Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,
Speaker 1: along with my co host Lisa Brahma wits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. At least, I'm not sure if
Speaker 1: you're aware, but there is a chicken war taking place
Speaker 1: out there in the marketplace. Popeyees is going up against
Speaker 1: Chick fil A in a Twitter war over which chain
Speaker 1: has the best chicken sandwich. I wasn't aware of it
Speaker 1: until just a day or two ago, but I'll tell you,
Speaker 1: I know it's pretty Who is aware of it. That
Speaker 1: is Mike Klin, Mike's senior restaurant analyst for Bloomberg Intelligence.
Speaker 1: He joins us on the phone. So, Mike, um, again,
Speaker 1: I'm not a big fan of the fried chicken sandwich.
Speaker 1: Tell us what's going on out there? Uh? Yeah, so
Speaker 1: so Popeye's debut, Uh their version of the chicken sandwich.
Speaker 1: You know, it's it's been the kind of a long
Speaker 1: time coming. I mean, they're really knowing for their bone
Speaker 1: and chicken, you know, so I guess this is kind
Speaker 1: of low hanging fruit for relatively new owner restaurant brands.
Speaker 1: And uh, you know, it came out and had some
Speaker 1: spectacular reviews and um. Surely after the sandwich debut, Chick
Speaker 1: fil A posted a tweet about their um their chicken sandwich,
Speaker 1: and Popeyes responded with y'all good, and it just sparked
Speaker 1: this massive Twitter war with you know, Wendy's jumping in
Speaker 1: the fray and Mike before which sandwich was better? Yeah, Mike,
Speaker 1: before you going further. I mean the idea that this
Speaker 1: is innovation is sort of amazing to me. It's you know,
Speaker 1: it's basically this company that focuses on chicken sitting around
Speaker 1: a boardroom and saying, I have a brilliant idea. Why
Speaker 1: don't we put it between bread? I mean, what's the
Speaker 1: big deal? What is so special about these chicken sandwiches? Well,
Speaker 1: listen for I mean, chicken sandwiches have just continued to
Speaker 1: grow in popularity, right, it continues to take kind of
Speaker 1: share from from burgers, you know, I mean, will look
Speaker 1: at it, you know, obviously fried chicken sandwiches aren't that
Speaker 1: healthy for you, but they look at it as a
Speaker 1: healthier alternative to burgers, and people are into chicken, right,
Speaker 1: and um, you know, Popeyes has a lot of fanboys,
Speaker 1: you know, I mean myself included. I absolutely love Popeyes.
Speaker 1: So I think when one did come out, there was uh,
Speaker 1: you know, I think Popeyes knew there was going to
Speaker 1: be a lot of buzz about it, right because, like
Speaker 1: I said, this is kind of a long time coming.
Speaker 1: You know, I don't think they saw this level though
Speaker 1: of of you know, like this this fever pitch obviously
Speaker 1: about about the sandwich. You know, it's it's interesting, like
Speaker 1: I've been reading and there's been apparently a shortage of
Speaker 1: chicken sandwiches for Popeyes. I've actually run out and as
Speaker 1: a so what's that say about the supply chain? Like
Speaker 1: where all the chickens going? Yeah, so that's interesting. So
Speaker 1: what I'm hearing it was that it was the buns. Um,
Speaker 1: I wouldn't be surprised if it's chicken as well, right,
Speaker 1: because these chicken sandwiches have to be made made to
Speaker 1: specifications by the supplies, And what Popeyes are saying is,
Speaker 1: you know, we already burned through. You know, in two weeks,
Speaker 1: we burned through all the supply we had pegged for
Speaker 1: um August and September. UM. So I won't be surprised
Speaker 1: if they did run out in some stores. You know,
Speaker 1: I don't think all stores are have run out, but
Speaker 1: I think what they're trying to do is kind of uh,
Speaker 1: you know, uh stop themselves from disappointing customers. You know, so,
Speaker 1: but they have it sounds like they have run out
Speaker 1: the supply chain. Um. You know, the supplier has to
Speaker 1: start making chickens and getting their hands on some buns
Speaker 1: because you know, obviously the demand is there. I mean
Speaker 1: also there's some speculation that they've deliberately restricted the supply
Speaker 1: um to kind of create even more hype, right, so
Speaker 1: like you have a sandwich now that everybody wants, but
Speaker 1: not everybody can get, so they can kind of um,
Speaker 1: you know extend you know, then the marketing behind this. Yet. Yeah,
Speaker 1: just to give you a sense of of the flip side,
Speaker 1: the dark underbelly of the craze, I was working like
Speaker 1: a slave. This according to one exhausted Papaye's employee, who
Speaker 1: is describing the harrowing experience of trying to uh serve
Speaker 1: this incredible craze. I'm wondering if you want to take
Speaker 1: a broader kind of take on this, what this says
Speaker 1: about Twitter and the use of it in terms of
Speaker 1: marketing for some of these fast food companies. Because we've
Speaker 1: seen this increasingly sort of burger King versus McDonald's or
Speaker 1: you know, just the rivals kind of going back and
Speaker 1: forth and trying to be pithy it. How much increasingly
Speaker 1: is that a mainstay of the advertising tool for some
Speaker 1: of these fast food chains. Yeah, that's a great question.
Speaker 1: Then there's a couple of pieces to that question. But
Speaker 1: the first thing I'll addresses them the you know, the
Speaker 1: marketing piece. I mean, listen, this is it's very low
Speaker 1: cost for you to hire, you know, a few marketing
Speaker 1: interns and have them tweet on your account all day.
Speaker 1: It's a lot cheaper than buying um television, which still
Speaker 1: has an R o I on it, but or buying
Speaker 1: radio time, or or putting ads in magazines very very
Speaker 1: high r o EYES associated with social media marketing. Um,
Speaker 1: you know, you're advertising directly where your customers are. Right, Like,
Speaker 1: my son doesn't watch TV anymore, but he has his
Speaker 1: phone in his hand all the time he's basically walking
Speaker 1: around with a billboard in his hand. You know. So, uh,
Speaker 1: this is gonna continue. Um, we we think it's just
Speaker 1: gonna Social media marketing is just going to continue to
Speaker 1: be a larger percentage of the AD budgets of these companies.
Speaker 1: You know. The other thing you mentioned about the employees, Um,
Speaker 1: that was kind of interesting. Yeah, there was an article
Speaker 1: out last week about a few a few Popey's employees
Speaker 1: that were talking about a horrible experience. They were so
Speaker 1: busy they quit mid shift. You know. But um, you know,
Speaker 1: I'd caution about believing everything you read in that article.
Speaker 1: I mean they only you know, Popeyes has thousands of
Speaker 1: stores and there was only there was only five employees interviewed. Um.
Speaker 1: You know, I know growing up working in a car
Speaker 1: wash when the day was busy, it went a lot
Speaker 1: faster and I kind preferred preferred it that way. So, uh,
Speaker 1: you know that that there's been a lot of hype
Speaker 1: and a lot of politicizing I guess of of this situation.
Speaker 1: You know, Mike Calin, thank you so much for being
Speaker 1: with us. Mike Calin, senior restaurant analyst and car wash
Speaker 1: expert for us here at Bloomberg Intelligence joining us on
Speaker 1: the phone. Have you had one, Paul? I have not,
Speaker 1: but now I have to go. I mean there's a
Speaker 1: line out the Chick fil A on electionson Avenue every day.
Speaker 1: I know, but it's it's really just chicken on bread, right,
Speaker 1: I mean, what what I'm just, I'm sort of my
Speaker 1: mind is boggled. People are getting older and they need
Speaker 1: health insurance and they want to get it less expensive
Speaker 1: than it is in most places. Enter e Health, which
Speaker 1: is a company who shares have returned more than two
Speaker 1: d P over the past twelve months. Joining us right now.
Speaker 1: Scott Flanders, chief executive officer of the Health U from
Speaker 1: Mountain View, California. Scott, thank you so much for joining us.
Speaker 1: So just tell us a little bit about, uh, the
Speaker 1: provenance of the health dot com. Well, we started over
Speaker 1: twenty years ago helping individuals and families compare insurance plans,
Speaker 1: and then we evolved to help them enroll. We're a
Speaker 1: broker and we get paid by the health insurance companies,
Speaker 1: but we're neutral on behalf of the consumer. So we
Speaker 1: are consumer centric company and our single mission is to
Speaker 1: make sure Americans have the best and right insurance for them.
Speaker 1: So Scotts, as Lisa mentioned, your stock is up over
Speaker 1: two over the trailing twelve months. What's really been the
Speaker 1: driver there for behind the stocks? Now, that's great, Um,
Speaker 1: it's at the result of the explosive growth in Medicare
Speaker 1: private Medicare plans better known as Medicare advantage or Medicare
Speaker 1: supplement plans. They're about sixty million eligible Americans for Medicare
Speaker 1: right now, and of those, about thirty six million have
Speaker 1: opted to buy private insurance plans, many of which millions
Speaker 1: and millions of which can get zero premium products through
Speaker 1: Medicare Advantage. And we've been growing because we are gaining
Speaker 1: share of that growing market. So it's got you basically
Speaker 1: are like an Expedia for health insurance plans, right it
Speaker 1: is that a fair way to sort of roughly characterized. No,
Speaker 1: it's the perfect description. And just as Expedia carries all
Speaker 1: the airlines and has all of the flight of plans
Speaker 1: and prices as well as all hotels, we have all
Speaker 1: the plans and all the carriers, every doctor, every hospital,
Speaker 1: every pharmacy, and so we are able to help seniors
Speaker 1: get into the right Medicare plan. And that real consequence
Speaker 1: for seniors. It's a it's a stressful decision for them
Speaker 1: because you know, they use a lot of healthcare at
Speaker 1: their age, and what we do is we're that neutral
Speaker 1: guide to get them into the right plan. And so
Speaker 1: we've been growing six seven times the growth of the
Speaker 1: industry because we're on the side of the consumer. Why
Speaker 1: would companies health insurance companies pay you if you are
Speaker 1: ultimately trying to make the premiums lower for the end consumer, right, Well,
Speaker 1: they their challenges. They also try to enroll seniors in
Speaker 1: their own plans, and they do a good job of that,
Speaker 1: but they can only offer the best plan for the
Speaker 1: senior that is that their company offers, whereas we offer
Speaker 1: all of the company's plans. And so the reason that
Speaker 1: they use brokers, and broker's account for half of all
Speaker 1: enrollments in Medicare is because we reach into millions of
Speaker 1: seniors that they don't reach, and so they're willing to
Speaker 1: pay us. It's an offset to cost they would have anyway,
Speaker 1: because it's expensive for the health insurance carriers to go
Speaker 1: out and find seniors and explain to them the benefits
Speaker 1: and get them enrolled, and so paying a broker is
Speaker 1: really an offset to a cost that the carrier would
Speaker 1: have anyway. So, Scott, what you know, as we approached
Speaker 1: the two presidential election, certainly a lot of Democratic candidates
Speaker 1: are talking about changes in healthcare laws and maybe even
Speaker 1: Medicare for all. How how would that impact your business? Yeah,
Speaker 1: Medicare for all is a great sound bye, and you know,
Speaker 1: it's great for a political debate where you're limited to
Speaker 1: thirty seconds. You know, the challenge of it is what
Speaker 1: is your definition of Medicare for all. The reason that
Speaker 1: it's popular when it's not explained is because Medicare working
Speaker 1: and seniors are happy with it. The twenty plus million
Speaker 1: Americans that are on a Medicare advantaged plan today, Our
Speaker 1: polling shows very high user satisfaction with Medicare advantage and
Speaker 1: it's been the Trump's administration's plan and objective to get
Speaker 1: more seniors on Medicare advantage plans because it's cheaper for
Speaker 1: the government, and colitical studies show it's better health care
Speaker 1: for seniors, and so seniors like it, and so of
Speaker 1: course it would be popular to say let's have Medicare
Speaker 1: for all. The first thing I point out is seniors
Speaker 1: don't want Medicare for All. They feel like they've paid
Speaker 1: into this for their entire working lives and they do
Speaker 1: not want the system flooded by a hundred and fifty
Speaker 1: million non seniors. They know that would cause their benefits
Speaker 1: to be reduced. That's one big obstacle to Medicare for
Speaker 1: All and seniors vote, as we all know. The second
Speaker 1: obstacle is we have a hundred and fifty two hundred
Speaker 1: and sixty million Americans covered by employer sponsored healthcare and
Speaker 1: they don't want to give that up. And so I
Speaker 1: believe the political reality of this as we get deeper
Speaker 1: into the cycle, it will become more clear. And you're
Speaker 1: already seeing many candidates like Kamala Harris backing off of
Speaker 1: Medicare for All, even though she had signed on to
Speaker 1: the original Bernie Sanders bill. As she's dug deeper into it,
Speaker 1: her view has evolved, and I think wisely so. Scott Flanders,
Speaker 1: thank you so much for joining us. Scott is a
Speaker 1: chief executive officer of Healthy Trains on the NASTAC under
Speaker 1: the symbol h TH Companies based in Mountain View, California.
Speaker 1: We appreciate Scott coming on giving some thoughts about his
Speaker 1: company and the state of the US healthcare industry. It's
Speaker 1: getting to be pretty predictable. When we do get some
Speaker 1: sort of softening and trade talks, the place to look
Speaker 1: at is the socks, the semiconductor index, which will inevitably
Speaker 1: pop vice versa if you have some sort of hardening
Speaker 1: and trade tensions. That's the one that falls out of BED.
Speaker 1: Joining us down to discuss what the outlook is for
Speaker 1: some of these se conductor shares, as well as tech
Speaker 1: in general. David Garretty, chief market strategist at laid Law
Speaker 1: and Company, also a partner at bt block. He's joining
Speaker 1: us here in our Bloomberg Interactive Broker studios. So we
Speaker 1: are seeing today popping socks stocks. Micron is up two
Speaker 1: point six percent, for example, the Socks Index of Philadelphia
Speaker 1: Sock Exchange Semiconductor Index up two point one per cent.
Speaker 1: How much more could you see this index and these
Speaker 1: stocks rally if there was a protracted softening in trade
Speaker 1: discussions between the US and China. Yeah, if we were
Speaker 1: to end up with the situation where we saw maybe
Speaker 1: a call for six month truce in terms of trade discussions,
Speaker 1: pushing things out into you know, it might be possible
Speaker 1: to see you know, if I do a ten percent
Speaker 1: rally in these names. But bear in mind that a
Speaker 1: lot of what's been going on in terms of the
Speaker 1: equity markets to date have been predicated primarily upon the
Speaker 1: fact that the Federal Reserve was gonna be accommodative in
Speaker 1: terms of monetary policy against any economic softening that would
Speaker 1: occur as a result of these artificially induced trade wars
Speaker 1: between the US and China. Uh So, certainly we might
Speaker 1: say that equities to begin with anyway, including the semiconductor shares,
Speaker 1: are probably trading at elevated levels, especially when you look
Speaker 1: at a backdrop where corporate profits already down ten percent
Speaker 1: year over year from the third quarter of two thousand eighteen.
Speaker 1: So you know, clearly it's not gonna be profits that
Speaker 1: are driving the stock market higher. It was either the
Speaker 1: expectation of one or two things. Either one of them
Speaker 1: is going to be monetary policy easing, which we think
Speaker 1: we saw the Federal Reserve potentially back away a bit
Speaker 1: from at least against expectations is shown by the futures market,
Speaker 1: or you know, obviously we need to see a softening
Speaker 1: here with respected trade negotiations, and clearly, you know there's
Speaker 1: some positive noises being made here. But the question really
Speaker 1: boils down to are you going to see enough maturity
Speaker 1: on the US side to say, Okay, we're going to
Speaker 1: back down and stop beating our chest. So and again,
Speaker 1: it seems that you kind of highlighted what it seems
Speaker 1: to be kind of the drivers of this market, the
Speaker 1: push and pull between trade uncertainty and the FEDS ability
Speaker 1: to perhaps you know, ameliorate some of the downside from
Speaker 1: trade uncertainty. Assuming you know the market is pricing in
Speaker 1: three four, gosh, maybe five rate cuts over the next
Speaker 1: eighteen months, do you think that would be Do you
Speaker 1: think the FED will be successful in continuing to drive
Speaker 1: the economy for it even if there is this uncertainty
Speaker 1: from trade. Well, I would say that trying to overcome
Speaker 1: the uncertainty not just from trade, but trying to overcome
Speaker 1: the uncertainty that's coming from the current administration is going
Speaker 1: to be something that the FEDS to be able to offset.
Speaker 1: Me A lot of what has been coming out in
Speaker 1: terms of, if we can call it policy volatility for
Speaker 1: the administration clearly has made it very very difficult for
Speaker 1: anybody running a business to plan over you know, a
Speaker 1: two to a five year horizon for fear of the
Speaker 1: fact that you know, someone could turn right around in
Speaker 1: twenty four hours and say something completely opposite of what
Speaker 1: had been said before. Difficult to plan in an uncertain environment,
Speaker 1: and unless the administration we're able to move to a
Speaker 1: stance where they could give consistent, stable policy views that
Speaker 1: people could actually plan around, most likely you're going to
Speaker 1: find that people who are going to be make committing
Speaker 1: capital not just to the stock market but to the
Speaker 1: real economy here are going to say, look, we'll just
Speaker 1: take a glow go slow approach until we've got somebody
Speaker 1: more stable that we can deal with. Which tech company
Speaker 1: big tech do you think has most immunized itself from
Speaker 1: some of the push pull that we're seeing in the
Speaker 1: trade talks. I mean, the view around technology g is
Speaker 1: um Certainly if we look at the ongoing strength that
Speaker 1: there is around online search, Google still remains a fairly
Speaker 1: strong factor. Google on their own had pulled out from China.
Speaker 1: Not granted, there have been issues where Google has been
Speaker 1: seen doing some development work, potentially in collaboration with China,
Speaker 1: but I would argue that on balance it's a fairly
Speaker 1: small part other overall business. Uh, you might also say
Speaker 1: that at the same time, Amazon, uh, you know, it
Speaker 1: certainly has some strength in terms of just being able
Speaker 1: to displace retail. Granted, this is all happening against a
Speaker 1: consumer environment where the impact of tariffs could have a
Speaker 1: major effect on holiday shopping in two thousand nineteen. This
Speaker 1: is not necessarily something from which Amazon would be immune.
Speaker 1: But one would argue if you look at other participants
Speaker 1: in the retail channel, probably Amazon is still in a
Speaker 1: position to gain greater share against that. So one might
Speaker 1: argue that if you want to get away from semiconductors
Speaker 1: where clearly they're directly exposed relative to trade negotiations, Apple
Speaker 1: to some extent, also the impact that it's had on
Speaker 1: the iPhone in the overseas markets. But looking in terms
Speaker 1: of some of the tech names, Google, Amazon would be
Speaker 1: some major names that we would look at as being
Speaker 1: somewhat insulated, you know, staying with tech stocks. One of
Speaker 1: the risks that seems so faded a little bit is
Speaker 1: the regulator the regulation risk for a tech I mean,
Speaker 1: you know, it seems like it's been a you know,
Speaker 1: a lifetime ago when we had to tech CEOs in
Speaker 1: front of Congress and so on and so forth. How
Speaker 1: much of a risk do you think that is an
Speaker 1: overhang for technology stocks. I'm looking at just the NASDACS
Speaker 1: down two percent from on a trailing twelve month basis.
Speaker 1: How much of regulatory risk is still out there for
Speaker 1: the tech sector. I would say the regulatory risk continues
Speaker 1: to be a concern. I mean, we obviously have a
Speaker 1: situation situation right now where Congress is adjourned, but obviously
Speaker 1: wait until September and hearings are reconvened. Also in the meanwhile,
Speaker 1: it's been interesting to see that tech companies such as
Speaker 1: Facebook in the area of digital currencies. Facebook, as we know,
Speaker 1: would come out back in June two thousand nineteen discussed
Speaker 1: their effort at developing a digital currency libra um. There
Speaker 1: was universal pushback from regulators in this regard, but their
Speaker 1: indications now that Facebook is still planning on pushing forward
Speaker 1: to have an early launch. So you know, the fact
Speaker 1: that a company like Facebook would essentially act against regulators
Speaker 1: in this case not work collaboratively with them, I would
Speaker 1: think just argues for further attention to be paid to
Speaker 1: this area. So further attention just to follow up on
Speaker 1: the libra Have we determined that it actually is a
Speaker 1: cryptocurrency at this point. Uh, it probably is whatever Mark
Speaker 1: Zuckerberg says it is um, but we would argue that
Speaker 1: I would But in terms of companies developing digital currencies,
Speaker 1: I'd much rather look at what JP Morgan is doing
Speaker 1: with the jpm coin and the fact of seeing that
Speaker 1: actually developed and deployed, uh, than than putting any great
Speaker 1: expectations on my part with respect to what Facebook and
Speaker 1: Libra may do. So touch about that jpm coin, what
Speaker 1: is that? Essentially? It was announced back in February of
Speaker 1: two thousand nineteen. The initial intention was this was a
Speaker 1: way of trying to put in place a blockchain platform
Speaker 1: UM with a settlement token, the jpm coin that would
Speaker 1: be used to speed transfers reduced costs of being able
Speaker 1: to move money. First, it was targeted mostly in terms
Speaker 1: of other inter bank transactions, but over time as it
Speaker 1: started to expand, it has the potential of going out
Speaker 1: to more enterprise or corporate clients, not just of JP
Speaker 1: Morgan Chase, but also it's network of correspondent banks worldwide. Interesting.
Speaker 1: David Garretty, thanks so much for joining us. David's a
Speaker 1: chief market strategist at lay Lad Company, also a partner
Speaker 1: at bt Block, joining us as he's wanted to do
Speaker 1: in our Bloomberg Interactive Broker studio. We appreciate your thoughts
Speaker 1: on the market and on technology and on cryptocurrencies. Well,
Speaker 1: last night, China indicated that it would not immediately retaliate
Speaker 1: against the latest U s tariff increases announced by President
Speaker 1: Trump last week, emphasizing the need to discuss ways to
Speaker 1: de escalate the trade war between the world's two largest economies.
Speaker 1: To get the latest on the US China trade discussions,
Speaker 1: we go to Christopher Balding, Associate professor at Fulbright University
Speaker 1: in Vietnam. He's also a Bloomberg opinion columnist. Usually he's
Speaker 1: based in Saigon, but today he is in Los Angeles, California. Christopher,
Speaker 1: thank you so much for joining us. So what do
Speaker 1: you make of the move by China last night to say, hey,
Speaker 1: let's maybe de escalate this a little bit. I wouldn't
Speaker 1: read too much into it. At the same time, yesterday,
Speaker 1: for instance, they were criticizing the US for freedom of
Speaker 1: navigation patrols in the South China See. They were also
Speaker 1: calling for uh um an ending of the embargo against Huawei.
Speaker 1: Excuse me, um so I I'd be a little cautious
Speaker 1: reading too much into that one particular statement. So I
Speaker 1: want to read you something that Jim Bianco of Bianco
Speaker 1: Research said in an interview with the Market n z
Speaker 1: Z it's a German UH newspaper. He was talking about
Speaker 1: President Trump's tactics UH in the trade war, and he
Speaker 1: referred Spinal Tap, the sort of cult film from the
Speaker 1: nine eighties, saying, I think Trump is going to eleven
Speaker 1: on trade. He's going to turn it up so high
Speaker 1: that there is going to have to be a deal.
Speaker 1: That's the way he wants to do this. He will
Speaker 1: just make it intolerable so everybody has to sit down
Speaker 1: and cut a deal. Do you agree. I think there's
Speaker 1: some truth to that with with with a caveat, And
Speaker 1: what I mean by that is is if you if
Speaker 1: you actually go back and look over the past eighteen months, UM,
Speaker 1: there has been some back and forth, and there have
Speaker 1: been some stops and starts, but in reality, the trendline
Speaker 1: has been slow and steady escalation for the past eighteen months,
Speaker 1: which is where we're at today. UM. So if we
Speaker 1: stripped the rhetoric out, UM, it's actually been pretty pretty steady. UM. However,
Speaker 1: I think what's always important to remember is that UM, domestically,
Speaker 1: China has a lot more control over its economy, especially
Speaker 1: with the credit flows UM and how they're working to
Speaker 1: keep the economy going UM. So I think their their
Speaker 1: threshold for pain is quite high, and so they seem
Speaker 1: intent on essentially making Trump uh bring the pain for
Speaker 1: lack of a better term, and so I think it's
Speaker 1: going to be very interesting to see who blinks first
Speaker 1: in how much pain each side is willing to sustain.
Speaker 1: So on that front, UM, you know, it appears that,
Speaker 1: you know, President Trump and the administration are prepared to
Speaker 1: take the long road here. There's really hasn't been any
Speaker 1: indication that they are not. So is your expectation that
Speaker 1: these these trade discussions or impasse, if you will, uh,
Speaker 1: we kind of go beyond the election. I'm kind of
Speaker 1: I'm kind of looking at is the real the election?
Speaker 1: Is the real indicator about what's going to happen, because
Speaker 1: it's very you know, even though China might release an
Speaker 1: overnight statement, I don't think there's a whole lot of
Speaker 1: evidence that there's going to be any type of significant
Speaker 1: movement uh any any time soon. And so I think
Speaker 1: you really have to expect that Beijing is really hoping
Speaker 1: for uh, for a much more compliant president, It is
Speaker 1: willing to make a deal than President Trump. So I
Speaker 1: guess I'm looking right now at market reaction, which is
Speaker 1: that people buy it, I mean right now. And I
Speaker 1: was thinking, perhaps you're seeing a rally on this sort
Speaker 1: of de escalation or a parental de escalation by China. Uh,
Speaker 1: perhaps it's on light volume, but no, we learned it's
Speaker 1: actually on more value volume in terms of stock trading
Speaker 1: than we've seen in recent weeks. And I'm just wondering,
Speaker 1: do you think that traders are wrong, that they just
Speaker 1: keep getting fooled again and again that there's some sort
Speaker 1: of progress when it is just sort of a steady
Speaker 1: escalation and that's what it's going to be until UM,
Speaker 1: I do think it's going to be a much more
Speaker 1: steady escalation. And UM it is a little surprising to
Speaker 1: me that every time there is this, you know, um
Speaker 1: overnight negative comment or a Trump tweet, that the market
Speaker 1: jumps in reaction. And it would seem by now that
Speaker 1: the algorithms could figure out that to essentially moderate their
Speaker 1: expectation of a specific statement or tweet so Chris, I
Speaker 1: know you have a lot of expense experience in the
Speaker 1: UH in the Asian region gives your sense of kind
Speaker 1: of the pressure that President g is under to get
Speaker 1: not only a deal but the right deal. Well. I
Speaker 1: think the big issue for him economically is if he
Speaker 1: were to actually make significant material concessions on economic policy. UM.
Speaker 1: There's two specific issues. First of all, he's built himself
Speaker 1: up as the rejuvenator of China, you know, making China
Speaker 1: great again, and so that would be politically suicidal for
Speaker 1: him to to really back down to Trump. The other
Speaker 1: thing is is that if he was to really open
Speaker 1: up Chinese markets to competition and reduce subsidies to heavy
Speaker 1: industry and things like that, UM, there are very serious
Speaker 1: questions about the stability that that would bring or or
Speaker 1: the volatility that would bring to unemployment UH, to a
Speaker 1: lot of industries, UM, potential bank failures, things like that.
Speaker 1: So it's questionable even economically if he can do that
Speaker 1: without being willing to bear a significant amount of pain
Speaker 1: in the Chinese economy. There was a story today on
Speaker 1: the Bloomberg looking at how most US companies are planning
Speaker 1: to stay in China and simply ride out any unrest
Speaker 1: with respect to trade negotiations. And you have seen certain
Speaker 1: banks expand their operations overseas, and I'm wondering, you know,
Speaker 1: whether they're right in in betting that China won't retaliate
Speaker 1: against them as part of their effort against the US
Speaker 1: when they run out of goods to tariff. Well, I
Speaker 1: think it is a very serious question. And we've seen
Speaker 1: this with the Canadians, We've seen this with Brits um,
Speaker 1: we've seen this with Australians. That China has no qualms
Speaker 1: about using either business operations or foreign personnel as bargaining chips.
Speaker 1: And this is dating back many years. This is not
Speaker 1: just trade war related. Um, So I think it's I
Speaker 1: think it's a significant risk that those companies are absorbing
Speaker 1: deciding to stay in there and say China is not
Speaker 1: going to retaliate against US because they clearly have a
Speaker 1: long term pattern of doing so. So, Chris, there seems
Speaker 1: to be bipartisan support in the US for a meaningful
Speaker 1: trade deal with China. Is the same thing true in China. Well,
Speaker 1: the rumors that you hear, and I think there's there's
Speaker 1: solid evidence to back this up, is that there's a
Speaker 1: lot of in there's a not insignificant amount of infighting
Speaker 1: within China about what is how is best to proceed um.
Speaker 1: It's not lost on even you know, let's say Party
Speaker 1: supporters that China is becoming increasingly closed off from the
Speaker 1: global economy UM. Whether it's being able to vacation abroad
Speaker 1: as they put currency limits on people, UM, or whether
Speaker 1: it's invest abroad, all access to information overseas. It's not
Speaker 1: lost on anyone, even the Party supporters what is happening.
Speaker 1: So I think there is a not insignificant amount of
Speaker 1: infighting even within China. Christopher Balding, thank you so much
Speaker 1: for spending time with us. Christopher Balding is Associate professor
Speaker 1: at Fulbright University of Vietnam. He is also a Bloomberg
Speaker 1: Opinion Calmness. Thanks for listening to the Bloomberg P and
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