WEBVTT - World's Hottest Market 0:00:13.080 --> 0:00:16.520 Hello, and welcome to What Goes Up, a Bloomberg Weekly 0:00:16.600 --> 0:00:20.520 Markets podcast. I'm Sara Panzac, a reporter on the Process 0:00:20.560 --> 0:00:23.360 That team, and I'm Mike Reagan, a senior editor on 0:00:23.400 --> 0:00:26.080 the Markets team. This week on the show, third quarter 0:00:26.120 --> 0:00:29.280 earning season is in full swing. The banks kicked off 0:00:29.320 --> 0:00:32.440 reports with beats pretty much across the board, and after 0:00:32.760 --> 0:00:35.600 all that market talk, we'll be sitting down with one 0:00:35.640 --> 0:00:37.880 man at the center of one of the world's best 0:00:37.960 --> 0:00:40.800 performing stock markets. But Mike, I think we should leave 0:00:40.880 --> 0:00:43.479 people hanging. All right, we believe him hanging. We'd like 0:00:43.520 --> 0:00:45.919 to leave him hanging. Usually we leave them hanging un 0:00:45.920 --> 0:00:47.920 till the end for the craziest thing we saw in 0:00:47.960 --> 0:00:51.840 markets this week, But this time we're gonna leave him hanging. Uh. 0:00:51.920 --> 0:00:54.160 For the world's hottest stock market, I'll call that might 0:00:54.200 --> 0:00:56.640 be a little bit of a hit. And also, for 0:00:56.760 --> 0:00:59.840 fans of our segment, the Craziest thing I ever saw 0:00:59.880 --> 0:01:02.360 in markets this week a special treat. I think it's 0:01:02.400 --> 0:01:07.399 gonna be an elongated version of that segment because Sarah 0:01:07.440 --> 0:01:10.039 and I the stars were aligned this week and we 0:01:10.160 --> 0:01:13.160 both picked the same crazy market story to talk about, 0:01:13.240 --> 0:01:15.800 and it's a big one. It's a doozy so right, 0:01:15.840 --> 0:01:18.200 so we'll get to that earlier than usual as well, 0:01:18.800 --> 0:01:21.760 and also joining us this week on the podcast. So 0:01:21.800 --> 0:01:24.280 you know, it was a big week for bank earnings. 0:01:24.400 --> 0:01:28.479 All the big banks reported earnings. These are incredibly important 0:01:28.640 --> 0:01:31.560 for a variety of reasons in markets, UH, and to 0:01:31.600 --> 0:01:34.160 help us break it all down, we are happy to 0:01:34.200 --> 0:01:37.319 have Bloomberg reporter Felice Morans on the show. Fleee welcome, 0:01:37.560 --> 0:01:40.679 Thank you for having me and for our craziest thing 0:01:40.720 --> 0:01:43.840 we saw in markets this week discussion. We're bringing in 0:01:43.880 --> 0:01:47.440 the big guns here, Chris Nag, Executive editor of Markets 0:01:47.520 --> 0:01:50.160 at Bloomberg. Chris, welcome to the show. Welcome back. I 0:01:50.160 --> 0:01:54.120 guess police let's start with you though, Um, just big picture, 0:01:54.240 --> 0:01:58.280 what was sort of your main takeaway from this UH 0:01:58.600 --> 0:02:02.200 parade of bank earnings saw this week? So it's important 0:02:02.280 --> 0:02:06.240 to remember that four big banks all reported simultaneously on 0:02:06.280 --> 0:02:09.880 Tuesday morning, and that really doesn't happen too often if 0:02:09.919 --> 0:02:13.400 every day. Yeah, so a lot of what happened passed 0:02:13.400 --> 0:02:16.280 in a giant flood. I would say the big takeaway 0:02:16.320 --> 0:02:19.880 is that everybody did really well except for Goldman Sacks. 0:02:21.040 --> 0:02:23.520 So walk us through the results. So let's start with 0:02:23.560 --> 0:02:26.040 Goldman sacks. They didn't do well. So where was the 0:02:26.040 --> 0:02:29.480 big miss? What was the issue? So with Goldman, Uh, 0:02:29.520 --> 0:02:31.880 there were a couple of things. Overall, the earnings per 0:02:31.919 --> 0:02:34.480 share did miss. There were just a lot of things 0:02:34.520 --> 0:02:37.800 that caused them to miss and to be disappointing. On Tuesday, 0:02:37.880 --> 0:02:42.560 you had spectacular results from JP Morgan, and then Goldman came, 0:02:42.919 --> 0:02:46.040 and then you had City and Wells Fargo. And City 0:02:46.080 --> 0:02:49.280 and Wells Fargo weren't initially received so well either, but 0:02:49.360 --> 0:02:53.079 as the day went on, people became more positive. So 0:02:53.240 --> 0:02:56.079 a lot of what I've read is that one real 0:02:56.200 --> 0:02:58.840 stand out point of the business in this quarter was 0:02:59.120 --> 0:03:02.239 what they call fick uh, you know, fixed income commodities 0:03:02.440 --> 0:03:07.079 and currency trading um predominantly because of the volatility in 0:03:07.080 --> 0:03:10.480 the bond market we saw. So, you know, I'm as 0:03:10.480 --> 0:03:13.320 a consumer, you know, as a suitor sort of non 0:03:13.480 --> 0:03:16.000 bank stock investor, I always want to see what the 0:03:16.040 --> 0:03:18.760 macro takeaway is from these earnings, you know, and I'm 0:03:18.800 --> 0:03:22.440 not sure that a robust bond trading environment is necessarily 0:03:22.520 --> 0:03:25.000 a great sign for the economy. Uh. You know, a 0:03:25.000 --> 0:03:28.200 lot of this volume came because, uh, you know, markets 0:03:28.200 --> 0:03:31.560 were so nervous about the economy uh in this quarter, 0:03:32.080 --> 0:03:35.720 but walk us through sort of the consumer facing elements 0:03:35.720 --> 0:03:38.520 of the bank, I understand they were pretty strong results 0:03:38.560 --> 0:03:42.360 as well, despite this really narrow yield curves that we've 0:03:42.400 --> 0:03:45.880 seen that presumably would affect their net interest margins. I 0:03:45.880 --> 0:03:48.000 would say that if you were looking at trading, you 0:03:48.040 --> 0:03:51.040 would indeed think, oh, fick, that was a standout. But 0:03:51.080 --> 0:03:54.320 if you look overall at these results, the consumer was 0:03:54.440 --> 0:03:57.840 very healthy and one big bright spot was credit card 0:03:57.880 --> 0:04:01.520 spending that helped lift City Group. In fact, shares of 0:04:01.560 --> 0:04:05.400 City Group after its executives talked about how good credit 0:04:05.400 --> 0:04:08.400 cards were. I know Jamie Diamond flat out said on 0:04:08.440 --> 0:04:11.400 the earnings call that the consumer still seems to be 0:04:11.520 --> 0:04:15.200 very healthy. However, he did signal out business confidence and 0:04:15.200 --> 0:04:18.160 said that we still see an issue surrounding business confidence, 0:04:18.160 --> 0:04:20.120 and he even talked about the trade war and tariffs 0:04:20.120 --> 0:04:22.760 to a sense, did we hear any of the other 0:04:22.760 --> 0:04:25.480 executives talking about it on these calls? I mean, how 0:04:25.600 --> 0:04:29.760 much was consumer confidence or business confidence really a focus 0:04:29.800 --> 0:04:32.400 of some of the conversation when analysts or even the 0:04:32.400 --> 0:04:35.640 media we're asking questions. Well, I think Jamie Diamond's comments 0:04:35.640 --> 0:04:38.440 were very interesting in the statement. He was very careful 0:04:38.480 --> 0:04:41.919 to swing back and forth between saying something very positive 0:04:42.160 --> 0:04:45.000 and then caveatting, and then saying another positive thing and 0:04:45.040 --> 0:04:48.840 then caveatting. I did notice that some people felt he 0:04:48.920 --> 0:04:52.400 wasn't as exuberant or cheerful as he usually is. He's 0:04:52.400 --> 0:04:56.760 seen as a big, very charismatic cheerleader for banks, and 0:04:56.760 --> 0:04:59.720 and he wasn't as much this quarter. I did also 0:04:59.760 --> 0:05:03.080 read at UH several of the banks UH did increase 0:05:03.120 --> 0:05:08.159 their reserves for potential bad loans going forward. Was that 0:05:08.240 --> 0:05:10.840 a common theme and is that just them reacting to 0:05:11.520 --> 0:05:14.080 what the rest of us have reacted to all years, 0:05:14.080 --> 0:05:16.960 that this uncertainty about the economy. Well, there had been 0:05:16.960 --> 0:05:19.799 a little bit of an increase for energy loans, capital 0:05:19.839 --> 0:05:23.279 markets were soft, there was some energy problems. UM. I 0:05:23.320 --> 0:05:27.520 think some banks also talked about credit normalization. That's because 0:05:27.560 --> 0:05:30.560 they've made more loans, so you have to UH take 0:05:30.600 --> 0:05:33.520 precautions just because you have more lending out there. I 0:05:33.560 --> 0:05:36.279 think the takeaway really was that the consumer is healthy, 0:05:36.600 --> 0:05:40.080 people are still employed. There may be some hints or 0:05:40.320 --> 0:05:43.360 signs in the distant future, but for the third quarter, 0:05:43.880 --> 0:05:46.919 the economy stood solidly on the shoulders of the U 0:05:47.040 --> 0:05:50.120 S consumer You know, Chris, I often hear people say, well, 0:05:50.120 --> 0:05:52.719 you really need the bank stocks to rally to do 0:05:52.800 --> 0:05:56.560 well in order to kind of confirm a bullish stock market. Um. 0:05:57.000 --> 0:06:00.200 Are you a buyer of that theory? Uh? And you know, 0:06:00.279 --> 0:06:03.200 does this week's earnings sort of make you optimistic about 0:06:03.200 --> 0:06:06.360 the chance we'll get to another record this year. I'm 0:06:06.360 --> 0:06:08.520 not really a buyer of that theory, but I'm probably 0:06:08.600 --> 0:06:11.479 a sayer of that theory. I think that's one of 0:06:11.520 --> 0:06:15.120 these Wall Street uh um axioms that you you have 0:06:15.240 --> 0:06:19.000 trouble uh not repeating about four thousand times in your career, 0:06:19.000 --> 0:06:22.159 even if you wonder if it's true. Um. From the 0:06:22.200 --> 0:06:26.320 perspective of here's the engine of the uh the consumer 0:06:26.360 --> 0:06:28.599 engine of the economy, I think you you basically have 0:06:28.720 --> 0:06:31.640 to say, at least that plank looks a little better 0:06:31.680 --> 0:06:33.400 than it did a couple of weeks, or at least 0:06:33.400 --> 0:06:35.320 you get some confirmation that isn't falling off a cliff 0:06:35.320 --> 0:06:37.760 in the same way that manufacturing has. And that's by 0:06:37.800 --> 0:06:40.640 far the biggest the market's biggest concern at the moment, 0:06:40.720 --> 0:06:43.200 So that's good. We talk about bank earnings as if 0:06:43.240 --> 0:06:45.720 they're almost all that's happened this week, because we typically 0:06:45.760 --> 0:06:48.160 focus on bank earnings the first week. But we got 0:06:48.240 --> 0:06:50.720 results from Honeywell I want to point out in which 0:06:50.760 --> 0:06:53.039 we did see them raise their profit forecast for the 0:06:53.040 --> 0:06:56.280 fourth quarter. Uh. We also got some not so great 0:06:56.279 --> 0:06:59.120 earnings from the likes of Netflix. I guess you could 0:06:59.160 --> 0:07:03.560 call it except shares rallied because international subscriber growth was 0:07:03.960 --> 0:07:06.840 much better than expected if you just look across the board. 0:07:06.839 --> 0:07:09.000 It's still very early on. But where do we currently 0:07:09.040 --> 0:07:11.760 stand in the earning season and how do people feel 0:07:11.760 --> 0:07:14.160 at this point in time. Well, I feel like Netflix 0:07:14.240 --> 0:07:16.440 is a big deal because there's sort of this creeping 0:07:16.480 --> 0:07:20.000 concern right now that for various reasons, most of them 0:07:20.000 --> 0:07:22.520 having to do with we work that basically the price 0:07:22.600 --> 0:07:25.640 of speculative equity on Wall Street is about to come 0:07:25.800 --> 0:07:28.760 come in for a reckoning and a reevaluation. So the 0:07:28.800 --> 0:07:31.880 fact that one of the poster children for those valuations 0:07:31.920 --> 0:07:34.280 is able to rally, and I don't think the rally 0:07:34.320 --> 0:07:38.640 totally lasted, and the fact that Netflix uh was was 0:07:38.680 --> 0:07:41.920 able to stay elevated with that valuation after earnings is 0:07:42.040 --> 0:07:46.120 also basically net net a good sign for for the 0:07:46.160 --> 0:07:49.080 market state at the moment, so fo least, obviously we 0:07:49.120 --> 0:07:51.960 had the big banks come out. What else is coming 0:07:52.040 --> 0:07:54.480 up in the next week that's on your radar that 0:07:54.480 --> 0:07:56.480 we should keep an eye out. Well, I think it's 0:07:56.520 --> 0:07:59.600 interesting that Chris mentioned we work. I want to point 0:07:59.600 --> 0:08:02.360 out all so that Goldman reduced the value of its 0:08:02.360 --> 0:08:04.520 stake and we work by I think it was eighty 0:08:04.520 --> 0:08:07.840 million dollars. And people are keeping an eye on I 0:08:08.000 --> 0:08:10.800 P O s all sorts of things. Another thing happening 0:08:11.040 --> 0:08:14.680 in the week to come, Mark Zuckerberg, Facebook's CEO, is 0:08:14.680 --> 0:08:18.240 going to be testifying again in front of Congress. Uh. 0:08:18.280 --> 0:08:21.320 The payments companies who are partners in Libra have been 0:08:21.840 --> 0:08:25.720 dropping out, so he's probably not going to be uh 0:08:25.720 --> 0:08:29.280 in the spotlight for the cryptocurrency Libra as much as 0:08:29.280 --> 0:08:31.240 he would have been, but he'll still get asked a 0:08:31.280 --> 0:08:34.000 lot of really tough questions. So Fulice, you also report 0:08:34.000 --> 0:08:39.000 a lot on the intersection of markets and policy. Give 0:08:39.080 --> 0:08:41.200 us a sense, Like you said, Mark Zuckerberg will be 0:08:41.240 --> 0:08:46.000 testifying once again as we lead up to and the 0:08:46.000 --> 0:08:49.559 presidential election. We just had another Democratic debate this last week. 0:08:49.840 --> 0:08:53.800 What's the general sense how much our investors, analysts strategists 0:08:53.840 --> 0:08:56.480 really thinking about the election is something you need to 0:08:56.520 --> 0:08:59.640 take it into account when thinking about how to invest. 0:09:00.120 --> 0:09:05.400 Investors are definitely keeping a very close watch to investor surveys. Uh. 0:09:05.679 --> 0:09:10.040 Just in recent days showed us that investors think Elizabeth 0:09:10.080 --> 0:09:13.360 Warren is going to be the Democratic nominee and they 0:09:13.400 --> 0:09:17.320 overwhelmingly think at the current moment that President Trump will 0:09:17.360 --> 0:09:21.960 be re elected. In hard to reconcile this, I guess, 0:09:22.080 --> 0:09:24.160 but I'll tell you what, Sarah, I think. We it's 0:09:24.200 --> 0:09:28.120 time to transition right into the craziest thing for the doozy, 0:09:28.240 --> 0:09:31.160 all right, And as we both agreed, uh, this is 0:09:31.480 --> 0:09:35.920 uh wild story. It was in Vanity Fair by William Cohen, 0:09:36.480 --> 0:09:39.240 and let me just read the headline to you, uh quote, 0:09:39.280 --> 0:09:42.800 there's definite hanky panky going on. Okay, I got my interests, 0:09:42.800 --> 0:09:44.880 all right. And then the rest of it is the 0:09:44.960 --> 0:09:49.960 fantastically profitable mystery of the Trump Chaos trades. And what 0:09:50.080 --> 0:09:54.000 the story is about is a bunch of really high 0:09:54.120 --> 0:09:59.679 volume trades in SMP futures h that the author believes 0:10:00.320 --> 0:10:05.040 or points out occurred right before announcements from President Trump 0:10:05.120 --> 0:10:09.400 were sort of other geo political events that ended up 0:10:09.520 --> 0:10:12.880 boosting the stock market, and you know he you know, 0:10:12.920 --> 0:10:15.120 writes about them suspiciously. Let me just read you one 0:10:15.200 --> 0:10:19.600 paragraph of this story. Traders in the Chicago pits have 0:10:19.679 --> 0:10:22.560 been watching these kinds of wagers with an increasing mixture 0:10:22.600 --> 0:10:25.359 of shock and awe since the start of the Trump presidency. 0:10:26.040 --> 0:10:28.800 The precision and timing of these trades and the vast 0:10:28.840 --> 0:10:31.120 amount of money being made as a result of them, 0:10:31.480 --> 0:10:34.199 make the traders wonder if all this is on the level. 0:10:34.960 --> 0:10:37.960 Are the people behind these trades incredibly lucky or do 0:10:38.000 --> 0:10:41.079 they have access to information that other people don't have 0:10:41.280 --> 0:10:44.600 about say Trump or Beijing's latest thinking on the trade war, 0:10:45.160 --> 0:10:47.000 or any other of a number of ways that Trump 0:10:47.040 --> 0:10:49.760 is able to move the markets through his tweeting or 0:10:49.800 --> 0:10:54.760 slips of the tongue. So basically kind of accusing Trump 0:10:54.760 --> 0:10:59.440 of leaking insider information about his plans to Uh traders 0:10:59.440 --> 0:11:02.720 and investor is in the market. Uh, Chris Nag, you're 0:11:03.080 --> 0:11:05.160 one of the gurus in this company as far as 0:11:05.200 --> 0:11:10.800 analyzing trade by trade. Uh, you know what's going on. Um, 0:11:11.040 --> 0:11:12.840 we talked about this earlier. I think if you were 0:11:12.960 --> 0:11:16.480 editing this story, Uh, it might not have been published 0:11:16.480 --> 0:11:18.800 in exactly the same form. No, one would have read it. 0:11:20.440 --> 0:11:22.520 But what's your sort of takeaway on the story. And 0:11:22.520 --> 0:11:26.200 I know your team's working on a story basically dissecting 0:11:26.240 --> 0:11:29.439 what happened here. I mean, I don't think that there's 0:11:29.679 --> 0:11:33.240 gigantic opposition to the idea that the basic premise that 0:11:33.280 --> 0:11:35.680 Trump could be, as you put it earlier, wittingly or 0:11:35.760 --> 0:11:40.400 unwittingly telegraphing stuff that Wall Street traders in there, you know, 0:11:40.760 --> 0:11:43.319 immense wherewithal are able to pick up on in some 0:11:43.360 --> 0:11:47.600 cases front run pretty much the unanimous view of of 0:11:47.480 --> 0:11:50.400 of people we talked to is that this is sort 0:11:50.400 --> 0:11:54.079 of an instance of proof through a kind of juxtaposition. 0:11:54.120 --> 0:11:57.120 You're you're able to take, uh, Wall Street coughs up 0:11:57.120 --> 0:11:59.959 an enormous amount of gigantic futures trades in any given 0:12:00.120 --> 0:12:03.480 day or week, and if you want to go, uh 0:12:03.640 --> 0:12:06.760 find one at times in a sort of overly lucky 0:12:06.800 --> 0:12:10.760 way against some geo political eventor basically anything my my 0:12:10.880 --> 0:12:13.800 cats rolling over, you can you can you could easily 0:12:14.360 --> 0:12:17.640 uh make a case that there's a causal or there's 0:12:18.040 --> 0:12:20.679 a casual link between the two. I think some of 0:12:20.720 --> 0:12:23.880 the words that you use, uh in describing the article 0:12:24.000 --> 0:12:27.560 are are key. He he's pointing these things out and 0:12:27.559 --> 0:12:30.199 he's juxtapsing, he's juxtapositioning them. He's doing it in a 0:12:30.320 --> 0:12:33.080 very arch and moral way, and he's making it clear 0:12:33.120 --> 0:12:36.760 with his what his point is. But really it's it's 0:12:36.840 --> 0:12:41.400 kind of a marvel of juxtaposition and a lot of 0:12:41.440 --> 0:12:44.840 things are trotted out that would be true literally at 0:12:44.880 --> 0:12:47.160 any time. It's also true that Trump is moving markets 0:12:47.160 --> 0:12:49.360 all of the time too, so you have a very rich, 0:12:50.000 --> 0:12:54.640 uh landscape to mine, uh, whatever thesis you want out of. 0:12:54.640 --> 0:12:57.160 And I think that's basically how people are viewing this. 0:12:57.800 --> 0:12:59.880 I was speaking with an investor and trader about this 0:13:00.040 --> 0:13:02.720 article and he said, yeah, you can basically back up 0:13:03.320 --> 0:13:06.520 a story or a narrative for any trade out there. 0:13:06.559 --> 0:13:09.080 The problem is that if you have a story like 0:13:09.160 --> 0:13:11.920 this that runs, they never actually write about it obviously 0:13:11.920 --> 0:13:14.520 when you're wrong. The big Yeah, it's sort of the 0:13:14.800 --> 0:13:18.800 no hypothesis argument that, uh, there can't be tons of 0:13:18.800 --> 0:13:21.200 other trades that look just like this that fall flat. 0:13:21.240 --> 0:13:24.160 But the fact is there are uh, your average you 0:13:24.200 --> 0:13:28.199 know whatever, ten ten thousand or a hundred thousand contract 0:13:28.320 --> 0:13:31.960 sp futurest trade doesn't proceed a big market move, and 0:13:32.000 --> 0:13:34.559 all of those get ignored. People aren't in the business 0:13:34.559 --> 0:13:36.880 of trying to sell magazines by writing about those, which 0:13:36.920 --> 0:13:39.800 I think is irrelevant topic here. So what we're left 0:13:39.840 --> 0:13:44.360 with is some unnamed traders in the Chicago Pits saying 0:13:44.440 --> 0:13:46.480 this looks a little fishy. I gotta say, I didn't 0:13:46.480 --> 0:13:48.640 even realize there were any pits left in Chicago. Yeah, 0:13:49.320 --> 0:13:52.600 still has. Chicago Pits are where basically the high frequency 0:13:52.640 --> 0:13:54.560 trading industry grew out of, so one of the great 0:13:54.600 --> 0:13:57.800 technological things that's ever happened in this country. People are 0:13:57.800 --> 0:14:00.839 gonna also, it's not like it's not like we want 0:14:00.840 --> 0:14:03.400 to disparage the Chicago Pits, but it's also true that 0:14:03.559 --> 0:14:06.920 a scary amount of conspiracy theorizing seems to emanate from 0:14:06.920 --> 0:14:11.000 that area as well. Well, I gotta call those guys 0:14:11.040 --> 0:14:15.960 up more. I need to know journalists take note. We'll 0:14:16.040 --> 0:14:19.120 leave it at that then, Chris nag Police Marins, thank 0:14:19.120 --> 0:14:25.920 you so much for coming on the show. Thanks, thank you. 0:14:26.680 --> 0:14:29.360 So Sarah, let's shift gears now to that world's hottest 0:14:29.360 --> 0:14:32.680 stock market, and let's give listeners a little hint here 0:14:32.760 --> 0:14:43.160 courtesy of a great band from Baltimore called jaw Works. So, Sarah, 0:14:43.200 --> 0:14:46.160 obviously the name of this podcast is what goes up? 0:14:46.440 --> 0:14:49.760 And one thing that's been going up consistently in recent 0:14:49.840 --> 0:14:52.960 years is the Jamaican stock market. Last I look, it's 0:14:53.080 --> 0:14:56.240 up about four percent since the end of two thousand 0:14:56.320 --> 0:14:59.280 and thirteen, and that's in US dollar terms. By far 0:14:59.320 --> 0:15:02.520 and large, it's the best performing stock market in recent 0:15:02.600 --> 0:15:06.080 years by by a mile. Um. And it's a very 0:15:06.080 --> 0:15:09.440 interesting market. I mean, it's uh small market, obviously a 0:15:09.480 --> 0:15:12.600 small country, small stock market, um. And it's not the 0:15:12.640 --> 0:15:15.240 most convenient for foreign investors to invest in, but you 0:15:15.280 --> 0:15:19.240 cannot ignore how well it's been doing so earlier in 0:15:19.240 --> 0:15:21.200 the year, or actually at the end of two thousand 0:15:21.280 --> 0:15:23.840 and eighteen, it was I I traveled to Kingston to 0:15:24.040 --> 0:15:25.920 report on it, and I'll tell you it was just 0:15:26.000 --> 0:15:27.920 a pure coincidence that my trip was in the middle 0:15:27.920 --> 0:15:31.760 of the winter. I'm sure that there was no other 0:15:32.040 --> 0:15:35.560 reason that you pitched a story idea to travel to 0:15:35.680 --> 0:15:37.720 Jamaica in the middle of what was it the February 0:15:37.760 --> 0:15:41.240 maybe Coincidencember December. So as it gets a little bit 0:15:41.240 --> 0:15:42.800 colder now, I'm thinking it might be time for a 0:15:42.840 --> 0:15:45.320 return trip to the record on it, because once again, 0:15:45.360 --> 0:15:48.520 it's one of the best performing stock markets, and pretty 0:15:48.560 --> 0:15:51.720 much everyone I talked to while I was there talked 0:15:51.760 --> 0:15:56.200 about the reasons for it being linked to the government 0:15:56.280 --> 0:16:01.040 finances being brought in order the dead to GDP ratio 0:16:01.080 --> 0:16:03.720 and Jamaica was approaching about a hundred and fifty percent 0:16:03.800 --> 0:16:06.880 after the last recession, and they took some some very 0:16:06.960 --> 0:16:10.960 dressed steps to get that down UH, including a debt 0:16:10.960 --> 0:16:15.760 exchange where holders of Jamaican bonds swapped their bonds for 0:16:16.000 --> 0:16:19.160 UH for bonds paying a little bit less interest and 0:16:19.760 --> 0:16:24.120 longer maturities UM. And one of the fellas who was 0:16:24.240 --> 0:16:28.280 very instrumental in that debt exchange that for the first 0:16:28.320 --> 0:16:31.080 that exchange they did too, but he was the finance 0:16:31.120 --> 0:16:34.680 minister during the first exchange, and he's joining us on 0:16:34.720 --> 0:16:37.320 the show. His name is Oddly Shaw. Welcome to the show. Oddly, 0:16:37.440 --> 0:16:42.080 thank you, thank you. And now his title, he's got 0:16:42.160 --> 0:16:45.920 a better title now it's Minister of Industry, Commerce, Agriculture 0:16:46.040 --> 0:16:49.040 and Fisheries. So you've got a lot on your plate there, yes, 0:16:49.120 --> 0:16:51.920 thank you. And and I was Finance Minister between all 0:16:52.000 --> 0:16:58.000 seven and eleven and then sixteen to eighteen, and it 0:16:58.160 --> 0:17:01.880 was in that period into my shron the the stock 0:17:01.960 --> 0:17:06.280 exchange that I in fact guided that process in two 0:17:06.320 --> 0:17:09.560 thousand and nine when we established the Junior Stock Exchange. 0:17:10.080 --> 0:17:11.960 But I must say to you that it it had 0:17:12.000 --> 0:17:16.399 come out of a period not just of of important 0:17:16.440 --> 0:17:19.199 adjustments on the watchful eyes of the I m F 0:17:19.840 --> 0:17:22.119 in terms of the whole macro economy and how we 0:17:22.200 --> 0:17:25.520 managed the budgetary process and so on. It also came 0:17:25.560 --> 0:17:30.040 out of a period when the private sector had gotten 0:17:30.160 --> 0:17:36.359 risk averse. They had suffered from uh periods of extremely 0:17:36.560 --> 0:17:40.560 high interest rates. In fact, in the nineteen nineties, the 0:17:40.600 --> 0:17:45.359 average commercial bank lending rate was in excess of for 0:17:45.440 --> 0:17:48.840 a decade. It was the highest, if not the highest, 0:17:48.840 --> 0:17:53.600 in the world. Okay, unbelievable. So so people just came 0:17:53.640 --> 0:17:57.760 out of productive end of us and investments and we 0:17:57.880 --> 0:18:00.280 went into buy and sell because you have to buy 0:18:00.320 --> 0:18:02.680 and sell and making money fast to pay those kinds 0:18:02.720 --> 0:18:06.880 of extraordinary interest rates. In some countries, including yours, it's 0:18:06.880 --> 0:18:11.000 illegal to have interest rates like that. So so um, 0:18:11.000 --> 0:18:15.240 this talk exchange came out of the need to say, 0:18:15.280 --> 0:18:18.320 hold on, forget about going to banks to borrow high 0:18:18.359 --> 0:18:23.520 interest rate money, go for equity, right And I started 0:18:23.560 --> 0:18:28.680 there and and at the same time simultaneously we started 0:18:28.680 --> 0:18:32.520 a program of bringing down interest rates, and I can 0:18:32.720 --> 0:18:37.160 I can probably tell you that today we are now 0:18:37.400 --> 0:18:40.760 having private sector borroing money in single digit interest rates. 0:18:41.680 --> 0:18:46.439 It's six percent, seven percent, eight percent, absolutely right. And 0:18:46.560 --> 0:18:50.280 at the same time they're also investing heavily in the 0:18:50.359 --> 0:18:54.159 junior stock exchange, and that is why it is growing 0:18:54.720 --> 0:18:58.000 at the phenomenal rate that that is growing at that 0:18:58.040 --> 0:19:02.159 at this time because in urging equity investments and a 0:19:02.160 --> 0:19:06.840 lot of young entrepreneurs um are our targeting that avenue 0:19:07.000 --> 0:19:09.520 and we're very pleased with the progress that is making. 0:19:09.760 --> 0:19:13.280 So the junior exchanges for very small companies that was 0:19:13.359 --> 0:19:16.320 it a hundred millions makion dollars I believe or less 0:19:16.440 --> 0:19:19.320 roughly that right, and they get a tax in center, 0:19:19.440 --> 0:19:22.080 isn't that correct? Yes? Absolutely fun the stock. No, they 0:19:22.080 --> 0:19:25.240 don't have to pay uh income tax for what is 0:19:25.280 --> 0:19:29.280 it a few years after it's it's ten years, ten years, yes, absolutely. 0:19:29.840 --> 0:19:34.160 In In fact, in fact, in much of two thousand 0:19:34.240 --> 0:19:38.679 and sixteen, the previous government was going to close it 0:19:38.720 --> 0:19:42.399 down and that's when I became a finance minister again 0:19:43.040 --> 0:19:46.720 after after a four year break, and the first act 0:19:47.359 --> 0:19:51.440 that I took was to was to keep it the same. No, 0:19:52.040 --> 0:19:56.639 the junior stock Exchange remains in place, and as a 0:19:56.680 --> 0:19:59.800 result of that, there is renewed interest, more people going 0:19:59.840 --> 0:20:03.959 for equity financing rather than than than you know, loans 0:20:04.520 --> 0:20:07.800 and um. And it's it's really phenomenal what's happening now. 0:20:07.840 --> 0:20:09.960 As a matter of fact, I'm now encouraging the human 0:20:10.000 --> 0:20:15.720 and stuff finance to look at at another feature called 0:20:16.960 --> 0:20:21.439 nano stock exchange. It's it's aimed, it's aimed at the micro, 0:20:22.560 --> 0:20:26.720 the micro even smaller than than what the Junior Stock 0:20:26.760 --> 0:20:33.080 Exchange targeted. And because you see of Jamaican businesses are 0:20:33.160 --> 0:20:37.119 small and medium enterprises. Okay, And one of the things 0:20:37.119 --> 0:20:40.280 that is ironic about it right now is that the 0:20:40.280 --> 0:20:44.240 bulk of loans to the private sector are elevated among 0:20:44.320 --> 0:20:49.439 the ten percent. Many of them don't even have loans. 0:20:50.359 --> 0:20:54.400 But if they were able to get more equity financing right, 0:20:54.840 --> 0:20:57.560 then they will be able to be more productive. Then 0:20:57.600 --> 0:21:00.960 they will be able to systematically work with the government 0:21:01.040 --> 0:21:05.600 in targeting critical areas of new development and growth. Uh 0:21:06.040 --> 0:21:09.520 export markets. I mean, in Jamaica, we produce so many 0:21:09.840 --> 0:21:13.199 good things that that we now need to put it 0:21:13.240 --> 0:21:18.000 at an industrial level to to replace the traditional sugarcane. 0:21:18.400 --> 0:21:21.280 We have orchard crops, you have mangoes, you have fruit 0:21:21.359 --> 0:21:26.439 of all types, avocados, um you know, all kinds of 0:21:26.440 --> 0:21:29.399 things that are that are in global demands. And what 0:21:29.520 --> 0:21:33.000 you don't sell fresh, you can sell it processed. You 0:21:33.040 --> 0:21:36.680 have clear markets, you have the tourism industry of carry com. 0:21:36.760 --> 0:21:40.760 You have the diaspora with Jamaica and in the US, England, Canada. 0:21:41.320 --> 0:21:45.320 You have third country markets that are crying out for exotics. 0:21:46.200 --> 0:21:49.080 And I'm introducing another one which is exciting for us. 0:21:49.119 --> 0:21:53.800 It's a home grown school feeding program. All of these 0:21:53.840 --> 0:21:58.720 things require investment, right and if we can and if 0:21:58.720 --> 0:22:02.639 we can get the micro and small businesses to embrace 0:22:02.680 --> 0:22:06.080 these opportunities, and part of embracing that is to have 0:22:06.280 --> 0:22:10.440 to have them access money in an affordable way through 0:22:10.960 --> 0:22:15.240 the junior and possibly a microstock exchange. So the returns 0:22:15.320 --> 0:22:19.960 are undeniably strong on the Jamaican Stock Exchange, but I'm 0:22:20.000 --> 0:22:23.680 wondering how many companies have you guys been getting interests 0:22:23.720 --> 0:22:27.280 from in wanting to be listed on whether it's the 0:22:27.359 --> 0:22:30.359 regular stock exchange or a micro stock exchange or the 0:22:30.440 --> 0:22:33.440 junior stock exchange. Well, a lot of companies that don't 0:22:33.480 --> 0:22:36.639 have the exact numbers now because I'm not um that 0:22:36.800 --> 0:22:43.520 intimately that ministry anymore, but but the interest is there. 0:22:43.520 --> 0:22:46.880 And that is why I'm actually proposing to my minister, 0:22:47.840 --> 0:22:51.040 mic colleague minister, and to the Prime Minister that that 0:22:51.160 --> 0:22:53.560 we don't rule out looking at at a at a 0:22:53.600 --> 0:22:57.360 nano stock exchange, um, because I think that that will 0:22:57.840 --> 0:23:01.679 that will help to further us to mulate they drive 0:23:01.800 --> 0:23:08.320 towards more productive investments, right, and the old tradition of 0:23:08.400 --> 0:23:12.720 buy and sell. Is that enough to help you to 0:23:12.720 --> 0:23:18.240 to to lift especially rural areas from poverty. Okay, we 0:23:18.280 --> 0:23:20.800 need to add value and we need to build a 0:23:20.920 --> 0:23:25.240 value chain from what you grow to what you process 0:23:25.280 --> 0:23:27.800 and what you target not just the local markets, but 0:23:27.880 --> 0:23:30.760 to the export markets. And if you were to speak 0:23:30.800 --> 0:23:33.959