WEBVTT - Surveillance: Trade Should Be Enhanced, Mann Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.920 Bloomberg dot Com, and of course on the Bloomberg The 0:00:27.960 --> 0:00:31.800 Interview of the Day on international economics and Trade and 0:00:31.840 --> 0:00:35.520 with China, John Farroll Without Question, Katherine Man long Ago 0:00:35.800 --> 0:00:38.240 of brand Ice and other points, and O. E. C. 0:00:38.440 --> 0:00:41.680 D and now Darkening the Door at Fortress Corbett two 0:00:41.720 --> 0:00:45.360 thousand four, Peterson Institute, Breaking Up is Hard to Do, 0:00:45.479 --> 0:00:50.720 Global codependency, collective action and the challenges of global adjustment 0:00:51.400 --> 0:00:54.680 light years out in front of others. On the China 0:00:54.800 --> 0:00:58.080 US matter, Katherine Man, John a world class economist that 0:00:58.080 --> 0:01:00.080 really didn't need much for an introduction a sol at 0:01:00.000 --> 0:01:02.800 a greet global chief economists. Good morning to Catherine, Thank 0:01:02.840 --> 0:01:05.600 you great to see. Let's walk through that code dependency. 0:01:05.959 --> 0:01:09.520 Have we given enough thought to the full out of 0:01:09.640 --> 0:01:12.800 two of the launchest economies in the world, essentially going 0:01:12.840 --> 0:01:16.040 on it with each other? I think the answer is no. UM. 0:01:16.080 --> 0:01:19.520 I think the stock market has gyrated a little bit, 0:01:19.560 --> 0:01:24.399 but but has not fully appreciated the potential for a divorce. Um, 0:01:24.520 --> 0:01:28.679 and that certainly is something that the administration would like 0:01:28.760 --> 0:01:31.399 to see. Is it is a divorce, I mean we 0:01:31.440 --> 0:01:34.520 could get closer together. I mean the the objectives of 0:01:34.640 --> 0:01:38.600 market access, which was the original UH design of the 0:01:38.640 --> 0:01:42.080 Section three or one case, you know, protecting intellectual property, 0:01:42.240 --> 0:01:45.160 creating a level playing field for foreign firms in China 0:01:45.160 --> 0:01:47.280 in order to be able to access the market and 0:01:47.600 --> 0:01:50.840 serve the citizens and the firms there um. That would 0:01:51.120 --> 0:01:54.840 that would tighten the relationship. But that's not the direction 0:01:54.880 --> 0:01:58.639 that we currently appear to be going in. Divorce seems 0:01:58.680 --> 0:02:01.040 to be the direction that we're going in. That might 0:02:01.040 --> 0:02:03.800 be the direction we're going again in your view, is 0:02:03.800 --> 0:02:07.040 that the objective though, Catherine, because that's a different that's 0:02:07.040 --> 0:02:09.600 a different scenario. Entighly, the objective, as you points out, 0:02:09.680 --> 0:02:12.119 was to get market access. To rebelief that the objective 0:02:12.120 --> 0:02:15.080 now is to have a divorce. Well, I think that 0:02:15.280 --> 0:02:19.840 we've we've seen a number of different communications that suggest 0:02:19.919 --> 0:02:23.519 that if firms want to avoid having to pay the tariffs, 0:02:23.520 --> 0:02:27.000 that they should um move their production back to the 0:02:27.040 --> 0:02:29.760 United States. That that is a nice thing to say, 0:02:29.760 --> 0:02:33.680 it's probably unrealistic um and instead, uh, there will be 0:02:33.720 --> 0:02:37.440 some supply change that go to other countries, not not 0:02:37.520 --> 0:02:39.680 necessarily to the United States and probably not to the 0:02:39.720 --> 0:02:43.520 United States. So it's it's kind of, uh, you divorce 0:02:43.960 --> 0:02:46.680 China and you take up with I don't know, Vietnam 0:02:46.800 --> 0:02:49.800 or something like that. Um and and that's the strategy 0:02:49.960 --> 0:02:55.239 two pages decades ago, Catherine Man is a trade deficit sustainable? 0:02:55.360 --> 0:02:59.800 Maybe some of it's dated. Chapter three is must read, 0:03:00.200 --> 0:03:05.000 including at the White House, has us comparative advantage changed? 0:03:05.280 --> 0:03:09.640 And on page thirty where does comparative advantage come from? 0:03:10.080 --> 0:03:14.040 Lecture the president right now? A wise one. So comparative 0:03:14.080 --> 0:03:19.200 advantage comes from productivity growth, it comes from educated workers, 0:03:19.280 --> 0:03:22.720 it comes from how you use your resources, and and 0:03:22.760 --> 0:03:26.760 that is uh not none of that is enhanced with 0:03:26.840 --> 0:03:30.800 trade wars. It is an intellectual leap, going back to 0:03:31.440 --> 0:03:35.640 Ricardo Smith of tearing down the certitude of Thomas Munn 0:03:35.920 --> 0:03:39.320 and others hundreds of years ago. I mean John Farrell's 0:03:39.400 --> 0:03:45.280 ancestors lived Thomas Munn England. Are we going back to that? No, 0:03:45.400 --> 0:03:47.200 I don't think we're going to go back to um. 0:03:47.200 --> 0:03:49.520 A tar key, that's our tarkey is the word that 0:03:49.720 --> 0:03:53.200 the trade economists use when you produce and consume everything 0:03:53.240 --> 0:03:56.200 at home, which is the what the tweets said this morning, 0:03:56.680 --> 0:04:00.080 John continue, um So, I mean you don't you don't know. 0:04:00.120 --> 0:04:02.400 I mean, if you're a producer, you want market access 0:04:02.440 --> 0:04:05.080 to more markets to to sell your stuff. If you're 0:04:05.080 --> 0:04:08.040 a consumer, you want the variety that comes from you know, 0:04:08.680 --> 0:04:11.520 what you can buy that doesn't come from your own country. 0:04:11.960 --> 0:04:15.320 Um so. And of course producing you know, producing things abroad, 0:04:15.360 --> 0:04:18.360 it's cheaper, so that's good as well from a pocketbook standpoint. 0:04:18.600 --> 0:04:20.320 So there are a lot of reasons why you know, 0:04:20.360 --> 0:04:23.719 we think trade is good and uh it should be enhanced. 0:04:24.080 --> 0:04:27.120 Um We know, of course that there are adjustment issues 0:04:27.200 --> 0:04:29.760 as well, and that's been kind of the centerpiece of 0:04:29.760 --> 0:04:33.440 a lot of concerns. But closing the door to to trade, 0:04:33.839 --> 0:04:38.000 closing the door to um uh created markets abroader to 0:04:38.000 --> 0:04:41.960 to buy things from abroad. That doesn't enhance your capacity 0:04:41.960 --> 0:04:45.000 of your economy to deliver on on what your citizen's 0:04:45.000 --> 0:04:47.760 talk about. Comparative advantage though, because it's not that clear cut. 0:04:47.920 --> 0:04:51.320 Let's take the chip industry for instance, the Chinese import 0:04:51.440 --> 0:04:55.080 a load of semis from US companies. The Chinese would 0:04:55.120 --> 0:04:56.920 essentially like to end that. And the way they're looking 0:04:56.960 --> 0:04:59.000 to end that is the beef up these industries by 0:04:59.040 --> 0:05:02.360 subsidizing the This administration has a problem with that. That's 0:05:02.360 --> 0:05:06.320 not about comparative advantage. That's about skewing the results to 0:05:06.400 --> 0:05:09.400 your own advantage. It is not about a level playing field. 0:05:09.800 --> 0:05:12.400 The Chinese are ultimately doing the same thing on the 0:05:12.520 --> 0:05:17.039 Catherine Well. So, uh, comparative advantage is not immutable. It 0:05:17.040 --> 0:05:19.320 doesn't just come from the weather or from you know, 0:05:19.400 --> 0:05:21.599 the whether you have you know, minerals in the ground. 0:05:21.880 --> 0:05:25.320 Comparative advantage is something that can be built um as 0:05:25.320 --> 0:05:28.240 I say, educated workers, that's something that you build. Um 0:05:28.480 --> 0:05:32.119 A you know, superior technologies, those are something that you build. 0:05:32.160 --> 0:05:36.200 So so you know, subsidization is something that has is 0:05:36.240 --> 0:05:38.719 the you know, the Chinese are pretty obvious about that 0:05:39.120 --> 0:05:42.080 right now, but it's not like it's the only country 0:05:42.120 --> 0:05:44.680 that does that. Um going back to the to the 0:05:44.760 --> 0:05:47.640 day with was it you know what's what's may are 0:05:47.680 --> 0:05:50.719 important computer chips or potato chips. That goes back to 0:05:50.760 --> 0:05:55.239 the nineties um and and the US allowed um US 0:05:55.560 --> 0:05:58.480 chip producers back in the day to create a cartel 0:05:58.960 --> 0:06:01.720 uh sem attack. If you're remember back then, um, and 0:06:01.760 --> 0:06:05.280 that was in order to promote U S semiconductor industry. 0:06:05.400 --> 0:06:07.840 So I mean we did it too. Uh, they're doing 0:06:07.880 --> 0:06:10.680 it and so it's it's not new under the sun. 0:06:11.000 --> 0:06:15.599 Chapter six is the trade deficit sustainable? Is the external 0:06:15.720 --> 0:06:19.240 deficit caused by unfair trade practices? What did you do 0:06:19.320 --> 0:06:23.479 write this chapter for young Trump? So, I mean, you know, 0:06:23.560 --> 0:06:26.400 it's uh, people ask that question back then. I mean 0:06:26.480 --> 0:06:29.760 I think that we should remember that that the issues 0:06:29.880 --> 0:06:32.920 that are being displayed in the in the current environment 0:06:32.960 --> 0:06:35.960 with with the U. S And China, these are not 0:06:36.120 --> 0:06:39.120 new issues. These are absolutely not new issues. What is 0:06:39.160 --> 0:06:42.120 new is that the size of the two countries involved, 0:06:42.560 --> 0:06:45.479 and that it is it is taking place after a 0:06:45.520 --> 0:06:48.400 period of time when there's been so much integration between 0:06:48.440 --> 0:06:52.680 the two countries. There's so much interesting simply chain relationships, 0:06:52.760 --> 0:06:56.839 and that that means taking Barrett taking that apart is 0:06:56.920 --> 0:07:01.640 much more costly than than in Mrs Farroll from Coventry 0:07:01.680 --> 0:07:03.320 emails in and she says, what's it going to do 0:07:03.360 --> 0:07:05.840 for the dollar? She doesn't care about all this mumbo jumbo. 0:07:06.120 --> 0:07:07.479 She just wants to know what's it going to do 0:07:07.520 --> 0:07:10.120 for the dollar? Well, in the short run, all this 0:07:10.280 --> 0:07:14.720 uncertainty associated with policy changes, trade wars and so forth, 0:07:14.960 --> 0:07:19.280 people tend to um go to the dollar. Uh, it's 0:07:19.520 --> 0:07:22.600 the place that you go for safe haven. UM. But 0:07:22.680 --> 0:07:24.680 there are other kind of currencies that have started to 0:07:24.680 --> 0:07:26.480 be a little bit more attractive as well, which is 0:07:26.560 --> 0:07:29.280 which is the end? So by and large we're looking 0:07:29.360 --> 0:07:33.920 at short term improvements or a dollar appreciation. But then 0:07:34.280 --> 0:07:37.400 you know, then you the buyer's remorse sets in and 0:07:37.480 --> 0:07:41.679 the cost of disentangling your value chains looks bad. Um, 0:07:41.800 --> 0:07:45.000 and uh, there's and that, and there's a big trade deficit, 0:07:45.240 --> 0:07:48.680 trade deficity. There's a big um fiscal budget deficit that 0:07:48.720 --> 0:07:52.440 the US currently has, larger than uh most countries would 0:07:52.480 --> 0:07:55.080 have at this point in their business cycle. And you 0:07:55.120 --> 0:07:58.080 will have to be issuing treasury securities and I think 0:07:58.080 --> 0:08:00.160 there's some question marks about that. So cancery on a 0:08:00.240 --> 0:08:02.480 question for you, how you model to pass through from 0:08:02.600 --> 0:08:04.560 tariffs that could be on everything and they could be 0:08:04.640 --> 0:08:08.400 hired too, through to final prices and plug in those 0:08:08.440 --> 0:08:11.040 effects assumptions for me as well, because I think that's important. 0:08:11.080 --> 0:08:13.400 Just do that for US briefly. Well. So a lot 0:08:13.440 --> 0:08:16.920 of people do focus on for the foreign currency translations, 0:08:16.960 --> 0:08:19.360 so a product, you know, in theory of product is 0:08:19.400 --> 0:08:23.040 priced in yen or in yuan R and B, and 0:08:23.080 --> 0:08:26.360 then you adjust the price to translate it into dollars. 0:08:26.720 --> 0:08:30.080 And so they say, oh, well, if the yuan depreciates 0:08:30.120 --> 0:08:34.480 by ten percent, it offsets ten That's actually way too simplistic, 0:08:34.760 --> 0:08:37.640 because in fact, all that is invoiced in dollars to 0:08:37.720 --> 0:08:42.360 start with, so there's much less of a dollar translation 0:08:42.440 --> 0:08:46.800 effect than most people think. Catherine Man really really interesting, 0:08:46.840 --> 0:08:49.320 thoughtful stuff. Great to catch hell you this morning, Catherine Man, 0:08:49.360 --> 0:08:52.880 City Group Global Chief Economist Tom really thoughtful stuff and 0:08:52.920 --> 0:08:54.720 some great analysis of the last couple of days on 0:08:54.720 --> 0:09:12.360 this story. The big issue. The President certainly optimistic about 0:09:12.360 --> 0:09:14.520 the chances of a deal, saying it would become apparent 0:09:14.559 --> 0:09:16.800 in about three or four weeks whether trade talks with 0:09:16.920 --> 0:09:19.760 China we're going to be successful. Planning to meet with 0:09:19.840 --> 0:09:22.320 this Chinese counterpart, the President said he has a feeling 0:09:22.600 --> 0:09:25.600 it's going to be very successful here in New York 0:09:25.640 --> 0:09:28.360 to discuss some please to say is YenS nord Exante 0:09:28.520 --> 0:09:32.360 data founder and CEO. Good morning to yents. Good morning. 0:09:32.520 --> 0:09:37.480 The concept of the Trump put market sensitive policy preferences, 0:09:37.840 --> 0:09:40.000 and we've seen that being activated just a little bit 0:09:40.000 --> 0:09:42.320 in the last twenty four hours. Yeah. I think we 0:09:42.480 --> 0:09:47.040 saw obviously a very big market reaction starting last week 0:09:47.080 --> 0:09:52.360 and accelerating very much on Monday, and then the rhetoric 0:09:52.520 --> 0:09:55.439 from from Trump changed a little bit. I thought the 0:09:55.520 --> 0:09:59.240 Keys sentence really yesterday was this thing about the tariffs 0:09:59.360 --> 0:10:02.600 on the remain inning three hundred billion was not set 0:10:02.640 --> 0:10:04.480 in stone, like that was something that was still to 0:10:04.520 --> 0:10:07.000 be decided. So I thought that was the opening. That 0:10:07.120 --> 0:10:10.280 was the most reason, the most important reason why we're 0:10:10.280 --> 0:10:12.360 starting to rally back a little bit in these risk 0:10:12.400 --> 0:10:14.280 asses that have been hammered. There's a belief that we 0:10:14.280 --> 0:10:17.280 have the series of automatic stabilizers that will kick in. 0:10:17.600 --> 0:10:20.240 These policy preferences will kick in the likes of China, 0:10:20.280 --> 0:10:22.440 the sheep put that have growth and the risks around 0:10:22.440 --> 0:10:25.080 growth increased too much. They'll deliver stimulus that if the 0:10:25.120 --> 0:10:27.560 market backs off too much, the President will back away 0:10:28.000 --> 0:10:32.520 from market negative policy preferences, for instance, the FED put 0:10:32.520 --> 0:10:34.559 the power put. We've talked about that so much, all 0:10:34.600 --> 0:10:37.440 of these three things. Yes, do you believe that those 0:10:37.480 --> 0:10:39.920 three things could be activated? What do you think the 0:10:40.040 --> 0:10:44.240 risks are, the constraints around the deployment of those initiatives. Yes, 0:10:44.400 --> 0:10:49.360 so I think the problem with that narrative is that 0:10:49.520 --> 0:10:51.719 a lot of them have already been deployed, and then 0:10:51.760 --> 0:10:54.960 there's places like the eurosoone where they don't really have 0:10:55.080 --> 0:10:57.920 much left. So I was in the Chinese have have 0:10:58.000 --> 0:11:02.679 stimulated already, The FED has already done their pivot. Doesn't 0:11:02.679 --> 0:11:05.280 mean they couldn't quite aggressively in surprise, but they've done 0:11:05.640 --> 0:11:08.920 a fair bid. So I think really the most important 0:11:08.920 --> 0:11:11.880 part of what you're describing is some kind of softening 0:11:11.880 --> 0:11:15.240 of the stands in the trade negotiation itself. That's something 0:11:15.280 --> 0:11:17.120 that can be sort of pulled out of the hat 0:11:17.200 --> 0:11:19.440 if needed, if if the market started to tank, and 0:11:19.480 --> 0:11:22.600 that will be important to market certainly in the short term. 0:11:22.679 --> 0:11:25.320 So those are things I'm watching. Until then, We've got 0:11:25.320 --> 0:11:27.680 to think about how the efex market adjust as well. 0:11:27.920 --> 0:11:30.520 I hear a lot of analysis around the tariff impact, 0:11:30.800 --> 0:11:34.880 which doesn't account for the FX market adjusting. Just how 0:11:34.960 --> 0:11:38.560 much will the redmen be adjusted and to what degree 0:11:38.559 --> 0:11:41.000 and how much tolerance do the Chinese have to allow 0:11:41.320 --> 0:11:46.760 a weaker Chinese currency. Yeah, so the Chinese authorities really 0:11:46.800 --> 0:11:49.559 have a challenge on your hands here, right, because if 0:11:49.600 --> 0:11:52.000 they wanted to fully adjust to the tariff that is 0:11:52.040 --> 0:11:56.920 now spiking up on a large proportion of their goods, 0:11:56.920 --> 0:11:58.360 we would need to see a big move of like 0:11:58.400 --> 0:12:01.240 maybe more than ten percent. On the other hand, they've 0:12:01.280 --> 0:12:04.640 signaled from a psychological perspective that they don't really want 0:12:04.679 --> 0:12:06.800 to have it above seven. That was the signal they 0:12:06.840 --> 0:12:09.280 sent in the second half of last year, and I 0:12:09.280 --> 0:12:12.480 think that's a signal they're sending again. We are their fixings. 0:12:12.520 --> 0:12:14.720 Every day they come in the morning, they set essentially 0:12:14.720 --> 0:12:16.760 at a starting level, and that has been set low 0:12:16.840 --> 0:12:18.679 signal that they don't want it to be weaker than 0:12:18.720 --> 0:12:22.800 it already is. So they're sort of stuck between, Okay, 0:12:22.800 --> 0:12:25.560 what will be good for their exporters and what do 0:12:25.600 --> 0:12:29.800 they need to keep the situation calm, both in relation 0:12:29.880 --> 0:12:32.920 to keeping the trade negotiation going, not to do as 0:12:33.000 --> 0:12:36.400 anything that looks offensive to Minuchin and Trump and so forth, 0:12:36.840 --> 0:12:39.640 but also to avoid capital flight. Um, and that's a 0:12:39.679 --> 0:12:43.000 really big, big balancing act. Yeah, and some money question 0:12:43.080 --> 0:12:45.120 here is not only ram n B to seven in 0:12:45.160 --> 0:12:48.160 the vector that we see well out over two standard deviations, 0:12:48.760 --> 0:12:51.600 but dollar dynamics as well. If we assume now blended 0:12:51.600 --> 0:12:55.280 dollar is range bound. Should we look at a blended 0:12:55.320 --> 0:12:58.720 dollar Bloomberg Dollar Index or d x Y index or 0:12:58.760 --> 0:13:02.400 do we have to disaggreg gate Asia d x Y 0:13:02.520 --> 0:13:05.880 that bundled Pacific rim index or do we aggregate to 0:13:05.920 --> 0:13:08.320 the major pairs? What do we do in terms of 0:13:08.440 --> 0:13:12.960 judging scaling stronger dollar? Yeah? No, I always always look 0:13:13.000 --> 0:13:15.360 at it in a number of buckets. Right, So you 0:13:15.400 --> 0:13:18.320 want to look at this sort of low yield bucket, 0:13:18.360 --> 0:13:20.880 which is the yen and the euro and the Swiss 0:13:20.920 --> 0:13:23.480 franc What is that bucket? Hero hasn't moved at all? No, 0:13:23.720 --> 0:13:26.319 And obviously end is strong and the Swiss francs has 0:13:26.360 --> 0:13:28.959 been getting strong as well. And then you have like 0:13:30.280 --> 0:13:32.719 a bucket that is the commodity bucket, which is very 0:13:32.720 --> 0:13:37.240 important with Australia and Canada and so forth. And then 0:13:37.280 --> 0:13:41.720 you have the surrounding countries adjacent bucket to China, which 0:13:41.720 --> 0:13:46.480 witch buckets should Secretary Manu should look at. So I 0:13:46.520 --> 0:13:50.200 think from his perspective, clearly he wants to look at 0:13:50.240 --> 0:13:53.840 the Bilattal crosses for the people who is negotiating with, 0:13:54.640 --> 0:13:57.560 but he also needs to think about, Okay, what are 0:13:57.559 --> 0:14:00.439 the crosses that's going to really impact the I'm sure 0:14:00.440 --> 0:14:04.040 he's looking what do you think, what do you what crosses? 0:14:04.400 --> 0:14:06.960 What cross is the president at Well, he needs to 0:14:06.960 --> 0:14:08.840 look at dollar max, he needs to look at dollar 0:14:08.920 --> 0:14:13.240 can and look at dollar career. So there's probably a 0:14:13.280 --> 0:14:16.120 handful that are really important. Yes, we know the administration 0:14:16.280 --> 0:14:18.679 has looked at the Euro before. It's been interesting over 0:14:18.720 --> 0:14:20.960 the last week that the euro has been so resilient. 0:14:21.000 --> 0:14:22.800 I remember a conversation you and I had a number 0:14:22.800 --> 0:14:25.160 of months ago, and we were talking about the prospect 0:14:25.160 --> 0:14:27.920 of going into another risk off scenario and how the 0:14:27.960 --> 0:14:31.720 efex market would respond and we'd have this very counterintuitive 0:14:31.720 --> 0:14:34.280 move whether euro just wouldn't sell off in that environment. 0:14:34.600 --> 0:14:37.080 So walk me through what's been happening here and why 0:14:37.120 --> 0:14:39.680 the euro is starting to take on the character to 0:14:39.800 --> 0:14:43.920 some degree of the Japanese yen. Yeah. Yeah, the there's 0:14:43.960 --> 0:14:46.760 definitely an element of that. So it makes sense in 0:14:46.800 --> 0:14:50.640 the context of the rate environment that you have in 0:14:50.680 --> 0:14:54.000 the euro Zone. It's not that the yield curve is 0:14:54.120 --> 0:14:56.920 totally flat like you have in Japan, but there's very 0:14:56.960 --> 0:15:00.440 limited move for European interest rates to move further. So 0:15:00.520 --> 0:15:03.960 that means when global interest rates drop, actually the rate 0:15:03.960 --> 0:15:06.240 differential moves in the Euro's favor. So that's sort of 0:15:06.280 --> 0:15:09.560 the simple explanation from what's going on from a float perspective. 0:15:09.640 --> 0:15:13.040 What's happening is that European investors are incredibly active in 0:15:13.360 --> 0:15:16.040 emerging market trades around the world, and when you have 0:15:16.480 --> 0:15:19.720 some severe risk aversion, you get unwinding of those. And 0:15:19.800 --> 0:15:23.080 we saw it very clearly last week that the specific 0:15:23.160 --> 0:15:26.280 day when Ian was trading the worst with Thursday with 0:15:26.480 --> 0:15:29.560 some big moves and key emerging market currencies, and the 0:15:29.560 --> 0:15:33.040 euro actually had a pretty strong rally just as that happened. 0:15:33.040 --> 0:15:34.920 The Mexican pigs have been one of them. So we're 0:15:34.960 --> 0:15:37.560 unwinding the carry traits to some degree ends and I'm 0:15:37.600 --> 0:15:39.520 just wondering how long it takes to flush that out 0:15:39.560 --> 0:15:41.720 and before the Euro takes on what we would expect, 0:15:41.840 --> 0:15:44.160 which is a Euro to be weaker in this kind 0:15:44.160 --> 0:15:47.080 of environment. Yes, so I think it depends on whether 0:15:47.120 --> 0:15:49.960 you have like a short term hedging dynamics where there's 0:15:50.000 --> 0:15:52.320 some big real money guys that put some effects hedge 0:15:52.320 --> 0:15:55.280 in their portfolio, or whether it's really like a more 0:15:55.360 --> 0:15:58.760 wholesale getting out of every everything on a more structural basis. 0:15:58.800 --> 0:16:01.120 So I think we've seen the hedge elements take place, 0:16:01.600 --> 0:16:05.080 and now these e M portfolio managed have to decide, okay, 0:16:05.080 --> 0:16:07.640 do they sell the securities too. I don't think we're 0:16:07.720 --> 0:16:11.240 quite there yet. We have enjoyed five even six tweets 0:16:11.280 --> 0:16:14.120 from the President this morning. These are Elizabethan tweets back 0:16:14.160 --> 0:16:18.280 to Mercantile England of another time in place in one 0:16:18.280 --> 0:16:21.480 of the great thrust here. Yen's is the idea from 0:16:21.480 --> 0:16:24.280 the President that quote, we can make a deal with 0:16:24.360 --> 0:16:29.160 China tomorrow before their companies start leaving so as not 0:16:29.280 --> 0:16:34.440 to lose US a business. Explain this trade war if 0:16:34.440 --> 0:16:38.040 it's with a totalitarian regime led by a communist party. 0:16:38.520 --> 0:16:43.200 I mean, it's not even Elizabethan dynamics, is it. It's 0:16:43.840 --> 0:16:48.160 clearly a totally different situation than in a democracy where 0:16:48.160 --> 0:16:51.320 there's sort of different voices that can have their own opinions. 0:16:52.520 --> 0:16:56.240 One thing that I always thought was sort of tricky 0:16:56.280 --> 0:17:00.400 about the US China dynamic versus the US versus Mexico 0:17:00.480 --> 0:17:04.280 dynamic was that it there's in the US a reasonable 0:17:04.280 --> 0:17:07.560 amount of political backing for a tough stance versus China. 0:17:08.080 --> 0:17:10.040 So that means that the US kind of has a 0:17:10.080 --> 0:17:12.679 fighting chance, but can they really measure up with a 0:17:13.119 --> 0:17:15.159 you can call it to terror the Tera regime, but 0:17:15.240 --> 0:17:19.320 a regime where it's it's certainly more government directed. That's 0:17:19.359 --> 0:17:22.679 a big question. So the pains, I think on the 0:17:22.760 --> 0:17:27.600 sort of political coherence versus the actual economic pain. This 0:17:27.640 --> 0:17:29.840 is wonderful, Jory, thank you so much, and he will 0:17:29.840 --> 0:17:32.600 continue with us here, uh this morning. This is a 0:17:32.680 --> 0:17:50.320 really important conversation. Synthathizing off right now we're gonna jump 0:17:50.359 --> 0:17:54.080 to the equity markets, but also with a touch to technology. 0:17:54.400 --> 0:17:59.000 Mark Lehman that JMP Securities is encyclopedic on the heritage 0:17:59.000 --> 0:18:02.680 and history of his Gun Valley and also equity Marcus Mark, 0:18:02.760 --> 0:18:05.080 let me go to the general markets right now. With 0:18:05.200 --> 0:18:08.320 futures up twenty two, Can you acquire shares this morning 0:18:08.440 --> 0:18:12.320 or you on the sidelines? Well, I think you're going 0:18:12.359 --> 0:18:16.200 to have a necessary bounce back from a week of 0:18:16.600 --> 0:18:19.240 down drafts in a week of bad news. I think 0:18:19.280 --> 0:18:21.359 this is just the beginning. Though. We're not going to 0:18:21.440 --> 0:18:24.000 have a lot of news as relates to tariffs through 0:18:24.000 --> 0:18:26.840 the next six weeks, and looking for a catalyst for 0:18:26.880 --> 0:18:29.439 the market between now and then, now that earnings are 0:18:29.480 --> 0:18:31.960 behind us, is going to be hard to find UM. 0:18:32.119 --> 0:18:33.639 So this is going to be a kind of a 0:18:33.640 --> 0:18:36.679 wishy washy period I think for some time, and I 0:18:36.720 --> 0:18:39.399 expected about I'm not sure this is about to be 0:18:39.440 --> 0:18:41.920 bought for the next light up for the market so far. 0:18:42.359 --> 0:18:44.600 Went Bush out with a note saying that Apple iPhone 0:18:44.600 --> 0:18:47.919 production costs could rise to to three mark. How are 0:18:47.960 --> 0:18:50.280 you thinking about the prospect of higher costs, how it 0:18:50.320 --> 0:18:52.520 gets absorbed, whether it's in the margin or just a 0:18:52.600 --> 0:18:56.840 full path through to the consumer, Jonathan Johnathan, I think 0:18:56.840 --> 0:18:58.119 it's gonna be a little bit of both. I think 0:18:58.160 --> 0:19:00.080 you're going to see some companies able to absorb but 0:19:00.119 --> 0:19:02.480 and you're going to see some people probably pass it 0:19:02.480 --> 0:19:03.879 on the consumer. But I think this is going to 0:19:03.960 --> 0:19:06.080 put a wet blanket on a lot of demand here 0:19:06.600 --> 0:19:10.000 UM And I think we've seen um bits of this 0:19:10.400 --> 0:19:12.320 over time and some markets where they've been able to 0:19:12.359 --> 0:19:14.440 absorb it. I just think we're running out of legs 0:19:14.480 --> 0:19:16.920 to do that. And I think that's the reason why 0:19:16.960 --> 0:19:18.880 you have more pessimism in the tech stocks and more 0:19:18.880 --> 0:19:22.720 pessimism in the international community. And I again expect this 0:19:22.800 --> 0:19:26.119 to not go away quickly. We had some self inflicted 0:19:26.320 --> 0:19:28.920 um damaged by the President that he's been quickly able 0:19:28.960 --> 0:19:30.480 to reverse and this is not going to be one 0:19:30.480 --> 0:19:32.639 of those. Unfortunately, Well, what went through the demand in 0:19:32.760 --> 0:19:36.400 China because I didn't get convincing guidance from the big semis, 0:19:36.720 --> 0:19:39.000 the big chip makers in the last couple of weeks 0:19:39.040 --> 0:19:42.879 about China for the year ahead, even before this escalation marks. 0:19:42.880 --> 0:19:46.239 So what's your base case for demand? I think you're 0:19:46.280 --> 0:19:50.119 going to see just a damp dampening right now. I 0:19:50.160 --> 0:19:53.200 think globally, I think there's just too much skittishness as 0:19:53.200 --> 0:19:56.520 it relates to pricing, and there's too much skittishness as 0:19:56.520 --> 0:19:59.359 it relates to what is going on politically. UM and 0:19:59.400 --> 0:20:02.080 I think probably has the most to lose, but I 0:20:02.080 --> 0:20:06.640 think politically they have the most um the ability probably 0:20:06.680 --> 0:20:08.680 to stay there the longest. And I think the president 0:20:08.720 --> 0:20:11.800 here UM has less to lose, but I think he 0:20:11.840 --> 0:20:13.880 has more to lose politically. It's kind of an interesting 0:20:13.960 --> 0:20:17.439 juxtaposition between the two. I just think, Um, that's a 0:20:17.440 --> 0:20:20.800 bad situation for a resolution, and that will just dampen things. 0:20:20.880 --> 0:20:23.480 And that's a bad situation I think for the market. Marxist, 0:20:23.520 --> 0:20:25.359 are the time left that we've got with you? I 0:20:25.480 --> 0:20:30.280 have to ask why was Uber and Life missed priced 0:20:30.280 --> 0:20:38.240 by intelligence, well meaning bankers. It's a great it's dollar question. UM. 0:20:38.280 --> 0:20:41.640 I think the fee was bigger than that, but continue, Yes, 0:20:41.960 --> 0:20:45.320 the optimism obviously was high. UM. I think there was 0:20:45.560 --> 0:20:49.119 enough demand both institutionally, which we will talk about and 0:20:49.160 --> 0:20:52.480 we will see very shortly by what institutions participated what 0:20:52.560 --> 0:20:55.520 did not. UM. I think the retail hype, if you will, 0:20:55.720 --> 0:20:59.320 was great. UM. But the reality is and I think 0:20:59.359 --> 0:21:01.480 the most important thing as some of the later investors, 0:21:01.520 --> 0:21:04.600 both publicly as well as the last private rounds are 0:21:04.720 --> 0:21:09.399 well underwater well underwater lift as approaching lower than the 0:21:09.440 --> 0:21:12.600 first print. And it reminds people that individual investors are 0:21:12.640 --> 0:21:16.520 sometimes least likely UM, who should be participating in some 0:21:16.560 --> 0:21:19.320 of these deals. And that's unfortunate, really unfortunate. Mark Leman, 0:21:19.359 --> 0:21:21.160 thank you. We look to speak to you against soon. 0:21:21.280 --> 0:21:24.399 Mr Lehman is with j MP Securities with decades of 0:21:24.480 --> 0:21:43.720 experience on Left Coast equity and technology markets. Dana tells 0:21:43.760 --> 0:21:48.000 you where us Dana, to John's point, what portion of 0:21:48.160 --> 0:21:51.960 stores is from China? I mean like Big Box or 0:21:52.560 --> 0:21:58.359 Bergdorf Goodman, what portions from China? High? Thank you for 0:21:58.400 --> 0:22:01.439 having me today. UM. We just did a big piece 0:22:01.520 --> 0:22:04.320 in terms of whether it's retail, whether it's apparel, what 0:22:04.520 --> 0:22:07.679 percentage of all goods comes from China, And frankly, it 0:22:07.720 --> 0:22:11.080 could be at least twenty five of all goods may 0:22:11.119 --> 0:22:15.200 come in some former way from China, So it's significant. 0:22:15.440 --> 0:22:18.240 And what we're seeing is companies are taking three different 0:22:18.240 --> 0:22:21.800 actions in order to alleviate some of the pressure. And 0:22:21.880 --> 0:22:25.160 none of this happens overnight. It happens over time. So 0:22:25.240 --> 0:22:28.680 planning is key, and whether it's diversifying where your goods 0:22:28.720 --> 0:22:33.240 come from, whether it's negotiating with the manufacturers who you 0:22:33.320 --> 0:22:35.840 do business with in order for them to eat some 0:22:35.920 --> 0:22:39.879 of the costs, and last and mostly, what companies do 0:22:39.960 --> 0:22:43.240 not want to do is raise prices to the end consumer. 0:22:43.680 --> 0:22:45.960