1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,439 Speaker 2: with Lisa Bromwitz and am Marie Hortenn. Join us each 4 00:00:18,520 --> 00:00:21,400 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,440 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,800 --> 00:00:27,440 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,520 --> 00:00:31,040 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,520 --> 00:00:35,840 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. 10 00:00:36,280 --> 00:00:38,720 Speaker 1: Joining us now is Seth Carpenter of Morgan Stanley. We're 11 00:00:38,760 --> 00:00:41,160 Speaker 1: so pleased to say, Seth, what stands out to you 12 00:00:41,280 --> 00:00:45,680 Speaker 1: initial job as claims actually having an upward trend or 13 00:00:45,760 --> 00:00:48,400 Speaker 1: this idea that housing is flat on its back. 14 00:00:49,000 --> 00:00:50,640 Speaker 3: I mean, I think if I take them all together, 15 00:00:50,680 --> 00:00:53,479 Speaker 3: I'm actually pretty constructive on the US for this year 16 00:00:53,479 --> 00:00:53,960 Speaker 3: as a whole. 17 00:00:54,040 --> 00:00:56,720 Speaker 4: However, I think it's clear to me that. 18 00:00:56,720 --> 00:00:59,360 Speaker 3: We need to see we're going to see slower growth 19 00:00:59,400 --> 00:01:01,760 Speaker 3: over twenty two twenty four relative to twenty twenty three, 20 00:01:02,200 --> 00:01:05,680 Speaker 3: and so the incremental softening that you all were talking 21 00:01:05,720 --> 00:01:08,520 Speaker 3: about when you talked about jobless claims where they were going. 22 00:01:08,720 --> 00:01:10,520 Speaker 3: He always came back with some sort of adverb to 23 00:01:10,560 --> 00:01:12,880 Speaker 3: modify how much it was up, sort of slightly modestly 24 00:01:12,920 --> 00:01:14,639 Speaker 3: or whatever. So it's not as though things are falling 25 00:01:14,680 --> 00:01:17,080 Speaker 3: off of a cliff. I think for the housing sector 26 00:01:17,080 --> 00:01:20,560 Speaker 3: it's really important. The supply for single family homes is 27 00:01:20,600 --> 00:01:23,280 Speaker 3: clearly constrained because anybody who's got a two and a 28 00:01:23,319 --> 00:01:25,880 Speaker 3: half or three and a half percent mortgage, they're staying put, 29 00:01:26,160 --> 00:01:28,679 Speaker 3: and so the supply, as Mike was saying, is constrained. 30 00:01:29,000 --> 00:01:31,959 Speaker 3: On the other hand, monetary policy has always worked through 31 00:01:32,440 --> 00:01:35,240 Speaker 3: the housing sector primarily, and I think builders have to 32 00:01:35,280 --> 00:01:37,560 Speaker 3: be a bit cautious because they got to ask themselves 33 00:01:37,600 --> 00:01:40,640 Speaker 3: where is demand going to be, and so what does 34 00:01:40,680 --> 00:01:44,559 Speaker 3: it mean? I think it just means all cumulatively together, 35 00:01:44,600 --> 00:01:48,280 Speaker 3: we're getting that modest slowing in the economy. We think 36 00:01:48,280 --> 00:01:50,720 Speaker 3: things should slow down. We think inflation's coming down as well, 37 00:01:50,760 --> 00:01:54,080 Speaker 3: and taking together that allows the FED to cut But 38 00:01:54,160 --> 00:01:56,760 Speaker 3: I don't for now see any of these data as 39 00:01:56,840 --> 00:01:59,520 Speaker 3: being harbingers of just doom somehow that we're going to 40 00:01:59,560 --> 00:02:00,880 Speaker 3: go off of a cliff anytime soon. 41 00:02:01,080 --> 00:02:03,080 Speaker 1: Well, we can find plenty of people who probably do 42 00:02:03,120 --> 00:02:05,600 Speaker 1: find it doom saying, and this sort of question of 43 00:02:05,640 --> 00:02:08,720 Speaker 1: a tipping point has often been thrown out there Neil 44 00:02:08,760 --> 00:02:10,640 Speaker 1: data saying this is a time to cut race, because 45 00:02:10,680 --> 00:02:15,080 Speaker 1: if you don't, you never see a linear increase in unemployment. 46 00:02:15,120 --> 00:02:17,679 Speaker 1: You never see a linear kind of weakening in the 47 00:02:17,800 --> 00:02:20,960 Speaker 1: jobs picture. What gives you comfort that we're not seeing 48 00:02:21,120 --> 00:02:24,919 Speaker 1: the precipice of some sort of market increase in unemployment 49 00:02:24,960 --> 00:02:27,800 Speaker 1: at a time where we are seeing an inflection higher 50 00:02:27,880 --> 00:02:28,919 Speaker 1: in jobless claims. 51 00:02:29,040 --> 00:02:32,000 Speaker 3: Well, we've also never seen an economic recovery from a 52 00:02:32,000 --> 00:02:34,720 Speaker 3: global pandemic like the one we're living through right now. 53 00:02:34,800 --> 00:02:37,359 Speaker 3: So as we were coming out of the pandemic, there 54 00:02:37,360 --> 00:02:40,040 Speaker 3: were lots of frictions, lots of dislocations, lots of things 55 00:02:40,120 --> 00:02:42,680 Speaker 3: trying to sort out where to be. Businesses were running 56 00:02:42,680 --> 00:02:45,480 Speaker 3: shorthanded for years at a time, and so now we're 57 00:02:45,480 --> 00:02:49,040 Speaker 3: seeing them settling into Wow, this is staffing closer to 58 00:02:49,480 --> 00:02:51,000 Speaker 3: what we're going to want in the long run. And 59 00:02:51,040 --> 00:02:54,880 Speaker 3: so that kind of readjustment from a truly unprecedented shock. 60 00:02:55,200 --> 00:02:57,440 Speaker 3: I think we're now starting to move into the more 61 00:02:57,480 --> 00:02:59,320 Speaker 3: normal stage. So to say that we haven't seen this 62 00:02:59,400 --> 00:03:02,680 Speaker 3: situation but four is true on the other hand, we 63 00:03:02,800 --> 00:03:06,680 Speaker 3: haven't seen this situation before, and so drawing massive conclusions 64 00:03:06,720 --> 00:03:09,960 Speaker 3: about whether or not this sort of pattern is telling 65 00:03:10,040 --> 00:03:12,200 Speaker 3: us something. I think we want to be super cautious not. 66 00:03:12,200 --> 00:03:15,120 Speaker 5: To ask you to draw a massive conclusion, but can 67 00:03:15,120 --> 00:03:17,080 Speaker 5: you add just the retail data we got from earlier 68 00:03:17,160 --> 00:03:19,120 Speaker 5: the week into this that there does seem to be 69 00:03:19,160 --> 00:03:22,360 Speaker 5: some price fatigue. So you have companies who are not 70 00:03:22,400 --> 00:03:25,080 Speaker 5: as worried about labor shortages and now their margins are 71 00:03:25,080 --> 00:03:26,040 Speaker 5: starting to get squeezed. 72 00:03:26,320 --> 00:03:28,240 Speaker 3: Absolutely, so we think of this as all going in 73 00:03:28,280 --> 00:03:31,520 Speaker 3: the same direction. If we look even the full quarter 74 00:03:31,600 --> 00:03:33,160 Speaker 3: for the first quarter, where we have all the data 75 00:03:33,200 --> 00:03:36,440 Speaker 3: for the quarter, durable goods spending quarter on quarter was negative. 76 00:03:36,840 --> 00:03:41,440 Speaker 3: Non durable goods inflation adjusted was flat quarter on quarters, 77 00:03:41,440 --> 00:03:44,480 Speaker 3: So where the residual strength was for the consumer was 78 00:03:44,520 --> 00:03:47,360 Speaker 3: in services. That's exactly this sort of slowdown that we've 79 00:03:47,400 --> 00:03:50,080 Speaker 3: been expecting to see. And I think the retail sales 80 00:03:50,160 --> 00:03:54,320 Speaker 3: data again overweight goods, sort of shows you know, the 81 00:03:54,360 --> 00:03:57,480 Speaker 3: consumer is not dead. The consumer hasn't stopped spending entirely. 82 00:03:57,640 --> 00:04:00,720 Speaker 3: The consumer hasn't said that's it for me, I'm checking out. Instead, 83 00:04:00,760 --> 00:04:04,160 Speaker 3: what they said was, yeah, we've already bought lots of 84 00:04:04,200 --> 00:04:06,760 Speaker 3: lawn furniture, We've already bought lots of computer screens, We've 85 00:04:06,760 --> 00:04:09,000 Speaker 3: already bought a home office three times over. 86 00:04:09,680 --> 00:04:11,520 Speaker 4: Maybe it's time to cool down a bit. 87 00:04:11,880 --> 00:04:14,680 Speaker 6: Two issues you just brought up there. One is consumers 88 00:04:14,720 --> 00:04:17,520 Speaker 6: and they're concerned about higher prices so becoming more discerning. 89 00:04:17,600 --> 00:04:20,920 Speaker 6: But also what's going on in the labor market. Two 90 00:04:21,040 --> 00:04:22,640 Speaker 6: issues that you say are the biggest when it comes 91 00:04:22,680 --> 00:04:25,120 Speaker 6: to you a selection tariffs, which many would say inflationary, 92 00:04:25,160 --> 00:04:29,240 Speaker 6: and also immigration. How are you looking at twenty twenty five. 93 00:04:31,320 --> 00:04:33,440 Speaker 3: With a lot of trepidation because lots of different things 94 00:04:33,440 --> 00:04:37,360 Speaker 3: could happen. I agree with you when clients ask us 95 00:04:37,440 --> 00:04:40,720 Speaker 3: questions about the elections, Immigration and tariffs are two really 96 00:04:40,760 --> 00:04:44,320 Speaker 3: important things I would say to the earlier conversation about 97 00:04:44,640 --> 00:04:47,000 Speaker 3: have we ever seen a situation where the unemployment rate 98 00:04:47,080 --> 00:04:48,960 Speaker 3: drifts up gently over time? 99 00:04:49,680 --> 00:04:50,559 Speaker 4: It's not very common. 100 00:04:50,600 --> 00:04:52,960 Speaker 3: On the other hand, neither is the kind of increase 101 00:04:53,080 --> 00:04:56,480 Speaker 3: in the labor force that we're seeing from immigration. That's 102 00:04:56,520 --> 00:04:59,240 Speaker 3: not very common either, And so in lots of ways, though, 103 00:04:59,320 --> 00:05:02,000 Speaker 3: gentle ride in the unemployment rate that we've seen four 104 00:05:02,040 --> 00:05:04,880 Speaker 3: percent unemployment, I'm will enough to remember when four percent 105 00:05:04,960 --> 00:05:05,800 Speaker 3: was considered pretty good. 106 00:05:06,400 --> 00:05:07,640 Speaker 4: So we did see a rise. 107 00:05:07,480 --> 00:05:09,560 Speaker 3: On net but a big chunk of that has been 108 00:05:09,640 --> 00:05:12,120 Speaker 3: coming at least over the past year from increases in supply, 109 00:05:12,200 --> 00:05:15,760 Speaker 3: and I think immigration matters there. And so with the election, 110 00:05:16,240 --> 00:05:18,760 Speaker 3: we put out a piece of research for our clients 111 00:05:19,000 --> 00:05:21,400 Speaker 3: over the past week or so, and you could see 112 00:05:21,400 --> 00:05:23,719 Speaker 3: a range of outcomes of what happens to the labor 113 00:05:24,520 --> 00:05:28,120 Speaker 3: force depending on policies that go to get put in 114 00:05:28,160 --> 00:05:29,960 Speaker 3: place in there. I just think the range of outcomes 115 00:05:30,000 --> 00:05:32,000 Speaker 3: in the election is vast, and we have to be 116 00:05:32,040 --> 00:05:34,159 Speaker 3: super humble about what's going to happen. You could see 117 00:05:34,400 --> 00:05:37,320 Speaker 3: big constriction in the labor supply, which would be adverse 118 00:05:37,360 --> 00:05:39,640 Speaker 3: for growth and could be inflationary. Or you could see 119 00:05:39,680 --> 00:05:42,159 Speaker 3: things sort of status quo, a little bit of a reduction, 120 00:05:42,200 --> 00:05:44,120 Speaker 3: in which case the economy gets to trundle on. 121 00:05:44,640 --> 00:05:46,599 Speaker 6: We have to be humble or the fetest to be humble. 122 00:05:46,640 --> 00:05:50,880 Speaker 6: How do they think about these kind of contential massive 123 00:05:50,960 --> 00:05:54,200 Speaker 6: changes while they're deciding whether or not they're going to 124 00:05:54,200 --> 00:05:55,240 Speaker 6: make a cup before. 125 00:05:55,000 --> 00:05:55,920 Speaker 4: The year end. 126 00:05:56,320 --> 00:05:58,960 Speaker 3: So I think humility is called for all around, particularly 127 00:05:59,000 --> 00:06:01,800 Speaker 3: for anyone in economic where we're not particularly good at it. 128 00:06:01,839 --> 00:06:05,440 Speaker 3: On average, we need to practice humility a lot for 129 00:06:05,520 --> 00:06:08,000 Speaker 3: the FED, they're going to have to sit back and 130 00:06:08,320 --> 00:06:11,239 Speaker 3: wait on the policies. I do think if we listen 131 00:06:11,279 --> 00:06:14,360 Speaker 3: to J. Powell, if we listen to sort of where 132 00:06:14,400 --> 00:06:18,320 Speaker 3: our analysis is that monetary policy is currently restrictive, they 133 00:06:18,360 --> 00:06:21,800 Speaker 3: can come off of the peak now this year and 134 00:06:22,000 --> 00:06:24,000 Speaker 3: not have to worry about having done too much in 135 00:06:24,080 --> 00:06:26,520 Speaker 3: terms of easing policy. I think as we get into 136 00:06:26,520 --> 00:06:29,400 Speaker 3: twenty twenty five, though, they probably do need to think 137 00:06:29,440 --> 00:06:33,560 Speaker 3: a lot more about what the election outcomes mean for policy, 138 00:06:33,680 --> 00:06:38,080 Speaker 3: fiscal policy, tariff policy, all other policy, immigration policy before 139 00:06:38,120 --> 00:06:40,560 Speaker 3: they can have any sort of conviction about which way 140 00:06:40,560 --> 00:06:41,000 Speaker 3: they need. 141 00:06:40,880 --> 00:06:42,000 Speaker 4: To go with policy. 142 00:06:42,320 --> 00:06:45,600 Speaker 1: I asked Terry Wiseman, is this fun? And he just said, no, 143 00:06:46,440 --> 00:06:47,440 Speaker 1: is this fun for you? 144 00:06:50,279 --> 00:06:52,800 Speaker 3: This is, I have say, one of the most challenging 145 00:06:53,000 --> 00:06:56,880 Speaker 3: macroeconomic environments to do forecasting in. And it's a double 146 00:06:57,000 --> 00:06:59,760 Speaker 3: edged sword because, on the one hand, very hard to 147 00:06:59,800 --> 00:07:02,440 Speaker 3: do forecasting when there's so many cross currents in so 148 00:07:02,440 --> 00:07:05,400 Speaker 3: many situations that you haven't seen before. On the other hand, 149 00:07:05,480 --> 00:07:07,360 Speaker 3: maybe it's a good time to be a forecaster because 150 00:07:07,400 --> 00:07:08,720 Speaker 3: nobody else knows what's going on. 151 00:07:08,640 --> 00:07:11,000 Speaker 1: Either well, The reason why I ask this is just 152 00:07:11,040 --> 00:07:14,200 Speaker 1: simply because when I try to put together even the 153 00:07:14,200 --> 00:07:16,400 Speaker 1: themes to really hook into, I'm not sure which takes 154 00:07:16,440 --> 00:07:18,920 Speaker 1: pre eminence. I'm not sure if it's the rate cutting cycle, 155 00:07:18,920 --> 00:07:20,520 Speaker 1: I'm not sure if it's the weakening, or I'm not 156 00:07:20,560 --> 00:07:22,679 Speaker 1: sure if it's some of the disruptions that are causing 157 00:07:22,960 --> 00:07:26,160 Speaker 1: inflationary increases. I don't have a sense of where the 158 00:07:26,160 --> 00:07:28,120 Speaker 1: balance of risks are. Is it that any cut rates 159 00:07:28,160 --> 00:07:30,160 Speaker 1: you have a resurgence in inflation, or as if you 160 00:07:30,160 --> 00:07:33,000 Speaker 1: don't cut soon enough, you fall off a cliff into recession. 161 00:07:33,280 --> 00:07:35,160 Speaker 1: I can make a good argument for any of these, 162 00:07:35,560 --> 00:07:38,240 Speaker 1: and I believe it. So how do you sort of 163 00:07:38,480 --> 00:07:41,080 Speaker 1: plan with any kind of long term forecast When the 164 00:07:41,200 --> 00:07:43,960 Speaker 1: likes of Muhammadellary you're saying, if you don't have that 165 00:07:44,040 --> 00:07:46,360 Speaker 1: type of long term forecast, you're going to have a 166 00:07:46,400 --> 00:07:48,400 Speaker 1: mistake and you're going to have just volatile markets that 167 00:07:48,400 --> 00:07:50,640 Speaker 1: are going to essentially break No. 168 00:07:50,920 --> 00:07:53,480 Speaker 3: So I think that's fair. Lots of volatility in the 169 00:07:53,480 --> 00:07:55,400 Speaker 3: real side of the economy and in markets. I do 170 00:07:55,480 --> 00:07:57,520 Speaker 3: think the time horizon matters a lot. So some of 171 00:07:57,560 --> 00:08:00,400 Speaker 3: our clients are very short term focused and they're say 172 00:08:00,400 --> 00:08:01,440 Speaker 3: for the rest of this year. 173 00:08:01,320 --> 00:08:02,400 Speaker 4: I feel pretty constructive. 174 00:08:02,440 --> 00:08:05,320 Speaker 3: I don't see a scenario where the US really falls 175 00:08:05,320 --> 00:08:07,440 Speaker 3: off of the cliff over the course of twenty twenty four. 176 00:08:07,800 --> 00:08:10,080 Speaker 3: I do see inflation coming down over the rest of 177 00:08:10,080 --> 00:08:12,640 Speaker 3: this year pretty substantially, and with that, I do see 178 00:08:12,640 --> 00:08:16,400 Speaker 3: the FED cutting getting beyond that. To the mid medium 179 00:08:16,480 --> 00:08:19,360 Speaker 3: term outlook, I think the uncertainty absolutely goes up. I 180 00:08:19,360 --> 00:08:22,440 Speaker 3: think the elections are a huge component to which way 181 00:08:22,640 --> 00:08:25,440 Speaker 3: things go, and I think it is impossible to have 182 00:08:25,520 --> 00:08:28,400 Speaker 3: high conviction. So the best thing investors can do, the 183 00:08:28,440 --> 00:08:30,960 Speaker 3: best thing policy makers can do is to think about 184 00:08:31,000 --> 00:08:34,240 Speaker 3: all of the outcomes contingently and to try to come 185 00:08:34,320 --> 00:08:37,680 Speaker 3: up with your best set of scenarios. And then you 186 00:08:37,720 --> 00:08:39,760 Speaker 3: will end up in one of the scenarios over time. 187 00:08:39,800 --> 00:08:41,720 Speaker 3: But you really have to do a lot of advanced planning. 188 00:08:41,720 --> 00:08:43,079 Speaker 3: This is one of the reasons why when we talk 189 00:08:43,120 --> 00:08:45,120 Speaker 3: to our clients we try to say we're. 190 00:08:44,960 --> 00:08:45,640 Speaker 4: Not going to tell you. 191 00:08:46,000 --> 00:08:47,760 Speaker 3: We're not going to predict what's going to happen. 192 00:08:47,600 --> 00:08:49,240 Speaker 4: With the election. That's a mugs game. 193 00:08:49,559 --> 00:08:53,920 Speaker 3: However, if we think across the different plausible scenarios, hear 194 00:08:54,040 --> 00:08:56,679 Speaker 3: what the key outcomes would be for fiscal for tariffs, 195 00:08:56,679 --> 00:08:59,280 Speaker 3: for immigration, and then here's how you should try to 196 00:08:59,280 --> 00:08:59,840 Speaker 3: think about. 197 00:08:59,720 --> 00:09:00,360 Speaker 4: Plan for that. 198 00:09:00,559 --> 00:09:03,120 Speaker 5: Just to add to this, because this idea, it's been 199 00:09:03,120 --> 00:09:05,280 Speaker 5: a criticism of the FED that they're not being more 200 00:09:05,320 --> 00:09:07,680 Speaker 5: clear in their outlooks. They keep saying we're waiting for 201 00:09:07,720 --> 00:09:09,679 Speaker 5: more data. There are people been clamoring who say, no, 202 00:09:09,760 --> 00:09:12,520 Speaker 5: give us something concrete, give us a clear direction. But 203 00:09:12,600 --> 00:09:15,160 Speaker 5: what you and Lisa were just describing as one where 204 00:09:15,200 --> 00:09:18,520 Speaker 5: there is not a clear direction. So how would you 205 00:09:18,600 --> 00:09:21,800 Speaker 5: rate FED communication in this environment? Should they be giving 206 00:09:21,880 --> 00:09:25,800 Speaker 5: us scenario analysis, should they be giving us more clear forecasts? 207 00:09:25,880 --> 00:09:27,559 Speaker 5: Or is it right just to say, look, we need 208 00:09:27,600 --> 00:09:28,960 Speaker 5: more data, we don't know right now. 209 00:09:29,280 --> 00:09:32,480 Speaker 3: Yeah, I think, especially the way you framed it, when 210 00:09:32,679 --> 00:09:36,480 Speaker 3: some of the FOMC members sort of ask me questions 211 00:09:36,480 --> 00:09:40,319 Speaker 3: about how they're doing, I actually think under these circumstances 212 00:09:40,720 --> 00:09:43,480 Speaker 3: they're doing a pretty good job. The quip I like 213 00:09:43,520 --> 00:09:45,440 Speaker 3: to give them is be as clear as you can be, 214 00:09:45,760 --> 00:09:48,079 Speaker 3: but by all means, be no more clear than that. 215 00:09:49,120 --> 00:09:51,760 Speaker 3: And I think they would be doing themselves a disservice. 216 00:09:51,760 --> 00:09:53,920 Speaker 3: They'd be doing markets a disservice if they tried to 217 00:09:53,960 --> 00:09:56,319 Speaker 3: be precise at a time when you can't be precise, 218 00:09:56,320 --> 00:09:58,200 Speaker 3: and I think that would be false precision. 219 00:09:58,280 --> 00:09:59,600 Speaker 4: I think would be false confidence. 220 00:09:59,640 --> 00:10:02,560 Speaker 3: And so when the world turns out different than expected 221 00:10:02,600 --> 00:10:05,240 Speaker 3: and they have to change course, which is exactly what 222 00:10:05,280 --> 00:10:08,000 Speaker 3: they should do, everyone will complain, Oh my gosh, you 223 00:10:08,000 --> 00:10:09,360 Speaker 3: told us you're going to do one thing, and now 224 00:10:09,360 --> 00:10:11,720 Speaker 3: you're doing something else. So just buy Nvidia. 225 00:10:14,160 --> 00:10:30,840 Speaker 1: Organ Stantley, thank you. Savvi's site of Raymond James joining us. Now, Savvi, 226 00:10:31,120 --> 00:10:33,679 Speaker 1: what are you expecting to hear from some of these 227 00:10:33,720 --> 00:10:36,080 Speaker 1: investment meetings, the latest being from Delta at a time 228 00:10:36,320 --> 00:10:38,679 Speaker 1: where it seems like there is an ongoing divergence between 229 00:10:38,720 --> 00:10:42,079 Speaker 1: people going across Atlantic versus domestic. 230 00:10:43,760 --> 00:10:46,520 Speaker 7: Yeah, even in the domestic market, you know, things are 231 00:10:46,600 --> 00:10:47,400 Speaker 7: really strong. 232 00:10:48,920 --> 00:10:49,840 Speaker 8: Is this good demand? 233 00:10:50,600 --> 00:10:52,600 Speaker 7: There's a little bit of oversupply, And I think that's 234 00:10:52,600 --> 00:10:56,040 Speaker 7: the difference between the Atlantic and the domestic markets is 235 00:10:56,240 --> 00:10:58,480 Speaker 7: we're still kind of getting back to you twenty nineteen 236 00:10:58,559 --> 00:11:02,560 Speaker 7: levels in the Transatlant market, whereas capacity in the domestic 237 00:11:02,600 --> 00:11:03,760 Speaker 7: market has surpassed that. 238 00:11:04,000 --> 00:11:07,599 Speaker 8: So demand is really strong. But you're right, there is 239 00:11:07,720 --> 00:11:10,000 Speaker 8: still strong demand in the Atlantic. 240 00:11:09,600 --> 00:11:11,760 Speaker 7: Despite you know what we looked at last summer as 241 00:11:11,800 --> 00:11:14,080 Speaker 7: being maybe pent up demand. 242 00:11:14,120 --> 00:11:17,760 Speaker 6: Tom a pricing standpoint, Do you think that domestically you 243 00:11:17,800 --> 00:11:20,360 Speaker 6: can get you know, cheaper airfares the way you're not 244 00:11:20,400 --> 00:11:22,960 Speaker 6: going to be able to get going transatlantic this summer. 245 00:11:24,840 --> 00:11:26,720 Speaker 7: I do believe so, and I think you're seeing that 246 00:11:26,760 --> 00:11:30,360 Speaker 7: in the data. We've seen pricing being a little bit softer. 247 00:11:30,520 --> 00:11:33,520 Speaker 7: You saw airlines in the first quarter really pull back 248 00:11:33,559 --> 00:11:34,600 Speaker 7: their growth a little bit. 249 00:11:35,240 --> 00:11:36,479 Speaker 8: But as we got into. 250 00:11:36,320 --> 00:11:38,800 Speaker 7: The second quarter and heading into the summer, you're seeing 251 00:11:39,200 --> 00:11:42,120 Speaker 7: a high single mid to high single digit growth in 252 00:11:42,200 --> 00:11:45,800 Speaker 7: the domestic market, and that's kind of creating, especially if 253 00:11:45,840 --> 00:11:48,200 Speaker 7: you're willing to have flexibility in some of those off 254 00:11:48,240 --> 00:11:51,280 Speaker 7: peak days or times there. 255 00:11:51,080 --> 00:11:53,280 Speaker 8: Are some better pricing available out there. 256 00:11:54,040 --> 00:11:56,840 Speaker 7: But as we're heading into July, we're definitely seeing fair 257 00:11:56,960 --> 00:11:57,800 Speaker 7: strengthen here. 258 00:11:58,320 --> 00:12:00,920 Speaker 6: When you look at the domestic market, who's winning this 259 00:12:01,000 --> 00:12:03,640 Speaker 6: space especially we are seeing cheaper airfares. 260 00:12:05,760 --> 00:12:08,640 Speaker 8: Yeah, I mean, I think consumer wins. There's a lot 261 00:12:08,679 --> 00:12:11,520 Speaker 8: of kind of optionality out there. The fares are coming 262 00:12:11,559 --> 00:12:14,280 Speaker 8: in better. You'll hear a lot of. 263 00:12:14,200 --> 00:12:17,160 Speaker 7: The executives say that we're seeing record revenue, and that's true. 264 00:12:17,800 --> 00:12:20,600 Speaker 7: I think this is probably the highest revenue this industry 265 00:12:20,640 --> 00:12:21,080 Speaker 7: has seen. 266 00:12:21,679 --> 00:12:24,240 Speaker 8: The problem is we also as having record costs. You've 267 00:12:24,280 --> 00:12:24,959 Speaker 8: seen a lot of. 268 00:12:24,960 --> 00:12:28,680 Speaker 7: Labor costs increases, few well stable, which is great news 269 00:12:28,720 --> 00:12:30,760 Speaker 7: for the industry. It is still higher than what it 270 00:12:30,840 --> 00:12:33,880 Speaker 7: was in twenty nineteen. So there are airlines that are 271 00:12:33,960 --> 00:12:36,480 Speaker 7: kind of struggling a bit more. I think those airlines 272 00:12:36,520 --> 00:12:39,880 Speaker 7: exposed to corporate demand, especially large corporate demand that is 273 00:12:39,880 --> 00:12:42,920 Speaker 7: starting to see a nice recovery here. I think they'll 274 00:12:42,960 --> 00:12:45,440 Speaker 7: stand out better heading into the summer season. 275 00:12:45,840 --> 00:12:48,880 Speaker 5: Sabbi Lisa has been talking about how we're expecting a 276 00:12:48,920 --> 00:12:53,000 Speaker 5: record travel season, especially around fourth of July, and the 277 00:12:53,040 --> 00:12:55,600 Speaker 5: ability of airlines, whether they're ready for whether they have 278 00:12:55,720 --> 00:12:58,480 Speaker 5: enough updated planes, and what the airports will look like. 279 00:12:58,520 --> 00:13:01,480 Speaker 5: Can you just contextualize the chaos that all of us 280 00:13:01,520 --> 00:13:04,240 Speaker 5: should expect if we're planning to travel this summer. 281 00:13:05,720 --> 00:13:07,520 Speaker 8: I always be ready. 282 00:13:07,559 --> 00:13:10,760 Speaker 7: The thing with summer is you have these thunderstorms that 283 00:13:10,880 --> 00:13:13,520 Speaker 7: just pop up from nowhere, and then kind of winter storms. 284 00:13:13,520 --> 00:13:16,120 Speaker 7: You can see it coming, you can prepare for it, 285 00:13:16,200 --> 00:13:20,240 Speaker 7: and that's the issue. Air traffic control centers, especially in 286 00:13:20,280 --> 00:13:23,640 Speaker 7: the Northeast and a little bit Florida, are still understaffed, 287 00:13:24,480 --> 00:13:29,200 Speaker 7: and so the risk of disruption is greater when there 288 00:13:29,240 --> 00:13:32,920 Speaker 7: are events, and you know, summer means there are going 289 00:13:33,000 --> 00:13:36,959 Speaker 7: to be storms somewhere, and so just kind of be flexible. 290 00:13:37,120 --> 00:13:39,920 Speaker 7: But I think airlines have done a lot to help 291 00:13:39,960 --> 00:13:42,719 Speaker 7: address that. You've seen, you know, some airlines just to 292 00:13:43,280 --> 00:13:46,360 Speaker 7: change the way they build a network. Some airlines just 293 00:13:46,440 --> 00:13:49,960 Speaker 7: taking advantage of what the FA has loved them to 294 00:13:50,000 --> 00:13:52,520 Speaker 7: do and kind of bring down capacity in the Northeast 295 00:13:52,720 --> 00:13:53,520 Speaker 7: to make sure. 296 00:13:53,280 --> 00:13:55,679 Speaker 8: That there's reliability. So I do expect this to. 297 00:13:55,679 --> 00:13:58,839 Speaker 7: Be a better summer than we've seen for a couple 298 00:13:58,840 --> 00:14:01,360 Speaker 7: of years, But it all depends on the weather. 299 00:14:01,520 --> 00:14:03,920 Speaker 8: So I would say, kind of be prepared and flexible. 300 00:14:04,240 --> 00:14:06,400 Speaker 5: You're giving me like a little bit of confidence, So 301 00:14:06,400 --> 00:14:09,720 Speaker 5: I feel better about this. Zevihia. How about this Spirit, 302 00:14:10,000 --> 00:14:13,920 Speaker 5: United and Jet Blue all delaying their analyst days. 303 00:14:13,679 --> 00:14:14,600 Speaker 4: What's going on? 304 00:14:16,040 --> 00:14:18,319 Speaker 8: They all delayed it for very different reasons. 305 00:14:18,480 --> 00:14:21,480 Speaker 7: So United, you know, they had that FA review and 306 00:14:21,520 --> 00:14:23,200 Speaker 7: they just didn't feel like that that was the right 307 00:14:23,240 --> 00:14:23,960 Speaker 7: time to do it. 308 00:14:24,880 --> 00:14:26,480 Speaker 8: If you look at Spirit. 309 00:14:26,600 --> 00:14:29,120 Speaker 7: It sounds like they still they are trying to come 310 00:14:29,200 --> 00:14:31,720 Speaker 7: up with a standalone business plan and there are some 311 00:14:31,800 --> 00:14:33,800 Speaker 7: initiatives that are trying to roll out, and maybe that's 312 00:14:33,880 --> 00:14:34,600 Speaker 7: taking longer. 313 00:14:35,040 --> 00:14:36,080 Speaker 8: Maybe they think that the. 314 00:14:37,360 --> 00:14:40,920 Speaker 7: Bondhold bondholded discussions might take a little bit longer and 315 00:14:41,000 --> 00:14:44,600 Speaker 7: want that behind them. But generally, look, there's just a 316 00:14:44,600 --> 00:14:47,840 Speaker 7: lot of uncertainty, whether you look at supply chain, whether 317 00:14:47,840 --> 00:14:50,200 Speaker 7: you're looking at the economy, and I think airlines are 318 00:14:50,200 --> 00:14:54,200 Speaker 7: feeling much more comfortable to do their investor dates towards 319 00:14:54,240 --> 00:14:56,520 Speaker 7: the end of the year, when they'll have better. 320 00:14:56,240 --> 00:14:57,760 Speaker 8: Clarity on twenty twenty five. 321 00:14:58,080 --> 00:15:01,280 Speaker 7: Even when it comes to what the aircraft deliveries that 322 00:15:01,320 --> 00:15:03,640 Speaker 7: they can expect, it's better to provide. 323 00:15:03,280 --> 00:15:06,000 Speaker 8: That towards the end of the year than doing closer 324 00:15:06,000 --> 00:15:07,160 Speaker 8: to the summer. 325 00:15:07,440 --> 00:15:10,120 Speaker 1: Sally Sythe of Raymond James, thank you so much for 326 00:15:10,160 --> 00:15:13,600 Speaker 1: being with Jonathan Miller of Miller Samuel writing this. When 327 00:15:13,600 --> 00:15:15,600 Speaker 1: the Fed does cut, I suspect there will be an 328 00:15:15,640 --> 00:15:18,640 Speaker 1: outsize pickup in sales, even with only a twenty five 329 00:15:18,720 --> 00:15:21,520 Speaker 1: basis point cut. Many it would be buyers have been 330 00:15:21,640 --> 00:15:24,200 Speaker 1: waiting two and a half years to see easing rates. 331 00:15:24,280 --> 00:15:27,160 Speaker 1: Jonathan joins us. Now, this to me, Jonathan, is really 332 00:15:27,200 --> 00:15:29,800 Speaker 1: one of the most interesting questions, and I love having 333 00:15:29,800 --> 00:15:32,760 Speaker 1: you on as always that there is this belief that 334 00:15:32,800 --> 00:15:34,960 Speaker 1: when you cut rates, you can do so in a 335 00:15:35,000 --> 00:15:38,040 Speaker 1: way that isn't going to reignite animal spirits. How much 336 00:15:38,080 --> 00:15:39,960 Speaker 1: of a rate cut you see only twenty five basis 337 00:15:39,960 --> 00:15:42,240 Speaker 1: points of a rate cut as reigniting a lot of 338 00:15:42,240 --> 00:15:45,160 Speaker 1: interest in the housing market. So how does that factor 339 00:15:45,160 --> 00:15:47,560 Speaker 1: into pricing in this idea that we can get a 340 00:15:47,560 --> 00:15:50,840 Speaker 1: soft landing with rate cuts given the backdrop that we 341 00:15:50,920 --> 00:15:52,120 Speaker 1: have right now, well. 342 00:15:52,000 --> 00:15:56,240 Speaker 9: I think that outsized response to the twenty five basis 343 00:15:56,240 --> 00:16:00,800 Speaker 9: point cut or a modest cut of some sort. You 344 00:16:00,880 --> 00:16:02,440 Speaker 9: have to think of the last two and a half 345 00:16:02,520 --> 00:16:06,120 Speaker 9: years have been this era of pent up demand that 346 00:16:07,000 --> 00:16:09,280 Speaker 9: suddenly the sort of legs are cut out from under 347 00:16:09,320 --> 00:16:12,640 Speaker 9: the housing market and people that were in the process 348 00:16:12,680 --> 00:16:15,680 Speaker 9: of thinking about it were stopped on the tracks, and 349 00:16:15,760 --> 00:16:19,880 Speaker 9: everybody's waiting. And the problem with the waiting part is 350 00:16:19,920 --> 00:16:22,920 Speaker 9: that when if you have a rate cut and this 351 00:16:23,040 --> 00:16:25,400 Speaker 9: surge of an activity, I think you're going to see 352 00:16:25,400 --> 00:16:30,920 Speaker 9: prices rise again. That the only way for more supply. 353 00:16:31,080 --> 00:16:32,880 Speaker 9: That's been one of the reasons why we've had such 354 00:16:33,200 --> 00:16:36,480 Speaker 9: price growth is inventory has been very lacking. We are 355 00:16:36,520 --> 00:16:40,080 Speaker 9: seeing inventory come in, but we haven't seen the same 356 00:16:40,800 --> 00:16:44,040 Speaker 9: amount of demand respond to it because of rates. So 357 00:16:44,160 --> 00:16:48,680 Speaker 9: when you see rates cut you're going to see a surge, 358 00:16:49,240 --> 00:16:51,480 Speaker 9: at least in the short run, you're going to see 359 00:16:51,480 --> 00:16:54,720 Speaker 9: a surge in demand, and that's going to keep prices elevated, 360 00:16:54,760 --> 00:16:57,760 Speaker 9: which has sort of broken all the rules of economics, 361 00:16:58,080 --> 00:17:01,280 Speaker 9: where we're talking about record price and mortgage rates are 362 00:17:01,280 --> 00:17:02,560 Speaker 9: more than double where they were. 363 00:17:03,200 --> 00:17:05,480 Speaker 1: There was a theory out there that when the Fed 364 00:17:05,560 --> 00:17:08,280 Speaker 1: cuts rates, that's actually going to cause more volume to 365 00:17:08,280 --> 00:17:10,960 Speaker 1: come on to the markets. You'll actually see more houses 366 00:17:11,000 --> 00:17:14,560 Speaker 1: go out there, which will actually cause prices to fall 367 00:17:14,800 --> 00:17:16,720 Speaker 1: because you'll actually get price discovery in a way that 368 00:17:16,720 --> 00:17:18,840 Speaker 1: we haven't had for four years. 369 00:17:19,119 --> 00:17:20,119 Speaker 4: Why don't you believe that? 370 00:17:20,920 --> 00:17:23,840 Speaker 9: So let's take a market like Miami, and there's been 371 00:17:24,000 --> 00:17:29,600 Speaker 9: lots of discussion about inventories coming in. Over the last year, 372 00:17:29,680 --> 00:17:33,400 Speaker 9: inventory has risen about thirty eight percent, so you'd think, wow, 373 00:17:33,560 --> 00:17:37,440 Speaker 9: you know, prices are going to be challenged, But that 374 00:17:37,600 --> 00:17:41,600 Speaker 9: inventory result of after that increase is still twenty five 375 00:17:41,600 --> 00:17:45,720 Speaker 9: percent below pre pandemic. So when you look at the 376 00:17:45,720 --> 00:17:48,320 Speaker 9: percentage of inventory growth, and we are seeing it, and 377 00:17:48,320 --> 00:17:51,960 Speaker 9: it is good for consumers in the long run, but 378 00:17:52,080 --> 00:17:55,600 Speaker 9: it's not enough yet. That there was such an incredible 379 00:17:55,760 --> 00:18:00,000 Speaker 9: deficit of supply that sort of you know, a high 380 00:18:00,200 --> 00:18:03,480 Speaker 9: percent or whatever the local market number, you know, the 381 00:18:03,640 --> 00:18:07,560 Speaker 9: sort of headline grabbing increase in inventory is still coming 382 00:18:07,640 --> 00:18:13,320 Speaker 9: from a record low, and it's not it's not even 383 00:18:13,800 --> 00:18:15,800 Speaker 9: I want to say, it's not even close. But it's 384 00:18:15,920 --> 00:18:20,360 Speaker 9: still well below long term norms. And that's the dilemma, 385 00:18:20,520 --> 00:18:22,800 Speaker 9: you know, it's sort of you know, everybody's waiting for 386 00:18:22,880 --> 00:18:27,920 Speaker 9: rates to to to become more affordable. But in the meantime, 387 00:18:28,000 --> 00:18:30,800 Speaker 9: I think we're going to see price growth, and so 388 00:18:30,920 --> 00:18:34,280 Speaker 9: someone waiting for a lower rate, you know, another you know, 389 00:18:34,560 --> 00:18:39,399 Speaker 9: another fifty basis or even more, Uh, they're going to 390 00:18:39,440 --> 00:18:41,960 Speaker 9: be disappointed because I think two or three years from now, 391 00:18:42,000 --> 00:18:44,200 Speaker 9: prices are going to be higher than they are now, 392 00:18:45,640 --> 00:18:49,000 Speaker 9: even with more supply coming into the market. For example, 393 00:18:49,040 --> 00:18:52,920 Speaker 9: in a lot of suburbs that we track, bidding wars, 394 00:18:53,080 --> 00:18:56,160 Speaker 9: especially in the New York metro area are forty to 395 00:18:56,160 --> 00:19:01,000 Speaker 9: fifty percent of the closings. So what does that tell 396 00:19:01,040 --> 00:19:04,560 Speaker 9: you about supply. It tells you that it's extremely low. 397 00:19:04,840 --> 00:19:07,359 Speaker 9: It's not the same in every market. Some markets have 398 00:19:07,440 --> 00:19:11,680 Speaker 9: more supply than others, but it is still a challenge 399 00:19:11,680 --> 00:19:16,359 Speaker 9: in housing right now is supply and the FED you know, 400 00:19:17,320 --> 00:19:19,520 Speaker 9: if you look at what happened this spring, this is 401 00:19:19,560 --> 00:19:25,360 Speaker 9: a very underwhelming spring market, right. I think consumers were expecting, 402 00:19:26,680 --> 00:19:28,159 Speaker 9: you know, this is you know, rates are going to 403 00:19:28,240 --> 00:19:30,520 Speaker 9: come down and we're going to see this sonic boom 404 00:19:30,560 --> 00:19:34,960 Speaker 9: of demand. But rates until the last few weeks have 405 00:19:35,080 --> 00:19:38,440 Speaker 9: really been sort of stuck at an elevated level, and 406 00:19:38,880 --> 00:19:42,680 Speaker 9: you're not going to see a lot of You didn't 407 00:19:42,720 --> 00:19:47,320 Speaker 9: see the surge that everybody was expecting this spring, and 408 00:19:48,040 --> 00:19:51,879 Speaker 9: now the consumers are you know, I don't know if 409 00:19:51,920 --> 00:19:56,240 Speaker 9: anybody's taking the forecast seriously because it's like we just 410 00:19:56,320 --> 00:19:59,359 Speaker 9: keep setting the rate cut date two or three months 411 00:19:59,400 --> 00:19:59,760 Speaker 9: from now. 412 00:20:00,119 --> 00:20:02,760 Speaker 5: If you are one of these people who had been 413 00:20:02,760 --> 00:20:04,879 Speaker 5: hoping for that twenty five basis point cut to be 414 00:20:04,920 --> 00:20:06,920 Speaker 5: the thing that ignites things and not just ignites things, 415 00:20:06,920 --> 00:20:11,160 Speaker 5: but to Lisa's point, makes housing prices going down. Asking 416 00:20:11,200 --> 00:20:13,760 Speaker 5: for a friend, when does that moment come? How long 417 00:20:13,880 --> 00:20:15,960 Speaker 5: will it take for enough supply to come online that 418 00:20:16,040 --> 00:20:17,320 Speaker 5: actually you see some relief. 419 00:20:17,880 --> 00:20:21,200 Speaker 9: I think it's three or more years. I think it's 420 00:20:21,320 --> 00:20:24,000 Speaker 9: not a couple of quarters. I think it's a long 421 00:20:24,119 --> 00:20:28,040 Speaker 9: process because rates were too low for too long during 422 00:20:28,040 --> 00:20:34,960 Speaker 9: the pandemic and literally existing inventory was wipe clean off 423 00:20:34,480 --> 00:20:38,880 Speaker 9: off the earth basically, and we're coming from a very 424 00:20:38,920 --> 00:20:41,840 Speaker 9: low point and that's a challenge. And in fact, in 425 00:20:41,880 --> 00:20:45,600 Speaker 9: this period, new development or new construction, which is only 426 00:20:45,680 --> 00:20:49,479 Speaker 9: ten percent of supply, is where we could see faster 427 00:20:49,640 --> 00:20:54,360 Speaker 9: supply coming into the market. Except but that's only ten 428 00:20:54,400 --> 00:20:57,160 Speaker 9: percent of the market. The other ninety percent is based 429 00:20:57,200 --> 00:21:02,479 Speaker 9: on organic growth, and it's starting from a very low point, 430 00:21:02,560 --> 00:21:03,600 Speaker 9: and that's the challenge. 431 00:21:03,760 --> 00:21:06,160 Speaker 6: Can we talk about the rental market in New York Manhattan? 432 00:21:06,200 --> 00:21:08,040 Speaker 6: Prices are actually decreasing? 433 00:21:08,440 --> 00:21:08,680 Speaker 4: Why? 434 00:21:09,040 --> 00:21:13,800 Speaker 9: Yes, actually Manhattan. So the way to think of pricing 435 00:21:13,840 --> 00:21:18,399 Speaker 9: in Manhattan on the rental market is it's almost like 436 00:21:19,440 --> 00:21:22,040 Speaker 9: it's a choppy I don't know if you call it 437 00:21:22,080 --> 00:21:26,400 Speaker 9: a bottom, but it's this one month, it's up, one 438 00:21:26,400 --> 00:21:28,640 Speaker 9: month it's down. It's been like this for about six 439 00:21:28,720 --> 00:21:32,840 Speaker 9: or seven months, but still remaining at very elevated levels. 440 00:21:32,840 --> 00:21:35,720 Speaker 9: In fact, rents right now are about twenty percent higher 441 00:21:36,560 --> 00:21:38,000 Speaker 9: than before the pandemic. 442 00:21:38,520 --> 00:21:40,280 Speaker 1: So I guess that when you put all this together, 443 00:21:40,800 --> 00:21:43,000 Speaker 1: this is actually kind of a counter to what the 444 00:21:43,000 --> 00:21:46,479 Speaker 1: FED is saying. They're saying that actually when they cut rates, 445 00:21:46,600 --> 00:21:49,200 Speaker 1: they're going to be just adjusting things and that inflation 446 00:21:49,240 --> 00:21:50,879 Speaker 1: will continue to go down and that rents are just 447 00:21:50,960 --> 00:21:53,240 Speaker 1: a lagging indicator and that they're coming down much faster. 448 00:21:53,560 --> 00:21:55,320 Speaker 1: From what you're saying, it sounds like that's not the case, 449 00:21:55,359 --> 00:21:57,240 Speaker 1: and that when they cut rates, they're going to reignite 450 00:21:57,240 --> 00:22:00,200 Speaker 1: some of the price increases that have kept inflation where 451 00:22:00,200 --> 00:22:02,920 Speaker 1: it is given where rents fall in terms of waiting 452 00:22:03,080 --> 00:22:05,480 Speaker 1: in the inflation metric, Is that true? Is that kind 453 00:22:05,480 --> 00:22:06,320 Speaker 1: of how you see So. 454 00:22:06,920 --> 00:22:09,359 Speaker 9: That's how I see it. But the sort of the 455 00:22:09,400 --> 00:22:12,760 Speaker 9: bigger question mark for me is that sort of initial 456 00:22:12,840 --> 00:22:18,240 Speaker 9: burst in activity of a modest rate cut. How long 457 00:22:18,440 --> 00:22:23,240 Speaker 9: does that surge or that pent up demand last? You know, 458 00:22:23,359 --> 00:22:25,920 Speaker 9: is this a six month phenomenon? Is this a long 459 00:22:26,000 --> 00:22:31,080 Speaker 9: term phenomenon? You know, that's the question in my mind? 460 00:22:31,240 --> 00:22:33,960 Speaker 9: How long will this hold up? 461 00:22:34,400 --> 00:22:36,639 Speaker 1: Jonathan Miller, It's always wonderful to see you. Thank you 462 00:22:36,640 --> 00:22:38,920 Speaker 1: so much for being with us, Jonathan Miller of Miller 463 00:22:39,000 --> 00:22:41,800 Speaker 1: Samuel At a time when people around this table are 464 00:22:41,880 --> 00:22:44,280 Speaker 1: inquiring minds about rents and buying home. 465 00:22:44,320 --> 00:22:45,879 Speaker 6: Two out of three are two out of three are? 466 00:22:46,040 --> 00:22:48,680 Speaker 10: Some people have a locked in mortgage of about three percent, 467 00:22:48,760 --> 00:23:08,200 Speaker 10: But whatever. 468 00:23:00,160 --> 00:23:04,680 Speaker 1: And Asasia Amrosovi capital saying this, our market's becoming too stretched. 469 00:23:04,880 --> 00:23:07,879 Speaker 1: The answer is definitely a yes, near term, and I 470 00:23:07,920 --> 00:23:10,080 Speaker 1: think it's time for a breather after a monster rally 471 00:23:10,119 --> 00:23:12,920 Speaker 1: we've had since Abook twenty second and a Stasia joins us. Now, 472 00:23:13,280 --> 00:23:18,360 Speaker 1: so are you bearish or are you just basically acknowledging that, Yeah, 473 00:23:18,440 --> 00:23:21,840 Speaker 1: things feel pretty heady, and so yeah, things could happen. 474 00:23:21,920 --> 00:23:24,240 Speaker 11: Look, you have to trade this market. You have to 475 00:23:24,280 --> 00:23:26,080 Speaker 11: take a week to week. And you know, if I 476 00:23:26,160 --> 00:23:28,520 Speaker 11: look at video right now, if I look at the NASDAK, 477 00:23:28,560 --> 00:23:31,000 Speaker 11: if I look at, for example, the relative strength indicator, 478 00:23:31,040 --> 00:23:34,240 Speaker 11: it has been screaming over bought for probably the last 479 00:23:34,280 --> 00:23:36,399 Speaker 11: week or maybe a little bit longer. And when you 480 00:23:36,480 --> 00:23:39,600 Speaker 11: have this condition, you know something is inevitably going to happen, 481 00:23:39,640 --> 00:23:42,080 Speaker 11: and you're going to have some consolidation, You're going to 482 00:23:42,160 --> 00:23:44,720 Speaker 11: have some pullback. So yes, I do think the trades 483 00:23:44,840 --> 00:23:47,320 Speaker 11: like Nvidia and the NASDAK near term are overstretched. But 484 00:23:47,400 --> 00:23:50,600 Speaker 11: that's why I really emphasize, Lisa the word near term 485 00:23:50,920 --> 00:23:53,719 Speaker 11: is because I do think they are fundamental catalysts that 486 00:23:53,760 --> 00:23:57,399 Speaker 11: are propping up this rally, whether it's in semiconductors or 487 00:23:57,400 --> 00:24:00,400 Speaker 11: something else. And I don't think those fundamental are going 488 00:24:00,440 --> 00:24:03,280 Speaker 11: to dissipate near term too much exuberance, for sure. 489 00:24:03,440 --> 00:24:06,520 Speaker 1: The problem with this idea that fundamentals are good. Sure, 490 00:24:06,560 --> 00:24:09,040 Speaker 1: but how do you price out the kind of gains 491 00:24:09,040 --> 00:24:11,199 Speaker 1: that we're seeing. How do you price in one and 492 00:24:11,200 --> 00:24:14,639 Speaker 1: a half trillion dollars of market cap gains in less 493 00:24:14,640 --> 00:24:17,679 Speaker 1: than a year for a company with a business model 494 00:24:17,960 --> 00:24:20,040 Speaker 1: The yes seems to be hinged to the future, but 495 00:24:20,080 --> 00:24:23,760 Speaker 1: that is not necessarily tested in terms of longevity, right. 496 00:24:23,880 --> 00:24:25,520 Speaker 4: But you can see it in the data. You can 497 00:24:25,560 --> 00:24:26,320 Speaker 4: see it in the numbers. 498 00:24:26,320 --> 00:24:28,400 Speaker 11: You can see it in the spending intentions, for example 499 00:24:28,440 --> 00:24:32,640 Speaker 11: from hyperscalers and also other companies and other governments trying 500 00:24:32,680 --> 00:24:34,240 Speaker 11: to build that artificial intelligence. 501 00:24:34,359 --> 00:24:34,560 Speaker 4: You know. 502 00:24:34,600 --> 00:24:36,639 Speaker 11: I don't think it's a coincidence that the stock is 503 00:24:36,720 --> 00:24:38,439 Speaker 11: rallied as much as it did when you have I 504 00:24:38,440 --> 00:24:40,600 Speaker 11: think in the last quarter you have a four hundred 505 00:24:40,600 --> 00:24:43,160 Speaker 11: and twenty seven year over year increase in data center 506 00:24:43,200 --> 00:24:47,120 Speaker 11: spending on Nvidia chips. So that's what I mean by fundamentals, 507 00:24:47,119 --> 00:24:49,720 Speaker 11: and I don't think that's a one off obviously. I 508 00:24:49,760 --> 00:24:51,520 Speaker 11: don't think it's a couple of quarters, but it might 509 00:24:51,600 --> 00:24:54,600 Speaker 11: still be into twenty twenty five that we see this 510 00:24:54,680 --> 00:24:57,960 Speaker 11: surgeon spending on artificial intelligence, because let's face it, this 511 00:24:58,040 --> 00:25:00,840 Speaker 11: is the biggest, you know, megatrend that we have today, 512 00:25:01,040 --> 00:25:04,239 Speaker 11: and you're either going to implement artificial intelligence or you're 513 00:25:04,280 --> 00:25:07,200 Speaker 11: going to be left behind. And that's why everybody from 514 00:25:07,200 --> 00:25:10,639 Speaker 11: a hyperscaler to I think a smaller fintech company, you know, 515 00:25:10,760 --> 00:25:13,879 Speaker 11: to probably a logistics producer, all of those companies are 516 00:25:13,880 --> 00:25:16,320 Speaker 11: figuring out how to embed AI, and you can't do 517 00:25:16,440 --> 00:25:17,760 Speaker 11: that without those core. 518 00:25:17,680 --> 00:25:19,879 Speaker 5: Chips, even though some of the fundamentals are there. If 519 00:25:19,920 --> 00:25:22,520 Speaker 5: I wanted to build a really successful trading strategy this year, 520 00:25:22,520 --> 00:25:24,320 Speaker 5: what kind of would have been simple? I'd get all 521 00:25:24,359 --> 00:25:26,480 Speaker 5: of my best quant friends together, which you know I 522 00:25:26,800 --> 00:25:29,639 Speaker 5: have many, not really, you know, and put together an 523 00:25:29,680 --> 00:25:32,720 Speaker 5: equity momentum strategy. In fact, that strategy has done so 524 00:25:32,760 --> 00:25:35,920 Speaker 5: well market neutral momentum that it's the best year from 525 00:25:35,960 --> 00:25:38,000 Speaker 5: it for two thousand and seven. So it's clear that 526 00:25:38,040 --> 00:25:40,720 Speaker 5: a lot of algos are writing this wave. I'm worried 527 00:25:40,720 --> 00:25:41,439 Speaker 5: about the bots. 528 00:25:41,600 --> 00:25:45,240 Speaker 11: Should I be well, if the trend is your friend, 529 00:25:45,280 --> 00:25:47,600 Speaker 11: you know, you shouldn't be right. But the question is, 530 00:25:47,640 --> 00:25:49,800 Speaker 11: you know, what's going to derail this at the very moment, 531 00:25:49,840 --> 00:25:51,639 Speaker 11: and actually this is something that we're thinking about as 532 00:25:51,680 --> 00:25:53,280 Speaker 11: we ponder the second half. 533 00:25:53,119 --> 00:25:54,919 Speaker 4: Of the year. What are the risks? 534 00:25:55,160 --> 00:25:56,879 Speaker 11: You know, one of the risks is that maybe growth 535 00:25:56,960 --> 00:25:59,399 Speaker 11: is too weak. The other one is growth is too strong, 536 00:25:59,640 --> 00:26:01,639 Speaker 11: you know. The third one is maybe in Nvidia or 537 00:26:01,720 --> 00:26:04,840 Speaker 11: artificial intelligence doesn't deliver a nearer term, so I think, 538 00:26:05,160 --> 00:26:07,840 Speaker 11: and of course there's politics. There's the elections in France 539 00:26:07,840 --> 00:26:10,200 Speaker 11: and the United States. So if any of those things 540 00:26:10,200 --> 00:26:12,480 Speaker 11: present a hiccup that I think that's when you worry 541 00:26:12,480 --> 00:26:16,040 Speaker 11: about the unwinds of those trends. But I think the 542 00:26:16,200 --> 00:26:18,720 Speaker 11: comfort level in the market right now is that those 543 00:26:18,720 --> 00:26:21,840 Speaker 11: are periphery risks. But we are, and we've been talking 544 00:26:21,840 --> 00:26:24,240 Speaker 11: about this, we're in the sweet spot right now because 545 00:26:24,520 --> 00:26:26,840 Speaker 11: you know, if growth is strong, that's great for all 546 00:26:26,880 --> 00:26:29,000 Speaker 11: sorts of trades. If growth is weak, well, guess what 547 00:26:29,080 --> 00:26:30,800 Speaker 11: the FED is going to step in and actually cut 548 00:26:30,800 --> 00:26:34,440 Speaker 11: interest rates. So that's why I think so many investors 549 00:26:34,480 --> 00:26:36,320 Speaker 11: have been sticking with the trades that are working. 550 00:26:37,080 --> 00:26:39,480 Speaker 5: Even so, even if growth is strong, you look at 551 00:26:39,520 --> 00:26:41,600 Speaker 5: what some of their earnings estimates are for next year. 552 00:26:41,600 --> 00:26:44,080 Speaker 5: We're at fourteen percent, I think is the latest consensus, 553 00:26:44,280 --> 00:26:46,639 Speaker 5: which would make it the strongest year for S and 554 00:26:46,680 --> 00:26:49,000 Speaker 5: P earnings since two thousand and eight, if you get 555 00:26:49,080 --> 00:26:51,680 Speaker 5: rid of some of the COVID weirdness from twenty twenty one. 556 00:26:52,000 --> 00:26:53,479 Speaker 5: Does that make sense to you or do we need 557 00:26:53,520 --> 00:26:55,840 Speaker 5: to reckon with something different if there is a tinge 558 00:26:55,880 --> 00:26:57,600 Speaker 5: of slowdown in this economy. 559 00:26:57,880 --> 00:26:59,760 Speaker 11: Look, this makes sense to me because one of the 560 00:26:59,760 --> 00:27:04,119 Speaker 11: things I'm encouraged by, beyond their artificial intelligence, you know, momentum, 561 00:27:04,200 --> 00:27:05,680 Speaker 11: is that I actually think there's a fair bit of 562 00:27:05,720 --> 00:27:08,560 Speaker 11: economic momentum globally. You know, for example, it was all 563 00:27:08,600 --> 00:27:11,760 Speaker 11: about the US consumer really holding out the overall global economy. 564 00:27:12,000 --> 00:27:14,520 Speaker 11: We still have the US consumer, but we now also 565 00:27:14,600 --> 00:27:17,560 Speaker 11: have the global economy that's pacing something like four percent 566 00:27:17,640 --> 00:27:20,320 Speaker 11: growth versus point eight percent that we saw just a 567 00:27:20,359 --> 00:27:24,160 Speaker 11: few months ago. We also have the global manufacturing momentum 568 00:27:24,160 --> 00:27:26,600 Speaker 11: that's really picking up in the United States and China 569 00:27:26,640 --> 00:27:29,879 Speaker 11: and Korea, Taiwan, Europe. So that's a whole lot of 570 00:27:29,960 --> 00:27:32,560 Speaker 11: to Lisa's point, broadening out that I actually think is 571 00:27:32,600 --> 00:27:34,439 Speaker 11: playing out beneath the surface. 572 00:27:34,600 --> 00:27:37,680 Speaker 6: Based off the retail sales that surprised the downside earlier 573 00:27:37,720 --> 00:27:40,679 Speaker 6: this week, are you concerned at all about cracks in 574 00:27:40,720 --> 00:27:41,560 Speaker 6: the US consumer. 575 00:27:42,960 --> 00:27:45,919 Speaker 11: You know, it's the story of that bifurcation. Unfortunately that 576 00:27:46,040 --> 00:27:48,600 Speaker 11: continues to play out. And for example, when we look 577 00:27:48,640 --> 00:27:52,880 Speaker 11: at the spending intentions and the perception of prices across 578 00:27:52,960 --> 00:27:56,959 Speaker 11: the consumer cohorts, and fortunately the lower income consumer is 579 00:27:57,040 --> 00:28:01,360 Speaker 11: seeing that price pressure and is therefore lowering the spending intentions. 580 00:28:01,600 --> 00:28:01,800 Speaker 3: You know. 581 00:28:01,840 --> 00:28:04,080 Speaker 11: So that's that's one thing that you don't actually see 582 00:28:04,080 --> 00:28:06,640 Speaker 11: the same dynamic in the higher income consumer. 583 00:28:06,960 --> 00:28:07,119 Speaker 4: You know. 584 00:28:07,200 --> 00:28:08,879 Speaker 11: The other thing that's happening, of course, when you look 585 00:28:08,920 --> 00:28:12,000 Speaker 11: at credit card default rates for example, that's the same dichotomy. 586 00:28:12,240 --> 00:28:15,200 Speaker 11: We're seeing some of the normalization and the lower income 587 00:28:15,200 --> 00:28:18,639 Speaker 11: cohort and those delinquencies rising. But that's not the case, 588 00:28:18,680 --> 00:28:21,159 Speaker 11: for example, when you look at American Express and you 589 00:28:21,160 --> 00:28:23,359 Speaker 11: look at those default rates. And the last thing I 590 00:28:23,400 --> 00:28:25,879 Speaker 11: would say, look, retail sales are important, but it's not 591 00:28:26,000 --> 00:28:28,959 Speaker 11: your entire consumption basket. You know, it's what you spend 592 00:28:29,080 --> 00:28:31,040 Speaker 11: at some of the online shops and brick and mortar 593 00:28:31,240 --> 00:28:34,000 Speaker 11: and you know, gas stations. But when you think about what, 594 00:28:34,200 --> 00:28:36,520 Speaker 11: especially the high income cohor is going to be spending on, 595 00:28:36,800 --> 00:28:40,440 Speaker 11: it's entertainment, it's travel and you're seeing very strong momentum 596 00:28:40,520 --> 00:28:41,720 Speaker 11: in those parts of the economy. 597 00:28:41,760 --> 00:28:43,640 Speaker 6: I also want to ask you about the politics of Europe, 598 00:28:43,640 --> 00:28:45,280 Speaker 6: because you have a call on this. You think now 599 00:28:45,400 --> 00:28:46,920 Speaker 6: is the time to actually pile in. 600 00:28:47,760 --> 00:28:48,120 Speaker 4: I do. 601 00:28:48,400 --> 00:28:48,760 Speaker 10: I do. 602 00:28:48,800 --> 00:28:50,480 Speaker 11: We wrote a piece and we called it the Summer 603 00:28:50,520 --> 00:28:52,479 Speaker 11: of Europe. And you know, I don't think it's just 604 00:28:52,480 --> 00:28:55,720 Speaker 11: a summer trade. You know, I think beyond the politics. 605 00:28:55,760 --> 00:28:57,320 Speaker 11: I'll come back to this in a second, but beyond 606 00:28:57,360 --> 00:28:59,840 Speaker 11: the politics, I think there's a lot of strong economic 607 00:29:00,040 --> 00:29:02,720 Speaker 11: momentum that's playing out in Europe. If you think about Europe, 608 00:29:02,760 --> 00:29:04,840 Speaker 11: in the last couple of years, you had a spike 609 00:29:04,880 --> 00:29:08,000 Speaker 11: in oil, in natural gas prices. You had a spike 610 00:29:08,040 --> 00:29:11,040 Speaker 11: in mortgage rates because fifty three percent of those mortgage 611 00:29:11,080 --> 00:29:13,719 Speaker 11: rates are adjustable rate mortgages. So there's a lot of 612 00:29:13,760 --> 00:29:16,560 Speaker 11: pain that has occurred for the European consumer. But you 613 00:29:16,640 --> 00:29:19,160 Speaker 11: fast forward to today and we have one rate cut 614 00:29:19,160 --> 00:29:21,800 Speaker 11: that's already in place, hopefully more to come. And so 615 00:29:21,840 --> 00:29:24,480 Speaker 11: I think the peak pain from mortgage rates is now 616 00:29:24,560 --> 00:29:27,120 Speaker 11: behind us in Europe. And so when I look at 617 00:29:27,160 --> 00:29:29,880 Speaker 11: the real disposable income and the forecast that we have 618 00:29:30,000 --> 00:29:32,480 Speaker 11: for this year and next, they're supposed to pick up 619 00:29:32,520 --> 00:29:35,280 Speaker 11: relative to where they've been last year. So that's why 620 00:29:35,440 --> 00:29:39,560 Speaker 11: fundamentally business confidence is recovering in Europe. And I think 621 00:29:39,560 --> 00:29:41,880 Speaker 11: there's a lot to like from the economics. And then 622 00:29:42,240 --> 00:29:46,600 Speaker 11: you know, when you look at prior election cycles, for example, 623 00:29:46,760 --> 00:29:51,200 Speaker 11: twenty seventeen, we did see that volatility picks up into 624 00:29:51,240 --> 00:29:55,240 Speaker 11: the election. It's likely subsidies thereafter, So I think there's 625 00:29:55,360 --> 00:29:58,320 Speaker 11: enough precedent to say that election volatility should be bought. 626 00:29:58,520 --> 00:30:01,560 Speaker 1: Do you think that basically travelers going to single handedly 627 00:30:01,600 --> 00:30:04,240 Speaker 1: support the European economy. I'm just so well, I mean. 628 00:30:04,320 --> 00:30:06,760 Speaker 11: I don't know about you, but you know, as far 629 00:30:06,760 --> 00:30:09,400 Speaker 11: as everybody I talked, seems to be heading to Europe 630 00:30:09,440 --> 00:30:12,800 Speaker 11: this summer, right, and obviously there's data to support that 631 00:30:12,840 --> 00:30:13,160 Speaker 11: as well. 632 00:30:13,240 --> 00:30:14,760 Speaker 1: Yeah, well, I mean, I'm just wondering how much this 633 00:30:14,800 --> 00:30:16,320 Speaker 1: is actually going to help. When you put out all 634 00:30:16,400 --> 00:30:19,479 Speaker 1: together what you're saying, it seems as though you're not 635 00:30:19,720 --> 00:30:22,880 Speaker 1: bearish on Nvidia, but you're not bullish particularly at this 636 00:30:22,960 --> 00:30:25,320 Speaker 1: point in order to sort of see a massive surge. Basically, 637 00:30:25,320 --> 00:30:26,720 Speaker 1: don't get out, but it might be a little late 638 00:30:26,720 --> 00:30:29,280 Speaker 1: to get in, and that basically right now, the gains 639 00:30:29,320 --> 00:30:32,000 Speaker 1: are to be had elsewhere. Is that basically the way 640 00:30:32,040 --> 00:30:34,280 Speaker 1: that you would frame it, that independent of all the 641 00:30:34,360 --> 00:30:37,880 Speaker 1: uncertainties of rate cutting cycles and elections, that right now, 642 00:30:37,920 --> 00:30:40,720 Speaker 1: if you just follow the economics, things aren't that bad. 643 00:30:40,840 --> 00:30:42,000 Speaker 4: They're not going to get that bad. 644 00:30:42,120 --> 00:30:43,920 Speaker 1: The broadening out is going to work, and some of 645 00:30:43,920 --> 00:30:46,520 Speaker 1: the really kind of expensive trades might need to pause. 646 00:30:46,320 --> 00:30:48,800 Speaker 11: For Yeah, that's right. I think there's some rebalancing that 647 00:30:48,840 --> 00:30:50,760 Speaker 11: can be done in the portfolios right now. I don't 648 00:30:50,800 --> 00:30:53,120 Speaker 11: think you should wholesale get out of the video or 649 00:30:53,200 --> 00:30:56,200 Speaker 11: the the Nasdaq trade, but maybe just maybe you want 650 00:30:56,240 --> 00:30:58,720 Speaker 11: to pair back some of those gains that you've had 651 00:30:58,760 --> 00:31:01,360 Speaker 11: in the position. It may you want to reallocate some 652 00:31:01,400 --> 00:31:04,400 Speaker 11: of those parts of the market that actually consolidated over 653 00:31:04,400 --> 00:31:06,880 Speaker 11: the last couple of months and have not participated. And 654 00:31:06,920 --> 00:31:08,920 Speaker 11: so things that I would be looking to is partially 655 00:31:08,920 --> 00:31:13,640 Speaker 11: consumer discretionary, consumer finance. I mentioned this some delinquencies arising, 656 00:31:13,760 --> 00:31:14,880 Speaker 11: but they're actually you know. 657 00:31:14,840 --> 00:31:16,200 Speaker 8: Pretty well in check and normal. 658 00:31:16,480 --> 00:31:18,960 Speaker 11: You know, you may want to look at an industrial's 659 00:31:19,000 --> 00:31:22,760 Speaker 11: sector as well, because actually the manufacturing momentum is rising, 660 00:31:23,040 --> 00:31:26,600 Speaker 11: and manufacturing apswing typically lasts about nine months, so I'm 661 00:31:26,640 --> 00:31:30,240 Speaker 11: not satying getting wholesale out of the winners, but peel 662 00:31:30,280 --> 00:31:33,640 Speaker 11: a little bit back and reallocate to the broadening out 663 00:31:33,640 --> 00:31:34,320 Speaker 11: trade and. 664 00:31:34,240 --> 00:31:37,240 Speaker 1: Then I seed. Also my speed time for vacation. Have 665 00:31:37,320 --> 00:31:39,520 Speaker 1: a great time on your vacation. On the other side 666 00:31:39,680 --> 00:31:41,560 Speaker 1: at the Shamrosi Capital. 667 00:31:42,440 --> 00:31:46,000 Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best 668 00:31:46,000 --> 00:31:49,080 Speaker 2: in markets, economics, an gio politics. You can watch the 669 00:31:49,080 --> 00:31:52,120 Speaker 2: show live on Bloomberg TV weekday mornings from six am 670 00:31:52,240 --> 00:31:56,200 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 671 00:31:56,360 --> 00:31:58,600 Speaker 2: or anywhere else you listen, and as always on the 672 00:31:58,600 --> 00:32:00,960 Speaker 2: Bloomberg Terminal and the blimp buck bestess out 673 00:32:05,080 --> 00:32:05,480 Speaker 7: Mm hmm.