Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best an economics, geopolitics, finance and investment.
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Speaker 1: we're thrilled to every usually for big events, So today's
Speaker 1: a big event. It's always a big event. When Ellen
Speaker 1: Zenner joins his chief US economist, Morgan Stanley Ellen on claims,
Speaker 1: I go to the four week moving average. How do
Speaker 1: you interpret claims with this two hundred thirty one thousand statistic?
Speaker 1: And can you say there's finally a vector in place
Speaker 1: of higher claims more pain.
Speaker 2: So I hope that there's a higher vector in place.
Speaker 2: I disagree that higher claims will be more pain. We're
Speaker 2: coming off of extraordinarily low levels. As you said, we
Speaker 2: look at the four week moving average to smooth through volatility,
Speaker 2: and it has been lifting, but it is still very low.
Speaker 3: And so what does that tell me?
Speaker 2: Something that Mike and Lisa alluded to as well, normalization
Speaker 2: slowing in normalization, good god man, that's what we've been needing,
Speaker 2: and I don't see this accelerating at an extreme pace.
Speaker 2: I've been on the road the last few days in
Speaker 2: several states meeting with corporate clients. They are finally seeing
Speaker 2: some relief in terms of how tight the labor market
Speaker 2: has been in terms of the availability of the kinds
Speaker 2: of employees that they need. We're seeing not just claims
Speaker 2: rising a bit here, but I focus on continuing claims.
Speaker 2: People that have been losing their jobs are staying unemployed
Speaker 2: for a bit longer, and that's been rising since October,
Speaker 2: so it's getting more difficult to just get re employed
Speaker 2: right away. This is the kind of softness in the
Speaker 2: labor market that we have needed, and of course it
Speaker 2: takes pressure off the FED to raise rates again. Right
Speaker 2: going on extended.
Speaker 4: Hold, what is the distance between normalization and an outright downturn?
Speaker 2: So well, the difference is jobs stay positive, So normalization
Speaker 2: is you've got more supply coming back into the labor market,
Speaker 2: so you see participation rates rising, which we have.
Speaker 3: That is what puts upward pressure on the unemployment rate.
Speaker 2: And we've been seeing that, and if people are having
Speaker 2: taken longer to be able to get re employed, then
Speaker 2: that should produce further upward pressure on the unemployment rate.
Speaker 2: But that just takes pressure off the labor market, pressure
Speaker 2: off of businesses, off of margins.
Speaker 3: You see wages grow more.
Speaker 2: Slowly, and you'll see confidence build among FED policy makers
Speaker 2: that they have done enough here. I don't think we're
Speaker 2: anywhere near getting to negative job gains. I think negative
Speaker 2: jobs would mean that companies have stopped hiring. What I
Speaker 2: hear is that they're doing selective hiring, that they stop hiring,
Speaker 2: and that they start firing, and I mean firing up broadly.
Speaker 2: And that's just not what we're seeing. But I'm ever watchful,
Speaker 2: especially reading earnings transcripts, to see if that's something that's
Speaker 2: around the around the corner.
Speaker 4: I'm glad you mentioned earnings because we were talking about Walmart,
Speaker 4: and I understand their idiosyncrasies here, but they talked about
Speaker 4: potentially seeing outright deflation over the next year with consumers
Speaker 4: clearly pushing back. You do see margin pressure, you do
Speaker 4: see a market deterioration and consumer appetite over the past
Speaker 4: ninety days. How concerning is that to you about the
Speaker 4: nonlinearity of where things could be.
Speaker 3: So, Lisa, we.
Speaker 2: Put out a consumer survey that goes out into the
Speaker 2: field every two weeks, and one of the biggest areas
Speaker 2: of trade down that households have been doing is within
Speaker 2: stores themselves, say, going from a high priced branded good
Speaker 2: to the generic good within the store. And that means
Speaker 2: that those retailers are going to see some deflation. And
Speaker 2: we've been hearing from businesses that input costs are falling,
Speaker 2: but prices that they're charged or falling faster. And that's
Speaker 2: important because we all started to think we the economics
Speaker 2: community at large, not myself though an exception, started to
Speaker 2: think that households just have unlimited price tolerance, and that
Speaker 2: is not the case. Finances start to slow, we run
Speaker 2: through that excess savings, and you will start to trade down.
Speaker 2: The lower income groups that Walmart serves are the groups
Speaker 2: that have been standing the greatest pressure. Look at delinquency
Speaker 2: rates for the lowest income groups on credit cards on
Speaker 2: auto loans, that points to stress.
Speaker 1: Ellen Molly Smith and Alice Atkins for Bloomberg made a
Speaker 1: big splash the other day using your research, the Morgan
Speaker 1: Stanley View and the key distinction is a four point
Speaker 1: three percent unemployment rate. I hereby dubb at the Zentner
Speaker 1: four point three percent statistic. How do we get to
Speaker 1: a four point three percent unemployment rate that radically shifts
Speaker 1: Fed policy?
Speaker 3: I'm not expecting right close them from the Fed.
Speaker 2: The unemployment rate at four point three percent, we think
Speaker 2: is a soft landing unemployment rate in that it is
Speaker 2: driven by slower job gains and higher labor force participation.
Speaker 2: Now I understand that is a beautiful scenario for the FED.
Speaker 2: And we have them cutting next year by one hundred.
Speaker 3: Basis points because of normalization.
Speaker 2: That's very different than cutting because the FED thinks there's
Speaker 2: a recession. If the FED thinks that there's recession, they're
Speaker 2: starting big and they're doing a lot, and that's very
Speaker 2: different than the normalization scenario.
Speaker 1: And then overlay with that, what we're hearing Julia Coronatto
Speaker 1: leading the way on this, doctor Coronado suggesting productivity is underestimated.
Speaker 1: Do you believe that we have an underestimation of the
Speaker 1: efficiency of the American economy and that gets you to
Speaker 1: a benevolent four point three percent unemployment rate?
Speaker 2: Yees, So I do think that productivity is being underestimated.
Speaker 2: I would add, though, that productivity has not been well estimated,
Speaker 2: and so you'd have to say, well, it's.
Speaker 3: Being estimated you worse than before.
Speaker 2: And I'm not sure we can say that, but I
Speaker 2: think there are a lot of new ways that productivity
Speaker 2: exhibits itself in the economy that we're just not able
Speaker 2: to capture. Government data is not able to capture. But absolutely,
Speaker 2: if productivity is higher, then you can withstand higher wage
Speaker 2: growth without it being inflationary. It gives the FED more
Speaker 2: runway because it keeps it lid on inflation. And so
Speaker 2: it's really it lifts all boats. It's productivity and infrastructure
Speaker 2: or what economists go to sleep at night dreaming about, Tom.
Speaker 4: Which is the reason why I think people are sort
Speaker 4: of hopeful that we're going to get that and we're
Speaker 4: going to create this soft landing and avoid something more challenging.
Speaker 4: I guess to wrap it all up, we've been talking
Speaker 4: all morning about the potential for deflation. Tom was talking
Speaker 4: about how difficult that is for any economy to handle.
Speaker 4: This was the word that Walmart used. But you're talking
Speaker 4: about normallyation. How concerned would you be to see some
Speaker 4: sort of material deflation, not disinflation. Deflation, and certain good
Speaker 4: sectors that we have been seeing on the margins over
Speaker 4: the past couple of months.
Speaker 3: Yeah, so, Lisa, good sectors. I'm not worried about it
Speaker 3: at all.
Speaker 2: We've goods prices in the US have been in deflation
Speaker 2: for a decade leading up to COVID. That's normal, right,
Speaker 2: we were importing a lot of deflation, but that's externally determined.
Speaker 3: I would be very, very concerned about a.
Speaker 2: Deflation scenario in the US for services, for domestically determined prices.
Speaker 2: For US to get to that broadly, you're talking about
Speaker 2: an extraordinary downturn on the magnitude of the financial crisis
Speaker 2: in two thousand and eight that would get that kind
Speaker 2: of price declines, declines in the level of prices instead.
Speaker 2: I think deceleration is in train. I think it's going
Speaker 2: to be faster than the FED is expecting. And I
Speaker 2: think I've been really pleased, and I think they should
Speaker 2: be pleased too with the progress that we see.
Speaker 1: The Newtonian mechanics of Ellen Zentner, of Morgan Stanley there
Speaker 1: and the dynamics of price change. Ellen, thank you so
Speaker 1: much for the brief. William Dudley joins us now former
Speaker 1: New York Fed president of Bloomberg opinion columnist Bill Ewan,
Speaker 1: I'm going to suggest Professor williams now holding Court in
Speaker 1: the former Dudley chair, have a unique perspective on our flows,
Speaker 1: our liquidity, our trust Sitting at the New York Fed.
Speaker 1: What is the confidence or trust deterioration you've observed.
Speaker 5: I think there is a complete trust in the New
Speaker 5: York Fed because that the Fed basically understands the plumbing
Speaker 5: of the financial system and understands what needs to be
Speaker 5: done to make sure that plumbing works always, even under
Speaker 5: times is pressed. One area of vulnerability where the Fed
Speaker 5: and the treasure you're looking at right now is the
Speaker 5: treasure market itself, because the buying of treasury borrowing has
Speaker 5: gone up dramatically and the capacity of the primary dealers
Speaker 5: to take on that uh that burden has diminished because
Speaker 5: of all the regulation on capital and leverage. So there
Speaker 5: do need to be some significant changes, I think, to
Speaker 5: the treasury market to make it more strong and resilient.
Speaker 5: And what I propose is a couple of things. One
Speaker 5: central characteringum of treasuries, so they all go through a
Speaker 5: central current party, so your risk is just to the
Speaker 5: central current party. Allows you to net out a lot
Speaker 5: of bilateral risk to a single risk to one.
Speaker 6: Uh end person.
Speaker 5: Second, increase the leverage the haircuts a bit so that
Speaker 5: they don't need to be increased during time to stress.
Speaker 5: Right now, you have low haircuts, and then there's there's stress,
Speaker 5: and the haircuts go up, which force people to sell.
Speaker 5: And the last thing which Mike was talking about is
Speaker 5: opening up the fens repo facility more broadly, making it
Speaker 5: so that people can take treasures and turn them into
Speaker 5: cash at any time. And if they know that, then
Speaker 5: they don't actually have to sell the treasures, you know,
Speaker 5: in anticipation of a problem.
Speaker 6: They can wait to see if they actually need the care.
Speaker 7: Bill if none of that gets done. Do you think
Speaker 7: the action we've seen and what you expect compromises the
Speaker 7: QT program coming out of the FED.
Speaker 6: No, I don't think so.
Speaker 5: I mean, I think the QT program basically is on
Speaker 5: autopilot as long as there isn't a lot of market disruptions.
Speaker 5: So if the market performs reasonably well, then QT keeps going.
Speaker 5: Only if we have the kind of events like we
Speaker 5: had in September twenty nineteen or market twenty twenty, we
Speaker 5: can see QT is suspended because if the market isn't
Speaker 5: working right, the last thing the Fed wants to do
Speaker 5: is done more securities in the marketplace.
Speaker 4: What's as take here, Bill, If there isn't this sort
Speaker 4: of fix that you propose or this three pronged proposal,
Speaker 4: how much are we seeing what sort of the new
Speaker 4: normal looks like with bouncing around twenty basis points on
Speaker 4: a ten year yield from day to day versus something
Speaker 4: more significant that creates a real crisis in the world's
Speaker 4: deepest and most liquid market.
Speaker 5: I think the volatility we've seen this year is not
Speaker 5: a treasure market function problem. I think the volatility we've
Speaker 5: seen this year is people trying to figure out what
Speaker 5: what's the trajectory of short term rates over the next
Speaker 5: six to twelve months, and there's been lots of changes
Speaker 5: in view as the economic data has come out. I
Speaker 5: think the problem is more when all sudden people want
Speaker 5: it dump treasuries and there's not enough capacity on their
Speaker 5: side to absorb that. That has happened a few times,
Speaker 5: and obviously it needs it needs a catalyst, and it's
Speaker 5: hard to predict what that catalyst could be, But what
Speaker 5: I want is a treasury market that can handle those
Speaker 5: kind of shocks if and when they occur.
Speaker 4: Are you saying that right now there is an inability.
Speaker 4: What do you expect will happen if there is some
Speaker 4: sort of catalyst.
Speaker 5: Well, if there's sometimes are cast One of the problems
Speaker 5: we allowed the treasury trading is handled by algorithmic traders
Speaker 5: who basically don't really provide long term liquity to the market.
Speaker 5: They just provide liquidity for a microsecond and then they
Speaker 5: move it security off to someone else, and when things
Speaker 5: get scary, they completely withdraw from the market, and then
Speaker 5: the market is really now then has to go to
Speaker 5: the primary dealer community.
Speaker 6: But the primary dealer commun.
Speaker 5: Has an allocated capital to this business because most of
Speaker 5: the time they're actually not doing it, so there's no
Speaker 5: one there sort of an extremist provide balance sheet capacity
Speaker 5: to sort of come the market. And that's one reason
Speaker 5: why you'd like to have the ability to take your
Speaker 5: treasury security to the FED and turn them into cash
Speaker 5: without actually having to sell them. So the Treasury is
Speaker 5: only one the FED is the only one that has
Speaker 5: a balance sheet that is actually elastic, So why not
Speaker 5: make it clear that that elastic balance sheet available on
Speaker 5: an ex anti basis as opposed to only exposts after
Speaker 5: the vice she had the problem?
Speaker 1: Bill, how does our data dependency look next year? I
Speaker 1: think we've had a celebration of disinflation in place. Is
Speaker 1: the nature or character of the Fed's data dependency different
Speaker 1: now and forward?
Speaker 5: Well, I think they're more confident that they've moved monetary
Speaker 5: policy to a restrictive level and it's actually working to
Speaker 5: bring down inflation. But we still don't know a lot
Speaker 5: of things. We don't really know if how tight monetary
Speaker 5: policy is. We don't know how long it's going to
Speaker 5: take to get inflation down to two percent. So I
Speaker 5: think the degree of uncertainty risk is a lot less
Speaker 5: less today than it was, say, eighteen months ago, when
Speaker 5: the Fed started the tightening process. But there's still a
Speaker 5: lot of uncertainty about how strong the economics can being,
Speaker 5: whether the Fed is done.
Speaker 7: What a roller coaster write this bond market has been
Speaker 7: on over the last few months.
Speaker 6: Bell, what if for?
Speaker 7: To catch up with you? SA always is former New
Speaker 7: York Fed President Bill Dutley. There an interesting thought provoking
Speaker 7: piece from Bill on the future of this treasury market.
Speaker 1: We talked to a lot of experts on this, and
Speaker 1: this is what you get if you get a double
Speaker 1: degree at the you claimed holy Cross, the College of
Speaker 1: the Holy Cross, and economics in accounting, the hyper detail, mathematics, ratios,
Speaker 1: the financial analysis of retail that Chuck Rahm has acclaimed for.
Speaker 1: He's a Gordon Haskett. I'm not going to mince words.
Speaker 1: We protect the copyright of all of our guests. Get
Speaker 1: his brilliance from Gordon A Hausket. How do you go
Speaker 1: and outperform on Walmart with a thirty pe? Explain why
Speaker 1: Walmart has a pe like a luxury goods pervader.
Speaker 8: And Walmart's been executing lawlessly for several quarters and even
Speaker 8: maybe the past couple of years, and the business mixshift
Speaker 8: and the gross market visibility. I mean, there's never been
Speaker 8: a time in the twenty years I've covered Walmart where
Speaker 8: I've been this bullish on the long term outlook. Clearly
Speaker 8: today it's interesting. It's a little bit about positioning. You
Speaker 8: guys talked in your remarks about valuation. That's a factor
Speaker 8: if you really dig it underneath the covers here, it's
Speaker 8: really less about the top line. And I think less
Speaker 8: about the back half of October commentary that the CFO
Speaker 8: recently made. I think it's more about the margin flow
Speaker 8: through that was disappointing. The US margins were disappointing. So
Speaker 8: when you have a stock at an all time high,
Speaker 8: at very rich valuations and you get a little bit
Speaker 8: but disconnect, you get this negative reaction. I think the
Speaker 8: stock will come back throughout the day and over the
Speaker 8: next couple of weeks, but today could be difficult for
Speaker 8: the stock.
Speaker 1: Can they compete with Amazon or Darra I never said
Speaker 1: this before, Chuck Grum, But can they beat Amazon?
Speaker 8: I don't know if they can beat Amazon, but they
Speaker 8: can definitely compete. And I think the physical assets of
Speaker 8: their four thousand plus stores in the country really provide
Speaker 8: them with being really close and being able to connect
Speaker 8: with their customers. So Walmart plus there's a lot of
Speaker 8: opportunity there. So can they beat Probably not, but can
Speaker 8: they compete one hundred percent?
Speaker 4: Chuck, you said that margins disappointed, and that's really interesting
Speaker 4: At a time where people are wondering when are consumers
Speaker 4: is going to start pushing back on price increases? Is
Speaker 4: this an indication that Walmart is seeing that that time
Speaker 4: is now and then order for them to compete, they've
Speaker 4: got to take a hit on the margins.
Speaker 8: Well, I think almost uniformly, you know, consumers are pushing
Speaker 8: back on price and that's why prices are coming down
Speaker 8: almost across the board. And can we cover Home Depot,
Speaker 8: we cover TJ, we cover you know Hard, you know, Macy's, Walmart,
Speaker 8: They're all talking about prices starting to flatten out and retreat.
Speaker 8: I think the US margins were softer because of the
Speaker 8: GLP influence on the on the margins because of the drug.
Speaker 8: It's a lower margin product. It was a higher sales
Speaker 8: in here in the quarter. And when you have discretionary
Speaker 8: sales be softer, those are higher margin categories for Walmart.
Speaker 8: So it's really a mixed factor. It looks like obviously
Speaker 8: the calls at eight o'clock and the callbacks are later
Speaker 8: in the day, so we'll get more clarity later in
Speaker 8: the day. But looking at what it looks like now,
Speaker 8: I think it's more of a mixed factor.
Speaker 4: You know, we were talking earlier about what's good news
Speaker 4: or bad news for the broader economy. When Walmart does
Speaker 4: headly or well in terms of which consumers are shopping,
Speaker 4: there is there any read through based on the earnings
Speaker 4: that we've gotten from retailers about whether we're seeing a
Speaker 4: division between haves and have nots, about whether we are
Speaker 4: seeing any broader trends in terms of how the consumer
Speaker 4: is evolving, Which areas are going to be bright spots
Speaker 4: and which won't.
Speaker 6: That's a great question. I think it's really too early
Speaker 6: to tell.
Speaker 8: I mean, you look at Walmart's numbers, they're up, you know,
Speaker 8: comp up five, Target yesterday down five. You know, you
Speaker 8: look at Macy's down six or seven. Here, it looks
Speaker 8: pretty uniform. I think there's pressures across the board. It's
Speaker 8: not really like the high end doing well. You guys
Speaker 8: talked about Berbery earlier. We'll get more color from Nordstrom
Speaker 8: next week. I think it's pretty uniform across the board.
Speaker 8: And you know, we've been talking about our consumer surveys
Speaker 8: being weak, traffic being weak. Today's numbers and the reactions
Speaker 8: here over the past forty eight hours have really nothing
Speaker 8: to do with the top line. The top line and
Speaker 8: the sales are pretty much in line with where people thought.
Speaker 8: It's a positioning and it's the margin flow throughs for
Speaker 8: certain companies.
Speaker 1: What's the future of Nordstrom's the family dynamic and also
Speaker 1: the attempt to be luxury. I guess what I is
Speaker 1: an amateur, I'd say is accessible luxury. Is nord Strum
Speaker 1: a sleeper for five years out?
Speaker 6: I think it's a great concept.
Speaker 8: I think the rack has really been their achilles heel
Speaker 8: over the past several years. So if they could get
Speaker 8: the rack fix. I think the fact that they all
Speaker 8: have a huge presence of full line stores across the
Speaker 8: country is actually a tremendous asset piece of v Coals
Speaker 8: or Macy's, which have got hundreds of stores. So I
Speaker 8: think it's I think it's a viable concept. They need
Speaker 8: to get the rack fixed, and that's what people and
Speaker 8: investors have been waiting for.
Speaker 7: Chuck, what's the rack?
Speaker 6: It's a ro off price division.
Speaker 7: And what do you mean by fixed? What's wrong with it?
Speaker 8: Well, when you look at you know, you look at
Speaker 8: TJ and Ross comping up, you know, load of mid
Speaker 8: single digits, and you see the rack comping down. It's
Speaker 8: just it's been broken. I mean it's their business hasn't
Speaker 8: been good. It seems like there's been some cannibalization across
Speaker 8: the store base. We're not exactly. Sure, there's been some
Speaker 8: merchandise issues. They've tried to price up when when the
Speaker 8: consumer wanted to be priced down. But yeah, the North
Speaker 8: From viable for sure. But the rack division, the off
Speaker 8: price division, I'm sorry, we're not clarifying earlier.
Speaker 7: Is really the No, It's okay now, I know, I'm
Speaker 7: just just for people who are trying to follow. Have
Speaker 7: you noticed, Chuck that the off rack the rack is
Speaker 7: actually close to the Nord from stores. Have you noticed that,
Speaker 7: which is kind of odd.
Speaker 8: Yeah, I mean I could tell you my wife, We'll
Speaker 8: tend to go to the rack now a lot more
Speaker 8: than a bowl line.
Speaker 6: So that's what I'm talking about.
Speaker 8: The cannibalization factor of that is probably maybe the issue here,
Speaker 8: and maybe they need to close more rack stores, but
Speaker 8: you know, ironically, they're trying to grow more right now.
Speaker 8: So we're old rated, we're kind of we're kind of
Speaker 8: perplexed on some of the strategies there.
Speaker 7: For the time being, it's trying to be TJX and
Speaker 7: knowst them at the same time with the same grand
Speaker 7: it's hot to do, Chuck, Thank you, Chuck Goldenske, thank
Speaker 7: you mate.
Speaker 1: Right now and these important meets we're making jokes about it.
Speaker 1: Come on, this is important. Michael Hurston joins and I
Speaker 1: had a China research a twenty two v AT research. Michael,
Speaker 1: thank you so much for briefing us this morning. What
Speaker 1: did you What was the unexpected that you saw last night?
Speaker 1: Besides a dictator faux pap by the president late? What
Speaker 1: was the unexpected of the meeting?
Speaker 9: Nothing too unexpected, frank, which I think is good. Maybe
Speaker 9: the Chinese readout perhaps was a bit more positive than
Speaker 9: I was expecting, and that really reflects what has been
Speaker 9: a bit of a excuse me, a recalibration in China's
Speaker 9: official tone towards the US over the last few weeks.
Speaker 9: But other than that, I would say, no big surprises.
Speaker 1: Okay, no big surprise is great.
Speaker 6: What's next?
Speaker 1: When's the next meeting? Is the President travel to China
Speaker 1: to make it too well?
Speaker 9: I think that's actually a really important point, Tom, because
Speaker 9: this is basically the last high profile meeting that the
Speaker 9: two leaders are going to have before the next US
Speaker 9: presidential election. So this kind of sets the parameters for
Speaker 9: the next year, and those parameters really are trying to
Speaker 9: find stability, not allowing a crisis to take place over
Speaker 9: something like Timewan and then just making incremental progress on
Speaker 9: some of the key issues in the relationship. But if
Speaker 9: you think about it, the closer we got to the
Speaker 9: US presidential election, the harder it will be for Biden
Speaker 9: to do anything that's seen as being soft on China.
Speaker 9: And of course, why would chi Jinpang make concessions to
Speaker 9: the US when he doesn't know who the next president
Speaker 9: will be. So I think that's where we are. That's
Speaker 9: why this was kind of an important window for the
Speaker 9: two leaders to meet.
Speaker 4: Did the dictator comment mean anything to you?
Speaker 6: Not really.
Speaker 9: I don't want to dismiss it entirely. I think it
Speaker 9: probably was perhaps not the positive tone to go out on,
Speaker 9: But I think in the grand scheme, given how much
Speaker 9: work both sides did to try to make this meeting happen,
Speaker 9: I don't think it's going to color too much on
Speaker 9: the Chinese side.
Speaker 4: What did you make of the meetings that Xijimpang had
Speaker 4: with US executives apples, Tim Cook for example, a whole
Speaker 4: host of others, and then a private meeting with Elon Musk.
Speaker 3: What's your takeaway of how.
Speaker 4: Different the business view on China is from the US
Speaker 4: government's view on that country.
Speaker 9: I think there are a few very prominent US firms
Speaker 9: that have this special position in China where and that
Speaker 9: would put Apple and Tesla very much as the two
Speaker 9: bell Weathers in that category. They have managed this straddle
Speaker 9: between the US and China.
Speaker 6: It's not an.
Speaker 9: Easy straddle on either side, but they're kind of a
Speaker 9: special category. If you look at the broader set of
Speaker 9: US firms in China, it's really a mix between those
Speaker 9: who feel like they have a decent market in China
Speaker 9: and those who are really upset about China's policies. And
Speaker 9: so I would put Tesla and Apple in this kind
Speaker 9: of special category, and so it's no surprise that they
Speaker 9: got some special attention from CHICHIPI do.
Speaker 3: You have a sense of who needs who more?
Speaker 4: Of whether Tesla and Apple need China more than China
Speaker 4: needs them and the jobs that they provide.
Speaker 9: It's an interesting question. I would say for the companies
Speaker 9: they need app they need China more. But if we're
Speaker 9: talking about Apple and Tesla, they are very important bell
Speaker 9: Weathers for how the business community looks at the playing
Speaker 9: field in China, and not just the US business community,
Speaker 9: that's Europeans, Japanese, you know, global companies in China, which
Speaker 9: is why I think Beijing actually has to tread very
Speaker 9: carefully with things like, for example, potential retaliation against Apple.
Speaker 9: So yeah, the companies need China work, but these are
Speaker 9: quite important that Chi Jinping looks to try to revive
Speaker 9: confidence in China's economy and China's investment environment.
Speaker 1: Michael, A question we haven't brought up yet. I've been
Speaker 1: remiss on this is Hong Kong. Is Hong Kong going
Speaker 1: to evolve into something that we don't see right now?
Speaker 1: Is there a Hearson Hong Kong out there that's going
Speaker 1: to be different.
Speaker 9: I think Hong Kong, really, and I was just there
Speaker 9: last week, is in this somewhat gradual transition from a
Speaker 9: global hub to really more of a pure capital gateway
Speaker 9: to China and is increasing becoming more of a Chinese city.
Speaker 9: That is still an interesting position for it to play.
Speaker 9: And a number of China watchers that I've had discussions
Speaker 9: with recently have made the point that they think Hong
Speaker 9: Kong is going to remain an interesting city as the
Speaker 9: political environment in China states very tight and in some
Speaker 9: cases even titans further so, Hong Kong losing its status
Speaker 9: as a global financial center, but still quite an important
Speaker 9: city in the context of in particular context of China.
Speaker 1: So what's the alternative for those people whining and dining
Speaker 1: with mister g last night. What city do they go to?
Speaker 9: I think if we're talking about the financial sector, you know,
Speaker 9: it's a number of places. Singapore obviously has has gained
Speaker 9: a step, even Tokyo has become more important as a
Speaker 9: regional financial center. If we're talking about the multinationals there,
Speaker 9: you know, it's wherever they can get capacity and wherever
Speaker 9: they can get the logistics right. So in many cases
Speaker 9: is you know, you mentioned Vietnam earlier, Vietnam, Fishary, but
Speaker 9: it's also Mexico. It's a lot of countries.
Speaker 7: Michael, we got to leave you that. Thanks for Aminus, Michael
Speaker 7: Hesson that have twenty two vave research. Thank you very much.
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