0:04:41.600 tricky to do, but that's exactly what Defense trying to 0:04:41.640 --> 0:04:43.919 pull off. This If carpont I was reading on Portugal, 0:04:43.960 --> 0:04:47.000 of all places, in their housing crisis, and it seems 0:04:47.000 --> 0:04:51.160 like every every every nation has a housing crisis. Are 0:04:51.200 --> 0:04:55.680 we modeling out housing inflation correctly? Or is it a 0:04:55.760 --> 0:04:59.520 squashy or changing set of data that we're gonna have 0:04:59.520 --> 0:05:03.800 to adjud us down the road housing inflation. There's a 0:05:03.960 --> 0:05:07.040 very strong sort of philosophical argument here. The way we 0:05:07.120 --> 0:05:10.560 measure housing inflation in the United States is not on 0:05:10.720 --> 0:05:14.039 home prices. The BLS is theory, if you will, is 0:05:14.040 --> 0:05:17.800 that they want to separate out homes as an asset 0:05:18.240 --> 0:05:21.640 versus the flow of housing services that you get. And 0:05:21.680 --> 0:05:25.000 so that's why we have this concept of owners equivalent 0:05:25.120 --> 0:05:29.479 rent And when the BLS measures housing inflation, they look 0:05:29.480 --> 0:05:32.640 at quotes on rents and then they tried to ascribe 0:05:33.000 --> 0:05:35.480 that obviously directly to people who are renting their homes, 0:05:35.480 --> 0:05:36.960 where they also try to ascribe some of that to 0:05:37.000 --> 0:05:40.320 people who own their homes. Um, it is what it 0:05:40.400 --> 0:05:43.160 is at this point. That's the way that how is measured. 0:05:43.200 --> 0:05:45.720 The U s. I did a completely amateur apples to 0:05:46.560 --> 0:05:51.080 apples to onions analysis week. Dr Carpenter and I looked 0:05:51.120 --> 0:05:54.400 at the rent increases from the pandemic beginning in New 0:05:54.480 --> 0:05:59.880 York City and approximated the income increases, which are tangible, 0:06:00.520 --> 0:06:02.520 but it ends up with a plug of a negative 0:06:02.560 --> 0:06:05.960 twelve and a half percent over three or four years. 0:06:06.160 --> 0:06:11.320 I mean, does the FED understand the angst all listeners 0:06:11.360 --> 0:06:15.520 and viewers feel about the housing economy and then what 0:06:15.560 --> 0:06:18.960 do they do about it? So my sense is yes, 0:06:19.320 --> 0:06:21.880 the FED does understand that there is a challenge here. 0:06:22.000 --> 0:06:24.920 What you've pointed out is that real wage growth has 0:06:24.960 --> 0:06:29.280 been negative because overall consumer prices have been rising faster 0:06:29.680 --> 0:06:33.320 than people's income. Now, in general, what that does is 0:06:33.360 --> 0:06:36.080 it tends to crip people's spending behavior, and we have 0:06:36.200 --> 0:06:39.240 seen over the past couple of years a notable slowdown 0:06:39.320 --> 0:06:42.440 in consumer spending growth. Uh So, how does it affect 0:06:42.480 --> 0:06:44.680 housing directly? Well, what needs to happen is a bit 0:06:44.680 --> 0:06:49.640 of a pullback for housing specifically. That's usually tied historically 0:06:49.760 --> 0:06:53.760 for with increases in total employment. So it's slowing in 0:06:53.800 --> 0:06:56.320 the labor market will help there. The five dred seventeen 0:06:56.360 --> 0:06:58.839 thousand non farm barrel print doesn't go in that direction. 0:06:59.360 --> 0:07:02.560 But there is thing special about this cycle with COVID. 0:07:02.640 --> 0:07:06.359 We did see a surge in demand for more housing space, 0:07:06.400 --> 0:07:10.320 people wanting to live alone because they're working from home, 0:07:10.360 --> 0:07:12.840 people wanting to have more space, and I think there's 0:07:13.040 --> 0:07:16.840 part of this shift that was COVID specific. The challenge, 0:07:16.840 --> 0:07:20.240 of course, is sorting out the cyclical part of inflation 0:07:20.280 --> 0:07:22.640 in housing, the cyclical part of demand and housing from 0:07:22.640 --> 0:07:26.440 a strong labor market, from that idiosyncratic COVID driven part 0:07:26.440 --> 0:07:29.040 of things. I don't think anybody believes that a COVID 0:07:29.040 --> 0:07:32.400 cycle is a normal business cycle. We're speaking with Seth 0:07:32.400 --> 0:07:35.480 Carpenter of Morgan Stanley, the the economist who previously was 0:07:35.480 --> 0:07:38.320 at the Federal Reserve, who has a long and storied 0:07:38.400 --> 0:07:42.760 history in this particular sphere, and I'm curious about your 0:07:42.800 --> 0:07:45.640 process this week, in the past couple of weeks, as 0:07:45.680 --> 0:07:49.160 we've seen this data come in hotter than expected, causing 0:07:49.200 --> 0:07:52.680 your team to increase their expectations of terminal rates, to 0:07:52.840 --> 0:07:55.559 increase how long the FED was going to high rates, 0:07:56.320 --> 0:07:59.280 but then also to increase the rate cuts on the 0:07:59.320 --> 0:08:01.880 back end. Can you talk about the process of how 0:08:01.960 --> 0:08:06.360 much your view shifted. I think the key right now 0:08:06.480 --> 0:08:09.280 is trying to figure out how much underlying momentum there 0:08:09.320 --> 0:08:12.400 is and as a result, how much the Fed needs 0:08:12.440 --> 0:08:16.160 to raise rates. I think, as far as we can 0:08:16.480 --> 0:08:20.400 tell now, the FED strategy remains titan policy. Have the 0:08:20.480 --> 0:08:23.960 economy slowed down enough that you can be very certain 0:08:24.440 --> 0:08:26.520 that you're going to be on a glide that back 0:08:26.560 --> 0:08:30.360 to two percent over a couple of years. Uh, The 0:08:30.440 --> 0:08:33.640 last several data points have not been consistent with that outcome, 0:08:33.679 --> 0:08:36.920 and so as a result, more tightening is what's necessary 0:08:37.559 --> 0:08:40.560 for the Fed strategy. I think the open question, and 0:08:40.600 --> 0:08:43.080 the part that's very very difficult for us to know, 0:08:43.440 --> 0:08:46.080 for markets to know generally, and for the Federal Reserve 0:08:46.160 --> 0:08:49.520 to know, is just how far is enough? And part 0:08:49.520 --> 0:08:52.120 of that is how much was the five seventeen thousand 0:08:52.240 --> 0:08:55.080 jobs a one off like it was in July of 0:08:55.160 --> 0:08:57.000 last year, and how much of it is an indication 0:08:57.040 --> 0:09:00.800 of underlying strength? Inherently difficult. How much of the strength 0:09:00.840 --> 0:09:05.199 in January's data for retail sales, for non farm pay rolls, 0:09:05.280 --> 0:09:10.080 for inflation was because of changing seasonal adjustment. That's gonna 0:09:10.400 --> 0:09:12.880 come out later in the year because seasonal adjustment has 0:09:12.920 --> 0:09:14.800 to be zero sum over the course of a year. 0:09:15.320 --> 0:09:18.680 Very hard to know right now. Um. And so that's 0:09:18.679 --> 0:09:21.400 what we've done, is we've said, with the data available now, 0:09:21.760 --> 0:09:23.520 and then if we go to the March meeting, what 0:09:23.600 --> 0:09:26.079 data will the FED have available? It'll be clear things 0:09:26.120 --> 0:09:28.040 are stronger than they thought, So they'll hike more than 0:09:28.520 --> 0:09:30.679 we get to the main meeting. What information will be 0:09:30.720 --> 0:09:33.480 available to the FED? Then another month or so worth 0:09:33.520 --> 0:09:37.480 of extra data they have to take data, not one 0:09:37.559 --> 0:09:40.320 month changing their view, but on the sort of accumulated 0:09:40.400 --> 0:09:43.120 history of data. And by the time we get to May, 0:09:43.240 --> 0:09:45.560 it's not it's good. It's very hard to see why 0:09:45.600 --> 0:09:48.120 they would have concluded. And everything is hunky dorry at 0:09:48.120 --> 0:09:49.760 that part. And so that's why we put in those 0:09:49.800 --> 0:09:52.599 extra hikes. What would lead to even more hikes? What 0:09:52.640 --> 0:09:56.160 would lead to for example, yesterday Lauretta Mester talking about 0:09:56.240 --> 0:09:59.040 fifty basis points being on the table. I think, if 0:09:59.040 --> 0:10:03.640 we get your evidence that January's data, we're not an anomaly, 0:10:03.720 --> 0:10:07.040 but we're a shift in inflection higher we get another 0:10:07.559 --> 0:10:10.280 four hundred thousand non farm barrels, for example, I think 0:10:10.280 --> 0:10:13.840 they have to be talking about the fifty basis point hike. 0:10:14.200 --> 0:10:16.120 So that's just real quick here twenty seconds. Do you 0:10:16.120 --> 0:10:17.960 think that this all takes us further away from a 0:10:17.960 --> 0:10:23.600 soft landing. It's a mixed bag. I'll say no for now. 0:10:24.080 --> 0:10:27.280 It's hard to say that a stronger economy results in 0:10:27.679 --> 0:10:30.120 a weaker economy that doesn't sort of follow on its own. 0:10:30.200 --> 0:10:32.679 The tricky part is the FED has to react if 0:10:32.679 --> 0:10:36.720 it's a substantially stronger economy, and it's always been difficult 0:10:36.760 --> 0:10:39.280 to gauge how much to tighten. So it's a bit 0:10:39.320 --> 0:10:42.240 of a mixed bag. Maybe at the margin greater chance 0:10:42.240 --> 0:10:44.319 of a hard landing, but for now we're happy to 0:10:44.360 --> 0:10:46.920 stick with our soft landing story. Dr Carpenter, thank you 0:10:46.960 --> 0:10:49.920 so much, Seth Carpenter, at least for now. With Morgan Stanley, 0:10:50.000 --> 0:11:03.160 thank you so much. What we're gonna do here is 0:11:03.240 --> 0:11:05.560 dive into the politics of the moment. There's eight ways 0:11:05.600 --> 0:11:09.080 to go. Always with Professor Schiller Wendy Schiller's directing Tubbin 0:11:09.160 --> 0:11:12.679 Center for American Politics and Policy at Brown University or 0:11:12.760 --> 0:11:16.360 textbook definitive Wendy, I want to go back to Ronald Reagan, 0:11:17.200 --> 0:11:20.160 and I can remember clear when the FDR Democrat became 0:11:20.200 --> 0:11:23.800 a Republican and changed how primaries were on. There was 0:11:23.880 --> 0:11:26.920 a moment I think it was in a nineteen I 0:11:26.960 --> 0:11:31.840 think eight, nineteen seventy eight, whatever, nineteen seventy six where 0:11:31.840 --> 0:11:34.960 he was pushed aside because he was too conservative, and 0:11:35.040 --> 0:11:39.120 he figured out, you run conservative and moved to the middle. 0:11:39.720 --> 0:11:44.160 Along the election trail that seems to be absolutely blown 0:11:44.280 --> 0:11:47.560 up is the governor of South Carolina jumps into the race. 0:11:48.120 --> 0:11:50.040 As we see Paul John help me hear the poll 0:11:50.120 --> 0:11:54.000 for Trump overnight couldn't be Yeah, yeah, the Quentin piach 0:11:54.040 --> 0:11:56.640 Pole the leader, and right behind him is Rhonda Santis. 0:11:57.440 --> 0:12:00.120 The leaderships, it seems like when it's all blown not 0:12:00.640 --> 0:12:04.640 How are the primaries different this year versus what we 0:12:04.720 --> 0:12:08.960 knew with Ronald Reagan. Um, we don't have time for 0:12:08.960 --> 0:12:12.840 the entire explanation. Tom. As always, you ask a very 0:12:12.840 --> 0:12:16.520 broad question a couple of things. Ronald Reagan understood that 0:12:16.559 --> 0:12:18.600 you could gain steam in a primary, and you're right. 0:12:18.600 --> 0:12:22.280 In nineteen seventy six, he challenged an incumbent Republican and 0:12:22.320 --> 0:12:24.520 he didn't win the nomination to a typical and Republican 0:12:24.559 --> 0:12:27.160 party typically to have sort of I lost last time, 0:12:27.200 --> 0:12:30.839 so on the nominee next time, up until Donald Trump. Uh, 0:12:30.840 --> 0:12:33.800 and then the Democrats changed their primary system in four 0:12:34.440 --> 0:12:36.520 and eighty eight. They kept sort of changing the rules 0:12:36.520 --> 0:12:39.600 about how delegates were allocated. What we're waiting for is 0:12:39.679 --> 0:12:42.920 key how the Republican structure their primary season for twenty 0:12:42.920 --> 0:12:45.080 four makes a big difference to Ron De Santis and 0:12:45.200 --> 0:12:48.199 Donald Trump. We've seen the Democrats move their calendar. Obviously, 0:12:48.200 --> 0:12:51.040 South Carolina is a big primary, big primary and a 0:12:51.120 --> 0:12:54.400 big priority now for the Democrats. What will the Republicans do? 0:12:54.679 --> 0:12:56.200 And when I'm talking about is how they divide up 0:12:56.200 --> 0:12:59.559 their delegates in the beginning, proportional representation which kept Trump 0:12:59.600 --> 0:13:01.960 a lot of actually in the early primaries in sixteen, 0:13:02.480 --> 0:13:05.880 or winner take all, which would help Trump. Also because 0:13:06.080 --> 0:13:08.880 Trump is now a known commodity, has got a built 0:13:08.920 --> 0:13:11.960 in base, and if it's plurality, he'll he'll start winning 0:13:11.960 --> 0:13:15.000 those early primaries. And that presents a challenge if you 0:13:15.040 --> 0:13:18.160 think for Ronda Santis, even though he's got Florida, that's 0:13:18.160 --> 0:13:19.959 gonna be And we haven't heard yet what the r 0:13:20.040 --> 0:13:22.240 NC will do with how where they're gonna make any 0:13:22.280 --> 0:13:25.079 changes or keep things stas quo Wendy. A lot of 0:13:25.120 --> 0:13:26.800 people are talking about how much time, And I say 0:13:26.800 --> 0:13:28.240 a lot of people. I'm saying the two people next 0:13:28.280 --> 0:13:29.839 to me are talking about how much time it takes 0:13:30.120 --> 0:13:32.200 for the election process to be carried out. And I'm 0:13:32.240 --> 0:13:35.920 wondering how much room is there to change the gravitational 0:13:35.960 --> 0:13:39.000 force and the Republican Party away from Trump towards Ronda 0:13:39.040 --> 0:13:43.520 Santis perhaps a bit more, but also potentially to Nicki Haley. Well, 0:13:43.559 --> 0:13:46.400 the only way it gravitationally pulls towards Ronda Santis if 0:13:46.400 --> 0:13:49.040 it's Wanda Santa's declares and starts running. I think the 0:13:49.120 --> 0:13:51.520 mistake that he might make is to wait too long. 0:13:51.559 --> 0:13:53.640 Now you have Florida in your back pocket, you get 0:13:53.679 --> 0:13:56.200 a lot of free publicity, but it doesn't mean you're 0:13:56.240 --> 0:13:59.360 you're out there really connecting with primary voters. And that's 0:13:59.400 --> 0:14:01.240 what the Santis has to do earlier than I think 0:14:01.240 --> 0:14:04.120 he's comfortable with UH And then Nikki Hall is going 0:14:04.160 --> 0:14:06.680 to be out there. Tim Scott from South Carolina, he's 0:14:06.679 --> 0:14:08.840 a senator, he may get in the race as well. 0:14:09.040 --> 0:14:11.400 I think the idea is the more people can present 0:14:11.480 --> 0:14:15.680 alternatives positively, not beat up on Trump, not attack Trump, 0:14:15.880 --> 0:14:19.520 but positive alternatives without all the baggage they're hoping they 0:14:19.520 --> 0:14:21.840 can start to pick up some steam among rank and 0:14:21.840 --> 0:14:24.720 file primary voters. On the Democratic side, we have President 0:14:24.760 --> 0:14:27.520 Biden trying to deal with both domestic and also international issues, 0:14:27.560 --> 0:14:29.320 and the latest news on that front is that he 0:14:29.480 --> 0:14:31.800 is thinking about some sort of phone call with a 0:14:32.000 --> 0:14:36.120 Chinese premiere with with paying the president of China. How 0:14:36.200 --> 0:14:39.160 much does this give him a bit of a difficult 0:14:39.200 --> 0:14:42.520 position to put out there, trying to both dovetail a 0:14:42.640 --> 0:14:45.840 hawkish message with a sort of a sort of olive 0:14:45.880 --> 0:14:49.320 branch to the Chinese leadership to try to smooth over 0:14:49.360 --> 0:14:51.960 some of those relations. Yeah, I mean, I think that 0:14:52.040 --> 0:14:54.120 he's handling this in the way that he handles on everything. 0:14:54.120 --> 0:14:56.360 He's sort of marched into his own tune. He's got 0:14:56.360 --> 0:14:59.000 a lot of foreign policy experience, and China is an 0:14:59.000 --> 0:15:01.760 extremely important not telling you three something you don't know, 0:15:02.080 --> 0:15:05.720 a very important economic partner. And he's been moderate in 0:15:05.720 --> 0:15:07.760 his response to this because, you know, picking a fight 0:15:07.800 --> 0:15:11.640 with Russia and China at the same time, particularly China economically. 0:15:12.000 --> 0:15:14.280 We just got out of that with tariffs and you know, 0:15:14.280 --> 0:15:16.840 they stopped buying our soybeans that cost us a lot 0:15:16.880 --> 0:15:19.160 of tax by our dollars and subsidies back to farmers. 0:15:19.360 --> 0:15:21.880 You know, there's a lot of very negative consequences to 0:15:21.960 --> 0:15:25.080 picking up big fight with China GEO, politically and economically, 0:15:25.320 --> 0:15:27.440 and he's not falling for it. He's deciding I'm gonna 0:15:27.480 --> 0:15:29.960 take this slowly, one day at a time, and I'm 0:15:29.960 --> 0:15:32.760 not going to jeopardize what seems to be a renewed 0:15:33.480 --> 0:15:36.440 and healthier relationship than under the Trump administration. When the 0:15:36.560 --> 0:15:40.560 underreported is the four base agreement between the Philippines and 0:15:40.600 --> 0:15:43.160 the United States, I'm gonna say two weeks ago where 0:15:43.200 --> 0:15:46.680 we're gonna expand out there with investment in for some 0:15:46.800 --> 0:15:51.160 form of military bases in Luzon in the South China. See. 0:15:51.280 --> 0:15:54.400 How important is that? What does that signal to the 0:15:54.520 --> 0:15:58.240 Navy and to China, Well, it's extremely important. As you know, 0:15:58.320 --> 0:16:00.680 China has been making incursions in this China see for 0:16:00.760 --> 0:16:04.680 quite some time, obviously rattling their saber. When it comes 0:16:04.680 --> 0:16:08.040 to Taiwan. Uh, just understanding that the United States will 0:16:08.080 --> 0:16:11.720 maintain its military presence and that it will be prepared 0:16:12.200 --> 0:16:14.560 in some way, shape or form to block any of 0:16:14.600 --> 0:16:17.800 what they consider overreach by the Chinese military. And then 0:16:17.840 --> 0:16:20.160 you threat to Taiwan. So I think it's a it's 0:16:20.160 --> 0:16:22.240 you know, it's a traditional move. We've been affiliate with 0:16:22.280 --> 0:16:24.640 the Philippines for very long time, and some people would 0:16:24.640 --> 0:16:27.160 object to the nature of that relationship in its early days. 0:16:27.200 --> 0:16:30.760 But nonetheless they have to show the military United States 0:16:30.760 --> 0:16:34.080 and the President that we are going to engage some way, 0:16:34.120 --> 0:16:37.440 shape or form, not to give China a freehand. When 0:16:37.440 --> 0:16:40.440 do we have this Munich security comfort zone going open Germany, 0:16:40.480 --> 0:16:42.880 what do you expect to come out of that? Well, 0:16:42.920 --> 0:16:46.000 I mean, I think you know, the whole question of 0:16:46.920 --> 0:16:49.880 the Ukraine Russian conflx, how much how much weaponry we 0:16:49.920 --> 0:16:52.120 are giving to Ukraine. We've seen this in the past 0:16:52.160 --> 0:16:53.960 where we give a lot of weapons and then we 0:16:54.040 --> 0:16:56.680 lose and then the enemy gets our weapons, whether they're 0:16:56.680 --> 0:16:59.640 destroyed or not. Uh. And it's it's a delicate balance. 0:17:00.040 --> 0:17:01.800 And then you've got Finland saying, listen, when are we 0:17:01.800 --> 0:17:04.040 getting into NATO. You want to expand NATO, We want 0:17:04.040 --> 0:17:05.720 to be a part of NATO. Let us in already. 0:17:06.000 --> 0:17:08.120 So I think there's a lot of complications going on, 0:17:08.520 --> 0:17:10.280 and I think, you know, Trump took advantage of this 0:17:10.320 --> 0:17:12.399 in terms of our NATO partners and saying you have 0:17:12.440 --> 0:17:15.280 to do more and I think President Biden is doing 0:17:15.320 --> 0:17:16.960 a lot with weaponry, but you have to make sure 0:17:16.960 --> 0:17:20.080 Europe's in UH and continues to stay in and think 0:17:20.080 --> 0:17:22.840 it's politically very important to President Biden and by Europe. Ready, 0:17:22.960 --> 0:17:26.119 Way main gairmany time. Way, Wendy, thank you and so 0:17:26.160 --> 0:17:29.040 alwa it's Wendy ship of that brand university. Wendy just wonderful. 0:17:32.920 --> 0:17:34.920 We're gonna do something different with Helene Becker. We're not 0:17:34.920 --> 0:17:37.160 going to get a single best buy in an individual stock. 0:17:37.200 --> 0:17:39.000 We're not going to complain to her about the cost 0:17:39.080 --> 0:17:42.159 to Paris or the like Placid this weekend for Lisa. 0:17:42.200 --> 0:17:45.160 What we're gonna do is talk to her about the unspeakable. 0:17:45.200 --> 0:17:47.320 When you're Helene Becker at Cow and you can write 0:17:47.320 --> 0:17:50.280 about it, you can think about it, you can experience. 0:17:50.280 --> 0:17:52.720 I cut to the chase Helene Becker. When I was 0:17:52.800 --> 0:17:57.600 in school a long time ago, a friend of a 0:17:57.680 --> 0:18:02.240 girlfriend's family was a PanAm pilot and he walked on water. 0:18:02.720 --> 0:18:06.080 There was a time where these people were gods of 0:18:06.160 --> 0:18:10.399 the airspace. Maybe it touches to the DiCaprio movie Catch 0:18:10.480 --> 0:18:14.520 Me If you can. Things have changed? Do you have 0:18:14.800 --> 0:18:19.680 confidence in the pilot training, the pilots coming up from 0:18:19.720 --> 0:18:23.080 the regionals. Are they the same as that god from 0:18:23.080 --> 0:18:27.720 fifty years ago? Um? So this are two questions Tom. 0:18:27.800 --> 0:18:29.760 The first part of the question is do we have 0:18:29.840 --> 0:18:33.479 confidence in the safety and and and security of our 0:18:33.640 --> 0:18:38.080 er any of our air traffic UM system. Yes we do. UM. 0:18:38.280 --> 0:18:42.280 The pilots of fifty years ago we're trained during wars. 0:18:42.440 --> 0:18:45.440 We don't have that much anymore. So pilots now are 0:18:45.480 --> 0:18:49.320 more civilian trained. But yes, they all have this fift 0:18:49.880 --> 0:18:54.399 hours of experience before they can work for commercial airline UM. 0:18:54.520 --> 0:18:56.560 Unless they're in the military, they can have a few 0:18:57.119 --> 0:19:02.119 few fewer hours. UM. But yes, it's gotten increasingly difficult 0:19:02.160 --> 0:19:07.399 to be a pilot because of concerns about safety. I 0:19:07.480 --> 0:19:11.920 look alaim at the financial part of it, of recruiting pilots, 0:19:12.480 --> 0:19:16.679 described the pilots shortage and the reports recently that the 0:19:16.720 --> 0:19:22.840 major carriers are basically stealing pilots from the lesser regional carriers. Yeah, 0:19:22.880 --> 0:19:26.880 they're eating their young. UM. So here's the situation. And 0:19:27.000 --> 0:19:29.440 we've been talking about this since two thousand fourteen, but 0:19:29.600 --> 0:19:34.439 the pandemic accelerated it. Um. You have a group of 0:19:34.440 --> 0:19:39.919 pilots beginning in about twenty seven thousand pilots are going 0:19:39.960 --> 0:19:43.800 to turn sixty five this decade. So when you think 0:19:43.840 --> 0:19:48.760 about that, the US airline industry employs about fifty seven thousand, 0:19:48.920 --> 0:19:53.240 sixty thousand pilots, so more than half or about what 0:19:54.440 --> 0:19:57.760 of pilots were retiring and they have to be replaced. 0:19:58.560 --> 0:20:02.879 UM in the US only trains collectively about five or 0:20:02.880 --> 0:20:05.320 six thousand pilots a year, so you were going to 0:20:05.440 --> 0:20:08.920 have a shortage anyway. Then you had the pandemic, and 0:20:09.240 --> 0:20:15.160 airlines asked pilots who were intending to retire between two 0:20:15.240 --> 0:20:20.520 to consider retiring in and UM. The only airline that 0:20:20.560 --> 0:20:23.320 really didn't do that was United. They made different arrangements 0:20:23.320 --> 0:20:27.320 with their with their pilots, but others retired. And then 0:20:27.400 --> 0:20:30.760 when things started to recover, not only did you have 0:20:30.880 --> 0:20:34.640 to hire back the ten thousand that retire, but when 0:20:34.640 --> 0:20:37.680 you think about growth, and you need roughly five or 0:20:37.720 --> 0:20:41.840 six thousand pilots a year collectively for all airlines, UM, 0:20:41.880 --> 0:20:45.040 you were hiring fourteen or fifteen thousand pilots in two 0:20:45.160 --> 0:20:48.240 in an environment where you're only training a third of that. 0:20:48.640 --> 0:20:53.000 So we were going to have a shortage. And I'm sorry, 0:20:53.040 --> 0:20:55.159 go ahead of hell and this all boils down to 0:20:55.160 --> 0:20:57.600 this question of consumer experience and how much of this 0:20:57.640 --> 0:21:01.240 is what's behind this shortage compere a city relative to 0:21:01.359 --> 0:21:04.720 demand and an experience that I mean, I can't blame 0:21:04.760 --> 0:21:07.280 this and why a plane turns around, but a feeling 0:21:07.320 --> 0:21:10.000 that things are kind of running more by a shoestring 0:21:10.000 --> 0:21:13.320 than they used to. How much well consumers put up 0:21:13.320 --> 0:21:16.480 with given that this is a catastrophic experience for somebody 0:21:16.520 --> 0:21:18.600 who's on that flight, But if they want to leave 0:21:18.640 --> 0:21:21.399 New Zealand and go to UH somewhere else, they're going 0:21:21.440 --> 0:21:25.119 to get back on a plane. Right. So, UM, I 0:21:25.119 --> 0:21:27.320 think the incident you're talking about was the one yesterday 0:21:27.359 --> 0:21:30.280 where there was a fire at JFK and UH and 0:21:30.320 --> 0:21:33.399 Air New Zealand aircraft turned around halfway into the flight 0:21:33.520 --> 0:21:36.240 or something like that. Yeah, So here's the thing you 0:21:36.280 --> 0:21:39.359 want to travel as a consumer. Um, you've missed it. 0:21:40.040 --> 0:21:42.240 Maybe you haven't traveled that much in the last couple 0:21:42.240 --> 0:21:44.240 of years, and you want to get back and you 0:21:44.240 --> 0:21:46.880 want to get back to experiences and doing things, and 0:21:47.480 --> 0:21:49.560 air is part and and maybe air is part of 0:21:49.600 --> 0:21:52.879 your vacation, and so you try to figure out the 0:21:52.880 --> 0:21:57.200 best way to do that. UM, traveling days of week 0:21:57.280 --> 0:22:00.159 that are maybe less popular, like Tuesday wins to Saturday day. 0:22:00.160 --> 0:22:02.840 They're a little less popular than the other four days 0:22:02.880 --> 0:22:06.280 of the week. Um. And then the other part of 0:22:06.359 --> 0:22:08.840 it is for the consumer, we're seeing a lot of 0:22:08.920 --> 0:22:13.800