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Terminal and the Bloomberg Business app. We begin with our top story, stock setting fresh record highs as investor, as a wait, FED shared Jaypouse testimony Academy's Peter Cheer right. In this we have argued quite aggressively that the FED should make their first cut in July, partly because the economic data supports it, but also taking the spotlight off of the FED in the heat of the election. Peter joins us now for more pink and mornit. The reasons
once about the economy, the second about the politics. So let's start with the second one, the politics. Why is that an important consideration for this Federal Reserve?
Well, I'm going to start with the first one, which but basically every guest has been on saying September looks likely they should be doing, they should be acting sooner than later. I completely agree, and if anything, I would air to the side that they do it in July. If you do this in September, I just in visional
world where this is going to blow up in social media. Clearly, if they cut in September, say stocks rally three five percent, you will see the Trump campaign aggressively go after the FED, blame them for playing favorites. It won't be the case, but that the reality doesn't mean anything anymore, right, It's how these things play out in the social media narrative is what's important. You do the first cut in July, you'll get some flak, but it's Suly thirty first, no
one cares. It'll quiet down and you can move on and you set up a September rate cut. I think much easier. That's how I would play it. You know, maybe you're not supposed to think that way, but to me, it makes the most sense.
We've drowned to distinction, repeat today this morning, persuade what they should do and what it will do. This is what you think they should do, what do you think they will do, and what do you expect to hit d from Cham and Pound this morning.
I think they're going to set us up for September. I think they're going to continue to look at the data. I think the data is going to come in weak. I'm hopeful that CPI comes in low enough. Maybe it lets them squeeze towards July. But I think it's already too late with the messaging. So I think we get that September cut twenty five, then another twenty five in November, and then twenty five in December, so we get seventy five this year.
Some people would say that just because the Fed has even signaled to cut, we've already gotten the easing and financial conditions that have given a shot of stimulus to the economy. Why is that not the case, as we have just experienced the thirty five, thirty fifth record high of this year.
Well, so, for example, I just pulled up the equal weight to SMP, which month to data is down two point two percent. Year to date is up three and a half percent. So this market has been very narrow rally, right. It's really all about AI. The AI story this transitional, So I don't think we should set policy based on the excitement over AI. Right, if AI is real, it might still be undervalued. So when you look at the broad market, you know, the Russell two thousand still done
poorly value stocks. So I think we get caught up in the broad indices. You look below the surface, markets are only doing okay. I think the job data is turning. It's turning fairly quickly, and with inflation around two point eight percent or somewhere in that neighborhood, you don't want to risk a recession. Back when we were five percent, the Fed could afford a risk a recession, right, inflation was so bad, so painful, they could do that. Now
there's no reason to create a recession. So all those reasons tell me cut now. Even if financial conditions look pretty decent. And I've liked in the last week or so, twos tens is widening, and I do think one thing people are going to, you know, find mistake in this time is even as the FED cuts, I don't think tens and thirties are going to respond that much. I think tens and thirties are going to focus on the deficit.
The supply, and you're going to see twos tens go back to zero, maybe slightly, you know, even uninverted over time, and you're going to see that four thirty to four to fifty range on tens hold even when the Fed begins cutting rates.
There's a lot to unpack there.
Let's go to the deficit.
I am curious about how much the politics of the moment.
You guys are.
I'm serious because this is something that people talk about. We just had Kelsey barrow On saying by the time year, I.
Know you guys are lacking my obsession.
It is important at a time, especially when you have all of the monoptions this week. How much are you looking at that.
It's something that sort of takes away that.
The opportunity to really buy into weakness.
So again, I think that's why yields are going to stay somewhat high, suddenly high at the long end. It comes up in conversation after conversation, And what I try and bring back is if you remember August and September last year, where treasuries were sale every single day, I think we went from four percent to five percent no matter what the data was. Maybe we'd rally briefly treasuries go for sale. There's a huge fixation on the deficit, our willingness to kind of talk about not paying. You're
going to see episodes of that. It's not going to be NonStop. It's not consistent, right because this deficit is going to take time. But I would expect every year or so you get that sort of noise. Even earlier this year, right we went from three ninety to four seventy, same sort of trend. So I think more and more you're going to see these breaks to the upside on yields because people fixate on the deficit and neither party is going to change suse.
You don't buy those those SIPs in price, not until we.
Get not until we get high enough in that range. Because I think everyone's comfortable with treasuries right now. I think people position too long. So down here at four thirty, I'm selling treasuries. You know, maybe they go to four twenty. I think we get back to four fifty before long, even with the FED cutting, I think that's going to be. The realization is, yeah, whatever the Fed's doing at the front end is great, but it doesn't solve the deficit problem.
It doesn't solve our long term debt problems, and this overall supply is still real. So that's why I'm not back comfort the long end.
Quick go back to the optics, the political optics of a September cut. Take that a step further. It's not just going to be that the Trump campaign would come out and maybe say, you know, they're in the tank for President Biden. If Trump is elected, does this give him the excuse with his own party to go back to that Wall Street Journal report, which is that they want to blunt the independence of the FED?
Yeah.
I think if you over the last year or so, right, there's a lot more both from Trump and others talking about the Fed's independence, questioning you know, Congress, what Congress says over the FED. I think if they cut in September, it leaves them much more open to under a new administration attack about what their mandate is, whether they have to be rule followers, how much flexibility they have. Again, I think all of that may play out one way or the other. I think it's less likely if they
do this in July. And again, the data is there for them to think about cutting, and you would argue, right, I think other people have is this lag effect, why not get a couple cuts in earlier. I just feel it would be very prudent and better for the fed's long term health and independence to get something done sooner than later.
And does he need to signal that today.
I think he should be pretty strong about if we get good enough date in the coming weeks, we could cut sooner. And that kind of gives him a little bit of like CPI I think will actually be a miss, so it'll be lower than expected. So I don't know whether that's not a mis or win anymore, and however we want to interpret it, but I think we'll get a lower CPI. Any problems with CPI will either be one off things explainable, or to be housing related, which
everyone now knows is lagged effect. It's one reason the FED looks at pc and I've been learning more and more about this. But suppose it would take an act of cong risk to change how CPI uses that, which is why people go to cp You know, you look at anything like Zillow or anything that's kind of contemporaneous rent let's come way down, so it's artificially inflated. I think those are the things that give him the leeway between the jobs report and that to like put July on the table.
It Councy Barrow is with us about ten to fifteen minutes ago, and shade really through a distinction between cunning interest rights to fine tune policy and response to disinflation and cunning interest rights and response to a much weaker labor market. Now I said that there were bearish right cuts and bullish right cuts, I'd actually let your opinion on that. Do barish rate cuts exist? Are there right cuts that are bearish for this market?
You know?
I think it's all relative what's been priced in. So right now, I think, yeah, if we had a really you know, steep dropping employment, then we get a Barish rate cut, and maybe equities couldn't keep up and couldn't keep going. But as it stands right now, I think everything's going to be really positive. I think we're all sitting there trying to watch what triggers this breakout though of the Rustle two thousand. The value the equal weighted versus that still to me isn't clear.
Right.
It feels to me we've been on this path where the data is good enough you should see the broad economy doing well. The fed's accommodate enough, you should do that, and those still aren't working.
We all remember November twenty sixteen, and we've talked about this a few times. Small caps rallied almost eleven percent in November twenty sixteen. On the Trump election. I think a question we've all gone back to around the type in the last couple of weeks. It's just how relevant that playbook is this time around? Is it relevant at all?
You know, I'm kind of ignoring most of the election stuff. I think, one, it's too clear what's going to go on, who's going to be even representing? And I think we see time and time again, right, whatever they say they're going to do, the policies wind up coming.
Much more and narrow.
I've been a big fan of Mexico recently, right, there was a lot of concern after the Mexican elections that would change. You saw the Mexican takes all that's coming back to normal. Right, Whatever you say to get elected and whatever you wind up doing tend to be two very different things. So I'm paying very little attention to any other rhetoric. And I would say on top of all of it is it feels that people are very willing to put their own interpretations on it.
So if you're empty, if.
We get politically in chose dislocations in the markets through this summer, you're a buyer.
A buyer, Yes, that's.
Exactly what Cassie Burrow said ten minutes ago, even.
Though her sense of what to buy was somewhat different. So that's I guess my question to you, what are you a buyer of during the silication?
So the one thing I would say, maybe slightly different, is I do like energy, And I would say, when you look at the world right now, you've got Pudin, dictator g dictator Kim, dictator Kumane, effectively a dictator. They have to be looking at what's going on here, and they probably don't understand our political system, but they see the leader of the free world, the commander in chief,
you know, internally focused facing all these questions. I think the risk that someone takes some action and tries to take advantage of that over the summer is much higher. So I am looking for the potential for a geopolitical risk that I would not fade, and that's why I kind of want to own commodities ahead of that. I think almost anything that gets done would affect energy prices in particular. And on top of that, not quite even in that same vein, we're sitting here all this internal focus.
Obon's traveling to Russia, right, Pudin and Modi met, the rest of the world's moving on. Well, we're internally focused. That I don't like for the future.
I got to squeeze this in. You're surrounded by generals at academy. You just said take advantage. What does taking advantage look like? What does that mean?
You know? I think if you watch what's going on right, the last time we did funding for Ukraine, right, A lot of this plays out in social media. How difficult that was to get over the hurdle. You watch what's been going on with Israel and Goza, where we're supposed to support what we're not supposed to do. A lot again plays out in social media. So we're having a lot of activity around the second Thomas Shoal in the Philippines, a couple hundred miles off the coast of Philippines. Would
anyone really care? What would we do if something like that?
So?
I think we're already stretched. We have engaged in two wars neither of those. Are you going smoothly? Certainly by any stretch of the imagination. So do you push the envelope? Do you do something different? I think China could do something maybe, you know North Korea has been extremely quiet. Do you get weapons sales, something to just shake it
up where they view that one. We're stretched too. They can use misinformation social media to push against us, and the time frame is right for that, where we already have enough questions without their misinformation.
Pete, we could do this all low. It's going to see you. I know you've got to go. Pitch of Academy Security, Democratic donor Troy Beck saying he would like to see Biden drop out, try and police to say, John, just now try wonderful to catch up with you, sir. For people in the audience who aren't familiar with you, can you just share with us how you've supported democratic causes this president in years gone by and what changed for you two thursdays ago.
So I've been a defender of President Biden as first of all his presidency. I think by any objective measure, he's done an extraordinary job. You know, he has passed to infrastructure bills, one of them bipartisan chips bill, prescription drugs, addressing you know, real issues for Americans.
And I think on a sort.
Of degree of difficulty adjusted basis, if you consider he's facing an incredibly hostile opposition, one that in many cases doesn't even recognize the you know, legitimacy of his clear win in twenty twenty, right, that's the conditions in which he's operating. I think he can make a case he's the best Democratic president of my lifetime in terms of
what he has accomplished. I supported him in twenty twenty, I supported him again in this cycle, and to be clear, however this resolves, I will support him or whoever the Democratic nominee is. And I think that's an important, an important note. I think whatever happens with this you know, inter family squabble, we're going to have to unify around our candidate, and if that's Biden, I will get behind him.
I'll walk on glass for the guy.
What's changed is that the debate confirmed, you know, the concerns that I think everybody had, and I think most notably don't voters. I think the Biden campaign has very understandably come out and shrewdly attacked this as sort of a you know, a cabal led by elites or donors millionaires. In that quote you just showed if I were them,
that's what i'd say too. But I think what's actually happening here is that in a sense, donors and the electeds who have come out and I've talked to elected privately who share their concerns and would like to change, but are not there yet to do it publicly, And I understand some of the calculations there.
I think what's.
Happening is people are coming around to exactly the view that voters have been expressing through polls for a year.
I think that's what's going on.
And so I think that what the debate confirmed, and for that matter, the radio interview he did and the Stephanopolis interview, they have confirmed the degree of impairment from age. So it's true. Everyone knew that, you know, this was an eighty one year old man running for president, and that's hard. What we were hoping for was that he was anomalous and that he would have the the stamina
and acuity to do this. And I think what a lot of people are saying now is we need a candidate who can express, who can make the case, you know, with the vigor that this moment deserves, given the authoritarian threat that we face in Trump and the administration that he would install.
Trey is the concern with you and the people you're speaking with about Biden winning in November or Biden's ability to govern for the next four years.
I think the two are related, right.
So, historically Biden has represented a you know, a vote for safety. In twenty twenty, he was you know, old by the standards of somebody running for president, but he was considered establishment.
He was coherent.
He was not saying crazy things and threatening authoritarian policies like the alternative, which was Donald Trump. I think what some voters are struggling with now is they already know Trump.
Is a bad guy.
They know he lies, they know he's literally a criminal, He's a convicted criminal. They know he is threatening policy implementation that they don't agree with, whether it's reproductive rights, uh you know, uh, firing you know, much of the civil service, and installing loyalists, using the the judiciary to punish people. But they're struggling with this because they now see a less vigorous Joe Biden and I don't blame
Joe Biden for this. I believe that the Biden campaign, when they green lit this campaign, had a different candidate. And I think what we've seen is uh is significant impairment. I'm not a doctor, but I saw what I saw, and others saw what they saw, and we need somebody to make the case during the campaign and then, of course, should we win, and I fervently hope we do. We want someone with the vigor to do one of the
hardest jobs in the world. Now, I want to make clear I don't have any substance of concerns about Biden's age. You're not electing one person, You're electing a team. In my mind and many many people I know understand this. You're talking about an army of bureaucrats high and low. And I know the team that Trump is assembling. I know what he assembled previously and what he's talking about
doing now is worse and frightening. And I know that Biden is surrounded by hyper competent people handling things domestically and abroad. But you know, the way most voters see it is they see two names on the ballot, or in this case, maybe three or four, depending on the state they live.
It's right, didn't his team around him do the American people disservice by hiding a lot of these issues that they have of the past few months that we saw out full display for ninety minutes on CNN two thursdays ago.
You know a lot of people are making that case. I don't know.
I don't know what the campaign sees, I don't know what his staff sees on a day to day basis. I'm not here to make that sort of allegation, you know, of a cover up. What I'll say is, we did see what we saw. I think we've seen things previously, and people rightly say, well, haven't there been signs of decline or physical impairment, you know, slower Gate, et cetera,
you know, prior to the debate. Absolutely, But I think what we were hoping was that those were anomalous, and I think when we saw on the biggest stage the performance we saw, you know, it confirmed a lot of people's concerns.
Yeah, well try.
There is also this issue of whether Joe Biden is currently operating at the same playbook with the same playbook in some ways, the Donald Trump is by just something coming out and being defiant and saying people get in line.
Yeah.
So, on the one hand, I do find that dispiriting that you know, he's describing you know, everyone as either a cabala the lead or you know, acting in bad faith. On the other hand, the positive of that is he's fighting, and he's showing the sort of scrappy joe that got him elected. His campaign has clearly mobilized and forced to
you know, enlist allies. Now a lot has been made of those allies and saying, well, look the labor movement, people of color who are historically you know, critical to his political power, or lining up behind them.
I think that that's.
A very I think that's a very you know, good political line of attack by them, But I don't think it's substantively true. I think what you've seen is elites from those you know, labor union leaders lining up behind them. And by the way, privately, labor union leaders have expressed grave concerns to me. I've also, you know, I can cite any number of polls that show that people of
color are deeply concerned about Biden's age. You know, something like sixty four percent of all voters would like Biden replaced on the ticket, and that includes fifty five percent of black voters.
So I think it's it's.
Substantively not true that the average person of color who's a voter has no concerns at all about Biden's age.
Trey, appreciate your input today. We're going to have to do this again soon. Trey Beck there, the Democratic donor, on the latest with the president, how much things changed for him two thursdays ago. Sticking with travel, the TSA screening more than three million people on Sunday, rounding out the July fourth holiday weekend. It's the first time that many passengers have been screened in a single day in
the agency's history. Eight of the ten busiest screening days have come this year, as travel demand top's pre pandemic levels. To discuss this and a whole lot more, Helene Becker of TD Cowen joins us. Helene, let's talk about this super busy weekend at a time when bobbing is I've been to build planes and United Airlines at least their jets are strutting to hold onto the wheels. Helene, I'm just wondering if things too busy.
Yeah, thanks for the question, John, Yeah, I mean, we've never seen these kind of travel levels before. The system has proven that it really is having a hard time handling it, especially when there's bad weather and we have huge delays and so on. It just cascades down through the entire network, and so you're seeing bigger plane in general rather than more service because there's only so much that can be done. And we don't often, you know, you and me and Lisa and the team, we always
talk about airline traffic. We don't talk about what's happening at the airports. And the airports are having their own issues with lack of parking, with the lack of in some cases, lack of food options, and lack of seating, especially at some of the older airports where people you know, are asked to come early and then they have to wait. There's no charging stations, and a lot of older airports
the charging stations and newer airports don't work. So, you know, there's this whole ecosystem that was built around the smaller level of population that travels, and now we're seeing so many people travel on a regular basis. To your point, eight of the ten busiest days have been this year, and most of them have been in the last six weeks.
So do you think that, Helene, this is introducing a problem that is just would have been the case even pre pandemic, or do you think that it's been exacerbated to a big degree because the personalitist isn't there after a lot of the layoffs in twenty twenty in twenty twenty one that have left a lot of senior people no longer in the workforce.
Yeah, that's a great question, and the answer is yes. I think this level of travel was coming anyway, because you have an aging population and you have a lot of peopleeople who have more time to travel, and they're doing so right. They're doing a lot of bucketless trips and so on. So you're seeing this huge increase in international travel. For younger people, they got used to traveling with their parents and they want to continue to travel
with their own families. So you're seeing a lot of that. But to your point, we were expecting those kind of travel numbers maybe a little bit later in the decade.
Not so much now.
And also, all those people who left, whether they were furloughed or they chose early retirement, or they chose their careers in the twenty twenty to let's say twenty one mid twenty twenty two timeframe. The people who have come in to replace them more or less experienced. The FAA says were short about three thousand air traffic controllers. Congress approves the new budget which allows for the hiring of more.
It also allows a path for those who have been air traffic controllers in the military to come into the network without going through the hire FA training academy. So there is a way to increase that. But if the busiest airports, the pay scales are still relatively low, so people don't want to do that career. They don't want that job because they have to live within I think an hour an hour and a half of their base.
They don't It's very expensive to live in the New York area, it's very expensive to live in Chicago area, San Francisco, and so people don't want those jobs. And the result is that we have this limitation on how much capacity can grow, which is good for It should eventually be good for airlines because they should make more money, but for travelers it means they have to pay more for airline tickets.
Can we talk about what happened yesterday with United the most recent mishap when it comes to losing its wheel, and John asked the question earlier that was the right one. Do you think this is a United issue or do you think this is a Boeing issue.
I think it's an issue. I think it's more of a supply chain issue, and I think in this case it was a unit probably a United issue, not a Boeing issue. Aircraft come out of maintenance, they have to be double check, triple check before they go back on the line, and it's just a case with a wheel falling off. This is not obviously the first time United has had an issue. I don't want to disparage them because they're a safe airline. I fly them a lot.
You guys probably fly them as fair them out and being in the New York area, so I don't want to say negative things about them. But yeah, I mean every airline can be good or bad on any given day, and they're just having this issue. And for them, this was a seven five seven I think that you're talking about, and that's an older plane that's been around for a very long time with a really good safety record.
Aline, what do you like right now in the airline sector, everyone seems they left out, so terminal four is a mess. Just to throw that out again, Alan, what do you like in the airline sector right now?
Well, Delta actually was our top pick for twenty twenty four, so getting thrown under the bus there, but yeah, you know, I think from a balance sheet perspective, from a traffic perspective, growth opportunity. Their big advantage is that only pilots are unionized on property.
Everybody else is.
Not unions, so they have the ability to make adjustments without going through an entire big process. Unlike the other airlines. If they want to make adjustments, they have to go through the unions. So Delta is our top pic for twenty twenty four. I think it still continues to be. We also have Buys and United and Alaska Airs other ideas.
Copa.
I've talked to you guys a lot about Coca in the past. It's one of our favorite names in the mid cap airliance sector. So I think those are they our top four or five.
Elaine, thanks for jumping on for us. I appreciate it. A line back of the of td cown. This is the Bloomberg Survenants podcast, bringing you the best in markets, economics, angio 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 term nope and look bloom bug business Sounds Yeah,