1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,720 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. President 7 00:00:33,760 --> 00:00:37,000 Speaker 1: Donald Trump will address the nation from the Oval Office 8 00:00:37,080 --> 00:00:41,360 Speaker 1: at nine pm Eastern Time this evening. Bloomberg, of course, 9 00:00:41,400 --> 00:00:45,200 Speaker 1: will cover the cover the president's speech as well as 10 00:00:45,240 --> 00:00:49,279 Speaker 1: the democratic response to the President's remarks. Now, this is 11 00:00:49,520 --> 00:00:53,320 Speaker 1: decided to be a focus of the national emergency that 12 00:00:53,400 --> 00:00:56,720 Speaker 1: he wants wants to declare over the border security, and 13 00:00:56,800 --> 00:00:58,920 Speaker 1: the President has said in recent days that he might 14 00:00:59,000 --> 00:01:04,560 Speaker 1: employ the emergency funding for the border wall if Congress 15 00:01:04,640 --> 00:01:07,840 Speaker 1: doesn't approve it. Well, can he do so? Noah Feldman 16 00:01:07,959 --> 00:01:12,280 Speaker 1: is professor of law Harvard University also a Bloomberg opinion columnist. 17 00:01:12,560 --> 00:01:16,800 Speaker 1: He can be followed on Twitter at Noah are Feldman. Noah, 18 00:01:17,200 --> 00:01:22,000 Speaker 1: can the President declare a national emergency to build a wall? No, 19 00:01:22,200 --> 00:01:25,840 Speaker 1: he can't. There's no provision in the Constitution that says 20 00:01:26,280 --> 00:01:29,199 Speaker 1: that the president can declare an emergency and then spend 21 00:01:29,280 --> 00:01:32,680 Speaker 1: money that hasn't been appropriated to him, and Donald Trump 22 00:01:32,720 --> 00:01:36,000 Speaker 1: can invent one for the occasion. There are provisions in 23 00:01:36,080 --> 00:01:39,440 Speaker 1: law statutes that allow the president to declare an emergency 24 00:01:39,440 --> 00:01:41,240 Speaker 1: and do certain things, but as far as I know, 25 00:01:41,720 --> 00:01:45,160 Speaker 1: none of those provisions says that whence he's declared an emergency, 26 00:01:45,240 --> 00:01:48,120 Speaker 1: the president can spend money on something that Congress has 27 00:01:48,120 --> 00:01:50,920 Speaker 1: made it completely clear that it doesn't want him to 28 00:01:50,960 --> 00:01:53,040 Speaker 1: spend money on, such as the wall, which has now 29 00:01:53,120 --> 00:01:55,640 Speaker 1: been denied him by two Congresses in a row. Well, 30 00:01:55,760 --> 00:02:00,520 Speaker 1: Provisor Felman, though there is a significant constituency within Congress 31 00:02:00,720 --> 00:02:03,960 Speaker 1: who do support the wall, is there enough data that 32 00:02:04,000 --> 00:02:07,800 Speaker 1: we have to make that assertion that definitely Congress does 33 00:02:07,840 --> 00:02:12,080 Speaker 1: not want this. Yes, the previous Congress was asked to 34 00:02:12,120 --> 00:02:15,360 Speaker 1: provide appropriation and funding for this and declined, and the 35 00:02:15,400 --> 00:02:18,120 Speaker 1: current Congress has been asked to do so by the 36 00:02:18,160 --> 00:02:21,600 Speaker 1: president and has declined. It never gets more explicit than 37 00:02:21,800 --> 00:02:24,079 Speaker 1: that Congress has to be seen as a single body 38 00:02:24,120 --> 00:02:25,920 Speaker 1: speaking with a single voice, and it says yes or 39 00:02:25,919 --> 00:02:28,320 Speaker 1: no when it does it by a vote. In this instance, 40 00:02:28,720 --> 00:02:30,840 Speaker 1: it's it said no, and it's it said no, twice. 41 00:02:31,240 --> 00:02:35,320 Speaker 1: There's also president in Supreme Court precedent for thinking of 42 00:02:35,480 --> 00:02:40,000 Speaker 1: Congress's refusal to authorize something as an explicit statement to 43 00:02:40,040 --> 00:02:42,839 Speaker 1: the president that he that he can't do that thing. 44 00:02:43,280 --> 00:02:45,440 Speaker 1: That goes all the way back to the famous steel 45 00:02:45,440 --> 00:02:49,480 Speaker 1: seizure case when Harry Truman tried to seize the steel mills, 46 00:02:49,480 --> 00:02:52,200 Speaker 1: and the Supreme Court said, this is a situation where 47 00:02:52,639 --> 00:02:55,239 Speaker 1: Congress has not authorized the president to do this. And 48 00:02:55,320 --> 00:02:57,799 Speaker 1: their proof was that there were other pieces of legislation 49 00:02:57,840 --> 00:03:00,000 Speaker 1: that had authorized the presidents to do other sorts of things, 50 00:03:00,320 --> 00:03:02,640 Speaker 1: but there was no legislation saying the president could seize 51 00:03:02,639 --> 00:03:04,560 Speaker 1: in that way. And so the court said that was 52 00:03:04,600 --> 00:03:07,680 Speaker 1: evidence that Congress did not intend to give the president 53 00:03:07,760 --> 00:03:11,800 Speaker 1: this authority. Now, well, what does that National Emergencies Act 54 00:03:11,919 --> 00:03:15,360 Speaker 1: outline as the specific powers of the president to declare 55 00:03:15,360 --> 00:03:18,560 Speaker 1: an emergency. Well, one thing that's very frustrating about the 56 00:03:18,600 --> 00:03:21,120 Speaker 1: National Emergencies Act is that it's kind of an empty shell. 57 00:03:21,560 --> 00:03:24,640 Speaker 1: It says that the president may declare a state of emergency, 58 00:03:24,800 --> 00:03:27,600 Speaker 1: and it says that when he does that, Congress could 59 00:03:27,960 --> 00:03:31,239 Speaker 1: choose to overrule it. And it says that once he's 60 00:03:31,280 --> 00:03:34,840 Speaker 1: done that, he has whatever authority comes from one of 61 00:03:34,920 --> 00:03:38,640 Speaker 1: four hundred and seventies separate laws scattered all over the 62 00:03:38,680 --> 00:03:42,480 Speaker 1: statute books, each of which confers some special authority on 63 00:03:42,520 --> 00:03:44,960 Speaker 1: the president in an emergency. So then you have to 64 00:03:44,960 --> 00:03:47,040 Speaker 1: figure out which one of those fourigers and the seventy 65 00:03:47,080 --> 00:03:49,680 Speaker 1: plus laws is in play, and you have to see 66 00:03:49,720 --> 00:03:52,200 Speaker 1: if there's any authority under those laws that actually would 67 00:03:52,240 --> 00:03:54,600 Speaker 1: let the president do the thing in question. And in 68 00:03:54,600 --> 00:03:58,240 Speaker 1: this instance, nobody has put forward to my knowledge. I've 69 00:03:58,240 --> 00:04:00,680 Speaker 1: looked high and low some of our party that says 70 00:04:00,920 --> 00:04:02,920 Speaker 1: that when the president there's a state of emergency, he 71 00:04:02,960 --> 00:04:06,080 Speaker 1: can use uh, he can take money that hasn't been 72 00:04:06,080 --> 00:04:09,040 Speaker 1: appropriated to do something that Congress doesn't want him to do. So, 73 00:04:09,160 --> 00:04:12,560 Speaker 1: Professor Velevan, let's say President Trump says, you know what, 74 00:04:12,840 --> 00:04:14,720 Speaker 1: I'm going to give this a try. Anyway, I'm going 75 00:04:14,800 --> 00:04:18,200 Speaker 1: to go ahead and declare national emergency. Just take them, 76 00:04:18,320 --> 00:04:21,480 Speaker 1: take the money, and it goes to the Supreme Court. 77 00:04:22,200 --> 00:04:25,080 Speaker 1: Do you think that they would rule against him given 78 00:04:25,080 --> 00:04:30,320 Speaker 1: the composition currently? I do. Even the conservative justices are 79 00:04:30,360 --> 00:04:34,240 Speaker 1: real believers in the separation of powers, and there's probably 80 00:04:34,279 --> 00:04:37,800 Speaker 1: no clearer violation of the separation of powers than the 81 00:04:37,880 --> 00:04:41,680 Speaker 1: president deciding that he gets to spend money when it 82 00:04:41,680 --> 00:04:45,039 Speaker 1: hasn't been appropriated by the Congress. You know, the fundamental 83 00:04:45,120 --> 00:04:47,760 Speaker 1: power of Congress in the US constitutional system, The most 84 00:04:47,760 --> 00:04:50,520 Speaker 1: basic thing they can do is the power of the purse. 85 00:04:51,040 --> 00:04:52,960 Speaker 1: And if the president can get around the power of 86 00:04:52,960 --> 00:04:56,240 Speaker 1: the purse, then we don't really need Congress anymore. And 87 00:04:56,400 --> 00:04:59,160 Speaker 1: that can't possibly be the design that the Framers put 88 00:04:59,240 --> 00:05:02,720 Speaker 1: in place. And the Conservatives on the Court our originalists, 89 00:05:02,760 --> 00:05:06,039 Speaker 1: and they believe in what the Founders designed, and they're 90 00:05:06,080 --> 00:05:11,599 Speaker 1: not interested in abolishing Congress. Noah Feldon, does the International 91 00:05:11,600 --> 00:05:17,560 Speaker 1: Emergency Economic Powers Act? Does that offer the president away 92 00:05:17,600 --> 00:05:23,200 Speaker 1: in which to use the legal apparatus of the government 93 00:05:23,320 --> 00:05:29,720 Speaker 1: in order to change the direction or flow of financial transactions. Well, 94 00:05:30,279 --> 00:05:33,440 Speaker 1: this is not an instance where financial transactions would be 95 00:05:33,440 --> 00:05:35,240 Speaker 1: in play. I mean, there are emergency powers like the 96 00:05:35,240 --> 00:05:38,280 Speaker 1: one that you mentioned, which say, for example, you know, 97 00:05:38,360 --> 00:05:43,120 Speaker 1: if we're suddenly in a war with another country, or if, um, 98 00:05:43,160 --> 00:05:45,440 Speaker 1: you know, our assets are seized another country, that the 99 00:05:45,480 --> 00:05:49,840 Speaker 1: president could take unilateral steps, again authorized by Congress two, 100 00:05:50,680 --> 00:05:53,320 Speaker 1: as you say, reverse the flow of transactions or freeze 101 00:05:53,360 --> 00:05:55,080 Speaker 1: assets or things like that. But this is not what 102 00:05:55,120 --> 00:05:58,440 Speaker 1: we're talking about. This is about the President actually taking 103 00:05:58,520 --> 00:06:01,560 Speaker 1: money from the U. S. Treasury that has to be 104 00:06:01,680 --> 00:06:05,120 Speaker 1: by law appropriated by Congress and putting it to a 105 00:06:05,160 --> 00:06:08,760 Speaker 1: purpose that Congress has said you can't use it for. 106 00:06:09,120 --> 00:06:12,159 Speaker 1: And that's that's not covered by any of the emergency 107 00:06:12,200 --> 00:06:14,840 Speaker 1: powers accident I'm aware of. I have to wonder what's 108 00:06:14,880 --> 00:06:17,600 Speaker 1: the potential liability to President Trump should he go ahead 109 00:06:17,760 --> 00:06:21,200 Speaker 1: and declare the emergency powers to seize this cash. I mean, 110 00:06:21,279 --> 00:06:23,919 Speaker 1: let's say he says, look politically it looks good for me. 111 00:06:24,080 --> 00:06:26,280 Speaker 1: I don't care if it's legal. If it gets shot down, 112 00:06:26,440 --> 00:06:29,960 Speaker 1: so be it. Will there be any consequences from that? 113 00:06:29,960 --> 00:06:32,840 Speaker 1: That's really the deep question. You know. President Trump, as 114 00:06:32,880 --> 00:06:36,279 Speaker 1: you know, has been avoiding the Constitution where he can, 115 00:06:36,440 --> 00:06:39,720 Speaker 1: pushing it where possible, and breaking it where he thinks 116 00:06:39,720 --> 00:06:43,120 Speaker 1: there's a political advantage to him, and repeatedly the courts 117 00:06:43,120 --> 00:06:46,960 Speaker 1: have struck down his actions, and to all intents and purposes, 118 00:06:47,000 --> 00:06:49,400 Speaker 1: it seems like he doesn't care, and he may judge 119 00:06:49,400 --> 00:06:51,680 Speaker 1: in this instance too, why not just break the Constitution 120 00:06:51,680 --> 00:06:53,920 Speaker 1: and then blame the courts and maybe that gives him 121 00:06:53,960 --> 00:06:57,520 Speaker 1: some some cover. And you know, at one time I 122 00:06:57,560 --> 00:06:59,920 Speaker 1: would have said, we lived in a country where repeated 123 00:07:00,080 --> 00:07:03,279 Speaker 1: violations of the Constitution by the president would have effects, 124 00:07:03,279 --> 00:07:05,920 Speaker 1: would have blowback, would eventually lead the public to give 125 00:07:06,000 --> 00:07:08,039 Speaker 1: up on the president, or would eventually leave Congress to 126 00:07:08,040 --> 00:07:11,640 Speaker 1: think about impeaching him. That hasn't happened yet, and so 127 00:07:12,640 --> 00:07:14,280 Speaker 1: you know, I'm not gonna sit here and say that 128 00:07:14,320 --> 00:07:16,640 Speaker 1: I'm certain that that's going to happen. But I do 129 00:07:16,760 --> 00:07:23,080 Speaker 1: believe still that slow, gradual, incremental steps towards realizing that 130 00:07:23,120 --> 00:07:26,120 Speaker 1: this is a president who have ignores the Constitution will 131 00:07:26,160 --> 00:07:29,040 Speaker 1: have a long term negative effect on the presidency, and 132 00:07:29,080 --> 00:07:34,280 Speaker 1: they each one incrementally increases the odds of impeachment. What 133 00:07:34,320 --> 00:07:38,480 Speaker 1: do you believe the Democrats can do. Well, the first 134 00:07:38,520 --> 00:07:40,920 Speaker 1: thing they can do is let it, you know, let 135 00:07:40,920 --> 00:07:43,960 Speaker 1: the word ring out loud and clear that this is 136 00:07:44,000 --> 00:07:48,200 Speaker 1: not just outside the president's statutory powers, but this violates 137 00:07:48,240 --> 00:07:52,080 Speaker 1: the separation of powers. Every American has been through Civics 138 00:07:52,080 --> 00:07:54,200 Speaker 1: class and knows that we have the separation of powers 139 00:07:54,280 --> 00:07:56,440 Speaker 1: and knows that Congress has the power of the person. 140 00:07:56,480 --> 00:07:59,040 Speaker 1: If you take that away, we don't have a democracy anymore. 141 00:07:59,080 --> 00:08:00,840 Speaker 1: We don't have a constitutional system anymore. And I think 142 00:08:00,840 --> 00:08:03,400 Speaker 1: the Democrats should really beat that point as hard as 143 00:08:03,440 --> 00:08:05,720 Speaker 1: they can. I think Americans still believe in the Constitution. 144 00:08:05,960 --> 00:08:08,240 Speaker 1: We still believe there should be a Congress, and frankly, 145 00:08:08,280 --> 00:08:10,120 Speaker 1: if the president can just allocate my on his own, 146 00:08:10,280 --> 00:08:12,080 Speaker 1: it's as though we don't have a Congress, and that's 147 00:08:12,120 --> 00:08:15,000 Speaker 1: just not the system that Americans want. So that's the 148 00:08:15,000 --> 00:08:17,520 Speaker 1: first thing that Democrats can do, and I think the 149 00:08:17,560 --> 00:08:19,560 Speaker 1: second thing they can do is remind the public that 150 00:08:19,640 --> 00:08:23,040 Speaker 1: this is a president who's flouting the rule of law 151 00:08:23,360 --> 00:08:26,240 Speaker 1: and he's doing it on a daily basis. And last, 152 00:08:26,240 --> 00:08:28,120 Speaker 1: but not least, the Democrats will probably have to go 153 00:08:28,160 --> 00:08:31,480 Speaker 1: to court to block this. Professor Noah Feldman, thank you 154 00:08:31,520 --> 00:08:33,320 Speaker 1: so much for being with us and for your insights. 155 00:08:33,440 --> 00:08:37,319 Speaker 1: Professor Noah Feldman of Harvard University is also a Bloomberg 156 00:08:37,320 --> 00:08:42,400 Speaker 1: Opinion columnist, coming to us from Boston talking about President 157 00:08:42,440 --> 00:08:46,600 Speaker 1: Trump's efforts to get the appropriations to build the one. 158 00:09:01,320 --> 00:09:03,800 Speaker 1: The U. S And China are talking and markets like 159 00:09:03,960 --> 00:09:06,600 Speaker 1: that they are discussing a trade deal and trying to 160 00:09:06,600 --> 00:09:08,880 Speaker 1: get it done within the next few months. Joining us 161 00:09:08,880 --> 00:09:11,280 Speaker 1: now to talk about the feasibility if that is. Leland Miller, 162 00:09:11,520 --> 00:09:15,199 Speaker 1: chief executive of China beige Book International, joining us here 163 00:09:15,280 --> 00:09:18,040 Speaker 1: in our Bloomberg in our active broker studios in New York, 164 00:09:18,320 --> 00:09:21,679 Speaker 1: so Leland. Do you think it is likely that the 165 00:09:21,720 --> 00:09:24,000 Speaker 1: two sides here will come to some kind of meeting 166 00:09:24,000 --> 00:09:25,640 Speaker 1: of minds, And if so, what does that look like? 167 00:09:26,080 --> 00:09:27,960 Speaker 1: I do? I think that there are going to have 168 00:09:28,000 --> 00:09:29,880 Speaker 1: a trade deal at the end of this ninety days. 169 00:09:30,160 --> 00:09:31,640 Speaker 1: I think the way this looks there's that there will 170 00:09:31,679 --> 00:09:34,800 Speaker 1: be a framework that's set up um that they'll call 171 00:09:34,840 --> 00:09:36,880 Speaker 1: a deal, and then there'll be a hundred eighty days 172 00:09:36,960 --> 00:09:42,760 Speaker 1: or so implementation period where the Chinese, where the Chinese 173 00:09:43,320 --> 00:09:45,040 Speaker 1: do all the things that they're supposed to do, and 174 00:09:45,080 --> 00:09:46,959 Speaker 1: the U S evaluates where the Chinese have done what 175 00:09:46,960 --> 00:09:51,839 Speaker 1: they're supposed to do. And will that conclude the arrangement 176 00:09:52,000 --> 00:09:56,480 Speaker 1: or will it just bring more contradiction and more debate. 177 00:09:57,120 --> 00:10:00,760 Speaker 1: The idea is it'll solve it. For so what President 178 00:10:00,760 --> 00:10:03,120 Speaker 1: Trump would like to do is get this issue out 179 00:10:03,120 --> 00:10:06,360 Speaker 1: of his hair, move on to some other trade issues, 180 00:10:06,880 --> 00:10:10,360 Speaker 1: and solve this up until brings it back. So when 181 00:10:10,440 --> 00:10:13,040 Speaker 1: during the campaign season you're going to see China being 182 00:10:13,280 --> 00:10:16,640 Speaker 1: a major issue, the Democrats are going to bring him up, 183 00:10:16,760 --> 00:10:19,800 Speaker 1: bring it up his trade deals, his z T E. Tweets, 184 00:10:20,040 --> 00:10:23,520 Speaker 1: So is going to be the year that this comes back. 185 00:10:24,080 --> 00:10:26,559 Speaker 1: But twenty nineteen, he'd like to take it off the agenda, 186 00:10:26,600 --> 00:10:28,280 Speaker 1: and that's the goal of getting a deal by by 187 00:10:28,320 --> 00:10:32,559 Speaker 1: by March one. So basically, no escalating trade, tariff threats, etcetera, 188 00:10:32,800 --> 00:10:35,080 Speaker 1: come to some kind of peace move forward. Have it 189 00:10:35,080 --> 00:10:37,439 Speaker 1: not be part of the equation, which raises the question, 190 00:10:37,679 --> 00:10:41,520 Speaker 1: can we keep blaming the trade tensions for weakness that 191 00:10:41,520 --> 00:10:44,400 Speaker 1: we're seeing in China because that is what some people 192 00:10:44,440 --> 00:10:47,120 Speaker 1: are trying to do. What is your view on that? Yeah, 193 00:10:47,160 --> 00:10:49,480 Speaker 1: that's not accurated. There are definitely parts of the economy 194 00:10:49,480 --> 00:10:51,839 Speaker 1: that have been suffering quite dramatically. I mean, you look 195 00:10:51,880 --> 00:10:56,160 Speaker 1: at our manufacturing data. Public data showed export orders weakening. 196 00:10:56,160 --> 00:10:59,040 Speaker 1: I think it was early October, maybe late September, Yeah, 197 00:10:59,040 --> 00:11:01,480 Speaker 1: in China August, you know, we we were we were 198 00:11:01,520 --> 00:11:04,000 Speaker 1: showing this in in August, and so we have seen 199 00:11:04,160 --> 00:11:07,920 Speaker 1: a dramatic hit to manufacturing for the last several months, 200 00:11:07,920 --> 00:11:10,800 Speaker 1: no question about that. But overall, the economy was gonna 201 00:11:10,800 --> 00:11:12,880 Speaker 1: weaken no matter what was done on the trade side, 202 00:11:13,240 --> 00:11:16,640 Speaker 1: and we had seen in seventeen A lot of people 203 00:11:16,679 --> 00:11:20,160 Speaker 1: thought this was organic momentum that was pushing us UM 204 00:11:20,200 --> 00:11:23,840 Speaker 1: into beyond with this was beautiful Chinese growth was actually happening, 205 00:11:23,880 --> 00:11:27,360 Speaker 1: is it? By mid seventeen, private firms were already getting 206 00:11:27,400 --> 00:11:30,319 Speaker 1: skeptical of of the rally and we're borrowing less and 207 00:11:30,400 --> 00:11:33,560 Speaker 1: hiring less and investing less. But state firms, under orders 208 00:11:33,559 --> 00:11:36,480 Speaker 1: from Beijing, of course, just kept going right straight through, 209 00:11:36,600 --> 00:11:40,080 Speaker 1: straight through the Party congress Ineen. So you saw this 210 00:11:40,120 --> 00:11:43,480 Speaker 1: particularly manufacturing and property and commodities, which were the you know, 211 00:11:43,520 --> 00:11:46,400 Speaker 1: the old economy sectors. So there was an overheating that 212 00:11:46,440 --> 00:11:47,839 Speaker 1: had to be dealt with and it it was gonna result 213 00:11:47,840 --> 00:11:50,880 Speaker 1: in the slowdown no matter what. Um. What you had 214 00:11:50,880 --> 00:11:53,720 Speaker 1: in early eighteen was no doubt, some frontloading of orders 215 00:11:53,760 --> 00:11:56,240 Speaker 1: in order to get to to to beat the tariffs. 216 00:11:56,559 --> 00:11:59,040 Speaker 1: So what that meant was things earlier in the year 217 00:11:59,040 --> 00:12:00,520 Speaker 1: were probably a little bit better here than they would 218 00:12:00,520 --> 00:12:02,920 Speaker 1: have been otherwise, and it's just pushed the trouble farther 219 00:12:02,920 --> 00:12:04,520 Speaker 1: into the year. And that's where we are now, and 220 00:12:04,559 --> 00:12:06,600 Speaker 1: our our que for data is the worst that we've 221 00:12:06,640 --> 00:12:10,680 Speaker 1: seen since the first quarter of sixteen, when we when 222 00:12:10,720 --> 00:12:14,480 Speaker 1: we when when China markets were in a panic. We 223 00:12:14,480 --> 00:12:18,360 Speaker 1: almost the last time you were physically in China it's 224 00:12:18,360 --> 00:12:24,520 Speaker 1: been it's been um earlier this year. UM, but I 225 00:12:24,559 --> 00:12:29,680 Speaker 1: haven't spent a lot of time there at all recently. Okay, 226 00:12:29,960 --> 00:12:33,040 Speaker 1: but you know, there's there's some questions, you know, it's 227 00:12:33,040 --> 00:12:34,720 Speaker 1: it's a different environment there right now. Well, that's why 228 00:12:34,800 --> 00:12:37,360 Speaker 1: I wanted you to go, is maybe just expand on that. 229 00:12:37,640 --> 00:12:41,800 Speaker 1: What are your concerns, what are your personal perspective and 230 00:12:41,840 --> 00:12:45,080 Speaker 1: experiences tell you. I don't think there's a risk for 231 00:12:45,120 --> 00:12:47,880 Speaker 1: Americans right now, but the environment is changing. Is the 232 00:12:47,880 --> 00:12:50,720 Speaker 1: economy slows and we're certainly reporting that the economy slowing, 233 00:12:51,280 --> 00:12:55,040 Speaker 1: and there's significant tensions over Huawei. The Canadians are seeing that. 234 00:12:55,559 --> 00:12:57,760 Speaker 1: It's just, you know, I think that you're you're most 235 00:12:57,800 --> 00:13:00,520 Speaker 1: at risk if you're a big tech CEO in a 236 00:13:00,559 --> 00:13:03,840 Speaker 1: Canadian tex EO. But I think that it's it just 237 00:13:03,920 --> 00:13:07,680 Speaker 1: factors into your into your thinking now, whereas last year, 238 00:13:07,880 --> 00:13:10,080 Speaker 1: past years, no matter whether things were good or bad, 239 00:13:10,120 --> 00:13:11,960 Speaker 1: you just didn't think about it. So you said that 240 00:13:11,960 --> 00:13:14,320 Speaker 1: the fourth quarter data was the worst that you've seen 241 00:13:14,360 --> 00:13:18,040 Speaker 1: since the beginning of Of course, China engaged in a 242 00:13:18,120 --> 00:13:21,640 Speaker 1: massive stimulus that year, expanded its debtload dramatically in order 243 00:13:21,640 --> 00:13:25,600 Speaker 1: to prop up the economy cannot do that again. If 244 00:13:25,640 --> 00:13:28,000 Speaker 1: it absolutely had to, it would go back to the well. 245 00:13:28,160 --> 00:13:30,520 Speaker 1: But I think what people are making making two mistakes 246 00:13:30,520 --> 00:13:33,199 Speaker 1: on stimulus. The first is the idea that China is 247 00:13:33,240 --> 00:13:35,800 Speaker 1: not easing right now and they'll they'll start doing it soon. 248 00:13:36,200 --> 00:13:38,120 Speaker 1: But if you look at China age book data, we've 249 00:13:38,120 --> 00:13:41,280 Speaker 1: seen three straight quarters where borrowing numbers have been elevated 250 00:13:41,280 --> 00:13:45,600 Speaker 1: from sixteen. Firms are borrowing, And what we saw originally 251 00:13:45,640 --> 00:13:48,600 Speaker 1: was that shadow banking was being shut down, So so 252 00:13:48,679 --> 00:13:51,400 Speaker 1: firms are being pushed for more on balance sheet lending 253 00:13:51,440 --> 00:13:54,080 Speaker 1: at banks, but then deleveraging to the extent it ever 254 00:13:54,160 --> 00:13:57,320 Speaker 1: started uh ended quickly, and now you're seeing the shadow 255 00:13:57,360 --> 00:14:00,600 Speaker 1: banks lending again, you're seeing banks barring or so there 256 00:14:00,679 --> 00:14:04,080 Speaker 1: is a lot of clandestine easying going on right now. 257 00:14:04,120 --> 00:14:07,319 Speaker 1: All our credit indicators in Q four while we're pointed up, 258 00:14:07,679 --> 00:14:10,560 Speaker 1: the problem is it wasn't resulting in more investment. It 259 00:14:10,640 --> 00:14:14,240 Speaker 1: was not resulting in boosting growth because firms were overwhelmingly 260 00:14:14,240 --> 00:14:17,400 Speaker 1: taking that capital and they were battening down the hatches. 261 00:14:17,720 --> 00:14:21,040 Speaker 1: They were dealing with the cash flow problems and they 262 00:14:21,080 --> 00:14:24,120 Speaker 1: were really troubled by the uncertainty. So that's something that 263 00:14:24,160 --> 00:14:26,240 Speaker 1: needs to change if China wants to swing back upwards. 264 00:14:26,840 --> 00:14:31,600 Speaker 1: If you are a Chinese investor, are you looking to 265 00:14:31,760 --> 00:14:34,800 Speaker 1: figure out a way to get your money out of China. 266 00:14:35,120 --> 00:14:36,920 Speaker 1: I think Chinese investors have been trying to do that 267 00:14:36,960 --> 00:14:39,200 Speaker 1: for years and years, and you're still trying because you know, 268 00:14:39,440 --> 00:14:42,000 Speaker 1: even if you were convinced the Chinese economy is a 269 00:14:42,080 --> 00:14:45,880 Speaker 1: wonderful medium term or long term bet, you have to diversify, 270 00:14:45,960 --> 00:14:48,440 Speaker 1: and the problem that Chinese investors have in the Chinese 271 00:14:48,520 --> 00:14:50,480 Speaker 1: the problem the Chinese firms have is that they don't 272 00:14:50,480 --> 00:14:53,840 Speaker 1: have enough options for diverse diversification, which is why they're 273 00:14:53,840 --> 00:14:56,600 Speaker 1: constantly being shoved into the equities markets, the bond markets, 274 00:14:56,640 --> 00:14:59,600 Speaker 1: the commodity markets, or property because those are the only 275 00:14:59,640 --> 00:15:02,360 Speaker 1: places in China you can put your money legally. We 276 00:15:02,360 --> 00:15:06,320 Speaker 1: were speaking earlier with Victor she, professor of you See 277 00:15:06,320 --> 00:15:08,960 Speaker 1: San Diego, and he was talking about how they've sort 278 00:15:08,960 --> 00:15:11,520 Speaker 1: of reached a point of diminishing returns where the more 279 00:15:11,560 --> 00:15:14,120 Speaker 1: that China borrows, the more of the interest expenses, and 280 00:15:14,160 --> 00:15:18,040 Speaker 1: they're borrowing to just cover their maintenance payments. Do you 281 00:15:18,160 --> 00:15:21,760 Speaker 1: agree with that assessment. Yeah, I think Victor's work is 282 00:15:21,760 --> 00:15:24,280 Speaker 1: is I can't comment on the exact numbers. We don't 283 00:15:24,320 --> 00:15:26,800 Speaker 1: do that type of of deep diving the debt, but 284 00:15:26,920 --> 00:15:30,280 Speaker 1: the the idea that China's debt is bigger um than 285 00:15:30,360 --> 00:15:32,640 Speaker 1: than than people think. I think that's right, and I 286 00:15:32,680 --> 00:15:34,880 Speaker 1: think that there is causing stresses in the system that 287 00:15:34,920 --> 00:15:38,200 Speaker 1: aren't immediately apparent and certainly aren't reflected in the public data. 288 00:15:38,520 --> 00:15:40,440 Speaker 1: So you have a problem. You know. One of the 289 00:15:40,480 --> 00:15:45,280 Speaker 1: reasons that Lelho and other Chinese policymakers are so against 290 00:15:45,360 --> 00:15:48,880 Speaker 1: another trip back to the well for more big time 291 00:15:48,960 --> 00:15:51,960 Speaker 1: monetary stimulus is that they've seen what's happened. They saw 292 00:15:51,960 --> 00:15:56,120 Speaker 1: what happened in the excesses of UH, They've seen the 293 00:15:56,200 --> 00:15:59,480 Speaker 1: problems that came from, and they don't think they could 294 00:15:59,520 --> 00:16:01,240 Speaker 1: do it again. And if they had to do it again, 295 00:16:01,280 --> 00:16:03,480 Speaker 1: they think it's it's a lot more problems problematic and 296 00:16:03,520 --> 00:16:06,440 Speaker 1: a lot less bang for the book. What did you 297 00:16:06,520 --> 00:16:10,520 Speaker 1: make of the recent comments regarding Taiwan from the Chinese leadership. 298 00:16:11,760 --> 00:16:15,600 Speaker 1: That's interesting. Usually you can expect before Taiwanese election that 299 00:16:16,040 --> 00:16:19,320 Speaker 1: the Chinese leader will pull out the old Chinese playbook 300 00:16:19,320 --> 00:16:22,280 Speaker 1: and talk about unification. It is interesting, though, I mean 301 00:16:22,360 --> 00:16:25,440 Speaker 1: President she is under siege for his handling of trade 302 00:16:25,480 --> 00:16:29,200 Speaker 1: and the weakening economy, and there are reasons to think 303 00:16:29,240 --> 00:16:31,520 Speaker 1: that if if if he looks at the United States 304 00:16:31,560 --> 00:16:35,040 Speaker 1: and he thinks that there's not resolved to defend Taiwan 305 00:16:35,160 --> 00:16:37,680 Speaker 1: or to defend other US allies, that could be a 306 00:16:37,680 --> 00:16:41,440 Speaker 1: place where he pushes back UH in order to you know, 307 00:16:41,560 --> 00:16:44,440 Speaker 1: use the nationalism card back home. It's a worry more 308 00:16:44,480 --> 00:16:46,480 Speaker 1: now that I would think it's been in the past. 309 00:16:47,000 --> 00:16:49,560 Speaker 1: Thanks very much for being with us always enlightening. Leland 310 00:16:49,600 --> 00:16:52,880 Speaker 1: Miller is the chief executive of the China Beije Book International. 311 00:16:53,200 --> 00:16:55,200 Speaker 1: You can of course follow them as we do on 312 00:16:55,240 --> 00:17:17,880 Speaker 1: Twitter at China Beije Book. Emerging markets debt has been 313 00:17:18,080 --> 00:17:20,879 Speaker 1: rallying dramatically in the past two trading sessions along with 314 00:17:21,000 --> 00:17:23,440 Speaker 1: all risk assets. Enjoining us now to talk about whether 315 00:17:23,480 --> 00:17:27,399 Speaker 1: this can last is Damian Sasaur, chief Emerging markets credit 316 00:17:27,480 --> 00:17:31,120 Speaker 1: strategist for Bloomberg Intelligence, joining us here in our interactive 317 00:17:31,160 --> 00:17:34,520 Speaker 1: Burger Studios. So, Damien, what's your feeling do you feel 318 00:17:34,560 --> 00:17:37,679 Speaker 1: like this incredible rally, which by on spreads measure, has 319 00:17:37,680 --> 00:17:41,640 Speaker 1: been the best two day rally, is it sustainable? Well? 320 00:17:41,640 --> 00:17:44,880 Speaker 1: First of all, happy New Year, and secondly, it's really 321 00:17:44,960 --> 00:17:46,679 Speaker 1: nice to be here when I'm not talking about emerging 322 00:17:46,720 --> 00:17:48,879 Speaker 1: markets melting down, So this is something new for me. 323 00:17:49,000 --> 00:17:51,119 Speaker 1: But um, yeah, no, I mean just in terms of 324 00:17:51,800 --> 00:17:55,919 Speaker 1: the debt load, the two maturing debt this year, um, 325 00:17:56,160 --> 00:17:59,359 Speaker 1: coming out of emerging markets dollar debt that is. Yeah. No, 326 00:17:59,480 --> 00:18:01,520 Speaker 1: I mean, look, we see sovereign issuance improving in the 327 00:18:01,520 --> 00:18:03,359 Speaker 1: beginning of this year. We see the Philippines and Israel 328 00:18:03,440 --> 00:18:06,720 Speaker 1: happy markets. Um, that's certainly a changed since the fourth 329 00:18:06,760 --> 00:18:09,119 Speaker 1: court of last year when really no issuer could come 330 00:18:09,160 --> 00:18:12,440 Speaker 1: to market. And and look, I mean just given where 331 00:18:12,480 --> 00:18:14,600 Speaker 1: yields are now and and and and certainly where yields 332 00:18:14,640 --> 00:18:16,520 Speaker 1: are in China, which we've all discussed. And I know 333 00:18:16,560 --> 00:18:18,320 Speaker 1: you had a guest on yesterday who was talking to this. 334 00:18:18,800 --> 00:18:20,400 Speaker 1: You know, China's got a lot of debt out there, 335 00:18:20,480 --> 00:18:22,120 Speaker 1: and the fact that now they can bring that debt 336 00:18:22,119 --> 00:18:24,840 Speaker 1: back home into local currency and potentially lower their cost 337 00:18:24,880 --> 00:18:27,160 Speaker 1: of funds is is actually a bullish thing. So yeah, 338 00:18:27,160 --> 00:18:29,239 Speaker 1: we're we're we're looking at all of that, and and 339 00:18:29,280 --> 00:18:32,159 Speaker 1: things are looking a bit rosier than last year. So Damian, 340 00:18:32,200 --> 00:18:34,800 Speaker 1: this one point to trillion that's gonna be rolled over 341 00:18:34,840 --> 00:18:37,359 Speaker 1: in China they're gonna find buyers for that, you know, 342 00:18:37,440 --> 00:18:40,520 Speaker 1: I don't know, you know, I had trouble reconciling that number. 343 00:18:41,000 --> 00:18:42,760 Speaker 1: Um And you make a great point, you know, how 344 00:18:42,880 --> 00:18:45,119 Speaker 1: deep and what's the breath of those local markets? You 345 00:18:45,119 --> 00:18:47,760 Speaker 1: know that hasn't yet been tested, certainly not on that scale. 346 00:18:48,160 --> 00:18:49,800 Speaker 1: But you know, if you just look at you know, 347 00:18:49,880 --> 00:18:51,760 Speaker 1: all of the dead outstanding out of China, and I'm 348 00:18:51,800 --> 00:18:54,720 Speaker 1: talking debt benchmark eligible debt, not just credit because if 349 00:18:54,760 --> 00:18:57,800 Speaker 1: you kind of look at the there, I guess the 350 00:18:57,800 --> 00:18:59,280 Speaker 1: big number that the b I S comes out with 351 00:18:59,359 --> 00:19:03,680 Speaker 1: is that China Credit Global of China GDP. I mean, 352 00:19:03,680 --> 00:19:05,800 Speaker 1: that's a huge number. They don't need to refinance all 353 00:19:05,840 --> 00:19:08,119 Speaker 1: of that, and while a lot of that is short term, 354 00:19:08,160 --> 00:19:10,919 Speaker 1: you know, it's pretty easy to roll it over. Specifically 355 00:19:10,920 --> 00:19:12,760 Speaker 1: on local currency, we don't see that being a really 356 00:19:12,760 --> 00:19:14,440 Speaker 1: big issue. I think the real issue are going to 357 00:19:14,480 --> 00:19:17,280 Speaker 1: be in pockets of that market, specifically in property and 358 00:19:17,320 --> 00:19:20,080 Speaker 1: specifically in high yield, where a lot of you know, 359 00:19:20,960 --> 00:19:24,240 Speaker 1: issuers who have poor fundamentals have been able to issue 360 00:19:24,440 --> 00:19:26,760 Speaker 1: in dollars, have been able to issue locally, and they're 361 00:19:26,760 --> 00:19:30,159 Speaker 1: gonna have a lot of trouble rolling that debt over all. Right, Well, 362 00:19:30,240 --> 00:19:33,720 Speaker 1: you were talking about just the general feeling and emerging 363 00:19:33,760 --> 00:19:35,879 Speaker 1: markets and you're talking about the amount of debt coming. 364 00:19:35,920 --> 00:19:38,760 Speaker 1: Do that you think we'll have an easier time getting 365 00:19:38,840 --> 00:19:41,439 Speaker 1: rolled over now that there's a more constructive tone. And 366 00:19:41,480 --> 00:19:43,720 Speaker 1: I'm just wondering, can you square the idea of a 367 00:19:43,840 --> 00:19:48,920 Speaker 1: dramatically slowing Chinese economy with ongoing strength in emerging markets? 368 00:19:48,920 --> 00:19:53,560 Speaker 1: Are these two ideas incompatible? Ah? Yeah, that's that's the question. 369 00:19:53,640 --> 00:19:56,960 Speaker 1: Right when China catch is called e M sneezes um. Look, 370 00:19:57,000 --> 00:19:58,520 Speaker 1: you you make a great point, you know. I mean, 371 00:19:58,600 --> 00:20:01,680 Speaker 1: China has definitely got its issues. Growth is slowing, and 372 00:20:01,880 --> 00:20:03,600 Speaker 1: I am hard pressed to find a way that they're 373 00:20:03,600 --> 00:20:05,840 Speaker 1: ever going to get growth, real growth up to a 374 00:20:05,880 --> 00:20:09,639 Speaker 1: point without really, uh taking on more leverage. And I 375 00:20:09,640 --> 00:20:11,320 Speaker 1: think there was a real willingness on the part of 376 00:20:12,440 --> 00:20:14,800 Speaker 1: President she and on the government to really you know, 377 00:20:14,880 --> 00:20:17,480 Speaker 1: to really focus on the de levering program. But right now, 378 00:20:17,600 --> 00:20:19,800 Speaker 1: you know, things are tough, there is pain on the ground, 379 00:20:19,920 --> 00:20:22,000 Speaker 1: and they need to basically grow their economy and they're 380 00:20:22,000 --> 00:20:24,199 Speaker 1: gonna try and grow the we're out of it using leverage. 381 00:20:24,400 --> 00:20:26,960 Speaker 1: I think that goes without saying whether or not the 382 00:20:27,000 --> 00:20:29,200 Speaker 1: market has the stomach to take on that leverage. Whether 383 00:20:29,240 --> 00:20:31,280 Speaker 1: their buyers for it remains to be seen. But at 384 00:20:31,280 --> 00:20:33,960 Speaker 1: this stage there's still a lot of you know, um 385 00:20:34,200 --> 00:20:37,440 Speaker 1: viable assets that are trading at much more attractive levels 386 00:20:37,520 --> 00:20:39,200 Speaker 1: right now than they were at this time last year, 387 00:20:39,240 --> 00:20:40,840 Speaker 1: and I think that remains to be seen. You know, 388 00:20:41,280 --> 00:20:43,720 Speaker 1: you really get some value today where you weren't getting 389 00:20:43,760 --> 00:20:45,720 Speaker 1: any last year, and I think that's the real change. 390 00:20:46,200 --> 00:20:49,840 Speaker 1: Is there a dollar squeeze going on? I think there was, 391 00:20:50,240 --> 00:20:52,560 Speaker 1: you know, and I I I mean my big risk 392 00:20:52,640 --> 00:20:54,359 Speaker 1: I mean going into you know, the beginning of this 393 00:20:54,440 --> 00:20:56,600 Speaker 1: year was that you know, liquidity would not return to 394 00:20:56,640 --> 00:20:58,600 Speaker 1: the US capital markets and that was going to kind 395 00:20:58,600 --> 00:21:00,840 Speaker 1: of weigh on you know, the emerging markets. But you know, 396 00:21:01,480 --> 00:21:03,840 Speaker 1: since Chair Power kind of came out and said, you know, 397 00:21:03,880 --> 00:21:06,040 Speaker 1: the feed is um you know, you know, they had 398 00:21:06,040 --> 00:21:08,119 Speaker 1: been dismissed on the impact of balance sheet unwind and 399 00:21:08,160 --> 00:21:11,080 Speaker 1: now they're saying that FET is not on autopilot. You know. 400 00:21:11,400 --> 00:21:13,280 Speaker 1: I mean, the markets have read patients for a pause, 401 00:21:13,320 --> 00:21:16,000 Speaker 1: and you know it's and if you're right, and growth 402 00:21:16,040 --> 00:21:18,760 Speaker 1: is the big concern, that's bullish for bonds. So you 403 00:21:18,800 --> 00:21:20,840 Speaker 1: may see some bond buyers returning, and you see may 404 00:21:20,840 --> 00:21:23,320 Speaker 1: see some bond buyers moving out along the curve, taking 405 00:21:23,359 --> 00:21:26,159 Speaker 1: more duration into the portfolios. You see Goldman saying U 406 00:21:26,160 --> 00:21:28,760 Speaker 1: S yields of peak. You know, as there's a lot 407 00:21:28,760 --> 00:21:30,760 Speaker 1: of reason to be bullish this morning, which resions do 408 00:21:30,800 --> 00:21:33,560 Speaker 1: you think will have the biggest rallies? Okay? So you 409 00:21:33,560 --> 00:21:35,320 Speaker 1: know it depends. So if we see a deal here 410 00:21:35,359 --> 00:21:38,000 Speaker 1: in US China on trade, I happen to think the 411 00:21:38,000 --> 00:21:41,640 Speaker 1: Indian credits are severely undervalued. I'm talking Peru and Chile. 412 00:21:41,960 --> 00:21:45,160 Speaker 1: I think there's no question about it in global um 413 00:21:45,200 --> 00:21:47,880 Speaker 1: asset markets. I mean, I can't think of a better 414 00:21:47,920 --> 00:21:50,200 Speaker 1: way to play a China U S trade deal there. 415 00:21:50,240 --> 00:21:52,320 Speaker 1: And then if you do believe that the e c 416 00:21:52,440 --> 00:21:56,639 Speaker 1: B bond buying program is now done finished, some of 417 00:21:56,640 --> 00:21:58,879 Speaker 1: your safe having credits such as Poland, Hungary and and 418 00:21:59,040 --> 00:22:01,119 Speaker 1: and the Czech Republic are no longer going to be 419 00:22:01,160 --> 00:22:03,439 Speaker 1: safe anymore right there, They're gonna be at risk. So 420 00:22:03,440 --> 00:22:05,359 Speaker 1: so you've got little pockets and little things that are 421 00:22:05,440 --> 00:22:07,159 Speaker 1: changing around us. And so those are the kind of 422 00:22:07,200 --> 00:22:10,760 Speaker 1: things that we're looking at. And just finally, just to 423 00:22:10,800 --> 00:22:13,919 Speaker 1: go back to China for a second, you believe that 424 00:22:13,960 --> 00:22:18,680 Speaker 1: they're financial I guess you might call it expansion. It's 425 00:22:18,680 --> 00:22:21,040 Speaker 1: gonna work. You think that they're easing of credit is 426 00:22:21,040 --> 00:22:25,200 Speaker 1: going to work. So yeah, you know you can offer 427 00:22:25,240 --> 00:22:27,720 Speaker 1: to lend money, but if no one shows up, yeah, no, no, 428 00:22:28,000 --> 00:22:30,480 Speaker 1: it's a great point. But you know the reality is 429 00:22:30,520 --> 00:22:32,280 Speaker 1: people are showing up. You've seen I think they had 430 00:22:32,320 --> 00:22:34,080 Speaker 1: China Bond just came out with their numbers today. They 431 00:22:34,080 --> 00:22:38,199 Speaker 1: had the second biggest offshore purchases of local remnimbic denominated 432 00:22:38,200 --> 00:22:41,000 Speaker 1: debt um last month. And and look, if they are 433 00:22:41,040 --> 00:22:43,760 Speaker 1: indeed easing rates, you know that is bullish for off 434 00:22:43,760 --> 00:22:46,760 Speaker 1: shoreholders of of of of one denominated debt. And so yeah, 435 00:22:46,960 --> 00:22:50,240 Speaker 1: you are seeing dollars flowing in, and so whether or 436 00:22:50,240 --> 00:22:51,879 Speaker 1: not those dollars gonna be able to flow out remains 437 00:22:51,920 --> 00:22:55,120 Speaker 1: to be seen though, Thanks very much, Damian sass Our, 438 00:22:55,480 --> 00:23:17,960 Speaker 1: Chief Emerging market credit strategist for Bloomberg Intelligents. The topic 439 00:23:18,119 --> 00:23:23,640 Speaker 1: is cannabis. Canada's cannabis shortage could last as long as 440 00:23:23,920 --> 00:23:27,840 Speaker 1: three years. This according to industry executives, who say production 441 00:23:28,080 --> 00:23:31,560 Speaker 1: estimates are to Rosie Well. Here to tell us more 442 00:23:31,560 --> 00:23:34,320 Speaker 1: about the industry is Keith Merker, He is the chief 443 00:23:34,320 --> 00:23:38,960 Speaker 1: executive of Weed m D and they are traded in Toronto. 444 00:23:39,160 --> 00:23:43,280 Speaker 1: The symbol there is w m D. He joins us 445 00:23:43,280 --> 00:23:45,480 Speaker 1: here in studio. Keith, thank you very much for being here. 446 00:23:46,040 --> 00:23:50,520 Speaker 1: Just tell people exactly what is weed m D and 447 00:23:50,760 --> 00:23:53,920 Speaker 1: a little bit about how you came to be such 448 00:23:53,960 --> 00:23:58,159 Speaker 1: a big cultivator of cannabis. You bet, and thanks for 449 00:23:58,200 --> 00:24:00,320 Speaker 1: having me here today. It's wonderful being in this studio 450 00:24:00,359 --> 00:24:03,040 Speaker 1: with you folks and chatting about Weed m D and 451 00:24:03,119 --> 00:24:05,639 Speaker 1: of course the Canadian cannabis and of course the overall 452 00:24:05,640 --> 00:24:10,560 Speaker 1: cannabis industry. Weed MD has been around since late We 453 00:24:10,560 --> 00:24:12,960 Speaker 1: were one of the initial applicants under what was then 454 00:24:13,040 --> 00:24:18,000 Speaker 1: the brand new commercial cannabis industry in Canada. Unfortunately, at 455 00:24:18,000 --> 00:24:20,360 Speaker 1: the time we were not one of the initial licensees 456 00:24:20,440 --> 00:24:23,960 Speaker 1: due to a very difficult regime in place at the time, 457 00:24:23,960 --> 00:24:26,160 Speaker 1: whereby in Canada was much different than what you've seen 458 00:24:26,240 --> 00:24:30,000 Speaker 1: in the States. Uh the government was dragged really kicking 459 00:24:30,040 --> 00:24:33,600 Speaker 1: and screaming into a commercial cannabis industry by court dictat 460 00:24:33,760 --> 00:24:37,280 Speaker 1: in Canada. Uh so came through the legal system versus 461 00:24:37,280 --> 00:24:38,880 Speaker 1: in the States where you see it coming through either 462 00:24:38,920 --> 00:24:43,280 Speaker 1: ballot measures or through legislatures on a state level, and 463 00:24:43,320 --> 00:24:47,320 Speaker 1: so we actually pivoted to the US weed m D 464 00:24:47,480 --> 00:24:49,520 Speaker 1: was one of the first multi state operators, which is 465 00:24:50,040 --> 00:24:52,399 Speaker 1: one of the hot button buzzwords that you see out 466 00:24:52,440 --> 00:24:55,480 Speaker 1: there around the US companies today operating in the cannabis space. 467 00:24:56,080 --> 00:25:00,520 Speaker 1: And so later in when the government started open up 468 00:25:00,520 --> 00:25:03,280 Speaker 1: the door again to licenses in Canada, we made the 469 00:25:03,320 --> 00:25:05,840 Speaker 1: decision at the time to sell off our US assets, 470 00:25:05,960 --> 00:25:08,840 Speaker 1: moved back to Canada, get our facilities up and running, 471 00:25:09,000 --> 00:25:11,119 Speaker 1: and we now have what will be one of the 472 00:25:11,200 --> 00:25:15,359 Speaker 1: largest production platforms online in Canada by you know, later 473 00:25:15,480 --> 00:25:19,480 Speaker 1: this quarter of twenty nineteen, so Keith Pam was talking 474 00:25:19,520 --> 00:25:23,720 Speaker 1: about the acute shortage of marijuana that is predicted. Is 475 00:25:23,760 --> 00:25:26,800 Speaker 1: this due to higher than expected medical demand or higher 476 00:25:26,800 --> 00:25:31,399 Speaker 1: than expected recreational demand in Canada. It's more so the latter. 477 00:25:31,600 --> 00:25:34,320 Speaker 1: So we've got a brand new industry that's just come 478 00:25:34,359 --> 00:25:37,320 Speaker 1: into place on the adult side in Canada, and that's 479 00:25:37,480 --> 00:25:41,080 Speaker 1: entailed developing a whole brand new supply chain, whereby we 480 00:25:41,119 --> 00:25:43,280 Speaker 1: had to come up with new packaging, we had to 481 00:25:43,280 --> 00:25:45,880 Speaker 1: come up with excise tax stamping on all the products 482 00:25:45,880 --> 00:25:48,919 Speaker 1: that we deliver, and we're delivering now palettes full of 483 00:25:49,000 --> 00:25:52,399 Speaker 1: cannabis that are packaged and ready for distribution in adult 484 00:25:52,520 --> 00:25:57,200 Speaker 1: use market versus what was historically a simpler supply chain, 485 00:25:57,280 --> 00:25:59,840 Speaker 1: let's say, whereby we were shipping directly to patients and 486 00:26:00,040 --> 00:26:02,960 Speaker 1: Canada from our facilities. So in other words, it results 487 00:26:03,000 --> 00:26:09,639 Speaker 1: from the legalization of recreational use. Correct, Well, I'm just 488 00:26:09,680 --> 00:26:13,560 Speaker 1: wondering how much a price is going to go up. Well, 489 00:26:13,640 --> 00:26:16,119 Speaker 1: the government was very clever in Canada and that what 490 00:26:16,160 --> 00:26:19,240 Speaker 1: they did is they created a distribution model whereby the 491 00:26:19,280 --> 00:26:23,199 Speaker 1: provincial typically the liquor agencies across the provinces, would be 492 00:26:23,240 --> 00:26:25,560 Speaker 1: in charge of distribution and would stand in the middle 493 00:26:25,680 --> 00:26:28,560 Speaker 1: as a wholesaler to what would then be retailers that 494 00:26:28,560 --> 00:26:32,359 Speaker 1: would either be privately owned or publicly owned or some hybrid, 495 00:26:32,359 --> 00:26:35,880 Speaker 1: depending again on the province that they're working in. And 496 00:26:36,000 --> 00:26:40,359 Speaker 1: so these middlemen were in a position where they could 497 00:26:40,960 --> 00:26:45,159 Speaker 1: um dictate pricing to some degree and also control that 498 00:26:45,240 --> 00:26:48,639 Speaker 1: supply chain from that that critical position that they took. 499 00:26:49,240 --> 00:26:52,120 Speaker 1: And so you know, in an environment where we would 500 00:26:52,160 --> 00:26:55,560 Speaker 1: be selling directly to a retailer, we could certainly be 501 00:26:55,760 --> 00:26:57,639 Speaker 1: as a as a cultivator in a better position to 502 00:26:57,680 --> 00:27:01,760 Speaker 1: command higher pricing. In the situation is today. Um, unfortunately 503 00:27:01,840 --> 00:27:05,000 Speaker 1: that's not quite the case. To some degree, there is 504 00:27:05,000 --> 00:27:08,560 Speaker 1: some truth to it. But by and large, by dealing 505 00:27:08,560 --> 00:27:11,280 Speaker 1: with a single buyer in each province and they're only 506 00:27:11,320 --> 00:27:14,960 Speaker 1: being a few very large provinces as buyers, it changes 507 00:27:15,040 --> 00:27:18,399 Speaker 1: that sort of supply demand dynamic. Not because of this 508 00:27:18,600 --> 00:27:23,440 Speaker 1: current shortage. I understand that Alberta has temporarily stopped issuing 509 00:27:23,920 --> 00:27:28,160 Speaker 1: licenses retail licenses, and Ontario said it will initially open 510 00:27:28,240 --> 00:27:31,600 Speaker 1: just twenty five stores, and that's in the most populous 511 00:27:31,680 --> 00:27:35,480 Speaker 1: province of Canada. Yeah, and so we distribute as WEED 512 00:27:35,600 --> 00:27:38,680 Speaker 1: m D to both of those provinces today, and they 513 00:27:38,720 --> 00:27:42,560 Speaker 1: are two of the largest UH provinces by which we'll 514 00:27:42,560 --> 00:27:45,760 Speaker 1: see demand coming from over time. And you know, in 515 00:27:45,840 --> 00:27:49,920 Speaker 1: my conversations with both of them, they told me that 516 00:27:49,960 --> 00:27:53,080 Speaker 1: they received roughly twenty of what they had asked for 517 00:27:53,119 --> 00:27:57,239 Speaker 1: from the LPs in the early going. Now, not pointy fingers, uh. 518 00:27:57,320 --> 00:27:59,480 Speaker 1: We MP has always taken a very rational approach to 519 00:27:59,520 --> 00:28:03,840 Speaker 1: the market. We you know, we're executors. So we've built 520 00:28:03,840 --> 00:28:06,200 Speaker 1: and retrofitted and ramped up a facility in record time 521 00:28:06,200 --> 00:28:08,160 Speaker 1: in Canada. As one example, you've got like a hundred 522 00:28:08,200 --> 00:28:11,400 Speaker 1: and thirty six thousand square feet under cultivation we do today, 523 00:28:11,600 --> 00:28:15,440 Speaker 1: We'll have five hundred and five fifty thousand plus online 524 00:28:15,480 --> 00:28:20,040 Speaker 1: later this quarter. So we're furiously executing and retrofitting and working. 525 00:28:20,240 --> 00:28:22,520 Speaker 1: This is in a great hybrid greenhouse scenario where we're 526 00:28:22,520 --> 00:28:25,560 Speaker 1: producing grade A product um And you know, we were 527 00:28:25,640 --> 00:28:28,480 Speaker 1: very careful to make promises that we could keep when 528 00:28:28,520 --> 00:28:31,040 Speaker 1: it came to dealing with the provincial agencies, which is 529 00:28:31,160 --> 00:28:33,080 Speaker 1: stands US is in good stead going forward with those 530 00:28:33,080 --> 00:28:38,760 Speaker 1: relationships that are critical. Unfortunately, many others were let's just 531 00:28:38,760 --> 00:28:41,280 Speaker 1: say a little bit optimistic with respect to what they 532 00:28:41,280 --> 00:28:45,000 Speaker 1: could deliver to the provinces on on, you know, as 533 00:28:45,040 --> 00:28:48,400 Speaker 1: as recreational cannabis rolled out in Canada. You know, I 534 00:28:48,440 --> 00:28:51,440 Speaker 1: heard you're talking about Fannie Mae and Freddie mac prior 535 00:28:51,480 --> 00:28:53,880 Speaker 1: to the break that maybe Canada needs to implement some 536 00:28:53,920 --> 00:28:56,840 Speaker 1: kind of governmental agency to deal with the issue. You 537 00:28:56,840 --> 00:29:00,480 Speaker 1: could call it Mary Jane. Keith Burker, CEO of Weed 538 00:29:00,560 --> 00:29:06,120 Speaker 1: Empty with his proposal for Mary Jane a government agency. 539 00:29:08,320 --> 00:29:10,840 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 540 00:29:11,200 --> 00:29:14,360 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, 541 00:29:14,480 --> 00:29:18,400 Speaker 1: SoundCloud or whatever. Podcast platform you prefer. I'm pim Fox. 542 00:29:18,480 --> 00:29:21,800 Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at 543 00:29:21,920 --> 00:29:24,960 Speaker 1: Lisa Abramo wits one. Before the podcast, you can always 544 00:29:25,000 --> 00:29:27,040 Speaker 1: catch us worldwide on Bloomberg Radio