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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Joining us right now, and this is a timely conversation

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Speaker 2: because we're like the stock market, We're all gonna die.

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Speaker 2: And maybe we look at gold mac Dasic joins us.

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Speaker 2: How to fixed income strategy from Maryland for Bank of

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Speaker 2: America private bank? What's the level of sweat among your clients?

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Speaker 2: And don't give me the Brian Mooyn and answer blah

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Speaker 2: blah blah. Okay, what's the level of panic out there

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Speaker 2: on a Friday? Not that bad, Not that bad at all.

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Speaker 2: That's what we're here.

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Speaker 3: Retail has been surprisingly resilient, looking to put capital to work.

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Speaker 2: Week.

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Speaker 3: You are not seeing panic, specially they're going to the

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Speaker 3: equity markets from most of the two legged Vidiuser clients

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Speaker 3: that they're directing very maturely to this market environment.

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Speaker 2: Ran listens every morning, So don't sweat. But is it

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Speaker 2: just because they think things and systems will adjust? The

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Speaker 2: Trump message from the White House and we'll move forward.

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Speaker 3: I think they have a very good ability and they

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Speaker 3: have out of the past couple of years to sort

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Speaker 3: of look through the noise. And at the end of

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Speaker 3: the day, there is that's obviously economic uncertainty here, and

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Speaker 3: I know outside a certain sectors, certain geographies, there are

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Speaker 3: not a lot of massive layoffs. Right the corporate sector

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Speaker 3: is still not laying people off.

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Speaker 2: So even if there's a.

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Speaker 3: Slight uptaket unemployment from the lows, until you actually start

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Speaker 3: to let people go into you're afraid of your own job,

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Speaker 3: your brother in law loses his job, your wife loses

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Speaker 3: their job. Until that happens, people are still relatively sanguine.

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Speaker 3: And again we're not seeing any sentiment, significant sentiment changes

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Speaker 3: from retail with regards to the equity markets, which is impressive.

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Speaker 4: All right, Well, how about in fixed income space here?

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Speaker 4: I mean, you can sit there at a two your

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Speaker 4: treasure and get darn your four percentiest. Do you do

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Speaker 4: that that's not a bad living or do you take

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Speaker 4: some credit risk?

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Speaker 3: So we don't think you need to take a lot

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Speaker 3: of credit risk, but we would like people to certainly

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Speaker 3: be longer duration than a sort of two to three

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Speaker 3: or on average, right the radio clients should be around

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Speaker 3: probably think five to six years. It depends individual client,

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Speaker 3: But end of the day, the bomb market average duration

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Speaker 3: is just over six. We really don't want clients to

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Speaker 3: be too short to whatever their strategic duration target is

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Speaker 3: without a good reason. Again, a lot of clients are

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Speaker 3: actually still where you do have some concerns from retail

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Speaker 3: clients is actually the fixed income side. They get more

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Speaker 3: worried about that, having seen that bond bear market, the

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Speaker 3: eighteen percent drop twenty twenty one, twenty two from the highs,

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Speaker 3: that's concerned, though that's obviously a lot more likely from

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Speaker 3: a yield of negative two percent real rates than it

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Speaker 3: is at a roughly plus two percent real yields across the.

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Speaker 4: Current It's interesting, I mean, over the last couple of years,

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Speaker 4: when I look at the Bloomberg fixed income total return screen,

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Speaker 4: where I've seen the best returns has been with risk

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Speaker 4: high yield leverage loans actually, and those two are actually

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Speaker 4: underperforming this year. That's kind of a change, at least

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Speaker 4: definitely underperforming.

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Speaker 3: Again, not surprising to see credit both high and IG

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Speaker 3: underperform the index. With equities, they have a higher correlation

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Speaker 3: to equities, But again for the retail client, depends on

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Speaker 3: your time frame where you might see some market value

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Speaker 3: changing in your corporate bounds relative to treasuries spread widening.

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Speaker 3: If you're strategically long credit year in and year out,

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Speaker 3: you're getting that extra yel over credit losses, you'll get

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Speaker 3: a better portfolio performance. So right now we're actually just

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Speaker 3: kind of pulling our horns in on our sector tilts

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Speaker 3: neutral across sectors and fixed income.

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Speaker 2: Are you throwing a brick? It's some you know advisor

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Speaker 2: at Bank of America who goes back to road sixty

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Speaker 2: forty strategy. Is it like a dinosaur or is it

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Speaker 2: germane today?

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Speaker 3: No, no, no, we do not think it's a dinosaur

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Speaker 3: at all. Maybe I'm the dinosaur, but we don't think

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Speaker 3: it's a dinosaur at all. We had a lot of

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Speaker 3: concerns obviously that bonds were no longer doing their jobs.

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Speaker 3: You needed something else to replace. Equid to replace bonds

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Speaker 3: as diverse for equities, commodities was given as a particularly

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Speaker 3: good one. We were never buyers of that at those valuations.

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Speaker 3: We had a couple of years back again negative real yields. Yeah,

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Speaker 3: it's probably hard for bonds to work the way I've

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Speaker 3: described it for a retail client, as you're in a

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Speaker 3: former meter race. If you're two percent behind inflation, well

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Speaker 3: you're fifty meters behind the starting line versus commodities. Combody

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Speaker 3: are gonna track inflation. The bonds are below inflation, you're

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Speaker 3: not starting in a good place. You're having fifty yards back.

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Speaker 3: You're sitting in the stands. Now, we've got bonds that

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Speaker 3: are two percent on average real above inflation. So they're

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Speaker 3: already beating inflation, and so they're ahead in the race.

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Speaker 3: That's why they're diverse fied. That's why they diverse filed

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Speaker 3: in August. That's why they're diversifying. Now they have the

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Speaker 3: evaluations where they can come down with any uncertainty.

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Speaker 2: What's the biggest mistake high networth retail makes and fixed income.

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Speaker 5: Historically?

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Speaker 2: Blog? Is it just that simple?

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Speaker 3: It's been the opposite. It's been the opposite again for

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Speaker 3: the past seven years. The issue has not been yield hoggy,

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Speaker 3: it's been afraid of duration. So scarred, so scarred by

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Speaker 3: those double digit losses in terms of high quality fixed income.

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Speaker 2: That's one of the.

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Speaker 4: Rough I mean historically rough. In twenty twenty two.

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Speaker 2: It was very rough.

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Speaker 3: Again, when you're in when you're negative two percent real yields,

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Speaker 3: there are not a lot of good things that can happen, right,

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Speaker 3: but that that negative two to two percent move, that

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Speaker 3: four hundred basis point move and real rates. Our opinion,

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Speaker 3: generally speaking, that was the bond fair market.

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Speaker 2: Yep.

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Speaker 4: How about I mean mortgage backed securities. I'm seeing some

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Speaker 4: of the best returns in fixed income and mortgage backed securities.

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Speaker 4: What's going on in that market?

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Speaker 3: We like mortage backed securities generally speaking. Again, we're neutral

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Speaker 3: cross sectors, but within sectors we do like mortgage backs

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Speaker 3: because what's the rest of the mortgage back. You're always

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Speaker 3: going to get your principle and your interest payment back.

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Speaker 3: You just don't know when. If people prepay, you get

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Speaker 3: more cash using your rates are lower. You don't want

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Speaker 3: it rates go up. The bonds extend, you get less

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Speaker 3: cash flow, and you'd like to reinvest in higher yields.

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Speaker 3: The bonds have already extended, hopefully some of you have

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Speaker 3: two percent mortgages on whatever properties you have. The bonds

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Speaker 3: have extended already, you're still getting a cash flow, so

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Speaker 3: you're almost basically a flat yield on mortgage backs to

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Speaker 3: investigreate corporate right now, that makes mortgage backs look relatively attractive,

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Speaker 3: especially at a alta equity environment.

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Speaker 2: With all the politics that's going on, folks, we're waiting

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Speaker 2: for a conversation or rehoarded in conversation with a gentleman

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Speaker 2: from the Netherlands, mister Routie now at NATO, the new

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Speaker 2: leader of NATO, and we're looking forward to that here

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Speaker 2: in about four minutes. We hope we're lining up the

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Speaker 2: antennae in the satellites starlink Matt Disick with US with

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Speaker 2: Bank of America. I look at this and the number

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Speaker 2: one thing has been the gift of cash. If you

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Speaker 2: believe disinflation's in order, not the fear of deflation. But

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Speaker 2: after the sticky inflation, there's a settlement of GDP, we

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Speaker 2: get a disinflationary trend. Can you model cash back under

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Speaker 2: four percent? I believe you can.

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Speaker 3: And if you maintain the idea that the FED is

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Speaker 3: focused on getting back to two percent inflation or very

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Speaker 3: close to it, well then you know, no matter how

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Speaker 3: aggressive fiscal policy is, it can't really change demographics. It's

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Speaker 3: very tough to change the population dynamics, and so real

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Speaker 3: rates again that they have to be you know, fifty

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Speaker 3: base points above inflation. Probably not in that range of

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Speaker 3: fifty to one hundred and fifty one percent on average,

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Speaker 3: one percent over inflation, right, So then a three percent

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Speaker 3: fit of funds right, two percent inflation plus one percent reel.

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Speaker 3: Sounds like a reasonable place.

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Speaker 2: To be really valuable on a Friday. Thank you so much.

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Speaker 2: Mentisic for this will be with us here again. Next

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Speaker 2: time we'll talk rugby at University of Pennsylvania.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on Applecar,

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Speaker 1: playing Android otto with the Bloomberg Business app, or what

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Speaker 1: Us Live on YouTube.

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Speaker 2: This is a joy, as we had Sam Stova earlier.

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Speaker 2: Now we're really gonna dive into the adjustments of someone

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Speaker 2: who's got in the market so right. John Stolfiz in correction,

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Speaker 2: half correction, partial correction, has said be comfortable on equities.

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Speaker 2: He's chief investment strategists at Oppenheimer. This morning, are you

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Speaker 2: still a bull? Yes?

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Speaker 5: I am Tom still a bull? Why very much? Because

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Speaker 5: when we look at the way business is navigating these waters,

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Speaker 5: the earning season that just ended Q four earning season.

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Speaker 5: You've got double digit gains and seven out of nine

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Speaker 5: sectors only two sectors negative. One was double digit earnings negative.

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Speaker 5: That was energy. We're figures because we're a wash in

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Speaker 5: oil right now. But the seven sectors that were double

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Speaker 5: digit gains, it wasn't just and communications services. It was

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Speaker 5: you had good, strong value stocks in there and values

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Speaker 5: out performing growth right now. And we think it's you

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Speaker 5: know the market is dynamic.

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Speaker 2: Okay, well, let's be dynamic. Let's pretend we're on a

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Speaker 2: couch forty years ago. I'll do my lur Rukaiser imitation

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Speaker 2: and you do your John Stolfi's imitation. It's seven eight

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Speaker 2: thirty at night, the world's turned upside down, and Uncle

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Speaker 2: Lou's they're having us calm down. How will corporations adapt

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Speaker 2: to this Maelstrom? What does securities research at Oppenheimer's say, Well.

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Speaker 5: I think what what is generally the thought here is

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Speaker 5: that corporations have been under due rest now for over

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Speaker 5: sixteen years. In many points we had the great financial writing.

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Speaker 2: It has been under duress. Now come out.

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Speaker 5: You don't know them recently, but if you look at

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Speaker 5: it over the last few years. I mean, it had

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Speaker 5: tough times, and some of the other texts did. But

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Speaker 5: when you look at the markets and managements, how they've

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Speaker 5: operated across the sectors, it's great financial crisis, the pandemic,

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Speaker 5: the disruption of the global supply chain, the levels of

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Speaker 5: inflation that were hit, the FED policy tightening, no recession.

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Speaker 5: The consumer is still spending. It's the resilience Tom, That's

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Speaker 5: what gives us the courage of our convictions. At this point.

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Speaker 4: Some are concerned about the consumer there, John. We had

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Speaker 4: some of the airlines earlier this week take their earnings down.

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Speaker 4: We had some retailers like Coals take their guidance down

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Speaker 4: here maybe suggesting that all this uncertainty out there in

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Speaker 4: the marketplace.

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Speaker 5: The news, the noise.

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Speaker 4: Maybe impacting the consumer. How do you think about that.

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Speaker 5: Well, Paul, without a doubt. You know, we had the

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Speaker 5: FED raise eleven times and then on pause at nine

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Speaker 5: at the higher end and just started to cut last September.

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Speaker 5: Just what fifty bip September, a pair of twenty five

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Speaker 5: BIPs in November and December. So very much. It's no

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Speaker 5: doubt you're going to feel the slowing because people are

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Speaker 5: feeling a pinch but American consumers tend to move towards

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Speaker 5: discount stores, private labels. We tend to keep shopping. The

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Speaker 5: world criticizes for all life of consuming.

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Speaker 2: But what if whatever the percentage is fortif the fancy

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Speaker 2: people in America are keeping American consumption going, does Oppenheimer

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Speaker 2: think that is dented and that will push into a

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Speaker 2: diminished revenue growth. No?

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Speaker 5: Not at this point, We're still looking where we.

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Speaker 2: Get into, say such a negative error. Come on, I mean,

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Speaker 2: I need some negativity from Stolfus.

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Speaker 5: Well, to me, it looks like guitar prices are up.

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Speaker 2: Actually, you know, you know, hold on, let's stop the show,

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Speaker 2: folks right now. We go to Paul Sweeney disciplinarian. Should

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Speaker 2: we have a joint guitar purchase this weekend where Stulfus

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Speaker 2: and I both purchase separate crutches?

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Speaker 4: I think you jump right in there.

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Speaker 2: There we go. Okay, continue with John.

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Speaker 5: There's a child oil.

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Speaker 2: Now there's a challenge.

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Speaker 5: But we have seen and what happens if the tariffs

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Speaker 5: affect Sitku spruce, you know, coming in from Canada. There's

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Speaker 5: all kinds of issues there the one thinks of. But

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Speaker 5: the realistic thing is we think that we're moving towards

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Speaker 5: a new globalization. We think probably a point where with

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Speaker 5: all this pressure that's been put on by the tariffs,

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Speaker 5: the fact that we are the consumer of the world

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Speaker 5: in size, the rest of the world has over capacity

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Speaker 5: because over the last forty years they've been building capacity.

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Speaker 5: We think we'll come out of this. Okay, I think

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Speaker 5: that you know, Schumer, for all I've heard, there's plenty

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Speaker 5: of criticism today, I think he recognizes the fact that

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Speaker 5: we need to move together to try to avoid a

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Speaker 5: shutdown and come to some kind of negotiation. We're looking

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Speaker 5: for cooler heads to prevail, and you know, in this case,

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Speaker 5: I think Schuber's showed you a cooler head.

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Speaker 2: I mean, Paul, the sophistication of YouTube live chat is

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Speaker 2: killing me. Tanner, Good morning epiphones for everyone.

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Speaker 4: Oh yeah, there you go here, Hey, John, I know

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Speaker 4: at one point you had an SMP target of around

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Speaker 4: seventy one hundred, I think the highest on the street.

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Speaker 5: You sure know how to hurt a guy.

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Speaker 4: So what are we doing here with this call?

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Speaker 5: Oh that's a great one, Paul. What we're going to

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Speaker 5: do with that is that it's under review at this time,

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Speaker 5: but we've got to figure. It's very early in the year. Yep,

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Speaker 5: this has been a very the dark pitch book. The

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Speaker 5: negative thought really has over been overly projected. Likely, so

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Speaker 5: let's take a look. But we'll probably look at it

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Speaker 5: and see how we go. And we got into the

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Speaker 5: second quarter.

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Speaker 2: John Sulfas for this Lapko were thrillies with us. We're

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Speaker 2: going to continue with mister Solphus, a lengthy conversation this morning.

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Speaker 2: Good morning on your commute. I know it's a Friday.

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Speaker 2: People are starting to look at March madness, and Sweeney's

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Speaker 2: totally unfocused. What's his name sprained his ankle, Cooper Flag,

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Speaker 2: Cooper Flag sprained his ankles. Sweeney had to be medicated

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Speaker 2: with a double tang mimosa this morning just to get

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Speaker 2: to the show. Oh, there's lots of distractions with John Stolfus.

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Speaker 2: There's no distraction, John, I'm going to cut to the

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Speaker 2: chase and we're gona do. This is a global Wall

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Speaker 2: Street right now. So you got a fan distribution and

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Speaker 2: a bull like you extend your X axis. We come down.

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Speaker 2: You're going to get back to s and P seventy

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Speaker 2: one hundred. I get it. You extend your x axis

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Speaker 2: out Everybody in the game understands this. David Costin and

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Speaker 2: Goldman Sachs did a fan distribution of outcomes where they

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Speaker 2: got down to a low single digit probability a center

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Speaker 2: tendency out there. You pushed against that. Do you still

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Speaker 2: push against a single digit equity world?

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Speaker 5: I do. I'd still push against it. And I think

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Speaker 5: that the reason why is where we are today is

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Speaker 5: we are at a watershed period of innovation that is

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Speaker 5: driving that can drive all sectors here. And it's not

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Speaker 5: just about tech. It's about what tech can do for

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Speaker 5: the utes. It's what it can do for healthcare. It's

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Speaker 5: what it can do for repurposing buildings and real estate,

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Speaker 5: for finding resources in consumer staples, designing products for consumer

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Speaker 5: discretionary This is a very this is you know, it's

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Speaker 5: what is it the Chinese curses. May you live in

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Speaker 5: interesting times, but the other side of it, for the optimists,

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Speaker 5: interesting times can produce not just risks, but can also

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Speaker 5: produce opportunities. And we you know, when we look in hindsight,

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Speaker 5: because as you know, I've been in this business for

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Speaker 5: over forty years. It's going to be forty two. Sometime

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Speaker 5: between Maine and May and July.

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Speaker 2: Oh you're a new kid.

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Speaker 5: God bless me on that way. The thing is, I've

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Speaker 5: been through every boombust and recovery cycle, and generally, when

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Speaker 5: we look back hindsight, I perfection says, gosh, if only

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Speaker 5: we bought more, if only we backed up the truck.

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Speaker 5: When people get so negative.

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Speaker 2: Crash of eighty seven, which was, we don't need to

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Speaker 2: go into it now, folks, there's too much valuable time here.

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Speaker 2: With John Stolfiz Crash of eighty seven. I walked in

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Speaker 2: the door and she handed me a triple my.

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Speaker 5: There you go.

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Speaker 2: She took it, She took it off of a normal

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Speaker 2: Martini class and put it in a Rocks class. Yeah.

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Speaker 4: October nineteenth, we walked out of ne York Stock Exchange.

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Speaker 4: I went to the pig and poke or something.

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Speaker 2: Yeah, that's what we did. And guess what, life went on?

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Speaker 4: Life went on exactly three months later? Where were we

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Speaker 4: exactly back on?

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Speaker 5: My aunt had turned eighty that year in August, and

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Speaker 5: I learned a lot about investing from her. Her first

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Speaker 5: phone call to me was the first words were, Johnny,

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Speaker 5: what should we be buying today? So that's that's where

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Speaker 5: I come, folks.

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Speaker 2: Bronze it what you just heard there. What was her name?

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Speaker 2: Mary Stolfer's aunt Mary, Aunt Mary. Okay, in the cannon

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Speaker 2: of Bloomberg surveillance bronze it to the memory of Aunt Mary.

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Speaker 2: What did she say?

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Speaker 5: She said, Johnny, what should we be buying today? That

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Speaker 5: was our exact words.

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Speaker 4: I'll go to Aunt Mary again, what should we be

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Speaker 4: buying here? If? If you feel like the world's not

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Speaker 4: coming to an end here?

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Speaker 5: Great question was you know ap and I doesn't let

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Speaker 5: me talk individual stocks because I managed my the Friday.

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Speaker 5: I can give you. I can give you the sectors,

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Speaker 5: the worst performance, sectors the worst performance I want to

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Speaker 5: own consumer discretionary, infotech, communications services, financials, industrials, those look

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Speaker 5: good to me. You know, they are at the bottom

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Speaker 5: of performance from the peak coming down there. And you know,

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Speaker 5: when it comes to healthcare, the utes, real estate, and staples,

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Speaker 5: I think they've had the run. Now they've had it.

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Speaker 5: I think it's a little late to get defensive, right.

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Speaker 4: I mean, a lot of folks are feeling like this

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Speaker 4: pullback in the market is kind of a self inflicted

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Speaker 4: problem here with all the talks about tariffs and what

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Speaker 4: that means for potentially growth and inflation. But that talk

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Speaker 4: in that environment. I don't see that changing anytime soon.

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Speaker 5: Well, you know, I think it incrementally it can begin

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Speaker 5: to change. I think the first thing is hopefully fingers

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Speaker 5: crossed today we don't see a government shutdown when they

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Speaker 5: take that vote, that gets taken off the table. Then

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Speaker 5: beyond that, you've got to figure that. You know, it

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Speaker 5: was Bloomber intelligence that I think about a month ago

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Speaker 5: said that if twenty five percent tariffs were put in

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Speaker 5: against Mexico and Canada, both of those countries would go

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Speaker 5: into recession pretty quickly. And the thing is, the pressure

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Speaker 5: of the constituencies here, whether it's from business or the

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Speaker 5: consumers in all countries around the world to different effects

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Speaker 5: with these tariffs will likely, we think, once again, bring

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Speaker 5: cooler heads to the table, some kind of a deal

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Speaker 5: to come out of it. And it's it's it's just

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Speaker 5: that it's time for it. You know, it's not at

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Speaker 5: this moment, but it looks like there's too much at

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Speaker 5: stake to let things go to hell?

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Speaker 4: Right Valuation? Did this pullback here hasn't made valuation attractive

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Speaker 4: or maybe just less egregious for some people?

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Speaker 5: Well, I think for those who were thinking it was egregious,

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Speaker 5: it's less egregious. And for those who thought that it

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Speaker 5: was primarily because demand for stocks had gone up so

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Speaker 5: broadly and people, you know, it's no longer bucktail party

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Speaker 5: stocks that people that the private investor is doing. They're

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Speaker 5: looking to replace what used to come from social security

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Speaker 5: and corporate pension plans. Yeah, and with you know, with

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Speaker 5: a four oh one K, you just get x amount

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Speaker 5: in terms of that contribution that goes into the things.

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Speaker 5: So people have to invest like institutions, and that gives

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Speaker 5: a lot of support to the market.

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Speaker 2: Question. Didn't we have Sam Stovall a couple of times

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Speaker 2: this week? John, It's just simple if with things beaten down,

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Speaker 2: do you buy things that have gone down less or

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Speaker 2: do you buy things that have been beaten up?

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Speaker 5: I think it depends upon the quality more than anything else.

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Speaker 5: So if it's something that has been really battered, happens

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Speaker 5: to be good quality, good management, good prospects for the balance.

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Speaker 5: Otherwise one thing you want to really emphasize quality here.

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Speaker 5: It's so overused these days, but we do believe that

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Speaker 5: quality of leadership and a corporation and ideas, and you

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Speaker 5: can find those across market capitalizations, whether it's large, mid

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Speaker 5: or small, with the large likely favored by the largest

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Speaker 5: investor community.

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Speaker 2: I got to get this in. We've got a huge

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Speaker 2: response on YouTube this Thank you so much. I mean,

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Speaker 2: come on the epiphone for thirty five hundred bucks with

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Speaker 2: the P ninety pickups. Explain to Joe Pass what the

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Speaker 2: great jazz guitars. Joe Pass explained what P nineties do

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Speaker 2: because all these kids out there, they're like Seymour Duncan Rocker, rocker,

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Speaker 2: What a P nineties do that give you that sound?

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Speaker 5: The P nineties is a single coil a type pickup

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Speaker 5: instead of a dual coil, so it'll be more prone

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Speaker 5: to buzzing and hum. But that said, it has a

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Speaker 5: really good fat tone when he's rolled around us. There's

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Speaker 5: a roundness and a very rich sound that you get.

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Speaker 5: But I prefer a PAF type pickup, you know, whether

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Speaker 5: it was built by DiMarzio or Seymour Duncan.

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Speaker 2: John Stoles, thank you so much.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

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00:21:06,920 --> 00:21:09,880
Speaker 1: with the Bloomberg Business app. You can also listen live

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00:21:09,960 --> 00:21:13,560
Speaker 1: on Amazon Alexa from our flagship New York station. Just

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00:21:13,600 --> 00:21:16,119
Speaker 1: say Alexa. Play Bloomberg eleven thirty.

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Speaker 2: We're gonna squeeze a two hour discussion in here with

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Speaker 2: America's giant and Treid Douglas Erwin, his professor at Dartmouth.

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Speaker 2: He's absolutely definitive. We mentioned Adam posing yesterday and Sad

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Speaker 2: Bone of the Peterson Institute. It's real simple, folks. The

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Speaker 2: must read this weekend The Incoherent Case for tariffs Doug Erwin.

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Speaker 2: In what way is the White House incoherent?

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Speaker 6: Well, in several ways, unfortunately. First is just trying to

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Speaker 6: justify what it is they're trying to do. What is

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Speaker 6: the mission? What is the goal? What is the end

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Speaker 6: game that they want to accomplish. Is it revenue? Is

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Speaker 6: it bringing back manufacturing jobs? Is it reducing the traid down?

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Speaker 6: Is it national security? It's all the above. And the

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Speaker 6: problem is is we just draw on an insight by

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Speaker 6: Jon Tinbergen, an old Dutch economist who won the Nobel

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Speaker 6: Prize many years ago. We're just saying, if you have

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Speaker 6: a policy target that you want to hit, you need

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Speaker 6: an instrument that will do that. And the problem is

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Speaker 6: terriffs can't achieve multiple objectives in this way without a

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Speaker 6: lot of collateral damage, and so it's not clear what

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Speaker 6: the administration wants to achieve.

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Speaker 2: First and foremost, the Bible on this, folks, this is

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Speaker 2: when Blancheflower was younger, Slaughter was younger, Doug Irwin was.

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Speaker 2: I got a graduate school against the tide and intellectual

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Speaker 2: history of free trade. Here's my book review. Shut up

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Speaker 2: and read it, Doug Irwin. This morning, I go to

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Speaker 2: John Stuart Mill nineteenth century early and he's arguing about

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Speaker 2: infant industries. It is if President Trump wants to bring

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Speaker 2: infant manufacturing back to America, can he do that? Is

433
00:23:00,600 --> 00:23:04,840
Speaker 2: because there any tip? Is there a policy's success template

434
00:23:04,920 --> 00:23:10,119
Speaker 2: to work off to bring infant manufacturing industry back to America.

435
00:23:11,440 --> 00:23:13,320
Speaker 6: Well, it's interesting you bring u John Stuart Mill, because

436
00:23:13,320 --> 00:23:14,960
Speaker 6: we're talking about the nineteenth century, and of course he

437
00:23:15,040 --> 00:23:17,840
Speaker 6: refers to William McKinley quite a bit, another nineteenth century

438
00:23:17,880 --> 00:23:22,399
Speaker 6: president who imposed tariffs to try to keep industries here

439
00:23:22,640 --> 00:23:25,960
Speaker 6: in the United States. You know, you can do it sometimes,

440
00:23:26,000 --> 00:23:28,440
Speaker 6: but the cost can be very high. You know, many

441
00:23:28,440 --> 00:23:32,480
Speaker 6: countries around the world try to reshore industries. So Argentina

442
00:23:32,520 --> 00:23:35,600
Speaker 6: has a little bastion of manufacturing in Tierra del Fuego

443
00:23:35,640 --> 00:23:39,520
Speaker 6: of all places that they've inculcated with tax subsidies and

444
00:23:41,000 --> 00:23:44,639
Speaker 6: important tariff tariffs. So you can reshore some industries, but

445
00:23:44,760 --> 00:23:47,560
Speaker 6: the question is at what price, at what cost to

446
00:23:47,680 --> 00:23:50,040
Speaker 6: other sectors of the economy, and is it really worth it?

447
00:23:51,119 --> 00:23:55,040
Speaker 4: So, Professor, depending upon the day, the administration has different

448
00:23:55,119 --> 00:23:59,760
Speaker 4: reasons for imposing terrffs, whether it's to you know, choke

449
00:23:59,800 --> 00:24:02,679
Speaker 4: off drugs come into the country, or immigration or the other.

450
00:24:02,800 --> 00:24:06,320
Speaker 4: Some days it's trade deficits. I'm just not sure. But

451
00:24:06,480 --> 00:24:09,239
Speaker 4: for trade deficits, let's just stick to the economics. If

452
00:24:09,280 --> 00:24:11,479
Speaker 4: the US one is a trade deficit with a particular country,

453
00:24:11,520 --> 00:24:14,199
Speaker 4: is that inherently a problem? And if it is, do

454
00:24:14,320 --> 00:24:15,520
Speaker 4: tariffs address that?

455
00:24:17,000 --> 00:24:17,240
Speaker 2: Well?

456
00:24:17,440 --> 00:24:19,520
Speaker 6: Generally, I mean, we can have a debate about whether

457
00:24:20,200 --> 00:24:23,920
Speaker 6: reducing the trade deficit overall not a particular bilateral balance,

458
00:24:24,119 --> 00:24:26,320
Speaker 6: but the trade deficit overall is a good policy or not,

459
00:24:26,400 --> 00:24:27,920
Speaker 6: or whether we should make that an objective.

460
00:24:27,920 --> 00:24:28,720
Speaker 2: But let's say it is.

461
00:24:29,119 --> 00:24:31,199
Speaker 6: Then the question is you raise, is you know, our

462
00:24:31,320 --> 00:24:34,000
Speaker 6: terraces and a way of achieving that, and generally not,

463
00:24:34,480 --> 00:24:36,679
Speaker 6: because when you impose tariffs, the dollar is going to

464
00:24:36,720 --> 00:24:40,040
Speaker 6: appreciate and imports may go down, but exports are going

465
00:24:40,040 --> 00:24:41,879
Speaker 6: to be hit as well because of the appreciation of

466
00:24:41,920 --> 00:24:45,680
Speaker 6: the dollar. In addition, there's foreign retaliation. So yes, import

467
00:24:45,800 --> 00:24:48,520
Speaker 6: teriffs will reduce imports, but then foreign terff retaliation is

468
00:24:48,520 --> 00:24:51,399
Speaker 6: going to reduce US exports. So what we try to

469
00:24:51,440 --> 00:24:53,679
Speaker 6: point out is that, yes, there are policies that we

470
00:24:53,720 --> 00:24:56,879
Speaker 6: can do as Americans to reduce the trade deficit. First

471
00:24:56,880 --> 00:24:59,760
Speaker 6: and foremost, cut the fiscal deficit, because that is a

472
00:24:59,800 --> 00:25:03,320
Speaker 6: big source of dissaving in the US. It's a big

473
00:25:03,359 --> 00:25:07,080
Speaker 6: source of excess spending. And you might recall Marty Feldstein

474
00:25:07,119 --> 00:25:09,159
Speaker 6: way back in the nineteen eighties had the twin deficit

475
00:25:09,280 --> 00:25:12,280
Speaker 6: hypothesis that the current account deficit is being driven in

476
00:25:12,320 --> 00:25:15,840
Speaker 6: part by the fiscal deficit. And so that's one concrete

477
00:25:15,840 --> 00:25:19,200
Speaker 6: thing we could do to end our alliance on foreign

478
00:25:19,200 --> 00:25:22,480
Speaker 6: capital inflows and help balance our books on both sides

479
00:25:22,680 --> 00:25:25,240
Speaker 6: in terms of the trade accounts and the fiscal accounts.

480
00:25:26,040 --> 00:25:31,040
Speaker 4: Do tariffs raise revenue for the US government for is

481
00:25:31,080 --> 00:25:32,280
Speaker 4: that efficient way to do that?

482
00:25:33,800 --> 00:25:33,919
Speaker 2: Well?

483
00:25:34,080 --> 00:25:37,040
Speaker 6: It can, yes, So we get about two percent of

484
00:25:37,040 --> 00:25:39,360
Speaker 6: the federal government's revenue today has raised through the tariff.

485
00:25:39,640 --> 00:25:42,080
Speaker 6: But The idea that you could balance the budget or

486
00:25:42,520 --> 00:25:45,920
Speaker 6: pay for tax cuts with a big increase in tariffs

487
00:25:46,800 --> 00:25:48,919
Speaker 6: is really not going to work. And one of the

488
00:25:48,920 --> 00:25:52,720
Speaker 6: problems is that imports are very sensitive to tariffs, so

489
00:25:52,840 --> 00:25:55,960
Speaker 6: as you raise tariffs, the volume of imports is going

490
00:25:56,000 --> 00:25:58,000
Speaker 6: to shrink. It's a tax base that's going to shrink

491
00:25:58,240 --> 00:26:01,119
Speaker 6: and disappear the more you tax, so that revenue is

492
00:26:01,119 --> 00:26:03,879
Speaker 6: going to disappear. Once again, there's no alternative really to

493
00:26:04,280 --> 00:26:06,840
Speaker 6: income and corporate taxes as a revenue raising device for

494
00:26:06,960 --> 00:26:07,399
Speaker 6: the US.

495
00:26:07,680 --> 00:26:10,840
Speaker 2: We are honor that Douglas Irwin is with us. I'll

496
00:26:10,840 --> 00:26:13,800
Speaker 2: put out on social his Foreign Affairs article. I'm not

497
00:26:13,840 --> 00:26:16,960
Speaker 2: going to mince words, folks. A subscription to the print

498
00:26:17,080 --> 00:26:20,960
Speaker 2: Foreign Affairs magazine is literally the price of a fancy

499
00:26:21,040 --> 00:26:23,960
Speaker 2: martini in Manhattan, Okay. And it is the bible you

500
00:26:24,040 --> 00:26:26,200
Speaker 2: throw to your kids and say, shut up and read

501
00:26:26,240 --> 00:26:29,320
Speaker 2: Douglas Irwin, shut up and read outam imposing and on

502
00:26:29,520 --> 00:26:32,280
Speaker 2: we go. There's a lot of people out there, Professor

503
00:26:32,359 --> 00:26:36,399
Speaker 2: Irwin that think fancy ivy League professors are talking about

504
00:26:36,400 --> 00:26:39,960
Speaker 2: a rigged system. And one way to start it is

505
00:26:40,000 --> 00:26:45,200
Speaker 2: all the American corporations boosting up real estate in Dublin.

506
00:26:45,600 --> 00:26:49,040
Speaker 2: So even Bono can't afford to live in Dublin anymore.

507
00:26:49,280 --> 00:26:53,440
Speaker 2: Doug Irwin comment on the free launch of tax avoidance

508
00:26:53,560 --> 00:26:56,520
Speaker 2: in Ireland by American corporations.

509
00:26:57,800 --> 00:26:59,760
Speaker 6: This is a really big issue, and you put your

510
00:26:59,800 --> 00:27:02,640
Speaker 6: finger on something. When we try to put use tariffs

511
00:27:02,640 --> 00:27:05,040
Speaker 6: to adjust these things, we're sort of missing the boat.

512
00:27:05,800 --> 00:27:09,280
Speaker 6: I'd recommend to you. Kimberly Clousing of UCLA Law School,

513
00:27:09,320 --> 00:27:12,520
Speaker 6: also affiliated with the Peterson Institute, who has pointed out,

514
00:27:12,840 --> 00:27:15,520
Speaker 6: as many others have as well, that the tax code

515
00:27:16,240 --> 00:27:20,399
Speaker 6: sort of pushes American manufacturers overseas, and so we have

516
00:27:20,520 --> 00:27:24,320
Speaker 6: to resolve our tax system, our tax code problems to

517
00:27:24,359 --> 00:27:28,760
Speaker 6: bring back that economic activity and stop the offshoring of

518
00:27:29,920 --> 00:27:34,399
Speaker 6: intellectual property, receipts, corporate income and things of that sort.

519
00:27:34,760 --> 00:27:37,880
Speaker 6: So just putting on tariffs isn't going to solve that problem,

520
00:27:38,080 --> 00:27:40,520
Speaker 6: but the domestic, the US tax code can.

521
00:27:41,000 --> 00:27:44,080
Speaker 2: Please comment and then the leadership on this, folks, came

522
00:27:44,080 --> 00:27:48,879
Speaker 2: home William Klein, who was hugely influential for me, Douger.

523
00:27:49,000 --> 00:27:53,159
Speaker 2: When the President loves to talk about a bilateral approach

524
00:27:53,520 --> 00:27:57,200
Speaker 2: or even some would say a unilateral approach, William Klein

525
00:27:57,280 --> 00:28:00,639
Speaker 2: would say we live in a multilateral world. Is the

526
00:28:00,760 --> 00:28:04,960
Speaker 2: dreams and hopes of sixteen under Pennsylvania Avenue going to

527
00:28:05,000 --> 00:28:09,280
Speaker 2: discombobulate because we refuse to look at this multilaterally.

528
00:28:11,560 --> 00:28:14,440
Speaker 6: I think it's a shortcoming of their approach. And first

529
00:28:14,440 --> 00:28:16,280
Speaker 6: of all, I mean it has to start with sort

530
00:28:16,280 --> 00:28:19,399
Speaker 6: of foreign passing, recognizing that we have allies and people

531
00:28:19,440 --> 00:28:23,160
Speaker 6: that are democratic, market oriented economies, and we're all sort

532
00:28:23,160 --> 00:28:25,560
Speaker 6: of trying to achieve the same thing. They're not our enemies.

533
00:28:25,560 --> 00:28:26,720
Speaker 2: There's a wonderful.

534
00:28:27,800 --> 00:28:31,400
Speaker 6: YouTube video of Ronald Reagan giving one of his Saturday

535
00:28:31,760 --> 00:28:36,359
Speaker 6: radio addresses which is almost speaking to Trump from the grave.

536
00:28:36,840 --> 00:28:39,360
Speaker 6: It's talking about how our allies are and our trading

537
00:28:39,400 --> 00:28:42,680
Speaker 6: partners are our friends, not our enemies, and we really

538
00:28:42,720 --> 00:28:45,400
Speaker 6: have to work with them if we're going to confront

539
00:28:45,400 --> 00:28:48,600
Speaker 6: the China threat and other threats around the world. So

540
00:28:48,720 --> 00:28:51,600
Speaker 6: you can't alienate everyone and think that everyone's sort of

541
00:28:51,640 --> 00:28:54,600
Speaker 6: taking advantage of you. There are countries with goodwill that

542
00:28:54,640 --> 00:28:57,520
Speaker 6: we could work with cooperatively and improve the trade situation.

543
00:28:58,440 --> 00:29:01,320
Speaker 2: Professor, thank you so much. I'm not going to mince words.

544
00:29:01,760 --> 00:29:04,640
Speaker 2: Just buy against the tide. Just put it on a

545
00:29:04,640 --> 00:29:07,200
Speaker 2: coffee table. You don't have to read it. Just put

546
00:29:07,240 --> 00:29:09,080
Speaker 2: it there at school. It's got a beautiful light blue

547
00:29:09,080 --> 00:29:11,920
Speaker 2: cover and all that. Dougerwin, thank you so much it

548
00:29:12,080 --> 00:29:12,960
Speaker 2: dart Min's this morning.

549
00:29:19,560 --> 00:29:23,480
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

550
00:29:23,480 --> 00:29:26,520
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

551
00:29:26,520 --> 00:29:29,560
Speaker 1: Auto with the Bloomberg Business app. You can also watch

552
00:29:29,600 --> 00:29:32,560
Speaker 1: us live every weekday on YouTube and always on the

553
00:29:32,600 --> 00:29:33,680
Speaker 1: Bloomberg terminal.

554
00:29:34,160 --> 00:29:37,520
Speaker 2: Guess what, folks, this is really the most important discussion

555
00:29:37,560 --> 00:29:42,160
Speaker 2: of the day. Sheila Cagilos with Jeffreys, and she brings

556
00:29:42,200 --> 00:29:47,480
Speaker 2: in bulletproof engineering cred along with their economics. It's on

557
00:29:47,560 --> 00:29:50,240
Speaker 2: the airline industry. We're going to talk about the state

558
00:29:50,280 --> 00:29:53,280
Speaker 2: of the industry now. But Sheila, I'm just going to

559
00:29:53,360 --> 00:29:56,960
Speaker 2: cut to the chase. Every house on the East Coast

560
00:29:58,040 --> 00:30:01,440
Speaker 2: is looking at the Try State area on my place.

561
00:30:01,480 --> 00:30:05,480
Speaker 2: I've got a lovely place, folks. I counted twelve airplanes

562
00:30:05,520 --> 00:30:08,160
Speaker 2: in the sky like a couple of weeks ago, a

563
00:30:08,240 --> 00:30:13,040
Speaker 2: record amount airline safety in Denver the other day. Here

564
00:30:13,120 --> 00:30:16,320
Speaker 2: the other day, the horror of what we saw in Washington.

565
00:30:16,800 --> 00:30:20,240
Speaker 2: People are really falling a part of this. You've got

566
00:30:20,320 --> 00:30:22,960
Speaker 2: engineering cred. Do you believe in the system.

567
00:30:23,480 --> 00:30:25,959
Speaker 7: I do, but I also think this is where our

568
00:30:26,000 --> 00:30:28,920
Speaker 7: airline and defense coverage come into play exactly.

569
00:30:29,000 --> 00:30:29,760
Speaker 2: That's why we're here.

570
00:30:29,840 --> 00:30:30,760
Speaker 7: Yeah, I met with that.

571
00:30:30,760 --> 00:30:32,880
Speaker 2: I can tell you it's a four hour conversation.

572
00:30:34,320 --> 00:30:36,640
Speaker 7: I think it's very important, you know, with the DOGE

573
00:30:36,920 --> 00:30:40,480
Speaker 7: cuts which have impacted defense, whether it's the manufacturers or

574
00:30:40,520 --> 00:30:45,360
Speaker 7: the service names, to realize how important government employees are actually.

575
00:30:45,040 --> 00:30:45,800
Speaker 4: To the system.

576
00:30:46,080 --> 00:30:48,440
Speaker 7: Within the system of the US. I understand a five

577
00:30:48,440 --> 00:30:51,720
Speaker 7: percent headcunt cut that exists at banks all the time,

578
00:30:52,120 --> 00:30:54,280
Speaker 7: but to do it within government employees where we tend

579
00:30:54,320 --> 00:30:57,840
Speaker 7: to be understaffed. The FAA, as an example, air traffic

580
00:30:57,880 --> 00:31:02,720
Speaker 7: controllers in Newark are understaffed and we're flying forty percent

581
00:31:02,760 --> 00:31:05,960
Speaker 7: more passengers through that airport as an example, So to

582
00:31:06,080 --> 00:31:08,680
Speaker 7: fire five percent of them in a blanket, you know,

583
00:31:08,800 --> 00:31:11,080
Speaker 7: layoff does not seem to make sense. And a lot

584
00:31:11,080 --> 00:31:13,719
Speaker 7: of the companies that have been hit, SAI C, Parsons,

585
00:31:13,840 --> 00:31:19,600
Speaker 7: Raytheon Technologies, Litos actually provides systems for the FAA.

586
00:31:20,000 --> 00:31:23,400
Speaker 2: Do those people Paul's got the Gulf Stream, Scott's still here.

587
00:31:23,400 --> 00:31:24,760
Speaker 7: In a couple of days, he'll be fine.

588
00:31:24,800 --> 00:31:28,960
Speaker 2: Out of EWR. Do the flight controllers have the power

589
00:31:29,040 --> 00:31:33,240
Speaker 2: to say we don't have enough people, we can't do

590
00:31:33,360 --> 00:31:33,840
Speaker 2: our job.

591
00:31:34,800 --> 00:31:37,720
Speaker 7: You know, I know both the former administrator Mike Whittaker

592
00:31:37,800 --> 00:31:40,920
Speaker 7: FAA administrator, as well as Dan Elwell under Trump administration

593
00:31:41,040 --> 00:31:44,200
Speaker 7: number one. I do think there's areas where we could

594
00:31:44,200 --> 00:31:47,400
Speaker 7: cut administrator, cut air traffic controllers. Perhaps we don't need

595
00:31:47,400 --> 00:31:49,600
Speaker 7: them from twelve am to six pm when there aren't

596
00:31:49,600 --> 00:31:52,760
Speaker 7: twelve planes in the sky above your backyard. But you know,

597
00:31:52,800 --> 00:31:56,920
Speaker 7: we might have to fulfill more funding and also technology,

598
00:31:57,280 --> 00:31:59,960
Speaker 7: the data. There's a lot of data that the FAA

599
00:32:00,080 --> 00:32:02,840
Speaker 7: as we just need the technology to mine it, and

600
00:32:02,880 --> 00:32:05,720
Speaker 7: so cutting these service contracts don't necessarily make sense.

601
00:32:06,080 --> 00:32:06,320
Speaker 2: Chill.

602
00:32:06,440 --> 00:32:08,800
Speaker 4: Earlier this week, we had a number of the major

603
00:32:08,840 --> 00:32:14,840
Speaker 4: airlines cut their earnings, forecast their guidance Outlook what happened,

604
00:32:14,840 --> 00:32:16,600
Speaker 4: because it seems like I'm thinking back to the earnings

605
00:32:16,640 --> 00:32:19,080
Speaker 4: last season. I didn't hear much talk about that. What happened.

606
00:32:19,520 --> 00:32:23,920
Speaker 7: The drastic change is what's scaring folks, so, you know,

607
00:32:24,200 --> 00:32:26,800
Speaker 7: and it wasn't one thing. That's what I think everybody

608
00:32:26,840 --> 00:32:29,560
Speaker 7: is concerning for folks. So first it was the safety issues.

609
00:32:29,600 --> 00:32:31,560
Speaker 7: So let's close up on that. Whether it was Delta

610
00:32:31,680 --> 00:32:35,000
Speaker 7: or American put these airlines on a marketing hiatus where

611
00:32:35,120 --> 00:32:37,400
Speaker 7: it doesn't make sense to put out a fly for

612
00:32:37,440 --> 00:32:41,920
Speaker 7: free tomorrow. Second, corporate travel, we've seen that tightening, whether

613
00:32:41,960 --> 00:32:44,240
Speaker 7: it's our clients as well, paralyzed by what's going on

614
00:32:44,280 --> 00:32:46,680
Speaker 7: in the markets. They can't leave their desk, so it

615
00:32:46,840 --> 00:32:50,040
Speaker 7: maybe prohibits a work travel trip. So corporates are tightening

616
00:32:50,080 --> 00:32:52,960
Speaker 7: their budget and seeing a pull back. And then third leisure,

617
00:32:53,480 --> 00:32:56,240
Speaker 7: everybody sees what's going on with the stock market, maybe

618
00:32:56,240 --> 00:32:58,840
Speaker 7: pulls back on that last trip. And then fourth federal

619
00:32:58,880 --> 00:33:00,360
Speaker 7: employees as well, traveling less.

620
00:33:00,600 --> 00:33:02,520
Speaker 2: Paul, I just looked at the flight. I always look

621
00:33:02,560 --> 00:33:05,280
Speaker 2: at here and it's down one thousand bucks. Sure, road

622
00:33:05,400 --> 00:33:06,320
Speaker 2: trip over to Paris.

623
00:33:06,400 --> 00:33:10,920
Speaker 4: Yeah, but your the the Euros, you know, not where

624
00:33:10,920 --> 00:33:11,480
Speaker 4: it was a couple.

625
00:33:11,720 --> 00:33:14,160
Speaker 2: That's okay. But I can get tear I can get

626
00:33:14,240 --> 00:33:15,840
Speaker 2: tear free. Moet shunned down.

627
00:33:15,800 --> 00:33:18,360
Speaker 4: There, very good Chila talk. It is about the the

628
00:33:18,360 --> 00:33:22,400
Speaker 4: the airlines. Where are we in terms of capacity? Are

629
00:33:22,400 --> 00:33:24,800
Speaker 4: they at? Are they where they need to be? Where

630
00:33:24,800 --> 00:33:27,120
Speaker 4: they want to be, Because it still feels like every

631
00:33:27,120 --> 00:33:28,280
Speaker 4: plane I get on is full.

632
00:33:28,520 --> 00:33:31,080
Speaker 7: So yeah, I think we're watching the data really closely

633
00:33:31,120 --> 00:33:34,720
Speaker 7: over the next two three weeks, so forty percent of

634
00:33:34,800 --> 00:33:38,000
Speaker 7: airline earnings are in Q two, so it's go time

635
00:33:38,000 --> 00:33:40,920
Speaker 7: for them. Let's see what happens from March fifteenth through

636
00:33:40,960 --> 00:33:44,720
Speaker 7: April fifteenth. April ninth is one delta reports. But capacity,

637
00:33:44,720 --> 00:33:47,440
Speaker 7: to answer your question, TSA, volumes are up about one percent.

638
00:33:47,520 --> 00:33:51,080
Speaker 7: Capacity splatsh. So we've seen capacity tighten. That's been the

639
00:33:51,120 --> 00:33:53,880
Speaker 7: story of the last eight months. But we're seeing capacity

640
00:33:53,880 --> 00:33:56,880
Speaker 7: come in in Q two. Obviously, prices are down, so

641
00:33:56,960 --> 00:33:59,920
Speaker 7: airlines are trying to keep their profit levels adding more capacity.

642
00:34:00,360 --> 00:34:02,320
Speaker 7: That just exasperates the issue.

643
00:34:02,440 --> 00:34:05,200
Speaker 4: What what do airlines typically do if they do see

644
00:34:05,400 --> 00:34:08,600
Speaker 4: a shift down and demand, whether it's just consumer uncertainty

645
00:34:08,640 --> 00:34:11,000
Speaker 4: around tariffs or whatever. What do they do on the

646
00:34:11,000 --> 00:34:12,120
Speaker 4: cost side to adjust for that?

647
00:34:12,160 --> 00:34:15,640
Speaker 7: Typically very difficult. Yeah, you know, you don't have many

648
00:34:15,719 --> 00:34:17,920
Speaker 7: variable costs. A lot of it is fixed. Your planes fix,

649
00:34:18,000 --> 00:34:21,520
Speaker 7: your pilot's fixed, your schedules, your gates, so very little

650
00:34:21,520 --> 00:34:23,520
Speaker 7: you could do. You could maybe add red eye find

651
00:34:23,560 --> 00:34:27,120
Speaker 7: to add incremental opportunities. That's what Southwest is doing. But

652
00:34:27,160 --> 00:34:29,880
Speaker 7: that's what makes airlines trade up five to seven times PE.

653
00:34:30,160 --> 00:34:33,840
Speaker 7: You know, seventy percent discounts to the market. Airlines have

654
00:34:33,880 --> 00:34:36,719
Speaker 7: not been seen as the best investment vehicles because they

655
00:34:36,719 --> 00:34:37,800
Speaker 7: have very little maneuvers.

656
00:34:37,800 --> 00:34:39,960
Speaker 4: They could pull Blue.

657
00:34:39,680 --> 00:34:44,040
Speaker 2: Button Detroit Lions button. Then let's start there. How trothy

658
00:34:44,239 --> 00:34:46,239
Speaker 2: is the business right now? I mean, is it going

659
00:34:46,239 --> 00:34:49,200
Speaker 2: into one of those ugly periods where it's tough to

660
00:34:49,280 --> 00:34:51,640
Speaker 2: maintain free cash flow or even revenue pop?

661
00:34:52,080 --> 00:34:53,320
Speaker 7: I think depends on the carrier.

662
00:34:53,960 --> 00:34:55,839
Speaker 2: Really yeah, it's not an industry thing.

663
00:34:56,440 --> 00:34:58,560
Speaker 7: I think some will be better off. So Atlantic is

664
00:34:58,560 --> 00:35:00,799
Speaker 7: still holding in well, Tom still checking out his flight

665
00:35:00,840 --> 00:35:03,319
Speaker 7: to Paris. I think Atlantic is strong, but how long

666
00:35:03,360 --> 00:35:04,200
Speaker 7: does that last?

667
00:35:04,480 --> 00:35:05,920
Speaker 5: If all of Europe Pacific?

668
00:35:06,040 --> 00:35:06,439
Speaker 2: Right now?

669
00:35:06,520 --> 00:35:10,800
Speaker 7: Pacific is okay as well the very limited capacity. Luckily

670
00:35:10,840 --> 00:35:13,439
Speaker 7: Boeing is not delivering many seven eight sevens. Airbus isn't

671
00:35:13,520 --> 00:35:14,600
Speaker 7: delivering many eight three.

672
00:35:14,480 --> 00:35:16,600
Speaker 5: Fifties single best idea right now.

673
00:35:16,920 --> 00:35:20,879
Speaker 7: I actually think Boeing, despite tariffs, despite Macro, despite everything,

674
00:35:21,880 --> 00:35:25,239
Speaker 7: folks were, you know, the equity offering was oversubscribe when

675
00:35:25,280 --> 00:35:27,359
Speaker 7: Boeing had fifty five billion a debt. Now they're down

676
00:35:27,400 --> 00:35:29,600
Speaker 7: to twenty five billion a net debt stocks at the

677
00:35:29,600 --> 00:35:33,400
Speaker 7: same exact price. Folks have waited six years for planes.

678
00:35:33,560 --> 00:35:36,359
Speaker 7: Air airlines are not going to cancel yet, and then

679
00:35:36,400 --> 00:35:38,960
Speaker 7: the aftermarket put in a ge or an F TI

680
00:35:39,080 --> 00:35:42,640
Speaker 7: F ties a smidcap name I cover it's it's been

681
00:35:43,080 --> 00:35:45,080
Speaker 7: you know, hurt by a short report out there. So

682
00:35:45,160 --> 00:35:46,279
Speaker 7: that's the other one I throw in.

683
00:35:46,520 --> 00:35:51,400
Speaker 2: Well, I'm Boeing. Do American companies, says United, Delta, the

684
00:35:51,440 --> 00:35:54,200
Speaker 2: others you know better than I do. Do they want

685
00:35:54,239 --> 00:35:57,160
Speaker 2: to buy Airbus or is it just like we can't

686
00:35:57,160 --> 00:35:58,640
Speaker 2: buy to lose its un American?

687
00:35:58,840 --> 00:35:59,399
Speaker 5: No, they do.

688
00:35:59,520 --> 00:36:01,720
Speaker 7: I mean, but the US is only twenty to twenty

689
00:36:01,719 --> 00:36:05,040
Speaker 7: five percent of the sky skyline, you know, it's not

690
00:36:05,160 --> 00:36:06,680
Speaker 7: as it's not fifty percent.

691
00:36:06,520 --> 00:36:08,719
Speaker 2: Boeing selling to who? Then who's their dominant? Who's there?

692
00:36:09,000 --> 00:36:09,360
Speaker 4: Is interesting?

693
00:36:09,400 --> 00:36:11,719
Speaker 7: Because this is why I think Boeing's quite interesting as

694
00:36:11,719 --> 00:36:14,799
Speaker 7: well as Airbus. We have one hundred and seventy five

695
00:36:14,880 --> 00:36:18,480
Speaker 7: operators buying planes in twenty twenty five. That is very

696
00:36:18,560 --> 00:36:20,280
Speaker 7: well diverse across the globe.

697
00:36:21,040 --> 00:36:23,080
Speaker 4: Where is Boeing in terms of you know, I've been

698
00:36:23,080 --> 00:36:25,480
Speaker 4: told by a lot of folks what drives this name

699
00:36:25,560 --> 00:36:28,319
Speaker 4: is can be the number of deliverables on the seven

700
00:36:28,400 --> 00:36:28,839
Speaker 4: three seven.

701
00:36:28,960 --> 00:36:29,640
Speaker 7: That's all that matters.

702
00:36:29,719 --> 00:36:32,480
Speaker 4: Okay, So where is the company now and where would

703
00:36:32,480 --> 00:36:33,440
Speaker 4: they like to get to?

704
00:36:33,719 --> 00:36:36,359
Speaker 7: And you have confidence they can get to that seven

705
00:36:36,440 --> 00:36:38,960
Speaker 7: three seven is about fifty to sixty percent of their

706
00:36:38,960 --> 00:36:41,600
Speaker 7: free cash flow. You have to assume Defense holds its

707
00:36:41,600 --> 00:36:46,720
Speaker 7: own and stops losing money. But three seven they were

708
00:36:46,760 --> 00:36:49,719
Speaker 7: at twenty to end the year. We're now in the thirties.

709
00:36:50,320 --> 00:36:52,600
Speaker 7: In terms of production, they're still in the twenty five range.

710
00:36:52,640 --> 00:36:55,839
Speaker 7: They're getting out of inventory, but we have three hundred

711
00:36:55,840 --> 00:36:57,840
Speaker 7: and eighty four deliveries for this year on the max

712
00:36:58,680 --> 00:37:02,040
Speaker 7: for contexts they did six hundred at the peaks that I.

713
00:37:01,960 --> 00:37:06,000
Speaker 2: Got a squeeze, is said, is there financial integrity improved?

714
00:37:06,680 --> 00:37:10,840
Speaker 2: Is the systems analysis of Boeing? I got free cash

715
00:37:10,880 --> 00:37:16,200
Speaker 2: flow negative fourteen gazillion, another year negative fourteen gazillion, now

716
00:37:16,360 --> 00:37:20,560
Speaker 2: negative five kazillion forward and then finally they flipped positive

717
00:37:20,600 --> 00:37:23,560
Speaker 2: in twenty twenty six. What's the integrity of that?

718
00:37:23,680 --> 00:37:27,399
Speaker 7: Guess it's Defense. Defense has lost three billion triple seven

719
00:37:27,560 --> 00:37:30,560
Speaker 7: X has lost four billion development programs. And then of

720
00:37:30,600 --> 00:37:34,920
Speaker 7: course you add the strike, you add DeLay's given you

721
00:37:34,960 --> 00:37:36,040
Speaker 7: gave away free aircraft.

722
00:37:36,080 --> 00:37:39,360
Speaker 2: How's it turned around? How they fix the damn rivets

723
00:37:39,719 --> 00:37:40,960
Speaker 2: that fell out of the airplane?

724
00:37:40,960 --> 00:37:43,160
Speaker 7: It's interesting because I was in Charleston three weeks ago.

725
00:37:43,160 --> 00:37:46,120
Speaker 7: That's where they manufactured eight epens. They do the three

726
00:37:46,120 --> 00:37:49,160
Speaker 7: sevens up in Seattle and rent In got reported by

727
00:37:49,239 --> 00:37:52,880
Speaker 7: a Boeing employee for my shoes not being suitable for

728
00:37:52,960 --> 00:37:54,799
Speaker 7: the factory floor. And I was like, this is a

729
00:37:54,880 --> 00:37:56,839
Speaker 7: very stark change to how it's been. You know, they're

730
00:37:57,000 --> 00:37:59,440
Speaker 7: very the fays integrated into the way.

731
00:37:59,440 --> 00:38:02,760
Speaker 2: We were wearing Christian No I was wearing. I was wearing.

732
00:38:03,000 --> 00:38:04,759
Speaker 7: I was wearing. I won't give the brand, but I

733
00:38:04,800 --> 00:38:09,920
Speaker 7: was wearing. Yeah, No, it was it was it was

734
00:38:10,200 --> 00:38:11,040
Speaker 7: ballet flats.

735
00:38:11,080 --> 00:38:13,520
Speaker 2: And so they wouldn't let you on the floor with.

736
00:38:13,520 --> 00:38:18,160
Speaker 7: Ballet They gave me an exception, but I was, I was, do.

737
00:38:18,200 --> 00:38:21,360
Speaker 2: You buy them? Yeah, okay, do you buy the ballet

738
00:38:21,400 --> 00:38:24,400
Speaker 2: flats on Madison Avenue the store. If you go in

739
00:38:24,520 --> 00:38:27,200
Speaker 2: the store, you can only come out with three boxes.

740
00:38:27,680 --> 00:38:28,399
Speaker 2: I've learned that.

741
00:38:28,640 --> 00:38:28,839
Speaker 4: Yeah.

742
00:38:28,840 --> 00:38:29,560
Speaker 7: But they they.

743
00:38:29,560 --> 00:38:31,480
Speaker 2: Wouldn't let you on the floor in ballet flats.

744
00:38:31,520 --> 00:38:35,080
Speaker 7: Nope, they they they I had a solid talk about

745
00:38:35,440 --> 00:38:38,960
Speaker 7: appropriate you want to see right, So that that comes

746
00:38:38,960 --> 00:38:41,400
Speaker 7: back to my engineering. I gotta gotta step it.

747
00:38:41,440 --> 00:38:42,640
Speaker 5: Up, not Boeing.

748
00:38:42,920 --> 00:38:45,719
Speaker 2: So I could say Shila, Thank you so much. Shia

749
00:38:46,600 --> 00:38:49,160
Speaker 2: with this was Jeffreys. They're managing and I love it.

750
00:38:49,239 --> 00:38:53,280
Speaker 2: The real engineering integrity there on the aviation position.

751
00:38:53,440 --> 00:38:58,200
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752
00:38:58,320 --> 00:39:02,600
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753
00:39:02,760 --> 00:39:06,200
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754
00:39:06,280 --> 00:39:10,319
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755
00:39:10,360 --> 00:39:13,719
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756
00:39:13,920 --> 00:39:15,640
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