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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.

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Speaker 1: Daily we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We

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Speaker 1: welcome all of you worldwide. Good morning to Bloomberg Surveillance.

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Speaker 1: Right now, we've got futures at negative three eleven over

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Speaker 1: on the Bloomberg terminal, We're down over one thousand Dow

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Speaker 1: points over the last eighteen hours or so. We are

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Speaker 1: thrilled to bring you this morning. Jeffrey, you of UBS

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Speaker 1: Wealth Management, of course with his wonderful ability on correlations

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Speaker 1: of market, particularly back to foreign exchange. Jeff let's start there.

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Speaker 1: What are the correlations in the market now that allow

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Speaker 1: you to be more equities? Well, right now, the lack

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Speaker 1: of correlations, you know, between what's going on in foreign

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Speaker 1: exchange markets, you know, for example, versus what's happening in

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Speaker 1: equities and thinking the fact that FX is ignoring this,

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Speaker 1: which tells you, especially if you look at the MFX

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Speaker 1: and the dollar, it's been discounting. Let's just say the

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Speaker 1: divergence between us and the rest of the world already.

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Speaker 1: So I think FX traders are not too fuss about

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Speaker 1: this dolly and down two big figures, you know from

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Speaker 1: the highs. Again, not too fuss about it. So again

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Speaker 1: reason to be not pessimistic, Jeff, I want to go

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Speaker 1: a little Matthew here right now, within the global leverage,

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Speaker 1: within the mysteries of the financial system, everybody, including Mr Tullub,

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Speaker 1: worries about tail risk. What are the distributions of the

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Speaker 1: financial system now and how exposed are those tail risks,

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Speaker 1: those so called fat tales out that lead to jump

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Speaker 1: conditions that lead to abrupt moves. I believe you're pretty

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Speaker 1: sanguine and that well, again they need to be more

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Speaker 1: specific about tail risk coming from. Where is it an

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Speaker 1: event risk that's in the price already or is this

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Speaker 1: just code for the likes of risk parity, risk control

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Speaker 1: other products out there where you have enforced the leveraging

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Speaker 1: you know, so leverage type structures, which is actually causing

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Speaker 1: vicious cycles in At this point, I think we need

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Speaker 1: to be clear about you know what Peter talked about earlier.

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Speaker 1: Is it a market structure issue or an event risk issue.

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Speaker 1: I think we're looking for technical issues and market structure

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Speaker 1: right now a bit too much and ignoring some of

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Speaker 1: the positive and negative issues in the markets right now.

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Speaker 1: So again focus on fundamentals. I don't worry too much

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Speaker 1: about the tail risks coming from market structures. We continue

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Speaker 1: to worry about the tail risks from events. But if

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Speaker 1: I guess the concern is that we have a numerous

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Speaker 1: events or risks, it's emerging markets, it's a dollar higher,

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Speaker 1: it's a concern about encycle in the US, it's the

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Speaker 1: and if they all come at the same time China,

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Speaker 1: they all come at the same time, could it be

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Speaker 1: the perfect storm? So there's not one catalyst, but all

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Speaker 1: these little bits coming together, absolutely and then the perfect storm.

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Speaker 1: Then people ask what is the safe haven? Right So

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Speaker 1: it's the safe haven the dollar, and people are asking

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Speaker 1: questions from clients already. Do you think China is actually

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Speaker 1: exacerbating the treasury sell off, you know as a counter

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Speaker 1: punching near to the trade wars and whatnot. Well, in

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Speaker 1: an environment where emerging markets are using reserves already and

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Speaker 1: you're seeing the data, of course they're not going to

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Speaker 1: have less flow to buy treasury. So again that should

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Speaker 1: be in the price. It's in the price of dollar

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Speaker 1: performance against emerging markets already, So again I wouldn't overplay

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Speaker 1: that angle. When the time comes, diversification should start to

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Speaker 1: do its job and the FED will react as well. Okay,

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Speaker 1: so what do you think the FED will do? I

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Speaker 1: know UBS have an outlier call right on the FED

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Speaker 1: probably having from here having having to stop hiking. Does

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Speaker 1: the Trump accusing them of being local change that? So

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Speaker 1: that's where we have to be very careful in terms

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Speaker 1: of if is the FED So the sake of argument,

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Speaker 1: you know, if they let's say, pause up ahead, are

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Speaker 1: they responding to political pressure domestically are they responding to data?

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Speaker 1: Let's focus on the data as much as possible. If

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Speaker 1: the market starts a second guest that then we may

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Speaker 1: have more issues about credibility. Jeff, I want to walk

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Speaker 1: your risk parity right now. I want you to explain

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Speaker 1: to our global audience what this phrase risk parity is

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Speaker 1: and why it may blow up with the correlations where

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Speaker 1: they are now between equities and thick income. So fundamentally,

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Speaker 1: you are targeting to rather than target and return framework,

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Speaker 1: You're you're targeting a volatility framework and deploying leverage at

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Speaker 1: the same time. So it starts to break down. And

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Speaker 1: that's the worry right now. When conventional diversification starts to do,

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Speaker 1: it stops doing its job. So you don't get the

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Speaker 1: positive diversification benefits from owning bonds in a leverage manner

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Speaker 1: for that matter. And the risk is the fear in

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Speaker 1: markets where I know what's been talked about the structure

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Speaker 1: is you get a correlated sell off where if equities

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Speaker 1: for and bonds for, it starts to accelerate. But I

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Speaker 1: think that's overplayed. In January it was shown ultimately risparity

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Speaker 1: didn't contribute aggressively to that. So you're this is critical.

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Speaker 1: You're not concerned about an overlay of risk parity damage

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Speaker 1: that leads to a greater volatility right now, So risk

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Speaker 1: parity intrinsically is not short volt It is leverage that

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Speaker 1: we need to distinguish leverage short vol versus leverage in

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Speaker 1: a volatility framework. These are completely separate, right, very good.

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Speaker 1: So it was like the Green Book of the International

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Speaker 1: Monetary Funds, Jeff for you there with a clinic. Take

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Speaker 1: Christmas charity right now with ubs we enjoy is it

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Speaker 1: once a year or twice a year that we go

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Speaker 1: to the land of avocado toast. I believe this once

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Speaker 1: a year. Okay, Well, here at Oppenheim our Funds, we

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Speaker 1: thank them for their commitment to Bloomberg on the economy,

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Speaker 1: Bloomberg Surveillance and all of John Farrell's various media properties,

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Speaker 1: which is a good way to bring in. Christian Momaney

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Speaker 1: can just say that we have a live audience Oppenheim

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Speaker 1: the Funds, and it didn't fill out until Krishna walked

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Speaker 1: into the room. They're not here for us, they're mostly

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Speaker 1: his his entourage, which is a paid audience. Christian mamany

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Speaker 1: ce io and had a fixed income here at Oppenheimer Funds.

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Speaker 1: What's your observation the keys from the last couple of

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Speaker 1: weeks in the price action, we've seen well, so the

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Speaker 1: correction was long in the making. When you have the

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Speaker 1: Fed talking about there are no neutral rates or we

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Speaker 1: are not close to neutral rates and we can keep going.

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Speaker 1: And when Trump is declaring victory that NAFTA was an

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Speaker 1: easy win and we're gonna show it to the Chinese,

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Speaker 1: that's a bad combination for the market. I think at

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Speaker 1: the end of the day, though the economy is doing

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Speaker 1: reasonably well, earning should be reasonably good. We have. We

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Speaker 1: still have an up trend still in place despite the correction.

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Speaker 1: We have seen these types of corrections before, so this

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Speaker 1: too shall pass. So it's a couple of things I

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Speaker 1: want to get into with you, whether you think rights

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Speaker 1: have repriced enough in treasuries and whether there are any

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Speaker 1: worrying signals coming from credit. So let's do both with

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Speaker 1: us now. Sure, so rates have definitely repriced. I think

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Speaker 1: the question for US is our rates going to three

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Speaker 1: and a half percent anytime soon? And my answer is

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Speaker 1: the likelihood is yes. Probability is probably uh, relatively low

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Speaker 1: at this point. So the as far as credit is concerned,

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Speaker 1: I think that is probably the strongest place in the

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Speaker 1: market right now. And I take a great deal of

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Speaker 1: comfort watching the credit markets even today after a massive correction,

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Speaker 1: and all year for that matter, credit spreads have been

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Speaker 1: relatively resilient, especially in the high yield market. And if

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Speaker 1: there's if there's going to be a significant correction in equities,

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Speaker 1: credit not showing any cracks, I think that would be

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Speaker 1: very unusual. The mathiness of this is the search for

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Speaker 1: fat tails in the idea of a jump condition. Some

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Speaker 1: would say we saw a jump condition in February. Those

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Speaker 1: that loaded the boat on what was a February eight

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Speaker 1: look pretty smart. Now that was just a correction congresion

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Speaker 1: most of the people, and I would suggest most of

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Speaker 1: the shareholders of Oppenheimer funds. It's a distant memory what

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Speaker 1: a real bear market is, isn't it. We don't remember

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Speaker 1: what negative eighteen percent is, do we? We We don't,

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Speaker 1: But for good reason that is the underlying trend really

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Speaker 1: has been very, very modest. So when you have two

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Speaker 1: growth rate, inflation not manifesting itself in any significant way,

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Speaker 1: a central bank that is accommodative, that's a good that's

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Speaker 1: a good combination expecting type corrections in that environment, I

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Speaker 1: think is relatively this is a coiled spring and alogy,

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Speaker 1: I mean, we're not being given the opportunity for the

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Speaker 1: coil spring unless John we sustained four GDP without an

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Speaker 1: inflation re element. Do you see treasury yields at three

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Speaker 1: eighteen right now in a ten year going much higher

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Speaker 1: than they are at the moment, Krishna, No, I don't.

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Speaker 1: I think if you kind of take a one year view,

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Speaker 1: our view would be that rates are lower in one

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Speaker 1: year's time rather than meaningfully higher from where they are.

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Speaker 1: So you think tens and thirties were vine right now,

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Speaker 1: I think tenth and thirties for long term investors are

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Speaker 1: extraordinarily goodbye at the moment. What than that mix of

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Speaker 1: a higher price ands picked a tenure in a lower yield.

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Speaker 1: What part of that will be in the real space

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Speaker 1: in one part will be in that squishy inflation space

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Speaker 1: above it. Well, so I think that's really the kind

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Speaker 1: of not the beauty, but I think that's really the

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Speaker 1: thing to watch today. That is, the rise in yield

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Speaker 1: has been entirely driven by real rates, belief in the economy,

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Speaker 1: and all that exactly. The fact that real rates have

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Speaker 1: risen sort of slows the economy down meaningfully in six

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Speaker 1: to nine months, and I think that will lead to

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Speaker 1: a rally and treasuries at something. This is a really

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Speaker 1: important point. Goes to Christian's work, but also Jeffrey, you

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Speaker 1: we mentioned earlier from us, because John, we've had uprise

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Speaker 1: in the real rate. It's a compensating factor that can

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Speaker 1: give you confidence out if you believe that story. But

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Speaker 1: you think this can be self limiting, essentially, that's what

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Speaker 1: you say in Christna, Oh yes it is. And and

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Speaker 1: throughout the cycle this has been self limiting. That is,

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Speaker 1: coming into two thousand and eighteen, we had a trillion

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Speaker 1: dollars worth of stimulus dropped in the economy. Economy accelerated

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Speaker 1: in a very very very rapid way. And uh, and

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Speaker 1: then we are talking about FED tightening and things like that.

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Speaker 1: That's all self regulatory, regular regulating mechanism. UH. In today's world,

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Speaker 1: when the trend growth rate is still two percent and

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Speaker 1: inflation is absent, you know, we will have lots of

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Speaker 1: ups and downs, but at the end of the day,

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Speaker 1: things are not going to change. One here, you make

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Speaker 1: the observation of what is happening in credit and what

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Speaker 1: is been happening in credit through eighteen. And there are

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Speaker 1: two observations you can make, and that two binary opinions

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Speaker 1: you can have. One is that you look at high

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Speaker 1: you and you say, everything's okay. The other is that

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Speaker 1: you look at investment gride and you say it's not.

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Speaker 1: What's handing an investment grade? And why is that so different? Well,

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Speaker 1: so investment grade, the issuance was meaningfully higher in investment

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Speaker 1: grade than it was in high yield. So I think

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Speaker 1: that technical consideration certainly drove widening in investment grade spreads.

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Speaker 1: But even investment grade spreads in the later half of

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Speaker 1: two thousand and eighteen into the third quarter, for example,

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Speaker 1: have done materially better, and even when they're widened, they

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Speaker 1: only widened marginally. So if you you know, with the

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Speaker 1: tightest the coming into the year was d basis points

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Speaker 1: spreads that went to a little over a hundred and ten.

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Speaker 1: Now we are back close to hundreds. So it's been

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Speaker 1: back and forth. We panic in the market because it's

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Speaker 1: a big move relative to that's the surveillance bre exclusive

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Speaker 1: momonty panics. But at the end of the day, the

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Speaker 1: move isn't that the move isn't that substantis this is

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Speaker 1: important because the conversation for the last thirty two seconds

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Speaker 1: has been entirely the real yield conversation. Your property tomorrow?

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Speaker 1: What time is it tomorrow? Quite often, oh probably tomorrow?

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Speaker 1: So well, Christian, very importantly here the Oppenheimer funds heritages

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Speaker 1: the international markets. Is this pullback again with dal future

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Speaker 1: is improving negative one versus negative three hundred ninety minutes

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Speaker 1: two hours ago? Is it an opportunity in international stocks?

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Speaker 1: Were they hammered yesterday or is it just a domestic story?

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Speaker 1: So clearly equities have gone down globally, but remember equities

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Speaker 1: International equities went down meaningfully lower long before the US

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Speaker 1: market crack. So if you look at valuations on a

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Speaker 1: global basis, international valuations are extraordinarily cheap. You look at

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Speaker 1: the emerging market valuation relative to the U S valuations,

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Speaker 1: Even with the sell off, I think international valuations remain

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Speaker 1: far more attractive than US. Doesn't mean US equities won't

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Speaker 1: come down, but I think for long term investors the

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Speaker 1: better opportunities internationally. I've heard a lot of people make

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Speaker 1: the big convergence call for equities. Can you make the

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Speaker 1: same call for the bond market. I'm looking at the

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Speaker 1: BODON treasury spread right now on a ten year maturity

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Speaker 1: of about two sixty five basis points. Can you make

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Speaker 1: the same code for convergence in fixed income? Well, there's

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Speaker 1: not going to be an equity convergence unless there is

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Speaker 1: a band convergence. And I think there will be a

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Speaker 1: band conversions coming in two thousand nineteen, and it will

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Speaker 1: be driven not typically as international economy is doing much better.

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Speaker 1: It will come from the U S economy starting to

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Speaker 1: slow down. The convert sense will be driven by US

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Speaker 1: lowness as opposed to acceloration in internationally kind I want

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Speaker 1: to touch on her next conversation is he I am

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Speaker 1: f right about global slowdown? Well, I am f is

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Speaker 1: right and in that things are slowing down and we

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Speaker 1: have probably seen the peak of the recent sport in

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Speaker 1: economic growth. So I think two thousand nineteen is going

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Speaker 1: to be lots slower than two th canvass the world

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Speaker 1: with Christian MoManI here at up and I'm her friends

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Speaker 1: John Farren I visiting at today in their studios down

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Speaker 1: down their beautiful studios. It's pretty fancy, you know. I

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Speaker 1: could get comfortable here. I'm thinking, can we come more often? Christian?

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Speaker 1: Would you welcome? You could do your could do your

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Speaker 1: other properties here. I'm a nice guy. Really never said that.

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Speaker 1: He does not say that about me. She is from

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Speaker 1: the University of Middletown, Connecticut. Dana Peterson was City Group

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Speaker 1: out of the Wesleyan University Economic Shop as well and

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Speaker 1: critically Dana Peterson with expertise at the FED on the

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Speaker 1: fiscal watch as well. Dana, wonderful to speak to you.

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Speaker 1: Where are we in the dynamic of all the debt

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Speaker 1: we're going to have to create to pay for our

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Speaker 1: deficit and what it means for the American economy. When

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Speaker 1: you see all the gloom, the reports chronic trillion dollar deficits,

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Speaker 1: how do you respond? Sure, absolutely, it seems like no

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Speaker 1: one's paying attention in Washington. Indeed, as we did have

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Speaker 1: the tax reform passed in December of last year, and

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Speaker 1: then also the Biparson Budget Act of eighteen earlier this year,

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Speaker 1: and certainly how the Republicans have already advanced UM legislation

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Speaker 1: for tax reform two point oh which would cost another

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Speaker 1: six and sixty billion UM. And when we look at this,

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Speaker 1: certainly the fiscal stimulus from the federal government is definitely

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Speaker 1: bolstering the U s economy. We're looking at probably three

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Speaker 1: pc growth to this year with at least seven tents

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Speaker 1: of contributed by fiscal stimulus, and the next year probably

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Speaker 1: around two point eight percent, but again around one percentage

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Speaker 1: point from fiscal stimulus. But over time this is going

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Speaker 1: to to really affect the economy in terms of outside debt,

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Speaker 1: as you mentioned um, certainly crowding out of business investment,

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Speaker 1: and even currently now we're seeing the Treasury, the US

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Speaker 1: Treasury responding to this with increased issuance. In fact, the

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Speaker 1: Treasury has increased its nominal UH note issuance and bond

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Speaker 1: issuance as a February of this year, and in the

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Speaker 1: second half of this year, we're probably looking at the

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Speaker 1: most debt issued ever, Danna Peterson. If growth is coming

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Speaker 1: from added fiscal stimulus, then what should be the real

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Speaker 1: interest rate level currently? If interest rates are moving because

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Speaker 1: people anticipate greater economic growth, well, I would like to

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Speaker 1: say that underlying growth is still quite strong. We're looking

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Speaker 1: at around two in a quarter percent and that's normably

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Speaker 1: about potential, which is probably you know, one in three

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Speaker 1: quarters percentage point. So the other eyeling economy is doing

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Speaker 1: very well despite the stimulus. But the set is is

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Speaker 1: normalizing rates so they're not responding to and overheating in

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Speaker 1: the economy, and the neutral rate is uh, you know,

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Speaker 1: I'm looking and looking at the different research of particularly

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Speaker 1: the Lobock Williams model is suggesting that the neutral rate

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Speaker 1: is in the range is at two point seven five.

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Speaker 1: She she did that without avoiding the art starting She's

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Speaker 1: just you know, but see here here's my point. Let

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Speaker 1: me just go back to this for a second. The

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Speaker 1: idea being that if everyone looks at the physical stimulus

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Speaker 1: because and then they say, oh, well, you know, the

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Speaker 1: federal government budget deficit and all this is, and that's

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Speaker 1: what's fueling the economy or getting us, you know, an

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Speaker 1: extra half a percent or an extra percent of GDP growth.

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Speaker 1: And then you get people that say, all right, so

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Speaker 1: why do interest rates move? They move either because there's

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Speaker 1: a lot of the inflation or because there is real

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Speaker 1: economic growth. So if you have this one time fiscal

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Speaker 1: stimulus that goes away, shouldn't rates then anticipate a lower

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Speaker 1: growth trajectory. So as a result, rates should actually be

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Speaker 1: going down. Well, rate should actually be rising if you're

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Speaker 1: anticipating lots of debt coming down the line. Indeed, for

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Speaker 1: the federal budget deficit was close to eight billion dollars

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Speaker 1: and then next year we're gonna be looking at a

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Speaker 1: trillion dollars and it's only going to get worse going forward.

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Speaker 1: So naturally rates should reflect that. And indeed, uh, you know,

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Speaker 1: when you look at a tenure yield, it's been lower

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Speaker 1: than what fundamentals would suggest. And you know, certainly now

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Speaker 1: that we're at three and a a quarter, that's probably more

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Speaker 1: in line with the expectations for for growth at least

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Speaker 1: the next few years and the tenure outlook for for

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Speaker 1: federal budget deficits. Danna, I want to get in troup

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Speaker 1: with Katherine Man. That's what our job is here this morning.

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Speaker 1: You're wonderful Chief Economists. Is President Trump right about feed independence?

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Speaker 1: Do we need a FED that's a little more politically sensitive? Well,

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Speaker 1: I think that's great. Actually wrote a couple of papers

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Speaker 1: about this, and history tells us that an independent set

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Speaker 1: is probably the best bet because when you had instances

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Speaker 1: of government, either Congress or presidents or even sometimes a

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Speaker 1: populist interfering with the fed's work, you get pretty bad outcomes.

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Speaker 1: And I think the important thing is that the FET

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Speaker 1: is not restricting policy to slow down and over the economy.

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Speaker 1: The FET is just normalizing, trying to create some monetary

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Speaker 1: policy space. And it's best if you don't have commentary

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Speaker 1: from those, uh you know, who are not within the feed.

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Speaker 1: And so FET independence is very important. I think we

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Speaker 1: look around the world, we see a number of cases

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Speaker 1: where uh, the central bank is not an attendant, and

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Speaker 1: you see rampant inflation and flower growth. Dana, thank you.

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Speaker 1: So Dana Peterson was City Group and update here more

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Speaker 1: towards fiscal and fixed incomes as as you would do

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Speaker 1: with the market move then economics him I want you

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Speaker 1: to bring in our esteem, guest, but there's two ideas

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Speaker 1: here that are really important. First, anybody out of the

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Speaker 1: combine at California San Diego is Wayne Matthew, Waste statistics

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Speaker 1: like James Hamilton's and time series analysis and all that stuff,

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Speaker 1: which is really cool. A bunch of they like grow

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Speaker 1: Nobel Laureates out there and in how things move. And

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Speaker 1: then you combine that with I think the gross misreporting

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Speaker 1: of the Chinese technology companies, including ten Cents. I make

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Speaker 1: jokes about it. So we finally have in front of

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Speaker 1: us a real authority on that consumer juggernaut in Asia,

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Speaker 1: in China and on ten Cent as well. Why don't

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Speaker 1: you want justin? Guest? Justin Leverenz is the director of

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Speaker 1: Emerging Market Equities portfolio manager of op and Heimer's Developing

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Speaker 1: Markets Fund and the Emerging Markets Innovators Fund, and he

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Speaker 1: joins us here at beautiful Oppenheimer Funds Studios. Thanks very

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Speaker 1: much for being with us, Justin. All right, as Tomas describing,

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Speaker 1: We're going to use this as a point for you

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Speaker 1: to talk a little bit about Chinese equities and in

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Speaker 1: particular ten Cents. I think just before we went on,

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Speaker 1: you said you've been buying ten Cent for how long?

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Speaker 1: Been in the main dynasty for years? Okay? What is

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Speaker 1: going on with that kind of commerce in China? And

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Speaker 1: I know in the fund you've also got Ali Baba

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Speaker 1: in a variety of other stocks. But what what's the

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Speaker 1: thesis for ten Cent for owning it? Now? Sure? Well,

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Speaker 1: the thesis for ten Cent is slightly different than commerce.

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Speaker 1: Commerce would be Ali Baba or Pindo Door or those companies,

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Speaker 1: some of which are related to wehe Chat, the super

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Speaker 1: app that ten Cent owns as a property to distribute.

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Speaker 1: Does everybody use wheat Chat in China? We Chat has

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Speaker 1: a billion subscribers, you know, so slight the smaller than

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Speaker 1: Facebook of course, but we're talking about one particular geography,

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Speaker 1: so you know, effectively all of organized China has whet Chat.

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Speaker 1: Is that something that they have already monetized completely? Absolutely not.

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Speaker 1: So if you think about what ten Cent was when

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Speaker 1: I invested twelve or thirteen years ago, was kind of

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Speaker 1: speculative bet that a large user base would eventually be monetized.

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Speaker 1: That got monetized in a way that I had not anticipated,

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Speaker 1: which will come to in the moment. I had anticipated

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Speaker 1: it was going to become a massive platform for advertising.

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Speaker 1: What it became was a massive platform from content. So

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Speaker 1: you know, this is the company with the largest music

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Speaker 1: of course, the company's going public at the moment, the

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Speaker 1: largest literature base, and really the core of the company

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Speaker 1: from profitability perspective is games. You know, the largest game

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Speaker 1: market in the world, and ten Cent complete dominates games.

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Speaker 1: Then four or five years ago they came out with

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Speaker 1: wheat Chat, which all of a sudden became a billion

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Speaker 1: of users, and is this super app platform that we've

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Speaker 1: never seen in the rest of the world that lots

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Speaker 1: of the ecosystem, and ten Cents invested in all of

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Speaker 1: those companies, whether it's j D or Pindo, a Door

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Speaker 1: or may Twin, d mping have invested in all those

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Speaker 1: companies which create distribution capabilities for all of these things.

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Speaker 1: And that, to your your direct question, is absolutely not

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Speaker 1: monetized properly yet because unlike Facebook, in my particular view,

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Speaker 1: this company has been very deliberated about user engagement and

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Speaker 1: making sure that they don't put ad loads that start

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Speaker 1: to disrupt the entire ecosystem. So very cautious. Okay, to

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Speaker 1: cut to the chase. You own this thing at two

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Speaker 1: dollars sixty seven cents. Yes, I'm still trading a two hundred.

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Speaker 1: He said that with a straight face. Okay, well that's

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Speaker 1: why he takes twelve weeks off in a row, and

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Speaker 1: I don't. Okay, it's gone from two dollars to two

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Speaker 1: hundred sixty seven dollars. I'm looking at a log moving

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Speaker 1: average and I've had one, two, maybe three, and now

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Speaker 1: four times to buy the long term moving average? Is

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Speaker 1: this the mother of all buying opportunities? To enter ten cents?

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Speaker 1: If I know the boat left the dock fifteen years ago, Well,

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Speaker 1: our horizon is the long term. I think you know

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Speaker 1: the reason why the largest actively manage emerging market investor

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Speaker 1: in the world, just because we're all about the long term.

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Speaker 1: So things like the last couple of days don't really

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Speaker 1: when you get when you get a pull back to it,

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Speaker 1: when you get let's go. Well, I'm not a technical investor,

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Speaker 1: so I'm not sure about moving averages, but I would agree,

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Speaker 1: But I would agree with you. You know, three thirty

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Speaker 1: billion dollars, this is a company that's gonna be a

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Speaker 1: trillion dollars in the next five or ten years. You

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Speaker 1: know him. There are no charts in the building of

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Speaker 1: a minami. There's no charts here, no charts. They do

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Speaker 1: no technical analysis here. I got a charter to Mamani

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Speaker 1: might do technical analysis. I do not. Yes, okay, we'll

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Speaker 1: go with that, all right. I want to ask you

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Speaker 1: about innovation because, as I described the title of one

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Speaker 1: of the funds, do you believe innovation is going to

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Speaker 1: reap profits for investors in China? Absolutely so. If you

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Speaker 1: think about the developed world in the last ten or

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Speaker 1: twenty years, significant disproportionate returns have come out of disruption.

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Speaker 1: If you think about emerging markets in the twenty five

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Speaker 1: years I've been involved, it's largely bent about mean reversion

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Speaker 1: sort of investment opportunities. I think the emerging markets have

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Speaker 1: completely shifted in the last decade in the sense that

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Speaker 1: actually disruption is becoming a very common theme and developing

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Speaker 1: in the emerging markets as well. So if you look

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Speaker 1: kind of across the globe, there are really two pools

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Speaker 1: of significant talent, two pools of continental size sort of

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Speaker 1: tech opportunities. One, of course, we know it is in

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Speaker 1: the United States and the second, which most didn't believe

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Speaker 1: me five years ago, is actually China. You know, if

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Speaker 1: you look at unicorns around the world, almost unicorns are

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Speaker 1: in China. The top seven of the largest market capitalization companies,

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Speaker 1: seven of the ten or in China. Your comments on Facebook,

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Speaker 1: what can Mr Zuckerberg learn from ten Cent? What does

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Speaker 1: the ten Cent best practice that he needs to learn

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Speaker 1: in Facebook? I think the issue is about sustainability. You know,

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Speaker 1: ten Cent is a company that's enormously cautious about sustainability

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Speaker 1: and not over monetizing in the short term. Is that

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Speaker 1: because there's a cultural bias in China to look at

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Speaker 1: time as something that is very powerful and you can

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Speaker 1: look ten fifty years into the future. I think it's

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Speaker 1: about governance. You know, it's not distinctively ready to ten

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Speaker 1: Cent in Facebook, but one of the things that we

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Speaker 1: constantly think about is governance. You know, most companies are

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Speaker 1: run by people are not either intelligent or they follow

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Speaker 1: ten cents of very clever company. That's got why they

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Speaker 1: distributed set of management that that thanks for the longer.

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Speaker 1: Within every book in China, there's a red phone linked

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Speaker 1: to the Communist Party on every s oes desk, every

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Speaker 1: industrial justice is ten Cent linked into the government. Can

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Speaker 1: you be so bold as to say that? Well, what

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Speaker 1: I can say is all companies have to operate in

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Speaker 1: a particular context, whether it's Russia, which we invest in,

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Speaker 1: or China or the United States. And absolutely ten Cents,

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Speaker 1: the largest content company in China has to be very

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Speaker 1: careful about things like content rules. And this has been

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Speaker 1: the most intelligent conversation hit on China Intencent. Yeah, I

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Speaker 1: think so shy. You know, let's let's have them back

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Speaker 1: at China. No, I just see, I see all this

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Speaker 1: techie polming at the most enthusiasm about making money Intencent

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Speaker 1: over the next sixteen weeks. And the fact is two

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Speaker 1: dollars sixty seven cents to two sixty seven dollars move

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Speaker 1: the decimals, you know, that's what we're talking of. All

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Speaker 1: the unicorns are in China. What's the unicorn? He acquired

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Speaker 1: a company above billion dollars and the market valuation and

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Speaker 1: private markets we few as well see the way you

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Speaker 1: did that. Okay, Yeah, thanks for listening to the Bloomberg

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Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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00:26:52,560 --> 00:26:56,760
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane. Before the podcast, you can always catch just worldwide.

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Speaker 1: I'm Bloomberg Radio