WEBVTT - Consumers Are Really Driving Banking Industry: Leon 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Wicks. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.400 at Bloomberg dot com. Today is a big day for 0:00:20.680 --> 0:00:22.520 the big banks and reporting earnings. We had a kind 0:00:22.520 --> 0:00:26.000 of a mixed bag. JP Morgan and City outperform expectations. 0:00:26.040 --> 0:00:28.440 Wals Fargo came in a little bit worse than expected. 0:00:28.440 --> 0:00:31.520 That's stockdown about four percent today. Let's dive into some 0:00:31.640 --> 0:00:34.120 of those numbers. Ken Lee, Owned, director of Equity Research 0:00:34.200 --> 0:00:36.519 at c f R A Research, joins us on the 0:00:36.600 --> 0:00:38.680 phone from New York Can Thanks so much for joining us. 0:00:38.680 --> 0:00:42.080 Give us your takeaways here from the first batch of 0:00:42.120 --> 0:00:46.239 earnings coming from the big money center banks. The consumer 0:00:46.360 --> 0:00:50.480 is really driving banking and those with strong large franchises 0:00:51.040 --> 0:00:54.360 such as JP Morgan or even Bank of America Tomorrow 0:00:54.840 --> 0:00:57.720 are are really growing those business both in terms of 0:00:57.840 --> 0:01:03.040 loans and also why the card business UM City UM 0:01:03.280 --> 0:01:06.120 had strong results, not as strong as JP Morgan, but 0:01:06.200 --> 0:01:11.120 you know, Well's Fargo is still disappointing. Today we reiterated 0:01:11.120 --> 0:01:14.360 our buy on JP Morgan and our cell on Wells 0:01:14.440 --> 0:01:18.639 Fargo with a new CEO, It's gonna be a long 0:01:18.760 --> 0:01:23.440 time before we see the transformation. They have twelve different 0:01:23.600 --> 0:01:29.399 federal regulatory examinations, including the asset freeze from the Federal Reserve. 0:01:30.240 --> 0:01:34.960 That means that their long growth was only up one percent. Uh, 0:01:35.120 --> 0:01:38.520 we have a flat rate environment. Banks typically have half 0:01:38.600 --> 0:01:41.320 the revenue coming from net interest income, so the other 0:01:41.400 --> 0:01:44.160 businesses are really important. But if you have an ascid 0:01:44.200 --> 0:01:48.600 freeze like Wells Fargo, Uh, the non net interest incomes 0:01:48.680 --> 0:01:53.240 down sixteen percent sixteen percent to the fourth quarter. So 0:01:53.280 --> 0:01:55.800 we're staying with our cell on Wells Fargo. I'm I'm 0:01:55.800 --> 0:01:58.440 struggling to understand. You see, the consumer is really driving everything. 0:01:58.520 --> 0:02:00.640 Jamie Diamond of JP Morgan saying the same thing. And 0:02:00.720 --> 0:02:04.600 yet their consumer lending book actually there, their new loans 0:02:04.720 --> 0:02:09.160 underwritten actually declined. Can you square that? Yeah? I can? 0:02:09.520 --> 0:02:16.520 And what's driving um the consumers? It's actually it also 0:02:16.560 --> 0:02:21.560 includes small business loans and uh, they're expanding into twenty 0:02:21.600 --> 0:02:25.639 new markets. UM. Small business loans are driven not by 0:02:25.680 --> 0:02:28.560 e commerce but by face to face and for the 0:02:28.680 --> 0:02:32.320 US economy, that's really what's driving job growth and businesses 0:02:32.919 --> 0:02:37.840 um In terms of the consumer loans, uh you know, 0:02:37.960 --> 0:02:41.120 being so much flat, you know, yet strong comps a 0:02:41.240 --> 0:02:44.600 year ago, but for all of two thousand nineteen, you know, 0:02:44.720 --> 0:02:47.640 it was up strongly. Ken, I'm looking at the JP 0:02:47.760 --> 0:02:51.040 morgan and the City results. Both had really strong uh 0:02:51.160 --> 0:02:54.799 fick trading, fixed income, credit commodities trading results. Is that 0:02:54.919 --> 0:02:58.440 just a byproduct of easy comps from a week fourth 0:02:58.440 --> 0:03:01.560 core last year or was the market that much better 0:03:01.560 --> 0:03:03.959 here in this fourth quarter than Thanks for the question, 0:03:04.000 --> 0:03:07.400 and it's easy comps here over year. The sequential from 0:03:07.440 --> 0:03:11.200 third to fourth quarter was kind of flatter up two percent. 0:03:11.919 --> 0:03:14.640 This is why our investment plan with the with the 0:03:14.639 --> 0:03:17.239 banks is go for the JP Morgan's or a Bank 0:03:17.280 --> 0:03:20.800 America at large banking. We get Goldman tomorrow. They're going 0:03:20.840 --> 0:03:24.680 to have strong also trading results in sick. It's not 0:03:24.720 --> 0:03:28.120 going to happen for each of the quarters. In so 0:03:28.440 --> 0:03:31.520 it's it's kind of because of the week fourth quarter 0:03:31.560 --> 0:03:34.760 of two thousand eighteen, not the strength of the fourth 0:03:34.840 --> 0:03:37.560 quarter of two thousand nineteen Ken It's interesting a lot 0:03:37.560 --> 0:03:39.760 of people were saying, what is the upside of the 0:03:39.800 --> 0:03:42.720 financial sector, and that's why we've seen the underperformance through 0:03:42.760 --> 0:03:46.200 the rally of the past number of years. Seems like 0:03:46.240 --> 0:03:48.200 there still is a lot of upside. If you look 0:03:48.200 --> 0:03:51.320 at the fourth quarter, Uh, do you think that it 0:03:51.440 --> 0:03:54.280 is an achronistic or just sort of uh, you know, 0:03:54.400 --> 0:03:57.600 a one time deal. Uh that we got a quarter 0:03:57.800 --> 0:03:59.320 like the one that we got in the fourth quarter 0:03:59.400 --> 0:04:03.560 with easy ums, with a rally and risk assets, etcetera, etcetera, 0:04:03.680 --> 0:04:08.680 and not necessarily something that can be sustained. So um. 0:04:08.680 --> 0:04:12.240 Talking about stocks that diversified bank stocks, the larger ones 0:04:12.320 --> 0:04:15.360 were up over thirty Most of that came in the 0:04:15.400 --> 0:04:18.039 fourth quarter last year. We look ahead to this year, 0:04:18.680 --> 0:04:22.520 we see some separation of the large banks. So looking 0:04:22.520 --> 0:04:25.800 at the fundamentals matters. So long as we have a 0:04:25.839 --> 0:04:30.040 strong US economy, job growth, that's going to drive the consumer. 0:04:30.720 --> 0:04:33.920 When we look at is there a distressed industry where 0:04:34.240 --> 0:04:39.080 it's alarming? Uh, possibly an energy but right now, you know, 0:04:39.120 --> 0:04:43.360 the non performing loans for the large banks is very small. Um. Again, 0:04:43.400 --> 0:04:47.120 then you look global, Uh, certainly city has more exposure 0:04:47.720 --> 0:04:51.520 with more revenue coming from outside the US, from Latin 0:04:51.560 --> 0:04:55.520 America and Asia. We prefer to stay with the U 0:04:55.800 --> 0:04:59.960 s so UM. I think for an investor, the import 0:05:00.040 --> 0:05:03.400 and point is the stocks are always cheap to the 0:05:03.600 --> 0:05:07.800 SMP five there trading at about eleven or twelve times earnings. 0:05:08.120 --> 0:05:11.719 The smps up you know, mid twenty times earnings, and 0:05:11.760 --> 0:05:15.640 I think there's interest to look at these stocks because 0:05:16.120 --> 0:05:20.039 on the relative valuation they appear to be attractive. So 0:05:20.120 --> 0:05:22.600 can the big money center banks. Investment banks have had 0:05:22.760 --> 0:05:26.000 a good run over the trailing UH twelve months. Howbout 0:05:26.000 --> 0:05:27.760 some of the regional banks. Is that a place where 0:05:27.800 --> 0:05:32.000 maybe investors can find some value. UM, there is value, 0:05:32.040 --> 0:05:35.360 but regional banks have a very different profile. They don't 0:05:35.360 --> 0:05:39.559 have capital markets except from maybe a US bank. UM 0:05:39.640 --> 0:05:42.560 we do like USA Bank, but they also have a 0:05:42.640 --> 0:05:47.080 very much higher percentage of commercial loans to total net revenue. 0:05:47.360 --> 0:05:53.920 Commercial loans also includes UH real estate and UH for 0:05:53.920 --> 0:05:56.760 for the regional banks. UM. You know, when you look 0:05:56.800 --> 0:05:59.599 at where there could be risk would be in over 0:05:59.680 --> 0:06:03.039 to oltment of the office real estate market. We don't 0:06:03.040 --> 0:06:06.840 see it yet, but when you got thirty of your 0:06:06.880 --> 0:06:09.479 toiling net revenue is coming from real estate out of 0:06:09.480 --> 0:06:14.000 your total commercial loans. You know, that's a higher risk 0:06:14.080 --> 0:06:16.640 exposure than you're going to see what the money center back. 0:06:16.960 --> 0:06:18.679 And one thing that I thought was interesting with cities 0:06:18.760 --> 0:06:22.120 earnings in particular was that their expenses went up, and 0:06:22.160 --> 0:06:25.239 I had to do with their personnel costs as well 0:06:25.279 --> 0:06:29.240 as their technology investments. Do you view this as a 0:06:29.279 --> 0:06:33.840 good sign or a bad sign? If you're not investing 0:06:34.040 --> 0:06:37.200 with technology, then you're gonna be a You're gonna be 0:06:37.240 --> 0:06:40.360 a loser out over the next few years. And it's 0:06:40.360 --> 0:06:43.719 the question of where they're putting it. City has a 0:06:43.800 --> 0:06:47.120 very concentrated business in the US. You know, they're only 0:06:47.160 --> 0:06:49.880 in a handful of state, so this is going to 0:06:50.040 --> 0:06:54.520 their networks on the consumer side in Mexico, Brazil and 0:06:54.560 --> 0:06:59.080 also Asia. Uh. They also are investing in their global 0:06:59.200 --> 0:07:02.760 corporate network work as well. Um the new hires. I 0:07:02.800 --> 0:07:06.000 think they're trying to regain some share in the equity 0:07:06.080 --> 0:07:09.560 underwriting business, so it's more bankers. Nobody wants to be 0:07:09.600 --> 0:07:11.800 in trading, and I think that's the theme you're gonna 0:07:11.800 --> 0:07:14.840 see all week. Even though you saw that easy comps 0:07:14.880 --> 0:07:18.840 on the thick trading um and equity trading would regulated 0:07:18.920 --> 0:07:22.240 capital no one really wants to be in trading. They 0:07:22.240 --> 0:07:26.120 want to move into more stable, recurring businesses, whether it's 0:07:26.520 --> 0:07:31.280 credit card or wealth or asset management. Ken Leon, thanks 0:07:31.320 --> 0:07:33.640 so much for joining us. We appreciate your comments on 0:07:33.800 --> 0:07:36.080 the banks. Kenley, owned, director of Equity Research at c 0:07:36.240 --> 0:07:43.560 f R A joining us on the phone from New York. 0:07:51.800 --> 0:07:54.280 Let's get straight to column that I thought was really 0:07:54.320 --> 0:07:58.840 interesting from Bloomberg Opinion and joining us now is Mark Gilbert, 0:07:59.040 --> 0:08:01.360 who is who at the column, and it was about 0:08:01.360 --> 0:08:03.679 black Rock and a recent push that they have made 0:08:04.120 --> 0:08:08.520 to change their investing criteria to account for climate change. 0:08:09.160 --> 0:08:12.040 What was sort of the nuts and boards of this change, 0:08:12.200 --> 0:08:15.920 Mark Well, Larry fink Is annual letter to chief executives 0:08:16.520 --> 0:08:20.600 published today basically said there's a fundamental reshaping of the 0:08:20.640 --> 0:08:23.760 financial world going on as as the climate crisis becomes 0:08:23.800 --> 0:08:26.560 front and center. UM. So black Rock says it's going 0:08:26.600 --> 0:08:30.160 to put environmental, social and governance issues and sustainability at 0:08:30.200 --> 0:08:33.720 the center of its investment approach. UM. In practice, that 0:08:33.800 --> 0:08:37.320 means basically doubling the number of E s G exchange 0:08:37.320 --> 0:08:40.160 trade of funds it offers, its planning to increase the 0:08:40.160 --> 0:08:45.000 amount of allocates to so socially responsible investing basically tenfold 0:08:45.040 --> 0:08:48.959 in the coming decade. But in practical terms, because black Rock, 0:08:49.040 --> 0:08:51.720 which manages seven trillion dollars, is the world's biggest fund manager, 0:08:51.960 --> 0:08:54.760 because so much of it is wrapped up in basically 0:08:54.800 --> 0:08:57.600 index tracking products, in practical terms, a lot of that 0:08:58.000 --> 0:09:03.360 investment assets is not available to basically participate in this 0:09:03.400 --> 0:09:06.840 push against climate change. So, Mark, we've been hearing more 0:09:07.040 --> 0:09:11.280 and more and more about e s G investing, social investing, 0:09:11.320 --> 0:09:14.760 sustainable investing. But boy, when Larry Fink and black Rock 0:09:14.840 --> 0:09:18.120 put their name behind it, it really amps up the conversation. 0:09:18.160 --> 0:09:20.840 What's the trend been in s G investing? It's massive. 0:09:20.960 --> 0:09:23.079 I mean, in the past two years, my inbox, my 0:09:23.400 --> 0:09:29.320 email inboxes just inundated with initiatives with a new growing 0:09:29.320 --> 0:09:32.320 awareness that look, it's not climate change, it's a climate 0:09:32.360 --> 0:09:36.040 crisis um, and that the fund managers, because they're the 0:09:36.040 --> 0:09:38.240 main allocators of capital in the world, they're at the 0:09:38.280 --> 0:09:42.959 forefront um of the fight to persuade companies and to 0:09:43.120 --> 0:09:47.120 force boards to pay more attention to their greenhouse emissions 0:09:47.200 --> 0:09:52.120 and to basically save the planet. Well understood, The question 0:09:52.200 --> 0:09:55.960 here is to the s G strategies effectively uh put 0:09:56.040 --> 0:10:01.040 into place some kinds of measurers to aliorate the situation. 0:10:01.400 --> 0:10:04.440 Or is it sort of uh cover up, not not 0:10:04.520 --> 0:10:06.280 cover up. That makes it sound illicit, but it was 0:10:06.360 --> 0:10:08.560 you know something where it's basically it looks good, it's 0:10:08.559 --> 0:10:10.840 putting lipstick on a pick. Is there an element of that? 0:10:11.160 --> 0:10:13.839 There's an element of green washing? Shure e s G 0:10:14.600 --> 0:10:17.560 is a key factor for millennials, for example, for the 0:10:17.640 --> 0:10:20.880 younger class of investors, who every film manager wants to 0:10:20.880 --> 0:10:23.679 get on board early and they're saving career um and 0:10:23.720 --> 0:10:26.320 basically lock them in for life, so that there's an 0:10:26.320 --> 0:10:29.839 element of green washing. But there's also a serious undercurrent 0:10:29.880 --> 0:10:32.160 to this which has grown over the past couple of years, 0:10:32.160 --> 0:10:35.360 which is that Look, one of the things Larry Thinks 0:10:35.360 --> 0:10:37.560 says in his letter is if you don't know what 0:10:37.720 --> 0:10:40.479 the future is going to be for let's say flood insurance, 0:10:40.760 --> 0:10:43.720 then how can you issue thirty year mortgages. If you 0:10:43.800 --> 0:10:46.760 don't know what the climate costs are going to be 0:10:46.800 --> 0:10:48.880 for cities, then how can you lend them money through 0:10:48.880 --> 0:10:52.319 the municipal bond market? So clearly the climate change is 0:10:52.800 --> 0:10:56.600 affecting the world of finance in a fundamental way um, 0:10:56.720 --> 0:11:01.120 and that is forcing investment funds to pay attention in 0:11:01.160 --> 0:11:03.480 a way that they haven't done before. So, yes, there's 0:11:03.480 --> 0:11:05.520 an element of dream washing. Yes there's an element of 0:11:06.120 --> 0:11:08.640 me too, of being seen to be doing the right thing. 0:11:08.920 --> 0:11:12.559 But I think underpinning this is a genuine fundamental change 0:11:12.960 --> 0:11:16.400 in thinking about what is needed to save the planet, because, 0:11:16.480 --> 0:11:19.000 let's face it, there's no point having returns of seven 0:11:19.040 --> 0:11:21.120 eight nine percent of there's no planner to enjoy them. 0:11:21.120 --> 0:11:24.199 In Mark's is there any sense you mentioned returns? Do 0:11:24.280 --> 0:11:26.320 we have any data yet to show whether E S 0:11:26.320 --> 0:11:31.280 G investing, whether I sacrifice performance to amp up my 0:11:31.360 --> 0:11:33.840 E S G factor. I can show you returns that 0:11:33.880 --> 0:11:36.160 prove that it's fantastic for your returns, and I can 0:11:36.200 --> 0:11:40.200 show you studies that show it's absolutely detrimental for your returns. Um, 0:11:40.600 --> 0:11:42.320 the jury is still out on at one thing. Cliff 0:11:42.360 --> 0:11:45.000 Cliff hasness of a q R. He argues that if 0:11:45.000 --> 0:11:47.480 you're not losing returns, then you're not really doing the 0:11:47.559 --> 0:11:51.559 job of socially responsible investing, because you want the companies 0:11:51.600 --> 0:11:54.480 you punished to pay more for their capital, that in 0:11:54.559 --> 0:11:56.880 turn would lead to higher returns for those willing to 0:11:56.960 --> 0:11:59.480 lend to them, and so you should be willing to 0:11:59.559 --> 0:12:02.640 sacrific five stold returns if in fact you want to 0:12:02.679 --> 0:12:05.520 force those companies to do more in terms of their 0:12:05.559 --> 0:12:08.760 greenhouse gas emissions. And I have some I have a 0:12:08.760 --> 0:12:11.280 lot of sympathy for that few. There's another issue here, 0:12:11.280 --> 0:12:14.240 which is that, Okay, the millennials, they say they want 0:12:14.240 --> 0:12:16.679 a s G, are they willing to pay more for it? 0:12:16.920 --> 0:12:19.240 You know, the the rise of exchange of trade of 0:12:19.320 --> 0:12:23.040 funds has pushed fees down all across the industry. But 0:12:23.120 --> 0:12:26.520 if you want those exchange traded funds to be actively 0:12:26.600 --> 0:12:29.760 engaging with boards, that cost money, and it cost time, 0:12:30.320 --> 0:12:32.200 and that means that the low fees that have been 0:12:32.280 --> 0:12:36.240 enjoyed in ETF so far probably aren't sustainable if you 0:12:36.280 --> 0:12:38.760 want that those trillions of dollars of capital that are 0:12:38.760 --> 0:12:43.239 in index tracking funds to be available to engage with boards. 0:12:43.440 --> 0:12:45.679 Done a second, are you saying that basically black Rock 0:12:45.720 --> 0:12:49.400 doesn't have enough it doesn't have enough resources to be 0:12:49.520 --> 0:12:51.920 active on the boards of some of these companies to 0:12:52.000 --> 0:12:57.120 affect greener changes without higher without higher fees. Two thirds 0:12:57.120 --> 0:12:59.040 of that seven trillion of assets are and in next 0:12:59.080 --> 0:13:02.720 tracking products, and that the drive to you know, the 0:13:02.840 --> 0:13:05.360 doubling we've seen in e t F s two seven 0:13:05.760 --> 0:13:08.640 to two seven to well normal six trillion dollars in 0:13:08.640 --> 0:13:12.040 the past five years has been driven up mostly by 0:13:12.080 --> 0:13:14.760 lower fees. And if you're charging lower fees for an 0:13:14.800 --> 0:13:18.520 index tracking product, then you can't allocate the staff on 0:13:18.559 --> 0:13:21.960 that asset to go and engage with the boards. It's 0:13:22.000 --> 0:13:25.240 simple maths. So, Mark, what I noticed store in my 0:13:25.280 --> 0:13:27.480 career is that E s G investing really seemed to 0:13:27.559 --> 0:13:30.880 begin or grow or take shape in Europe and then 0:13:30.920 --> 0:13:33.800 moved to the US too. Why did that happen? Europe 0:13:33.840 --> 0:13:36.559 still ahead on this issue that the European Union is 0:13:36.600 --> 0:13:38.600 going to come up later this year whether what it 0:13:38.600 --> 0:13:42.559 calls a taxonomy, a set of criteria which is designed 0:13:42.559 --> 0:13:46.280 to avoid the greenwashing issue. It's designed to set standards 0:13:46.280 --> 0:13:48.960 for what counters in the s G funds. It's designed 0:13:49.000 --> 0:13:51.880 to set standard for what counters a green bond. M 0:13:52.160 --> 0:13:54.840 Europe has just been been ahead of this game. I'm 0:13:54.840 --> 0:13:57.520 not really sure why. Culturally, I guess we're just that 0:13:57.600 --> 0:14:00.760 much more in hune with the environment. Mark Gilbert, thanks 0:14:00.800 --> 0:14:03.960 so much for joining US market. Mark Gilmbert is a 0:14:03.960 --> 0:14:07.120 bloomber view calmness. Joining US from London. You can read 0:14:07.120 --> 0:14:10.000 more of Mark's work, Bloomberg Opinion work and that of 0:14:10.080 --> 0:14:13.400 other Bloomberg Opinion writers on the terminal by typing an O, P, 0:14:13.640 --> 0:14:16.760 I N GO or on the web Bloomberg dot com 0:14:16.880 --> 0:14:35.320 slash opinion. They have just some great work. Well. Overnight 0:14:35.960 --> 0:14:39.360 yesterday afternoon, the US said that it was no longer 0:14:39.440 --> 0:14:43.920 considering China a currency manipulator. Why whatever labeled China that 0:14:44.000 --> 0:14:46.880 in the first place still remains unclear. Why I decided 0:14:46.920 --> 0:14:50.440 to strip it of that label is much more clear 0:14:50.520 --> 0:14:52.920 as we head into the final stages of the Phase 0:14:52.960 --> 0:14:55.880 one negotiations between the US and China. Joining US now 0:14:55.960 --> 0:14:59.800 Damian sass Our, Chief Markets correspondent having to do with 0:15:00.160 --> 0:15:03.920 emerging markets for Bloomberg Intelligence here, uh, particularly the debt 0:15:04.000 --> 0:15:06.920 side of things. Can you make sense of what what 0:15:07.040 --> 0:15:08.720 of this in any way, shape or form? Well, I 0:15:08.760 --> 0:15:10.840 think the way we have to begin is because I mean, look, 0:15:10.840 --> 0:15:13.760 there's three criteria that the United States government mandates for 0:15:13.800 --> 0:15:16.240 some for a country to be deemed the currency manipulator 0:15:16.320 --> 0:15:18.120 one and each have a trade surplus with the U 0:15:18.160 --> 0:15:20.720 S that's greater than twenty billion U S dollars China 0:15:20.760 --> 0:15:23.320 did satisfy that criteria. The other two, that being a 0:15:23.360 --> 0:15:26.120 current account surplus um in access to two percent of 0:15:26.200 --> 0:15:30.600 GDP and persistent one sided effects intervention um really didn't materialize. 0:15:30.600 --> 0:15:32.160 And so, yeah, you're absolutely right. It was a little 0:15:32.160 --> 0:15:33.960 bit of a mystery as to how the U s 0:15:34.000 --> 0:15:35.880 actually labeled them in the first place, but it's not 0:15:35.920 --> 0:15:37.920 a really big mystery because they labeled them literally the 0:15:38.000 --> 0:15:41.000 day after the UN broke above seven. So it was 0:15:41.040 --> 0:15:43.440 more political than anything. And I think the Trump administration 0:15:43.480 --> 0:15:46.000 is really using this designation as a way to kind 0:15:46.040 --> 0:15:48.440 of force the hand of other countries. All right, so 0:15:48.840 --> 0:15:53.960 does what's the practical implication of the US labeling China manipulator? 0:15:54.160 --> 0:15:56.760 And then I guess removing that classification, was there any 0:15:56.840 --> 0:16:00.160 practical in the global trade scheme of things of all? 0:16:00.160 --> 0:16:02.800 None whatsoever? I mean, the only thing being labeled the 0:16:02.800 --> 0:16:05.320 currency manipulated by the US means you can't be involved 0:16:05.360 --> 0:16:09.000 in government procurement contracts, right, which China was never involved 0:16:09.040 --> 0:16:12.600 with anyway. So the impact on China is not so much. 0:16:12.640 --> 0:16:15.400 I mean, what's interesting though, is not so much who 0:16:15.560 --> 0:16:18.360 is labeled the currency manipulator or not on the list. 0:16:18.440 --> 0:16:21.560 This this round like Thailand. Thailand was not on the 0:16:21.640 --> 0:16:23.800 I mean, they have been actively intervening in their currency 0:16:23.840 --> 0:16:25.880 to protect the box from appreciating for the better part 0:16:25.880 --> 0:16:28.360 of the last year, yet they were not on this list. 0:16:28.520 --> 0:16:33.520 Others who were Switzerland, the Netherlands, Germany. The qualitative statement 0:16:33.520 --> 0:16:36.520 of accompany that currency manipulator, Well, it was more about 0:16:37.400 --> 0:16:40.960 about them saying that they need to stimulate a fiscal stimulus. 0:16:41.000 --> 0:16:43.120 There's not an a fiscal stimulus relative to what they 0:16:43.120 --> 0:16:46.960 should be stimulating. Um. With regard to Singapore, their savings 0:16:47.000 --> 0:16:49.320 rate is too high, so they're labeled the currency manipulated. 0:16:49.320 --> 0:16:51.920 There's all sorts of different you know, kind of a 0:16:52.000 --> 0:16:55.000 qualitative assessments around these countries, and so far the United 0:16:55.000 --> 0:16:58.320 States is concerned with regard to China. The interesting thing 0:16:58.400 --> 0:17:00.840 here is there's a need for greater trend parency between 0:17:00.920 --> 0:17:05.680 China's policy banks and their fex activities, which obviously makes 0:17:05.680 --> 0:17:07.760 sense and at least now we're just talking a little 0:17:07.760 --> 0:17:11.679 bit earlier about the massive CNY option volumes that have 0:17:11.720 --> 0:17:13.720 been going through over the better part of the last 0:17:13.720 --> 0:17:17.840 two days. We saw thirteen billion rnimbi options trade yesterday. 0:17:18.040 --> 0:17:27.880 Really discussing this with me I want to shift gears 0:17:27.880 --> 0:17:29.680 are a little bit away from the options trading, which 0:17:29.720 --> 0:17:31.840 is interesting in light of the fact that there wasn't 0:17:31.840 --> 0:17:34.680 a lot of actual movement in the actual price action. 0:17:34.720 --> 0:17:36.480 I am wondering about some of the numbers in the 0:17:36.560 --> 0:17:39.919 data that we got this week about trade and just 0:17:40.040 --> 0:17:43.880 where it's been rerouted in China and some of the 0:17:43.920 --> 0:17:49.480 potential consequences to the economy of the ongoing trade skirmish. 0:17:49.560 --> 0:17:52.359 I think it's interesting that they've actually offset the entirety 0:17:52.359 --> 0:17:54.520 of any impact with the U. S Can you talk 0:17:54.520 --> 0:17:56.240 a little bit that, Yeah, so you trade with the US, 0:17:56.280 --> 0:17:57.840 I mean, like, first of all, trying to announced a 0:17:57.880 --> 0:18:01.280 trade balance overnight expanded to about forty billion dollars. US 0:18:01.280 --> 0:18:04.840 exports and imports both surprised to the upside. Trade with 0:18:04.880 --> 0:18:08.000 the US, however, down eleven for the full year twenty nine. 0:18:09.240 --> 0:18:10.879 It was the EU and the a C in the 0:18:10.880 --> 0:18:13.280 Southeast Asian Bloc that picked up the slack there. So 0:18:13.400 --> 0:18:15.639 you know, it's it's really as you say, it's about 0:18:15.800 --> 0:18:20.160 um a rejiggering of trading within the Asian bloc, right, 0:18:20.200 --> 0:18:22.159 and so if you know trade with the US is 0:18:22.200 --> 0:18:25.399 indeed gonna you know, decline or remain at lower levels 0:18:25.400 --> 0:18:27.800 than they have been in the past. It makes perfect 0:18:27.800 --> 0:18:31.359 sense that you would see trade with Malaysia, Indonesia, Thailand 0:18:31.359 --> 0:18:34.359 and so forth go up simply because those are the 0:18:34.400 --> 0:18:36.399 countries that the US is probably gonna do more business with, 0:18:36.440 --> 0:18:37.639 So they're going to serve as a bit of a 0:18:37.640 --> 0:18:40.320 conduit into China, if you follow me. So yeah, look, 0:18:40.359 --> 0:18:42.440 I mean, I think I think the trade data was interesting. 0:18:42.440 --> 0:18:44.879 I think it was um it was good. But we 0:18:44.960 --> 0:18:47.800 have total social financing data coming out of China overnight, 0:18:47.880 --> 0:18:49.800 and that is going to be for me, far more 0:18:49.800 --> 0:18:52.720 important because that's if we don't see long term corporate 0:18:52.920 --> 0:18:55.680 lending pick up in China. I think you're gonna see 0:18:55.680 --> 0:18:59.040 a lot more PBOC stimulus throughout the better part of 0:18:59.080 --> 0:19:02.720 this year, and that might not necessarily be a bad thing. 0:19:02.760 --> 0:19:05.680 It would obviously be good for foreign holders of China 0:19:05.720 --> 0:19:08.800 government bonds, but I can't see that being necessarily a 0:19:08.840 --> 0:19:11.720 really good thing for a lot of local equities in China. 0:19:12.040 --> 0:19:15.720 So we are presumably getting a Phase one trade deale 0:19:15.720 --> 0:19:19.040 signed tomorrow. We've not seen anything on paper, so we're 0:19:19.160 --> 0:19:21.120 as Michael McKee said, he's not even gonna think about 0:19:21.119 --> 0:19:24.399 it until he sees it on. We may never know. 0:19:24.560 --> 0:19:30.400 You have to really something, don't that right exactly? So 0:19:30.520 --> 0:19:33.760 I mean, did the merchant markets care about this or 0:19:33.960 --> 0:19:36.080 is this kind of much do about nothing? You know? 0:19:36.200 --> 0:19:37.880 I mean I think they would care a lot if 0:19:37.920 --> 0:19:40.280 nothing got done, But right now it seems fully priced 0:19:40.320 --> 0:19:41.960 to me, Paul, And you know what I'm really more 0:19:42.000 --> 0:19:45.240 focused on. I'm really more focused on, um, the EU 0:19:45.320 --> 0:19:47.240 and you know, um we have Mr Hogan, you know, 0:19:47.280 --> 0:19:50.280 the EU Trade Commissioner in the United States today meeting 0:19:50.280 --> 0:19:52.920 with Lyon Heiser, and you know, this is about autos, 0:19:52.960 --> 0:19:55.480 this is about big ticket sales, is about durables. And 0:19:55.560 --> 0:19:58.040 so for me, I'm interested to see how that goes 0:19:58.119 --> 0:20:01.080 because if indeed China is not going to Trump's whipping 0:20:01.119 --> 0:20:03.480 boy for the better part of you know, this election year, 0:20:03.840 --> 0:20:07.080 and his focus shifts to the European region, that would 0:20:07.080 --> 0:20:09.639 be obviously interesting in the impact on a lot of 0:20:09.680 --> 0:20:13.120 the euro denominated emerging market countries in my universe, poland 0:20:13.240 --> 0:20:15.639 Hungry check. Obviously that wouldn't be a good thing from 0:20:15.640 --> 0:20:17.960 any of those countries. Just real quick. Here, A lot 0:20:17.960 --> 0:20:20.119 of people are saying that the Chinese consumer is showing 0:20:20.119 --> 0:20:23.120 signs of strength again, or at least stabilization, just real 0:20:23.200 --> 0:20:26.480 quick buying that, you know. I mean, we've talked a 0:20:26.480 --> 0:20:28.720 lot about and you know, I came here prepared to 0:20:28.760 --> 0:20:30.880 talk about China defaults with you, and you know, it's 0:20:30.880 --> 0:20:33.479 really interesting to me forget about the consumer because for me, 0:20:33.880 --> 0:20:36.040 you know, come on, I mean, I did it just 0:20:36.119 --> 0:20:38.679 for you. But I mean I mean Kinghai Provincial, Taiwu, 0:20:38.880 --> 0:20:40.760 Dandong Port, I mean, I've been following some of this 0:20:40.840 --> 0:20:43.520 very honestly. I actually met the former Traman Wangwa Ling 0:20:43.520 --> 0:20:45.800 of Dengong Port back in the days, the biggest port 0:20:46.000 --> 0:20:49.760 in northeastern China, kind of by North Korea. And my goodness, 0:20:49.840 --> 0:20:53.160 the forceful ruling that came out of Leona Ling Province, 0:20:53.160 --> 0:20:56.199 I'm sorry if I'm uh pronounced that. Well, it was 0:20:56.280 --> 0:21:00.760 such a bad ruling for creditors and investors in that issue. 0:21:00.920 --> 0:21:02.800 I mean, if we see more of that, this is 0:21:02.840 --> 0:21:05.800 gonna be uh it's it's basically going to deter a 0:21:05.880 --> 0:21:08.320 lot of officer investors from participating in their local credit markets, 0:21:08.359 --> 0:21:10.880 which is not good for the China consumer. Damon. I've 0:21:10.920 --> 0:21:13.040 got to say, we have to have a two hour special. 0:21:13.160 --> 0:21:16.199 Yes we do, Yes, I'm sure he's got a podcast 0:21:16.480 --> 0:21:18.879 we can probably listen in. Damien sass Our, chief Emerging 0:21:18.920 --> 0:21:23.159 markets credit strategists for Bloomberg Intelligence, giving us his thoughts 0:21:23.160 --> 0:21:27.080 on we're getting some trade discussions and trade manipulating currency 0:21:27.080 --> 0:21:29.679 manipulator discussions between the US and China. But of course 0:21:29.720 --> 0:21:33.240 tomorrow signing the Phase one deal between the US and China, 0:21:33.600 --> 0:21:49.120 it's got to be good for markets. Well, the gig 0:21:49.160 --> 0:21:52.760 economy has really been a new development over the last 0:21:52.760 --> 0:21:55.000 ten or fifteen years. Forty eight percent of millenear workers 0:21:55.040 --> 0:21:57.679 say they earn extra income on the side. According to 0:21:57.680 --> 0:22:00.600 a new bank rate dot com survey, Explosion an Opportunity 0:22:00.680 --> 0:22:05.440 ses terra on more people across different generations into side hustles. 0:22:05.560 --> 0:22:08.399 Gen xers of baby boomers said they've engaged in the 0:22:08.400 --> 0:22:11.880 gig gig economy. It's not just uber and lift, it's 0:22:11.880 --> 0:22:15.320 also impacting business such as jewelry and accessories. Jessica Harron 0:22:15.400 --> 0:22:17.960 is a founder and chief executive officer of Stella and 0:22:18.000 --> 0:22:19.920