WEBVTT - China, Equities, ETFs, and Commodities (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news on the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.720 at Bloomberg dot com slash podcast just reading on the 0:00:21.720 --> 0:00:25.240 Bloomberg termoil right Now. Protests against china strict COVID measures 0:00:25.760 --> 0:00:28.680 failed to materialize on Monday as a Chinese authorities deployed 0:00:28.680 --> 0:00:31.560 a heavy police presence in the capital on other major 0:00:31.640 --> 0:00:35.159 cities to deter a repeat of the weekend's demonstrations. When 0:00:35.159 --> 0:00:36.600 we saw that news over the weekend, I said, we 0:00:36.640 --> 0:00:38.800 need to check in with Leland Miller. He's our go 0:00:38.880 --> 0:00:41.040 to voice and all things China. He's the CEO of 0:00:41.120 --> 0:00:44.960 China bag Book International. Leland, We I'd love to get 0:00:45.000 --> 0:00:49.199 your perspective given your experience in China. What did we 0:00:49.280 --> 0:00:53.080 really see over the weekend with some of these demonstrations. 0:00:53.080 --> 0:00:57.560 What are the takeaways? Well, clearly frustration is boiling over. 0:00:58.200 --> 0:01:01.880 You know, the Chinese people have to deal with a 0:01:02.080 --> 0:01:07.800 very draconian zero COVID policy for UH for months and 0:01:07.840 --> 0:01:10.320 months and months and months and months and months now, 0:01:10.520 --> 0:01:15.280 and it is crushed economic activity, it's crushed travel, it's 0:01:15.720 --> 0:01:18.560 it's torn families apart. UH. And so I think that 0:01:18.600 --> 0:01:20.720 there is a desire right now to send a message 0:01:20.760 --> 0:01:22.679 that this needs to end. UH. And I think a 0:01:22.680 --> 0:01:27.080 lot of the protests UM, we're about a frustration with 0:01:27.120 --> 0:01:32.280 the leadership for not providing a roadmap out of this UH. 0:01:32.280 --> 0:01:36.440 You know, winter is COVID spreading season. Things were never 0:01:36.480 --> 0:01:39.000 going to be opened up over the winter and there 0:01:39.040 --> 0:01:42.039 and then they're still not going to be UH for 0:01:42.080 --> 0:01:44.120 the most part. But I think that the idea that 0:01:44.160 --> 0:01:47.360 people still don't have a date on the horizon, they 0:01:47.360 --> 0:01:49.240 don't have an idea of when when their misery is 0:01:49.280 --> 0:01:51.600 going to end. I think that this, this this caused 0:01:51.800 --> 0:01:54.000 things to really boil over. In addition, of course to 0:01:54.000 --> 0:01:56.960 the fact that you've you've seen some very grizzly events recently, 0:01:57.040 --> 0:02:00.200 like people trapped in their houses and and uh ire 0:02:00.240 --> 0:02:02.280 is consuming them. So so this is this has really 0:02:02.320 --> 0:02:04.760 gotten to a point where where people had enough. Now 0:02:05.160 --> 0:02:08.800 I'm not sure from from what we understand here in 0:02:08.840 --> 0:02:11.880 the West, it's incredibly dangerous to protest in China. Right, 0:02:11.960 --> 0:02:14.239 My idea is that if you go out there, you're 0:02:14.320 --> 0:02:18.120 literally risking your life. Um, is that really the case? 0:02:18.240 --> 0:02:22.800 Do people in China understand that? Because that raises really 0:02:22.840 --> 0:02:25.480 the bar for you know what, I'm willing to go 0:02:25.520 --> 0:02:29.000 out of my house and protests against Yeah, protests in 0:02:29.160 --> 0:02:32.800 China aren't uncommon, but what is very uncommon is to 0:02:32.880 --> 0:02:37.919 see protests uh surging in multiple cities at the same 0:02:37.919 --> 0:02:40.560 time about the same thing. Uh. This is sort of 0:02:40.840 --> 0:02:43.240 this is you know, not just about dissatisfaction with the 0:02:43.280 --> 0:02:47.119 local issue or a bank that people think might be insolving. 0:02:47.240 --> 0:02:51.120 This is about a fundamental policy that the central government 0:02:51.160 --> 0:02:54.920 has uh that that that that there's no tolerance for anymore. 0:02:55.000 --> 0:02:59.679 So the you know, protesting can happen, but this clearly 0:02:59.800 --> 0:03:02.680 was sending a signal that it could become something much bigger, 0:03:02.680 --> 0:03:05.240 which is why the authorities have moved in to try 0:03:05.280 --> 0:03:07.400 to stop it from from from boiling out of control 0:03:07.440 --> 0:03:11.080 in the short term, Leland, Does the Chinese government not 0:03:11.360 --> 0:03:15.320 understand Did the Chinese people not understand that they can't 0:03:15.360 --> 0:03:21.400 get to some level of herd immunity without massive vaccinations. 0:03:21.440 --> 0:03:25.280 That's what the rest of the world has learned. How 0:03:25.320 --> 0:03:29.880 has it spun within China? Well, the the way the 0:03:29.919 --> 0:03:33.080 Beijing has handled this over the past year or so, 0:03:33.480 --> 0:03:36.720 past two years or so has has been quite puzzling. 0:03:37.200 --> 0:03:40.560 You know. The for for the first two years and one, 0:03:41.120 --> 0:03:43.400 there were you know, there was there was there were 0:03:43.400 --> 0:03:46.480 tight restrictions on on COVID, but nothing like what we've 0:03:46.520 --> 0:03:50.320 seen in There was plenty of time for the leadership 0:03:50.400 --> 0:03:53.480 to have started a vaccine rollout, to imported mr and 0:03:53.560 --> 0:03:55.720 A vaccines, to do a lot of the things that 0:03:55.880 --> 0:03:58.200 China needs in order to get out of this, and 0:03:58.280 --> 0:04:00.760 none of it was done. And of course the you know, 0:04:00.840 --> 0:04:03.640 the belief is that that she didn't want to be 0:04:03.680 --> 0:04:06.880 embarrassed by importing foreign vaccines. He wanted Chinese companies to 0:04:06.880 --> 0:04:09.200 be able to do it so they could claim victory 0:04:09.280 --> 0:04:12.680 domestically over the virus. But it's gotten to the point where, 0:04:12.720 --> 0:04:15.160 you know, we're we're here on the on the cusp 0:04:15.200 --> 0:04:18.599 of three. Most of the world has mostly moved on 0:04:18.720 --> 0:04:22.360 from COVID, and China is looking at what could probably 0:04:22.400 --> 0:04:26.359 going to be the worst COVID outbreaks that they've seen 0:04:26.560 --> 0:04:30.000 in the coming months. And so the policy response has 0:04:30.040 --> 0:04:33.359 been completely puzzling, and I think that's one of the 0:04:33.400 --> 0:04:36.599 reasons that people are are so frustrated. Is there any 0:04:36.680 --> 0:04:40.360 element of you know, the party maintains control over the 0:04:40.400 --> 0:04:42.880 people by locking them down. I mean, it sounds so 0:04:43.000 --> 0:04:46.479 dramatic and it's but in a sense, I can't understand 0:04:46.600 --> 0:04:50.159 how that would actually work. Yeah, you hear that a lot. 0:04:50.560 --> 0:04:53.760 It's it's hard to believe that this is about control. 0:04:54.120 --> 0:04:58.359 Uh first and foremost. Uh. You have a situation where, 0:04:58.839 --> 0:05:03.040 you know, health, health, health risks aside, the economy needs 0:05:03.200 --> 0:05:05.880 to be open in order to thrive, in order to 0:05:06.080 --> 0:05:08.680 just be able to tread water. And what's happening right 0:05:08.680 --> 0:05:11.880 now is remarkable. Um, you saw very very few people 0:05:11.960 --> 0:05:14.520 as we entered two believing that you know, there wouldn't 0:05:14.520 --> 0:05:16.680 be a second half bounce, that she wouldn't relent at 0:05:16.720 --> 0:05:19.960 certain point, and nothing of the sort has happened. So 0:05:20.200 --> 0:05:22.000 if you look at what's likely to happen in the 0:05:22.040 --> 0:05:25.320 coming months, the party has got to be responsive, look 0:05:25.400 --> 0:05:28.039 at least look responsive to the people who are protesting 0:05:28.120 --> 0:05:31.120 right now. So there will be some sort of rhetorical relaxation. 0:05:31.480 --> 0:05:33.960 There's some policies they could target, they could talk about 0:05:34.040 --> 0:05:37.560 less you know, splitting families apart, and they can talk 0:05:37.600 --> 0:05:41.760 about you know, less stringent lockdowns or lockdowns for for 0:05:41.760 --> 0:05:44.039 for short amounts of time, But you're about to go 0:05:44.240 --> 0:05:46.960 into the winter months where COVID will spread out of 0:05:47.000 --> 0:05:50.919 control if there is no sort of control mechanism. And 0:05:51.000 --> 0:05:54.840 so there's really no good answer right now to to 0:05:54.839 --> 0:05:57.239 to to the problem that the Chinese government has to solve. 0:05:57.440 --> 0:05:59.880 They cannot functionally open up the economy and not have 0:06:00.160 --> 0:06:03.479 massive COVID outbreaks, but they can't keep the population under 0:06:03.480 --> 0:06:07.839 control indefinitely under a draconian COVID zero. So you're likely 0:06:07.880 --> 0:06:09.680 to see them try to thread the needle, try to 0:06:09.720 --> 0:06:12.320 do the middle ground, and there's no guarantee that's not 0:06:12.400 --> 0:06:14.440 gonna be a disaster as well. Yeah, that is. It's 0:06:14.480 --> 0:06:16.440 tough stuff. I don't know how they're going to manage that. 0:06:16.520 --> 0:06:19.680 Leland Miller, thanks so much for taking the time today. 0:06:19.760 --> 0:06:21.560 We absolutely wanted to hear from you to get your 0:06:21.880 --> 0:06:24.560 latest thoughts on China. Here, Leland Miller used to see 0:06:24.560 --> 0:06:27.360 of the China Basebook International. They have their own proprietary 0:06:27.920 --> 0:06:30.240 data sets and data sources over in China get some great, 0:06:30.279 --> 0:06:37.320 great information. Well, China seems to be one of the 0:06:37.400 --> 0:06:41.599 narratives of this Monday morning trading demonstrations over the weekend 0:06:41.640 --> 0:06:46.040 causing some uneasiness as it relates to that economy, Apple 0:06:46.160 --> 0:06:48.719 saying they're going to be short maybe six million iPhones 0:06:48.760 --> 0:06:52.280 because of the disruptions and there plants over there in China, 0:06:52.320 --> 0:06:54.000 So we need to just kind of get a circle 0:06:54.040 --> 0:06:56.360 around this whole thing. We'll do that with Gina Martin Adams, 0:06:56.680 --> 0:06:59.560 chief equity strategist of Bloomberg Intelligence, and a Rack Ronnick. 0:06:59.560 --> 0:07:02.280 He's a senior tech an also Bloomberg Intelligence as well. Gina, 0:07:02.360 --> 0:07:04.800 let's start with you, how do you factor in I 0:07:04.839 --> 0:07:09.640 don't know, China risk if you will to your market outlook. Yeah, 0:07:09.680 --> 0:07:12.640 I think with respect to the US, China risk is 0:07:12.720 --> 0:07:16.640 largely centered on the multinational securities that do have exposure 0:07:16.720 --> 0:07:21.880 either import exposure or export exposure to China. UM. So 0:07:21.960 --> 0:07:27.320 clearly any sort of persistent slowdown into three, persistence of 0:07:27.400 --> 0:07:31.840 these lockdown measures and the zero COVID policy is a 0:07:31.880 --> 0:07:34.920 constant drag on this space in two that will continue 0:07:34.920 --> 0:07:38.720 into three. For global equities, there really is a matter 0:07:38.760 --> 0:07:42.000 of the investment opportunity set just continually shrinking with the 0:07:42.080 --> 0:07:45.320 lack of kind of the investibility of China. This recall 0:07:45.440 --> 0:07:49.480 for the last more than fifteen nearly twenty years now, 0:07:50.160 --> 0:07:54.240 China was anticipated to be a very strong emerging market player, 0:07:54.560 --> 0:07:57.560 and that was certainly reflected in its growing share of 0:07:57.600 --> 0:08:01.280 the market cap of the global indices over the last year, 0:08:01.800 --> 0:08:04.680 even closer to two years. Now that's really come under question, 0:08:04.960 --> 0:08:09.120 and it makes pretty tremendous train tremendous sea change in 0:08:09.160 --> 0:08:13.240 the investibility of global markets. Not having that big player 0:08:13.800 --> 0:08:16.200 as an area where you can put capital in the 0:08:16.200 --> 0:08:19.200 global markets has resulted in a flight to other areas 0:08:19.600 --> 0:08:23.680 in emerging markets, in particular India, whereas evaluation premium for 0:08:23.720 --> 0:08:28.080 Indian securities is off the charts, investors have clearly tried 0:08:28.160 --> 0:08:31.200 to find ways to you know, leverage emerging market growth. 0:08:31.280 --> 0:08:34.840 What about China? What about producers? Um, let's bring in 0:08:34.920 --> 0:08:39.360 on a rag here. Um, it's fascinating what the point 0:08:39.440 --> 0:08:42.240 gene is making about valuations on the stocks. But you know, 0:08:42.400 --> 0:08:46.240 producers that make consumer goods like apple still seem to 0:08:46.240 --> 0:08:50.360 have no problem. Um, you know, made in China, having 0:08:50.440 --> 0:08:52.439 made in China stamped on their on their products and 0:08:52.480 --> 0:08:55.080 consumers still buy them like crazy. Right? Is that changing 0:08:55.080 --> 0:08:57.959 it all? On a rug. I don't think so, and 0:08:58.080 --> 0:09:00.560 only the reason is there is no donative at this point. 0:09:00.600 --> 0:09:01.839 I mean, what are you going to do by a 0:09:01.880 --> 0:09:04.480 Nokia phone? So I mean, but they could produce in 0:09:04.520 --> 0:09:09.280 India for example, like investors are there instead? Right, No, 0:09:09.360 --> 0:09:11.160 that's the fair point. But the thing is this is 0:09:11.240 --> 0:09:14.280 unlike stocks, this supply chain took twenty years to build. 0:09:14.480 --> 0:09:17.200 You just can't get up and start building iPhones anywhere else. 0:09:17.400 --> 0:09:20.040 They have already started to do that, but just less 0:09:20.040 --> 0:09:23.920 than five percent of all iPhone assembly, and and a 0:09:24.240 --> 0:09:27.840 large rationale for that is the supply chain for most 0:09:27.920 --> 0:09:32.640 electronic goods is centered in China. So don't talk to 0:09:32.679 --> 0:09:35.720 us about you know, what's Apple really doing day to 0:09:35.760 --> 0:09:38.400 day to try to mitigate this issue? What have you seen? 0:09:39.600 --> 0:09:42.240 So we have already heard that they are assembling these 0:09:42.280 --> 0:09:45.320 phones outside the China at this point, and I think 0:09:45.559 --> 0:09:47.480 it's going to take four or five years to make 0:09:47.480 --> 0:09:50.280 a meaningful DNT to that. The second part is going 0:09:50.320 --> 0:09:52.840 to be are they you know, the parts and the 0:09:52.840 --> 0:09:56.280 other things that they need to actually assemble these products? 0:09:56.480 --> 0:09:59.079 Are they going to start sourcing them outside now? For 0:09:59.280 --> 0:10:02.200 that they really need to invest eggressively in areas such 0:10:02.200 --> 0:10:06.120 as Mexico or other low cost regions where they can 0:10:06.960 --> 0:10:09.840 manufacture some of these pots without that, you know, the 0:10:09.840 --> 0:10:13.160 supply chain doesn't make any sense to um, you know, 0:10:13.240 --> 0:10:16.240 just do things in isolation, because at any given time 0:10:16.280 --> 0:10:19.480 they are making millions of these units. It's not you know, 0:10:19.559 --> 0:10:21.960 something that has only a few thousands that you produced, 0:10:23.720 --> 0:10:26.360 all right, it's fascinating. So they basically can't, is what 0:10:26.400 --> 0:10:31.240 you're saying, move substantially, UM as quickly as investors can. 0:10:32.360 --> 0:10:34.760 I just wonder if that means Gina. Does that mean 0:10:34.800 --> 0:10:37.400 that there's an opportunity here? I mean, do you buy 0:10:37.440 --> 0:10:39.680 the dip in that situation knowing that it has to 0:10:39.720 --> 0:10:43.520 come back by the dip in China? Is that the question? Um? 0:10:43.600 --> 0:10:47.360 You know, I think for investors that are willing to 0:10:47.400 --> 0:10:50.320 take a tremendous amount of risk, your potential reward for 0:10:50.440 --> 0:10:54.680 taking on that degree of risk is is fairly substantial, right, 0:10:54.760 --> 0:10:58.160 But I at this point in time, it's relatively unpredictable. 0:10:58.200 --> 0:11:01.320 Most rational people are acting that the results of these 0:11:01.360 --> 0:11:05.839 protests over the weekend will be more further compression and 0:11:05.920 --> 0:11:10.400 economic activity more clamped down as the authorities in China 0:11:10.480 --> 0:11:14.640 try to take on you know, um, these protesters. So 0:11:14.960 --> 0:11:18.079 I think that the risk is tremendous right now. That said, 0:11:18.559 --> 0:11:21.800 the stocks are incredibly discounted. You are taking a risk 0:11:21.880 --> 0:11:26.520 that there is no opening coming in three Nonetheless, there 0:11:26.679 --> 0:11:30.800 is very little expectation for growth baked into prices. So 0:11:30.920 --> 0:11:34.160 I think that your risk reward works, right. You take 0:11:34.200 --> 0:11:35.880 on a lot of risk, You could get a tremendous 0:11:35.880 --> 0:11:37.640 amount of reward, but it is it is a lot 0:11:37.679 --> 0:11:42.080 of risk. Admittedly, all right, Gina, great stuff. Appreciate checking 0:11:42.080 --> 0:11:45.800 in with us, Gina. Martin Adams, chief equity strategist for 0:11:45.800 --> 0:11:48.880 Bloomberg Intelligence, and Anama Rana used to senior tech animals 0:11:48.880 --> 0:11:52.440 with Bloomberg Intelligence. Well he falls Apple very closely. And again, 0:11:52.640 --> 0:11:55.400 investors today are just trying to parts what's going on 0:11:55.600 --> 0:11:58.280 in China, What does that mean for the outlook for 0:11:58.280 --> 0:12:00.240 global economic growth, What does it mean for some of 0:12:00.240 --> 0:12:04.080 the tech companies that still like Apple, rely pretty heavily 0:12:04.160 --> 0:12:07.080 on the supply chain, with lots of parts of that 0:12:07.320 --> 0:12:10.480 in mainland China. And you think about how this government 0:12:10.559 --> 0:12:12.520 is dealing with the zero COVID policy and what that 0:12:12.559 --> 0:12:15.839 means for economic activity. So again that's kind of the 0:12:15.920 --> 0:12:22.320 narrative of what this market is trying to digest. Let's 0:12:22.360 --> 0:12:25.840 talk China. Let's talk kind of investing in emerging markets. 0:12:25.960 --> 0:12:28.080 Because we're talking marging markets. The M S c I 0:12:28.160 --> 0:12:30.199 big part of that is China. We can do that 0:12:30.240 --> 0:12:32.319 today with Kevin Carter. He's the c I O and 0:12:32.559 --> 0:12:36.400 founder of E m q Q Global. He joins US 0:12:36.440 --> 0:12:39.200 Live and our Bloomberg Interactive Broker studios, so he gets 0:12:39.200 --> 0:12:42.079 an extra gold star today for being live, not phoning 0:12:42.080 --> 0:12:45.200 it in. Kevin, You've been doing business. So let's start 0:12:45.200 --> 0:12:47.839 with the acronym. We always throw around these acronyms, and 0:12:47.880 --> 0:12:51.560 I feel like I guess emerging markets and then it's 0:12:51.600 --> 0:12:55.040 tech tech stocks y K E m q Q. Well 0:12:55.080 --> 0:12:59.040 that's exactly, and it's emerging markets technology and and specifically 0:12:59.080 --> 0:13:02.320 it's emerging market can sumer technology. It's the smartphone enabled 0:13:02.720 --> 0:13:06.280 emerging market consumer that we're trying to tap into. So yes, 0:13:06.520 --> 0:13:09.120 E is for emerging, M is for market in. Q Q, 0:13:09.880 --> 0:13:12.920 as you know, is synonymous with tech investing and also 0:13:13.640 --> 0:13:16.000 a sort of double and tender because the ten Cent 0:13:16.160 --> 0:13:19.559 original platform that messaging was called q Q. That's right 0:13:19.559 --> 0:13:21.560 back in the day. So when it's an E t 0:13:21.720 --> 0:13:23.800 F by the way it is Q. Yeah, then that's 0:13:23.800 --> 0:13:27.360 an exchange traded fund. That's correct, exactly. I just want 0:13:27.360 --> 0:13:29.120 to clear this up because a lot of people driving 0:13:29.120 --> 0:13:31.480 around like one cm QQ exactly, and then they don't 0:13:31.480 --> 0:13:33.000 know there's an e t F. So if they like 0:13:33.080 --> 0:13:34.640 what Kevin has say, can't go and buy it. If 0:13:34.679 --> 0:13:36.959 they think it's hogwash, they can sell it or whatever. 0:13:37.080 --> 0:13:39.959 You know. Yeah, well, the indexes are are up this year, 0:13:40.080 --> 0:13:42.680 so good stuff. All right, talk to us about your 0:13:43.040 --> 0:13:45.679 take from China. I mean you've been doing business there 0:13:45.720 --> 0:13:48.319 for a long time, investing in these companies and these industries. 0:13:48.400 --> 0:13:52.160 What's your takeaway. Well, look, China is the second largest 0:13:52.160 --> 0:13:55.319 economy in the world at least, and a big thing, 0:13:55.559 --> 0:13:58.599 and it's been the biggest part of the Emerging markets indexes, 0:13:58.640 --> 0:14:03.040 the broad ones over UM, and it's an important place. 0:14:03.080 --> 0:14:05.959 But it's different than us, and it has its own 0:14:06.080 --> 0:14:08.120 challenges in its own ways of doing things, and I 0:14:08.200 --> 0:14:10.840 think it's hugely misunderstood. I think there's a lot of 0:14:10.840 --> 0:14:17.120 fears about China UM that are unfounded, things like delisting, 0:14:18.160 --> 0:14:22.800 the so called government crackdown. So I think China's why 0:14:22.840 --> 0:14:25.680 are those unfounded? I have those fears and I feel 0:14:25.720 --> 0:14:31.120 like they're founded quite well. Well, um uh, I could 0:14:31.160 --> 0:14:34.840 go into disappeared for a couple of months. When the 0:14:34.880 --> 0:14:36.960 when the richest guy in the country just disappears for 0:14:37.000 --> 0:14:40.280 a few months, that's worrying. Yes, well, I think Jack's 0:14:40.400 --> 0:14:44.200 doing five but um but look what we do is 0:14:44.280 --> 0:14:47.840 invest in the internet and any commerce companies in emerging markets, 0:14:47.840 --> 0:14:50.880 including China. And the reality is that while China might 0:14:50.880 --> 0:14:54.200 be an emerging market in a traditional sense, when it 0:14:54.240 --> 0:14:58.120 comes to the Internet and e commerce and smartphones, China 0:14:58.200 --> 0:15:01.160 is the most developed country on planet by far. I mean, 0:15:01.280 --> 0:15:06.040 China is the Jetsons and their e commerce market dwarfs 0:15:06.080 --> 0:15:08.560 the rest of the world, and it's actually four times 0:15:08.560 --> 0:15:11.200 bigger than the other forty five emerging markets combined. So 0:15:11.480 --> 0:15:14.440 China is important. It's an important part of the global 0:15:14.480 --> 0:15:17.880 consumer internet story. But it's the second wave, and it's 0:15:17.880 --> 0:15:20.560 the third wave that's coming beyond China that I think 0:15:20.560 --> 0:15:22.680 investors should be looking at. I think a fair question 0:15:22.760 --> 0:15:26.520 is is China even investable today? Well? I think it 0:15:26.680 --> 0:15:29.880 certainly is. There are places like Russia that are definitely 0:15:30.000 --> 0:15:33.120 not investable currently in a traditional sense, but no, I 0:15:33.160 --> 0:15:35.840 think China is very much investable but it you know, 0:15:35.920 --> 0:15:38.000 it's it's a volatile place for sure, and I think 0:15:38.000 --> 0:15:40.040 it always will be. And well, we just had Gina 0:15:40.080 --> 0:15:42.600 Martin Adams on from Bloomberg Intelligence who said there's a 0:15:42.600 --> 0:15:45.800 lot of risk there, but the rewards are massive. Um, 0:15:46.080 --> 0:15:49.160 the third wave that you speak of, is this also 0:15:49.200 --> 0:15:51.200 a China play or are you talking about India? We 0:15:51.200 --> 0:15:54.360 were talking about during the commercial how important India could be. Sure. So, 0:15:54.360 --> 0:15:57.880 so we have a second strategy, which is the emerging 0:15:57.920 --> 0:16:00.760 markets Internet companies ex China, which we called fm q 0:16:00.960 --> 0:16:05.520 Q and the way to think about, uh, what's happening 0:16:05.600 --> 0:16:07.880 on the planet, and it's happened here, but it happened 0:16:07.880 --> 0:16:09.720 here so long ago. We forget that this is a 0:16:10.480 --> 0:16:13.920 wave that's happening. But you have sort of three mega trends. 0:16:13.960 --> 0:16:17.200 You have billions of new consumers and emerging markets. They're 0:16:17.200 --> 0:16:20.320 getting their first computer in form of a smartphone that 0:16:20.400 --> 0:16:23.320 costs eighty dollars brand new and is running on Android, 0:16:23.800 --> 0:16:26.040 and they're getting access to the Internet for the first time. 0:16:26.040 --> 0:16:29.360 And because they don't have a computer, uh you know 0:16:29.400 --> 0:16:31.520 it's a traditional computer, they don't have a bank account, 0:16:31.520 --> 0:16:35.520 there's no target stores. These people are leap frogging traditional consumption. 0:16:35.560 --> 0:16:40.600 And so the first wave of consumer internet technology on 0:16:40.640 --> 0:16:42.800 the planet started in the US around the year two 0:16:42.840 --> 0:16:45.760 thousand and we had a fifteen year S curve of growth. 0:16:46.280 --> 0:16:49.280 The second wave, the China wave, started about two thousand 0:16:49.280 --> 0:16:52.120 five with Ali Baba ten Cent Bai Do, which went 0:16:52.160 --> 0:16:55.800 public before Google, and that wave, that S curve. You know, 0:16:55.840 --> 0:16:58.320 it's still growing, but the steepest part of that growth 0:16:58.320 --> 0:17:04.600 curve is behind us. And now you have India, Nigeria, Indonesia, Brazil, 0:17:04.760 --> 0:17:07.240 all of these other five and a half billion people 0:17:07.400 --> 0:17:10.240 that are getting their first computer today and again it's 0:17:10.280 --> 0:17:12.480 not on their desk, it's in their pocket and it 0:17:12.560 --> 0:17:15.199 costs sixty dollars and they're getting the Internet for the 0:17:15.240 --> 0:17:19.520 first time. And that story is just getting started. And 0:17:19.680 --> 0:17:22.800 FM can QQ. So if I look at the performance 0:17:22.880 --> 0:17:26.560 year to date, obviously everything's down um and and E 0:17:26.680 --> 0:17:29.440 m q Q is down thirty six percent. F m 0:17:29.520 --> 0:17:33.640 q Q is down fifty Is there uh, you think 0:17:34.080 --> 0:17:39.920 less risk in in the frontier markets. Well, I think 0:17:39.920 --> 0:17:42.880 there's a lot less risk in both versions because they're 0:17:42.880 --> 0:17:45.000 both down as you mentioned quite a bit. And in fact, 0:17:45.760 --> 0:17:47.680 you know, the broader E m q Q is down 0:17:47.920 --> 0:17:51.360 at least at one point, you know, over se as 0:17:51.440 --> 0:17:53.280 of a couple of weeks ago. So this is a 0:17:53.400 --> 0:17:56.920 volatile place. But we're investing in companies, were investing in 0:17:57.080 --> 0:17:59.800 what we think are going to be the most important 0:18:00.040 --> 0:18:02.840 growth businesses on the planet for the next couple of decades. 0:18:02.880 --> 0:18:06.120 And those are the Internet companies that are providing all 0:18:06.119 --> 0:18:08.679 the same things that the Fank stocks provide us, but 0:18:08.760 --> 0:18:11.200 they're providing those services to the five and a half 0:18:11.240 --> 0:18:14.960 billion people in India, in Brazil and the places I mentioned. 0:18:15.400 --> 0:18:18.560 And that is if you're going to invest in emerging markets, 0:18:18.600 --> 0:18:20.680 that's where you want to And these are actively managed. 0:18:20.720 --> 0:18:23.080 I mean, this isn't you're not tracking an index here now, 0:18:23.160 --> 0:18:26.159 these are these are rules based indexes. So we you know, 0:18:26.200 --> 0:18:30.040 we own every publicly traded emerging markets internet company in 0:18:30.080 --> 0:18:33.520 our broader offering. And then the ex China version fm 0:18:33.600 --> 0:18:36.399 q Q owns, you know, the seventy five or so 0:18:36.480 --> 0:18:39.159 that are not Chinese. What's number one on your to 0:18:39.320 --> 0:18:42.720 do list looking at these companies in terms of due diligence? 0:18:42.840 --> 0:18:46.400 Is a quality of management? Is it? Soundness of business models? 0:18:46.400 --> 0:18:49.680 A balance sheet? How do you guys? Rule of law? Overall? Yes, 0:18:49.920 --> 0:18:53.480 thank you. Well, you know again, the world's got a 0:18:53.480 --> 0:18:55.320 lot of risk, and emerging markets have a lot of risk. 0:18:55.359 --> 0:18:57.000 I mean, we've seen in Russia this year, I mean 0:18:57.119 --> 0:19:00.560 war and you know your stocks basically wiped out completely. 0:19:00.640 --> 0:19:03.240 So you know there's no free lunch, and emerging markets 0:19:03.240 --> 0:19:06.680 and and and there is volatility um in terms of 0:19:06.760 --> 0:19:09.720 the main part of the due deligence we do is 0:19:09.760 --> 0:19:13.240 just identifying these companies because one of the problems, particularly 0:19:13.240 --> 0:19:16.280 in emerging markets, is that the database has so much power. 0:19:16.880 --> 0:19:20.240 And the biggest problem in the traditional indexes is that 0:19:20.320 --> 0:19:22.840 about a third of the companies are government owned banks 0:19:22.840 --> 0:19:26.320 and oil companies, state owned enterprises, which, in addition to 0:19:27.160 --> 0:19:31.520 having conflicts of interest and inefficiency, there's corruption that's rampant. 0:19:32.000 --> 0:19:34.520 And the second problem with the indexes is most of 0:19:34.560 --> 0:19:37.199 the internet companies aren't included. So if you look at 0:19:37.560 --> 0:19:41.560 Latin America, for example, Mercado Libre, the Amazon dot Com 0:19:41.640 --> 0:19:44.959 and PayPal of every country in Central and South America, 0:19:45.160 --> 0:19:48.240 it's not in the index. New Bank, the largest online 0:19:48.240 --> 0:19:51.480 bank in the world out of Brazil, backed by Berkshire Hathaway, 0:19:51.640 --> 0:19:53.520 and you on the New York Sock stage not in 0:19:53.560 --> 0:19:55.920 the index. So the first thing is to make sure 0:19:56.280 --> 0:19:59.400 that we find all these companies because the traditional approaches 0:19:59.440 --> 0:20:02.560 are leave being a big hole. Wow, good stuff, talk 0:20:02.640 --> 0:20:05.840 about risk and hopefully return. Kevin Carter, c I O 0:20:06.040 --> 0:20:09.680 and founder of E m q Q Global talking about 0:20:09.720 --> 0:20:13.359 emerging markets here. The risk reward UH certainly front of 0:20:13.480 --> 0:20:15.720 mind for a lot of investors today as we kind 0:20:15.720 --> 0:20:19.239 of process what's going on in China, as we've got 0:20:19.280 --> 0:20:22.479 another data point with Apple Computer and their production issues, 0:20:22.520 --> 0:20:29.679 So front of mine for emerging market investors. W T 0:20:29.760 --> 0:20:33.520 a coop oil getting back lots of the losses I 0:20:33.600 --> 0:20:35.840 had earlier today. We had reached a low today of 0:20:35.920 --> 0:20:38.320 seventy three dollars and sixty cents per barrel. We're now 0:20:38.320 --> 0:20:40.520 it's seventy five seventy five cents a barrel, off about 0:20:40.520 --> 0:20:42.560 six tenths of one percent. By the way, I just 0:20:42.600 --> 0:20:45.080 texted you a photo you did, and I texted Eric 0:20:45.119 --> 0:20:47.760 also check it out. I was at UH. I was 0:20:47.800 --> 0:20:51.400 in Newark, Ohio this week. I drove by a gas 0:20:51.400 --> 0:20:53.840 station called Sheets, which you may know if you're a 0:20:53.840 --> 0:20:55.880 trucker or if you spend a lot of time on highways. 0:20:56.359 --> 0:21:00.720 They had a dollar ninety nine a gallon unladed. That 0:21:00.840 --> 0:21:03.240 is amazing, and I guess it's I guess it was 0:21:03.320 --> 0:21:06.360 some kind of marketing thing. But my nephew at the Thanksgiving, 0:21:06.840 --> 0:21:10.200 you know, gathering, when the whole extended family was there, 0:21:10.640 --> 0:21:12.879 he's just got his driver's license, so he went around 0:21:12.920 --> 0:21:15.680 the house collecting people's keys and driving out to fill 0:21:15.760 --> 0:21:19.800 up at the sheets for his stuff, adding value there 0:21:19.840 --> 0:21:22.640 for in the of a Miller household. All right, we've 0:21:22.680 --> 0:21:25.600 got global energy here, let's talk about it. Let's round table. 0:21:25.720 --> 0:21:28.080 We can do that with Fernando Valley. He covers this 0:21:28.160 --> 0:21:32.040 stuff for Bloomberg Intelligence and Mike mcloney's our commodity strategist 0:21:32.280 --> 0:21:35.080 for Bloomberg Intelligence. I have no idea where these people are, 0:21:35.119 --> 0:21:37.080 but they're not in studio. I can tell you that 0:21:37.440 --> 0:21:41.840 Fernando talk to me about I guess you know your 0:21:41.920 --> 0:21:45.880 view of crude here. Is it all hinging upon demand 0:21:45.880 --> 0:21:49.160 out of China in the short term fall. I think 0:21:49.200 --> 0:21:52.920 that's correct. It's China, and then it is the Western 0:21:52.960 --> 0:21:56.120 world as well, because if you remember we talked about 0:21:56.160 --> 0:21:59.000