WEBVTT - Biden and Xi Talk, APAC Markets 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.640 --> 0:00:13.440 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:13.440 --> 0:00:16.159 along with Doug Krisner. Join us each day for the 0:00:16.200 --> 0:00:19.560 stories making news and moving markets in the Asia Pacific. 0:00:19.800 --> 0:00:22.200 You can subscribe to the show anywhere you get your 0:00:22.239 --> 0:00:26.200 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:26.239 --> 0:00:27.600 the Bloomberg Business App. 0:00:28.080 --> 0:00:31.400 Today, President Biden and Chinese President She held a call 0:00:31.480 --> 0:00:35.320 earlier there first since one on one back in November. 0:00:35.400 --> 0:00:38.000 Let's take a closer look now with Bloomberg White House 0:00:38.000 --> 0:00:42.280 correspondent Michelle jem Risco, who joins us from the District 0:00:42.280 --> 0:00:44.879 of Columbia. Good of you to make time for us. 0:00:45.120 --> 0:00:46.600 Always say thank you guys. 0:00:46.640 --> 0:00:49.159 So at least they're talking, right, I mean, what do 0:00:49.200 --> 0:00:50.919 we know about what was said in detail? 0:00:51.600 --> 0:00:53.960 Yeah, at least they're talking is the key here. I mean, 0:00:54.000 --> 0:00:57.000 this call was more than four months in the making. 0:00:57.080 --> 0:01:00.639 Really started where they finished off in November at Woodside 0:01:00.640 --> 0:01:05.200 in California, talking about the meaning of actually maintaining communications, 0:01:05.319 --> 0:01:08.080 especially at the leader level. So they had a laundry 0:01:08.120 --> 0:01:10.560 list of topics. In fact, it was only after we 0:01:10.640 --> 0:01:13.000 got readouts from both sides, from the US side and 0:01:13.040 --> 0:01:14.760 from the China side, And of course those are a 0:01:14.800 --> 0:01:17.520 little bit different in terms of interpretation of how the 0:01:17.560 --> 0:01:20.560 meeting went, the priorities. But it was only after all 0:01:20.600 --> 0:01:23.240 that that I, you know, put on a piece of paper. Okay, 0:01:23.280 --> 0:01:25.720 here are the ones the issues they talked about where 0:01:25.720 --> 0:01:28.240 there are areas of cooperation. Here are the areas where 0:01:28.240 --> 0:01:31.880 there are attentions. And really the lists are similar in lengths. 0:01:31.920 --> 0:01:34.120 I would say the weighty ones are more on the 0:01:34.120 --> 0:01:38.119 tension side. They talked a lot about tariffs and export controls. 0:01:38.560 --> 0:01:41.560 The China side thinks that there are so called endless 0:01:41.640 --> 0:01:45.200 restrictions on tech sector from the US. Their data security 0:01:45.200 --> 0:01:49.000 concerns of TikTok came up, as you mentioned, election interference, 0:01:49.400 --> 0:01:52.000 and then a range of geopolitical issues South China Sea, 0:01:52.440 --> 0:01:55.240 you know, support for Russians defense industrial base, that's really 0:01:55.240 --> 0:01:58.240 concerning on the US side, Taiwan, Hong Kong. I mean, 0:01:58.240 --> 0:02:01.400 the list goes on and on cooperation side, I mean 0:02:01.400 --> 0:02:05.320 they're looking to kind of advance some progress out of 0:02:05.360 --> 0:02:10.040 those meetings in California and the fall, especially on combating 0:02:10.040 --> 0:02:11.320 sentinel and drug trafficking. 0:02:11.320 --> 0:02:13.200 Then yeah, let's talk a little bit more about that, 0:02:13.240 --> 0:02:15.920 because I think the state media in China is actually 0:02:15.960 --> 0:02:19.679 portraying this as a kind of conciliatory stance taken by 0:02:19.800 --> 0:02:23.200 President She not with a lot of examples of it, 0:02:23.280 --> 0:02:25.040 but it seems like it's in contrast to what we 0:02:25.480 --> 0:02:29.640 heard before. And in fact, the People's Daily also called 0:02:29.680 --> 0:02:33.120 for improved tie. So that's the general thrust. What would 0:02:33.120 --> 0:02:35.320 the you know, if we had, if we had, let's say, 0:02:35.560 --> 0:02:39.200 a softer, gentler communist party, what would the US most 0:02:39.280 --> 0:02:40.000 like to see here? 0:02:41.480 --> 0:02:43.800 Well, I think they would most like to see you. 0:02:44.000 --> 0:02:46.000 Top of the list in terms of cooperation is that 0:02:46.280 --> 0:02:49.000 further progress and drug trafficking. They've talked to the US, 0:02:49.040 --> 0:02:53.720 Asians talked about wanting to see more cooperation, further signs 0:02:53.760 --> 0:02:57.040 that Chinese are cracking down on drug producers and what 0:02:57.080 --> 0:03:00.320 they call precursor chemicals to fentanyl, which of course is 0:03:00.320 --> 0:03:03.040 is coming in to Mexico and then and coming over 0:03:03.080 --> 0:03:05.760 the border. And so that is that was high on 0:03:05.800 --> 0:03:07.600 the list of November and remains high on the list 0:03:07.600 --> 0:03:09.840 in terms of trying to find ways of cooperation. I 0:03:09.840 --> 0:03:13.720 think there also one burseoning issue which is really interesting 0:03:13.840 --> 0:03:17.800 is artificial intelligence risks. Now we saw a resolution of 0:03:17.800 --> 0:03:21.320 the UN approved last week that was co sponsored by 0:03:21.840 --> 0:03:24.920 many countries, over one hundred countries, including China, but was 0:03:24.919 --> 0:03:28.200 written by the US, and it was all about just 0:03:28.280 --> 0:03:31.840 kind of finding ways to share information around AI. Not 0:03:32.000 --> 0:03:35.200 so popular a discussion when you're talking at the same 0:03:35.280 --> 0:03:40.520 time about the US trying to restrict data security issues 0:03:40.560 --> 0:03:45.440 and finding many reasons to restrict data going into China 0:03:45.480 --> 0:03:47.720 from the US and trying to protect American data as 0:03:47.720 --> 0:03:48.160 they see it. 0:03:48.280 --> 0:03:50.480 So, Michelle, from what I understand, the White House also 0:03:50.600 --> 0:03:53.720 hinted at a pending decision on tariffs. I mean, what 0:03:53.720 --> 0:03:57.120 do we know about this? Are there areas of specificity? 0:03:58.000 --> 0:03:59.960 Yeah, that is a tricky one, Doug, because that is 0:04:00.120 --> 0:04:02.360 something that we have been waiting for on the heels 0:04:02.400 --> 0:04:06.120 of some other announcements they've made around data security and 0:04:06.840 --> 0:04:10.240 Chinese cranes and other issues earlier this year. We have 0:04:10.320 --> 0:04:13.240 been waiting for those potential revisions to what they call 0:04:13.280 --> 0:04:15.120 the three oh one tariffs, the tariffs that were put 0:04:15.160 --> 0:04:19.400 in under in the Trump administration, and the read has 0:04:19.440 --> 0:04:21.240 been for quite some time that we don't know when 0:04:21.240 --> 0:04:24.400 it's coming, but that we do expect the Biden administration 0:04:24.520 --> 0:04:27.560 to maintain those tariffs and maybe even enhance them in 0:04:27.600 --> 0:04:30.520 some way, and sort of they've signaled that they want 0:04:30.560 --> 0:04:32.919 to kind of update them for the next generation, to 0:04:33.000 --> 0:04:35.920 kind of put finer points on certain areas of tariffs 0:04:35.920 --> 0:04:39.799 that will kind of match the US goal of trying 0:04:39.839 --> 0:04:45.200 to counter China's tech issues and trying to protect again 0:04:45.560 --> 0:04:47.200 data security for Americans. 0:04:47.200 --> 0:04:48.320 So we don't know. 0:04:48.360 --> 0:04:51.720 We know that it came up the White House booksman 0:04:51.800 --> 0:04:54.680 John Kirby today and the briefing was saying the three 0:04:54.760 --> 0:04:57.200 oh one tariffs did come up, but or excuse me, 0:04:57.240 --> 0:04:58.960 they did not come up. I'm getting confused with the 0:04:59.000 --> 0:04:59.760 TikTok issue. 0:05:00.120 --> 0:05:00.560 Yeah, did. 0:05:01.000 --> 0:05:04.279 They did talk. Us did talk in broad strokes about 0:05:04.760 --> 0:05:07.440 the needs to kind of keep up some of these 0:05:07.480 --> 0:05:10.039 tariffs and export controls, which, as I say, was not 0:05:10.320 --> 0:05:12.320 of course popular with President she at this time. 0:05:12.839 --> 0:05:14.599 You must have been reading my mind because I wanted 0:05:14.640 --> 0:05:17.440 to ask you about TikTok. I know that we can't know. 0:05:17.839 --> 0:05:19.880 We all wish that we could fly on the wall 0:05:19.920 --> 0:05:24.080 in those discussions or on the phone call between the two. 0:05:24.279 --> 0:05:27.839 I mean so many things. It's hard for China in 0:05:27.880 --> 0:05:30.080 a sense to agree to what the US wants. I mean, 0:05:30.360 --> 0:05:33.800 China simply cannot come out and say, Okay, well we'll 0:05:33.800 --> 0:05:37.159 go slow on tech development. You know, you wouldn't expect 0:05:37.160 --> 0:05:40.640 them to say that it's impossible, and on TikTok, you know, 0:05:40.760 --> 0:05:44.480 to sell it. It seems like a tall order. I mean, 0:05:44.520 --> 0:05:46.480 what do you imagine they discussed about TikTok? 0:05:47.320 --> 0:05:49.680 Yeah, I think this one is more kind of a 0:05:49.720 --> 0:05:53.440 reiteration of positions they talk a lot about. Okay, yeah, 0:05:53.480 --> 0:05:56.160 we know we disagree on things like Taiwan, and we 0:05:56.200 --> 0:05:58.640 know we disagree on things like TikTok, and we know 0:05:58.720 --> 0:06:01.480 we disagree on you know, how much the US might 0:06:01.520 --> 0:06:04.599 try to apply export controls and China from the other side, 0:06:04.600 --> 0:06:07.640 and both sides are angry at the other on those issues. 0:06:08.000 --> 0:06:10.960 But they do see value, the Biden administration says in 0:06:12.120 --> 0:06:14.599 at least explaining yourself, you know, and we've heard this 0:06:14.600 --> 0:06:18.000 from National Security Advisor Jake Sullivan, that they should be 0:06:18.040 --> 0:06:21.200 able to He talks about having a sustainable China policy 0:06:21.760 --> 0:06:24.560 is about holding multiple truths at the same time and 0:06:24.600 --> 0:06:27.039 working to reconcile those truths with the other side. So 0:06:27.080 --> 0:06:30.479 they see value in sending cabinet officials over to Beijing 0:06:30.640 --> 0:06:34.760 consistently and explaining what's coming, even if what's coming is 0:06:34.800 --> 0:06:36.960 then a hit on nose or in the form of 0:06:36.960 --> 0:06:42.000 export controls or something else that might restrict China's economic 0:06:42.080 --> 0:06:42.760 rise in some way. 0:06:42.920 --> 0:06:46.080 Yeah, and from a president chief's perspective in the background, 0:06:46.320 --> 0:06:49.240 the fact that President Biden is facing re election and 0:06:49.440 --> 0:06:52.720 wonder if that was kind of suggested in any way, Joe, 0:06:52.800 --> 0:06:55.320 I wish you the best or whatever was said, Michelle, 0:06:55.520 --> 0:06:59.279 Thank you so much, Bloomberg White House correspondent Michelle jem 0:06:59.360 --> 0:07:02.599 risco us as we took a close look at the 0:07:02.600 --> 0:07:05.680 phone call today between Presidents Biden and She, their first 0:07:05.720 --> 0:07:16.000 since November. Let's get to Singapore next in Our guest 0:07:16.120 --> 0:07:20.200 is Mark Cudmore, Bloomberg m Live Macro Strategistics focuses on 0:07:20.520 --> 0:07:24.200 the foreign exchange rates markets, and we're going to talk 0:07:24.240 --> 0:07:27.040 about what we heard today from two Fed officials who 0:07:27.120 --> 0:07:31.520 happened to be voters on the Monetary Policy Committee at 0:07:31.600 --> 0:07:34.480 least for this year, and they are still, my friend, 0:07:35.120 --> 0:07:37.960 expecting three rate cuts in twenty twenty four. What is 0:07:38.080 --> 0:07:40.920 very interesting, Mark, is that the market seems to be 0:07:41.000 --> 0:07:44.120 expecting fewer rate cuts than the Fed. Why do you 0:07:44.280 --> 0:07:45.800 think we're getting this disconnect? 0:07:46.760 --> 0:07:49.520 Well, I just find that both the markets and the 0:07:49.520 --> 0:07:52.240 FED just ridiculous. At the moment. There's no way we're 0:07:52.280 --> 0:07:55.400 gonna get three right cuts. The economy is way too strong. 0:07:55.440 --> 0:07:58.680 There's no justification for any rate cuts at all at 0:07:58.680 --> 0:07:59.960 the moment. The only way you're going to get right 0:08:00.080 --> 0:08:03.520 cuts is if you have a severe deterioration in the 0:08:03.600 --> 0:08:05.360 US economy. And I'm just not saying it's going to 0:08:05.400 --> 0:08:07.800 cause that at the moment. I know that the FED 0:08:08.040 --> 0:08:10.560 is desperate to cut, and that's fueling part of the problem. 0:08:10.760 --> 0:08:13.000 They kind of gave that signal December. I feel they 0:08:13.080 --> 0:08:16.520 repeated the twenty twenty one policy error. You know, Jerome 0:08:16.560 --> 0:08:19.760 Powell made very clear that despite the former rhetoric, he 0:08:19.840 --> 0:08:23.160 basically wants to be Arthur Burns not Vulcar, and he 0:08:23.200 --> 0:08:25.560 wants to fuel another inflationary bubble. So that's what we 0:08:25.600 --> 0:08:28.000 got through the December message. He reiter around that in March, 0:08:28.560 --> 0:08:31.280 and I know they're inclined to try cutting one. Maybe 0:08:31.320 --> 0:08:34.360 they'll get away with one before they'll be proven what 0:08:34.480 --> 0:08:37.080 folly that is, and I'll say something else. Not only 0:08:37.080 --> 0:08:39.400 do I think it's very unlikely that we get more 0:08:39.440 --> 0:08:42.160 than one rate cut, if we even get one, but 0:08:42.240 --> 0:08:44.760 I think it's more likely. I know it's the extreme 0:08:44.960 --> 0:08:47.000 that we'd end out getting one hundred and fifty rather 0:08:47.040 --> 0:08:49.040 than just fifty. And what I mean by that is 0:08:49.040 --> 0:08:52.319 the only justification for getting more than one rate cut, 0:08:52.480 --> 0:08:55.480 if even one, is because you've got a severe decline 0:08:55.480 --> 0:08:57.199 in the US economy, in which case the Fed will 0:08:57.200 --> 0:08:58.920 be panicking and cutting rights stratigally. 0:08:59.480 --> 0:09:02.520 We would possibly be cutting grades not because of strong 0:09:02.559 --> 0:09:06.040 economic growth or lack of it, but more because inflation 0:09:06.160 --> 0:09:08.439 is coming down. And you have to admit mark the 0:09:08.880 --> 0:09:12.040 PCE numbers that the Fed looks at most closely do 0:09:12.120 --> 0:09:13.800 have a two hand all two point five and two 0:09:13.840 --> 0:09:16.840 point eight percent, And with the FED funds rate at 0:09:16.880 --> 0:09:18.560 five and a half percent, does it not have a 0:09:18.559 --> 0:09:20.839 little bit of room to move to the downside? Your answer, 0:09:20.920 --> 0:09:24.040 right no is no. 0:09:24.640 --> 0:09:29.160 So is that PC that we're celebrating has come down 0:09:29.200 --> 0:09:31.960 to this level. It's still above target, I think importantly, 0:09:32.000 --> 0:09:34.720 But not only that, we know that we're through the 0:09:34.840 --> 0:09:39.200 disinflationary way from base effects, so we always knew that 0:09:39.240 --> 0:09:42.320 inflation was going to come much softer into the first 0:09:42.400 --> 0:09:43.719 quarter this year, which is part of the reason why 0:09:43.760 --> 0:09:45.160 the FED was hoping to be able to cut rights. 0:09:45.400 --> 0:09:47.720 We've now kind of reached near the end of that trend, 0:09:47.760 --> 0:09:49.920 so base effects will start being less supportive for this 0:09:49.960 --> 0:09:52.520 disinflation trend. And now we got oil prices way higher, 0:09:52.520 --> 0:09:54.800 and we've got a strong economy that seems to be reaccelerating. 0:09:55.000 --> 0:09:57.120 So now the answer is most definitely no. I mean, like, 0:09:57.160 --> 0:09:59.160 this is where we're we if we're not at the 0:09:59.160 --> 0:10:02.120 trough in a in core PC where we're pretty close 0:10:02.160 --> 0:10:04.920 to it, and it's where with the trough, member is 0:10:04.960 --> 0:10:07.160 still where above target. So this is an economy of 0:10:07.280 --> 0:10:09.680 just saying, hey, wait a second monetary policy is still 0:10:09.679 --> 0:10:11.680 too loose, so why would you ease it further? You 0:10:11.679 --> 0:10:12.520 need to tighten it more. 0:10:12.559 --> 0:10:15.439 Well, can you help me understand why or what may 0:10:15.520 --> 0:10:18.199 explain the heads inclination to want to cut And I'm 0:10:18.200 --> 0:10:20.760 wondering whether or not it's something underneath the hood here, 0:10:20.880 --> 0:10:24.720 something in the market where they're trying to stay true 0:10:24.720 --> 0:10:27.280 to that course as a way of alleviating stress down 0:10:27.320 --> 0:10:29.680 the road, somewhere in the credit market. Is that possible? 0:10:30.320 --> 0:10:32.600 Yeah, yeah, So I think there's a there's a few expansions. 0:10:32.600 --> 0:10:34.439 It's a great question. So I think there's a few expansions. 0:10:34.600 --> 0:10:36.240 Let's let's go to that. The eleph of the room, 0:10:36.320 --> 0:10:38.160 not of people think that there's politics involved in this, 0:10:39.000 --> 0:10:41.240 maybe maybe not. I don't have enough to spec I 0:10:41.320 --> 0:10:43.200 ignore that. But then there's two other issues. I think 0:10:43.200 --> 0:10:45.120 There's one is you know where they were at the 0:10:45.160 --> 0:10:47.360 economy and it fairness to them. I think that a 0:10:47.480 --> 0:10:50.800 lot of the metrics for judging the strength US consumer 0:10:51.040 --> 0:10:53.400 have been completely broken in recent years, not just because 0:10:53.400 --> 0:10:55.920 the pandemic distortions, but behaviors changed, and then we all 0:10:55.960 --> 0:10:58.480 these have these buy now, pay later models, which means 0:10:58.520 --> 0:11:00.920 that the metrics are used to would say that the 0:11:00.960 --> 0:11:03.920 consumers should have fallen off a cliff around the start 0:11:03.920 --> 0:11:06.480 of this year end of last year, in which case 0:11:06.480 --> 0:11:08.000 the FED should have been worried. But the consumer has 0:11:08.040 --> 0:11:09.839 clearly not fallen off cliff and the economy is still 0:11:09.920 --> 0:11:12.360 very strong, so that's not come through. So I understand 0:11:12.360 --> 0:11:13.959 why they might have been worried, but they should now 0:11:14.040 --> 0:11:16.640 change their mind. So I understand why they did the 0:11:16.679 --> 0:11:19.280 conversation in December, but it's time to now change their 0:11:19.280 --> 0:11:20.840 mind in that. And the final thing is are they 0:11:20.840 --> 0:11:23.280 worried about a credit crisis? Are they word of commercial 0:11:23.320 --> 0:11:26.559 real estate maybe, but I'm just not saying that it's 0:11:26.559 --> 0:11:29.640 being systemic. Yeah. Sure, it's gonna be problematic for certain regions, 0:11:29.640 --> 0:11:33.040 certain regional banks will suffer. But you know, there's thousands 0:11:33.040 --> 0:11:35.000 of banks in the US and they are far too many, 0:11:35.200 --> 0:11:37.200 so I think some regional banks can sadly go and 0:11:37.240 --> 0:11:38.080 it won't be systemic. 0:11:38.600 --> 0:11:41.760 So, Mark yours is a very bullish view. You're quite 0:11:41.760 --> 0:11:43.040 bullish on Yeah. 0:11:43.080 --> 0:11:45.520 I look, since the December FED. I think the December 0:11:45.520 --> 0:11:48.040 FED was just was mind blowing. I did not expect it. 0:11:48.200 --> 0:11:50.720 I actually wrote a piece that day going there's no 0:11:50.800 --> 0:11:52.800 way the FED will repeat the errors of twenty twenty 0:11:52.840 --> 0:11:57.520 one by being super dubbish while reiterating economic ecoptimism. I said, 0:11:57.559 --> 0:11:59.120 the only reason they could be ubbish is because they 0:11:59.160 --> 0:12:01.640 express concern about the economy, and instead they were like, 0:12:01.720 --> 0:12:04.040 we think growths fine, and yet we still want to 0:12:04.040 --> 0:12:05.120 cut and therefore. 0:12:04.800 --> 0:12:08.240 But a brief reason, Mark Bush, you're bullish on the economy. 0:12:08.280 --> 0:12:10.080 Clearly are you bullish on stocks here? 0:12:10.520 --> 0:12:12.360 I'm not even super bullish and the economy. I'm very 0:12:12.360 --> 0:12:15.520 bullish stocks globally. I'm always less excited about US stocks 0:12:15.520 --> 0:12:17.960 incorrectly so, clearly because they always keep on out performing. 0:12:18.080 --> 0:12:20.640 I just think because they're more expensive, but look, I wouldn't. 0:12:20.800 --> 0:12:23.040 I'm bullish stocks everywhere. I just think there are better 0:12:23.080 --> 0:12:26.000 opportunities elsewhere. I've said that before and been wrong, but 0:12:26.040 --> 0:12:28.320 I'm very bullush stocks everywhere Sincember. I don't think the 0:12:28.360 --> 0:12:31.440 economy is is. I think the economy is perfectly fine. 0:12:31.679 --> 0:12:34.800 But the point is is that the economy is saying 0:12:34.840 --> 0:12:36.480 we can cope with the level of rates the moment, 0:12:36.679 --> 0:12:38.800 and therefore earnings aren't going to suffer. The consumer is 0:12:38.800 --> 0:12:40.960 going to keep spending their markets still strong, companies are 0:12:41.000 --> 0:12:43.079 still going to make a lot of money. So yes, stocks, 0:12:43.520 --> 0:12:45.319 I'm very bull of stocks from a macro point of 0:12:45.360 --> 0:12:47.160 view for a good while. Yeah, I just do not 0:12:47.640 --> 0:12:48.920 anything on the horizon to change that. 0:12:49.000 --> 0:12:51.680 So I was going to ask about strong dollar week 0:12:51.760 --> 0:12:54.360 in and possible intervention on the part of the monetary 0:12:54.400 --> 0:12:56.520 authority in Japan, but we're out of time. We'll have 0:12:56.559 --> 0:12:58.600 to save that for later. Mark, it's always a pleasure. 0:12:58.920 --> 0:13:01.600 Thanks for making time for up. Mark Cudmore Bloomberg m 0:13:01.640 --> 0:13:05.520 live macro strategist. He focuses on the foreign exchange and 0:13:05.840 --> 0:13:07.200 the rates markets. 0:13:14.280 --> 0:13:14.360 Well. 0:13:14.440 --> 0:13:17.520 Joining us now is Michael Leon chief investment officer at 0:13:17.559 --> 0:13:22.000 Foundation Asset Management. So, Michael, we just heard about how 0:13:22.360 --> 0:13:25.719 strong economic news in the US is causing some concerns 0:13:25.720 --> 0:13:29.240 that will be higher for longer on rates. Is it 0:13:29.320 --> 0:13:31.760 such now that good news is bad news. 0:13:33.480 --> 0:13:37.920 To certain extent. Yes, rising interest rates or higher for 0:13:38.000 --> 0:13:42.679 longer interest rates is a tightening bias for Asian equities. 0:13:44.200 --> 0:13:46.720 But havn't said that, you know, given the valuation is 0:13:46.760 --> 0:13:50.880 so low right now, you have two different driving forces 0:13:50.920 --> 0:13:51.439 behind it. 0:13:53.120 --> 0:13:55.679 When you say two driving forces, what's the other one? 0:13:55.679 --> 0:13:58.240 I mean, if we can talk about higher US interest rates, 0:13:58.240 --> 0:14:02.440 what's the other driving force? Valuation? Yeah? 0:14:02.520 --> 0:14:05.000 I mean, you know, I mean, for example, MS see 0:14:05.160 --> 0:14:08.560 China training eight times learnings for this year, and Japan 0:14:08.640 --> 0:14:12.679 about twenty five, Indian about twenty seven s and P 0:14:12.840 --> 0:14:16.760 five hundred and about twenty. So it's really about half 0:14:17.160 --> 0:14:21.239 of the evaluation of the major markets. 0:14:21.920 --> 0:14:25.840 Yeah. Well, we always have overhangs in markets. Obviously we're 0:14:25.840 --> 0:14:29.240 worried now about higher for longer in the West. Here 0:14:29.320 --> 0:14:33.720 we've had policy has been one very deep consideration for 0:14:33.800 --> 0:14:35.920 whether or not you want to buy Chinese in Hong 0:14:36.000 --> 0:14:39.520 Kong stock. So how do you gauge policy at the moment, 0:14:39.680 --> 0:14:41.760 and you know, with valuations where they are, are you 0:14:41.760 --> 0:14:44.680 seeing a green light policy? 0:14:45.400 --> 0:14:50.119 Impulse is the difficult one to judge over my thirty experience, 0:14:50.960 --> 0:14:54.840 I do not consider fig running policies will be in 0:14:54.880 --> 0:15:00.520 the investment strategy, especially given the longer term had wins 0:15:00.520 --> 0:15:05.680 of Chinese economy, you know, namingly, you know, demographics, probably 0:15:05.720 --> 0:15:08.600 the leveraging and so and so forth. So that's probably 0:15:08.680 --> 0:15:11.160 much longer driving force behind me. In the short run. 0:15:11.800 --> 0:15:14.160 I'm sure a policy going to come out here and 0:15:14.200 --> 0:15:17.480 there to support, but probably going to change the trajectory here. 0:15:17.640 --> 0:15:19.880 When you look at the deflation story in China, I 0:15:19.880 --> 0:15:22.800 know we're going to get to the official inflation reports 0:15:23.160 --> 0:15:26.120 next week. Is this something that's going to be persistent? 0:15:26.160 --> 0:15:28.880 Do you think is China going to be dealing with 0:15:29.080 --> 0:15:31.880 maybe what Japan dealt with for for a very long time, 0:15:31.920 --> 0:15:34.040 beginning with late nineteen eighties. 0:15:35.040 --> 0:15:37.120 Well, if I have a crystal ball, I would say 0:15:37.240 --> 0:15:42.400 yes to that question. The you know, I mean you 0:15:42.440 --> 0:15:47.360 would have volatility in the cpis in China. But the 0:15:47.440 --> 0:15:52.320 trajectory is, you know, demand is slowing people and aging 0:15:53.760 --> 0:15:59.560 propertly is more abandoned, you know, in supply, I don't 0:15:59.560 --> 0:16:02.520 think there're as a rush. You know, I fee will 0:16:02.520 --> 0:16:04.560 pay out prices because they think price is going to 0:16:04.640 --> 0:16:08.320 go up in future. Right, But given the situation we're 0:16:08.360 --> 0:16:11.120 in today, there's just no rush to buy everything today. 0:16:11.440 --> 0:16:13.920 This is very interesting because you started off as saying 0:16:13.960 --> 0:16:18.240 that low valuations were a consideration, and yet when we 0:16:18.360 --> 0:16:21.760 mentioned one challenge possible challenge policy, you say, hey, they're 0:16:21.760 --> 0:16:24.760 even bigger challenges. You know, the demographics is one and 0:16:24.800 --> 0:16:28.040 the property crisis is another. So how do you actually 0:16:28.160 --> 0:16:30.880 sit on the line between bullish and bearish? Are you 0:16:30.920 --> 0:16:31.840 bullish or are you not? 0:16:32.560 --> 0:16:36.280 Well, that's a very good question, Brian. At Foundation, we 0:16:36.520 --> 0:16:41.240 more of long short equity per se. There's always positives 0:16:41.240 --> 0:16:46.960 and negatives, especially given the headwinds we have in China. 0:16:47.400 --> 0:16:50.600 Actually stronger companies when we look at them, actually the 0:16:50.800 --> 0:16:54.840 holding up okay, But in this challenging environment you have 0:16:55.040 --> 0:17:00.600 many companies the weaker peers actually suffering a lot. So yes, 0:17:00.920 --> 0:17:04.760 it's not our right bullish or parish. It's more of 0:17:04.880 --> 0:17:07.360 a where you see from a bottom up point of view, 0:17:07.920 --> 0:17:10.840 where you see the values and versus a company probably 0:17:10.880 --> 0:17:11.240 not going to. 0:17:11.240 --> 0:17:13.760 Do You were talking a moment about volatility and I'm 0:17:13.760 --> 0:17:16.920 wondering whether you're attempted to abandon your role as investor 0:17:17.000 --> 0:17:20.480 and take on the role of trader and exploit that 0:17:20.640 --> 0:17:24.520 volatility and maybe make short term trades rather than investing 0:17:24.560 --> 0:17:26.800 for the long term. Is that Is that a viable 0:17:26.800 --> 0:17:27.840 strategy for China? 0:17:28.880 --> 0:17:31.920 It maybe is a viable strategy from for the others, 0:17:31.920 --> 0:17:35.920 but not for us. We're bottom up fundamental guys. Our 0:17:36.000 --> 0:17:39.520 horizon is number in numbers of years rather the number 0:17:39.520 --> 0:17:42.600 of days. Well, for example, I mean, let's take a 0:17:42.600 --> 0:17:44.919 look at the EV right, I mean, yesterday show me 0:17:45.040 --> 0:17:48.480 is pre order was very very strong. Stock went up, 0:17:48.600 --> 0:17:51.280 but at the same time, I don't want to name names, 0:17:51.320 --> 0:17:55.240 but you know, the usual suspects. Some shares actually went 0:17:55.280 --> 0:18:01.320 down yesterday in the EV space. So the JET forecasts 0:18:01.320 --> 0:18:05.600 for global EV demand is about twenty million globally this year. Okay, 0:18:05.600 --> 0:18:10.240 Sara seventeen million this year. But China alone the production 0:18:10.359 --> 0:18:15.560 capacity is twenty million. Okay, there's a massive oversupply on 0:18:15.600 --> 0:18:19.320 the horizon. In the end, there's an eguity investor. You 0:18:19.480 --> 0:18:22.720 prefer a business not only can sell well, and also 0:18:22.800 --> 0:18:25.600 can sell well at the good price, good margins, and 0:18:25.680 --> 0:18:29.040 in this environment, even the ev not everybody gonna be 0:18:29.080 --> 0:18:30.360 happy at the end of the day. 0:18:30.560 --> 0:18:32.919 So, Doug, you know, Michael is very interesting because to 0:18:33.000 --> 0:18:35.600 my question, are you bullish or bearish? You know what 0:18:35.640 --> 0:18:37.200 his answer was, Yes. 0:18:38.320 --> 0:18:38.840 I'm both. 0:18:39.680 --> 0:18:42.320 Yeah. I mean he's really looking through the markets. And 0:18:42.520 --> 0:18:44.880 I find this other line here from one of your 0:18:44.960 --> 0:18:49.920 themes to be kind of intriguing. You like PCs over smartphones? Wow, 0:18:50.119 --> 0:18:51.240 lay that out for us. 0:18:51.240 --> 0:18:54.919 All right, Again, it's probably come from the competition. A 0:18:54.960 --> 0:18:59.080 PC is not rocket science. I mean, during the COVID 0:18:59.480 --> 0:19:02.960 the global people work from home, a lot of PCs 0:19:03.000 --> 0:19:05.879 being bort during that time. But having said that, for 0:19:05.840 --> 0:19:08.360 the last two years wins row slump. It's a very 0:19:08.400 --> 0:19:13.480 cyclical business. Now we come out this PC cycle, replacement 0:19:13.560 --> 0:19:16.360 is coming in again or happening again for next one 0:19:16.400 --> 0:19:19.840 or two years, not only AI driven PCs, but just 0:19:20.040 --> 0:19:24.520 general piece replacement is coming in. For the smartphone. It 0:19:24.640 --> 0:19:28.760 is very difficult because there are so many smallphone makers. Yeah, 0:19:28.840 --> 0:19:32.200 and for aipower smartphones, we're a little further out. 0:19:32.440 --> 0:19:35.240 Well, that's interesting that you bring up artificial intelligence because 0:19:35.280 --> 0:19:37.440 we were talking a moment ago about this phone call 0:19:37.480 --> 0:19:40.639 that took place between Presidents Biden and ch earlier, and 0:19:40.680 --> 0:19:43.600 I think from the China side, just a little bit 0:19:43.600 --> 0:19:47.000 of criticism at the restrictions that the Biden administration has 0:19:47.119 --> 0:19:51.680 placed on access to some of this most sophisticated high 0:19:51.760 --> 0:19:54.560 technology equipment. Do you think do you have confidence in 0:19:54.640 --> 0:19:57.480 China's ability, given the world that we're living in right now, 0:19:57.480 --> 0:20:02.040 to kind of cultivate its own high technology I want 0:20:02.080 --> 0:20:04.000 to use the term sector. I don't even know that 0:20:04.000 --> 0:20:07.920 that's right. Semiconductors clearly are going to be an issue 0:20:08.200 --> 0:20:11.000 and where AI is concerned, do you have confidence in 0:20:11.080 --> 0:20:16.240 China's ability to maybe create cultivate a homegrown semiconductor industry. 0:20:17.640 --> 0:20:20.600 I have a confidence for China to do well in 0:20:20.760 --> 0:20:26.600 the traditional legacy notes, you know, the the lower attack semiconductions, 0:20:26.960 --> 0:20:32.159 the leading edge semiconductors. Given the restriction sanctions in place, 0:20:32.920 --> 0:20:38.800 that progress is being slowed. Eventually China might achieve that, 0:20:38.960 --> 0:20:41.600 but you know, maybe two x of the time. 0:20:42.080 --> 0:20:47.160