WEBVTT - Bloomberg Surveillance TV: April 16, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 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 0:00:33.479 --> 0:00:37.040 Bloomberg Terminal and the Bloomberg Business app. Alisha Levine of 0:00:37.120 --> 0:00:39.600 B and WY wilt saying, the administrations Let's make a 0:00:39.600 --> 0:00:42.880 deal show removes the worst case tariff scenario. The market 0:00:42.880 --> 0:00:45.600 can only inflect high with the policy response. There will 0:00:45.600 --> 0:00:48.920 be equity vole as long as there is policy uncertainty. 0:00:49.040 --> 0:00:51.479 Alisa joins us some more. Alisha kind Mornick, Good morning. 0:00:51.479 --> 0:00:53.680 There's certainly a lot of that going around. Yeah, are 0:00:53.720 --> 0:00:54.680 we addressing any of this? 0:00:55.560 --> 0:00:55.800 Look? 0:00:56.040 --> 0:00:59.160 I think you know, as I've said, like time is 0:00:59.200 --> 0:01:01.280 not on the mark get side, and time is not 0:01:01.520 --> 0:01:05.680 on the real economy side. The longer that this gets 0:01:05.760 --> 0:01:09.600 drawn out, you're doing real damage. As corporations and individuals 0:01:09.600 --> 0:01:13.080 are sort of frozen in place waiting for the actual 0:01:13.120 --> 0:01:14.720 policy is So. 0:01:14.640 --> 0:01:17.080 The interesting thing about the. 0:01:16.560 --> 0:01:20.080 Ninety day pause and the recategorization of some of the 0:01:20.120 --> 0:01:24.320 electronic tariffs is that it does remove some of the 0:01:24.440 --> 0:01:28.280 left tail risk in the market, but it doesn't really 0:01:28.319 --> 0:01:31.479 remove the left tail risk in the real economy, which 0:01:31.520 --> 0:01:34.600 is getting damaged every day. So at first we were 0:01:34.600 --> 0:01:37.160 optimistic on that ninety day pause like everybody else, and 0:01:37.200 --> 0:01:39.800 then when you start thinking about what this actually means, 0:01:40.280 --> 0:01:42.720 it means it's gonna go on for much longer. So 0:01:42.840 --> 0:01:44.840 Q one's gonna come and find you had pre buying 0:01:44.880 --> 0:01:47.920 before tariffs. And the hard data, as we've talked about, 0:01:48.160 --> 0:01:49.400 has held up fairly well. 0:01:49.680 --> 0:01:53.600 The soft data is rock bottom, and again, you. 0:01:53.560 --> 0:01:55.800 Know where can this go from rock bottom? 0:01:55.880 --> 0:01:56.040 Right? 0:01:56.120 --> 0:01:56.600 So you're there. 0:01:56.640 --> 0:01:58.480 In fact, we did a chart, we did a chart 0:01:58.560 --> 0:02:01.560 for our team about you know what happens when consumer 0:02:01.640 --> 0:02:04.360 sentiment hits rock bottom. Well, it turns out the SMP 0:02:04.480 --> 0:02:06.960 tends to rally right after that. And we went back 0:02:07.000 --> 0:02:10.280 about forty years with this. So you know, the soft 0:02:10.360 --> 0:02:13.320 data is not telling us anything that we don't know. 0:02:14.360 --> 0:02:15.560 But we're here and. 0:02:15.680 --> 0:02:17.840 You know, the concern really is that unless you start 0:02:17.880 --> 0:02:19.760 seeing the outlines of what a deal looks like with 0:02:19.880 --> 0:02:23.720 Japan with the broad outlines, yes, details can take six months, 0:02:23.720 --> 0:02:26.919 twelve months, but what does it look like that would 0:02:27.000 --> 0:02:28.960 further remove left tail risk on the market. And I 0:02:29.000 --> 0:02:31.800 think here you're fairly priced. You're fairly priced at about fifty 0:02:31.800 --> 0:02:33.679 four hundred for where earnings are going. 0:02:33.720 --> 0:02:37.160 He saut of Eastern Time US retail sales US retail sales 0:02:37.200 --> 0:02:39.760 for March. Is it too early to expect some weakness 0:02:39.800 --> 0:02:40.680 to show up in those. 0:02:40.480 --> 0:02:43.560 Figures given the fact that the sentiment data was already 0:02:43.560 --> 0:02:47.720 cratering in March. If there's some some read through, you 0:02:47.760 --> 0:02:51.240 should start to see something going on. I find what's 0:02:51.280 --> 0:02:56.600 fascinating actually is the fact that tariff is on everybody's lips. 0:02:56.680 --> 0:02:59.520 The American public, which tends to tune out a lot 0:02:59.520 --> 0:03:02.480 of political stuff, is talking about tariffs everywhere, and so 0:03:02.520 --> 0:03:05.720 everybody knows about it and concerned about it. And of 0:03:05.760 --> 0:03:08.560 course it's the inflationary piece that everybody's worried about, because 0:03:08.560 --> 0:03:10.960 we just lived through banded inflation two years ago, and 0:03:11.000 --> 0:03:15.920 so that's the biggest fear here. But sales probably represents 0:03:15.919 --> 0:03:16.680 some pre buying. 0:03:17.240 --> 0:03:19.880 What do you need to see to try to get 0:03:19.880 --> 0:03:22.720 more confidence in some sort of risk rally. And I 0:03:22.720 --> 0:03:24.280 say this at a time where we do have a 0:03:24.360 --> 0:03:27.520 number of earnings that are coming out pretty positive. UBS's 0:03:27.520 --> 0:03:29.760 CIO came out with a list of five reasons why 0:03:29.760 --> 0:03:33.079 they actually are getting pretty positive for US equities in 0:03:33.080 --> 0:03:35.360 a six to twelve months basis, and they include April 0:03:35.400 --> 0:03:38.560 tariff showers, may fiscal flowers. This is really fun the 0:03:38.600 --> 0:03:42.080 FED put and the data by US exceptionalism, especially when 0:03:42.120 --> 0:03:44.640 it's on sale. That last point, do you think that 0:03:44.640 --> 0:03:46.640 the divergence between the US and the rest of the 0:03:46.640 --> 0:03:48.320 world has been overplayed totally? 0:03:49.080 --> 0:03:52.680 I think it's been totally overplayed, meaning meaning the rest 0:03:52.680 --> 0:03:55.160 of the We are the buyer for the rest of 0:03:55.200 --> 0:03:58.800 the world. You know, we have the best consumer on 0:03:58.880 --> 0:04:03.200 earth two percent of US GDP. The consumer can be down, 0:04:03.400 --> 0:04:06.080 can take a break, but ultimately this is what drives 0:04:06.080 --> 0:04:08.720 the global economy. And if there is concern about where 0:04:08.920 --> 0:04:11.520 US policy is going, well, boy, the rest of the 0:04:11.520 --> 0:04:13.680 world really has an issue here. That doesn't mean rest 0:04:13.720 --> 0:04:16.040 of the world can't outperform this year and some sort 0:04:16.040 --> 0:04:18.560 of catch up trade as some of the heat from 0:04:18.560 --> 0:04:20.719 the tech sector comes out on the multiples and the 0:04:20.839 --> 0:04:24.360 s andp resets here that's perfectly reasonable. But if you 0:04:24.440 --> 0:04:28.320 look forward for the cycle where this is going, I 0:04:28.400 --> 0:04:31.240 struggle to accept the fact that the rest of the 0:04:31.240 --> 0:04:33.080 world will be growing faster than the US. 0:04:33.200 --> 0:04:35.720 At the same time, people talk about the response to 0:04:35.760 --> 0:04:38.440 tariffs from the US and it comes to fiscal spending. 0:04:38.440 --> 0:04:40.320 You've seen that in the You've seen that in Europe, 0:04:40.320 --> 0:04:42.800 You've seen that in Japan, you've seen that in China. 0:04:42.839 --> 0:04:45.960 Why can't you just follow the fiscal spending at a 0:04:46.000 --> 0:04:48.599 time when a lot of people are saying that tariffs 0:04:48.680 --> 0:04:51.400 will hurt the United States as much as some of 0:04:51.440 --> 0:04:52.640 these other trading partners. 0:04:52.720 --> 0:04:56.400 So the fiscal spend is a great story as a trade. 0:04:56.720 --> 0:04:58.760 In the end, we do long term wealth creation, we 0:04:58.800 --> 0:05:02.120 do long term wealth present so that for US would 0:05:02.160 --> 0:05:05.920 represent a nice trade for the next twelve months. That's 0:05:06.040 --> 0:05:08.440 probably the right framework to. 0:05:08.400 --> 0:05:08.760 Look at it. 0:05:08.800 --> 0:05:10.839 But if you look at how the markets are performed 0:05:11.200 --> 0:05:14.559 since Liberation Day, actually the US has outperformed rest of world. 0:05:14.880 --> 0:05:17.200 With the understanding that the US is actually in a 0:05:17.240 --> 0:05:19.800 better position here than the rest of the world, specifically 0:05:19.880 --> 0:05:21.280 on the trade issue. 0:05:21.880 --> 0:05:23.600 So fiscal can only get you so far. 0:05:23.720 --> 0:05:25.359 As we've seen in the US, you can prop up 0:05:25.400 --> 0:05:27.120 the economy for a couple of years and then you 0:05:27.200 --> 0:05:31.080 really have to deal with the underlying productivity and barriers 0:05:31.120 --> 0:05:33.880 to growth that you have, for instance in Europe, that 0:05:33.920 --> 0:05:36.039 you have to deal with. So they're going to put 0:05:36.080 --> 0:05:39.159 a trillion dollars into the economy, how productive will that 0:05:39.240 --> 0:05:39.839 capital be? 0:05:40.400 --> 0:05:42.000 So where are the regulations going? 0:05:42.120 --> 0:05:44.599 Trying to get some visibility on policy down in Washington, 0:05:44.680 --> 0:05:46.200 and now we've got legal issues. So if you're just 0:05:46.279 --> 0:05:48.040 joining us, I want to share this story with you again. 0:05:48.320 --> 0:05:50.920 The California coverity Gavin Newsom has set a state is 0:05:50.920 --> 0:05:54.520 suing to hold President Donald Trump's tariffs, citing home to 0:05:54.560 --> 0:05:57.960 consumers and businesses, Home to consumers and businesses. Now, this 0:05:58.000 --> 0:05:59.719 is something people have been talking about for a while. 0:06:00.120 --> 0:06:02.040 Is that enough to say you've got a legal footing 0:06:02.360 --> 0:06:04.440 to push forward and really start what's happening here? 0:06:04.520 --> 0:06:06.839 Well, I think given the fact that the United States 0:06:07.120 --> 0:06:08.960 the administration has come out and said that this is 0:06:09.040 --> 0:06:11.880 due to IEPA a national security concern. 0:06:11.600 --> 0:06:14.480 That likely that will be upheld in court. 0:06:14.600 --> 0:06:15.880 And I think this is one of the things that 0:06:15.960 --> 0:06:19.880 Jamison Greer, the USTR Trade Representative has been very focused 0:06:19.920 --> 0:06:22.400 on making sure that anything they come out with can 0:06:22.520 --> 0:06:25.400 legally be upheld in court. But the courts are going 0:06:25.440 --> 0:06:28.040 to fight it out, and certainly Governor Newsom, i think 0:06:28.080 --> 0:06:30.440 eyeing maybe a twenty twenty eight bid, is going to 0:06:30.440 --> 0:06:32.159 do whatever he can to try to make this point 0:06:32.240 --> 0:06:32.760 very clear. 0:06:33.000 --> 0:06:35.120 This is almost exactly what Libby Canssel and PIMCO said 0:06:35.160 --> 0:06:37.159 to you and I on Sunday evening. This is what 0:06:37.240 --> 0:06:39.359 she was anticipating these kind of things. And this is 0:06:39.360 --> 0:06:41.320 the first and I'm sure it won't be the last. 0:06:41.560 --> 0:06:44.440 And this is ultimately the real question with exemptions. How 0:06:44.520 --> 0:06:47.880 much does that open up the Trump administration to legal 0:06:47.960 --> 0:06:50.280 challenges based in the fact that is it a national 0:06:50.320 --> 0:06:52.839 emergency or not. There has been a lack of direction 0:06:52.920 --> 0:06:55.359 in terms of exactly why some of the tariffs have 0:06:55.400 --> 0:06:58.599 gone on, which might go to some of the legal fight. 0:06:58.680 --> 0:07:01.480 That said, even if they you get undermined, there are 0:07:01.480 --> 0:07:04.720 other provisions that this president can use to try to 0:07:04.839 --> 0:07:05.960 get these tariffs through. 0:07:06.040 --> 0:07:06.960 So again, the. 0:07:06.960 --> 0:07:08.920 Whack a mole of tariffs, it's not going to go away. 0:07:08.960 --> 0:07:10.679 It's just going to get dragged out in a court system. 0:07:10.760 --> 0:07:13.200 Alicia, Everyone's become an expert in trade relations, and now 0:07:13.240 --> 0:07:15.480 they need to become an expert in trained law. As 0:07:15.480 --> 0:07:17.600 an investor, how do you navigate this mess at the moment? 0:07:17.720 --> 0:07:19.840 Really difficult, really difficult. 0:07:19.880 --> 0:07:22.960 Look, I think with the VIX at sixty and the 0:07:23.040 --> 0:07:27.240 SMP hitting about forty eight hundred, that's typically a signal 0:07:27.480 --> 0:07:31.840 to close your eyes and buy because you're downside from 0:07:31.920 --> 0:07:35.560 forty eight hundred in the worst case scenario is probably 0:07:35.600 --> 0:07:36.440 a forty. 0:07:36.080 --> 0:07:37.800 Four one hundred or forty five. 0:07:37.880 --> 0:07:40.600 Worst case scenario like deep recession earnings get cut to 0:07:40.640 --> 0:07:44.160 two thirty or something like that, is probably a forty 0:07:44.160 --> 0:07:46.600 four to forty five hundred from forty eight hundred, and 0:07:46.800 --> 0:07:49.680 it's asymmetric risk to the upside there, particularly when vics 0:07:49.720 --> 0:07:53.280 hit sixty. So we're looking at technical analysis for that 0:07:53.360 --> 0:07:55.840 kind of thing. The two hundred week moving average on 0:07:55.920 --> 0:07:59.720 the SMP, which is held for about fifty years, is 0:08:00.480 --> 0:08:03.840 at forty six hundred, so forty eight hundred, you've essentially 0:08:03.880 --> 0:08:05.800 de risked it. The only time the s and P 0:08:05.960 --> 0:08:10.000 went below the two hundred week moving average was during 0:08:10.080 --> 0:08:12.680 the depths of the global financial crisis and then a 0:08:12.720 --> 0:08:15.280 pop right and every crisis you just hit it if 0:08:15.280 --> 0:08:17.520 it's bad enough, and you respond from there. 0:08:17.720 --> 0:08:18.920 So that's what we're looking at. 0:08:19.040 --> 0:08:21.800 Here are fifty four hundred again where we think earnings 0:08:21.840 --> 0:08:25.160 are going, which you know it'll come down over the street. 0:08:25.360 --> 0:08:30.480 You're probably fairly priced for now for the kinds of uncertainty, very. 0:08:30.320 --> 0:08:31.360 Difficult to model. 0:08:31.640 --> 0:08:33.760 I think it's really good to remember though, there's also 0:08:33.760 --> 0:08:34.840 a right tail risk. 0:08:34.880 --> 0:08:37.200 We all sit here and talk about the left tail risk. 0:08:37.520 --> 0:08:41.120 We can't model it. It's a terrible policy. It's inflationary, 0:08:41.160 --> 0:08:43.360 it's tagflationary, we're going to go into a deep recession. 0:08:43.760 --> 0:08:45.680 But there's also the right tail and I think in 0:08:45.800 --> 0:08:48.800 markets there's always a two way trade. And I think 0:08:48.840 --> 0:08:51.520 now you're starting to get the conversation about Okay, what 0:08:52.080 --> 0:08:53.400 could the upside look like? 0:08:53.440 --> 0:08:55.160 And I think we just need to remember it. 0:08:55.240 --> 0:08:58.200 I'm glad you mentioned the VIX because the Treasury Secretary 0:08:58.200 --> 0:09:00.600 mentioned the VIX in my interview on Monday and he 0:09:00.600 --> 0:09:04.520 said it's likely peaked and it's spiked. Do you agree 0:09:04.520 --> 0:09:06.959 with him it's past it or do you think we 0:09:06.960 --> 0:09:09.240 could see the VIC spike again. 0:09:08.360 --> 0:09:12.480 On a probability basis, we've probably spiked. There can't be 0:09:12.520 --> 0:09:15.439 any certainties here would I do know when the market's 0:09:15.440 --> 0:09:18.280 down about twenty percent and the VIX is at sixty, 0:09:18.720 --> 0:09:21.319 I have better odds than not in deploying capital at 0:09:21.320 --> 0:09:24.080 that point. And so that's what I would say, should something, 0:09:24.320 --> 0:09:26.440 I'd say the real risk here is there is there 0:09:26.480 --> 0:09:31.040 some kind of financial contagent? Right the bond market and 0:09:31.080 --> 0:09:34.280 the FX market have moved so quickly, acting like the 0:09:34.320 --> 0:09:38.400 equity market. Frankly, you know what's out there that. 0:09:38.320 --> 0:09:39.640 We're not seeing. 0:09:39.880 --> 0:09:43.680 That that's leverage that could create a broader financial risk. 0:09:43.720 --> 0:09:47.280 If this is a policy induced error and a policy 0:09:47.360 --> 0:09:50.600 induced sell off, those can be fairly quick. Maybe you 0:09:50.640 --> 0:09:53.040 have a bit of a U shape recovery, but more 0:09:53.120 --> 0:09:56.120 or less we're intact. The issue is if this becomes 0:09:56.160 --> 0:09:59.800 a financial contagent. So yes, VIX at sixty should be 0:09:59.880 --> 0:10:03.200 a buy signal. The SMP at forty eight hundred more 0:10:03.280 --> 0:10:05.600 risks you know, to the upside than downside. It's still 0:10:05.600 --> 0:10:09.160 downside risk, but you're asymmetric risk. It's really the financial 0:10:09.160 --> 0:10:12.199 contagent issue. We don't know, we don't know. That's what 0:10:12.280 --> 0:10:13.040 we have to think about. 0:10:13.320 --> 0:10:15.480 Let's get to this. If you don't know how long 0:10:15.520 --> 0:10:17.480 talks are going to last, what do you do in between. 0:10:17.559 --> 0:10:20.480 We keep hearing this phrase, wait and see what kind 0:10:20.480 --> 0:10:22.560 of CAPEX decisions can you make in the meantime. 0:10:22.720 --> 0:10:26.240 So we're very concerned about that because already intentions to 0:10:26.400 --> 0:10:29.360 invest and intentions for CAPEX have dropped. If you look 0:10:29.360 --> 0:10:32.040 at all the survey data, that's what we're seeing. So 0:10:32.240 --> 0:10:35.720 it's a pretty it's a pretty brutal policy in terms 0:10:35.760 --> 0:10:38.920 of forward investment. And that's really where the problem is coming. 0:10:38.960 --> 0:10:42.880 That each day that this goes on and time is 0:10:42.920 --> 0:10:46.079 just not on the side for the real economy. You know, 0:10:46.320 --> 0:10:49.520 just as a reminder of the market always bottoms before 0:10:49.559 --> 0:10:50.720 the real economy does. 0:10:50.760 --> 0:10:52.839 It happened in COVID, it happens all the time. 0:10:53.000 --> 0:10:56.840 Is just to remember that that's that's out there, but 0:10:57.400 --> 0:11:02.480 there is real damage happening today right now. It's great 0:11:02.600 --> 0:11:06.760 that China and the US are negotiating, but it's impossible 0:11:06.800 --> 0:11:09.240 to make a decision if you're a COO or a 0:11:09.240 --> 0:11:12.760 CFO where to put investment. It's impossible, And so I'm 0:11:12.840 --> 0:11:15.360 concerned that you might have a freezing in the real 0:11:15.400 --> 0:11:18.079 economy here. I think I think the risk is real, 0:11:18.160 --> 0:11:20.480 and I think it's happening right now. It's certainly the 0:11:20.559 --> 0:11:24.319 damages to small businesses are beyond right. So the interesting thing, 0:11:24.600 --> 0:11:28.600 the challenge from the governor in California is really the 0:11:28.640 --> 0:11:32.960 first major AEPA challenge that we've seen since policy was 0:11:33.000 --> 0:11:36.280 announced on April second. So it's actually amazing that there 0:11:36.320 --> 0:11:39.320 haven't been more, hasn't been immediate, But I think the 0:11:39.320 --> 0:11:43.000 administration knows that AIPA is a little bit more on 0:11:43.040 --> 0:11:45.959 shaky ground, which is why they're putting pharmaceuticals and semis 0:11:46.000 --> 0:11:47.000 under two three two. 0:11:47.640 --> 0:11:49.520 Right, there's this other question. 0:11:49.640 --> 0:11:52.719 It's not just how this trickles out into the actual economy. 0:11:52.920 --> 0:11:55.320 Is are there certain sectors that are going to be 0:11:55.400 --> 0:11:58.320 so exposed so as to be not really desirable for you. 0:11:58.320 --> 0:12:00.800 I'm thinking of auto manufacturers, retailers. 0:12:01.040 --> 0:12:02.600 Yeah, look for that. 0:12:02.679 --> 0:12:04.960 In terms of an investment thesis, you just really have 0:12:05.000 --> 0:12:06.680 to look at how far the stocks have fallen and 0:12:06.720 --> 0:12:08.760 where the multiples are, because there is the price at 0:12:08.760 --> 0:12:12.200 which you pay because it's been completely de risk So 0:12:12.440 --> 0:12:15.400 the auto sector looks like it's been completely de risked. Here, 0:12:15.640 --> 0:12:17.880 the market's very efficient in pricing it with the worst 0:12:17.880 --> 0:12:19.200 case scenarios. 0:12:18.640 --> 0:12:21.000 And I think we have it again. 0:12:21.240 --> 0:12:25.320 We have to remember the market's always bottom before the 0:12:25.360 --> 0:12:26.840 real economy does. 0:12:26.880 --> 0:12:27.000 So. 0:12:27.360 --> 0:12:30.000 Sentiment data has been rock bottom really for about five 0:12:30.080 --> 0:12:32.319 or six weeks now. Again, the American public knows the 0:12:32.360 --> 0:12:36.000 word tariff, which I find fascinating. Fascinating because sometimes I 0:12:36.040 --> 0:12:40.600 don't know who the Defense Secretary is, and so we've 0:12:40.600 --> 0:12:45.240 seen the sentiment data really be terrible. The issue is, 0:12:46.160 --> 0:12:51.400 can the hard data, at this point declining do more 0:12:51.480 --> 0:12:56.559 damage to markets than what we're already anticipating and its investors. 0:12:56.600 --> 0:12:57.800 That's where we have to live. 0:12:57.840 --> 0:13:00.640 We've gone neutral on equities, We've moved some of the 0:13:00.679 --> 0:13:03.520 allocations to short term fixed simply because we too are 0:13:03.559 --> 0:13:06.720 really uncertain. It's very hard to have conviction except on 0:13:06.800 --> 0:13:08.280 price and valuations. 0:13:08.280 --> 0:13:10.520 President Biden forgot who the Defense Secretary was once upon 0:13:10.559 --> 0:13:12.320 a time, to remember when we lost him for about 0:13:12.360 --> 0:13:13.120 a week he was lost. 0:13:13.200 --> 0:13:14.240 He was under anesthesia. 0:13:14.480 --> 0:13:16.600 Yeah, that's right, and he didn't call the White House 0:13:16.679 --> 0:13:17.560 to tell them he was. 0:13:17.559 --> 0:13:19.160 Going to be under anesthesia. So yeah, I think it 0:13:19.240 --> 0:13:20.920 was twenty four for eight hours. It's that How long 0:13:20.920 --> 0:13:22.160 is we lost a defense secretary? 0:13:22.240 --> 0:13:24.680 Got to find space for jokes here, brahma elis Lafina 0:13:24.720 --> 0:13:35.679 bm wi. Wow, the leader is going to see Rick 0:13:35.760 --> 0:13:39.280 reader of Black Rock Writing. Taking opportunistic positions in good 0:13:39.320 --> 0:13:42.560 quality companies in the equity market has and should continue 0:13:42.559 --> 0:13:45.559 to pay off for investors with longer time horizons. I'm 0:13:45.559 --> 0:13:47.719 pleased to say that, Rick johin US Now for more, 0:13:47.800 --> 0:13:50.079 Rick Reader, it's been too long, my friend. Let's go 0:13:50.160 --> 0:13:52.920 straight to it. I just want to understand what you've 0:13:52.960 --> 0:13:55.800 been seeing with the team over the last week or so. 0:13:55.880 --> 0:13:58.960 Have the foreign buyers of treasuries been pulling back? 0:14:01.080 --> 0:14:03.800 So? I mean, boy, it's been an incredible period. 0:14:03.800 --> 0:14:06.040 I mean, so you know, to start with, I mean 0:14:06.080 --> 0:14:08.079 the treasury market to move back in the treasure. 0:14:07.800 --> 0:14:09.000 Of Friday was extraordinary. 0:14:09.040 --> 0:14:12.920 This pressure on the treasury market, concern about international selling 0:14:13.800 --> 0:14:16.080 that there was pretty amazing. And then we bounced back 0:14:16.120 --> 0:14:18.800 pretty nicely as some calm has come back in and 0:14:18.840 --> 0:14:20.600 then you know, the volatile and the equity market of 0:14:20.640 --> 0:14:24.080 the daily volatile a little bit calmer. This week does 0:14:24.120 --> 0:14:26.600 present you know, it's similar to what I've said there before. 0:14:26.840 --> 0:14:29.040 It does present some opportunity in these markets. 0:14:29.040 --> 0:14:29.920 It is, I will tell you. 0:14:30.040 --> 0:14:34.120 The uncertainty though, has led to liquidity in these markets. 0:14:34.280 --> 0:14:36.560 That's pretty rough. Right now. When you go to execute, 0:14:36.560 --> 0:14:37.000 you've got. 0:14:36.840 --> 0:14:39.040 To be very thoughtful and very tactical about how you 0:14:39.080 --> 0:14:42.080 do it, because markets are very jumpy and very uncertain 0:14:42.120 --> 0:14:42.880 these days. 0:14:42.720 --> 0:14:44.880 And Rick, typically the place you go full liquidity is 0:14:44.920 --> 0:14:49.560 the treasury market, deep predictable. That's why people buy treasuries. Rick, 0:14:49.600 --> 0:14:51.120 can I get your view on what you think was 0:14:51.160 --> 0:14:53.960 happening last week? Do you believe that was foreigners pulling back? 0:14:54.080 --> 0:14:56.160 Is there a question mark over the US safe haven 0:14:56.240 --> 0:14:59.000 status or is that just certain traits and winding things 0:14:59.040 --> 0:14:59.600 blowing up. 0:15:01.360 --> 0:15:02.120 It's a great question. 0:15:02.320 --> 0:15:04.240 I mean, so, first of all, you know when you 0:15:04.320 --> 0:15:06.800 have this pressure on the currency market, and by the way, 0:15:06.800 --> 0:15:08.960 it's super acute when you think about equities going down 0:15:09.480 --> 0:15:11.520 the same time that the currency is going down. 0:15:11.640 --> 0:15:14.360 Usually the dollar appreciates when you're in this risk off mode. 0:15:14.600 --> 0:15:20.040 So you've unquestionably seen the pressure on equities and international disposition. 0:15:19.560 --> 0:15:23.200 Of the equity of a number of US equities. 0:15:23.400 --> 0:15:25.840 In the rates market, it's a bit more blurred, but 0:15:25.920 --> 0:15:28.600 there's no question about it. There is some concern we 0:15:28.760 --> 0:15:32.080 fund so much of our treasury debt internationally, there is 0:15:32.120 --> 0:15:34.880 some concern with the currency depreciating. 0:15:34.600 --> 0:15:36.640 And then quite frankly that the back end of the. 0:15:36.600 --> 0:15:42.160 Curve going through these periods of spasm where inflation is higher. 0:15:42.600 --> 0:15:44.440 You know, even if the FED cuts, what does it 0:15:44.480 --> 0:15:46.400 do for the back end. There's an argument that when 0:15:46.400 --> 0:15:49.400 you've been the FED cuts, the back end becomes less tethered, 0:15:49.800 --> 0:15:52.080 and in fact you get a steepening. 0:15:51.640 --> 0:15:52.080 Of the curve. 0:15:52.200 --> 0:15:55.400 So yes, I think there's some international disposition for sure, 0:15:55.440 --> 0:15:58.960 as the currency weakens. But I think broadly it's its uncertainty, 0:15:58.960 --> 0:15:59.600 and it's just hard. 0:15:59.640 --> 0:16:01.120 You see watch days like Friday. 0:16:01.560 --> 0:16:03.560 You know, it's just hard stepping in, particularly in the 0:16:03.560 --> 0:16:05.640 back end, with this uncertainty still out there. 0:16:05.840 --> 0:16:07.360 So Ray welt, what point would you step in? 0:16:09.520 --> 0:16:12.360 So so I like gowning the belly of the yield 0:16:12.400 --> 0:16:13.920 curve and I like gowing. And you know, the front 0:16:14.000 --> 0:16:17.400 end has gotten pretty well priced. I mean you've got 0:16:17.400 --> 0:16:19.280 to and I think the way you all described it, 0:16:19.720 --> 0:16:21.520 you know, the Fed, you're pricing an awful lot of 0:16:21.520 --> 0:16:24.120 cuts for the FED this year and you haven't seen 0:16:24.160 --> 0:16:26.720 that hard data deseration. I do think you'll see that 0:16:26.880 --> 0:16:29.640 in labor over the next two or three months. You'll 0:16:29.680 --> 0:16:32.680 see some pullback of probably some significance in place like 0:16:32.880 --> 0:16:36.120 healthcare and education, leisure and hospitality, but we've got. 0:16:36.000 --> 0:16:38.040 To see it. But the billy of the yield curve, 0:16:38.040 --> 0:16:39.120 there are some opportunities. 0:16:39.120 --> 0:16:42.040 And frantly, Europe is more interesting because you don't have 0:16:42.080 --> 0:16:43.880 the inflation impact in Europe. 0:16:44.080 --> 0:16:46.120 The ECB's got to cut more aggressively. 0:16:46.400 --> 0:16:48.360 So I actually think, you know, we've you know where 0:16:48.400 --> 0:16:49.800 we've seen some real opportunities. 0:16:49.800 --> 0:16:51.760 Actually European rates very different. 0:16:51.800 --> 0:16:53.400 And by the way, you don't you don't have the 0:16:53.440 --> 0:16:56.560 international disposition there. In fact, that's where you have probably 0:16:56.640 --> 0:16:59.200 international I'm sure have you have international buying. So European 0:16:59.280 --> 0:17:01.520 rates is a place recently we've liked quite a bit. 0:17:01.680 --> 0:17:03.240 Can we take this a step further? 0:17:03.480 --> 0:17:06.199 You talk about how US treasury markets tend to be 0:17:06.280 --> 0:17:08.480 the deepest, most liquid, and then you talk about how 0:17:08.560 --> 0:17:11.560 rocky liquidity has been and how execution risk has become 0:17:11.600 --> 0:17:14.720 an increasing consideration for you. Have we gone to the 0:17:14.760 --> 0:17:18.200 point where on some of these days the European rates 0:17:18.240 --> 0:17:22.119 market has actually been more liquid than the US rates market? 0:17:23.680 --> 0:17:24.240 Good question. 0:17:24.640 --> 0:17:28.480 So more liquid I don't know if certainly the back 0:17:28.600 --> 0:17:31.600 end of the yeld curve it takes price to get 0:17:31.960 --> 0:17:34.439 to get execution. I don't know if it's more liquid 0:17:34.520 --> 0:17:37.920 it certainly feels to me like you have this ballast 0:17:38.160 --> 0:17:40.400 of you've got an ECB moving, you've. 0:17:40.320 --> 0:17:42.520 Got a yield curve that's also that's already pretty steep 0:17:42.560 --> 0:17:43.000 in Europe. 0:17:43.080 --> 0:17:44.879 And by the way, if you're a dollar investor, you 0:17:44.920 --> 0:17:48.119 get a cross currency swap benefit. And because the curves 0:17:48.160 --> 0:17:50.359 so steep, you roll down. So you know, there are 0:17:50.400 --> 0:17:52.400 a lot of reasons why I'm sure others as well 0:17:52.440 --> 0:17:56.080 as ourselves have felt like it's a safer place to 0:17:56.119 --> 0:17:59.040 be even though you're going to get European funding of 0:17:59.080 --> 0:18:00.720 fiscal and issues of the next couple of years. 0:18:00.760 --> 0:18:01.760 That just takes some time. 0:18:02.320 --> 0:18:04.920 But I don't you know, I still say the truagery 0:18:04.960 --> 0:18:09.679 market generally is much deeper, but you know, you're up. 0:18:10.240 --> 0:18:11.160 You definitely see. 0:18:10.960 --> 0:18:13.480 More buyers coming in internationally as well as what we 0:18:13.520 --> 0:18:14.200 see in the States. 0:18:14.600 --> 0:18:17.199 It seems like the picture that you're painting is a 0:18:17.240 --> 0:18:20.320 regime change. The picture that you're painting is shifting away 0:18:20.359 --> 0:18:23.679 from the United States and following a real flood of 0:18:23.760 --> 0:18:27.080 money into some of the overseas markets, and frankly not 0:18:27.320 --> 0:18:29.479 betting that the long end of the yield curve will 0:18:29.520 --> 0:18:32.720 provide the ballast that it has in the past. Can 0:18:32.760 --> 0:18:35.320 you talk about what else has changed? Does this really 0:18:35.440 --> 0:18:38.640 undermine or reshape the way you look at sixty forty 0:18:38.760 --> 0:18:40.760 or the position of gold in your portfolio. 0:18:42.960 --> 0:18:44.879 That is a long it's a great discussion. That's a 0:18:44.880 --> 0:18:46.959 long discussion. A ton has changed. 0:18:47.359 --> 0:18:49.840 Like you say, we've added in the portfolios, on in 0:18:49.840 --> 0:18:52.119 our fixed income or other portfolios, we've added gold. 0:18:52.520 --> 0:18:54.399 We think gold is a is a is. 0:18:54.400 --> 0:18:58.320 A good hedge generally, you know, quite frankly, you have 0:18:58.359 --> 0:19:00.440 to do during periods like this, you tactically. 0:19:00.160 --> 0:19:01.720 Hold more cash in the portfolios. 0:19:02.119 --> 0:19:04.240 We've done that back end of the yield curve and 0:19:04.320 --> 0:19:06.720 interest rates and as a hedge when you've got inflation 0:19:06.880 --> 0:19:10.840 moving potentially signmiulantly higher, not really a big benefit to 0:19:10.880 --> 0:19:11.560 the portfolio. 0:19:12.040 --> 0:19:14.320 And then the other one, when you get rates backing up. 0:19:14.800 --> 0:19:18.120 You can get your yield much more attractively using high 0:19:18.200 --> 0:19:21.280 quality assets. So even though you know you're you know, 0:19:21.359 --> 0:19:23.399 some pressure on parts of the high yield market, pressure 0:19:23.400 --> 0:19:25.920 is in the left loan market, you can actually still 0:19:25.960 --> 0:19:28.400 create them. In one of our ETF is bing ETF, 0:19:28.600 --> 0:19:31.320 we're able to create over seven percent yield and actually 0:19:31.359 --> 0:19:34.600 improve the quality of portfolio. Run more cash that becomes 0:19:34.600 --> 0:19:37.280 super attractive. As long as you're not stretching go down 0:19:37.320 --> 0:19:41.160 the credit structure into the triple C rated high yield, 0:19:41.160 --> 0:19:42.680 you can actually create more yield today. 0:19:42.720 --> 0:19:44.920 So I like the idea, build some more. 0:19:44.760 --> 0:19:47.800 Cash, use some tools that are different than in the past, 0:19:48.240 --> 0:19:50.440 and then quite frankly, just get higher quality and more 0:19:50.480 --> 0:19:51.720 liquidity in the portfolio. 0:19:51.920 --> 0:19:54.280 Rick, do you think the rhetoric around the fact that 0:19:54.400 --> 0:19:57.680 some investors are saying they're dumping dollar, dumping treasuries, that 0:19:57.760 --> 0:20:01.879 the US is losing safe haven reserve asset level? 0:20:01.960 --> 0:20:03.280 Do you think that rhetoric is overblown? 0:20:05.840 --> 0:20:08.240 I'd say sentiment can change really quickly. 0:20:08.359 --> 0:20:11.080 I mean, we're in this period now where there's clearly 0:20:11.560 --> 0:20:14.399 a concern about the currency, and there's clearly a concern 0:20:14.520 --> 0:20:16.879 about how do we bring the debt down, how do 0:20:16.920 --> 0:20:18.760 we get how do we get interest rates down? So 0:20:18.800 --> 0:20:21.400 I'd say near term, you know, there is a question listen. 0:20:21.400 --> 0:20:24.720 I think reserve currency status status is something that is 0:20:24.800 --> 0:20:27.520 absolutely critical to the United States. We fund a lot 0:20:27.520 --> 0:20:29.960 of debt globally. The number of you know, the percentage 0:20:29.960 --> 0:20:32.520 of trades in the world that happen in dollars bills 0:20:32.560 --> 0:20:36.200 as a collateral for for many of the transactions in 0:20:36.240 --> 0:20:39.320 the world. I think reserve currency status is absolutely critical. 0:20:39.760 --> 0:20:43.200 Are you denting it? You're definitely denting it. And listen, 0:20:43.240 --> 0:20:44.280 I think that I think this. 0:20:44.240 --> 0:20:45.440 Year is going to change. 0:20:45.600 --> 0:20:47.280 I think we've got a couple of months here where 0:20:47.280 --> 0:20:50.439 there's a lot of uncertainty an economy that's probably in 0:20:50.440 --> 0:20:53.240 the recession today in terms of certainly where corporate spend 0:20:53.240 --> 0:20:53.560 will be. 0:20:54.119 --> 0:20:55.440 And then but I think as you get to the 0:20:55.520 --> 0:20:56.119 back half of the. 0:20:56.160 --> 0:20:58.760 Year, things can really evolve. So listen, I think you're 0:20:58.840 --> 0:21:01.880 chipping away at reserve currency, but I don't think there's 0:21:01.920 --> 0:21:04.639 a natural alternative. So and I you know, and I 0:21:04.720 --> 0:21:06.800 think I think things can change, hopefully they do. 0:21:07.000 --> 0:21:08.879 Rick hopefully they do. But that last point that I 0:21:08.880 --> 0:21:12.119 think is important. If we are in recession today, do 0:21:12.160 --> 0:21:15.680 you think risk assets are approprily priced for that scenario? 0:21:17.960 --> 0:21:21.200 So I would say, I would say today, listen, I 0:21:21.240 --> 0:21:22.760 think that I think the tail, the. 0:21:22.720 --> 0:21:24.479 Tail has the taist has gotten fatter. 0:21:25.200 --> 0:21:28.159 I think quality assets they are pretty reasonable. There's a 0:21:28.160 --> 0:21:32.080 lot of quality assets we've had to agency mortgages, et cetera. Listen, 0:21:32.160 --> 0:21:34.040 I think you've got to put a wider range on 0:21:34.080 --> 0:21:37.280 the equity market today than you've had before. You've got 0:21:37.280 --> 0:21:40.840 an economy that's pretty uncertain, and you've got to you know, 0:21:40.920 --> 0:21:42.000 I think you've got to keep your. 0:21:41.880 --> 0:21:43.560 Beta bit more restrained. Today. 0:21:43.720 --> 0:21:45.560 Quite frankly, one of the most interesting trades in the 0:21:45.640 --> 0:21:46.560 last couple of weeks has. 0:21:46.440 --> 0:21:47.520 Been to sell puts. 0:21:47.760 --> 0:21:50.199 You know, not to necessarily increase, but you know, the 0:21:50.240 --> 0:21:53.119 best time to sell insurance is after a hurricane, and 0:21:53.200 --> 0:21:54.320 they've been some great trades. 0:21:54.440 --> 0:21:56.480 Actually sell downside. We are gosh. 0:21:56.520 --> 0:21:58.520 You know, if we go down another ten fifteen twenty 0:21:58.760 --> 0:22:01.480 spending on single name go down ten fifteen twenty percent, 0:22:01.840 --> 0:22:04.720 you get paid handsomely for taking that. So keep your 0:22:04.720 --> 0:22:07.240 beta restrained, hunker down a bit in terms of risk, 0:22:07.560 --> 0:22:09.800 but then find someplace like Gosh. I would add if 0:22:09.800 --> 0:22:13.400 we came down, if we if markets went down significantly, So. 0:22:12.960 --> 0:22:14.720 Anyway, a bunch of things to do in this market, 0:22:14.840 --> 0:22:15.040 I think. 0:22:15.080 --> 0:22:17.280 But I just think you have to expand your the 0:22:18.160 --> 0:22:20.320 where you think your return objectives are going to be, 0:22:20.320 --> 0:22:21.640 in the probability around it. 0:22:21.960 --> 0:22:23.560 In an environment like this. 0:22:23.840 --> 0:22:25.520 Things have changed a lot. Rick is good to see 0:22:25.560 --> 0:22:27.800 you as always, Rick Raider of black Rock There, Rick, 0:22:27.800 --> 0:22:39.880 thank you sir. We're doing against sing Wall Street's biggest banks, 0:22:39.960 --> 0:22:42.800 looking for some clarity on policy. JP Morgan's Chamei time 0:22:42.800 --> 0:22:45.359 and urging Trump to start talks with China and telling 0:22:45.400 --> 0:22:48.200 the ft quote, we should be careful. I don't think 0:22:48.240 --> 0:22:50.720 anyone should assume they have a divine right to success 0:22:50.760 --> 0:22:53.240 and therefore don't worry about it. Joining us now to 0:22:53.240 --> 0:22:56.760 discuss the former Republican House Majority leader Eric Cancer. Eric, 0:22:56.800 --> 0:22:58.440 welcome to the program, So welcome back. It's good to 0:22:58.440 --> 0:23:01.520 see it recent. What do you make of the approach 0:23:01.520 --> 0:23:03.879 from the administration to trade over the last few weeks. 0:23:04.240 --> 0:23:07.200 Well, listen, I mean there are so many, uh, there's 0:23:07.200 --> 0:23:10.080 so much noise, so many signals coming from the White 0:23:10.080 --> 0:23:10.760 House right now. 0:23:10.800 --> 0:23:12.560 I think that market. 0:23:12.160 --> 0:23:14.840 Players are just, you know, sort of trying to take 0:23:14.880 --> 0:23:17.639 a step back and figure out if they have a 0:23:17.680 --> 0:23:20.520 portfolio of companies, you know, what it is that they 0:23:20.600 --> 0:23:24.720 look like, if they're imports sensitive. Obviously, there's now a 0:23:24.760 --> 0:23:27.639 little bit more focus on what's coming out every single 0:23:27.720 --> 0:23:30.280 day of the White House. I think the imperative for 0:23:30.560 --> 0:23:33.919 the President and his team today as they're meeting with 0:23:34.040 --> 0:23:37.040 Japan is to demonstrate success. I mean, this is where 0:23:37.119 --> 0:23:41.720 I think people are looking for some amount of clarity 0:23:41.920 --> 0:23:44.199 and that what does it mean when we're supposed to 0:23:44.200 --> 0:23:47.080 be enduring some pain and the president's been pretty clear 0:23:47.160 --> 0:23:49.440 said hey, we've got we're going to we're going to 0:23:49.600 --> 0:23:52.080 change sort of the trajectory of the country. We're going 0:23:52.119 --> 0:23:55.359 to strengthen the foundation. And if that's the case, what 0:23:55.440 --> 0:23:57.600 does it really look like when he's dealing with the 0:23:57.680 --> 0:24:01.400 counterparty and if it's Japan and I would say even India, 0:24:01.440 --> 0:24:05.080 because India is the one that is most protectionist, that 0:24:05.200 --> 0:24:08.879 comes to mind. If we can demonstrate there's an opening 0:24:08.960 --> 0:24:12.000 up of that markets, that this is what it's all about. 0:24:12.200 --> 0:24:14.760 I think that that would calm some nerves right now. 0:24:14.760 --> 0:24:17.160 Are you convinced that is the metric for success? 0:24:17.680 --> 0:24:20.320 Well, I think you know there is. 0:24:20.560 --> 0:24:22.959 At leasta you talked about sort of taking him literally, 0:24:23.000 --> 0:24:25.879 taking him seriously or hinted of that what you just said, 0:24:26.200 --> 0:24:28.920 And I look at this term of the Trump administration 0:24:29.520 --> 0:24:31.639 somewhat differently than the way we looked at the at 0:24:31.680 --> 0:24:34.960 the last one, and that almost you he is sticking 0:24:35.000 --> 0:24:38.240 to his literal word when we're talking about tariffs and 0:24:38.320 --> 0:24:41.879 trade here. So Jonathan, back to your question, if he's 0:24:41.960 --> 0:24:45.240 about trade deficits, because that's been one of the real 0:24:45.640 --> 0:24:47.960 metrics that he's put out there consistently. 0:24:48.560 --> 0:24:49.520 That's what it's about. 0:24:49.560 --> 0:24:52.159 So who are we going to see the Japanese buying 0:24:52.160 --> 0:24:54.080 more of our goods? Are we going to see that 0:24:54.280 --> 0:24:57.800 along with the opening up of their markets so that 0:24:57.920 --> 0:25:00.000 our exports can flow into these other countries. 0:25:00.160 --> 0:25:03.520 The President ran though, on hutting everyday goods down in prices, 0:25:03.560 --> 0:25:06.320 things like grocery, things like gas. A recent CBS poll 0:25:06.400 --> 0:25:09.800 says a majority of American sea tariffs adding to prices, 0:25:09.840 --> 0:25:10.760 adding to inflation. 0:25:11.080 --> 0:25:13.280 Can they wrap this up before the midterms? 0:25:13.400 --> 0:25:16.200 Well, this is the and then this brings up the 0:25:17.280 --> 0:25:20.479 last point. I think that's really important about today and 0:25:20.680 --> 0:25:23.400 when we look at Capitol Hill when Congress gets bad, 0:25:24.359 --> 0:25:27.280 I think the administration and the Republicans need to act 0:25:27.320 --> 0:25:32.359 with dispatch. It's important that there is some success under 0:25:32.359 --> 0:25:35.280 the belt, demonstrably, so the markets see that. 0:25:35.280 --> 0:25:36.840 In terms of dealing with countries. 0:25:37.280 --> 0:25:40.840 And I think from the Republican standpoint in Congress, they've 0:25:40.880 --> 0:25:45.040 got to get this reconciliation bill done. Simplicity is their 0:25:45.119 --> 0:25:48.879 friend right now. Adding additional taxes doing those kinds of 0:25:48.880 --> 0:25:51.359 things is going to take weeks, if not months to 0:25:51.440 --> 0:25:54.520 bring everyone on board. And I think if we can 0:25:54.600 --> 0:25:58.639 just extend what President trumpet said was the greatest tax 0:25:58.680 --> 0:26:02.080 bill ever twoudy seventeen, they should just go ahead and 0:26:02.160 --> 0:26:02.480 do that. 0:26:02.760 --> 0:26:05.040 If I had said to you, Congress right now is 0:26:05.080 --> 0:26:07.280 debating whether or not to raise taxes on people that 0:26:07.320 --> 0:26:09.359 make a million dollars a year, would you think that 0:26:09.400 --> 0:26:11.000 came from a Republican or a Democrat. 0:26:11.200 --> 0:26:14.359 It is an extraordinary concept coming out of what I 0:26:14.440 --> 0:26:18.920 believe is still a very pro growth party. And I think, 0:26:19.080 --> 0:26:21.760 as I think you've been discussing this morning, the three 0:26:21.840 --> 0:26:25.440 legs of the stool of the Trump Economic Plan. One 0:26:25.480 --> 0:26:28.320 of them is taxes, the other deregulation, along with the 0:26:28.359 --> 0:26:31.639 trade agenda, all that has to come together to help 0:26:31.840 --> 0:26:37.480 growth in this country, to see incomes rise, wages, growth, wealth, all. 0:26:37.320 --> 0:26:38.800 Of it opportunity. 0:26:39.160 --> 0:26:41.600 And to sit here and say that we are going 0:26:41.640 --> 0:26:45.679 to be increasing marginal rates on individuals that ends up 0:26:45.720 --> 0:26:48.720 hurting small businesses. I mean, that's the trick there. When 0:26:48.720 --> 0:26:51.480 they start talking about millionaires. Remember we've got a lot 0:26:51.520 --> 0:26:55.520 of people in this country that file taxes, that have 0:26:56.080 --> 0:27:00.480 subs or LPs that are taxed at the individual level, 0:27:00.880 --> 0:27:03.639 but actually run businesses and I don't think they're going 0:27:03.680 --> 0:27:05.160 to get too far with that concept. 0:27:05.240 --> 0:27:06.120 But what if they do. 0:27:06.359 --> 0:27:09.640 This is a pillar of conservative orthodoxy not to raise 0:27:09.680 --> 0:27:11.960 taxes period on anyone. 0:27:12.280 --> 0:27:13.480 What do you make of the. 0:27:13.440 --> 0:27:15.359 Party in the direction of travel if they were to 0:27:15.400 --> 0:27:16.520 go ahead with this, Well. 0:27:16.359 --> 0:27:18.119 Again, I'm not sure that they're going to go ahead 0:27:18.119 --> 0:27:21.520 with this. So they're discussing, Well, I'm not so sure 0:27:21.560 --> 0:27:24.840 how widespread that discussion is and what kind of enthusiasm 0:27:24.880 --> 0:27:28.480 there is. This is not a pro growth item, and 0:27:28.560 --> 0:27:30.359 I think more of the focus is going to be 0:27:30.560 --> 0:27:33.520 on how they come together on these pay fors because 0:27:33.560 --> 0:27:37.040 we saw again the important data point that occurred last 0:27:37.040 --> 0:27:39.800 week was the bond markets. You know, we saw the 0:27:39.880 --> 0:27:43.840 concern there about the fiscal health going forward, and I 0:27:43.880 --> 0:27:46.280 think it's really important they focus on that so they 0:27:46.280 --> 0:27:49.119 can act with dispatch and get these tax rates extended. 0:27:49.200 --> 0:27:51.879 Heading into this year, the belief was that President Trump 0:27:52.119 --> 0:27:54.680 was going to be a pro business president who is 0:27:54.720 --> 0:27:58.879 going to focus on fiscal responsibility as well as celebrating 0:27:59.000 --> 0:28:02.879 national champions. We have seen policies that have reaped the 0:28:02.880 --> 0:28:06.320 opposite consequences in markets. Do you think that this president 0:28:06.320 --> 0:28:07.119 is still pro growth? 0:28:07.480 --> 0:28:09.320 I do think He's a business guy. I mean, we 0:28:09.359 --> 0:28:12.000 all know he's a real estate developer from New York 0:28:12.040 --> 0:28:15.640 City that was very successful and had times here where 0:28:15.680 --> 0:28:17.600 just like any in the real estate business, there are 0:28:17.680 --> 0:28:21.240 ups and downs. But he has demonstrated the ability in 0:28:21.320 --> 0:28:24.359 business to create wealth and I think he wants to 0:28:24.400 --> 0:28:26.919 do that for America, And so yes, I think he 0:28:27.080 --> 0:28:30.040 is now what he's going about doing in reordering our 0:28:30.119 --> 0:28:33.399 economy and trying to sort of rebalance if you will, 0:28:34.920 --> 0:28:38.200 the balance of trade as well as the burden sharing 0:28:38.280 --> 0:28:41.920 that occurs with us and our allies, importantly in the 0:28:41.920 --> 0:28:44.480 financial realm as well as the defense realm. 0:28:44.560 --> 0:28:47.440 Although you have a unique position because you wear the 0:28:47.480 --> 0:28:50.240 hat of both being in government in a leadership position 0:28:50.360 --> 0:28:53.400 and also talking with tons of companies while being vice 0:28:53.440 --> 0:28:54.280 chair of molus. 0:28:55.000 --> 0:28:56.800 Do they have the confidence to invest? 0:28:57.160 --> 0:28:59.680 Do they feel like they can be expanding right now 0:28:59.720 --> 0:29:03.400 and have confidence and conviction that ultimately this whole mix 0:29:03.680 --> 0:29:05.040 will benefit where they're heading? 0:29:05.320 --> 0:29:07.000 Well, I mean I would say, first of all, we're 0:29:07.040 --> 0:29:11.360 still America, right, I mean, there is still this unbelievable 0:29:11.440 --> 0:29:13.960 country that we've got with and we can go through 0:29:14.000 --> 0:29:17.760 the various aspects of what draws capital and investors here, 0:29:18.120 --> 0:29:21.360 rule of law, transparency, you name it, innovation, the rest. 0:29:21.640 --> 0:29:25.360 We're still that the Trump administration understands. The President in 0:29:25.360 --> 0:29:28.320 particular has said the biggest asset we've got is this 0:29:28.440 --> 0:29:31.720 huge consumer market that the world now has tooled up 0:29:31.760 --> 0:29:34.719 to take advantage of, and he's trying to use that 0:29:34.840 --> 0:29:40.360 to go in and create a more stable trajectory longer term, 0:29:40.480 --> 0:29:42.760 both from a fiscal and economic standpoint. 0:29:43.080 --> 0:29:44.800 So I think listen. 0:29:44.600 --> 0:29:47.000 Right now, as we started, there's a lot of signals 0:29:47.000 --> 0:29:50.040 that are creating this sort of question on the minds 0:29:50.080 --> 0:29:54.640 of individuals, whether they are strategics, whether they are sponsors, 0:29:54.880 --> 0:29:59.320 and how to go about in terms of conducting their business. 0:30:00.080 --> 0:30:02.840 And that's why I say again, really really important that 0:30:02.880 --> 0:30:06.960 we see manifestation of success. You know, the President's really 0:30:07.000 --> 0:30:11.400 good at communicating. I hope we can see some communication 0:30:11.480 --> 0:30:15.680 of success and that people will begin to understand what 0:30:15.760 --> 0:30:16.840 the trade off here is. 0:30:17.120 --> 0:30:20.600 This is ambitious stuff. Let's finish on this. Governor Youngkin 0:30:20.720 --> 0:30:22.600 is in your seat yesterday and we asked him this question. 0:30:22.640 --> 0:30:25.960 I'll phrase it differently. At the moment, there are two 0:30:26.040 --> 0:30:29.560 very left wing politicians in this country filling stadiums, getting 0:30:29.560 --> 0:30:31.479 support at a time in the Democratic Party is an 0:30:31.520 --> 0:30:33.840 absolute mess and support is rock bottom. I get that, 0:30:34.600 --> 0:30:37.560 But do you worry that if the president isn't successful 0:30:37.840 --> 0:30:40.000 that a number of years time this pendulum could swing 0:30:40.000 --> 0:30:43.360 aggressively to the left. If the right can't provide the solutions, 0:30:43.600 --> 0:30:46.000 does this country seacunt solutions from the left? 0:30:46.200 --> 0:30:50.600 Look, all I know is the left is so in tatters, 0:30:50.720 --> 0:30:53.600 and the one pill or that they've got of any 0:30:53.680 --> 0:30:57.800 kind of unity is so extreme on the cultural side 0:30:58.080 --> 0:30:58.920 and the. 0:30:58.720 --> 0:31:00.600 Design of where they see the world. 0:31:00.600 --> 0:31:03.720 There is no way that the mass of this country, 0:31:03.760 --> 0:31:06.000 in terms of an electorate, is going to adhere to 0:31:06.040 --> 0:31:10.160 that extreme Bernie Sanders AOC agenda. There is just no 0:31:10.240 --> 0:31:14.400 way now not to say that there will be unhappiness 0:31:14.440 --> 0:31:16.680 if we don't see success again. Which is why I 0:31:16.760 --> 0:31:19.400 come back to the point it's important that we act 0:31:19.480 --> 0:31:23.240 with that we see some urgency and acting with dispatch 0:31:23.360 --> 0:31:24.440 in Washington. 0:31:24.040 --> 0:31:26.400 Because you understand the risk here to bring up the 0:31:26.400 --> 0:31:30.160 em example, but you swing between Bolsonnaro and Lula, Bolscenaro 0:31:30.200 --> 0:31:32.200 and Lula, and you start to resemble what we see 0:31:32.200 --> 0:31:35.600 in Latin America. Repeatedly, we are America, we are America. 0:31:35.720 --> 0:31:37.560 We are not Brazil, right. 0:31:37.680 --> 0:31:46.760 So we have a long tradition of continued institutional guardrails protections. 0:31:47.200 --> 0:31:48.280 We have the. 0:31:48.360 --> 0:31:53.120 Deepest, broadest capital markets there are. I still believe that 0:31:53.200 --> 0:31:56.280 we can get through this. Again, as you said, this 0:31:56.440 --> 0:32:00.200 is a very ambitious goal that the President has set 0:31:59.840 --> 0:32:03.440 out to sort of rebalance. It is where we can 0:32:03.560 --> 0:32:06.200 head and the fact that there have been some people 0:32:06.280 --> 0:32:09.160 left out, and when you talk about these stadiums that are. 0:32:09.080 --> 0:32:10.520 Filled by Bernie Sanders and. 0:32:10.480 --> 0:32:14.120 Aoc accolodes, it is those people that are looking for 0:32:14.280 --> 0:32:16.680 the answers and frankly a lot of sort of people 0:32:16.760 --> 0:32:19.680 who feel left out if there are those stadiums. They 0:32:19.720 --> 0:32:22.440 are looking to the president to deliver on the promises 0:32:22.440 --> 0:32:23.080 that he's made. 0:32:23.200 --> 0:32:25.960 It's an ambitious agenda. We've said it repeatedly on this program. 0:32:26.000 --> 0:32:28.040 For the good of the country. We hope he's successful. 0:32:28.280 --> 0:32:29.760 Eric is good to see it. Thanks for dropping by 0:32:30.000 --> 0:32:42.360 the former House majority leader there, Eric Hanson, the United 0:32:42.440 --> 0:32:44.920 and I see Scott Kirby. Scott, welcome back to the program. 0:32:44.920 --> 0:32:47.160 Sarah's going to catch up with you once again. Let 0:32:47.160 --> 0:32:50.560 me just understand maybe your approach to this earnings report, 0:32:50.840 --> 0:32:53.480 how you and the team decided you know what this time, 0:32:53.520 --> 0:32:56.080 I think we have to do something different and offered 0:32:56.120 --> 0:32:58.040 dual forecast. Where did that come from, Scott? 0:32:58.640 --> 0:32:59.240 Yeah, we did. 0:32:59.440 --> 0:33:02.880 We appropriate to do something different. It starts with, you know, 0:33:03.000 --> 0:33:05.600 the environment has gotten more difficult. But first, you know, 0:33:05.640 --> 0:33:08.560 we did have you know, as you said in the intro, 0:33:09.360 --> 0:33:11.560 the best margins we've had in five years. We grew 0:33:11.600 --> 0:33:14.040 margins every year, one up, only two airlines that are profitable. 0:33:14.240 --> 0:33:16.160 And as we kind of went through it, we still 0:33:16.200 --> 0:33:19.080 see a viable path to getting to our as long 0:33:19.080 --> 0:33:21.200 as bookings remain stable as they are today, to getting 0:33:21.200 --> 0:33:24.240 to our original guidance. But we also recognize that there's 0:33:24.400 --> 0:33:28.040 more macroeconomic uncertainty, that people are fearful of a recession 0:33:28.120 --> 0:33:30.240 hasn't happened yet, but that they're fearful of a recession, 0:33:30.720 --> 0:33:33.320 and so we wanted to also give investors some outlook 0:33:33.400 --> 0:33:35.440 on what we think of recesion could look like if 0:33:35.440 --> 0:33:38.200 it happens here at United. So really the goal was 0:33:38.240 --> 0:33:40.640 to just give investors more information. 0:33:41.360 --> 0:33:43.560 It's non traditional. We're the first ones that I ever 0:33:43.600 --> 0:33:44.000 know if. 0:33:43.880 --> 0:33:45.560 They have done something like this, and so far the 0:33:45.600 --> 0:33:47.840 feedback has been has been really positive, and I think 0:33:47.840 --> 0:33:50.760 investors and others appreciate that we try to give them 0:33:50.880 --> 0:33:54.040 a more fulsome range as we give guidance since time, Scott, can. 0:33:53.960 --> 0:33:55.720 You give us a sense if you are catering more 0:33:55.760 --> 0:34:00.000 to investor nervousness or whether you're responding to actual weakness 0:34:00.080 --> 0:34:02.720 you see in some of the forward bookings by clients. 0:34:04.200 --> 0:34:07.040 So as I'm guessing your re friend to our capacity 0:34:07.120 --> 0:34:10.040 changes and we're going to pull about four points of 0:34:10.080 --> 0:34:13.120 capacity from the second half of this year, that's really 0:34:13.160 --> 0:34:17.120 just a pure tactical economic decision. We do see weakness, 0:34:17.120 --> 0:34:19.520 and because we see weakness, it means we're starting to 0:34:19.520 --> 0:34:22.120 cancel some of the utilization flying that red eye flight 0:34:22.440 --> 0:34:26.520 that was barely profitable and really peak strong times becomes unprofitable. 0:34:26.560 --> 0:34:28.200 When the demand environment weekends a. 0:34:28.200 --> 0:34:30.759 Little bit, customers have more choice to fly better times 0:34:30.760 --> 0:34:33.080 a day, and so they do, and so we're all 0:34:33.080 --> 0:34:37.000 we're really doing tactically is pulling some of that marginal flying. 0:34:37.280 --> 0:34:39.960 Marginaling good times turns negative and bad times, so we're 0:34:40.000 --> 0:34:41.120 just pulling that out of the system. 0:34:41.239 --> 0:34:43.759 How much do you see going forward though, any kind 0:34:43.800 --> 0:34:47.360 of retrenchment from consumers whatsoever. A lot of people have 0:34:47.400 --> 0:34:50.880 been talking about how particularly international travel is going to 0:34:50.920 --> 0:34:53.920 come down with people from overseas now coming to the US. 0:34:53.960 --> 0:34:56.480 Are you seeing that forward bookings or has that kind 0:34:56.520 --> 0:35:00.239 of been more of a narrative than a reality, more. 0:35:00.200 --> 0:35:03.200 Of a nerrative than a reality. We saw weakness starting 0:35:03.440 --> 0:35:05.239 at the end of January. We saw a step down, 0:35:05.800 --> 0:35:07.920 but it is stabilized in March, and even the first 0:35:08.040 --> 0:35:09.239 two weeks of April. 0:35:08.920 --> 0:35:10.040 It has stabilized. 0:35:10.080 --> 0:35:12.959 And the weakest area we see is actually the low 0:35:13.120 --> 0:35:18.000 end domestic consumer. Here in the United States, international has 0:35:18.040 --> 0:35:21.160 remained quite strong. International for what it's worth is eighty 0:35:21.200 --> 0:35:24.480 two percent US point of sale, so it's much more 0:35:24.520 --> 0:35:26.719 dependent on the US economy than foreigners coming to the 0:35:26.800 --> 0:35:29.319 United States. It's also less corporate than it used to be. 0:35:29.960 --> 0:35:32.319 And because of that, you know, the leisure traveler is 0:35:32.320 --> 0:35:36.160 still going, The premium leisure is still there. Typically, even 0:35:36.200 --> 0:35:39.520 in times of economic weakness, the high end consumer outperforms, 0:35:40.000 --> 0:35:41.400 and that's what we thought would happen. 0:35:41.440 --> 0:35:42.520 That's what we've seen so far. 0:35:42.600 --> 0:35:45.040 We'll keep watching it, of course, but that's certainly what 0:35:45.040 --> 0:35:45.799 we've seen so far. 0:35:45.960 --> 0:35:47.960 How much does this really put you in a position 0:35:48.000 --> 0:35:51.480 to consolidate market share right now? We keep seeing that 0:35:51.640 --> 0:35:54.080 among a lot of the leaders in different industries that 0:35:54.160 --> 0:35:56.440 this is time for them to compete on price, to 0:35:56.480 --> 0:36:00.399 compete on some of the offerings, and frankly squeak some 0:36:00.440 --> 0:36:03.080 of the other weaker players in the markets that you 0:36:03.160 --> 0:36:05.200 emerge on the other side a lot stronger. 0:36:05.200 --> 0:36:07.239 Do you see that happening with United right now? 0:36:07.280 --> 0:36:10.239 Well, Unit, we've had a five year strategy to win 0:36:10.320 --> 0:36:13.600 brand loyal customers and we've done that, so really nothing 0:36:13.640 --> 0:36:16.000 is changing now. We're not doing anything incremental, anything different. 0:36:16.520 --> 0:36:19.200 We're continuing the path that we have been on because 0:36:19.239 --> 0:36:21.880 it's worked. It's led to the best margins in good times. 0:36:21.920 --> 0:36:24.800 I think that lead is going to expand in tough times, 0:36:24.920 --> 0:36:28.080 not because we're doing anything special, but just because we'll 0:36:28.120 --> 0:36:30.719 have more seats to sell available to those customers. And 0:36:30.760 --> 0:36:33.279 when you're the brand loyal airline, when times get tough 0:36:33.280 --> 0:36:35.400 and you have more seats to sell, more customers migrate 0:36:35.400 --> 0:36:37.719 to you. And so we'll wind up selling more seats 0:36:37.719 --> 0:36:39.640 at lower prices because that's the way our your management 0:36:39.640 --> 0:36:42.520 system works. But we'll sell just as many seats, but 0:36:42.520 --> 0:36:44.720 it's going to make it much harder at the bottom 0:36:44.760 --> 0:36:46.160 of the customer choice pyramid. 0:36:46.440 --> 0:36:48.040 Scot as you know, there's a lot of tension right 0:36:48.080 --> 0:36:50.680 now between the United States and China that's been expressed 0:36:50.719 --> 0:36:53.480 in several rounds of towers from either side. We hope 0:36:53.480 --> 0:36:55.360 they can come to the table and have some talks, 0:36:55.400 --> 0:36:59.120 but so far not great for the maintenance of your plane, sir, 0:36:59.239 --> 0:37:01.879 and the exposure you have to China to Hong Kong. 0:37:02.120 --> 0:37:04.000 How are you managing that situation at the moment? 0:37:05.600 --> 0:37:10.160 So United We actually we have more of our heavy 0:37:10.160 --> 0:37:13.160 maintenance work done here in the United States than any 0:37:13.200 --> 0:37:14.480 airline in the country. 0:37:14.840 --> 0:37:16.640 We've been growing here in the US. 0:37:16.680 --> 0:37:18.200 In fact, over a three year period, we're going to 0:37:18.239 --> 0:37:21.000 hire about five thousand technicians here in the United States, 0:37:21.040 --> 0:37:25.760 building huge new facilities in Houston and in Orlando. 0:37:26.320 --> 0:37:27.560 And most of our work. 0:37:27.360 --> 0:37:29.480 Is done in the Free Trade Zone outside of Hong 0:37:29.560 --> 0:37:30.960 Kong the work that has done in China. 0:37:31.040 --> 0:37:32.719 So we're monitoring it day by day. 0:37:33.200 --> 0:37:35.839 But you know, we have a high percentage here in 0:37:35.880 --> 0:37:39.319 the United States, more than anyone else, and feel good 0:37:39.360 --> 0:37:40.000 about our setup. 0:37:40.080 --> 0:37:42.560 Because some CEOs have been quite outspoken about what they'd 0:37:42.640 --> 0:37:45.759 like to see from the administration on policy. Are you 0:37:45.840 --> 0:37:47.759 willing to do that? Is there are a reason why 0:37:47.800 --> 0:37:49.960 maybe you'd be a little bit more hesitant away in. 0:37:50.800 --> 0:37:54.000 Well, I've spent a lot of time in DC this year, 0:37:54.480 --> 0:37:57.799 as I always do, but I've mostly been focused on 0:37:57.880 --> 0:38:00.839 listening instead of talking. And so I want to understand 0:38:01.120 --> 0:38:04.160 where the administration was coming from, what their goals were, 0:38:04.400 --> 0:38:06.640 how they were trying to get there. And I actually 0:38:06.719 --> 0:38:08.120 got by the end of March felt like I had 0:38:08.120 --> 0:38:10.560 a pretty good understanding of that. And if you have 0:38:10.640 --> 0:38:13.440 that kind of understanding and you can put everything that's 0:38:13.440 --> 0:38:16.120 happening into context, you know, it makes it a lot 0:38:16.200 --> 0:38:20.480 easier to run, manage the business, to not make panicky decisions. 0:38:21.280 --> 0:38:23.440 And you know what I think is happening here is 0:38:23.800 --> 0:38:25.600 you know, we're nowhere near the end of game. Yet 0:38:26.000 --> 0:38:27.640 you know, these are still the opening moves of the 0:38:27.680 --> 0:38:28.240 chess game. 0:38:28.920 --> 0:38:31.080 And I think I and most. 0:38:30.840 --> 0:38:33.080 People that I talk to, you know, or things have 0:38:33.200 --> 0:38:35.040 slowed down, but we're all in a kind of a 0:38:35.120 --> 0:38:37.640 take a breath mode and let's wait till we get 0:38:37.680 --> 0:38:39.439 to whatever the new normal is going to be before 0:38:39.440 --> 0:38:41.080 we start making big long term decision. 0:38:41.120 --> 0:38:42.600 We've all got to take a deep breath. Your stock 0:38:42.640 --> 0:38:44.279 is out this morning by about six and a half 0:38:44.280 --> 0:38:46.080 of percent. I wanted to talk about something with you 0:38:46.120 --> 0:38:48.760 that we've been talking about for a while on this program. Scott, 0:38:48.800 --> 0:38:50.799 As you know, one of the most disruptive parts of 0:38:50.840 --> 0:38:53.480 flying right now is the boarding process, and when you 0:38:53.520 --> 0:38:56.480 get on, everyone is wrestling to find space to put 0:38:56.480 --> 0:38:59.360 that bag over their seat. How do we address that situation, 0:38:59.440 --> 0:39:02.040 Scott co Sunny was a traanveler. It is the most 0:39:02.040 --> 0:39:05.600 annoying experience. And it's not inn eight United. It's something 0:39:05.600 --> 0:39:06.720 we're saying across the board. 0:39:07.719 --> 0:39:10.320 As a father of seven, I understand it trying to 0:39:10.320 --> 0:39:12.759 get out with a bunch of kids, and I'd say 0:39:12.760 --> 0:39:14.799 we're fixing that at United. The biggest thing we can 0:39:14.840 --> 0:39:16.560 do we had to put bigger bends on the airplane. 0:39:16.600 --> 0:39:19.520 We're about we're over fifty percent through the fleet at United, 0:39:19.640 --> 0:39:21.480 but we're putting bends on all the airplanes that are 0:39:21.560 --> 0:39:25.000 large enough that on one hundred percent full airplane, every 0:39:25.040 --> 0:39:27.759 single customer can bring a roller board on and put 0:39:27.840 --> 0:39:30.239 it in the overhead. And I think that at its 0:39:30.280 --> 0:39:32.120 core is how we're going to solve It'scott. 0:39:31.719 --> 0:39:33.759 How much more can you get people to pay for 0:39:33.840 --> 0:39:35.880 things that they used to know they could get. I 0:39:35.880 --> 0:39:37.920 know that Fronteriry used to do that with cans of 0:39:37.960 --> 0:39:40.840 soda and then they had to backtrack or checking bags. 0:39:41.080 --> 0:39:43.800 Are there other things that you can monetize or doesn't 0:39:43.840 --> 0:39:47.080 really come down to the credit took hard business, the 0:39:47.160 --> 0:39:49.960 loyalty program counting on the front of the cabin. 0:39:51.160 --> 0:39:53.400 You know, yeah, you know. 0:39:53.440 --> 0:39:56.200 I actually we're kind of going the opposite direction. If 0:39:56.280 --> 0:39:58.720 we haven't disaggregated the product, give customers. 0:39:58.320 --> 0:39:59.840 What they want. If you want the premium product, you 0:39:59.840 --> 0:40:00.319 can get it. 0:40:00.320 --> 0:40:02.440 You can go the regular economy product all the way 0:40:02.480 --> 0:40:03.719 down to basic economy. 0:40:03.960 --> 0:40:06.080 But you know, we got Starlink coming next year. 0:40:06.200 --> 0:40:08.400 We're going to have the best, the fastest WiFi in 0:40:08.440 --> 0:40:10.760 the sky and that's going to be free for our customer. 0:40:10.800 --> 0:40:12.319 So WiFi is going to be free, and it's going 0:40:12.360 --> 0:40:15.520 to be by far the best experience, the most bandwidth, 0:40:15.520 --> 0:40:19.680 the fastest speeds for any customers. And you know, in 0:40:19.719 --> 0:40:23.160 a lot of ways, increasingly, instead of being an airline 0:40:23.160 --> 0:40:25.560 that also has a loyalty business, we are becoming a 0:40:25.600 --> 0:40:27.879 loyalty business that runs an airline. I mean being able 0:40:27.880 --> 0:40:30.560 to get customers to Tahiti and Cape down. That's the cool, 0:40:30.640 --> 0:40:33.160 sexy reward that you get in. 0:40:33.120 --> 0:40:34.120 The loyalty program. 0:40:34.640 --> 0:40:38.319 But you know, the large airlines, particularly like United, you know, 0:40:38.360 --> 0:40:41.799 we really have the best, the deepest loyalty program. And 0:40:41.880 --> 0:40:44.880 I talked earlier about brand loyal customers, like customers that 0:40:45.000 --> 0:40:48.280 want to fly United Airlines, and that is the strength. 0:40:48.280 --> 0:40:51.520 That's what's given us the resilience to have strong earnings 0:40:51.600 --> 0:40:54.320 even in a tough macro environment. It's what's going to 0:40:54.400 --> 0:40:57.920 let us outperform even if the economy gets weaker from here. 0:40:58.520 --> 0:41:00.440 That loyalty of customers. 0:41:00.160 --> 0:41:02.200 Whether you call it the loyalty business or just having 0:41:02.239 --> 0:41:05.680 brand loyal customers, is the foundation that's letting an unined 0:41:05.719 --> 0:41:06.200 out perform. 0:41:06.320 --> 0:41:08.560 A masterclass in communications from the firm in the last 0:41:08.600 --> 0:41:11.320 twenty four hours, Scott, appreciate your time. Thank you, Scott Kirby, 0:41:11.320 --> 0:41:16.280 the United Airlines CEO. This is the Bloomberg Surveillance Podcast, 0:41:16.400 --> 0:41:20.319 bringing you the best in markets, economics, and geopolitics. You 0:41:20.360 --> 0:41:23.120 can watch the show live on Bloomberg TV weekday mornings 0:41:23.120 --> 0:41:26.080 from six am to nine am Eastern. Subscribe to the 0:41:26.080 --> 0:41:29.600 podcast on Apple, Spotify or anywhere else you listen, and 0:41:29.640 --> 0:41:32.759 as always on the Bloomberg Terminal and the Bloomberg Business app.