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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. Dan Greenhouse has solace
seeing plenty of opportunity next year. It's been a tremendous year for both equity and credit, which understandably leaves many investors fearful of sounding too optimistic. Entering twenty twenty five, we feel differently. The economy is doing fine, inflation is largely normalized, and the consumer remains strong. Dan joins us now for more. Dan, It's good to see you.
Good to see you, sir.
Would you say the street is uncomfortably bullish then going into next year, because overwhelmingly it feels like people aren't bullish because they feel like what's the alternative, what else can they be? It's there some career risk associated with being slightly bearish at twenty twenty.
Five, I think uncomfortably bullish is the right way to put it, at least my interpretation from talking to people around the street and watching Bloomberg TV at seven AM, as I do every morning. There after two years where the S and P is up twenty percent, high yield and loans and even the lower rated credits are up ten percent or so this year, and there's a feeling, well, this can't continue, and so there's a hesitancy to sort
of embrace this. But in reality, I think, and you guys talk to people obviously for hours a day every day. I think there's been a whether you're listening or not list it's a separate story.
But thanks for really beginning on a great note.
Carry on.
There's been a hesitancy to embrace the bullish tone of things for several quarters now, So in that sense, I don't think it's anything new.
It's a difference between what people are saying and what they're doing. The fundamentage. Your survey out from Bank of America says things are tremendously bullish at the moment, cash record low, us ancuenty allocation record high. Do you sense things up that frothy sentiment? Is that high?
Yeah? I got to ask the other day whether I thought this was euphoria, and no, I don't think it's euphoria. Clearly, the Bank of America data that you just reference plays into positioning data, which suggests that people are certainly invested, and depending on how you measure positioning at the upper end of the range that's prevailed let's say since the GFC, so people are certainly in the market and expecting it to continue. So I think it's euphoria, Listen, I don't.
I guess The subsequent question there after becomes, well, what separates what we're experiencing now from euphoria? And I guess, thinking out loud here, there's still an acknowledgment. You mentioned the geopolitical risks on the way into this conversation. There's still an acknowledgment that things are not great. Incoming President elect Trump's policies could be inflationary, you could have a
widening of the wars, etc. Etc. So I think euphoria is probably an environment in which all of that stuff is not even acknowledged, and I just I don't think that's where we are now.
Vulnerable is another way to put it that at a certain point, it is a market that becomes increasingly vulnerable to a potential shock when everyone is in one trade and they feel like they've been pushed into that one trade because there is no alternative. Do you feel that vulnerability in some of these crowded trades where you know one thing could go wrong, it's unforeseen, and it could really torpedo a real mass mass trade that could pete to an exodus.
I listen, and I don't think this is a particular secret or I'm certainly not breaking any headlines here, but if something happens on the AI demand side of things, my argument for a year has been when people talk about this, everyone's in the trade or we're susceptible or vulnerable to it. We have seen no evidence from virtually any of the company is involved in this technology development that demand is weakening at all. And when you look back to the to the and we talked about this
the last few times I've been on. When you look to the nineties, Floyd Norris and The New York Times talked about the stock market being in a bubble in nineteen ninety five, greenspans a rational exuberant speech was nineteen ninety six, and obviously we still went on and had ninety seven, ninety eight, and certainly ninety nine. It wasn't until two thousand when you started to see those demand trends weakening. Everybody. It's not like we didn't know along
the way that we were overbuilding. There was a story about the telecom cables could wrap around the earth a thousand times or whatever it was. We knew we were overbuilding, but it still took until those demand trends weakened for the broader environment to really to borrow the word. I just use weekend, and I think now, whether it's AI or Broadcom in the last two days, or any of the derivative trades, I haven't heard. And again I've said
this one hundred times solo. This is not a particularly large tech investor, and we don't own any of these names. But I haven't seen any suggestion from anybody, either on the sell side or from the companies themselves, that demand trends are weakening. All I keep hearing is demand exceed supply from just about anybody who has any comment.
One thing that SOLIS does have a pretty big footprint in is looking at the potential combinations of companies, particularly media, particularly in a couple of other industries. And this has been an area that a lot of people think is going to be really hot next year. How much you seeing that in sort of the ground up analysis of companies in different sectors and which sectors do you see the most active discussions?
Well, it's when we had the lamb Western headlines the other day. I think I'm certainly in the camp that thinks next year is going to see a pickup in M and A activity. You see this emb the issuance trends are emblematic of this, and just CEO body language is emblematic of this. So I'd expect to see that. One area you mentioned SOLA is involvement in the media space. I would point, for instance, to what's going on with Comcast and Warner Brothers spinning out the linear let's oversimplify it,
spinning out the linear networks. The assumption is they're going to combine, and there's a lot to do there. From our standpoint, I think when people think about high yield and credit and investing a lot of that conversation becomes about dish or all tease. But those are the types of things that we pay a lot of attention to. Solace as a twenty year track record of investing in the media space, and I think there's there's going to be a lot there to to t to do in that space, for sure.
Are you expecting then a light regulatory touch?
So I I think the the conversation is, well, Lena Khan's gone, so it's game on, and I I don't think that's the case. And I think you and I have talked about this in the past. I think when you really and I'm sure you're well aware of this, when you really dig into jd Vance's philosophy and the people around him, it's not a game on type philosophy. It's there's still gonna be a scrutiny of the big tech stocks in particular, of the T tech companies in particular.
But I also don't think, I mean, listen, Josh Hawley, jd Vance, Tom Cotton are not gonna green light any merger so to speak, either either in the public domain or actually from the FTC standpoint. I think there's still gonna be a lot of scrutiny here. But but will it be lighter than what we've experienced the last couple of years. I think that's unquestionably a Yes.
You were with us on election night. Do you think this idea of the Trump trade is just overrun? Though?
No, no, l And I think, well, I guess maybe yes, half no, half yes, yes, So there no is Listen, we're going to have a friendlier business climate. The CEO confidence. The Bloomberg is a story this morning about CEO confidence spiking up. You saw it in a small business survey. Small businessmen are apparently all Republicans because that numbers spiked
up to the highest level. Yeah, it's political bias in some of these services, certainly political bias in some of these surveys, and by some of these surveys, we mean all of these surveys. But so in that sense, no, this is going to be two years at least until the mid terms, of probably four years of a more right leaning business friendly climate. And so that's going to persist. At the same time, I think there's and I'd be curious of your thought on this, there's a lot of
enthusiasm and optimism about what this administration can accomplish. And I'm a little more skeptical. I think, obviously the TCGA is going to get extended, but can you also afford no tax on tips? Can you also afford a further lowering of the corporate tax rate. I'm a little skeptical that this Congress is going to have.
So you're skeptical of the good stuff that would be beneficial to the market and the business climate, but what about tariffs and things that can actually have a negative impact.
Yeah, I enjoy this conversation a lot. I think that the talk around tariffs is just so universally bearish and bad. And listen, I don't want to give away my free market bona feeds here, Like, certainly tariffs are not optimal, but I also look back in the period in which we had tariffs and I don't remember them being dystopian
in any meaningful way. I mean, obviously everyone likes to point to the headline index there was no meaningful jump in inflation, But when you dig into the core goods data, there was a reversal of the downward the multi year downward trend. So core goods prices certainly did respond. But
if we can simultaneously get the currency to move. If we can simultaneously get oil prices lower, maybe present incoming President Trump is a little friendlier with the Saudis and we can maybe get a million barrels back on the market and we can get oil down into the fifties that that will help compensate.
And so just a little to that when US companies are actually pulling back like Chevron at the Permian, there needs to be a higher price to actually incentifize American companies to want to continue driply listen, I.
Mean we're pumping thirteen and a half million barrels right now, essentially a record high. So output in the United States is not the issue. Obviously, you've got the voluntary c talments across opek several million barrels spare capacities in the million barrels. Obviously they keep trying to bring that back on, but we're worried about Chinese demand and so there's a
lot of moving parts here. But I also think geopolitically, if you're President Trump, your goal is going to be the lower prices, and what is the easiest way to do that. It's going to be much harder to spur additional production of the Permian than it would be to just somehow get the Saudis to agree to pump a little bit more oil, which they might not. If you can compensate that by lowering Iranian output, then for Russian or Russian Iranians, probably easier, because the Iranians are back
up over three million barrels right now. That is up a lot from the day President Trump left office. If I'm President Trump, optimally you get a million Iranian barrels off the market, you compensate that with a million Saudi barrels. Maybe you depress oil prices a little bit in that environment, win win run.
They clearly want to run this hot. Just a final question to you.
They won't just started. How is it final?
Already here about five minutes into the segment, High christ, low inflation, disciplined on Fisco. Out of those three, which one do you think will be more difficult for the incoming administration to achieve?
High growth?
Love inflation, disciplined on fiscal.
There's no one in Washington, and this is a parlor game that we've played for decades now. There's no one's cutting spending. Spending never gets cut.
Is Alan watching?
I hope he'll listen. I'm happy I mentioned last time. I'll go work for Doze. Not full time, but I'll go work for Doze. This is not brain surgery. The CBO puts out a report all the time, all the different ways you can fix the deficit. Former Senator Tom Coburn now Ran Paul puts up the I Forget the watebook. It's called all different ways that you can cut. This is not brain surgery. There's the famous movie, not famous.
There was the movie Dave where the fake president comes in and he brings in I forget who it was, Charles Grodon, and Charles Groden's his friend. He's inn the coountant and he sits down and he looks at the Government of Books and he goes, this is the worst looking thing I've ever seen. If you put five Republican economists or or government fiscal people in a room with five Democrats, they can solve the problem over lunch. The problem is no one knows how to get elected once
they fix the problem. It's straight, which is why nothing's getting done.
Good to say, it's why you know it's a still not the four percent on a tenure.
Thank you for having me back on in the seven hour, not at six thirty.
Okay, we're gonna keep that going down. Worry you want the sevenite, the sevenite right.
Wherever you have me to come out and thank you.
Okay, Dank Greenhouse so solos Aultentive, Assi Masterms. Have a very happy.
Christmas and you as well.
I'm merry Christmas. Thank you. Turning to consumer spending, Jet Blue planning to expend its first class offerings in twenty twenty six as passengers continue to pay up for premium options. The carrier also cutting capacity to increase fares and focus on East Coast leisure destinations. Joining us now to discuss is the Jet Blue CEO Joanna Garretteeanna, good to see you.
Thanks thanks for having me.
The demand for premium is through the roof and a lot of people are trying to provide the capacity for it. What gives you the impression the confidence that that demand's going to stick around?
I mean Jet Blue has been doing premium for ten years. We introduced our Mint product ten years ago. This is just continuing to round out the suite of products that we have. We have a great coach experience, we have even more space, Mint Life Flat and now more of a domestic Mint and domestic business class seat that we're going to be introducing in twenty twenty six. Very excited to bring it to customers and leisure markets.
Food is best in class on your behalf. I've done the flight and Mint to California and to London as well. Where does that come from? How expensive is it to provide that kind of product?
Yeah, I mean, we really look to provide a differentiated experience and we lean in uncertain So food has been an area that we focus on. Comfort is another area that we spend a lot of time with. We have a great a great partnership with Tought and Needle, and as we think about our new domestic first class, comfort is going to be the area that we lean in on there as well, with some interesting features of our seat product that provide a bit more comfort to customers.
How difficult is it to thread a needle with the likes of business class given the fact that Jet Blue traditionally has been an airline that caters to pleasure travel, sure to the idea of traveling with the family to warm places in the winter time, how much does that kind of create a conflict for you?
You know, we don't think it creates a conflict because everybody's a leisure customer and when you think about what you like to do on a vacation, sometimes you want an elevated travel experience as well. So we want to make sure that we have an offering for every type
of leisure customer. One of the things we have done recently is kind of retrenched in the Northeast, really focusing on serving the best leisure markets out of the Northeast Europe, the West Coast down in the Caribbean, and there's a real market for that premium seat.
I guess another way to say this is businesses are willing to pay more on their expense accounts than individuals, especially when they're going on vacation. How difficult is it to charge the rates that make it worthwhile Given the fact that as people going on vacation and they typically have bledget's.
We're not focused on charging rates at are akin to what a business customer and a business would charge. We really want to make the premium experience affordable to leisure customers. When we introduced Mint ten years ago, we did just that. We reduced fares to the West Coast, we introduced a better product, a better service, and that's what we're looking to do here. It's really important for jet Blue to make sure that we have affordable fares and that all
of our products are accessible to the leisure customers. So that's the customer that we're targeting, somebody willing to pay a bit more, but not at the size that you would for a business.
You've been tasked with turning around the balance sheet of jet Blue, and you've made progress in that front. You just reported earnings that were positive and really pointed toward progress in that How much are you able to raise prices at a time where you see increasing consumer pushback, But at the same time, there seems to still be that ongoing demand for travel.
There's very healthy demand in the peak and that's where leisure travel is great. So as we think about you know, the holidays, we think about the summertime frame. You know, that's where I think jet Blue does its best because we fly to some of these great destinations. Troughs are definitely more challenging. We've seen some pricing pressure in the troughs.
We've reduced a lot of flying in the troughs. So it's really about balancing out that year and making sure that you know, when demand is high, you're focused on trying to capture your share of that demand, and then the troughs really reducing the losses.
So do you expect to increase fares this year?
We're hopeful that we can keep fares affordable that reflect the cost of service. It's more expensive to travel now because there are costs. Airport costs have gone up, labor costs have gone up, so there's meaningful inflationary pressure for the airlines as well. Our great food comes at a cost. When you start seeing the grocery costs go up, that means the food and an aircraft is going to go
up too. So we're really trying to balance it and make sure that relative to the other travel out there, that Jet Blue is an affordable fare for customers, inaccessible for a leisure customer.
Well, there's also been other constraints on the airline industry when it comes to getting the parts they need, comes to actually getting the planes they need to fly. And then next year a lot of people are talking about, well, we might get tariffs and potentially that might impact the supply chain.
How are you preparing for all of that?
Yeah, I mean Jet Blue has a unique situation with Pratt and Whitney. Right now, we have a number of aircraft sitting on the ground that we're paying for, but we're not able to fly because they're due for an engine inspection and there's not enough capacity to do those inspections. So that's definitely a headwind for Jet Blue. As you think about tariffs, it's a bit too soon to tell. I think the good news for Jeblo's. We take a lot of our aircraft from Alabama, but you know, depending
on how tariffs get put in. We do have exposure in Europe and in Canada because some of our aircraft come from there.
Of course, the Jet Blue Spirit Airlines potential merger was blocked. Are you potentially thinking about going at it again in the next four years in this space more mergers and acquisitions because there might be a lighter regulatory touch in Washington, d C.
We're really focused on delivering our new plan, Jet Forward. We want to see Jet Blue thrive as a successful standalone company. We have a brand that customers love, We've got a great product, a great service. We're focus on flying in the places that people know us. So we're really focus on our standalone plan jet Forward right now.
Okay, so you might not dip your toes back into that space, But do you think that this is going to be a more welcoming administration when it comes to things like mergers and acquisitions.
It's hard to speculate because we don't know exactly what the com plan's going to be, but it's hard to see an administration that's going to be worse than the administration we had around antitrust.
In the meantime, you have announced a number of changes in terms of the Jet Forward, including closing down certain operations in a number of cities. I believe that they are going to cut You're going to cut some fifty routes. Correct, Is it done? Are there more to come?
The network is always something that's evolving, So the majority of the changes are done. But you know, we're not going to rest on our laurels. If a particular market is not producing results, then we're going to take a good hard look at it see if we can improve it, and if not, then we're going to point those planes to a place where we can make money. We've got to become profitable, and part of that has made may maybe need to make some tough decisions.
I've got to follow up. Have you spokens the incoming administration.
We have not spoken to then incoming administration.
To go down to Mari Lanka anytime soon, Mike the pilgrimage.
Right now, I'm focused on holiday travel. We have one hundred and fifty thousand customers a day. Flying is a great place over the holiday, the sun for the holiday.
You can combine the two. What do we call that?
Work?
Patience, leisure, pleasure, leisure bleisia, yeah, leisure, Okay, Lezia, you sing a lot of pleasure. We see a lot of leisure.
We see a lot of leisure over the holidays too. Though. We're just really happy to be a part of connecting people with their families over over the whole.
What does it only look like that one hundred.
And fifty thousand people a day over the Christmas holiday, We've got about a thousand flights a day, and you know, it's amazing when you think what airlines do and the magic that we can deliver to customers, reuniting their families and making that great experience. It'll be busy, it'll be tough, and my hope is that everybody can be patient and a little kinder.
If you're asking for patients, does that mean they're going to be delays? How does this snack cut?
Oh, you've teed that one up perfectly delays. I wish this administration would focus more on air traffic control. That has definitely been a meaningful pressure to Jet Blue, to all airlines. When we think about this next administration, that is a real focus area for jeblue.
What would you like to see change?
What would they do to see more hiring. I'd love to see better technology and ultimately improving the amount of delays that come out of the air traffic control system in New York in particular, which is the hardest hit.
We don't like to say the same thing now one what's delays? Did they bred up?
You're talking to the choir I've had at well, Okay, Honestly, going to Florida is the hardest though, I have to be honest, because there's always weather, there are wins that come up. There's a random storm that comes up, and some people get delayed for a long period of time and they sit there and then their complane gets canceled and they take go on vacation with.
The family CEOs can't control the weather though. But what is interesting is we have here an airline CEO saying they want the FAA to hire more. The incoming administration is talking about dogifying the government.
It's true, well, hopefully do not talking about air traffic control. We are grossly understaffed and at the end of the day, those delays, even with weather, we should be able to have a more resilient aviation air traffic control system with weather. That is just something that we have to deal with.
Just pause for a second. Are you saying that all those it's not because of weather.
It's just some of the delays are definitely because of weather, but they are exacerbated because we are significantly understaffed among air traffic.
I never trust the excuse. You've got a problem with trust as well. I never trust it. I never trust.
I know it's actually going on.
And actually, to Joanna's point, there is a problem with air traffic.
The stuff's missing.
You can actually see how bad the weather is and you're thinking, and it's the weather.
For sometimes you look outside, the sky is blue, the sun is shining, and they're like air traffic control below. Yeah, that's a problem. The pilots missing went out the night before.
Who knows that's Japan, but that does not happen, doesn't have to.
Just to be very clear, JO going to see you appreciate time. Mart McCormick of TD Securities joined us right now for more Mark you're there, you're following it closer than we are. What's next.
Well, I think it's very clear that this is a common theme. This isn't just Canada. This is happening in France, is happening Germany's happening all over the world. What you're seeing is that the election of Trump is a disruption to the existing order. And I think a piece of this is work together in the markets and work together economy. We're seeing a central banks are trying to cut rates to stimulate the economy, Fiscal policy is being used to
stimulate the economy. Voters are unsatisfied with incumbents and compans are trying to find ways to maintain power. And that's just when you think about where this is going, where you think the existing order is going. It's just very clear that you know, using like short term incentives just to spend money to kind of help people ahead of an election is really not a long term strategy for economic policy, especially when you think about innovation and investment.
And again, this is a common theme that you saw on the UK budget. So I think this is not a piece of like what's going on in Canada. This is clearly not idiosyncratic. But what's very clear is that the political economy, what we're calling geomacro, is a force that's creating disruption. It's creating more volatility, more uncertainty, and it's coming through the currencies first market.
How much does this really push people back toward the dollar because there isn't There isn't another alternative that necessarily is more put together, whether it comes to the government or whether it comes to the economy.
Yeah, it just.
Reinforces dollar exceptionalism, US exceptionalism. These are things we've been talking about for months. I think one of the things that's very clear is we run a quantitative macro framework. We looked at different styles and drivers of markets. The dollar has behind it as a tailwind the equity market. It's got carry, it's got momentum, it's got essentially the terms of trade. It also has growth. So you can't
think of a better mix. The one thing that's a little bit challenging right now is markets have been really focused on mean reversion, so positioning, short term valuation models, those things have worked for the currencies all year. But what we're starting to see is momentum is a factor that's becoming increasingly more important as we push into the new year. So I'm a little bit wary here of like people coming in and buying the dollar with a
couple of weeks left in the year. But it's very clear where we're going in the front half of next year, and it's going to be a strong dollar across spoort.
But what about the end of twenty time, going to twenty twenty six, A lot of analysts are talking about the fact that actually we could see some weakness or minimum a plateau of the US dollar.
Yeah, this is uh, this is an important theme, I think because what we're seeing is a disruption to the global trade order. Again, you can look at we have indicators that we've looked at for globalization. So if you look at globalization as a theme, hyper globalization economic and
trade peaked ten years ago. It's been moving sideways. But along with the correlation, the thing that you see is that as globalization was rising, hyperglobalzation was rising, the US trade depsit was rising, and the US dollar is getting very expensive. So if you think about what is the north star of the Trump administration, one thing that he's talked about and one thing that I think is very important to their economic policy is eliminating the trade deficit.
You cannot reindustrialize the rust belt. You cannot reindustrialize the states that want it for this for Trump, this you know in this last election, Michigan, Ohio, Pennsylvania, Wisconsin, those states. What matters, I think is the reindustrialization and also the reduction of the trade depth to which means you need to find a way to weaken the dollar. So I think what's going to be very important is the world's
breaking apart. And as the global order is being ripped apart again, most countries are choosing national sovereignty over globalization. This is not a US story. This has been going on for over a decade. And essentially, as that order gets picked apart, the dollar rallies. It's the only game of town, and it's fomo, It's all these kind of themes.
But that creates the conditions for the Trump administration to address the major concern for industrialization, which is the trade deficit and the strength of the dollar, which again if we look at our longer term valuation models, the cheapest currencies in the world are the en the remedy to be the one Taiwanese dollar, all the Asian currencies that were low yielding funding currencies.
At LIASA said it already this morning. What's the alternative? Ma mcbakatdi math. Thank you. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, antient politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.