1 00:00:00,560 --> 00:00:03,040 Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm 2 00:00:03,120 --> 00:00:05,600 Speaker 1: Jason Kelly. We're here every day bringing you the latest 3 00:00:05,640 --> 00:00:09,880 Speaker 1: news from the world's of business and finance, plus technology, politics, economics, 4 00:00:09,960 --> 00:00:13,560 Speaker 1: all harnessing the power of Bloomberg Business Week reporters and editors, 5 00:00:13,600 --> 00:00:16,640 Speaker 1: not to mention our hundred journalists and analysts and more 6 00:00:16,640 --> 00:00:19,120 Speaker 1: than a hundred and twenty countries. You can download Bloomberg 7 00:00:19,120 --> 00:00:22,160 Speaker 1: Business Week on iTunes, SoundCloud, or Bloomberg dot Com. You 8 00:00:22,160 --> 00:00:24,280 Speaker 1: can also listen to our radio show weekdays at two 9 00:00:24,320 --> 00:00:33,680 Speaker 1: pm Eastern only on Bloomberg Radio. So they are around 10 00:00:33,720 --> 00:00:36,120 Speaker 1: four trillion dollars in et F investments in the US, 11 00:00:36,159 --> 00:00:40,080 Speaker 1: about five to six trillion globally. Let's get a look 12 00:00:40,200 --> 00:00:42,640 Speaker 1: at why our next guest sees E t F s 13 00:00:42,760 --> 00:00:45,200 Speaker 1: maybe becoming a ten trillion dollar market or even more 14 00:00:45,240 --> 00:00:48,199 Speaker 1: in the next five years. Ed Rosenberg and Rosenberg let 15 00:00:48,240 --> 00:00:50,199 Speaker 1: me say that again. He's back with us. Head of 16 00:00:50,240 --> 00:00:55,600 Speaker 1: et F Rosenberg. Sorry, it's the Irish pronunciation. That's fun. 17 00:00:56,960 --> 00:01:01,040 Speaker 1: You know, sometimes things go straight. Ed Rosenberg, head of 18 00:01:01,040 --> 00:01:03,480 Speaker 1: E t F That American Century Investments normally based in 19 00:01:03,560 --> 00:01:06,200 Speaker 1: Kansas City, Missouri or Missouri, depending on how you want 20 00:01:06,200 --> 00:01:09,360 Speaker 1: to say it. He's in our Bluemberg Interactive Broker studio 21 00:01:09,400 --> 00:01:11,479 Speaker 1: in New York. I'm gonna get killed. I can't get 22 00:01:11,480 --> 00:01:14,479 Speaker 1: these names out. Man, great to have you with us, well, 23 00:01:14,480 --> 00:01:16,960 Speaker 1: thank you for having them. M nice to have you 24 00:01:17,000 --> 00:01:18,960 Speaker 1: back with that potentially. And so you're talking about a 25 00:01:19,000 --> 00:01:21,080 Speaker 1: doubling of the market you are, I mean in the 26 00:01:21,120 --> 00:01:23,319 Speaker 1: next five years, there's a lot of changes the industry 27 00:01:23,360 --> 00:01:24,920 Speaker 1: is going to go through, and I think you're going 28 00:01:25,000 --> 00:01:28,959 Speaker 1: to see growth exponentially grow from that point forward. And why, 29 00:01:29,040 --> 00:01:31,800 Speaker 1: what's what's the catalyst here? So if you start off 30 00:01:32,000 --> 00:01:36,360 Speaker 1: the presidian acceptance so far from the sec has now 31 00:01:36,360 --> 00:01:38,720 Speaker 1: obviously it's not live yet because there's paperwork that has 32 00:01:38,760 --> 00:01:41,000 Speaker 1: to be filed. But that is a new type of 33 00:01:41,040 --> 00:01:43,200 Speaker 1: e t F. And when you think of a semi 34 00:01:43,200 --> 00:01:46,399 Speaker 1: transparent ETF that doesn't exist today, it allows you to 35 00:01:46,440 --> 00:01:49,560 Speaker 1: do so much in the industry that you can't do today. 36 00:01:49,880 --> 00:01:54,520 Speaker 1: Think of replicating an exact mutual fund that's concentrated, providing 37 00:01:54,600 --> 00:01:57,600 Speaker 1: true alpha that just doesn't exist today, that all of 38 00:01:57,640 --> 00:02:00,280 Speaker 1: a sudden you can have and it becomes a real 39 00:02:00,560 --> 00:02:03,040 Speaker 1: threat or target to mutual fund assets as we see them. 40 00:02:03,080 --> 00:02:08,040 Speaker 1: Today and help me understand what semi transparent active et 41 00:02:08,240 --> 00:02:12,680 Speaker 1: F means. So see the transparent arts not so think 42 00:02:12,720 --> 00:02:15,120 Speaker 1: of it this way right with with the Presidian model. 43 00:02:15,120 --> 00:02:17,399 Speaker 1: If you publish your holdings quarterly, it's like a mutual fund. 44 00:02:17,400 --> 00:02:19,239 Speaker 1: You're gonna be able to see the holdings quarterly going 45 00:02:19,280 --> 00:02:22,800 Speaker 1: backwards um, and then there's gonna be characteristics potentially published 46 00:02:22,840 --> 00:02:25,720 Speaker 1: around that so that firms have the ability to trade 47 00:02:25,800 --> 00:02:28,080 Speaker 1: on them right and quote them because they have to 48 00:02:28,080 --> 00:02:30,240 Speaker 1: be able to be bought and sold on the secondary 49 00:02:30,280 --> 00:02:33,880 Speaker 1: market using today's mechanisms through market makers and through the 50 00:02:33,880 --> 00:02:37,160 Speaker 1: exchanges today. But full transparency would mean I could see 51 00:02:37,160 --> 00:02:39,960 Speaker 1: it any minute of any trading direct So think of 52 00:02:40,000 --> 00:02:43,960 Speaker 1: a totally a concentrated portfolio. Thirty holdings apples your largest holding. 53 00:02:44,480 --> 00:02:47,120 Speaker 1: If you couldn't sell all that one day, right and 54 00:02:47,160 --> 00:02:48,840 Speaker 1: I'm a market maker, I'm just looking at it. You 55 00:02:48,880 --> 00:02:50,239 Speaker 1: see a go from three and a half percent to 56 00:02:50,320 --> 00:02:53,000 Speaker 1: two seven five to two? Could you start front running 57 00:02:53,040 --> 00:02:55,640 Speaker 1: because you know the portfolio matter is getting out. In 58 00:02:55,680 --> 00:02:58,880 Speaker 1: a semi transparent portfolio, you don't get the information every day, 59 00:02:59,200 --> 00:03:02,400 Speaker 1: so you can't see it, and so the portfolio manager 60 00:03:02,440 --> 00:03:04,160 Speaker 1: can put his true alpha in his best I p 61 00:03:04,360 --> 00:03:07,639 Speaker 1: out there and see it. Now. Remember there's other portfolios 62 00:03:07,680 --> 00:03:10,080 Speaker 1: that could be coming out there called proxy baskets, so 63 00:03:10,080 --> 00:03:12,280 Speaker 1: those will be more transparent because we all have some 64 00:03:12,360 --> 00:03:16,280 Speaker 1: type of substitute view into the portfolio of what they do. 65 00:03:17,040 --> 00:03:20,400 Speaker 1: You know, we had an interesting story on Friday by 66 00:03:20,400 --> 00:03:22,000 Speaker 1: our Rachel Evans. In fact, it was among the most 67 00:03:22,040 --> 00:03:24,680 Speaker 1: read on the Blueberg terminal, and and it had to 68 00:03:24,720 --> 00:03:28,840 Speaker 1: do with um E t F liquidity ease if we 69 00:03:28,919 --> 00:03:31,960 Speaker 1: hit our liquidity I should say, if we get into 70 00:03:32,040 --> 00:03:34,720 Speaker 1: some kind of crisis mode. And it talked about how 71 00:03:34,720 --> 00:03:37,600 Speaker 1: a lot of asset managers were relying on e t 72 00:03:37,800 --> 00:03:42,320 Speaker 1: fs as cash equivalents, but they're not cash. It's not cash. 73 00:03:42,360 --> 00:03:45,240 Speaker 1: So I do wonder if we have yet to understand 74 00:03:45,320 --> 00:03:47,280 Speaker 1: with so much money going into e t f s 75 00:03:47,320 --> 00:03:50,320 Speaker 1: at this point, we have yet to really understand how 76 00:03:50,400 --> 00:03:54,240 Speaker 1: e t s will function or not in a crisis. Well, 77 00:03:54,360 --> 00:03:56,680 Speaker 1: we have seen how they functioned in some crisis in 78 00:03:56,720 --> 00:04:00,320 Speaker 1: the past, Right, we've had market downturn significant like two 79 00:04:00,400 --> 00:04:02,800 Speaker 1: tho eight, and we've had other periods of where they 80 00:04:02,800 --> 00:04:06,600 Speaker 1: have been functionally right, the underlying securities weren't able to 81 00:04:06,840 --> 00:04:09,800 Speaker 1: trade or function and yet they still performed fine. So 82 00:04:09,920 --> 00:04:11,760 Speaker 1: e t f s tend to be price discovery in 83 00:04:11,760 --> 00:04:15,320 Speaker 1: those situations. And if you think of how e t 84 00:04:15,520 --> 00:04:18,159 Speaker 1: f s work today, when you say cash equivalents, there's 85 00:04:18,200 --> 00:04:20,080 Speaker 1: only a few of those et fs that are used 86 00:04:20,160 --> 00:04:23,000 Speaker 1: like that today. So if you even break up the 87 00:04:23,040 --> 00:04:25,880 Speaker 1: market into several segments, you'll see one of the segments 88 00:04:25,960 --> 00:04:28,920 Speaker 1: is about call it eight percent of all the e 89 00:04:29,000 --> 00:04:31,320 Speaker 1: t f s make up of all the volume across 90 00:04:31,360 --> 00:04:34,720 Speaker 1: the exchanges for e TuS because it's specific et f 91 00:04:34,800 --> 00:04:36,800 Speaker 1: s and those a lot of those are you know, 92 00:04:36,920 --> 00:04:39,920 Speaker 1: a basic index top five or top one tho, and 93 00:04:39,960 --> 00:04:42,200 Speaker 1: those are the ones that you would consider quote unquote 94 00:04:42,200 --> 00:04:44,440 Speaker 1: cash equivalents in some ways because they're used its hedging 95 00:04:44,520 --> 00:04:46,919 Speaker 1: vehicles and others. This said about half the institutions that 96 00:04:46,920 --> 00:04:49,400 Speaker 1: own bond ETFs are using them for cash manager. This 97 00:04:49,480 --> 00:04:51,760 Speaker 1: was a survey done by Greenwich Associate, and they could 98 00:04:51,800 --> 00:04:54,000 Speaker 1: because there's a lot of those short term ETFs. But 99 00:04:54,040 --> 00:04:55,800 Speaker 1: the other thing to remember is there was a study 100 00:04:55,880 --> 00:04:57,600 Speaker 1: done I'm tryn remember which firm did it a few 101 00:04:57,680 --> 00:05:01,960 Speaker 1: years ago that said roughly of all volume in the 102 00:05:01,960 --> 00:05:05,000 Speaker 1: fixed income ETFs does not lead to a creation or 103 00:05:05,040 --> 00:05:09,039 Speaker 1: redemption at all, So you only have ten the volume 104 00:05:09,080 --> 00:05:11,920 Speaker 1: that could cause a creation or redemption. So if everybody 105 00:05:12,000 --> 00:05:14,600 Speaker 1: sold all in one day, it wouldn't be that much 106 00:05:14,640 --> 00:05:16,400 Speaker 1: of a redemption in that much of a story. Really 107 00:05:16,440 --> 00:05:18,240 Speaker 1: haven't gone into crisis mode. If you think about e 108 00:05:18,320 --> 00:05:20,400 Speaker 1: t f S balloon in terms of assets, it's really 109 00:05:20,400 --> 00:05:24,360 Speaker 1: been post financial crisis. We've really seen the balloon are 110 00:05:24,360 --> 00:05:27,880 Speaker 1: ballooning in assets, right, So we don't really know, we don't. 111 00:05:27,880 --> 00:05:29,880 Speaker 1: But what you would say is is based on the 112 00:05:29,880 --> 00:05:32,400 Speaker 1: pattern that we've seen, is as long as the the 113 00:05:32,760 --> 00:05:36,039 Speaker 1: expectation is of clients is to be worried. Right if 114 00:05:36,120 --> 00:05:38,960 Speaker 1: you believe the expectation is it's going to be as 115 00:05:38,960 --> 00:05:41,680 Speaker 1: liquid as this individual stock. That's not true. It's as 116 00:05:41,720 --> 00:05:45,200 Speaker 1: liquid as the underlying security. So if that underlying market tightens, 117 00:05:45,520 --> 00:05:48,120 Speaker 1: those securities will tighten, right. And oh eight, just to 118 00:05:48,160 --> 00:05:50,320 Speaker 1: go back to then, I remember there are tons of 119 00:05:50,360 --> 00:05:52,760 Speaker 1: different bonds that didn't trade that we're in ETFs, but 120 00:05:52,800 --> 00:05:56,960 Speaker 1: the et F still traded. And so getting to ten 121 00:05:57,040 --> 00:06:00,800 Speaker 1: trillion or or beyond, Uh, what could get in the 122 00:06:00,800 --> 00:06:03,120 Speaker 1: way of that? What what could slow that down or 123 00:06:03,400 --> 00:06:07,159 Speaker 1: stop it? I mean, it's really hard to see what 124 00:06:07,279 --> 00:06:10,120 Speaker 1: could stop it unless there's a revival in mutual fund 125 00:06:10,120 --> 00:06:12,720 Speaker 1: assets going into active. That's the only thing I can 126 00:06:12,760 --> 00:06:15,760 Speaker 1: see that could stop it, because the everyone seems to 127 00:06:15,760 --> 00:06:18,720 Speaker 1: be switching now, it doesn't mean everybody, I'm just broadening, 128 00:06:19,040 --> 00:06:21,000 Speaker 1: is switching to e t f s from mutual funds. 129 00:06:21,040 --> 00:06:23,840 Speaker 1: When originally it started out as individual stocks. Right from 130 00:06:23,839 --> 00:06:26,080 Speaker 1: oh eight forward, it was individual stocks, which is why 131 00:06:26,080 --> 00:06:28,120 Speaker 1: you saw the volume drop and e t f I 132 00:06:28,200 --> 00:06:31,280 Speaker 1: and go up to roughly about every day now. And 133 00:06:31,360 --> 00:06:32,800 Speaker 1: so I think what you need to see is an 134 00:06:32,800 --> 00:06:37,080 Speaker 1: adoption of mutual funds again. So okay, so it's interesting. 135 00:06:37,120 --> 00:06:42,040 Speaker 1: So these types of semi transparent active ETFs, what are 136 00:06:42,040 --> 00:06:44,680 Speaker 1: we seeing in terms of creation of them, the amount 137 00:06:44,720 --> 00:06:47,000 Speaker 1: that are coming out? So there's nothing yet right there, 138 00:06:47,000 --> 00:06:51,120 Speaker 1: not live. Uh, we have filed our paperwork. So at 139 00:06:51,200 --> 00:06:54,719 Speaker 1: this moment, our timeline puts US in late fourth quarter 140 00:06:54,760 --> 00:06:57,520 Speaker 1: early first quarter next year to launch, right, it will 141 00:06:57,520 --> 00:06:59,799 Speaker 1: be the first of its kind. There are a bunch 142 00:06:59,839 --> 00:07:02,640 Speaker 1: of others by other providers in the proxy basket state, 143 00:07:03,080 --> 00:07:05,280 Speaker 1: which would be include places like n Y and C 144 00:07:05,440 --> 00:07:08,320 Speaker 1: or Fidelity or t R Price that have filed. When 145 00:07:08,400 --> 00:07:11,080 Speaker 1: they come out, there'll be another version of this and 146 00:07:11,120 --> 00:07:14,400 Speaker 1: so you're gonna see my My assumption is guesses they'll 147 00:07:14,440 --> 00:07:18,080 Speaker 1: all roughly come out around the same time, even though 148 00:07:19,080 --> 00:07:21,640 Speaker 1: those baskets or those models haven't been improved yet by 149 00:07:21,680 --> 00:07:24,040 Speaker 1: the SEC. I don't think it's that far in the 150 00:07:24,080 --> 00:07:26,960 Speaker 1: distance where they'll be approved. A lot of fun times 151 00:07:27,120 --> 00:07:29,920 Speaker 1: coming in the in the world of e T s. 152 00:07:30,560 --> 00:07:33,760 Speaker 1: All right, Ed Rosenberg, head of exchange Traded Funds we 153 00:07:33,880 --> 00:07:37,800 Speaker 1: call METS American Centry Investments. He's based out in Kansas City, Missouri, 154 00:07:37,800 --> 00:07:39,320 Speaker 1: but here with us in New York City. To take 155 00:07:39,320 --> 00:07:42,760 Speaker 1: great to have you back. Thanks, Yeah, nice to see you. 156 00:07:47,880 --> 00:07:50,520 Speaker 1: So this is such a timely conversation considering what we 157 00:07:50,640 --> 00:07:52,920 Speaker 1: just heard from Chargery Secretary step of a Nutan, who 158 00:07:52,920 --> 00:07:57,680 Speaker 1: said the Trump administration very serious, has very serious concerns 159 00:07:57,680 --> 00:08:02,080 Speaker 1: about Facebook proposed cryptocurrency. So let's get into a story 160 00:08:02,360 --> 00:08:05,640 Speaker 1: written by our own Andy Brown. Bloomberg New Economy editorial director, 161 00:08:05,680 --> 00:08:09,200 Speaker 1: Andy joining us on the phone in New York. You know, Andy, 162 00:08:09,280 --> 00:08:11,880 Speaker 1: I feel like when Facebook came out it was a 163 00:08:11,920 --> 00:08:15,720 Speaker 1: shout across the cryptocurrency world's bow. Recently, with the introduction 164 00:08:15,760 --> 00:08:18,800 Speaker 1: of its own digital coin, we're talking about Libra. Everyone 165 00:08:18,880 --> 00:08:22,560 Speaker 1: watching and that includes China. You write about that China 166 00:08:22,640 --> 00:08:27,240 Speaker 1: not is worried though about the world of cryptocurrencies. Yeah, 167 00:08:27,280 --> 00:08:30,760 Speaker 1: I mean, it seems that so many regulators around the 168 00:08:30,760 --> 00:08:35,280 Speaker 1: world of freaked out by the potential of libra um, 169 00:08:35,320 --> 00:08:38,680 Speaker 1: but the Chinese actually seemed to be taking it in 170 00:08:38,760 --> 00:08:42,600 Speaker 1: their stride um, and and a couple of reasons for this. 171 00:08:42,920 --> 00:08:46,000 Speaker 1: I mean, the first thing to point out is that China, 172 00:08:46,240 --> 00:08:50,360 Speaker 1: throughout its history, um, has been at the forefront of 173 00:08:50,679 --> 00:08:55,360 Speaker 1: financial innovation. Um. You know, it was the first civilization 174 00:08:55,400 --> 00:08:59,640 Speaker 1: in the world to issue paper notes. Um. It was 175 00:08:59,679 --> 00:09:03,160 Speaker 1: called buying money. You know, people noticed that as opposed 176 00:09:03,200 --> 00:09:09,080 Speaker 1: to gold, little silver or copper would could flutter away 177 00:09:09,080 --> 00:09:12,439 Speaker 1: on a breeze. And this was in the tenth century. UM. So, 178 00:09:12,440 --> 00:09:18,200 Speaker 1: so China is not at all afraid of financial innovation. Yeah. 179 00:09:18,320 --> 00:09:20,800 Speaker 1: It's so interesting too. I mean, and as Carol said, 180 00:09:20,840 --> 00:09:23,280 Speaker 1: on the day where we have the US government coming 181 00:09:23,320 --> 00:09:27,040 Speaker 1: up very strongly, we have the president tweeting about it. 182 00:09:27,360 --> 00:09:30,880 Speaker 1: So how much of an advantage does this potentially give 183 00:09:31,440 --> 00:09:35,120 Speaker 1: the Chinese. We heard Vincent Signarella talk about a similar 184 00:09:35,160 --> 00:09:37,960 Speaker 1: situation really with five G I mean, we're seeing this 185 00:09:38,040 --> 00:09:42,920 Speaker 1: across a number of different areas. Here it feels like, yeah, exactly. Well, 186 00:09:43,120 --> 00:09:46,320 Speaker 1: you know, don't forget the Chinese are working on their 187 00:09:46,360 --> 00:09:52,480 Speaker 1: own cryptocurrency, their own sovereign cryptocurrency. And what people are 188 00:09:52,559 --> 00:09:57,880 Speaker 1: saying is that the Facebook push the Libra could actually 189 00:09:58,320 --> 00:10:01,640 Speaker 1: encourage China to be up their development. And some people 190 00:10:01,679 --> 00:10:07,239 Speaker 1: even say that, you know, the technical developments conceptual ideas 191 00:10:07,280 --> 00:10:12,040 Speaker 1: around Libra could actually influence the final shape of China's 192 00:10:12,160 --> 00:10:16,960 Speaker 1: own currency. Um So, rather than seeing it as a challenge, 193 00:10:17,040 --> 00:10:21,080 Speaker 1: the Chinese are seeing this as a to action. How 194 00:10:21,120 --> 00:10:24,360 Speaker 1: much of this andy is that Chinese and the Chinese 195 00:10:24,360 --> 00:10:27,199 Speaker 1: government being also anti the US dollar and just tired 196 00:10:27,800 --> 00:10:31,439 Speaker 1: of the US dollar being the dominating currency. Yeah, well 197 00:10:31,440 --> 00:10:34,080 Speaker 1: there's there's there's definitely that to it. Look, I mean, 198 00:10:34,120 --> 00:10:36,679 Speaker 1: it's not as though they don't have the similar concerns 199 00:10:36,720 --> 00:10:38,960 Speaker 1: to regulate its all over the world. I mean, they're 200 00:10:38,960 --> 00:10:44,640 Speaker 1: worried about money laundering, they're worried about funding terrorism. This 201 00:10:44,800 --> 00:10:47,960 Speaker 1: thing Libra is going to be based in Geneva, so 202 00:10:48,200 --> 00:10:51,520 Speaker 1: who is going to regulate this currency? That you'll hear 203 00:10:51,559 --> 00:10:56,120 Speaker 1: the Chinese officials, um, you know, publicly worry about all 204 00:10:56,160 --> 00:10:59,959 Speaker 1: of these things, but they also see some very significant 205 00:11:00,040 --> 00:11:04,880 Speaker 1: and positives, and one of the positives certainly is the 206 00:11:05,000 --> 00:11:10,319 Speaker 1: role that cryptocurrencies to play UM in eroding the primacy 207 00:11:10,400 --> 00:11:13,880 Speaker 1: or the dominance of the US dollar. UM. I mean this, 208 00:11:14,120 --> 00:11:17,800 Speaker 1: This frustrates the Chinese enormously. What they noticed was that, 209 00:11:17,960 --> 00:11:19,880 Speaker 1: you know, in two thousand and eight, during the global 210 00:11:19,920 --> 00:11:22,679 Speaker 1: financial crisis, which was made in America, where did all 211 00:11:22,679 --> 00:11:24,839 Speaker 1: the money go, Well, it went to the the eye 212 00:11:24,840 --> 00:11:27,360 Speaker 1: of the storm. I think it all flooded to the 213 00:11:27,480 --> 00:11:30,440 Speaker 1: United States. And you know the reason for that, which 214 00:11:30,520 --> 00:11:33,559 Speaker 1: is ultimately when push comes to show people will trust 215 00:11:33,960 --> 00:11:37,200 Speaker 1: America and the institutions and the FED, you know that 216 00:11:37,440 --> 00:11:41,120 Speaker 1: backed the dollar, and the world just does not have 217 00:11:41,280 --> 00:11:43,679 Speaker 1: a similar level of confidence in the running piece that 218 00:11:43,679 --> 00:11:48,280 Speaker 1: They've been very frustrated in trying to internationalize the running B. 219 00:11:48,920 --> 00:11:52,319 Speaker 1: And they see at least at the margins, these cryptocurrencies 220 00:11:52,720 --> 00:11:56,640 Speaker 1: like the one that Facebook is proposing, backed by a 221 00:11:56,800 --> 00:12:02,440 Speaker 1: basket of currencies with no single currency dominating UM and 222 00:12:02,480 --> 00:12:05,040 Speaker 1: they see it the margins a a role for this, 223 00:12:05,480 --> 00:12:08,240 Speaker 1: you know, and expanding the the R and B and 224 00:12:08,679 --> 00:12:12,480 Speaker 1: you know its ability to influence trade and investment around 225 00:12:12,480 --> 00:12:14,680 Speaker 1: the world. Well, and one of the things you point 226 00:12:14,720 --> 00:12:17,520 Speaker 1: out in your Peace Andy. That I find fascinating is 227 00:12:17,559 --> 00:12:22,520 Speaker 1: this notion that while there's so much talk of digital 228 00:12:22,600 --> 00:12:26,439 Speaker 1: currencies and cryptocurrencies empowering individuals, this could be a very 229 00:12:26,559 --> 00:12:32,840 Speaker 1: powerful state tool ultimately when it comes to China, especially 230 00:12:32,840 --> 00:12:35,600 Speaker 1: in the United States for that matter. But I hadn't 231 00:12:35,600 --> 00:12:40,160 Speaker 1: really thought of that twist here. Yeah. Well, so you know, 232 00:12:40,240 --> 00:12:46,000 Speaker 1: Facebook talks about Libra in glowing terms about its ability 233 00:12:46,120 --> 00:12:49,679 Speaker 1: to um you know, take the friction out of cross 234 00:12:49,720 --> 00:12:57,200 Speaker 1: border transactions UM, and to empower UM particularly you know, 235 00:12:57,240 --> 00:12:59,600 Speaker 1: the poor and destitute around the world, bring them into 236 00:12:59,640 --> 00:13:04,119 Speaker 1: the global financial system. But in fact UM it empowers, 237 00:13:04,160 --> 00:13:09,320 Speaker 1: as you say, it empowers the state. And China likes this. So, 238 00:13:09,600 --> 00:13:13,079 Speaker 1: you know, in the US, with libertarians and freaking out 239 00:13:13,120 --> 00:13:16,920 Speaker 1: about the prospect of Facebook, which already has been you know, 240 00:13:17,080 --> 00:13:19,680 Speaker 1: using and abusing the data of his two billion also 241 00:13:19,880 --> 00:13:24,400 Speaker 1: uses UM you know, with this data potentially influencing the 242 00:13:24,520 --> 00:13:27,880 Speaker 1: last election in the US, and now, oh my goodness, 243 00:13:27,960 --> 00:13:32,160 Speaker 1: they're going to get hold of everybody's financial data too. UM. 244 00:13:32,240 --> 00:13:37,079 Speaker 1: The Chinese don't really have these kinds of privacy concerns. 245 00:13:37,120 --> 00:13:40,839 Speaker 1: In fact, to an authoritarian regime like the regime in China, 246 00:13:41,320 --> 00:13:44,840 Speaker 1: it's seen as a real advantage. Um. You know, Okay, 247 00:13:45,200 --> 00:13:48,280 Speaker 1: you can use it to monitor corrupt officials and to 248 00:13:48,679 --> 00:13:51,719 Speaker 1: crack down on telephone food, but you can also use 249 00:13:51,760 --> 00:13:56,000 Speaker 1: this to monitor the financial activities, the source of funds 250 00:13:56,080 --> 00:13:59,960 Speaker 1: for human rights groups, social activists, and so on. Yeah, 251 00:14:00,240 --> 00:14:02,360 Speaker 1: I do wonder, you know, Andy, I think about this 252 00:14:02,400 --> 00:14:04,880 Speaker 1: a lot that as the US pushes back and being 253 00:14:04,960 --> 00:14:08,840 Speaker 1: kind of a participant in the global world, I do see, 254 00:14:08,960 --> 00:14:10,960 Speaker 1: you know, we continue to see China taking steps and 255 00:14:11,000 --> 00:14:13,920 Speaker 1: this might be an opportunity if the US is slowing 256 00:14:13,960 --> 00:14:18,840 Speaker 1: down its moves or work in the global digital currency world. 257 00:14:19,360 --> 00:14:22,400 Speaker 1: You know, Um, I do wonder does China just step 258 00:14:22,480 --> 00:14:24,320 Speaker 1: right in and they become kind of one of the 259 00:14:24,400 --> 00:14:29,480 Speaker 1: leaders in developing this market. Well they could, they could 260 00:14:29,480 --> 00:14:32,800 Speaker 1: well be. Um, you know their plans that we haven't 261 00:14:32,800 --> 00:14:35,640 Speaker 1: actually heard too much about the plans. We've keeping it 262 00:14:35,760 --> 00:14:39,200 Speaker 1: under wraps. But now that Facebook has gone by the way, 263 00:14:39,240 --> 00:14:43,280 Speaker 1: Facebook banned in in China, so libre is not gonna 264 00:14:43,280 --> 00:14:49,080 Speaker 1: go anywhere in China. Um. But nevertheless, you know, um uh, 265 00:14:49,680 --> 00:14:54,000 Speaker 1: we're starting to hear lots of talk from Chinese regulators 266 00:14:54,040 --> 00:15:00,160 Speaker 1: about the potential um for cryptocurrencies. Um. So yeah, we 267 00:15:00,160 --> 00:15:03,400 Speaker 1: we could end up with with China yet again, you know, 268 00:15:03,480 --> 00:15:07,920 Speaker 1: sort of um and and sort of in historical terms, 269 00:15:07,920 --> 00:15:09,920 Speaker 1: they say this is it's always been a case. But 270 00:15:10,200 --> 00:15:13,800 Speaker 1: yet again at the forefront, all of fin tech and 271 00:15:13,880 --> 00:15:16,440 Speaker 1: so andy, while we have you, we can't let you 272 00:15:16,480 --> 00:15:20,080 Speaker 1: go without talking a little bit of Trump She US 273 00:15:20,200 --> 00:15:23,080 Speaker 1: China trade the latest and greatest. I believe you had 274 00:15:23,120 --> 00:15:26,360 Speaker 1: the President of United States saying he still considers President 275 00:15:26,400 --> 00:15:29,280 Speaker 1: She a friend. Maybe not so close as they were 276 00:15:29,680 --> 00:15:31,840 Speaker 1: read the tea leaves for us. Where are we in 277 00:15:31,880 --> 00:15:36,680 Speaker 1: that relationship? Yeah, the the you have to take all 278 00:15:36,720 --> 00:15:40,400 Speaker 1: of this my best friend uh type of rhetoric with 279 00:15:40,400 --> 00:15:42,920 Speaker 1: with a pinch of salt and the probably more than 280 00:15:42,960 --> 00:15:46,680 Speaker 1: a pen train more than the White House strategy all 281 00:15:46,680 --> 00:15:50,840 Speaker 1: along has been right from the beginning, Um, you know, 282 00:15:51,280 --> 00:15:55,520 Speaker 1: Trump needs to have a good personal, working relationship with 283 00:15:55,720 --> 00:16:00,560 Speaker 1: She and then sort of underneath that, um that the 284 00:16:00,600 --> 00:16:05,720 Speaker 1: trade negotiators can uh you know can can can work 285 00:16:05,720 --> 00:16:10,920 Speaker 1: out uh deals which are going to be extremely difficult. Um. 286 00:16:10,960 --> 00:16:14,200 Speaker 1: But they needed something to hold the relationship together right 287 00:16:14,200 --> 00:16:16,920 Speaker 1: at the top. And so they've been talking up this 288 00:16:16,920 --> 00:16:19,760 Speaker 1: this friendship. But of course, I mean it's a friendship 289 00:16:19,920 --> 00:16:24,320 Speaker 1: of convenience. Um, and frankly, it's not going to uh, 290 00:16:24,320 --> 00:16:26,360 Speaker 1: it's not going to get it's not going to help 291 00:16:26,840 --> 00:16:32,560 Speaker 1: resolve these really fundamental differences now between the US and China, 292 00:16:32,800 --> 00:16:35,800 Speaker 1: and you know, two of the two among them. First 293 00:16:35,800 --> 00:16:40,320 Speaker 1: of all, the Chinese demanding that the US remove the 294 00:16:40,400 --> 00:16:45,040 Speaker 1: tariffs on two billion dollars of Chinese goods before they'll 295 00:16:45,080 --> 00:16:50,120 Speaker 1: start talking. It is very uncertain that the US will 296 00:16:50,160 --> 00:16:53,280 Speaker 1: ever agree to that, um, you know. And secondly, they 297 00:16:53,320 --> 00:16:57,920 Speaker 1: want this reprieve for Huawei, and I'm not sure at 298 00:16:57,920 --> 00:17:00,320 Speaker 1: all that they're going to be satisfied with. It's kind 299 00:17:00,360 --> 00:17:04,879 Speaker 1: of halfway compromise where uh it seems like, you know, 300 00:17:05,000 --> 00:17:09,800 Speaker 1: the US will allow certain types of nonsensitive you know, 301 00:17:10,359 --> 00:17:14,800 Speaker 1: technology to flow to Huawei, um, you know, but block 302 00:17:15,240 --> 00:17:19,520 Speaker 1: the really important staff, including semiconductors. Well, it's interesting to 303 00:17:19,600 --> 00:17:22,320 Speaker 1: write go back to President Trump's tweet what about eight 304 00:17:22,320 --> 00:17:25,760 Speaker 1: hours ago, you know, where he he talked about China's 305 00:17:25,760 --> 00:17:27,639 Speaker 1: second quarter growth slow as it's been in more than 306 00:17:27,680 --> 00:17:29,800 Speaker 1: twenty seven years, and he talks about some other things 307 00:17:29,840 --> 00:17:31,919 Speaker 1: about the tariffs and so on and so forth, and 308 00:17:31,960 --> 00:17:33,879 Speaker 1: he says this is why China wants to make a deal, 309 00:17:34,040 --> 00:17:36,199 Speaker 1: and that with the US and wishes it had not 310 00:17:36,240 --> 00:17:38,480 Speaker 1: broken the original deal in the first place. It's just 311 00:17:38,920 --> 00:17:43,040 Speaker 1: fascinating and interesting, you know, Andy, to continue to see, um, 312 00:17:43,160 --> 00:17:46,520 Speaker 1: the President used Twitter um with the Chinese, and I 313 00:17:47,000 --> 00:17:49,800 Speaker 1: can't help but wonder if that just doesn't create more 314 00:17:49,880 --> 00:17:54,800 Speaker 1: problems by him being so public it does and and 315 00:17:54,800 --> 00:17:57,879 Speaker 1: and the other problem of course is uh, you know, 316 00:17:58,280 --> 00:18:04,680 Speaker 1: the Chinese going to try ultimately any deal that that 317 00:18:04,840 --> 00:18:08,200 Speaker 1: the US they do with the US with a president 318 00:18:08,320 --> 00:18:12,760 Speaker 1: that is able to change his mind and change policy 319 00:18:13,080 --> 00:18:17,119 Speaker 1: literally with a single tweet. Yeah, yeah, pretty amazing, all right, 320 00:18:17,200 --> 00:18:21,680 Speaker 1: Andy Brown, leader, the fearless leader I think of the 321 00:18:21,680 --> 00:18:26,160 Speaker 1: Bloomberg New Economy, uh, and the producer of the Bloomberg 322 00:18:26,160 --> 00:18:28,040 Speaker 1: New Economy form always good to check in with you 323 00:18:28,240 --> 00:18:31,480 Speaker 1: so timely, as we said, given everything that's going on 324 00:18:32,040 --> 00:18:36,720 Speaker 1: with crypto and libra, etcetera. Hi work if you can 325 00:18:36,840 --> 00:18:41,480 Speaker 1: get it, and if you get it, well, a little 326 00:18:41,480 --> 00:18:44,199 Speaker 1: Ella Fitzgerald for you. Um, I don't know if it's 327 00:18:44,200 --> 00:18:45,720 Speaker 1: a nice work, if you can get it. That's not 328 00:18:45,800 --> 00:18:49,760 Speaker 1: how some instant cart workers may feel. The grocery delivery 329 00:18:49,800 --> 00:18:52,600 Speaker 1: app is apparently hounding its own workers to take jobs 330 00:18:52,600 --> 00:18:54,960 Speaker 1: that aren't worth their time and effort. So let's find 331 00:18:54,960 --> 00:18:57,520 Speaker 1: out exactly what's going on. Let's bring in Josh Idolson, 332 00:18:57,600 --> 00:18:59,840 Speaker 1: labor reporter at Bloomberg News. He's in our Bloomberg Night 333 00:18:59,880 --> 00:19:03,120 Speaker 1: in One studio in Washington, d C. Also with us 334 00:19:03,320 --> 00:19:05,880 Speaker 1: till Weber, Bloomberg Business Week editor. He's in our Bloomberg 335 00:19:05,880 --> 00:19:09,359 Speaker 1: Interactive Broker studio in New York. Hey, Josh, interesting story. 336 00:19:09,400 --> 00:19:12,119 Speaker 1: What's going on in insta cart? Thanks for having me. 337 00:19:12,240 --> 00:19:15,080 Speaker 1: I talked to dozens of people who work for insta 338 00:19:15,160 --> 00:19:19,240 Speaker 1: cart who say, while the company presents work, there is 339 00:19:19,600 --> 00:19:24,080 Speaker 1: a flexible opportunity for so called independent contractors, that the 340 00:19:24,119 --> 00:19:27,840 Speaker 1: reality is a tremendous amount of pressure to take on 341 00:19:28,000 --> 00:19:30,760 Speaker 1: tasks that the company wants you to, even if they 342 00:19:30,760 --> 00:19:34,160 Speaker 1: don't look appealing to you. And they describe tactics that 343 00:19:34,280 --> 00:19:38,840 Speaker 1: range from four minutes of sonar pinging that your phone 344 00:19:38,840 --> 00:19:44,560 Speaker 1: will make might be able to call that hell brutal. Yeah, 345 00:19:45,880 --> 00:19:47,720 Speaker 1: and you were just listening to Joel do it for 346 00:19:47,760 --> 00:19:50,840 Speaker 1: a few seconds there, four minutes of it. And what 347 00:19:51,240 --> 00:19:56,480 Speaker 1: do these contractors, uh contractors not employees, right, what do 348 00:19:56,600 --> 00:19:59,879 Speaker 1: these contractors say that they do when that happens. So 349 00:20:00,280 --> 00:20:04,280 Speaker 1: people have described turning off their phones even to get 350 00:20:04,280 --> 00:20:07,280 Speaker 1: away from this sound. But what happens repeatedly, according to 351 00:20:07,320 --> 00:20:10,280 Speaker 1: workers is that they get pushed over the edge into 352 00:20:10,400 --> 00:20:13,919 Speaker 1: just accepting the job. Picture on your phone, there's a 353 00:20:14,040 --> 00:20:17,480 Speaker 1: bright accept all caps button with just a tap, not 354 00:20:17,560 --> 00:20:20,119 Speaker 1: a slide, just a tap. You can accept the job. 355 00:20:20,640 --> 00:20:23,919 Speaker 1: But there's no decline button, And so that pinging is 356 00:20:23,960 --> 00:20:27,280 Speaker 1: going to continue for four minutes if you don't accept 357 00:20:27,280 --> 00:20:31,960 Speaker 1: the job. And workers and behavioral economists that I talked 358 00:20:32,000 --> 00:20:35,080 Speaker 1: to say, this is not an accident. This is something 359 00:20:35,119 --> 00:20:38,520 Speaker 1: that is creating pressure on you to say yes by 360 00:20:38,600 --> 00:20:41,360 Speaker 1: making it a real pain to say no. And that's 361 00:20:41,400 --> 00:20:44,080 Speaker 1: on top of all kinds of other incentives, such as 362 00:20:44,680 --> 00:20:49,199 Speaker 1: creating a system for getting jobs, where in order to 363 00:20:49,200 --> 00:20:52,000 Speaker 1: get substantial work, workers say they have to have a 364 00:20:52,040 --> 00:20:54,840 Speaker 1: preferential status for picking hours, and in order to have 365 00:20:54,960 --> 00:20:57,840 Speaker 1: that status to get ours, you need to already have 366 00:20:58,040 --> 00:21:01,479 Speaker 1: a lot of hours you've done. And if you're rejecting jobs, 367 00:21:01,560 --> 00:21:04,240 Speaker 1: you can get kicked off for the rest of your 368 00:21:04,280 --> 00:21:06,680 Speaker 1: time for the day on the platform. Can I just say, though, 369 00:21:07,359 --> 00:21:10,280 Speaker 1: isn't it just providing more transparency to kind of how 370 00:21:10,320 --> 00:21:12,679 Speaker 1: the world works? Really? I mean, doesn't that kind of 371 00:21:12,720 --> 00:21:17,200 Speaker 1: happen in any company. I'm not I'm not taking their side. 372 00:21:17,640 --> 00:21:19,639 Speaker 1: That's one of the issues though, right, and Josh, you 373 00:21:19,640 --> 00:21:22,240 Speaker 1: can address this. I mean, this gets into this idea 374 00:21:22,440 --> 00:21:25,679 Speaker 1: of if they're not employees, you know, like, if our 375 00:21:25,720 --> 00:21:27,240 Speaker 1: bosses need to get in touch with us and they 376 00:21:27,240 --> 00:21:28,760 Speaker 1: want to get in touch, they're going to do it. 377 00:21:29,000 --> 00:21:31,520 Speaker 1: This is I mean, this is sort of separating employees 378 00:21:31,560 --> 00:21:33,919 Speaker 1: contractors the gig economy, right, I mean, this is one 379 00:21:33,960 --> 00:21:36,800 Speaker 1: of the fundamental kind of debates that we're having Or 380 00:21:36,800 --> 00:21:40,240 Speaker 1: am I missing something? No, you're not. Millions of people 381 00:21:40,440 --> 00:21:43,159 Speaker 1: have jobs where they are expected to be at a 382 00:21:43,160 --> 00:21:45,960 Speaker 1: certain place at a certain time and do whatever they're 383 00:21:46,000 --> 00:21:48,639 Speaker 1: told to do and are subject to all kinds of 384 00:21:48,680 --> 00:21:53,960 Speaker 1: detailed requirements, but are considered employees under US and state law. 385 00:21:54,080 --> 00:21:57,359 Speaker 1: And being an employee comes with a whole suite of 386 00:21:57,520 --> 00:22:01,840 Speaker 1: protections from collective bargaining rights to protection from sexual harassment 387 00:22:01,880 --> 00:22:05,639 Speaker 1: to minimum wage and overtime. Contractors do not have the 388 00:22:05,720 --> 00:22:09,920 Speaker 1: same protections, and contractors under federal and state law are 389 00:22:09,960 --> 00:22:13,320 Speaker 1: not supposed to be subject to the degree of control 390 00:22:13,400 --> 00:22:16,320 Speaker 1: by their boss that employees are. And so you have 391 00:22:16,400 --> 00:22:20,199 Speaker 1: some experts saying this and other companies are trying to 392 00:22:20,240 --> 00:22:23,000 Speaker 1: have their cake and eat it too. So, Josh, when 393 00:22:23,040 --> 00:22:25,399 Speaker 1: you went to instact for comment, what what kind of 394 00:22:25,400 --> 00:22:27,840 Speaker 1: feedback did you get from them? Instacart says that it 395 00:22:27,960 --> 00:22:31,520 Speaker 1: is trying to provide the best possible experience for workers, 396 00:22:31,600 --> 00:22:35,160 Speaker 1: and that the jobs are flexible and that some workers 397 00:22:35,200 --> 00:22:38,560 Speaker 1: appreciate that there are multiple ways to get work on 398 00:22:38,600 --> 00:22:41,920 Speaker 1: the platform now and insta cart says that those four 399 00:22:41,960 --> 00:22:46,480 Speaker 1: minutes give people time to think and consider the information 400 00:22:46,560 --> 00:22:50,879 Speaker 1: presented about whether the spatch of work is going to 401 00:22:50,920 --> 00:22:52,960 Speaker 1: be good for them or not. Keep in mind, though 402 00:22:53,200 --> 00:22:55,840 Speaker 1: you're not required to wait four minutes if you want 403 00:22:55,840 --> 00:22:59,359 Speaker 1: to press yes that you'll accept the job. I do 404 00:22:59,480 --> 00:23:02,200 Speaker 1: wonder to Josh, as you look at a company like this, 405 00:23:02,200 --> 00:23:04,520 Speaker 1: this is a company that's poised to go public, how 406 00:23:04,600 --> 00:23:07,920 Speaker 1: much our investor is concerned about sort of worker treatment 407 00:23:08,000 --> 00:23:10,600 Speaker 1: and all of those issues right now? Well, we know 408 00:23:11,000 --> 00:23:14,320 Speaker 1: that it is an issue, as we've seen in the 409 00:23:14,600 --> 00:23:18,120 Speaker 1: Uber and Lift filings for example. It's an issue for 410 00:23:18,560 --> 00:23:21,960 Speaker 1: people potentially taking a stake in the company. Whether these 411 00:23:22,000 --> 00:23:27,760 Speaker 1: companies are going to have major liability for allegedly failing 412 00:23:27,880 --> 00:23:31,160 Speaker 1: to comply with laws about what the differences between an 413 00:23:31,160 --> 00:23:35,520 Speaker 1: employee and a contractor, and particularly in California, where the 414 00:23:35,520 --> 00:23:39,240 Speaker 1: state Supreme Court last year said, if you're doing work 415 00:23:39,320 --> 00:23:42,880 Speaker 1: that is not outside the usual course of the company's business, 416 00:23:43,119 --> 00:23:46,800 Speaker 1: you are not someone who's a contractor. It's an issue 417 00:23:46,840 --> 00:23:50,320 Speaker 1: of great concern for these companies and their investors whether 418 00:23:50,480 --> 00:23:54,719 Speaker 1: they can continue to use the business model that they 419 00:23:54,760 --> 00:23:56,600 Speaker 1: have been And that's the bigger question, I think, right, 420 00:23:56,680 --> 00:23:59,800 Speaker 1: and I think we've always lean into this strategy angle 421 00:24:00,160 --> 00:24:02,560 Speaker 1: where we can, and this is like this little loophole 422 00:24:02,680 --> 00:24:07,080 Speaker 1: and strategy of like how technology can actually become this 423 00:24:07,240 --> 00:24:12,840 Speaker 1: overbearing boss and taking advantage of workers who who are 424 00:24:12,920 --> 00:24:18,600 Speaker 1: workers not employees, right, And and that's fascinating inside Josh 425 00:24:19,119 --> 00:24:22,200 Speaker 1: Josh Idolson is a labor reporter, one of our best, 426 00:24:22,720 --> 00:24:25,440 Speaker 1: doing some very important work here on the gig economy. 427 00:24:25,520 --> 00:24:28,400 Speaker 1: It really has a huge effect. And I know, Joel 428 00:24:28,440 --> 00:24:30,720 Speaker 1: you guys have focused a lot about this in the 429 00:24:30,760 --> 00:24:33,200 Speaker 1: magazine and rightly so it's a big question, right. It 430 00:24:33,280 --> 00:24:36,040 Speaker 1: sparks a lot of conversations about you know, full time 431 00:24:36,080 --> 00:24:38,919 Speaker 1: employee or part time employee. I mean, the economy has 432 00:24:38,960 --> 00:24:42,600 Speaker 1: changed dramatically, right, you are listening to Bloomberg Business Week, 433 00:24:42,680 --> 00:24:45,080 Speaker 1: or thanks to Joe Weber, editor of Bloomberg Business Weekend. 434 00:24:45,119 --> 00:24:48,360 Speaker 1: As a Jason mentioned josh Idleston, labor reporter Bloomberg News. 435 00:24:48,400 --> 00:24:51,919 Speaker 1: Catch that story at Bloomberg business Week dot com and 436 00:24:51,960 --> 00:24:54,040 Speaker 1: on the Bloomberg terminal and in the magazine. This is 437 00:24:54,040 --> 00:25:02,560 Speaker 1: Bloomberg a journal. Yeah, but you let me drive, no, no, 438 00:25:02,640 --> 00:25:08,399 Speaker 1: no home, honey, please, I'll do the right l let me. 439 00:25:08,720 --> 00:25:27,440 Speaker 1: I want to drive. Drive questions the Drive to the Globe. Thanks, 440 00:25:27,440 --> 00:25:31,960 Speaker 1: We'll try us on Bloomberg Radio this. Indeed, it is 441 00:25:32,040 --> 00:25:34,800 Speaker 1: time for the drive to the closer. Next guest says recession, 442 00:25:35,160 --> 00:25:37,920 Speaker 1: don't worry trade warton, don't worry about that too much either. 443 00:25:38,359 --> 00:25:40,680 Speaker 1: Let's get to Abbe des Bonde. He's founder and chief 444 00:25:40,720 --> 00:25:44,359 Speaker 1: investment officer at Centerstone Investors. He's back with us today, 445 00:25:44,440 --> 00:25:46,240 Speaker 1: joining us on the phone in New York. I'll be 446 00:25:46,400 --> 00:25:48,160 Speaker 1: good to have you here with us. I do feel 447 00:25:48,160 --> 00:25:50,800 Speaker 1: like we are at a point in the market and 448 00:25:50,880 --> 00:25:56,240 Speaker 1: really global economic environment. We're not quite sure what comes next. Um, 449 00:25:56,240 --> 00:25:59,080 Speaker 1: how do you see it? Hey, Carol, thanks for having 450 00:25:59,119 --> 00:26:02,920 Speaker 1: me on. Yeah. I think that we've got a nice 451 00:26:02,960 --> 00:26:07,760 Speaker 1: little kind of quiet zone here. I mean, today was quieter, boring, 452 00:26:07,760 --> 00:26:10,399 Speaker 1: however you want to call it that. I mean, you know, 453 00:26:10,440 --> 00:26:13,240 Speaker 1: we do have a kind of a period where interest 454 00:26:13,359 --> 00:26:20,120 Speaker 1: rate exposure is probably best, you know, shortened. Um, you've 455 00:26:20,160 --> 00:26:24,800 Speaker 1: got excitement when it comes to gold, potentially foreign currencies. 456 00:26:25,800 --> 00:26:29,560 Speaker 1: And what's new and different now versus last couple of 457 00:26:29,640 --> 00:26:33,399 Speaker 1: years is that the Europe, the Eurozone is actually starting 458 00:26:33,400 --> 00:26:35,680 Speaker 1: to show some signs of life. And I think that's 459 00:26:35,680 --> 00:26:37,800 Speaker 1: going to be kind of a surprise for people. And 460 00:26:37,840 --> 00:26:40,480 Speaker 1: it's gonna happen looks like at a surprising time of 461 00:26:40,520 --> 00:26:44,560 Speaker 1: the year, which is a summer whendow one's actually paying attention. Um, 462 00:26:44,640 --> 00:26:47,040 Speaker 1: so yeah, well I'm not saying don't worry about anything. 463 00:26:47,119 --> 00:26:48,879 Speaker 1: Of course, it's a you know, it's a little bit 464 00:26:48,920 --> 00:26:51,439 Speaker 1: of hyperpole. But you know, for the first time a 465 00:26:51,480 --> 00:26:55,080 Speaker 1: long time, as opposed to the horror show that Europe 466 00:26:55,119 --> 00:26:58,280 Speaker 1: has been, things are actually looking pretty good for international 467 00:26:58,320 --> 00:27:01,680 Speaker 1: markets led by Europe and what and so talk a 468 00:27:01,720 --> 00:27:03,960 Speaker 1: little bit more about where those signs of life are 469 00:27:04,000 --> 00:27:08,000 Speaker 1: emanating from. Hey like what where do where are people 470 00:27:08,640 --> 00:27:12,159 Speaker 1: uh seeing the optimism that's there? Are where what are 471 00:27:12,200 --> 00:27:14,840 Speaker 1: they seeing that's giving them optimism? I mean I think 472 00:27:14,880 --> 00:27:18,840 Speaker 1: that so I'm I think I see green shoots. So 473 00:27:18,880 --> 00:27:22,359 Speaker 1: it's kind of early to say that, hey, everyone sees this. 474 00:27:22,560 --> 00:27:25,520 Speaker 1: I think that there are some early warning or I 475 00:27:25,520 --> 00:27:29,080 Speaker 1: guess green shoots. And some of those indicators include like 476 00:27:29,080 --> 00:27:31,800 Speaker 1: p m I is coming out of France. Uh, there's 477 00:27:31,800 --> 00:27:35,600 Speaker 1: a bit of a dark cloud which is manufacturing that 478 00:27:35,720 --> 00:27:39,560 Speaker 1: is still sort of dampening. I think visually what it 479 00:27:39,600 --> 00:27:41,679 Speaker 1: looks like the recovery looks like in Europe because so 480 00:27:41,760 --> 00:27:45,240 Speaker 1: much of Europe is really manufacturing oriented, um, so that 481 00:27:45,240 --> 00:27:49,080 Speaker 1: that is still kind of there. But the unbeknownst to most, 482 00:27:49,119 --> 00:27:53,119 Speaker 1: it looks like domestic consumption is starting to recover. And 483 00:27:53,160 --> 00:27:54,879 Speaker 1: that's kind of interesting. You see it in the numbers, 484 00:27:55,200 --> 00:27:58,040 Speaker 1: you know, statements like the CEO of LVMH not too 485 00:27:58,040 --> 00:28:00,480 Speaker 1: long a couple of months ago. You know, they're kind 486 00:28:00,480 --> 00:28:05,240 Speaker 1: of surprised themselves about how how strong the economies are 487 00:28:05,440 --> 00:28:09,840 Speaker 1: locally domestic economies are, um, even in China, which is 488 00:28:10,119 --> 00:28:11,719 Speaker 1: you know you've seen seen a lot of the headlines 489 00:28:11,760 --> 00:28:14,200 Speaker 1: are about about how weak things are there and how 490 00:28:14,240 --> 00:28:16,760 Speaker 1: it's you know, multi decade low low and growth. But actually, 491 00:28:16,800 --> 00:28:22,960 Speaker 1: if you separate manufacturing from local domestic consumption, uh, people 492 00:28:22,960 --> 00:28:25,119 Speaker 1: are spending money. People are you know there's there's no 493 00:28:25,200 --> 00:28:27,600 Speaker 1: sign of like a huge global recession around the corner, 494 00:28:28,359 --> 00:28:30,160 Speaker 1: and that is I think that's that's been the big 495 00:28:30,160 --> 00:28:35,480 Speaker 1: weight on multiples for international markets in particular, and there's 496 00:28:35,520 --> 00:28:38,080 Speaker 1: just still no sign of that. In fact, you're starting 497 00:28:38,120 --> 00:28:41,320 Speaker 1: to see the beginning stages of recovery in Europe in 498 00:28:42,080 --> 00:28:44,920 Speaker 1: places that you wouldn't expect it. So yeah, so I'm 499 00:28:44,920 --> 00:28:48,360 Speaker 1: not saying yeah, hey, just you know, buy with no abandoned, 500 00:28:48,400 --> 00:28:51,600 Speaker 1: but um, things are not as bad as what what 501 00:28:51,600 --> 00:28:54,360 Speaker 1: what it seems, but abbe Then why does it feel 502 00:28:54,400 --> 00:28:58,080 Speaker 1: like so many global central banks are opting for an 503 00:28:58,120 --> 00:29:01,480 Speaker 1: easier monetary such ration or states because there are all 504 00:29:02,080 --> 00:29:04,520 Speaker 1: extremely focused on the main facturing side of the economy 505 00:29:04,560 --> 00:29:06,720 Speaker 1: and like so in certain countries like the United States, 506 00:29:06,720 --> 00:29:10,920 Speaker 1: for instance, manufacturing exports it's a very small percentage of 507 00:29:10,960 --> 00:29:15,680 Speaker 1: the total, but you know, they they demand big headlines, 508 00:29:16,240 --> 00:29:20,280 Speaker 1: and um, so I think the weight of the evidence 509 00:29:20,320 --> 00:29:23,760 Speaker 1: is that things are okay, But the weight of media 510 00:29:23,800 --> 00:29:26,840 Speaker 1: evidence is that, you know, because of the over over 511 00:29:26,920 --> 00:29:30,600 Speaker 1: focused on manufacturing, is that things are not as good 512 00:29:30,600 --> 00:29:32,600 Speaker 1: as they could be. And so I think there's this 513 00:29:32,760 --> 00:29:37,360 Speaker 1: continued fear of deflation. You know, all these big picture 514 00:29:37,440 --> 00:29:40,640 Speaker 1: problems that central banks are really trying to solve for 515 00:29:41,200 --> 00:29:45,880 Speaker 1: in order to preserve their independence, because increasingly each crisis 516 00:29:45,880 --> 00:29:49,640 Speaker 1: that we have lessons the or shortens the road that 517 00:29:49,720 --> 00:29:53,280 Speaker 1: these these guys have independence anymore, and so they're having 518 00:29:53,360 --> 00:29:55,440 Speaker 1: to become more and more proactive. So the Federal Reserve 519 00:29:55,480 --> 00:29:57,680 Speaker 1: is going to start cutting rates this month in the 520 00:29:57,720 --> 00:30:01,040 Speaker 1: midst of an expansion. That does and happened very often. 521 00:30:01,560 --> 00:30:04,680 Speaker 1: I think it shows I think it shows an insecurity 522 00:30:04,920 --> 00:30:08,880 Speaker 1: and regardless though our job as investors, as portfolio managers 523 00:30:08,920 --> 00:30:11,160 Speaker 1: looking out for our clients at Center Stone or wherever, 524 00:30:11,840 --> 00:30:14,000 Speaker 1: you know, we have to deal with the environment that's 525 00:30:14,000 --> 00:30:17,800 Speaker 1: given to us. And in that environment, if the central 526 00:30:17,800 --> 00:30:22,760 Speaker 1: banks are going to ease during a period of strength 527 00:30:22,840 --> 00:30:26,600 Speaker 1: or at least moderation and growth but not a recession, uh, 528 00:30:26,760 --> 00:30:29,960 Speaker 1: that's actually good for stocks, right all right, So tell 529 00:30:30,040 --> 00:30:32,480 Speaker 1: us about a couple of names that you're looking at, 530 00:30:32,520 --> 00:30:34,760 Speaker 1: because in some of the notes you sent over, I 531 00:30:34,800 --> 00:30:38,560 Speaker 1: have to say not household names necessarily, which is what 532 00:30:38,640 --> 00:30:41,200 Speaker 1: we like. Tell us what you're looking at. Yeah, so 533 00:30:41,280 --> 00:30:46,600 Speaker 1: I probably sent you all my losers ums have been 534 00:30:46,600 --> 00:30:49,880 Speaker 1: taken away from from me by M and A activity. 535 00:30:50,240 --> 00:30:52,280 Speaker 1: It's a very very healthy environment when you see lots 536 00:30:52,320 --> 00:30:54,880 Speaker 1: of your stocks getting taken out in M and A. 537 00:30:55,000 --> 00:30:57,440 Speaker 1: So it's not a narrow rally. It's pretty broad rally. 538 00:30:58,280 --> 00:31:03,040 Speaker 1: Even industries where you see uh weakness, for instance, the 539 00:31:03,160 --> 00:31:06,400 Speaker 1: semiconductor space, you know that that is a we're going 540 00:31:06,400 --> 00:31:09,680 Speaker 1: through like a very very serious down cycle in semi 541 00:31:09,680 --> 00:31:12,640 Speaker 1: conductor space. But guess what our number one are Actually 542 00:31:12,680 --> 00:31:17,640 Speaker 1: only semiconductor holding was taken out, um you know which 543 00:31:17,680 --> 00:31:23,240 Speaker 1: was that? That was called Versum Special Materials. There's a 544 00:31:23,280 --> 00:31:25,840 Speaker 1: company called Integrists that's very similar to it. That is 545 00:31:26,200 --> 00:31:29,760 Speaker 1: um that that's still trades publicly and I would imagine 546 00:31:29,840 --> 00:31:33,040 Speaker 1: will be taken away at some point. But tell us, 547 00:31:33,360 --> 00:31:36,120 Speaker 1: but tell us about like is it a liquid or 548 00:31:36,200 --> 00:31:39,400 Speaker 1: la quid um that's based over and I'm so bad 549 00:31:39,440 --> 00:31:42,320 Speaker 1: with French, but based over in Paris. This is one 550 00:31:42,360 --> 00:31:43,720 Speaker 1: that you like. The A d r s are up 551 00:31:43,720 --> 00:31:45,360 Speaker 1: about twelve percent the show you've got a bit of 552 00:31:45,400 --> 00:31:49,160 Speaker 1: a dividend as well. What's the thinking here? Yeah, I 553 00:31:49,200 --> 00:31:51,520 Speaker 1: mean air La key So these are um, this is 554 00:31:51,560 --> 00:31:53,720 Speaker 1: a business I've owned for a long long time. Um, 555 00:31:53,720 --> 00:31:55,960 Speaker 1: it's a very long you know, if you think about 556 00:31:56,440 --> 00:31:58,240 Speaker 1: what are those types of companies you can own and 557 00:31:58,360 --> 00:32:02,040 Speaker 1: not have to worry about like Amazon threat right, and 558 00:32:02,160 --> 00:32:04,400 Speaker 1: the air separation is one of those things. I mean, 559 00:32:04,400 --> 00:32:06,880 Speaker 1: these these plants are meant to last forty fifty years 560 00:32:06,920 --> 00:32:10,920 Speaker 1: and there's no technology that's going to displace the separation 561 00:32:10,920 --> 00:32:14,320 Speaker 1: of air into you know, nitrogen or whatever for the 562 00:32:14,360 --> 00:32:18,640 Speaker 1: refineries down south. So, um, it's a very safe business. Um, 563 00:32:18,680 --> 00:32:23,200 Speaker 1: it's very well I think it's very conservatively accounted for. Um. 564 00:32:23,240 --> 00:32:25,600 Speaker 1: They tend to depreciate things in a much shorter life 565 00:32:25,640 --> 00:32:28,400 Speaker 1: than the actual life of the assets, and so that 566 00:32:28,600 --> 00:32:32,080 Speaker 1: the earnings are very clean, the balance sheets clean, the 567 00:32:32,120 --> 00:32:35,160 Speaker 1: management is very good. Um. You know, these are all 568 00:32:35,840 --> 00:32:38,680 Speaker 1: traits that we like at center Stone, things that you're 569 00:32:38,680 --> 00:32:41,440 Speaker 1: allowed to own and just like forget about, you know, 570 00:32:41,560 --> 00:32:45,480 Speaker 1: for for years it's Amazon is not going to displace it. 571 00:32:45,600 --> 00:32:47,520 Speaker 1: You know, these are great businesses to own and just 572 00:32:47,520 --> 00:32:49,959 Speaker 1: just let them do the work for you. And so 573 00:32:50,040 --> 00:32:52,320 Speaker 1: we have that that center Stone portfolio, Like that is 574 00:32:52,360 --> 00:32:55,280 Speaker 1: a collection of businesses that just take the hard work 575 00:32:55,320 --> 00:32:57,600 Speaker 1: off of your shoulders. You don't have to trade. It's 576 00:32:57,600 --> 00:33:00,680 Speaker 1: a low turnover strategy. And those are types of businesses 577 00:33:00,720 --> 00:33:02,720 Speaker 1: that we're looking for. All right, All We've got to 578 00:33:02,800 --> 00:33:04,480 Speaker 1: leave it on that note. Nice to check in with 579 00:33:04,560 --> 00:33:08,080 Speaker 1: you on this Monday. Abbe Despondae, founder and Chief investment 580 00:33:08,120 --> 00:33:12,320 Speaker 1: officer of our Centerstone Investors, all joining us today on 581 00:33:12,400 --> 00:33:15,240 Speaker 1: the phone in New York. Thanks for listening to Bloomberg 582 00:33:15,280 --> 00:33:18,560 Speaker 1: Business Week. You can subscribe to the podcast on iTunes, SoundCloud, 583 00:33:18,640 --> 00:33:20,760 Speaker 1: or Bloomberg dot com. You can also listen to our 584 00:33:20,840 --> 00:33:23,720 Speaker 1: radio show every weekday at two pm Eastern only on 585 00:33:23,760 --> 00:33:24,600 Speaker 1: Bloomberg Radio.