WEBVTT - Bloomberg Surveillance TV: June 20, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.439 with Lisa Bromwitz and am Marie Hortenn. Join us each 0:00:18.520 --> 0:00:21.400 day for insight from the best in markets, economics, and 0:00:21.440 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.800 --> 0:00:27.440 are live on Bloomberg Television weekday mornings from six to 0:00:27.520 --> 0:00:31.040 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.520 --> 0:00:35.840 Bloomberg Terminal and the Bloomberg Business App. 0:00:36.280 --> 0:00:38.720 Joining us now is Seth Carpenter of Morgan Stanley. We're 0:00:38.760 --> 0:00:41.160 so pleased to say, Seth, what stands out to you 0:00:41.280 --> 0:00:45.680 initial job as claims actually having an upward trend or 0:00:45.760 --> 0:00:48.400 this idea that housing is flat on its back. 0:00:49.000 --> 0:00:50.640 I mean, I think if I take them all together, 0:00:50.680 --> 0:00:53.479 I'm actually pretty constructive on the US for this year 0:00:53.479 --> 0:00:53.960 as a whole. 0:00:54.040 --> 0:00:56.720 However, I think it's clear to me that. 0:00:56.720 --> 0:00:59.360 We need to see we're going to see slower growth 0:00:59.400 --> 0:01:01.760 over twenty two twenty four relative to twenty twenty three, 0:01:02.200 --> 0:01:05.680 and so the incremental softening that you all were talking 0:01:05.720 --> 0:01:08.520 about when you talked about jobless claims where they were going. 0:01:08.720 --> 0:01:10.520 He always came back with some sort of adverb to 0:01:10.560 --> 0:01:12.880 modify how much it was up, sort of slightly modestly 0:01:12.920 --> 0:01:14.639 or whatever. So it's not as though things are falling 0:01:14.680 --> 0:01:17.080 off of a cliff. I think for the housing sector 0:01:17.080 --> 0:01:20.560 it's really important. The supply for single family homes is 0:01:20.600 --> 0:01:23.280 clearly constrained because anybody who's got a two and a 0:01:23.319 --> 0:01:25.880 half or three and a half percent mortgage, they're staying put, 0:01:26.160 --> 0:01:28.679 and so the supply, as Mike was saying, is constrained. 0:01:29.000 --> 0:01:31.959 On the other hand, monetary policy has always worked through 0:01:32.440 --> 0:01:35.240 the housing sector primarily, and I think builders have to 0:01:35.280 --> 0:01:37.560 be a bit cautious because they got to ask themselves 0:01:37.600 --> 0:01:40.640 where is demand going to be, and so what does 0:01:40.680 --> 0:01:44.559 it mean? I think it just means all cumulatively together, 0:01:44.600 --> 0:01:48.280 we're getting that modest slowing in the economy. We think 0:01:48.280 --> 0:01:50.720 things should slow down. We think inflation's coming down as well, 0:01:50.760 --> 0:01:54.080 and taking together that allows the FED to cut But 0:01:54.160 --> 0:01:56.760 I don't for now see any of these data as 0:01:56.840 --> 0:01:59.520 being harbingers of just doom somehow that we're going to 0:01:59.560 --> 0:02:00.880 go off of a cliff anytime soon. 0:02:01.080 --> 0:02:03.080 Well, we can find plenty of people who probably do 0:02:03.120 --> 0:02:05.600 find it doom saying, and this sort of question of 0:02:05.640 --> 0:02:08.720 a tipping point has often been thrown out there Neil 0:02:08.760 --> 0:02:10.640 data saying this is a time to cut race, because 0:02:10.680 --> 0:02:15.080 if you don't, you never see a linear increase in unemployment. 0:02:15.120 --> 0:02:17.679 You never see a linear kind of weakening in the 0:02:17.800 --> 0:02:20.960 jobs picture. What gives you comfort that we're not seeing 0:02:21.120 --> 0:02:24.919 the precipice of some sort of market increase in unemployment 0:02:24.960 --> 0:02:27.800 at a time where we are seeing an inflection higher 0:02:27.880 --> 0:02:28.919 in jobless claims. 0:02:29.040 --> 0:02:32.000 Well, we've also never seen an economic recovery from a 0:02:32.000 --> 0:02:34.720 global pandemic like the one we're living through right now. 0:02:34.800 --> 0:02:37.359 So as we were coming out of the pandemic, there 0:02:37.360 --> 0:02:40.040 were lots of frictions, lots of dislocations, lots of things 0:02:40.120 --> 0:02:42.680 trying to sort out where to be. Businesses were running 0:02:42.680 --> 0:02:45.480 shorthanded for years at a time, and so now we're 0:02:45.480 --> 0:02:49.040 seeing them settling into Wow, this is staffing closer to 0:02:49.480 --> 0:02:51.000 what we're going to want in the long run. And 0:02:51.040 --> 0:02:54.880 so that kind of readjustment from a truly unprecedented shock. 0:02:55.200 --> 0:02:57.440 I think we're now starting to move into the more 0:02:57.480 --> 0:02:59.320 normal stage. So to say that we haven't seen this 0:02:59.400 --> 0:03:02.680 situation but four is true on the other hand, we 0:03:02.800 --> 0:03:06.680 haven't seen this situation before, and so drawing massive conclusions 0:03:06.720 --> 0:03:09.960 about whether or not this sort of pattern is telling 0:03:10.040 --> 0:03:12.200 us something. I think we want to be super cautious not. 0:03:12.200 --> 0:03:15.120 To ask you to draw a massive conclusion, but can 0:03:15.120 --> 0:03:17.080 you add just the retail data we got from earlier 0:03:17.160 --> 0:03:19.120 the week into this that there does seem to be 0:03:19.160 --> 0:03:22.360 some price fatigue. So you have companies who are not 0:03:22.400 --> 0:03:25.080 as worried about labor shortages and now their margins are 0:03:25.080 --> 0:03:26.040 starting to get squeezed. 0:03:26.320 --> 0:03:28.240 Absolutely, so we think of this as all going in 0:03:28.280 --> 0:03:31.520 the same direction. If we look even the full quarter 0:03:31.600 --> 0:03:33.160 for the first quarter, where we have all the data 0:03:33.200 --> 0:03:36.440 for the quarter, durable goods spending quarter on quarter was negative. 0:03:36.840 --> 0:03:41.440 Non durable goods inflation adjusted was flat quarter on quarters, 0:03:41.440 --> 0:03:44.480 So where the residual strength was for the consumer was 0:03:44.520 --> 0:03:47.360 in services. That's exactly this sort of slowdown that we've 0:03:47.400 --> 0:03:50.080 been expecting to see. And I think the retail sales 0:03:50.160 --> 0:03:54.320 data again overweight goods, sort of shows you know, the 0:03:54.360 --> 0:03:57.480 consumer is not dead. The consumer hasn't stopped spending entirely. 0:03:57.640 --> 0:04:00.720 The consumer hasn't said that's it for me, I'm checking out. Instead, 0:04:00.760 --> 0:04:04.160 what they said was, yeah, we've already bought lots of 0:04:04.200 --> 0:04:06.760 lawn furniture, We've already bought lots of computer screens, We've 0:04:06.760 --> 0:04:09.000 already bought a home office three times over. 0:04:09.680 --> 0:04:11.520 Maybe it's time to cool down a bit. 0:04:11.880 --> 0:04:14.680 Two issues you just brought up there. One is consumers 0:04:14.720 --> 0:04:17.520 and they're concerned about higher prices so becoming more discerning. 0:04:17.600 --> 0:04:20.920 But also what's going on in the labor market. Two 0:04:21.040 --> 0:04:22.640 issues that you say are the biggest when it comes 0:04:22.680 --> 0:04:25.120 to you a selection tariffs, which many would say inflationary, 0:04:25.160 --> 0:04:29.240 and also immigration. How are you looking at twenty twenty five. 0:04:31.320 --> 0:04:33.440 With a lot of trepidation because lots of different things 0:04:33.440 --> 0:04:37.360 could happen. I agree with you when clients ask us 0:04:37.440 --> 0:04:40.720 questions about the elections, Immigration and tariffs are two really 0:04:40.760 --> 0:04:44.320 important things I would say to the earlier conversation about 0:04:44.640 --> 0:04:47.000 have we ever seen a situation where the unemployment rate 0:04:47.080 --> 0:04:48.960 drifts up gently over time? 0:04:49.680 --> 0:04:50.559 It's not very common. 0:04:50.600 --> 0:04:52.960 On the other hand, neither is the kind of increase 0:04:53.080 --> 0:04:56.480 in the labor force that we're seeing from immigration. That's 0:04:56.520 --> 0:04:59.240 not very common either, And so in lots of ways, though, 0:04:59.320 --> 0:05:02.000 gentle ride in the unemployment rate that we've seen four 0:05:02.040 --> 0:05:04.880 percent unemployment, I'm will enough to remember when four percent 0:05:04.960 --> 0:05:05.800 was considered pretty good. 0:05:06.400 --> 0:05:07.640 So we did see a rise. 0:05:07.480 --> 0:05:09.560 On net but a big chunk of that has been 0:05:09.640 --> 0:05:12.120 coming at least over the past year from increases in supply, 0:05:12.200 --> 0:05:15.760 and I think immigration matters there. And so with the election, 0:05:16.240 --> 0:05:18.760 we put out a piece of research for our clients 0:05:19.000 --> 0:05:21.400 over the past week or so, and you could see 0:05:21.400 --> 0:05:23.719 a range of outcomes of what happens to the labor 0:05:24.520 --> 0:05:28.120 force depending on policies that go to get put in 0:05:28.160 --> 0:05:29.960 place in there. I just think the range of outcomes 0:05:30.000 --> 0:05:32.000 in the election is vast, and we have to be 0:05:32.040 --> 0:05:34.159 super humble about what's going to happen. You could see 0:05:34.400 --> 0:05:37.320 big constriction in the labor supply, which would be adverse 0:05:37.360 --> 0:05:39.640 for growth and could be inflationary. Or you could see 0:05:39.680 --> 0:05:42.159 things sort of status quo, a little bit of a reduction, 0:05:42.200 --> 0:05:44.120 in which case the economy gets to trundle on. 0:05:44.640 --> 0:05:46.599 We have to be humble or the fetest to be humble. 0:05:46.640 --> 0:05:50.880 How do they think about these kind of contential massive 0:05:50.960 --> 0:05:54.200 changes while they're deciding whether or not they're going to 0:05:54.200 --> 0:05:55.240 make a cup before. 0:05:55.000 --> 0:05:55.920 The year end. 0:05:56.320 --> 0:05:58.960 So I think humility is called for all around, particularly 0:05:59.000 --> 0:06:01.800 for anyone in economic where we're not particularly good at it. 0:06:01.839 --> 0:06:05.440 On average, we need to practice humility a lot for 0:06:05.520 --> 0:06:08.000 the FED, they're going to have to sit back and 0:06:08.320 --> 0:06:11.239 wait on the policies. I do think if we listen 0:06:11.279 --> 0:06:14.360 to J. Powell, if we listen to sort of where 0:06:14.400 --> 0:06:18.320 our analysis is that monetary policy is currently restrictive, they 0:06:18.360 --> 0:06:21.800 can come off of the peak now this year and 0:06:22.000 --> 0:06:24.000 not have to worry about having done too much in 0:06:24.080 --> 0:06:26.520 terms of easing policy. I think as we get into 0:06:26.520 --> 0:06:29.400 twenty twenty five, though, they probably do need to think 0:06:29.440 --> 0:06:33.560 a lot more about what the election outcomes mean for policy, 0:06:33.680 --> 0:06:38.080 fiscal policy, tariff policy, all other policy, immigration policy before 0:06:38.120 --> 0:06:40.560 they can have any sort of conviction about which way 0:06:40.560 --> 0:06:41.000 they need. 0:06:40.880 --> 0:06:42.000 To go with policy. 0:06:42.320 --> 0:06:45.600 I asked Terry Wiseman, is this fun? And he just said, no, 0:06:46.440 --> 0:06:47.440 is this fun for you? 0:06:50.279 --> 0:06:52.800 This is, I have say, one of the most challenging 0:06:53.000 --> 0:06:56.880 macroeconomic environments to do forecasting in. And it's a double 0:06:57.000 --> 0:06:59.760 edged sword because, on the one hand, very hard to 0:06:59.800 --> 0:07:02.440 do forecasting when there's so many cross currents in so 0:07:02.440 --> 0:07:05.400 many situations that you haven't seen before. On the other hand, 0:07:05.480 --> 0:07:07.360 maybe it's a good time to be a forecaster because 0:07:07.400 --> 0:07:08.720 nobody else knows what's going on. 0:07:08.640 --> 0:07:11.000 Either well, The reason why I ask this is just 0:07:11.040 --> 0:07:14.200 simply because when I try to put together even the 0:07:14.200 --> 0:07:16.400 themes to really hook into, I'm not sure which takes 0:07:16.440 --> 0:07:18.920 pre eminence. I'm not sure if it's the rate cutting cycle, 0:07:18.920 --> 0:07:20.520 I'm not sure if it's the weakening, or I'm not 0:07:20.560 --> 0:07:22.679 sure if it's some of the disruptions that are causing 0:07:22.960 --> 0:07:26.160 inflationary increases. I don't have a sense of where the 0:07:26.160 --> 0:07:28.120 balance of risks are. Is it that any cut rates 0:07:28.160 --> 0:07:30.160 you have a resurgence in inflation, or as if you 0:07:30.160 --> 0:07:33.000 don't cut soon enough, you fall off a cliff into recession. 0:07:33.280 --> 0:07:35.160 I can make a good argument for any of these, 0:07:35.560 --> 0:07:38.240 and I believe it. So how do you sort of 0:07:38.480 --> 0:07:41.080 plan with any kind of long term forecast When the 0:07:41.200 --> 0:07:43.960 likes of Muhammadellary you're saying, if you don't have that 0:07:44.040 --> 0:07:46.360 type of long term forecast, you're going to have a 0:07:46.400 --> 0:07:48.400 mistake and you're going to have just volatile markets that 0:07:48.400 --> 0:07:50.640 are going to essentially break No. 0:07:50.920 --> 0:07:53.480 So I think that's fair. Lots of volatility in the 0:07:53.480 --> 0:07:55.400 real side of the economy and in markets. I do 0:07:55.480 --> 0:07:57.520 think the time horizon matters a lot. So some of 0:07:57.560 --> 0:08:00.400 our clients are very short term focused and they're say 0:08:00.400 --> 0:08:01.440 for the rest of this year. 0:08:01.320 --> 0:08:02.400 I feel pretty constructive. 0:08:02.440 --> 0:08:05.320 I don't see a scenario where the US really falls 0:08:05.320 --> 0:08:07.440 off of the cliff over the course of twenty twenty four. 0:08:07.800 --> 0:08:10.080 I do see inflation coming down over the rest of 0:08:10.080 --> 0:08:12.640 this year pretty substantially, and with that, I do see 0:08:12.640 --> 0:08:16.400 the FED cutting getting beyond that. To the mid medium 0:08:16.480 --> 0:08:19.360 term outlook, I think the uncertainty absolutely goes up. I 0:08:19.360 --> 0:08:22.440 think the elections are a huge component to which way 0:08:22.640 --> 0:08:25.440 things go, and I think it is impossible to have 0:08:25.520 --> 0:08:28.400 high conviction. So the best thing investors can do, the 0:08:28.440 --> 0:08:30.960 best thing policy makers can do is to think about 0:08:31.000 --> 0:08:34.240 all of the outcomes contingently and to try to come 0:08:34.320 --> 0:08:37.680 up with your best set of scenarios. And then you 0:08:37.720 --> 0:08:39.760 will end up in one of the scenarios over time. 0:08:39.800 --> 0:08:41.720 But you really have to do a lot of advanced planning. 0:08:41.720 --> 0:08:43.079 This is one of the reasons why when we talk 0:08:43.120 --> 0:08:45.120 to our clients we try to say we're. 0:08:44.960 --> 0:08:45.640 Not going to tell you. 0:08:46.000 --> 0:08:47.760 We're not going to predict what's going to happen. 0:08:47.600 --> 0:08:49.240 With the election. That's a mugs game. 0:08:49.559 --> 0:08:53.920 However, if we think across the different plausible scenarios, hear 0:08:54.040 --> 0:08:56.679 what the key outcomes would be for fiscal for tariffs, 0:08:56.679 --> 0:08:59.280 for immigration, and then here's how you should try to 0:08:59.280 --> 0:08:59.840 think about. 0:08:59.720 --> 0:09:00.360 Plan for that. 0:09:00.559 --> 0:09:03.120 Just to add to this, because this idea, it's been 0:09:03.120 --> 0:09:05.280 a criticism of the FED that they're not being more 0:09:05.320 --> 0:09:07.680 clear in their outlooks. They keep saying we're waiting for 0:09:07.720 --> 0:09:09.679 more data. There are people been clamoring who say, no, 0:09:09.760 --> 0:09:12.520 give us something concrete, give us a clear direction. But 0:09:12.600 --> 0:09:15.160 what you and Lisa were just describing as one where 0:09:15.200 --> 0:09:18.520 there is not a clear direction. So how would you 0:09:18.600 --> 0:09:21.800 rate FED communication in this environment? Should they be giving 0:09:21.880 --> 0:09:25.800 us scenario analysis, should they be giving us more clear forecasts? 0:09:25.880 --> 0:09:27.559 Or is it right just to say, look, we need 0:09:27.600 --> 0:09:28.960 more data, we don't know right now. 0:09:29.280 --> 0:09:32.480 Yeah, I think, especially the way you framed it, when 0:09:32.679 --> 0:09:36.480 some of the FOMC members sort of ask me questions 0:09:36.480 --> 0:09:40.319 about how they're doing, I actually think under these circumstances 0:09:40.720 --> 0:09:43.480 they're doing a pretty good job. The quip I like 0:09:43.520 --> 0:09:45.440 to give them is be as clear as you can be, 0:09:45.760 --> 0:09:48.079 but by all means, be no more clear than that. 0:09:49.120 --> 0:09:51.760 And I think they would be doing themselves a disservice. 0:09:51.760 --> 0:09:53.920 They'd be doing markets a disservice if they tried to 0:09:53.960 --> 0:09:56.319 be precise at a time when you can't be precise, 0:09:56.320 --> 0:09:58.200 and I think that would be false precision. 0:09:58.280 --> 0:09:59.600 I think would be false confidence. 0:09:59.640 --> 0:10:02.560 And so when the world turns out different than expected 0:10:02.600 --> 0:10:05.240 and they have to change course, which is exactly what 0:10:05.280 --> 0:10:08.000 they should do, everyone will complain, Oh my gosh, you 0:10:08.000 --> 0:10:09.360 told us you're going to do one thing, and now 0:10:09.360 --> 0:10:11.720 you're doing something else. So just buy Nvidia. 0:10:14.160 --> 0:10:30.840 Organ Stantley, thank you. Savvi's site of Raymond James joining us. Now, Savvi, 0:10:31.120 --> 0:10:33.679 what are you expecting to hear from some of these 0:10:33.720 --> 0:10:36.080 investment meetings, the latest being from Delta at a time 0:10:36.320 --> 0:10:38.679 where it seems like there is an ongoing divergence between 0:10:38.720 --> 0:10:42.079 people going across Atlantic versus domestic. 0:10:43.760 --> 0:10:46.520 Yeah, even in the domestic market, you know, things are 0:10:46.600 --> 0:10:47.400 really strong. 0:10:48.920 --> 0:10:49.840 Is this good demand? 0:10:50.600 --> 0:10:52.600 There's a little bit of oversupply, And I think that's 0:10:52.600 --> 0:10:56.040 the difference between the Atlantic and the domestic markets is 0:10:56.240 --> 0:10:58.480 we're still kind of getting back to you twenty nineteen 0:10:58.559 --> 0:11:02.560 levels in the Transatlant market, whereas capacity in the domestic 0:11:02.600 --> 0:11:03.760 market has surpassed that. 0:11:04.000 --> 0:11:07.599 So demand is really strong. But you're right, there is 0:11:07.720 --> 0:11:10.000 still strong demand in the Atlantic. 0:11:09.600 --> 0:11:11.760 Despite you know what we looked at last summer as 0:11:11.800 --> 0:11:14.080 being maybe pent up demand. 0:11:14.120 --> 0:11:17.760 Tom a pricing standpoint, Do you think that domestically you 0:11:17.800 --> 0:11:20.360 can get you know, cheaper airfares the way you're not 0:11:20.400 --> 0:11:22.960 going to be able to get going transatlantic this summer. 0:11:24.840 --> 0:11:26.720 I do believe so, and I think you're seeing that 0:11:26.760 --> 0:11:30.360 in the data. We've seen pricing being a little bit softer. 0:11:30.520 --> 0:11:33.520 You saw airlines in the first quarter really pull back 0:11:33.559 --> 0:11:34.600 their growth a little bit. 0:11:35.240 --> 0:11:36.479 But as we got into. 0:11:36.320 --> 0:11:38.800 The second quarter and heading into the summer, you're seeing 0:11:39.200 --> 0:11:42.120 a high single mid to high single digit growth in 0:11:42.200 --> 0:11:45.800 the domestic market, and that's kind of creating, especially if 0:11:45.840 --> 0:11:48.200 you're willing to have flexibility in some of those off 0:11:48.240 --> 0:11:51.280 peak days or times there. 0:11:51.080 --> 0:11:53.280 Are some better pricing available out there. 0:11:54.040 --> 0:11:56.840 But as we're heading into July, we're definitely seeing fair 0:11:56.960 --> 0:11:57.800 strengthen here. 0:11:58.320 --> 0:12:00.920 When you look at the domestic market, who's winning this 0:12:01.000 --> 0:12:03.640 space especially we are seeing cheaper airfares. 0:12:05.760 --> 0:12:08.640 Yeah, I mean, I think consumer wins. There's a lot 0:12:08.679 --> 0:12:11.520 of kind of optionality out there. The fares are coming 0:12:11.559 --> 0:12:14.280 in better. You'll hear a lot of. 0:12:14.200 --> 0:12:17.160 The executives say that we're seeing record revenue, and that's true. 0:12:17.800 --> 0:12:20.600 I think this is probably the highest revenue this industry 0:12:20.640 --> 0:12:21.080 has seen. 0:12:21.679 --> 0:12:24.240 The problem is we also as having record costs. You've 0:12:24.280 --> 0:12:24.959 seen a lot of. 0:12:24.960 --> 0:12:28.680 Labor costs increases, few well stable, which is great news 0:12:28.720 --> 0:12:30.760 for the industry. It is still higher than what it 0:12:30.840 --> 0:12:33.880 was in twenty nineteen. So there are airlines that are 0:12:33.960 --> 0:12:36.480 kind of struggling a bit more. I think those airlines 0:12:36.520 --> 0:12:39.880 exposed to corporate demand, especially large corporate demand that is 0:12:39.880 --> 0:12:42.920 starting to see a nice recovery here. I think they'll 0:12:42.960 --> 0:12:45.440 stand out better heading into the summer season. 0:12:45.840 --> 0:12:48.880 Sabbi Lisa has been talking about how we're expecting a 0:12:48.920 --> 0:12:53.000 record travel season, especially around fourth of July, and the 0:12:53.040 --> 0:12:55.600 ability of airlines, whether they're ready for whether they have 0:12:55.720 --> 0:12:58.480 enough updated planes, and what the airports will look like. 0:12:58.520 --> 0:13:01.480 Can you just contextualize the chaos that all of us 0:13:01.520 --> 0:13:04.240 should expect if we're planning to travel this summer. 0:13:05.720 --> 0:13:07.520 I always be ready. 0:13:07.559 --> 0:13:10.760 The thing with summer is you have these thunderstorms that 0:13:10.880 --> 0:13:13.520 just pop up from nowhere, and then kind of winter storms. 0:13:13.520 --> 0:13:16.120 You can see it coming, you can prepare for it, 0:13:16.200 --> 0:13:20.240 and that's the issue. Air traffic control centers, especially in 0:13:20.280 --> 0:13:23.640 the Northeast and a little bit Florida, are still understaffed, 0:13:24.480 --> 0:13:29.200 and so the risk of disruption is greater when there 0:13:29.240 --> 0:13:32.920 are events, and you know, summer means there are going 0:13:33.000 --> 0:13:36.959 to be storms somewhere, and so just kind of be flexible. 0:13:37.120 --> 0:13:39.920 But I think airlines have done a lot to help 0:13:39.960 --> 0:13:42.719 address that. You've seen, you know, some airlines just to 0:13:43.280 --> 0:13:46.360 change the way they build a network. Some airlines just 0:13:46.440 --> 0:13:49.960 taking advantage of what the FA has loved them to 0:13:50.000 --> 0:13:52.520 do and kind of bring down capacity in the Northeast 0:13:52.720 --> 0:13:53.520 to make sure. 0:13:53.280 --> 0:13:55.679 That there's reliability. So I do expect this to. 0:13:55.679 --> 0:13:58.839 Be a better summer than we've seen for a couple 0:13:58.840 --> 0:14:01.360 of years, But it all depends on the weather. 0:14:01.520 --> 0:14:03.920 So I would say, kind of be prepared and flexible. 0:14:04.240 --> 0:14:06.400 You're giving me like a little bit of confidence, So 0:14:06.400 --> 0:14:09.720 I feel better about this. Zevihia. How about this Spirit, 0:14:10.000 --> 0:14:13.920 United and Jet Blue all delaying their analyst days. 0:14:13.679 --> 0:14:14.600 What's going on? 0:14:16.040 --> 0:14:18.319 They all delayed it for very different reasons. 0:14:18.480 --> 0:14:21.480 So United, you know, they had that FA review and 0:14:21.520 --> 0:14:23.200 they just didn't feel like that that was the right 0:14:23.240 --> 0:14:23.960 time to do it. 0:14:24.880 --> 0:14:26.480 If you look at Spirit. 0:14:26.600 --> 0:14:29.120 It sounds like they still they are trying to come 0:14:29.200 --> 0:14:31.720 up with a standalone business plan and there are some 0:14:31.800 --> 0:14:33.800 initiatives that are trying to roll out, and maybe that's 0:14:33.880 --> 0:14:34.600 taking longer. 0:14:35.040 --> 0:14:36.080 Maybe they think that the. 0:14:37.360 --> 0:14:40.920 Bondhold bondholded discussions might take a little bit longer and 0:14:41.000 --> 0:14:44.600 want that behind them. But generally, look, there's just a 0:14:44.600 --> 0:14:47.840 lot of uncertainty, whether you look at supply chain, whether 0:14:47.840 --> 0:14:50.200 you're looking at the economy, and I think airlines are 0:14:50.200 --> 0:14:54.200 feeling much more comfortable to do their investor dates towards 0:14:54.240 --> 0:14:56.520 the end of the year, when they'll have better. 0:14:56.240 --> 0:14:57.760 Clarity on twenty twenty five. 0:14:58.080 --> 0:15:01.280 Even when it comes to what the aircraft deliveries that 0:15:01.320 --> 0:15:03.640 they can expect, it's better to provide. 0:15:03.280 --> 0:15:06.000 That towards the end of the year than doing closer 0:15:06.000 --> 0:15:07.160 to the summer. 0:15:07.440 --> 0:15:10.120 Sally Sythe of Raymond James, thank you so much for 0:15:10.160 --> 0:15:13.600 being with Jonathan Miller of Miller Samuel writing this. When 0:15:13.600 --> 0:15:15.600 the Fed does cut, I suspect there will be an 0:15:15.640 --> 0:15:18.640 outsize pickup in sales, even with only a twenty five 0:15:18.720 --> 0:15:21.520 basis point cut. Many it would be buyers have been 0:15:21.640 --> 0:15:24.200 waiting two and a half years to see easing rates. 0:15:24.280 --> 0:15:27.160 Jonathan joins us. Now, this to me, Jonathan, is really 0:15:27.200 --> 0:15:29.800 one of the most interesting questions, and I love having 0:15:29.800 --> 0:15:32.760 you on as always that there is this belief that 0:15:32.800 --> 0:15:34.960 when you cut rates, you can do so in a 0:15:35.000 --> 0:15:38.040 way that isn't going to reignite animal spirits. How much 0:15:38.080 --> 0:15:39.960 of a rate cut you see only twenty five basis 0:15:39.960 --> 0:15:42.240 points of a rate cut as reigniting a lot of 0:15:42.240 --> 0:15:45.160 interest in the housing market. So how does that factor 0:15:45.160 --> 0:15:47.560 into pricing in this idea that we can get a 0:15:47.560 --> 0:15:50.840 soft landing with rate cuts given the backdrop that we 0:15:50.920 --> 0:15:52.120 have right now, well. 0:15:52.000 --> 0:15:56.240 I think that outsized response to the twenty five basis 0:15:56.240 --> 0:16:00.800 point cut or a modest cut of some sort. You 0:16:00.880 --> 0:16:02.440 have to think of the last two and a half 0:16:02.520 --> 0:16:06.120 years have been this era of pent up demand that 0:16:07.000 --> 0:16:09.280 suddenly the sort of legs are cut out from under 0:16:09.320 --> 0:16:12.640 the housing market and people that were in the process 0:16:12.680 --> 0:16:15.680 of thinking about it were stopped on the tracks, and 0:16:15.760 --> 0:16:19.880 everybody's waiting. And the problem with the waiting part is 0:16:19.920 --> 0:16:22.920 that when if you have a rate cut and this 0:16:23.040 --> 0:16:25.400 surge of an activity, I think you're going to see 0:16:25.400 --> 0:16:30.920 prices rise again. That the only way for more supply. 0:16:31.080 --> 0:16:32.880 That's been one of the reasons why we've had such 0:16:33.200 --> 0:16:36.480 price growth is inventory has been very lacking. We are 0:16:36.520 --> 0:16:40.080 seeing inventory come in, but we haven't seen the same 0:16:40.800 --> 0:16:44.040 amount of demand respond to it because of rates. So 0:16:44.160 --> 0:16:48.680 when you see rates cut you're going to see a surge, 0:16:49.240 --> 0:16:51.480 at least in the short run, you're going to see 0:16:51.480 --> 0:16:54.720 a surge in demand, and that's going to keep prices elevated, 0:16:54.760 --> 0:16:57.760 which has sort of broken all the rules of economics, 0:16:58.080 --> 0:17:01.280 where we're talking about record price and mortgage rates are 0:17:01.280 --> 0:17:02.560 more than double where they were. 0:17:03.200 --> 0:17:05.480 There was a theory out there that when the Fed 0:17:05.560 --> 0:17:08.280 cuts rates, that's actually going to cause more volume to 0:17:08.280 --> 0:17:10.960 come on to the markets. You'll actually see more houses 0:17:11.000 --> 0:17:14.560 go out there, which will actually cause prices to fall 0:17:14.800 --> 0:17:16.720 because you'll actually get price discovery in a way that 0:17:16.720 --> 0:17:18.840 we haven't had for four years. 0:17:19.119 --> 0:17:20.119 Why don't you believe that? 0:17:20.920 --> 0:17:23.840 So let's take a market like Miami, and there's been 0:17:24.000 --> 0:17:29.600 lots of discussion about inventories coming in. Over the last year, 0:17:29.680 --> 0:17:33.400 inventory has risen about thirty eight percent, so you'd think, wow, 0:17:33.560 --> 0:17:37.440 you know, prices are going to be challenged, But that 0:17:37.600 --> 0:17:41.600 inventory result of after that increase is still twenty five 0:17:41.600 --> 0:17:45.720 percent below pre pandemic. So when you look at the 0:17:45.720 --> 0:17:48.320 percentage of inventory growth, and we are seeing it, and 0:17:48.320 --> 0:17:51.960 it is good for consumers in the long run, but 0:17:52.080 --> 0:17:55.600 it's not enough yet. That there was such an incredible 0:17:55.760 --> 0:18:00.000 deficit of supply that sort of you know, a high 0:18:00.200 --> 0:18:03.480 percent or whatever the local market number, you know, the 0:18:03.640 --> 0:18:07.560 sort of headline grabbing increase in inventory is still coming 0:18:07.640 --> 0:18:13.320 from a record low, and it's not it's not even 0:18:13.800 --> 0:18:15.800 I want to say, it's not even close. But it's 0:18:15.920 --> 0:18:20.360 still well below long term norms. And that's the dilemma, 0:18:20.520 --> 0:18:22.800 you know, it's sort of you know, everybody's waiting for 0:18:22.880 --> 0:18:27.920 rates to to to become more affordable. But in the meantime, 0:18:28.000 --> 0:18:30.800 I think we're going to see price growth, and so 0:18:30.920 --> 0:18:34.280 someone waiting for a lower rate, you know, another you know, 0:18:34.560 --> 0:18:39.399 another fifty basis or even more, Uh, they're going to 0:18:39.440 --> 0:18:41.960 be disappointed because I think two or three years from now, 0:18:42.000 --> 0:18:44.200 prices are going to be higher than they are now, 0:18:45.640 --> 0:18:49.000 even with more supply coming into the market. For example, 0:18:49.040 --> 0:18:52.920 in a lot of suburbs that we track, bidding wars, 0:18:53.080 --> 0:18:56.160 especially in the New York metro area are forty to 0:18:56.160 --> 0:19:01.000 fifty percent of the closings. So what does that tell 0:19:01.040 --> 0:19:04.560 you about supply. It tells you that it's extremely low. 0:19:04.840 --> 0:19:07.359 It's not the same in every market. Some markets have 0:19:07.440 --> 0:19:11.680 more supply than others, but it is still a challenge 0:19:11.680 --> 0:19:16.359 in housing right now is supply and the FED you know, 0:19:17.320 --> 0:19:19.520 if you look at what happened this spring, this is 0:19:19.560 --> 0:19:25.360