WEBVTT - Bloomberg Surveillance: Airline Industry Confidence 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.080 I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best an economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.840 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:30.160 --> 0:00:34.040 Helene Becker joins now senior research analyst at TD Cowen, 0:00:34.640 --> 0:00:36.720 and we're thrilled that she could be with us today. 0:00:37.080 --> 0:00:39.240 Helene, January twenty second. 0:00:39.240 --> 0:00:41.400 I guess we get an earnings report from United, the 0:00:41.440 --> 0:00:45.400 others will lined up. What is their urgency to act, 0:00:45.840 --> 0:00:49.239 not so much off the Boeing accident, but their urgency 0:00:49.280 --> 0:00:53.920 to act because of the topsy turvy markets they're in now. 0:00:54.120 --> 0:00:59.320 I think that we have a situation where we're expecting, 0:00:59.880 --> 0:01:03.520 or we saw fourth quarter traffic was pretty good. The 0:01:03.560 --> 0:01:07.720 further we get away from twenty twenty, the more we'll 0:01:07.720 --> 0:01:12.280 see managed corporate travel come back. I think the trip 0:01:12.319 --> 0:01:14.479 where you have maybe a one day trip isn't coming 0:01:14.520 --> 0:01:16.920 back anytime soon. I feel like it's a lot like 0:01:17.000 --> 0:01:20.959 after nine to eleven tom when the really short haul 0:01:21.040 --> 0:01:24.959 trips went away, and we expect that to continue really now. 0:01:26.040 --> 0:01:29.240 But the longer haul trips. People need to get out, 0:01:29.319 --> 0:01:31.280 they need to see their clients. We've been talking about 0:01:31.319 --> 0:01:34.119 this for about a year now and we're seeing that. 0:01:34.160 --> 0:01:37.520 We're seeing that increase in managed travel, and we think 0:01:37.520 --> 0:01:40.080 that we'll continue into the rest of this year. 0:01:40.560 --> 0:01:44.320 With the Boeing accident, with the rivets, the fasteners, whatever, 0:01:44.360 --> 0:01:46.680 we're going to see in the coming weeks of that analysis, 0:01:46.720 --> 0:01:50.160 even months, I should say, of that analysis, what does 0:01:50.200 --> 0:01:53.000 it mean for the dynamic of refleeting A word I 0:01:53.080 --> 0:01:56.680 discovered last week. I think Helene Becker, you know, refleeting 0:01:56.760 --> 0:02:00.640 is going out and buying the bright, shiny new thing accelerated. 0:02:02.040 --> 0:02:06.520 Yeah, well yes, and no American did their refleeting in 0:02:06.560 --> 0:02:10.480 the last decade, so they're on the downside of that. 0:02:11.560 --> 0:02:14.920 United is doing it now and into twenty thirty two. 0:02:15.160 --> 0:02:17.440 Delta is in the middle of it. But Delta has 0:02:17.480 --> 0:02:20.240 a different and Southwest actually have different viewpoints on the 0:02:20.240 --> 0:02:23.320 way they refleet. They kind of spend about ten percent 0:02:23.880 --> 0:02:28.399 revenue on capex, somewhere between eight and ten percent every year, 0:02:28.520 --> 0:02:32.440 so they're continually refleeting, so we view that fairly favorably. 0:02:32.760 --> 0:02:36.000 I don't think anything changes. There's a lot of pressure 0:02:36.040 --> 0:02:39.960 on the industry to lower their carbon footprint. I know 0:02:40.080 --> 0:02:45.360 aviation only makes up two percent of total transportation carbon, 0:02:45.480 --> 0:02:53.680 but others are doing the whole reduction carbon faster, so 0:02:53.840 --> 0:02:57.040 aviation over time will become a bigger percentage of it. 0:02:57.080 --> 0:03:00.320 So there's a lot of pressure to fly young are 0:03:00.360 --> 0:03:02.519 more fully efficient aircraft oleane. 0:03:02.600 --> 0:03:05.160 I can't get past this comment from George ferguson words 0:03:05.200 --> 0:03:07.160 you never want to hear, when he basically came out 0:03:07.160 --> 0:03:09.800 and said it's not as safe as it was before 0:03:09.880 --> 0:03:12.800 the pandemic, talking about the safety of flying at a 0:03:12.840 --> 0:03:16.639 time when we did just have this incident with Alaska Airlines, 0:03:16.840 --> 0:03:20.080 also the incident that we saw in Japan, Questions around 0:03:20.080 --> 0:03:23.519 the competency and staffing levels at some of the agencies. 0:03:23.919 --> 0:03:25.680 Are you concerned? Do you feel like that is an 0:03:25.720 --> 0:03:27.760 accurate statement that it is not as safe to fly 0:03:27.880 --> 0:03:29.240 today as pre pandemic. 0:03:30.400 --> 0:03:35.280 No, no, no, I disagree with that completely. The fact 0:03:35.360 --> 0:03:38.640 that there were no casualties on the japan Air A 0:03:38.760 --> 0:03:44.320 three thirty is hugely significant. They were able to evacuate 0:03:44.360 --> 0:03:51.000 that entire aircraft without any incident, with half the doors 0:03:51.280 --> 0:03:54.360 being half the emergency doors being unusable because of fire. 0:03:55.000 --> 0:03:57.640 So I think that's one thing to consider. I think 0:03:57.680 --> 0:04:01.040 from an aviation perspective and a safety perspect that every 0:04:01.120 --> 0:04:04.000 time there's an incident, there's an investigation. There is no 0:04:04.200 --> 0:04:07.080 cover up. You never see that as you would in 0:04:07.120 --> 0:04:11.040 some as you may in some other industries. There have it. 0:04:11.400 --> 0:04:14.760 I mean, not to cha the industry, but there really 0:04:14.800 --> 0:04:18.159 haven't been any major accidents. The fact that Alaska air 0:04:18.480 --> 0:04:21.920 pilots were able to declare any emergency turnaround land safely 0:04:22.480 --> 0:04:27.480 with no injuries is hugely significant. And I think aviation 0:04:27.640 --> 0:04:31.080 is still the sepest form of transportation. No other industry 0:04:31.120 --> 0:04:36.240 does the deep dive into accidents that aviation does, and 0:04:36.279 --> 0:04:42.359 then aviation trains for every accident, and I think I 0:04:42.400 --> 0:04:44.920 think it's I think aviation is still very safe. 0:04:45.320 --> 0:04:47.120 I think that a lot of people will point to 0:04:47.160 --> 0:04:49.680 what happened in Japan and point out that that plane 0:04:49.680 --> 0:04:51.560 that everyone did manage to get out of I believe 0:04:51.640 --> 0:04:55.200 was an air bus and not a poet. But nevertheless, Yeah, 0:04:55.240 --> 0:04:57.760 So going forward, though, I'm curious what about some of 0:04:57.800 --> 0:05:00.360 the air traffic control issues and some of these other things. 0:05:00.520 --> 0:05:03.400 How important is it for airlines to do some sort 0:05:03.440 --> 0:05:06.400 of pr job, if nothing else, to assuage some of 0:05:06.440 --> 0:05:08.880 the concerns of neurotic people like myself. Where you're looking 0:05:08.960 --> 0:05:10.720 at this and thinking like, I don't. 0:05:10.480 --> 0:05:15.400 Know, well, I think you have to think aviation is 0:05:15.440 --> 0:05:18.560 safe number one. Number two, Yes, we do need to 0:05:18.600 --> 0:05:21.400 address the air traffic control situation, and the fact that 0:05:21.440 --> 0:05:27.120 we now have a permanent administrator is hugely important. That's another, 0:05:27.520 --> 0:05:31.720 you know, another thing that we view favorably. The FAA 0:05:31.760 --> 0:05:34.520 is certified to March eighth, so the government needs to 0:05:34.560 --> 0:05:37.520 really step up its efforts and get it certified permanently. 0:05:38.800 --> 0:05:41.760 My views are different than some of my peer group. 0:05:41.880 --> 0:05:44.480 I personally think the government should be responsible for safety 0:05:44.520 --> 0:05:47.520 and security, and I think your traffic control should be 0:05:47.560 --> 0:05:51.160 a separate corporation that's public that's paid for everybody. Right now, 0:05:51.240 --> 0:05:55.800 General Aviation, TOLUM and least in John don't pay for 0:05:56.040 --> 0:05:57.720 using air traffic control system. 0:05:58.000 --> 0:06:00.159 Helen, this is I wish we had another hour to 0:06:00.160 --> 0:06:02.680 cover this because I think each and every listener and 0:06:03.800 --> 0:06:06.360 viewer want to know about Back to the Reagan uproar 0:06:06.440 --> 0:06:11.719 and unions of years ago. How different is our transportation 0:06:12.000 --> 0:06:16.279 safety structure versus other major developing countries. 0:06:17.240 --> 0:06:20.760 Yeah, so euro Control runs Europe and that's a public 0:06:20.800 --> 0:06:27.240 company and Canada's public company and Canada it's just run differently. 0:06:27.520 --> 0:06:30.039 And I'm not saying it's better. I'm not saying it's worse. 0:06:30.160 --> 0:06:33.560 I'm just saying it's different, and you don't have the 0:06:33.600 --> 0:06:36.960 puts and starts that you have here. I've been talking 0:06:36.960 --> 0:06:39.599 about next gen since I started covering the industry four 0:06:39.680 --> 0:06:42.440 decades ago, and we're still talking about it. It's years 0:06:42.440 --> 0:06:47.040 behind schedule, it's over budget. Air traffic control, to your point, Tom, 0:06:47.720 --> 0:06:51.000 the Reagan administration fired all the air traffic controllers. They 0:06:51.040 --> 0:06:55.839 retrained them NAT because the union that represents them. They're 0:06:55.880 --> 0:06:59.400 they're well trained, but they're overworked, they're fatigued. We don't 0:06:59.400 --> 0:07:02.360 have enough of them to handle what we're doing right now, 0:07:02.400 --> 0:07:05.760 and so the aviation system will slow down. You won't 0:07:05.760 --> 0:07:09.600 be able to We'll see growth through replacing smaller aircraft 0:07:09.640 --> 0:07:12.920 with larger aircraft. We don't think we'll see the same 0:07:13.040 --> 0:07:15.360 level of pilot hiring in twenty four and twenty five 0:07:15.360 --> 0:07:19.400 that we saw in twenty one, two and three. That 0:07:19.560 --> 0:07:23.560 from that perspective. As we move further into the decade 0:07:23.800 --> 0:07:26.840 and people have more experience, that will be beneficial. But 0:07:26.960 --> 0:07:29.200 we're not going to grow as fast as we grow 0:07:29.280 --> 0:07:31.960 in prior decades because we just don't have the experience, 0:07:32.480 --> 0:07:37.400 and we can push the air traffic controllers to too 0:07:37.520 --> 0:07:40.520 much over time because it's a very taxing job to 0:07:40.560 --> 0:07:43.880 begin with, and we don't want any accidents to occur 0:07:46.000 --> 0:07:48.800 in the US because we want to continue to be 0:07:48.800 --> 0:07:50.800 able to say it's the safest form of transportation. 0:07:51.160 --> 0:07:53.600 Helen, I've got sixty seconds left on a clock top 0:07:53.600 --> 0:07:55.400 pic if ivor trade this year? What is it? 0:07:56.240 --> 0:07:56.440 Oh? 0:07:56.520 --> 0:07:59.600 Yeah, our favorite trade this year is Delta after United 0:07:59.640 --> 0:08:01.600 was our face for trade for the past two years. 0:08:01.680 --> 0:08:02.560 Why the change? 0:08:05.720 --> 0:08:09.280 The difference in capex, frankly is the biggest difference. I 0:08:09.320 --> 0:08:13.080 think United will continue to do well, but they're going 0:08:13.120 --> 0:08:14.520 to borrow a lot of money, sick. They have a 0:08:14.600 --> 0:08:18.520 sixty billion dollar capex program between now and twenty thirty two, 0:08:19.040 --> 0:08:21.840 and Deltas is not nearly as big, so you won't 0:08:21.920 --> 0:08:24.000 see the stress and the balance sheet that you may 0:08:24.040 --> 0:08:24.960 see at United. 0:08:25.320 --> 0:08:27.520 Interesting, Helene, thank you, thanks for the up date and 0:08:27.560 --> 0:08:30.240 lane backing there of td count, Thank you very much. 0:08:34.280 --> 0:08:36.720 Starting in the conversation this morning with Lori Cavassino, the 0:08:36.720 --> 0:08:39.920 head of US screty strategy at RBC Capital Markets, Loury, 0:08:39.920 --> 0:08:41.760 Good morning to you. This line jumped down from your 0:08:41.800 --> 0:08:44.480 most recent note, the week's start in January is just 0:08:44.480 --> 0:08:47.800 the beginning of a phase of turbulence. How concerned are 0:08:47.840 --> 0:08:48.319 you about that? 0:08:50.000 --> 0:08:51.719 Well, well, Johnny, I was talking to one of my 0:08:51.800 --> 0:08:54.880 traders last week and we were discussing the CFTC data. 0:08:54.880 --> 0:08:58.560 We're starting to see it's really just looking very very stretched, 0:08:58.600 --> 0:09:01.240 and I said, this looks scary, and I think we 0:09:01.320 --> 0:09:03.640 need to keep in mind that sentiment has been oscillating 0:09:03.920 --> 0:09:06.400 very very quickly over the last six months, so this 0:09:06.480 --> 0:09:09.080 isn't necessarily something that has to derail a call for 0:09:09.120 --> 0:09:11.400 the year. Maybe damp an enthusiasm just a little bit, 0:09:12.200 --> 0:09:14.760 but really what we've started to see the CFTC data 0:09:14.800 --> 0:09:17.560 on institutional investor positioning line up with what we're seeing 0:09:17.600 --> 0:09:20.840 on the retail survey for aaii, and both are looking 0:09:21.040 --> 0:09:23.760 very very stretched right now. I think there are a 0:09:23.800 --> 0:09:26.040 number of things that could come in and trip this 0:09:26.160 --> 0:09:28.480 market up a bit, but usually it's something the market 0:09:28.480 --> 0:09:30.400 doesn't see coming, So I think we need to focus 0:09:30.440 --> 0:09:32.959 here on the idea that sentiment itself just got carried 0:09:32.960 --> 0:09:34.160 away at the end of last year. 0:09:34.440 --> 0:09:36.960 Laurie Mike Wilson has been cautious on the markets. Over 0:09:37.000 --> 0:09:40.800 at Morgan Stanley has a brilliant paragraph parketing to nominal 0:09:40.840 --> 0:09:43.079 growth could be the surprise this year. It's one of 0:09:43.160 --> 0:09:46.720 his more optimistic constructions of where we're heading in the 0:09:46.720 --> 0:09:50.440 mystery of twenty twenty four, what do mid caps and 0:09:50.559 --> 0:09:51.640 small caps do? 0:09:52.679 --> 0:09:55.000 If we get legitimate. 0:09:54.440 --> 0:09:57.520 Animal spirit, we get legitimate nominal GDP. 0:09:59.320 --> 0:10:02.080 So what we've done typically seen is that when GDP 0:10:02.160 --> 0:10:03.640 and we tend to look at it in real terms 0:10:03.679 --> 0:10:05.640 as opposed to nominal terms. But if you're looking at 0:10:05.640 --> 0:10:08.360 real GDP above two point six percent, and two point 0:10:08.360 --> 0:10:10.320 six percent has been the long term average since the 0:10:10.360 --> 0:10:13.600 late seventies, we typically see that small caps and value 0:10:13.600 --> 0:10:16.800 stocks outperform in that environment. When GDP is running cool 0:10:16.880 --> 0:10:20.400 below trend, that's when large caps and growth tend to outperform. 0:10:20.480 --> 0:10:22.480 So it goes back to this question of leadership and 0:10:22.600 --> 0:10:25.560 rotation in the market. We've got GDP forecasts sitting at 0:10:25.600 --> 0:10:28.040 about one point three percent this year. That's up from 0:10:28.040 --> 0:10:30.720 about one percent back in November, so they're moving in 0:10:30.920 --> 0:10:32.800 the right direction. But if we really want to get 0:10:32.840 --> 0:10:36.640 a lasting, sustainable, durable leadership rotation away from the megacap 0:10:36.679 --> 0:10:39.840 growth stocks and into basically everything else in the market, 0:10:40.080 --> 0:10:42.559 you need to see GDP expectations move up quite a 0:10:42.600 --> 0:10:44.040 bit more from where they are right now. 0:10:44.600 --> 0:10:46.760 I mean, okay, well, the GDP's got to come up. 0:10:46.800 --> 0:10:48.520 I get that, But what do we do right now? 0:10:48.520 --> 0:10:49.920 I mean, you're deploying. 0:10:49.880 --> 0:10:51.840 Cash to small you know they've pulled back. 0:10:51.920 --> 0:10:55.679 You deploying cash this morning to small caps and mid caps. 0:10:56.679 --> 0:10:58.920 So I still like them, I don't like them quite 0:10:58.920 --> 0:11:00.559 as much as I did, you know, say four or 0:11:00.559 --> 0:11:03.360 five weeks ago when we last spoke. One of the 0:11:03.400 --> 0:11:05.880 things we've seen is that, in addition to sentiment getting 0:11:05.880 --> 0:11:08.280 a little frothy at the broader market, if you look 0:11:08.280 --> 0:11:10.920 at small cap positioning on the CFTC data, we're at 0:11:10.960 --> 0:11:13.760 important crossroads. We're basically at the three year highs, but 0:11:13.800 --> 0:11:15.880 we're not at all time highs. So we're going to 0:11:15.960 --> 0:11:18.160 know pretty soon whether or not small caps are really 0:11:18.200 --> 0:11:20.880 able to power through and take things up another leg 0:11:21.400 --> 0:11:23.440 of we's also still seeing that small caps look very 0:11:23.480 --> 0:11:25.319 cheap relative to large But if you look at a 0:11:25.400 --> 0:11:28.000 Russell two thousand and forward pe, it's back to average. 0:11:28.000 --> 0:11:31.000 Now that's not usually where things top out at, but 0:11:31.080 --> 0:11:33.280 it is telling us that maybe we have made a 0:11:33.320 --> 0:11:36.520 lot of the easy money in small caps already. So 0:11:36.600 --> 0:11:38.120 do I like them? Yes? Do I like them as 0:11:38.200 --> 0:11:39.880 much as I did a month ago? Not quite? 0:11:40.200 --> 0:11:42.400 This sounds all kind of negative, and yet you just 0:11:42.480 --> 0:11:45.480 upgraded your forecast for year end twenty twenty four to 0:11:45.640 --> 0:11:48.559 a fifty one fifty. That's a ten percent upside from here. 0:11:48.679 --> 0:11:50.280 If it's not small caps what leads. 0:11:51.920 --> 0:11:54.439 So I think that the value stocks in particular are 0:11:54.440 --> 0:11:56.280 something to keep an eye on. From here. We've seen 0:11:56.320 --> 0:11:58.640 the financials act quite well now I'm actually a little 0:11:58.640 --> 0:12:01.760 bit nervous about that heading into reporting season, but we've 0:12:01.760 --> 0:12:03.960 started to see some more favorable views emerge on the 0:12:04.000 --> 0:12:06.360 industrials as well. So I think we're going to get 0:12:06.400 --> 0:12:08.720 some interesting clues in this reporting season. But I do 0:12:08.760 --> 0:12:12.240 think sector composition is very, very tough right now. I 0:12:12.280 --> 0:12:14.040 do think, Lisa, if you kind of go back to 0:12:14.080 --> 0:12:16.800 our target, we were anticipating about a ten percent return, 0:12:16.800 --> 0:12:18.679 and we put that target out in early our mid 0:12:18.720 --> 0:12:21.280 November we were on sort of the earlier side of 0:12:21.280 --> 0:12:24.760 putting targets out. We trued up all of our you know, 0:12:24.800 --> 0:12:26.840 sort of models for year end. We did have this big, 0:12:26.880 --> 0:12:29.400 ferocious run in December, and now where we're sitting today, 0:12:30.080 --> 0:12:31.920 even with this upgrade on the fifty one to fifty, 0:12:31.960 --> 0:12:34.040 it's only about an eight percent return on the year, 0:12:34.200 --> 0:12:36.960 So it's not necessarily getting more bullish. It's just kind 0:12:36.960 --> 0:12:39.480 of truing up our model for the year ahead based 0:12:39.520 --> 0:12:41.040 on the moves that we had in December. 0:12:41.160 --> 0:12:43.600 You mentioned banks, and I find this interesting. How important 0:12:43.679 --> 0:12:45.680 is Friday going to be as JP Morgan kicks off 0:12:45.720 --> 0:12:48.560 earnings to give a sense of what the landscape is 0:12:48.600 --> 0:12:50.679 for banks? Or is it just JP Morgan's world and 0:12:50.720 --> 0:12:51.880 everybody else is living in it? 0:12:53.240 --> 0:12:55.440 So I think they all matter, Lisa. You know, I 0:12:55.440 --> 0:12:57.680 don't think it's just any one particular bank. I know 0:12:57.760 --> 0:13:00.240 some get more attention than others, especially the one that 0:13:00.280 --> 0:13:02.520 come at the beginning. But I tell you what I 0:13:02.559 --> 0:13:05.080 think is important for the banks is one, are those 0:13:05.200 --> 0:13:07.360 sort of strong numbers that we've seen in terms of 0:13:07.360 --> 0:13:10.320 performance going to hold up. Sometimes we do see, you know, 0:13:10.360 --> 0:13:11.960 sort of the banks give back when they've had a 0:13:12.000 --> 0:13:14.600 strong lead into reporting season, So are the numbers going 0:13:14.640 --> 0:13:17.480 to be good enough to really justify sustaining some of 0:13:17.480 --> 0:13:19.960 the better trends we've seen recently. I think that's one thing. 0:13:20.600 --> 0:13:22.720 But also I think for someone like me who's not 0:13:22.840 --> 0:13:25.800 a specialist in the financials, we really go in and 0:13:25.840 --> 0:13:28.120 look at the financials for clues on the plumbing of 0:13:28.120 --> 0:13:30.160 the economy, on the health of the consumer. And I 0:13:30.160 --> 0:13:32.440 think that's probably going to be the most important thing 0:13:33.040 --> 0:13:34.720 coming out of the next kind of week or so 0:13:34.800 --> 0:13:36.160 with those banks earnings. 0:13:35.840 --> 0:13:38.240 The real headline over the weekend coming into this morning 0:13:38.320 --> 0:13:41.560 a positive surprise in Washington, d C. Laurie this story 0:13:41.600 --> 0:13:44.960 congressional leaders announcing a deal on top line spending for 0:13:45.000 --> 0:13:47.600 the current fiscal year. Laurie, I was speaking to Wemy 0:13:47.640 --> 0:13:49.520 with Silverman in the last week and we talked about 0:13:49.520 --> 0:13:52.800 your line that talking about politics the election this year 0:13:52.840 --> 0:13:55.600 specifically is like staring at the sun. Is it that 0:13:55.880 --> 0:13:58.160 bad this year for you and the team? 0:13:58.600 --> 0:14:01.520 Yeah, it's pretty awful, John. I mean it's interesting that 0:14:01.600 --> 0:14:05.000 line comes from my conversations with US based investors who 0:14:05.000 --> 0:14:07.080 are like, Okay, it's time to write our outlooks. You know, 0:14:07.120 --> 0:14:08.800 this is kind of thinking back the last month or so, 0:14:09.800 --> 0:14:11.480 you know, what do we say about this? And we 0:14:11.559 --> 0:14:13.600 kind of walk people through data, We get through it quickly, 0:14:13.640 --> 0:14:17.040 and then we move on European and Canadian investors. I mean, 0:14:17.080 --> 0:14:19.160 you could easily spend a whole meeting on this. It's 0:14:19.280 --> 0:14:22.160 like it's like a spectator sport for them at this point. 0:14:22.640 --> 0:14:24.720 But I do think it's a major source of uncertainty. 0:14:24.760 --> 0:14:26.400 And I'll tell you what it was interesting to me 0:14:26.480 --> 0:14:28.120 last week when I was working through some of the 0:14:28.200 --> 0:14:29.400 data we saw at the end of the year in 0:14:29.480 --> 0:14:31.800 the beginning of this year, is that you are starting 0:14:31.800 --> 0:14:34.880 to see money flows improve or turn positive to Japan, 0:14:34.960 --> 0:14:38.160 to emerging markets, to China, and to Europe. US flows 0:14:38.200 --> 0:14:40.240 are still holding up, but we are starting to see 0:14:40.280 --> 0:14:43.920 non US geographies really attract, you know, some better flows. 0:14:44.000 --> 0:14:45.720 And I think part of that has to do with 0:14:45.800 --> 0:14:47.760 the election. Based on what I'm hearing from the non 0:14:47.840 --> 0:14:49.240 US investors. 0:14:48.840 --> 0:14:54.640 Laurie answer a question for OURBC clients watching listening, which is, jeez, 0:14:54.640 --> 0:14:56.600 we started the year week and. 0:14:56.520 --> 0:15:00.000 That signals a terrible year ahead. Is there any valid 0:15:00.040 --> 0:15:01.000 to that emotion? 0:15:02.840 --> 0:15:06.400 So I tend to be very skeptical of you know, 0:15:06.480 --> 0:15:09.120 these seasonal, you know kind of studies. Whenever we do 0:15:09.160 --> 0:15:10.840 this on this day, we do this for the rest 0:15:10.840 --> 0:15:13.240 of the week. I think that those kinds of studies 0:15:13.320 --> 0:15:16.600 can be massaged frankly, you know, change your starting point 0:15:16.640 --> 0:15:19.240 to show whatever you want to show. I've been actually 0:15:19.320 --> 0:15:22.760 looking at seasonality over the last ten years. We've had 0:15:22.760 --> 0:15:25.080 some good ones, we've had some stinkers, but we have 0:15:25.280 --> 0:15:27.680 seen that January has been pretty much a mixed bag. 0:15:27.760 --> 0:15:30.080 There have been some difficult ones if you especially look 0:15:30.120 --> 0:15:33.440 over the last five years. So it would be sort 0:15:33.440 --> 0:15:36.120 of keeping with a recent seasonality to have a rough 0:15:36.120 --> 0:15:38.640 start to the year. Does that necessarily tell you that 0:15:38.680 --> 0:15:40.240 you have to run away for the rest of the year. 0:15:40.240 --> 0:15:41.640 I don't think so. And I go back to what 0:15:41.680 --> 0:15:44.000 we talked about at the top of the show. Sentiment 0:15:44.040 --> 0:15:48.160 has been oscillating so quickly. We were basically overbought in August, 0:15:48.320 --> 0:15:51.400 oversold in November, overbought in December again, and that all 0:15:51.480 --> 0:15:55.080 round tripped off of oversold conditions last October and post SVB. 0:15:55.720 --> 0:15:58.280 So I think that sentiment helps you tactically. I don't 0:15:58.280 --> 0:16:00.160 think you can use it that much to make a 0:16:00.240 --> 0:16:02.560 really kind of longer term view. At this point, Laurie. 0:16:02.560 --> 0:16:04.720 Wonderful to get your views this morning. Thanks Obama. This 0:16:04.800 --> 0:16:07.680 lor Convasaye of the vampy seat capital market. 0:16:17.840 --> 0:16:20.760 Claudia sam will be up all night watching a football 0:16:20.800 --> 0:16:25.000 game as well. Claudia for the Department of Economics at Michigan, 0:16:25.200 --> 0:16:28.560 all that heritage. What does blue football actually mean? Do 0:16:28.600 --> 0:16:30.760 you completely ignore it? Or are you at the fifty 0:16:30.880 --> 0:16:32.120 yard line for every game? 0:16:33.520 --> 0:16:33.960 Well, they don't. 0:16:34.040 --> 0:16:35.960 Let the grad students have very good seats. 0:16:35.960 --> 0:16:36.880 But we went. 0:16:37.200 --> 0:16:38.960 You know, it's it's Michigan. 0:16:38.760 --> 0:16:40.080 Go Blue, Go Blue. 0:16:40.320 --> 0:16:43.160 We'll see tonight. Thank you so much for joining Claudia. 0:16:43.200 --> 0:16:45.640 Barry rid Oldson. You had a great idea out there 0:16:45.680 --> 0:16:50.800 that in our hysteria right now of single statistics. 0:16:50.040 --> 0:16:52.320 We have denominator blindness. 0:16:52.720 --> 0:16:56.240 Let's take the national debt the interest expense of that, 0:16:56.840 --> 0:17:00.080 and we forget how large our economy is or how 0:17:00.160 --> 0:17:04.120 large our labor force is. How is hysterical are we 0:17:04.200 --> 0:17:06.240 right now? And do we need to calm down? 0:17:07.560 --> 0:17:10.119 Well, we've needed to calm down for decades. This is 0:17:10.160 --> 0:17:13.600 not a new conversation. The debt has to be put 0:17:13.640 --> 0:17:17.280 in context, not just of our GDP. That's a flow 0:17:17.359 --> 0:17:17.919 that we get. 0:17:17.800 --> 0:17:18.440 That every year. 0:17:18.600 --> 0:17:20.880 We need to think about in terms of their wealth, 0:17:20.920 --> 0:17:24.199 which is multiples of what that debt is. And I 0:17:24.600 --> 0:17:26.720 also a firm believer, and we need to look under 0:17:26.720 --> 0:17:28.720 the hood and what are we spending our money on. 0:17:29.000 --> 0:17:31.720 There's good ways to do it investment R and D, 0:17:32.040 --> 0:17:34.920 and there's ways that aren't as good, maybe really high 0:17:34.960 --> 0:17:37.439 income tax cuts. So that's where we need to have 0:17:37.480 --> 0:17:39.920 a conversation, not just throwing around big numbers. 0:17:40.480 --> 0:17:42.800 Is the FED throwing around big numbers? Are they having 0:17:42.800 --> 0:17:46.240 a conversation as they move out into twenty twenty four 0:17:46.320 --> 0:17:49.600 that you would consider appropriate and rational. 0:17:50.560 --> 0:17:52.600 In terms of the debt or in terms of what they're. 0:17:52.400 --> 0:17:53.919 Doing in terms of what they're going to do with 0:17:53.920 --> 0:17:55.120 their monetary policy? 0:17:55.119 --> 0:17:55.639 Excuse me? 0:17:56.800 --> 0:17:59.359 Yeah, no, I mean the FED is trying to do 0:17:59.400 --> 0:18:01.800 the impossible. Well, right now, my heart goes out to them, 0:18:01.840 --> 0:18:03.800 and we will play a parlor game for the next 0:18:03.880 --> 0:18:06.320 year or two and what their next move is. And yeah, 0:18:06.560 --> 0:18:08.440 they've got the eye on the prize, right. They work 0:18:08.480 --> 0:18:11.640 through financial markets, but they really don't care about financial markets. 0:18:11.720 --> 0:18:14.919 It's about getting inflation down, it's about keeping people with jobs. 0:18:15.080 --> 0:18:17.320 And we're well on our way, but it's going to 0:18:17.320 --> 0:18:20.320 be tough. To know when they're there and can say, okay, 0:18:20.400 --> 0:18:21.200 we can back off. 0:18:21.520 --> 0:18:23.800 Let's do an anatomy of what happened on Friday, because 0:18:23.840 --> 0:18:26.320 it was some confusing data that I tried to parse 0:18:26.359 --> 0:18:29.280 through and continue to and read more reports, and I'm 0:18:29.280 --> 0:18:32.679 just as confused. Which data screams the truest to you 0:18:32.760 --> 0:18:35.480 at a time where we got stronger than expected headline number, 0:18:35.720 --> 0:18:39.479 some real shows of strength, and then real signs of weakness, 0:18:39.600 --> 0:18:41.640 particularly in services. Employment. 0:18:43.080 --> 0:18:46.159 Big picture of Friday's payrolls was a good day. We 0:18:46.200 --> 0:18:49.200 had unemployments staying at three point seven percent. We're averaging 0:18:49.240 --> 0:18:52.479 a little under two hundred thousand jobs in recent months. 0:18:52.720 --> 0:18:55.400 If you think about what the labor market is buffering, 0:18:55.440 --> 0:18:58.200 we have a five percentage point more than that increase 0:18:58.240 --> 0:19:01.000 in the federal funds rate. This is a labor market. 0:19:01.400 --> 0:19:01.680 Now. 0:19:01.800 --> 0:19:03.439 You can go under the hood. You can do this 0:19:03.520 --> 0:19:06.560 in almost any month and say, ugh, that doesn't look 0:19:06.600 --> 0:19:10.480 so good now. Granted, there were some real science things 0:19:10.480 --> 0:19:12.840 to keep an eye on, you know, and we always 0:19:12.920 --> 0:19:15.040 need to, but this was not a flashing red We're 0:19:15.080 --> 0:19:16.959 going over the cliff. I mean, come on, we've been 0:19:17.040 --> 0:19:19.720 under the one employer it's been under four percent for 0:19:19.880 --> 0:19:21.880 the longest stretch since the nineteen sixties. 0:19:22.040 --> 0:19:22.680 Well, it's good. 0:19:22.760 --> 0:19:25.600 What about the services ISM data. That's fact that hiring 0:19:25.640 --> 0:19:28.159 fell the most, the sort of sub index for that 0:19:28.200 --> 0:19:31.879 particular data point came in the most going back to 0:19:31.960 --> 0:19:34.639 twenty twenty at the height of the pandemic. Does this 0:19:34.720 --> 0:19:36.640 make you feel like we're at a tipping point? Even 0:19:36.640 --> 0:19:38.800 if no, we're not heading into the abyss that we 0:19:38.880 --> 0:19:42.880 are cooling off in a much more material way. 0:19:42.920 --> 0:19:46.000 It's been like case last year. We needed to rebounce. 0:19:46.000 --> 0:19:48.560 We needed to get to a place that was expansionary 0:19:48.680 --> 0:19:51.520 but not red hot. I mean, we were coming out 0:19:51.560 --> 0:19:54.439