WEBVTT - We Have All The Elements Of EM Contagion: Bill Rhodes 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.960 Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. Well, 0:00:32.960 --> 0:00:35.879 the story may be the same across the emerging markets, 0:00:35.920 --> 0:00:39.559 that debts are owed in dollars while revenue for a 0:00:39.640 --> 0:00:46.040 variety of companies is actually received in devalued emerging markets currencies. 0:00:46.320 --> 0:00:48.919 Here to tell us more about the situation and its 0:00:48.960 --> 0:00:52.240 potential ramifications is Bill Rhodes. He's the president and the 0:00:52.320 --> 0:00:57.120 chief executive of William R. Rhodes Global Advisors. He is 0:00:57.280 --> 0:01:02.000 also the author of Banker to the World, Leadership Lessons 0:01:02.040 --> 0:01:04.880 in Global Finance. Bill Rhodes, thank you very much for 0:01:04.880 --> 0:01:10.240 coming into the studio. This issue of debts odin dollars 0:01:10.240 --> 0:01:14.040 but companies earn in local currency. How bad is it 0:01:14.080 --> 0:01:17.080 going to get? Well? As you know, you have my 0:01:17.400 --> 0:01:21.120 oup ed that I did for Reuters on June twenty two, 0:01:21.319 --> 0:01:27.000 where I forecast the situation getting worse in Argentina, although 0:01:27.120 --> 0:01:29.240 people at that point we're optimistic because they had just 0:01:29.319 --> 0:01:32.240 gotten a loan from the I m F, a record 0:01:32.280 --> 0:01:35.600 loan of fifty billion dollars. And also predicted at that 0:01:35.640 --> 0:01:38.080 point because the election hadn't taken place yet in UH 0:01:38.600 --> 0:01:41.520 in Turkey that Van would win and it was going 0:01:41.560 --> 0:01:43.880 to be a disaster. I went into his interest rate 0:01:43.880 --> 0:01:47.400 policy because he thinks the best way to fight inflation 0:01:47.760 --> 0:01:50.720 is to drop interest rates. Its unique vision of the world, 0:01:50.720 --> 0:01:53.160 and he put his son in law in his Ministry 0:01:53.160 --> 0:01:57.120 of Treasury and Finance to implement his program. So what 0:01:57.120 --> 0:01:59.640 are we saying in the case of Turkey UH In 0:01:59.640 --> 0:02:03.200 addiction into the Argentine problem, UH, we see a country 0:02:03.280 --> 0:02:08.280 like Argentina who has tremendous indebtedness in dollars UH. And 0:02:08.360 --> 0:02:12.680 also the banking system in Turkey is having problems because 0:02:12.680 --> 0:02:17.160 of the build up in nonperforming because the companies in 0:02:17.440 --> 0:02:21.120 UH in Turkey have barred very heavily in dollars. And 0:02:21.200 --> 0:02:24.720 you have now a depreciation of the currency of some 0:02:24.800 --> 0:02:28.360 forty three percent since the beginning of the year, inflation 0:02:28.520 --> 0:02:32.880 reaching eighteen percent, and it's not clear what Turkey is 0:02:32.880 --> 0:02:34.640 going to do at least in the case of Argentina, 0:02:34.680 --> 0:02:37.040 they say they finally will get away from their gradual 0:02:37.080 --> 0:02:41.640 list program, which they call gradualismo UH and put in 0:02:41.720 --> 0:02:44.280 somewhat of a shock program. And the I m F 0:02:44.919 --> 0:02:48.800 says that they will be dispersing additional money from the 0:02:48.840 --> 0:02:51.440 fifty billions. So that's going on, but you have problems elsewhere. 0:02:51.480 --> 0:02:56.000 South Africa also has heavy borrowings in foreign currencies, both 0:02:56.040 --> 0:02:59.000 dollars and euros, and they're in the first recession in 0:02:59.160 --> 0:03:04.120 nine years UH, and their currency is also reaching record lows. 0:03:04.160 --> 0:03:06.680 And then we go back to Indonesia shades of the 0:03:06.720 --> 0:03:10.280 Asian financial crisis, and and the value of the ruby 0:03:10.440 --> 0:03:14.560 is UH has reached visa e the dollar, the lowest 0:03:14.639 --> 0:03:17.640 rates in the Asian financial crisis. So we see a 0:03:17.720 --> 0:03:20.000 lot of spreading problems. And then of course we have 0:03:20.080 --> 0:03:23.959 the big elections in Brazil UH, you know, which is 0:03:24.000 --> 0:03:26.560 the biggest economy of all the ones I've mentioned, And 0:03:26.600 --> 0:03:30.399 there you have an absolute mess as to who will 0:03:30.440 --> 0:03:34.600 emerge as a winner. The extreme right Bosonaro x army 0:03:34.680 --> 0:03:38.680 captain who says that he's really going to basically put 0:03:38.720 --> 0:03:42.280 the troops on the streets there permanently, or the extreme 0:03:42.360 --> 0:03:46.960 left UH, the successor to Lula and the People's Party 0:03:47.080 --> 0:03:50.840 and the Workers Party, and so it's very unclear what 0:03:50.920 --> 0:03:54.280 the situation is in Brazil. So you have all the 0:03:54.360 --> 0:03:57.120 elements of contagion. Now I'm not saying that we're looking 0:03:57.160 --> 0:04:01.120 at two thousand seven UH or we're looking at the 0:04:01.160 --> 0:04:04.680 Asian financial crisis, but I think we have to remember 0:04:04.680 --> 0:04:08.040 that emerging markets can drag developed markets into the tank. 0:04:08.720 --> 0:04:10.880 And I think the markets here in the United States, 0:04:10.880 --> 0:04:13.840 with all this liquidity still slashing around, have not taken 0:04:13.840 --> 0:04:18.479 into consideration that our friend Powell at the FED is 0:04:18.480 --> 0:04:20.640 going to raise interest rates two more times this year 0:04:21.040 --> 0:04:23.719 and we'll continue next year, and this of course puts 0:04:23.839 --> 0:04:26.760 more pressure on the currencies and the ability of these 0:04:26.760 --> 0:04:29.400 countries to pay. That was the origin of the eighty 0:04:29.440 --> 0:04:33.560 two Latin American debt crisis, the Asian financial crisis. And 0:04:33.640 --> 0:04:37.400 so I'm saying, we've seen this movie each time it's different, 0:04:37.880 --> 0:04:41.159 but we ought to take it seriously. At what point 0:04:41.240 --> 0:04:44.920 will it kind of hit a crucial point where there's 0:04:44.920 --> 0:04:47.359 sort of a denue mall of some of these pressures. 0:04:48.680 --> 0:04:53.880 I think that as you see the FED raising interest 0:04:53.960 --> 0:04:58.599 rates and remember the running down your quantitative easing uh 0:04:58.680 --> 0:05:03.520 in uh in your up. Uh. Droggy is restated he's 0:05:03.520 --> 0:05:05.479 going to stop the quantitative easing by the end of 0:05:05.480 --> 0:05:09.120 the year. So I think that people will start reflecting 0:05:09.160 --> 0:05:11.320 that we're nine years going into ten years since the 0:05:11.360 --> 0:05:15.200 Great Recession, and I think that maybe you might see 0:05:15.320 --> 0:05:18.279 people starting to pull back somewhat by the end of 0:05:18.320 --> 0:05:22.800 the year. Now. Uh. You know, the Trump administration says 0:05:22.800 --> 0:05:26.560 Fagett about that we're onto nirvana for the next four 0:05:26.680 --> 0:05:29.720 at least till two thousand twenty when the presidential election 0:05:29.760 --> 0:05:32.359 will go on. But they're not taking into account some 0:05:32.440 --> 0:05:36.320 of the the the the events and actions which I'm 0:05:36.360 --> 0:05:41.320 talking about. So people are still out there buying stocks, 0:05:41.320 --> 0:05:45.640 a record high of the doo, the dollars, a record high. 0:05:45.800 --> 0:05:49.320 Unemployments a record low, could go lower. But we have 0:05:49.400 --> 0:05:51.640 to remember that that was a similar situation at the 0:05:51.680 --> 0:05:54.359 time of the Asian financial crisis, and it was a 0:05:54.360 --> 0:05:57.440 similar situation. Of course, we had runaway inflation of the 0:05:57.520 --> 0:06:00.880 in the Latin American debt crisis and were inflation so 0:06:00.920 --> 0:06:03.320 far is very very tame. But I don't think that 0:06:03.360 --> 0:06:07.400 the Powell Chairman Powell is going to take into consideration 0:06:07.520 --> 0:06:10.120 what's going on in the emerging markets because his primary 0:06:10.160 --> 0:06:12.880 responsibilities the United States of America. Yeah, this could be 0:06:12.920 --> 0:06:15.320 a warning shot that we have much more with Bill 0:06:15.400 --> 0:06:18.080 Rhodes coming up. Stick with us. Bill Rhodes, President, chief 0:06:18.120 --> 0:06:22.039 executive of William R. Rhodes Global Advisors, author of the 0:06:22.040 --> 0:06:24.400 book Banker to the World. It's a wonderful read. I 0:06:24.480 --> 0:06:27.320 recommend you get it. He has a former senior advisor 0:06:28.040 --> 0:06:32.240 for City Current and he helped restructure the debt of 0:06:32.240 --> 0:06:37.200 a number of sovereign entities over the years. So fantastic insight. 0:06:37.279 --> 0:06:40.279 We're gonna head to China next. We're waiting, uh, the 0:06:40.279 --> 0:06:57.440 potential tariffs that could come out this week. It is 0:06:57.480 --> 0:07:00.680 the opinion piece heard around the worlds in New York 0:07:00.720 --> 0:07:03.480 Times op ed that was penned by an anonymous author 0:07:03.960 --> 0:07:08.320 titled I Am part of the Resistance inside the Trump Administration. 0:07:08.640 --> 0:07:10.960 Here to talk about the potential fallout from this is 0:07:11.000 --> 0:07:14.840 Al Hunt, columnist with Bloomberg Opinion. Well, thank you so 0:07:14.920 --> 0:07:18.680 much for being with us. You know, this is seemingly 0:07:19.040 --> 0:07:23.400 a bombshell in terms of the potential effects and the 0:07:23.440 --> 0:07:26.360 potential crisis within the White House, in terms of being 0:07:26.400 --> 0:07:30.440 able to trust one another. What's your big takeaway, And 0:07:30.480 --> 0:07:32.480 do you think that we're going to find out who 0:07:32.680 --> 0:07:37.360 authored this piece? I think here's a bombshell almost every hour, Lisa, 0:07:37.480 --> 0:07:41.960 So we've almost debased the term. But you're right, it's huge. 0:07:42.000 --> 0:07:44.800 I've never I've been in Washington, I will confess to 0:07:44.840 --> 0:07:47.880 you for almost half a century, I've never seen anything 0:07:48.120 --> 0:07:51.800 quite like this these last couple of weeks. I think 0:07:51.920 --> 0:07:56.080 it was an extraordinary column. One can argue about whether 0:07:56.600 --> 0:07:59.040 it should have been written or not, but I have 0:07:59.160 --> 0:08:01.880 no doubt in the New York Times editorial page editor 0:08:01.920 --> 0:08:06.400 that it was. It was modified, But it's also not surprising. Uh. 0:08:06.880 --> 0:08:09.640 It conforms with what Bob Woodward has written, has come 0:08:09.640 --> 0:08:11.960 out this week. It conforms that what's been reported by 0:08:12.000 --> 0:08:15.040 major news organization. It conforms that what we know about 0:08:15.120 --> 0:08:17.600 Donald Trump. And the other point I would make me 0:08:17.680 --> 0:08:21.440 say is it's hard to imagine these series of inside 0:08:21.480 --> 0:08:25.760 revelations from any other president. For a simple reason, they 0:08:25.800 --> 0:08:30.080 commanded some loyalty. Trump commands no loyalty. For a very 0:08:30.080 --> 0:08:34.800 simple reason. He gives no loyalty. Al Hunt. All right, 0:08:34.840 --> 0:08:38.040 you've been at it for, as you said, almost half 0:08:38.080 --> 0:08:39.920 a century. I was going to ask you what it 0:08:40.000 --> 0:08:43.560 was like to cover the administration of Woodrow Wilson. Uh. Well, 0:08:43.559 --> 0:08:46.720 the McKinley years were the best, Yeah, weren't they. The 0:08:46.800 --> 0:08:50.000 reason I bring up Woodrow Wilson is because the substance 0:08:50.520 --> 0:08:54.040 of the op ED makes it clear that there's a 0:08:54.120 --> 0:08:58.160 cadre of officials who are working behind the scenes in 0:08:58.320 --> 0:09:03.000 order to restrain the president or guide the president, whoever 0:09:03.040 --> 0:09:06.160 you want to describe it. But we've had situations like 0:09:06.280 --> 0:09:10.080 this before, haven't we. Yeah, we have. When Wilson was incapacitated, 0:09:10.160 --> 0:09:14.120 that was the case. Um. But but that was in 0:09:14.200 --> 0:09:19.280 nineteen nineteen twenty. It was before the nuclear age. It 0:09:19.360 --> 0:09:22.280 was easier to do that in those times. There was 0:09:22.320 --> 0:09:25.479 a sense that the people that we're doing it were 0:09:25.720 --> 0:09:30.800 generally reflecting Wilson's policies wishes. He also was very much 0:09:30.840 --> 0:09:33.160 of a of a lame duck president. He couldn't get 0:09:33.200 --> 0:09:35.439 the Liga Nations through or any of that. I think 0:09:35.559 --> 0:09:38.960 this is different and it's more serious because I think 0:09:39.040 --> 0:09:44.000 you have you know a man who is um I 0:09:44.040 --> 0:09:46.720 want to say, psychologically unsuited for the job. That's not 0:09:46.760 --> 0:09:50.840 my expertise, but certainly he is substantially in temperamentally and 0:09:50.880 --> 0:09:53.880 emotionally unfit for the job, and that makes him dangerous 0:09:54.000 --> 0:09:57.000 and I think people around him know that. And secondly, 0:09:57.080 --> 0:09:58.959 with a couple exceptions, and I would point out Jim 0:09:58.960 --> 0:10:01.040 Mattis certainly as one. There aren't a whole lot of 0:10:01.080 --> 0:10:04.240 really good people around me, So I have to wonder. 0:10:04.360 --> 0:10:09.920 I mean, markets have treated what you're describing. Uh, They've 0:10:09.920 --> 0:10:12.920 simply shrugged it off. And any turmoil seen in the 0:10:12.920 --> 0:10:16.120 White House hasn't necessarily bled out into the markets at all. 0:10:17.160 --> 0:10:20.360 That might change when it comes to the mid term elections, 0:10:20.600 --> 0:10:23.560 and that is where the focus is right now, and 0:10:23.679 --> 0:10:26.280 especially as we see these contentious hearings going on in 0:10:26.280 --> 0:10:28.720 the Senate right now with Brett kavanaught to become the 0:10:28.800 --> 0:10:33.880 next Supreme Court member. Do you think that pieces like 0:10:33.920 --> 0:10:36.720 what we saw in the New York Times weaken Republican 0:10:36.760 --> 0:10:40.960 power more generally or just go after President Trump himself 0:10:41.000 --> 0:10:44.600 and his leadership. Well, I think it's hard to divorce 0:10:45.080 --> 0:10:47.880 the popularity in the standing of a present from that 0:10:48.040 --> 0:10:50.240 of his party in the mid term elections. There are 0:10:50.240 --> 0:10:53.680 other factors, but I would be I would be stunned 0:10:53.679 --> 0:10:56.920 if the Democrats don't have a pretty big night in November. 0:10:57.520 --> 0:11:00.480 I think they'll take back the half. Probably not the Senate, 0:11:00.520 --> 0:11:02.560 but the Republicans won't make the kind of games they 0:11:02.600 --> 0:11:05.800 once expected in the Senate. Democrats probably win. I don't 0:11:05.800 --> 0:11:09.840 know seven eight ten governorships, including some big ones. I 0:11:09.880 --> 0:11:12.760 don't know how the market will react to that. I 0:11:12.840 --> 0:11:15.120 do have a feeling that Trump won't react well to 0:11:15.200 --> 0:11:19.240 that al hunt. We've been monitoring the hearings that are 0:11:19.240 --> 0:11:24.080 currently taking place before the Senate Judiciary Committee. The hearings 0:11:24.240 --> 0:11:28.960 to speak to an illicit information from Judge Brett Kavanaugh, 0:11:29.120 --> 0:11:34.040 appointed to the U. S. Supreme Court. The senators that 0:11:34.080 --> 0:11:36.679 are on the committee, they've been in the Senate a 0:11:36.720 --> 0:11:39.760 long time. So does the argument that O G. It 0:11:39.880 --> 0:11:42.760 used to be collegial in the past, does that really 0:11:42.760 --> 0:11:46.199 hold any water. It's exaggerated. I think it's worse today, 0:11:46.240 --> 0:11:50.480 but it's exaggerated. Don't forget the board hearings. Uh, you know, 0:11:50.600 --> 0:11:53.080 don't forget that there was a time back in the 0:11:53.160 --> 0:11:56.280 sixties where Republicans were trying to impeach a Supreme Court 0:11:56.400 --> 0:11:59.480 Justice William O. Douglas. So the idea that it was 0:11:59.520 --> 0:12:02.280 all these come by I moments before and now it's 0:12:02.280 --> 0:12:05.280 really nasty and ugly is exaggerated, but it certainly there 0:12:05.360 --> 0:12:08.760 was more comedy. Uh, there was more collegiality than there 0:12:08.840 --> 0:12:11.520 was less, less bitterness than there was before. I think 0:12:11.600 --> 0:12:14.920 there really the Democrats know they're almost certainly going to 0:12:15.040 --> 0:12:18.000 lose this one. I think what really embitters them though, 0:12:18.160 --> 0:12:23.800 is how really unconsciably h Merrick Garland was treated in 0:12:23.800 --> 0:12:26.439 two thousand sixteen by Mitch McConnell and the Republicans. He 0:12:26.440 --> 0:12:28.600 should said, the should have been a vote on Judge Garland, 0:12:28.920 --> 0:12:30.800 just as there should be a vote on Judge Kavanall. 0:12:31.120 --> 0:12:34.120 I think that bitterness is carried over and they're fighting 0:12:34.160 --> 0:12:38.080 a losing battle, but they really feel aggrieved. Do you 0:12:38.160 --> 0:12:41.319 think that there will be any blowback when Mitch McConnell 0:12:42.240 --> 0:12:47.920 maybe takes the Senate floor, if indeed the Democrats are 0:12:47.920 --> 0:12:50.560 in the majority in the House after the midterm elections, 0:12:50.559 --> 0:12:53.599 as you describe, well, he's got a he's got a 0:12:53.679 --> 0:12:56.880 very difficult act because he's going to have to deal 0:12:56.920 --> 0:12:59.199 with Trump, he's going to have to deal with his caucuss, 0:12:59.200 --> 0:13:01.240 and he's gonna have to deal with the likelihood of 0:13:01.240 --> 0:13:05.160 a Democratic speaker and majority leader. And he's up for 0:13:05.240 --> 0:13:08.440 reelection in two thousand and twenty. And as we say, 0:13:08.480 --> 0:13:10.920 he ain't a spring chicken, so he's got he You know, 0:13:10.920 --> 0:13:13.040 Mitch McConnell is going to have a lot of conflicts 0:13:13.080 --> 0:13:16.160 come next January. All right, we're gonna leave it there, 0:13:16.160 --> 0:13:20.120 but thanks very much. Bloomberg opinion columnist Al Hunt on 0:13:20.240 --> 0:13:24.800 the ins and outs and ups and downs in Washington, 0:13:24.960 --> 0:13:45.240 d C. Ostensibly the tech hearings on Capitol Hill this week, 0:13:45.480 --> 0:13:49.160 or to assess the national security concerns, especially given the 0:13:49.280 --> 0:13:55.040 foreign interference in domestic elections. What we got wasn't necessarily 0:13:55.080 --> 0:13:57.160 that joining us now to talk about what that means 0:13:57.200 --> 0:14:00.720 going forward in terms of oversight and NASH security. As 0:14:00.720 --> 0:14:04.239 Clint Watts, Senior Fellow at the Foreign Policy Research Institute, 0:14:04.240 --> 0:14:06.280 also a Senior Fellow at the Center for Cyber and 0:14:06.320 --> 0:14:09.800 Homeland Security at the George Washington University, UH he has 0:14:09.840 --> 0:14:12.440 served in the U. S. Army, the FBI, the Joint 0:14:12.520 --> 0:14:15.839 Terrorism Task Force, as well as a number of other agencies. Clint, 0:14:15.880 --> 0:14:18.640 thank you so much for being with us. So what's 0:14:18.640 --> 0:14:21.200 the big takeaway from these hearings. The big takeaway, I 0:14:21.200 --> 0:14:24.040 think is that social media is in trouble, but it's 0:14:24.040 --> 0:14:27.160 not necessarily with the government meaning that. I think what 0:14:27.200 --> 0:14:29.440 we saw in the Senate yesterday was the social media 0:14:29.440 --> 0:14:33.360 companies have moved faster than the regulators. I'll give you 0:14:33.400 --> 0:14:36.280 one example, the Honest Ads Act, which was essentially the 0:14:36.320 --> 0:14:40.280 way we have political advertising on print, radio, and television 0:14:40.280 --> 0:14:42.920 should be in social media as well. Social media companies 0:14:42.920 --> 0:14:44.880 have already kind of done that on their own, you know, 0:14:44.920 --> 0:14:47.840 they've moved to match these and yet Congress hasn't passed 0:14:47.840 --> 0:14:50.560 these very simple laws from two years ago. At the 0:14:50.560 --> 0:14:52.040 same point, when we saw in the House as this 0:14:52.080 --> 0:14:55.040 sort of bickering around politics, it was like a politics show, 0:14:55.360 --> 0:14:57.400 and the social media companies were there. It was rather 0:14:57.520 --> 0:15:01.480 silly to watch. So I I think the regulation is 0:15:01.480 --> 0:15:03.040 not going to come from the US. With the social 0:15:03.040 --> 0:15:05.560 media company sphere is the EU. They have moved much 0:15:05.560 --> 0:15:09.280 more aggressively about data privacy, and I think there was 0:15:09.320 --> 0:15:12.280 a pure research report that talked about how young people 0:15:12.280 --> 0:15:14.920 have marched away from Facebook, you know, deleting the app, 0:15:15.560 --> 0:15:17.760 not willing to be on the platform anymore. That is 0:15:17.800 --> 0:15:19.640 the big fear I think for social media. It's going 0:15:19.680 --> 0:15:22.760 to come from outside the government. Now do we all 0:15:22.800 --> 0:15:26.040 need to go and rewatch the movie with Scarlett Johansson 0:15:26.240 --> 0:15:29.800 and Joaquin Phoenix called her and which she has he 0:15:29.880 --> 0:15:34.320 has a relationship with what is ostensibly an artificially intelligence 0:15:34.880 --> 0:15:39.520 powered personality. Yeah, I I worry about three audiences for 0:15:39.640 --> 0:15:44.040 different reasons. In foreign influence, I'm most worried about the 0:15:44.120 --> 0:15:46.800 Third world countries that are coming online. They've never really 0:15:46.800 --> 0:15:49.480 been on newspapers. Their first experience with the Internet is 0:15:49.520 --> 0:15:52.480 through a social media app. They don't say let's Google something, 0:15:52.520 --> 0:15:55.040 they say let's Facebook something. You are in a bubble. 0:15:55.440 --> 0:15:58.160 The second one is actually the older generation in America. 0:15:58.160 --> 0:15:59.640 If you look at the people that have stayed on 0:15:59.680 --> 0:16:02.720 the plant forms it, they are inexperience with it. They 0:16:02.760 --> 0:16:05.040 don't know when they're getting duped. They're not used to 0:16:05.040 --> 0:16:07.760 these digital communications, and they're the most aggressive about their 0:16:07.760 --> 0:16:10.760 political views and kind of corrodes the environment. The third 0:16:10.760 --> 0:16:13.480 one is young people who are marching away in some 0:16:13.560 --> 0:16:16.400 respects from social media and moving to what you talked about, 0:16:16.440 --> 0:16:20.120 these apps or artificial intelligence. And I like to say, 0:16:20.200 --> 0:16:22.840 were we were worried about the matrix overtaking our young 0:16:22.880 --> 0:16:26.080 people are young people will enlist in the matrix, They 0:16:26.120 --> 0:16:28.000 will love it. They want to be in the matrix 0:16:28.000 --> 0:16:30.240 because it's more satisfying than the real world. That's what 0:16:30.280 --> 0:16:33.920 I'm really concerned about for the next generation that moves up. So, Clint, 0:16:34.040 --> 0:16:37.960 given what we saw from the Senate yesterday and given 0:16:38.000 --> 0:16:39.280 the fact that we didn't get a lot of hard 0:16:39.360 --> 0:16:44.240 questioning on the actual national security aspects of this, what's 0:16:44.240 --> 0:16:47.800 your feeling about how we're going to address this, especially 0:16:47.800 --> 0:16:50.960 in light of the discord that we're seeing in the 0:16:50.960 --> 0:16:53.400 White House right now. I mean, is this concerning to you? Yeah? 0:16:53.440 --> 0:16:55.880 I think Well, we'll see over time as a fragmentation 0:16:56.080 --> 0:16:58.520 of social media into apps that is similar to the 0:16:58.600 --> 0:17:00.800 way we saw a television sort of breakdown in cable 0:17:00.840 --> 0:17:03.600 TV news, meaning that people will start to move to 0:17:03.800 --> 0:17:07.040 platforms based on whether they satisfy their political views, and 0:17:07.040 --> 0:17:10.120 this will harden us into I call them preference bubbles. 0:17:10.119 --> 0:17:12.280 It's part the algorithm which feeds you things you want 0:17:12.520 --> 0:17:14.760 and part your own choices. You continue to choose things 0:17:14.840 --> 0:17:16.199 you like and you get more of what you like. 0:17:16.400 --> 0:17:20.600 And so this sort of breakdown is troubling for democracy 0:17:20.640 --> 0:17:23.320 because if you don't agree on facts, which is critical 0:17:23.359 --> 0:17:26.360 you can have in foreign policy debate, you get gridlock 0:17:26.400 --> 0:17:29.240 in Congress, much like we've already seen. You see sort 0:17:29.240 --> 0:17:32.000 of see flip flopping back and forth between political parties 0:17:32.040 --> 0:17:34.840 around the world, in democracies where it's right then left, 0:17:34.880 --> 0:17:38.040 and right and left and you really can't secure the country. 0:17:38.280 --> 0:17:41.720 It becomes uh for those that can manipulate the platforms, 0:17:41.720 --> 0:17:44.400 those that can manipulate people's minds. I really think we're 0:17:44.480 --> 0:17:49.080 entering an area where authoritarians have figured out, after open media, 0:17:49.200 --> 0:17:51.600 how to control it and and really how to dominate it. 0:17:52.600 --> 0:17:56.320 Messing with the enemy surviving in a social media world 0:17:56.359 --> 0:18:00.479 of hackers, terrorists, Russians and fake news. This is your 0:18:00.560 --> 0:18:05.960 latest book, What do you recommend people do? I think 0:18:06.119 --> 0:18:08.480 the big thing we can do is get back to 0:18:08.640 --> 0:18:12.040 picking good filters. We have gone through this era over 0:18:12.080 --> 0:18:14.520 the last thirty years that unfiltered is better and that 0:18:14.560 --> 0:18:17.439 goes for everything. If you remember movies, the unrated, the 0:18:17.480 --> 0:18:20.480 un conversion, and that we actually know what's good for 0:18:20.640 --> 0:18:24.679 no brokers, no middlemen, middle women, and this raw reporting, 0:18:24.840 --> 0:18:28.399 raw feeds. If I see the actual emails, I'll be 0:18:28.440 --> 0:18:31.440 able to know the context of everything. Actually is a 0:18:31.520 --> 0:18:34.280 true know when you're an expert, and know when you're not. 0:18:34.960 --> 0:18:37.240 We believe that if we have a connection to the Internet. 0:18:37.240 --> 0:18:39.800 We're just as smart as everybody else. And there's a 0:18:39.800 --> 0:18:42.280 guy named Tom Nichols. It talks about the death of expertise. 0:18:42.720 --> 0:18:45.320 We need to recognize when we are strong and when 0:18:45.320 --> 0:18:48.080 we're not, and when we're not what filters to gravitate towards. 0:18:48.119 --> 0:18:51.879 And I think ultimately moving back to having responsible journalism, 0:18:51.960 --> 0:18:56.560 responsible news outlets, going to information sources that have an 0:18:56.640 --> 0:18:59.240 editorial process is a good thing, not a bad thing, 0:18:59.320 --> 0:19:02.200 and that people need to realize sometimes they are misleading 0:19:02.240 --> 0:19:04.119 themselves and they have no one else to blame but 0:19:04.200 --> 0:19:06.320 themselves for doing that. Clint, we just have about a 0:19:06.320 --> 0:19:08.200 minute here, but I'd love to get your thoughts on 0:19:08.520 --> 0:19:11.280 the anonymous op ed that was published the New York Times. 0:19:11.760 --> 0:19:14.199 I We'm wondering, you know, President Trump said that this 0:19:14.320 --> 0:19:19.280 is a national security concern. Is it? I think he 0:19:19.400 --> 0:19:22.679 has a a small part of truth possibly in it, 0:19:22.680 --> 0:19:25.800 which is consistent with his rhetoric. But what if we 0:19:25.880 --> 0:19:28.920 have officials in the executive branch that aren't following orders, 0:19:28.960 --> 0:19:32.560 are not following procedures, are not following laws, and that 0:19:32.680 --> 0:19:35.560 is a soft revolt in some ways, it can be 0:19:35.840 --> 0:19:40.240 viewed that way. At the same point, we're seeing someone 0:19:40.640 --> 0:19:43.240 who's leading the White House in many ways, breaking political 0:19:43.280 --> 0:19:46.400 norms and testing things that our Constitution really did never 0:19:46.480 --> 0:19:48.639 think would happen. Right, We we have gaps in our 0:19:48.720 --> 0:19:53.160 laws essentially. So yeah, I'm concerned. You know, if everybody 0:19:53.200 --> 0:19:55.399 does their job and follows the constitution. I like to 0:19:55.400 --> 0:19:57.600 look at Rod Rosenstein. I think that's a great example 0:19:57.600 --> 0:20:00.399 over the last year. Someone who follows procedure, knows the 0:20:00.560 --> 0:20:03.440 roles in regardless of political parties, stands as the ground. 0:20:03.440 --> 0:20:05.200 If we have people like that, I think the country 0:20:05.280 --> 0:20:07.159 is fine. But if we don't, if we start breaking 0:20:07.200 --> 0:20:10.399 into this separate competing polls, then I'm going to get 0:20:10.480 --> 0:20:13.520 a little bit concerned. Thanks very much for being with us. 0:20:13.600 --> 0:20:16.080 Clint Watts is a senior Fellow at the Foreign Policy 0:20:16.200 --> 0:20:19.480 Research Institute. He's also a senior Fellow at the Center 0:20:19.520 --> 0:20:23.280 for Cyber and Homeland Security at the George Washington University. 0:20:23.520 --> 0:20:27.240 You can follow him on Twitter at Selected Wisdom. His 0:20:27.359 --> 0:20:45.240 new book, Messing with the Enemy. You know, so when 0:20:45.240 --> 0:20:49.800 you think of biotechnology companies, you think of Cambridge, Massachusetts. 0:20:49.960 --> 0:20:54.760 You think of Silicon Valley San Diego in California, of course, 0:20:54.960 --> 0:20:58.680 but you don't necessarily think of China, and that is changing. 0:20:58.760 --> 0:21:03.000 One of the reasons that's changing is that Chinese authorities, 0:21:03.000 --> 0:21:07.640 the government there has actually stipulated that the biotechnology sector 0:21:08.000 --> 0:21:11.959 should account for in excess of four percent of gross 0:21:11.960 --> 0:21:15.719 domestic product by twenty twenty and that there should be 0:21:15.720 --> 0:21:19.480 between ten to twenty life science parks that are dedicated 0:21:19.640 --> 0:21:22.800 for bio medicine. And here to tell us more about 0:21:22.880 --> 0:21:26.520 this particular aspect of the industry is Brad long Car. 0:21:26.640 --> 0:21:29.560 He is the chief executive of Long Car Investments. They're 0:21:29.600 --> 0:21:33.800 based in Lenexa, Kansas. He's also the index provider for 0:21:33.920 --> 0:21:35.960 a new E t F. It is called the Long 0:21:36.000 --> 0:21:40.240 Car China bio Pharma E t F. The symbolist C 0:21:40.680 --> 0:21:44.240 H and A and he joins us here in studio. Brad, 0:21:44.280 --> 0:21:47.480 thank you very much for being here. Did I describe 0:21:47.520 --> 0:21:51.280 that correctly visa v. The Chinese government and what their 0:21:51.320 --> 0:21:54.920 plans are for the biotech sector in China. Absolutely, thanks 0:21:54.920 --> 0:21:57.040 for having me. You hit the nail right on the head. 0:21:57.080 --> 0:21:59.679 There's four or five elements that are making this happen. 0:21:59.760 --> 0:22:02.159 In the government is a big one. They have a 0:22:02.200 --> 0:22:06.479 program called Made in China and the goal behind that 0:22:06.520 --> 0:22:11.280 program is to upgrade their economy to hire value sectors. 0:22:11.359 --> 0:22:15.280 Everyone of course thinks of China is a manufacturing based economy. 0:22:15.320 --> 0:22:17.760 They want to be leaders in tech and biotech, and 0:22:17.840 --> 0:22:20.320 so they're putting a lot of effort behind that. But 0:22:20.840 --> 0:22:23.880 that's really just one element. It's obviously an important one, 0:22:24.040 --> 0:22:27.879 but you know, until today, China didn't really even have 0:22:28.040 --> 0:22:31.520 a biotech sector. For example, the Hong Kong Stock Exchange 0:22:31.560 --> 0:22:34.720 had a rule that said, if you don't earn revenue, 0:22:35.000 --> 0:22:37.480 you can't list on our exchange. And so if you 0:22:37.520 --> 0:22:40.720 think about it, most biotech companies are conducting science and 0:22:40.760 --> 0:22:44.560 developing new things and don't earn revenue. And so the 0:22:44.600 --> 0:22:48.760 exchange realized that innovation is what drives a global economy, 0:22:48.880 --> 0:22:52.480 just like the government, and on April thirty, they instituted 0:22:52.520 --> 0:22:57.160 a new rule specifically for biotech companies that allow biotech 0:22:57.160 --> 0:23:00.400 companies to list there for the very first time. Already 0:23:00.480 --> 0:23:02.920 ten have signed up to I p O and two 0:23:02.960 --> 0:23:06.400 have happened, a company called ask Leidas and another one 0:23:06.440 --> 0:23:09.119 by jen which already trades here on the NASTAC. And 0:23:09.720 --> 0:23:12.320 we think there may be dozens and dozens over the 0:23:12.359 --> 0:23:15.400 coming year, and so I think this is an exciting 0:23:15.440 --> 0:23:18.479 moment because it may be just the very start of 0:23:18.520 --> 0:23:21.920 their biotech sector. I'm struck by the concept of trying 0:23:21.960 --> 0:23:27.879 to craft an index select stocks on Chinese indexes to 0:23:27.960 --> 0:23:30.800