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It's Stuart Kaiser, City and Official. Welcome to the program. Listen, thank you for the merch. We appreciate it. Let's just start with your note that came out yesterday evening, and just begin with the performance You went through Equal Wight S and P the Nastac, the headline S and P five hundred the Russell. What do all those different performance figures over the last three months, towny, what's the over overatching story?
I think I think it tells you people are just pretty conservatively positioned. Frankly, it's it's large cap tech leadership, high quality stocks, low risk stocks that are really driving the market higher. And that just tells you, you know that people, if they're going to be in equity markets, need to have a reason to be So you need a story or a theme or a high quality stock that gets you out of a five percent cash yield into an equity market that's been highly volatile.
I looked on a log SPX and I noticed three moving averages I use have converged to two tenths of a percent point two four percent of the s and P five hundred. You call it home on the painful range. What's the history to identify which way you go to get out of a painful range?
I think I think it's a great question, Tom, especially right now, because it does feel like we're sort of bracketed in you know where we are right now. When you when you get up to that sort of forty two hundred range, you kind of run into evaluation friction where people aren't you know, comfortable on the equities at that level, particularly when they're clipping a five percent coupon in cash. And to the downside, you know, we're we're
conservative positioned. As I mentioned, mutual funds are very low beta and expectations are so low right now that is kind of hard to surprise people, you know, to the downside. So you know, in terms of taking out of this range, I think you know, to the upside. It's going to have to be positioning driven. You know, maybe people get the follow the FED mentality and you get a bit of a positioning you know, squeeze to the upside and to the downside. Frankly, I think it's US growth and
it's the debt ceiling. You know, the debt ceiling is more tactical and the US growth data. I think we really need to fall apart in pretty aggressive fashion. But I think that's what can break you out to the downside. Right now, before we.
Get into some of those scenarios and the analysis that comes with it, I want to just sit on this range and you talk about how if you look at one measure, it's the most painful range going back to nineteen eighty or one of them. Can you talk about what the incentive is for anyone to do anything other than just sit in cash and get five percent if you're not going to get rewarded and the likelihood of getting you know, your face ripped off is pretty high.
Look, I think that's that's one of the big challenges, right I mean, if you look at that. We did a quick survey of our investors and two thirds of people said they wouldn't put money into equity markets unless they had ten percent ten percent or more potential upside, right, So to get people in the market, you really need
to offer them something. And so I think, you know, that's why we're run into this valuation limit around forty two hundred, because you had ten percent to forty two hundred, all of a sudden you're at forty six hundred, and a lot of people aren't kind of comfortable with, you know, with that type of upside level. So yet we're we're kind of bouncing into a ceiling out of floor effectively.
And to Tom's point, it's really narrowed all of these technicals, which you could argue creates kind of a you know, a very uncomfortable moment from life.
If there is more stability in the bond market, which we've seen, will that give the catalyst sort of the ability for stocks to find some sort of direction that has a little bit more conviction behind it.
Definitely, at least I think that's actually been a big contributor this year. If you look at you know, bond volatility and also the volatility of economic data itself, that stuff has really started to narrow I think it's made the market more investible. As I mentioned, it's hard to surprise people. I mean, after what happened last year, it's kind of hard to come out with something really surprising.
So yeah, I think bond volatility coming in a clearer path, you know, to Fed funds and inflation gives people more confidence to be in markets. But I think that's what got us from thirty eight hundred forty two hundred. You know what gets us that next step, I think is the bigger question.
John John Stolfs just publishes at OpCo the same as Stuart, are the same as Gold and Sacks. The idea once again earnings of surprise people. Everybody had a gloom frame work. Guess what. It didn't happen.
So what you mentioned the tactical cold around the debt ceiling and then talked about the longer time horizon. Does one inform the other? Does the debt ceiling negotiations ultimately mean slower growth in our future?
I think only if it really disrupts financial markets from here. I think, you know, I think, you know, if this was something persistent that kind of impacted government spending and activity, then yeah, I think that would increase your recession risks. If this is more of a one to two week just kind of choppy market scenario, I don't think it'll have a huge impact on the growth outlook. I think the big wildcard in the growth outlook is the credit channel.
You know, did we really disrupt lending or not? And I think that's why people are a little bit sort of on edge, particularly because the FED doesn't control the lending channel, right, so that if that tightens meaningfully, it's sort of outside of the fed's control and you could actually get an overtightening that the FED didn't really want initially.
Can our radio and TV listeners sho and how should they own shares of Apple Computer? How do you comfortably own something that elevated that dominant.
I think that I think Apple, would you call it? The big sort of five to ten stocks in the market are giving people a lot of angst just for that reason. I mean, if you're in Apple right now, I think it's a because you love the products and be because they probably have negative net debt on balance sheet and relatively strong earnings growth. So I think if you're in those stocks, it's because it's something you're comfortable owning. Now, if you look at your to date, we've seen basically
inflow into three sectors, healthcare, industrials, and tech. And I think you would argue both industrials and tech have really strong kind of investment thematics behind them that people are like comfortable owning just despite recessionary risks.
Yeah.
I think if you're an Apple, it's because you believe in kind of the medium to long term trend of the stock and in the near term you're comfortable based on you know, kind of the size and quality.
And how do you adapt to the zeitgeist which shows everybody's scared stiff any number of different you know the metrics better than me, but the answer is everybody's scared stiff. How do you adapt to that?
Well, I think I think the scared stiff is why, you know, cash positions are high, It's why mutual fundatas are low. So I think, to me, what that's actually done is it's raised the floor to the market a
little bit because there's not much left to sell. But yeah, I mean, this is the big question is how do you tempt people out of, to your point, high yield bond market, you know, higher yielding, you know, cash markets into equity markets, and I think the answer there is you need to have a single stock story, you need to have like a macro thematic like the Inflation Reduction Act creating a huge amount of spending, or you need the FED to stop and to get this kind of
FOMO follow the FED rally. That's not our base case nor something we necessarily endorse, but it's certainly something that I think people are teeing themselves up for.
You'll put in the credit channel is so important. We either find out the fed'sre over tightened or under tightened based on what develops that. Damn't we Is it that simple?
I think so.
I mean what we've said, everybody's saying, oh, this is great news. The market is going to do some of the tightening for the FED. We actually kind of disagree with that. I think if you thought the FED needed to do ten units of tightening and now they're going to do eight outsourced two to the market, well, they don't control that too, right, That too could be zero,
it could be six. So from our perspective, it actually adds more uncertainty to the growth outlook that you're quote unquote allowing the market and getting help from the market to do the tightening. So I actually think what that's done is it's helped the raid aspect of it, but it's actually added more uncertainty to the growth aspect in my opinion.
Seth commenter and Morgan Stanley said a similar thing. He said, the calibration of all of this gets so much harder when you outsource it to the credit channel in the way that it has been done because of the banking stress in the last couple of months. Show this was fun, this was great, Let's do it again. Sea fours Lindsay Pax wanking on the Fed's path forward, saying this tom the Committee has indicated a willingness to move to the sidelines in June, and still may do so. However, the
latest price data does not make the case for the FED. Rather, any decision to pause would be made in spite of the latest still elevated inflation data.
Still elevated. It came in a little bit and the vectors are in the right direction. But yeah, still elevated. Is abs at where we are, Lindsay Paxit joins us now chief economist is Stiffel Lindsay, just simple, I'm exhausted by it on a boring Monday in May where we're trying to sort out eight, nine, ten different threads. How close are we to recession?
I think the feed has done a very good job of continuing to support the economy while raising rates and trying to tame inflation. And so this delicate balance has allowed I think the consumer to continue to stay afloat, which pushes out our recession call to the end of
the year. Now, we do expect a downturn, but that being said, with the resilience of the consumer, Q two GDP could actually surprise to the upside, leading the first half of the year well above earlier expectations, much more robust than expected off setting even if we do see some of that downturn then in the second second half of the year.
So if we get a two point x percent economy, fine, how much of it is how much of America is advantaged by that? And how much of America is really struggling right now? Because I got all sorts of studies from Bloomberg and others to say there's a lot of people out there struggling, including bankruptcy levels. How narrow is this prosperity?
I think it is pretty narrow because when we isolate the consumer and look at how the consumer is spending, much of the factors that are supporting this still positive, albeit significantly reduced level of expenditures are very temporary factors. It's because consumers are increasingly willing to draw down savings, because they're still relying on that last sputtering of state and local stimulus, because they're increasingly turning to credit card
debt to supplement their spending. So it's very clear that the consumer is on fragile footing, but they're proving resilient, at least temporarily. And because of that resilience, businesses that were arguably overly optimistic in the first quarter are going to have to reverse course and increase production in Q two, significantly contributing to top line growth. Or if they don't and we see a growing disconnect between demand and supply, that will slow the level of disinflation that we've seen
in this economy thus far. In either case, this puts pressure on the FED to continue raising rates.
Why is it bad, lindsay, to see a slower disinflation and strong growth If that disinflation gets us back to that two percent level, well.
It's not, but it's predicated on the second part of your argument, if it gets us back to that two percent level. The problem is the level of momentum. That disinflation momentum is very very minimal, well under what the FED had anticipated at this point in the cycle. And if in fact the FED stops or moves to the sideline and allows inflation expectations to pick up, as we saw in the latest umished survey, that could reverse some
of this improvement. And so the pace of disinflation is not necessarily quite as important as the market buying into the Fed's resolved to continue along the pathway, so though, as so that that level of disay inflation leads us back to two percent target.
Lindsay I was really struck by a lot of the retailers reports, not the ones that we're going to get this week, obviously, but the ones that have already reported, and how much of the price increase they're passing along to consumers. They're actually increasing their profits, the profit margins for the first time at about a year and a half. If you take a look at what's reported so far in the S and P. Five hundred, does this seem sustainable?
To you that basically consumers are not pushing back and that pricing power is so extreme for some of these companies that they can keep just jacking prices up even well beyond what their production costs are.
Well, it's interesting because when we look at the producer price increases, we see that costs, yes, of materials, inputs are still going up, but to your point, businesses are passing on that and more to consumers. Now again, consumers are proving resilient. They are able to tap into some stored wealth, allowing businesses to pass on that cost increase. And if you look at the surveys, consumers are increasingly
willing and accepting of that level of inflation. But going forward, it is all going to come down to that stockpile of wealth and the ability for the consumer to make purchases in the marketplace. At some point, those savings that wealth runs out and businesses won't be able to pass on that cost increase without a significant loss of market share.
So translate that into retail sales tomorrow. Take it right down to the acuity of what we're going to see tomorrow on retail sales.
Well, when we look at this on a monthly basis. What we've seen is that consumer spending is increasingly volatile. Consumers are dramatically shifting the goods and services in their basket, something that they do when they're increasingly concerned about their financial footing, and so we do expect that volatility to be maintained going forward. Albeit for this week's report, we
do expect an uptick of a positive monthly increase. But again, looking at this on a year over year basis, excuse me, we have seen a significant loss of momentum from double digit growth in the aftermath of the pandemic now down to a very minimal but welcomed two level.
So finally, lindsay, what's your run rate on real GDP and nominal GDP sort of through the summer and into autumn? Are you running a two percent statistic, maybe a five percent nominal GDP?
I think Q two we absolutely could get a two handle again if we see a rebuilding of those inventories, businesses stepping back up their production in response to the resilient consumer. It's very realistic to see a two handle in Q two. However, as we move into the second half of the year, that's where the FED tightening really chokes off top line GDP and we could see a sub one percent and perhaps the first negative print by the end of the year.
And Lindsay, thank you for the client pund through the rest of the sea. Lindsay, pxident a stay four.
Kirby, it's so successful United at Nework that they don't have enough gates. So it's like Zurich. They got planes way out. You could wave to Pennsylvania.
Get very upset when I land in Europe and you've got to get the bus. You know, the bus, the bus, the bus busting. Trust me, not's.
Fallowness Oscar Mins. It's his faults, his fault. This on set the former United Airlines CEO set the table for mister Kirby, author of Turnaround Time, United an airline and its employees in the friendly and sometimes not so friendly skys. Good morning, sir, Thank you so much for.
Job with that kind of leading boy.
Nobody's no life is you know, we talked. Jamie Diamond was on the other day with Bloomberg and he had a cancer scare. You lived, You lived in real time a medical issue at United Airlines and many people say you handled it better than anybody. First CEOs out there. What was a lesson you learned after a horrific cardiac event while you were on the tour duty? What'd you learn there?
For me?
I learned since had only been on the job for thirty seven days before that occurred.
But I had had chance to connect with all my employees or many of them.
And the outpouring of affection and support was amazing, And it just confirmed that the organization, the group, the employees in that united family were ready for a set of directions and guidance that would lead us back to where we are today.
The airlines today have recovered. I believe they got a massive bailout in the middle of the pandemic. Have they paid back to the government, to the people that massive bailout?
So if I could take just little contention with the term bailout.
It's Monday, it's a slow news day. I'm trying to get it going.
No, I was not a valid The airline industry was in its the best state ever, I think, in its history, and we had our revenue dropped ninety three percent, So it was a significant issue to keep the airline working and going to the economy good return is where we did get loans and the loans are being repaid over a five or six year period, and in that interim period you're not allowed to do repurchases. You're not allowed to increase comp of your senior executive. So still working through.
It did plenty of repurchases going into the mess, though, of course much of that mess unforeseen. There has been some public pushback about whether you should have received any government loans whatsoever based on that. Do you think we are in a position now where shareholders of United get to own the upside and perhaps you can't talk directly about the company, but shareholders of the industry group get to own the upside, and perhaps the government doesn't in quite the same way.
Well, we negotiated fairly and and I think everyone is going to come out okay at the end of this. I don't think there's anybody that's going to be unfairly advantaged, at least from our perspective. The airline has taken a lot of a lot of its tolls. We'll appreciate the funds from the US government came in a very perfect time,
but it was not free. Steve Manuchin was a a sec A finance er, was there, and we had some really good conversations in details about what it would look like four or five years later and whether or not it would indeed be fair.
So I would say no.
Meanwhile, when you talk about what it looks like, the airline industry looks a little different now than it did before the pandemic. And we were just talking about how the front of the cab is off first class and business class and then comfort Plus, and then there are like three seats in the back that you can try to get for some kind of high price that you can jam your family into if you're in economy. Is this the future of flying?
It is not, because it's not probably the best representation of what we have today. Yeah, there are multiple classes for different budgets, and you try to do as much as you can. I think that United we've tried to put a lot of amenities in the back so you're not sitting in the back huddled, and there's plenty of there's plenty of entertainment and such, and again, you know, different budgets require different different seating arrangements, and as we've talked,
real estate and side an aircraft is very expensive. I think in the book, I try to demystify some of those things, sort of to build a bridge between the chasm of understanding by the general flying public and how we run a business. We really aren't in the business of trying to make you uncomfortable late and all those things. Really there's a ton of it for point to not make it so.
And understood, And definitely you can sense that there is this feeling though that there is no better example of wealth and equality than flying, because you go and it's like, if you pay enough, you can go first, and then you get these extra things, and it's basically you've got to walk past them to get to the back of
the cab to sit in your little seat. I'm just wondering if that's going to be sort of even unsteroids, because those are so much more profitable now and actually, relatively speaking, the most profitable possibly ever, those seats in the front of the cab rather than the back.
Well, I don't think we'reas most profitable ever. I think right before the pandemic was the most profitable time in airline history, and it was a nice array of the front, first class product economy, economy pluss and of course the basic economy at the end and through an increased flying taking people from everywhere they wanted to go to where they needed to go. That combination with volume demand and a good level of supply and customer service was really
what was creating the revenue generation and the profits. But againfits aren't the best in this industry and feels always volatile, so the equities are always going to be affected by that.
Regard your parachuting to Pepperdine to do a victory lap, and I want you to address right now something really emotional. A lot of our listeners particularly say this is the coughing side of the table. You're allowed to cough over here. They don't cough over there. We cough over here. I want you to talk about chairman and chief executive officer like you're on the board at Salesforce with mister Benioff.
Benioff handles a number of duties as well. What's the experience you have of the efficacy of a chairman's CEO being one person?
You know, I think it depends on the company in the industry. I've seen it work both ways. It's just fine, And I don't know that there is a degree of we tend to depending on our feeling for it, we
tend to lean one way or the other. Again, having been both at one time and having been separate from my perspective going forward, I think the separation makes sense because governance and the things that we face as public companies are pretty significant, and it's good to have sort of a division of authority.
Can we talk about lessons and can we go back to spring of twenty seventeen, and you obviously know where I'm going that day that passenger was dragged off the plane, how you responded to it at the time, oschool, When you look back, what were the lessons learned for you personally and for anyone that might find themselves in a similar position in years to come.
Yeah, I think and I talk about it all the time because it was a dark point and our tenure there, I think probably the biggest lesson it's never too late to do the right thing. I think our initial response, my initial response for a lot of different reasons, mostly that it wasn't United Airlines actually involved in any of that you saw, but it was indeed our response, my response that created the.
Issue, and it blew up.
And I think we're probably one of the first global brands to have a viral social media issue, and we tried to find someone else, but I think we may be the ones. And then you know, going on TV a couple of days later, and you know, taking them on personally.
When did you realize what the right thing is? I mean behindsight you and I could sit here now and I could say this was the right thing, Oscar, Why didn't you do it? When did you know we've got this wrong?
Aman?
It's right? Course, pretty quickly.
The middle of the night before I went on National TV again in the Hut. In the book, I highlight sort of my upbringing, my heritage, and all the things that influence us are the formative years. We're all parts of people we've met, as Tennyson says, And I think in the middle of the night I sort of looked upstairs for some guidance, and I felt the calms. I knew I wasn't going to try to blame the Express or somebody out the Express carrier or other Folks.
Tell me about International United Airlines now is in We got three airports in New York. Folks, you own Newark, I get that your box dot of JFK. Kirby's age dealing with US as well. Is this the future of America of United States airlines and that everybody's going to be fighting for a shortage of gates.
Well, there are methods and procedures and policies that can be implemented if we're all willing to do that, that would not rectify, but certainly modify some of those issues.
Uh.
You know, a w R is not someplace we own at United for It's one of the most difficult places to operate, and you've seen big airlines come in and out of there.
Because of that.
There's concept of slot control, there's plans oversight, and then there's air traffic control and it's modern.
Would you just he needs more flights to Italy? Can you talk to Kirby and.
Make that they flight right to night pots.
And we can go on international flights.
Very expensive thing, the F one race.
Cut your pepe. That's where it is.
Weekend.
We are going to focus now, and for those of you internationally and national, this is coming to a city near you. We're going to focus on New York City in the five bureaus. Let me get your attention. There are seven hundred and eighty nine bridges in New York City. I can't believe I'm saying that, but that's the number. There's twenty four movable bridges. Maybe there's four tunnels, y'all know.
Liebers with us right now. General, thank you so much for joining us Chair chief executive Officer the MTA in charge of all this headache. I'm just going to go to one incident, and Lisa Bramwooz is going to bring up others as well. I can't get up Madison Avenue anymore. When does the congestion end?
Well, you know you said exactly right, Tom, congestion is we got to do something about it. There's no choice. We can't have ambulances, can't get to hospitals. Yeah, we can't take times in progress. It's out of control.
Okay.
What New York is doing is we're leading the nation. We're saying it's time to do something about it. We've got a congestion pricing plan. It's been tried all over the western world Stockholm, London, Singapore, and we're going to put it into effect. We don't have a choice. It's time to, you know, start doing aggressive action to deal with congestion and also to save the planet. We all know that's on the agenda general.
It's so important here and I really bring this up. Folks living up near Mount Sign are the privilege of living near Mount signa where the ambulances can't get to the one hundred and first Street emergency room. Let's I want to go to the rapidity of this. London fixed this. Other cities have dealt with that. It's been a failure. Saying in Mexico City or Manila, how fast can you free up the congestion in this marvelous city.
It's a good question. We've got the federal approval almost almost done. We've been at this for a couple of years. Now, Trump, the Trump administration wouldn't let us deal with the environmental process. The federal law requires. Biden administration let us get started two years ago. We've hit the milestones. Now are going
to be implementing. We're literally going to start building out the infrastructure, the cameras, the sensors, to do it all in about a year and then Tom, you and I will watch as it starts to take effect on congestion, hopefully to open up the roads.
Lisa, my amateur taken on this, and I mean amateurs, he said, the camera's word, and that's the word. Nobody London is cameras driven. New York is not. That's my guesstimate of how we begin to get there.
Jenna, how much is this really an effort to try to bail out a subway system that has struggled through a pandemic and really still is not seeing its ridership come back.
Well, you know they are operating budget. We have like an eighteen billion dollar operating budget, Lisa. We actually dealt with that with the Governor's leadership in the current budget year. We've actually dealt with it for a four year plan period. So kudos to Governor Hockel and the New York State Legislature. Unlike many other places, we know that mass transit is the lifeblood of our city and our region, and it's for New It's like air and water. We can't survive
without it. The governor and the state legislatures stepped up the money from congestion pricing, by contrast, is going to go to our capital budget, which allows us to maintain this one hundred year old plus system. Stuff that's that old wants to fall apart. You got to invest in it like any business would it's a trillion dollar asset, and we need the money to maintain it and to improve it.
How is the infrastructure changing and the allocations of that budget, Jenne. Given that writership hasn't come back to its pre pandemic level just yet, there's a question about whether it will in the same at least in the near future, as a result of the work from home trends and the
emptying out in certain parts of the office space. How do you allocate to a system that is the lifeblood and is struggling with a lot of issues right now, whether it's elevated crime, whether it's just the general kind of build up of filth. I'm sorry, I'm a native New Yorker, so this is something that I have seen over the years. How much are you going to try to remedy that?
Well, Listen, first of all, let's let's get straight on the safety issue. A crime in the subway system is down like ten percent since last year, and given the rise and ridership over the same period, it's really down overall. We're back where we were roughly before the pandemic began in terms of the risk of being a victim of crime. They're like, you know, five to eight crimes on the subway system every day with a population four million right now, that's the size of the city of Los Angeles. So
we're not ashamed of our safety record at all. It's actually pretty good. But Lisa's question is on the money, how do you get people back to normal life. Interestingly, if you go apples to apples with pre COVID, we're about close to eighty percent. Work from home is a factor. It's what's you know, pushed us down in terms of ridership. But there's so many people who use the subway system to go to school, to go you know, to go to medical appointments, just to live their lives. Same with
the bus system that we're on the move. We are very much and rising and we've had four million rider days again and again in the last couple of weeks. It is headed in a good direction.
Jenno, this is a personal mission for me. I sit on Fifth Avenue and it's a privilege to sit on Fifth Avenue, and I count the number of people on theer city buses. Sometimes they see four people, sometimes they see twelve people, but many of those buses are empty. How do we fund free bus riding so that the bottom quintile people in New York City can service the upper quintile. It's an outrage that we don't fix the transportation system of the poorest people in New York City. How do we do it?
And you know, Tom that the key is to have transit remain affordable. I think you're right. I don't know if free everything is the right answer, but transit is one of the few things that makes New York City affordable. It is literally like ten percent the cost of owning an automobile. So we're really proud of that. It is one of the things that allows us to support our great you know, working in middle class New York community.
You know the buses in midtime that you're seeing a lot of that is people can walk faster than they can than the bus can go because of that congestion. I'm convinced I grew up riding the bus. I'm convinced people are going to come back when we pick up the speed, congestion, pricing, bus lanes, bus camera enforcement are going to do that.
What do you know about Lincoln Tunnel For those of you internationally and worldwide, the tunnel system in New York city is in an outrage some of the hours of the day when I'm getting older watching this, General, when do we get another tunnel to relieve the burden? What can you do about it? What can the mayor do about it?
You know, honestly, Tom, I don't want to disappoint you, but I'm not here to advocate for expanding the access of automobiles and trucks into our central business district. Every time we build new capacity and that respect, it just fills up. So what we have to do is to build more and better mass transit. It's the way that we can continue to grow our economy in the population of our central business district, both workers and residents, without
environmental consequences. And that's where we're headed. We're making those investments and.
Update and an experiment for all the cities of the world. General levers with the MTA in New York City's saving us as Greg Valuer, chief US policy strusses at AGF Investments, who breeze us on Washington this morning. Greg, you and I within the five six stories, and yes, doctor Brainer talking there about the debt ceiling. You and I were looking at Ukraine and maybe the most important week for mister Putin since February of a year ago. Putin's fighting
is military. Putin is fighting the so called mercenaries assistant him, and it's all happening in a battle which feels like the Battle of the Bulgian World War II.
It's quite a story, Tom. This weekend Zelenski got assurances of more military aid from Western Europe. As you say, he's fighting with the Wagner mercenaries. But I think the big story is back Mout, which is this horrible, bloody fighting that's gone on for months. I think is now leading to some advances by the Ukrainian forces. What struck me over the weekend, Tom was film of Russian soldiers fleeing, maybe like nineteen seventeen, nineteen eighteen when they fled Europe
at the end of World War One. If the Russian troops are fleeing, that's a really dramatic story.
Bring it back to domestic politics here and that there is a theme for Ukraine against Ukraine. Is that an election issue or does that drift away towards November of two thousand twenty four.
It's a long way away, obviously, But and Trump inflamed things on many fronts in the CNN interview, but one of the things Trump inflamed on was, of course, his lack of support for a Ukraine I think that will run into significant resistance among most Republicans.
Greg.
I just want to build on what you were talking about, that this could be one of the most significant developments, the most important stories out there. If Russian troops really are pantiting ship. Do you feel like there has been a material shift in this war where Ukraine is making headaway that perhaps is underappreciated in the market.
Could be hard to say.
What's the old saying the first casualty of war is the truth, so it's hard to say who's telling the truth. But I do sense a dramatic drop of morale, not just in the mercenaries from Wagner, but I think among Russian troops in general.
We're going to be watching this really closely, especially given the potential shift over in Turkey and what that means for Ukraine's potential NATO membership. Back in the US, we have been talking about the debt sealing limit, and I know that people don't really want to talk about it
because there's not really a new angle on it. But what do you make of this timeline that we have where President Biden has to get something together before he heads off to G seven and we're kind of shifting forward the timeframe base and a lack of tax or seats received by the US government.
Well, I tell you, Lisa, there's a risk of a fake out here, of getting too optimistic. Everybody this morning is saying they had a good weekend. I think there is agreement on certain big concepts, like a cap on spending, clawing back some money from COVID. That's encouraging to see, but these are complicated issues that could take weeks to fully resolve. So I think that there won't be a
deal on Tuesday. That's out of the question. Maybe a comment that they're getting closer, but after Biden comes back from aization trip, it could still take a few weeks to iron out all the details. Therefore, I think they have to have an extension.
Just as one example, Greg away from the public program, social security and all that. Everybody's focused on. What does all this ballet mean for the Pentagon.
I think they're still going to get an increase. You know, they got almost ten percent and this new fiscal year that started on October one. I don't think they're going to get ten percent in the next year's budget. Maybe five or six percent, but I don't see them getting a big haircut. And one of the reasons, of course, is Biden's desire to spend more money on Ukraine.
Well, it seems to be everybody's desire to spend it. And yet there's this narrow part of I'm going to say, a Republican party, maybe joined by the left as well, that wants to be isolationist. I mean, we've been We've dealt with this for our entire lives. Does it ever get any traction in America? Witness through the Pentagon budget.
I think the center holes on this. You've got a lot of Republicans, not just Lindsey Graham and Mitt Romney. You've got a lot of Republicans who want to keep up the defense spending, and with Joe Biden enough Democrats. So I think the center holes on this.
And Greg, we're trying to work out whether spending cuts might come from to make a forecast on what the economy might look like. Greg, if you got any kind of base case whatsoever, from where they might come from, how big they might be, and what it might mean for growth.
Yeah, John, I think you're going to see a cap on spending. I think that's very likely. They're just arguing over how much. Is it two four percent or is it zero. I don't think it's going to be zero. There will be some kind of a cap. They'll clawback on covid Aid. There are several other things that are on the table now, including if you want food stamps for federal benefits, you have to be willing to work, so I think you get it. Overall for the macro economy, I think it will be a slight headwind.
Greg fam Jeff Investments. Greg, thank you.
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