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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 2: You can join Brian Curtis and myself for the stories,

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Speaker 2: making news and moving markets in the APAC region. You

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Speaker 2: can subscribe to the show anywhere you get your podcast

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Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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Speaker 2: Bloomberg Business app.

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Speaker 3: Joining us now in our studios is Jill Deesis, Bloomberg's

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Speaker 3: China Eco Gov editor, to take a look at this

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Speaker 3: and give us some perspective. It seems like US China

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Speaker 3: relations have improved just a tad, although I don't think

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Speaker 3: they're breaking out the champagne the champagne Jill, what might

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Speaker 3: we expect from some of these meetings this week?

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Speaker 4: Well, Brian, first of all, I guess I would say

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Speaker 4: that when you compare to where we were just a

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Speaker 4: year ago, US China relations have actually picked up I

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Speaker 4: think quite a bit. Remember this, at this time last year,

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Speaker 4: were in the middle of the whole alleged Chinese spy

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Speaker 4: balloon debacle that really really kind of took off and

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Speaker 4: heightened tensions here. I think what you're expecting out of

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Speaker 4: this meeting between the head of the US Chamber of

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Speaker 4: Commerce in China this week is you know, Susan Clark.

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Speaker 4: She's expected to meet with a bunch of Chinese and

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Speaker 4: American officials. She's her delegation there is supposed to meet

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Speaker 4: with a bunch of senior government officials, local business leaders

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Speaker 4: in China. I think ultimately really you know, just trying

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Speaker 4: to get a handle on what exactly is you know,

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Speaker 4: happening in terms of US business relations in China. Remember,

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Speaker 4: foreign investment in China has you know, fallen off pretty

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Speaker 4: dramatically over the past couple of years as tensions have

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Speaker 4: increased and during the pandemic. So I think any kind

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Speaker 4: of you know, you know, any kind of dialogue that

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Speaker 4: these two sides can ultimately have over that would would

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Speaker 4: probably be productive from her perspective.

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Speaker 2: One of the sticking points I think is the technology

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Speaker 2: the export controls. And I don't know if the Chamber

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Speaker 2: of Commerce has an opinion on this. Certainly the White

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Speaker 2: House does, and they've been very very strict in disallowing

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Speaker 2: American firms to give China access to some of the

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Speaker 2: most sophisticated equipment. When it comes to the manufacturing of semiconductors.

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Speaker 2: This seems to be pretty immovable on the part of

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Speaker 2: the States, wouldn't you agree with that?

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Speaker 4: Yeah, I mean I think I'm not sure how much

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Speaker 4: the US Chamber of Commerce would ultimately have in terms

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Speaker 4: of leverage or leeway to discuss that with the Chinese side.

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Speaker 4: I'm not sure whether or not that's actually going to

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Speaker 4: come up during these meetings. But yes, i'd say that

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Speaker 4: going into twenty twenty four, you know, you really saw

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Speaker 4: a ratcheting it up of some concerns over those types

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Speaker 4: of export controls. I mean, we saw at the beginning

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Speaker 4: of the year that the Biden administration was looking to,

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Speaker 4: you know, exploring ways to strengthen tech curves in general.

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Speaker 4: I mean, this has been a long standing issue between

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Speaker 4: the US and China. We saw this really ratchet up

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Speaker 4: during the Trump administration. This idea of tree curbs and

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Speaker 4: concerns about China's access to advanced technology. We really saw

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Speaker 4: that just accelerate during the Biden administration. I still think

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Speaker 4: that from the Biden administration's perspective, you have a lot

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Speaker 4: of the whole Huawei phone issue that unfolded late last

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Speaker 4: year was really a major headache for the trade the

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Speaker 4: Trade Commission, Yes, go ahead.

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Speaker 3: Well, I was just going to say sure, because that

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Speaker 3: gets to a delicate area, which is I mean, to

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Speaker 3: be fair, the US is not trying to deny China

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Speaker 3: access to high levels of technology, only the highest levels.

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Speaker 3: And that's what that Huawei phone sort of suggested, was

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Speaker 3: there was the danger that they were going too far.

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Speaker 4: Yes, And I mean I think since then, we've even

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Speaker 4: seen the US, you know, sort of reach out and

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Speaker 4: try to pressure other countries into preventing China from obtaining

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Speaker 4: the highest end technology. So I think that, you know,

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Speaker 4: that continues to be an issue that I'm sure is

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Speaker 4: just going to accelerate getting into the rest of this year,

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Speaker 4: given that we've got this incredibly critical presidential election in

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Speaker 4: the US.

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Speaker 2: But I'm thinking back to last week with the Nvidia earnings,

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Speaker 2: didn't the company highlight the problems with these export controls?

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Speaker 2: Is a reason for the dismal performance in China?

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Speaker 4: Yes, I mean I think that, you know, there's been

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Speaker 4: you know, quite a bit of pushback from the technological

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Speaker 4: side on a bit of this, you know, So I

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Speaker 4: mean that's certainly, I think from a private business perspective,

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Speaker 4: a major concern as to how exactly. You kind of

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Speaker 4: operate within these sorts of fields. I think that the issue, though,

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Speaker 4: is that it doesn't really seem like the Biden administration

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Speaker 4: is lighting up All that being said, I would point

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Speaker 4: out that, you know, independent of this US Chamber of

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Speaker 4: Commerce visit in China, you've seen some other attempts by

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Speaker 4: the US to try to smooth over relations with China. Recently,

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Speaker 4: we just saw you know, a delegation from the Treasury

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Speaker 4: Department to make the case to top officials in Beijing

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Speaker 4: that Jenet Yell and the Treasury Secretary wants to visit

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Speaker 4: this year. So it is a really really complicated balance

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Speaker 4: for the US to kind of walk here where you know,

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Speaker 4: they obviously have the leverage in terms of trying to

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Speaker 4: you know, you know, continue implementing these curbs, but they're

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Speaker 4: also trying to maintain at least somewhat you know, cool

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Speaker 4: tensions with the relations with China.

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Speaker 3: Right now, the timing is interesting because it's coming right

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Speaker 3: before the NPC meetings next week, the annual gathering of

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Speaker 3: China's parliament in Beijing. So let's talk a little bit

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Speaker 3: about what we might see out of that. We'll always

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Speaker 3: get the target for economic growth during the year and

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Speaker 3: perhaps we'll get some indication about deficit spending.

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Speaker 4: Jill, Yeah, I think that at this point. So this is,

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Speaker 4: you know, the most important kind of political legislative gathering

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Speaker 4: of the year in China, and it's really something that

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Speaker 4: sets the agenda for the rest of the year. So

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Speaker 4: you've got all these lawmakers coming in sort of reading

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Speaker 4: over policy documents. Then they've got to leave this meeting

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Speaker 4: and then go implement all of these rules. As you mentioned,

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Speaker 4: the GDP target is likely going to be announced. A

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Speaker 4: lot of economists think it might be fairly aggressive this

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Speaker 4: year in terms of deficit spending. I mean, I think

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Speaker 4: that the thing that China has to really sort of

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Speaker 4: the line that China has to walk this year is

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Speaker 4: that they're really concerned about local governments, in particular taking

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Speaker 4: on more debt than you know, they're able to afford.

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Speaker 4: There's been a lot of chatter about whether or not

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Speaker 4: the central government needs to take a larger role in

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Speaker 4: terms of taking on some of that debt and alleviating

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Speaker 4: some of those burdens among local governments. I think what

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Speaker 4: we'd be looking for out of this meeting is, you know,

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Speaker 4: what they're going to be setting that budget at how

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Speaker 4: much in sovereign debt they plan on issuing this year,

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Speaker 4: what exactly that type of that level of calculation looks like,

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Speaker 4: because as we know, China is still dealing with a

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Speaker 4: lot of serious economic pressures that don't really seem to

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Speaker 4: be going away, and they've got to kind of manage

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Speaker 4: what that recovery and growth directory looks like.

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Speaker 2: Do you think there will be a mention of the

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Speaker 2: equity market. We've got a new regulator in place and

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Speaker 2: some new policies, a task force now to monitor short

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Speaker 2: selling and things of that nature. I'm wondering whether or

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Speaker 2: not the higher ups might address what's been going on

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Speaker 2: with in terms of the equity market and new regulation.

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Speaker 4: I mean, that's certainly a great question, and I think

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Speaker 4: that you know, that replacement of that top market regulator

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Speaker 4: just a couple of weeks ago was a pretty big

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Speaker 4: surprise on the part of Sheijinping. I mean, remember, Bloomberg

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Speaker 4: also reported that that she had met with, you know,

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Speaker 4: top market officials to kind of figure out how to

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Speaker 4: stem this market route, which at this point is something

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Speaker 4: that has reached something like six trillion dollars in value.

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Speaker 4: So I mean, it's certainly top of mind among officials,

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Speaker 4: and we've seen even you know, major officials, including Premier

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Speaker 4: Le Chung, actually address concerns about the market route maybe

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Speaker 4: not in specific terms, but certainly sort of vague pledges

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Speaker 4: to you know, enhance confidence that kind of thing. So

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Speaker 4: it's possible that something comes out of that. Otherwise, I

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Speaker 4: wouldn't be surprised if you do see you know, reports

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Speaker 4: within Chinese state media in the next few weeks about

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Speaker 4: everybody from Xi Jinping to Li Chang to you know,

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Speaker 4: any other you know, this new top market regulator that

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Speaker 4: they have in place kind of trying to meet with

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Speaker 4: you know, businesses and others to assuage concerns about the market.

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Speaker 3: Well, the equity market is one thing, but perhaps bigger

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Speaker 3: would be the property market, and perhaps something coming out

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Speaker 3: that would speak to building a little bit of momentum

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Speaker 3: in Tier one cities, because that's what they've done in

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Speaker 3: the past to try to help downturns. Is there anything

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Speaker 3: that's kind of legendary in the making that's coming to

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Speaker 3: rescue the property market.

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Speaker 4: I mean that's a very big question. I think that

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Speaker 4: at this point, I mean, what we just saw happen

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Speaker 4: in China was that some of the banks were lowering

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Speaker 4: their loan prime rates, specifically in terms of the references

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Speaker 4: for mortgages, trying to facilitate a little bit more borrowing

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Speaker 4: during a really important quarter. We'll see if that leads

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Speaker 4: to anything more soon.

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Speaker 3: Jill, thanks very much. Jill lisis Bloomberg's China ECOGOV editor.

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Speaker 2: Lu lu Chen Bloomberg Asia Investing In real Estate team

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Speaker 2: leader who joins us from Hong Kong. Lulu, thanks for

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Speaker 2: being with us. First of all, give me a sense

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Speaker 2: of scope. How big is the quant industry in China

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Speaker 2: and what do they do well?

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Speaker 1: The quant industry is a booming sector. It's really picked

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Speaker 1: up in the past few years, and it's attracted not

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Speaker 1: only local industry players like min Kong and also link Jun,

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Speaker 1: but also a lot of foreign players like d Shaw

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Speaker 1: and also to Sigma, So you know, it's a sector

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Speaker 1: that's been gaining quite a bit of attraction in managing

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Speaker 1: some one point five eight trillion yuan and combined assets.

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Speaker 3: I think we're quite curious too the impact on international investors.

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Speaker 3: You mentioned that there were some players like d Shaw

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Speaker 3: in this, but for other international investors, does this make

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Speaker 3: them more nervous about investing in China.

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Speaker 1: So the effect on international investors a couple of fronts.

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Speaker 1: Direct impact not so much because if you look at

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Speaker 1: DSHAW and two Sigma, the strategies that they're focused on

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Speaker 1: was not the target of these crackdowns. And then there's

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Speaker 1: also the requirement, the change in regulatory requirement that now

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Speaker 1: expands the scope of reporting on quant trading strategies to

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Speaker 1: offshore investors via the Mainlanta Hong Kong trading link, so

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Speaker 1: that could affect some investors. And then there's the broader sentiment.

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Speaker 1: Right the the moves that we've seen are pretty extreme.

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Speaker 1: The scenes coming out of China. You know, one fund

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Speaker 1: lost their access to the market completely, another one got

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Speaker 1: their short bidding orders rejected by brokers, and then regulators

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Speaker 1: sending people out in person onto the trading floors to

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Speaker 1: monitor their trading strategies. This reinforces the concerns that international

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Speaker 1: investors have, which is the lack of consistency and transparency

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Speaker 1: through these verbal window guidances. And you know, that is

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Speaker 1: the bigger fallout out of this series of events.

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Speaker 2: I'm wondering whether there's a bit of blame on the

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Speaker 2: part of Beijing focusing on the quant funds because they

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Speaker 2: do use computer algorithms to you execute their trades. Whether

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Speaker 2: Beijing feels as though some of the market weakness that

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Speaker 2: we have seen recently is due to these quant strategies.

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Speaker 1: Yeah, that is the narrative coming out that quant quants

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Speaker 1: are to be blamed for the meltdown that we've seen.

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Speaker 1: And what's really happened is a lot of these quants

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Speaker 1: were crowded in trades, and the smaller stocks in China

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Speaker 1: they are prone to, more prone to mispricing, and more

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Speaker 1: profitable for computer programs to exploit. And at the start

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Speaker 1: of the year, when there was a sharp decline in

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Speaker 1: small cap stocks, that prompted quant stock quant products with

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Speaker 1: heavy exposure to trim holds. This massive sell off triggered

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Speaker 1: losses and derivatives known as snowballs, and it caused a

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Speaker 1: quant quake if you all enforcing a lot of brokerages

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Speaker 1: to dump index futures as well, and so it really

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Speaker 1: pushed up the hedging costs for market neutral products and

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Speaker 1: some of the more leveraged ones were really hit, forcing

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Speaker 1: them to unwind positions even more, and that cascaded into

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Speaker 1: spiraling effect in the market.

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Speaker 3: The CSRC says that these are not really targeting short selling,

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Speaker 3: but rather abnormal trading. How does the CSRC actually categorize

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Speaker 3: abnormal trading?

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Speaker 1: I think the best way to look at it is

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Speaker 1: who who they penalized and looking at link June, which

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Speaker 1: is one of the most influential quant funds in China.

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Speaker 1: They lost access to the market for three days for

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Speaker 1: dumping a combined two point five cillion You have five

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Speaker 1: to seven billion yuan of shares within a minute when

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Speaker 1: trading resumed on Monday, following the holiday. And so in

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Speaker 1: this case, their crime was dumping shares in a very

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Speaker 1: short span of time and hence affecting market.

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Speaker 2: So the regulator right now has a new leader. I

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Speaker 2: guess they've referred to this person in a number of ways.

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Speaker 2: You can maybe unpack that a little bit for me.

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Speaker 2: But I'm wondering whether or not, in your view, Lulu,

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Speaker 2: you cover this on a daily basis, whether there's going

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Speaker 2: to be a lot more heavy hand when it comes

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Speaker 2: to new regulations in China.

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Speaker 1: Well, when Seeing stepped into the position, one of his

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Speaker 1: remits was to stem the market route, and to a

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Speaker 1: certain extent he has managed to do that. If you

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Speaker 1: look at a share market right now, it's rebounding. He

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Speaker 1: does have a reputation for being the broker butcher in

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Speaker 1: the past, issuing quite severe punishments and clamped downs on brokerages.

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Speaker 1: So you're the Beijing has brought in a regulator head

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Speaker 1: who is known for his strong hand as strong armed

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Speaker 1: approach towards regulating markets. And I think for the short term, yes,

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Speaker 1: it's helping the rebound, but longer term people aren't asking

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Speaker 1: whether these measures yeah.

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Speaker 3: In about thirty seconds or so, Lulu, what are we

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Speaker 3: seeing at the moment from the so called national team.

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Speaker 1: So Bloomberg previously reported that National Team was thinking of

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Speaker 1: as introducing a stabilization fund of two hundred and ninety

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Speaker 1: eight billion dollars and that money coming from offshore brokerages

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Speaker 1: and investment institutions could be used to stabilize some of

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Speaker 1: the markets in China. We suspect that some of that

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Speaker 1: money is now at play and that's why part of

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Speaker 1: the rebound is happening.

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Speaker 2: Lulu, we'll leave it there. Thank you so much for

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Speaker 2: joining us and sharing your expertise. Lulu Chan, Bloomberg Asia

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Speaker 2: Investing and the State Team leader.

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Speaker 3: Cole Smeed is joining us here in our studios. The

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Speaker 3: CEO and portfolio manager at SMED Capital Management Cole. Great

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Speaker 3: to have you with us. We've just been chatting a

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Speaker 3: little bit about the conditions in the marketplace for a

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Speaker 3: value shop like yours. You and your dad are legendary

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Speaker 3: for pushing value companies. So what's the environment like at

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Speaker 3: the moment?

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Speaker 5: Well, use Buffett's letter that came out on Saturday morning.

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Speaker 6: I think that's a pretty good picture.

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Speaker 5: Buffett's overwhelming picture was we find no opportunities in the

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Speaker 5: stock Market's at casino.

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Speaker 2: You know.

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Speaker 5: Those are the excerpts out of his letter that I

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Speaker 5: thought a lot about. Now he's saying in the ten

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Speaker 5: billion dollar plus investment arena that worker has to deal

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Speaker 5: with which is not true for all investors admittedly exactly,

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Speaker 5: but let's call a space of space. The most exciting

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Speaker 5: companies in America today are the kind of companies that

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Speaker 5: you could place ten billion dollars in two because they're

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Speaker 5: trillion two trillion dollar market caps.

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Speaker 6: So I think it's really interesting.

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Speaker 5: Here's the greatest investor of all time saying we often

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Speaker 5: have financial problems from time to time. Berkshire will stand

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Speaker 5: there ready to make investments when those arise. And yet

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Speaker 5: you'd go to most of US equity investors and they

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Speaker 5: think this is just peachy keen, this is awesome.

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Speaker 6: Who cares.

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Speaker 5: These are the same investors that thought inflation was never

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Speaker 5: going to be a real issue. They think inflation will

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Speaker 5: never be an issue in the future. And they also

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Speaker 5: thought the FED would have to begin cutting rates pretty

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Speaker 5: fast this year, starting in March. And now we sit

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Speaker 5: in you know, roughly March, and it's not looking like

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Speaker 5: till probably July or possibly later. And so I just

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Speaker 5: say that because the environment is very poor for taking

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Speaker 5: equity risks in the United States and to just kind

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Speaker 5: of give you know, I'm not saying it's bad everywhere.

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Speaker 5: That's that's not the point of this. This what's going

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Speaker 5: on the United States reminds us of you know, what

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Speaker 5: happens about every decade in certain markets around the world.

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Speaker 5: So for example, in twenty ten, it was Chinese companies

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Speaker 5: that were just greatly overpriced. Go look at the banks

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Speaker 5: and all the companies that comprise that. They're nowhere near

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Speaker 5: where they were. Go look at Japan in eighty nine

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Speaker 5: to ninety, same kind of thing. Oil stocks in nineteen eighty.

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Speaker 3: Sure, sure, but you know Buffett himself found value in

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Speaker 3: Japan with those I started off as you were just

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Speaker 3: coming up the stairs, correct, talking about those trading houses

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Speaker 3: in Japan. So there are opportunities out there.

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Speaker 6: Well, yeah, no, there's no question about that.

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Speaker 5: But you know Buffett, Buffett, he's a born and raised

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Speaker 5: kid in Omaha. His preference, like you said in the letter,

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Speaker 5: was US companies. You don't have to be like Warren

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Speaker 5: Buffett is how I look at it. So to your point,

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Speaker 5: I think, you know, we talked about the monkey throwing.

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Speaker 6: Darts to pickstocks.

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Speaker 5: I think the monkey can walk into a room with

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Speaker 5: every non US induscy on the board and throw a

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Speaker 5: dart and hit a stock market or stock exchange or

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Speaker 5: indosy abroad that will beat the S and P five hundred.

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Speaker 5: We think the outcomes in the S and P will

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Speaker 5: probably be zero percent returns over a decade, which that's

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Speaker 5: not counting inflation. And so you just think about the

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Speaker 5: likelihood of success.

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Speaker 6: If that's your.

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Speaker 5: Hurdle rate, it's very attractive for non US investors. Now,

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Speaker 5: the one other thing I'll add is I think it's

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Speaker 5: interesting to see more American style business practices showing them.

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Speaker 5: So use what's going on in the Japanese trading companies

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Speaker 5: that Buffet's involved in. They've been buying backstock that's historically

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Speaker 5: not a Japanese thing, that's an American thing. Look at

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Speaker 5: UniCredit in Europe, they're buying back a lot of stock.

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Speaker 5: So I think it's really interesting to watch these cheap

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Speaker 5: prices run into very shareholder friendly things and really good

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Speaker 5: money could be made, as been seen with those Japanese

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Speaker 5: trading houses.

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Speaker 2: So what if that dart lands on China.

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Speaker 6: Well, it's funny, So I don't think there are.

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Speaker 2: A lot of people are laughing in China.

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Speaker 5: Well they're not laughing there because they're having to deal

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Speaker 5: with their own economic problems that they created. I mean,

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Speaker 5: this is an all volunteer army. Don't forget that. So

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Speaker 5: here's a picture of pricing though. So I hoped the

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Speaker 5: taxi in here it was thirty dollars. That's one of

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Speaker 5: the cheapest taxies I'll hop in any American city, in

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Speaker 5: any major city in the world. And so what I

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Speaker 5: think a lot about is the activity. The cost of

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Speaker 5: activity in places like China are just very different than

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Speaker 5: they were five or ten years ago relative to the

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Speaker 5: rest of the world.

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Speaker 6: China is a time game.

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Speaker 5: It will take time to heal their credit markets and

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Speaker 5: their property markets. But they're not starting from a point

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Speaker 5: where people are overpaying for assets like they did not

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Speaker 5: too long ago, a decade ago.

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Speaker 3: You see, I knew that this environment wouldn't be that

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Speaker 3: pleasing to you. But actually in the United States, you know,

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Speaker 3: there are a lot of companies, either in the Russell

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Speaker 3: two thousand, or in industrials or in the financial sector

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Speaker 3: that are not expensive. I mean, obviously over the past

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Speaker 3: eighteen months who've been dominated by Magnificent seven and their ILK.

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Speaker 3: Doesn't it actually give you plenty of opportunities there to

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Speaker 3: find companies, you.

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Speaker 5: Know, on the US side of our portfolios, we really need,

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Speaker 5: like I'll call it a minimum five billion dollars. And

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Speaker 5: I even think that's probably like from a market cap perspective,

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Speaker 5: and I think that's probably on the lowest threshold we

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Speaker 5: could take downright on us. And even that you're now

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Speaker 5: in a MidCap space. So to your point, again, the

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Speaker 5: idea is not that all US stocks are stupid. Okay,

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Speaker 5: that's not the overarching idea. It's the composition of the

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Speaker 5: S and P five hundred, which as we all could note,

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Speaker 5: it's very.

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Speaker 6: It's an no index game.

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Speaker 5: But just to, I mean just to, I don't think

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Speaker 5: people understand how concentrated is. We know the magnificent seven.

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Speaker 5: But let me just throw out some numbers to you.

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Speaker 5: If you reconstituted what's in communication services today and in

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Speaker 5: consumer discretionary that used to be in technology, The tech

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Speaker 5: bubble peaked with twenty eight percent in technology, We're at

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Speaker 5: forty five if we build up the old tech and

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Speaker 5: it's growing. Okay, So again, it's crazy when I tell

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Speaker 5: people this reminds me of Japan in eighty nine.

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Speaker 6: Why well, because what are non US companies doing.

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Speaker 5: They're adopting American style business practices and capital location, just

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Speaker 5: like all the American companies wanted to get super lean

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Speaker 5: and be a lot more like the Japanese companies in

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Speaker 5: the early nineteen nineties. This is a game that ends

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Speaker 5: in misery. And I think that's why Buffett, to go

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Speaker 5: back to the original point, Buffett is playing this game

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Speaker 5: of when people start acting more sane, i'llbe a buyer.

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Speaker 5: Until then, I'm just gonna sit here by my time,

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Speaker 5: collect my five percent in short term T bills, which

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Speaker 5: is the best rate he's got on his cash really

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Speaker 5: going back for twenty years so more.

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Speaker 2: Maybe maybe he's waiting for peak insanity, and I don't

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Speaker 2: know that we're there yet. And to go back to

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Speaker 2: the bursting of the tech bubble, one of the things

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Speaker 2: that's very different about that environment versus where we are today.

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Speaker 2: The FED was in a very tight situation and was

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Speaker 2: unable to tighten until March of two thousand. Right now

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Speaker 2: we're eagerly anticipating rate cuts and many people are saying

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Speaker 2: that could potentially provide the next leg up. You don't

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Speaker 2: agree with that.

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Speaker 5: Well, so you know, use if you use the late

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Speaker 5: nineteen nineties, you know we had the Asian contagion ninety eight.

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Speaker 6: So what did the FED do?

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Speaker 5: The FED alleviated pressure, reduced rates because of that situation.

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Speaker 2: A bigger problem happened with long term capital because of

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Speaker 2: the bas had their own capital correct at that hedge fund,

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Speaker 2: and that's when the aggressive cutting happened. There were three

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Speaker 2: consecutive twenty five basis point cuts as a result of

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Speaker 2: the implosion of long term capital. But going into Y

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Speaker 2: two K, they were terrified of problems in the system.

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Speaker 2: And even though you could have made the argument that

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Speaker 2: rates needed to be much higher, the FIG wasn't willing

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Speaker 2: to do it because of the fear over a Y

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Speaker 2: two K problem.

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Speaker 5: Well correct, And you got to remember Greenspan was a stockbroker.

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Speaker 5: Green Span was more often willing to lean into problems.

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Speaker 5: And I know we talk about the Greenspan put, but

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Speaker 5: you have to understand the modern US Federal Reserve Bank

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Speaker 5: is an is architectu ultimately by Ben Bernanki.

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Speaker 6: His four speech The Great.

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Speaker 5: Moderation is considered the novel piece to lead the future

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Speaker 5: of the Central Bank. And the doctrine is you don't

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Speaker 5: lean into problems, you clean them up after they're done.

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Speaker 5: The only problem is for us as investors individually, the

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Speaker 5: Fed is not going to say, great, I'm going to

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Speaker 5: clean you guys up, and I'm going to recapitalize your

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Speaker 5: life because you did supid things as an individual investors. No,

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Speaker 5: they clean up the system, but the dead bodies still

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Speaker 5: go to the more.

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Speaker 6: That's the problem.

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Speaker 3: I'm curious whether you agree with David Einhorn that passive

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Speaker 3: is kind of killing you value guys.

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Speaker 6: You know what, The secret to life is weak competition.

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Speaker 5: I don't agree with Einhorn whatsoever because sitting there bemoaning

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00:23:20,359 --> 00:23:22,679
Speaker 5: that that gives you great prices for the things that

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00:23:22,720 --> 00:23:23,800
Speaker 5: others aren't interested in.

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Speaker 6: That is your opportunity.

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Speaker 5: And when I know he's done a couple interviews, and

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Speaker 5: I think your colleague Chanale's done a wonderful job in

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Speaker 5: one of those interviews kind of flushing some of that out.

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Speaker 5: I don't agree with that. No one's going to cry

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Speaker 5: for a billionaire buying value stocks.

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Speaker 6: I wouldn't either.

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Speaker 3: I thought you might be going there because you talked

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Speaker 3: about how the concentration of the market was so much

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Speaker 3: in the big tech forty five percent, I think you said,

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Speaker 3: and so that people who commit money passively, money's going

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Speaker 3: to go to them, even though they don't want it to. Well,

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Speaker 3: it's not going to go to you, and you wanted

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Speaker 3: to go to you and your company.

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Speaker 5: Except that you got a number of dogs chase cars

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Speaker 5: and people chase stocks. And so the problem with that

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Speaker 5: is when they start selling, it's going to come right

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Speaker 5: out of the leverage points that it's dead.

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Speaker 3: We got to go, Cole, We've already gone over. Cole Smeed,

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Speaker 3: CEO and portfolio manager Smeat Capital Management. This is Bloomberg.

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Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you

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00:24:15,880 --> 00:24:19,000
Speaker 2: the stories making news and moving markets in the Asia Pacific.

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