Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
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Speaker 1: welcome all of you worldwide. Good morning to Bloomberg Surveillance.
Speaker 1: Right now, we've got futures at negative three eleven over
Speaker 1: on the Bloomberg terminal, We're down over one thousand Dow
Speaker 1: points over the last eighteen hours or so. We are
Speaker 1: thrilled to bring you this morning. Jeffrey, you of UBS
Speaker 1: Wealth Management, of course with his wonderful ability on correlations
Speaker 1: of market, particularly back to foreign exchange. Jeff let's start there.
Speaker 1: What are the correlations in the market now that allow
Speaker 1: you to be more equities? Well, right now, the lack
Speaker 1: of correlations, you know, between what's going on in foreign
Speaker 1: exchange markets, you know, for example, versus what's happening in
Speaker 1: equities and thinking the fact that FX is ignoring this,
Speaker 1: which tells you, especially if you look at the MFX
Speaker 1: and the dollar, it's been discounting. Let's just say the
Speaker 1: divergence between us and the rest of the world already.
Speaker 1: So I think FX traders are not too fuss about
Speaker 1: this dolly and down two big figures, you know from
Speaker 1: the highs. Again, not too fuss about it. So again
Speaker 1: reason to be not pessimistic, Jeff, I want to go
Speaker 1: a little Matthew here right now, within the global leverage,
Speaker 1: within the mysteries of the financial system, everybody, including Mr Tullub,
Speaker 1: worries about tail risk. What are the distributions of the
Speaker 1: financial system now and how exposed are those tail risks,
Speaker 1: those so called fat tales out that lead to jump
Speaker 1: conditions that lead to abrupt moves. I believe you're pretty
Speaker 1: sanguine and that well, again they need to be more
Speaker 1: specific about tail risk coming from. Where is it an
Speaker 1: event risk that's in the price already or is this
Speaker 1: just code for the likes of risk parity, risk control
Speaker 1: other products out there where you have enforced the leveraging
Speaker 1: you know, so leverage type structures, which is actually causing
Speaker 1: vicious cycles in At this point, I think we need
Speaker 1: to be clear about you know what Peter talked about earlier.
Speaker 1: Is it a market structure issue or an event risk issue.
Speaker 1: I think we're looking for technical issues and market structure
Speaker 1: right now a bit too much and ignoring some of
Speaker 1: the positive and negative issues in the markets right now.
Speaker 1: So again focus on fundamentals. I don't worry too much
Speaker 1: about the tail risks coming from market structures. We continue
Speaker 1: to worry about the tail risks from events. But if
Speaker 1: I guess the concern is that we have a numerous
Speaker 1: events or risks, it's emerging markets, it's a dollar higher,
Speaker 1: it's a concern about encycle in the US, it's the
Speaker 1: and if they all come at the same time China,
Speaker 1: they all come at the same time, could it be
Speaker 1: the perfect storm? So there's not one catalyst, but all
Speaker 1: these little bits coming together, absolutely and then the perfect storm.
Speaker 1: Then people ask what is the safe haven? Right So
Speaker 1: it's the safe haven the dollar, and people are asking
Speaker 1: questions from clients already. Do you think China is actually
Speaker 1: exacerbating the treasury sell off, you know as a counter
Speaker 1: punching near to the trade wars and whatnot. Well, in
Speaker 1: an environment where emerging markets are using reserves already and
Speaker 1: you're seeing the data, of course they're not going to
Speaker 1: have less flow to buy treasury. So again that should
Speaker 1: be in the price. It's in the price of dollar
Speaker 1: performance against emerging markets already, So again I wouldn't overplay
Speaker 1: that angle. When the time comes, diversification should start to
Speaker 1: do its job and the FED will react as well. Okay,
Speaker 1: so what do you think the FED will do? I
Speaker 1: know UBS have an outlier call right on the FED
Speaker 1: probably having from here having having to stop hiking. Does
Speaker 1: the Trump accusing them of being local change that? So
Speaker 1: that's where we have to be very careful in terms
Speaker 1: of if is the FED So the sake of argument,
Speaker 1: you know, if they let's say, pause up ahead, are
Speaker 1: they responding to political pressure domestically are they responding to data?
Speaker 1: Let's focus on the data as much as possible. If
Speaker 1: the market starts a second guest that then we may
Speaker 1: have more issues about credibility. Jeff, I want to walk
Speaker 1: your risk parity right now. I want you to explain
Speaker 1: to our global audience what this phrase risk parity is
Speaker 1: and why it may blow up with the correlations where
Speaker 1: they are now between equities and thick income. So fundamentally,
Speaker 1: you are targeting to rather than target and return framework,
Speaker 1: You're you're targeting a volatility framework and deploying leverage at
Speaker 1: the same time. So it starts to break down. And
Speaker 1: that's the worry right now. When conventional diversification starts to do,
Speaker 1: it stops doing its job. So you don't get the
Speaker 1: positive diversification benefits from owning bonds in a leverage manner
Speaker 1: for that matter. And the risk is the fear in
Speaker 1: markets where I know what's been talked about the structure
Speaker 1: is you get a correlated sell off where if equities
Speaker 1: for and bonds for, it starts to accelerate. But I
Speaker 1: think that's overplayed. In January it was shown ultimately risparity
Speaker 1: didn't contribute aggressively to that. So you're this is critical.
Speaker 1: You're not concerned about an overlay of risk parity damage
Speaker 1: that leads to a greater volatility right now, So risk
Speaker 1: parity intrinsically is not short volt It is leverage that
Speaker 1: we need to distinguish leverage short vol versus leverage in
Speaker 1: a volatility framework. These are completely separate, right, very good.
Speaker 1: So it was like the Green Book of the International
Speaker 1: Monetary Funds, Jeff for you there with a clinic. Take
Speaker 1: Christmas charity right now with ubs we enjoy is it
Speaker 1: once a year or twice a year that we go
Speaker 1: to the land of avocado toast. I believe this once
Speaker 1: a year. Okay, Well, here at Oppenheim our Funds, we
Speaker 1: thank them for their commitment to Bloomberg on the economy,
Speaker 1: Bloomberg Surveillance and all of John Farrell's various media properties,
Speaker 1: which is a good way to bring in. Christian Momaney
Speaker 1: can just say that we have a live audience Oppenheim
Speaker 1: the Funds, and it didn't fill out until Krishna walked
Speaker 1: into the room. They're not here for us, they're mostly
Speaker 1: his his entourage, which is a paid audience. Christian mamany
Speaker 1: ce io and had a fixed income here at Oppenheimer Funds.
Speaker 1: What's your observation the keys from the last couple of
Speaker 1: weeks in the price action, we've seen well, so the
Speaker 1: correction was long in the making. When you have the
Speaker 1: Fed talking about there are no neutral rates or we
Speaker 1: are not close to neutral rates and we can keep going.
Speaker 1: And when Trump is declaring victory that NAFTA was an
Speaker 1: easy win and we're gonna show it to the Chinese,
Speaker 1: that's a bad combination for the market. I think at
Speaker 1: the end of the day, though the economy is doing
Speaker 1: reasonably well, earning should be reasonably good. We have. We
Speaker 1: still have an up trend still in place despite the correction.
Speaker 1: We have seen these types of corrections before, so this
Speaker 1: too shall pass. So it's a couple of things I
Speaker 1: want to get into with you, whether you think rights
Speaker 1: have repriced enough in treasuries and whether there are any
Speaker 1: worrying signals coming from credit. So let's do both with
Speaker 1: us now. Sure, so rates have definitely repriced. I think
Speaker 1: the question for US is our rates going to three
Speaker 1: and a half percent anytime soon? And my answer is
Speaker 1: the likelihood is yes. Probability is probably uh, relatively low
Speaker 1: at this point. So the as far as credit is concerned,
Speaker 1: I think that is probably the strongest place in the
Speaker 1: market right now. And I take a great deal of
Speaker 1: comfort watching the credit markets even today after a massive correction,
Speaker 1: and all year for that matter, credit spreads have been
Speaker 1: relatively resilient, especially in the high yield market. And if
Speaker 1: there's if there's going to be a significant correction in equities,
Speaker 1: credit not showing any cracks, I think that would be
Speaker 1: very unusual. The mathiness of this is the search for
Speaker 1: fat tails in the idea of a jump condition. Some
Speaker 1: would say we saw a jump condition in February. Those
Speaker 1: that loaded the boat on what was a February eight
Speaker 1: look pretty smart. Now that was just a correction congresion
Speaker 1: most of the people, and I would suggest most of
Speaker 1: the shareholders of Oppenheimer funds. It's a distant memory what
Speaker 1: a real bear market is, isn't it. We don't remember
Speaker 1: what negative eighteen percent is, do we? We We don't,
Speaker 1: But for good reason that is the underlying trend really
Speaker 1: has been very, very modest. So when you have two
Speaker 1: growth rate, inflation not manifesting itself in any significant way,
Speaker 1: a central bank that is accommodative, that's a good that's
Speaker 1: a good combination expecting type corrections in that environment, I
Speaker 1: think is relatively this is a coiled spring and alogy,
Speaker 1: I mean, we're not being given the opportunity for the
Speaker 1: coil spring unless John we sustained four GDP without an
Speaker 1: inflation re element. Do you see treasury yields at three
Speaker 1: eighteen right now in a ten year going much higher
Speaker 1: than they are at the moment, Krishna, No, I don't.
Speaker 1: I think if you kind of take a one year view,
Speaker 1: our view would be that rates are lower in one
Speaker 1: year's time rather than meaningfully higher from where they are.
Speaker 1: So you think tens and thirties were vine right now,
Speaker 1: I think tenth and thirties for long term investors are
Speaker 1: extraordinarily goodbye at the moment. What than that mix of
Speaker 1: a higher price ands picked a tenure in a lower yield.
Speaker 1: What part of that will be in the real space
Speaker 1: in one part will be in that squishy inflation space
Speaker 1: above it. Well, so I think that's really the kind
Speaker 1: of not the beauty, but I think that's really the
Speaker 1: thing to watch today. That is, the rise in yield
Speaker 1: has been entirely driven by real rates, belief in the economy,
Speaker 1: and all that exactly. The fact that real rates have
Speaker 1: risen sort of slows the economy down meaningfully in six
Speaker 1: to nine months, and I think that will lead to
Speaker 1: a rally and treasuries at something. This is a really
Speaker 1: important point. Goes to Christian's work, but also Jeffrey, you
Speaker 1: we mentioned earlier from us, because John, we've had uprise
Speaker 1: in the real rate. It's a compensating factor that can
Speaker 1: give you confidence out if you believe that story. But
Speaker 1: you think this can be self limiting, essentially, that's what
Speaker 1: you say in Christna, Oh yes it is. And and
Speaker 1: throughout the cycle this has been self limiting. That is,
Speaker 1: coming into two thousand and eighteen, we had a trillion
Speaker 1: dollars worth of stimulus dropped in the economy. Economy accelerated
Speaker 1: in a very very very rapid way. And uh, and
Speaker 1: then we are talking about FED tightening and things like that.
Speaker 1: That's all self regulatory, regular regulating mechanism. UH. In today's world,
Speaker 1: when the trend growth rate is still two percent and
Speaker 1: inflation is absent, you know, we will have lots of
Speaker 1: ups and downs, but at the end of the day,
Speaker 1: things are not going to change. One here, you make
Speaker 1: the observation of what is happening in credit and what
Speaker 1: is been happening in credit through eighteen. And there are
Speaker 1: two observations you can make, and that two binary opinions
Speaker 1: you can have. One is that you look at high
Speaker 1: you and you say, everything's okay. The other is that
Speaker 1: you look at investment gride and you say it's not.
Speaker 1: What's handing an investment grade? And why is that so different? Well,
Speaker 1: so investment grade, the issuance was meaningfully higher in investment
Speaker 1: grade than it was in high yield. So I think
Speaker 1: that technical consideration certainly drove widening in investment grade spreads.
Speaker 1: But even investment grade spreads in the later half of
Speaker 1: two thousand and eighteen into the third quarter, for example,
Speaker 1: have done materially better, and even when they're widened, they
Speaker 1: only widened marginally. So if you you know, with the
Speaker 1: tightest the coming into the year was d basis points
Speaker 1: spreads that went to a little over a hundred and ten.
Speaker 1: Now we are back close to hundreds. So it's been
Speaker 1: back and forth. We panic in the market because it's
Speaker 1: a big move relative to that's the surveillance bre exclusive
Speaker 1: momonty panics. But at the end of the day, the
Speaker 1: move isn't that the move isn't that substantis this is
Speaker 1: important because the conversation for the last thirty two seconds
Speaker 1: has been entirely the real yield conversation. Your property tomorrow?
Speaker 1: What time is it tomorrow? Quite often, oh probably tomorrow?
Speaker 1: So well, Christian, very importantly here the Oppenheimer funds heritages
Speaker 1: the international markets. Is this pullback again with dal future
Speaker 1: is improving negative one versus negative three hundred ninety minutes
Speaker 1: two hours ago? Is it an opportunity in international stocks?
Speaker 1: Were they hammered yesterday or is it just a domestic story?
Speaker 1: So clearly equities have gone down globally, but remember equities
Speaker 1: International equities went down meaningfully lower long before the US
Speaker 1: market crack. So if you look at valuations on a
Speaker 1: global basis, international valuations are extraordinarily cheap. You look at
Speaker 1: the emerging market valuation relative to the U S valuations,
Speaker 1: Even with the sell off, I think international valuations remain
Speaker 1: far more attractive than US. Doesn't mean US equities won't
Speaker 1: come down, but I think for long term investors the
Speaker 1: better opportunities internationally. I've heard a lot of people make
Speaker 1: the big convergence call for equities. Can you make the
Speaker 1: same call for the bond market. I'm looking at the
Speaker 1: BODON treasury spread right now on a ten year maturity
Speaker 1: of about two sixty five basis points. Can you make
Speaker 1: the same code for convergence in fixed income? Well, there's
Speaker 1: not going to be an equity convergence unless there is
Speaker 1: a band convergence. And I think there will be a
Speaker 1: band conversions coming in two thousand nineteen, and it will
Speaker 1: be driven not typically as international economy is doing much better.
Speaker 1: It will come from the U S economy starting to
Speaker 1: slow down. The convert sense will be driven by US
Speaker 1: lowness as opposed to acceloration in internationally kind I want
Speaker 1: to touch on her next conversation is he I am
Speaker 1: f right about global slowdown? Well, I am f is
Speaker 1: right and in that things are slowing down and we
Speaker 1: have probably seen the peak of the recent sport in
Speaker 1: economic growth. So I think two thousand nineteen is going
Speaker 1: to be lots slower than two th canvass the world
Speaker 1: with Christian MoManI here at up and I'm her friends
Speaker 1: John Farren I visiting at today in their studios down
Speaker 1: down their beautiful studios. It's pretty fancy, you know. I
Speaker 1: could get comfortable here. I'm thinking, can we come more often? Christian?
Speaker 1: Would you welcome? You could do your could do your
Speaker 1: other properties here. I'm a nice guy. Really never said that.
Speaker 1: He does not say that about me. She is from
Speaker 1: the University of Middletown, Connecticut. Dana Peterson was City Group
Speaker 1: out of the Wesleyan University Economic Shop as well and
Speaker 1: critically Dana Peterson with expertise at the FED on the
Speaker 1: fiscal watch as well. Dana, wonderful to speak to you.
Speaker 1: Where are we in the dynamic of all the debt
Speaker 1: we're going to have to create to pay for our
Speaker 1: deficit and what it means for the American economy. When
Speaker 1: you see all the gloom, the reports chronic trillion dollar deficits,
Speaker 1: how do you respond? Sure, absolutely, it seems like no
Speaker 1: one's paying attention in Washington. Indeed, as we did have
Speaker 1: the tax reform passed in December of last year, and
Speaker 1: then also the Biparson Budget Act of eighteen earlier this year,
Speaker 1: and certainly how the Republicans have already advanced UM legislation
Speaker 1: for tax reform two point oh which would cost another
Speaker 1: six and sixty billion UM. And when we look at this,
Speaker 1: certainly the fiscal stimulus from the federal government is definitely
Speaker 1: bolstering the U s economy. We're looking at probably three
Speaker 1: pc growth to this year with at least seven tents
Speaker 1: of contributed by fiscal stimulus, and the next year probably
Speaker 1: around two point eight percent, but again around one percentage
Speaker 1: point from fiscal stimulus. But over time this is going
Speaker 1: to to really affect the economy in terms of outside debt,
Speaker 1: as you mentioned um, certainly crowding out of business investment,
Speaker 1: and even currently now we're seeing the Treasury, the US
Speaker 1: Treasury responding to this with increased issuance. In fact, the
Speaker 1: Treasury has increased its nominal UH note issuance and bond
Speaker 1: issuance as a February of this year, and in the
Speaker 1: second half of this year, we're probably looking at the
Speaker 1: most debt issued ever, Danna Peterson. If growth is coming
Speaker 1: from added fiscal stimulus, then what should be the real
Speaker 1: interest rate level currently? If interest rates are moving because
Speaker 1: people anticipate greater economic growth, well, I would like to
Speaker 1: say that underlying growth is still quite strong. We're looking
Speaker 1: at around two in a quarter percent and that's normably
Speaker 1: about potential, which is probably you know, one in three
Speaker 1: quarters percentage point. So the other eyeling economy is doing
Speaker 1: very well despite the stimulus. But the set is is
Speaker 1: normalizing rates so they're not responding to and overheating in
Speaker 1: the economy, and the neutral rate is uh, you know,
Speaker 1: I'm looking and looking at the different research of particularly
Speaker 1: the Lobock Williams model is suggesting that the neutral rate
Speaker 1: is in the range is at two point seven five.
Speaker 1: She she did that without avoiding the art starting She's
Speaker 1: just you know, but see here here's my point. Let
Speaker 1: me just go back to this for a second. The
Speaker 1: idea being that if everyone looks at the physical stimulus
Speaker 1: because and then they say, oh, well, you know, the
Speaker 1: federal government budget deficit and all this is, and that's
Speaker 1: what's fueling the economy or getting us, you know, an
Speaker 1: extra half a percent or an extra percent of GDP growth.
Speaker 1: And then you get people that say, all right, so
Speaker 1: why do interest rates move? They move either because there's
Speaker 1: a lot of the inflation or because there is real
Speaker 1: economic growth. So if you have this one time fiscal
Speaker 1: stimulus that goes away, shouldn't rates then anticipate a lower
Speaker 1: growth trajectory. So as a result, rates should actually be
Speaker 1: going down. Well, rate should actually be rising if you're
Speaker 1: anticipating lots of debt coming down the line. Indeed, for
Speaker 1: the federal budget deficit was close to eight billion dollars
Speaker 1: and then next year we're gonna be looking at a
Speaker 1: trillion dollars and it's only going to get worse going forward.
Speaker 1: So naturally rates should reflect that. And indeed, uh, you know,
Speaker 1: when you look at a tenure yield, it's been lower
Speaker 1: than what fundamentals would suggest. And you know, certainly now
Speaker 1: that we're at three and a a quarter, that's probably more
Speaker 1: in line with the expectations for for growth at least
Speaker 1: the next few years and the tenure outlook for for
Speaker 1: federal budget deficits. Danna, I want to get in troup
Speaker 1: with Katherine Man. That's what our job is here this morning.
Speaker 1: You're wonderful Chief Economists. Is President Trump right about feed independence?
Speaker 1: Do we need a FED that's a little more politically sensitive? Well,
Speaker 1: I think that's great. Actually wrote a couple of papers
Speaker 1: about this, and history tells us that an independent set
Speaker 1: is probably the best bet because when you had instances
Speaker 1: of government, either Congress or presidents or even sometimes a
Speaker 1: populist interfering with the fed's work, you get pretty bad outcomes.
Speaker 1: And I think the important thing is that the FET
Speaker 1: is not restricting policy to slow down and over the economy.
Speaker 1: The FET is just normalizing, trying to create some monetary
Speaker 1: policy space. And it's best if you don't have commentary
Speaker 1: from those, uh you know, who are not within the feed.
Speaker 1: And so FET independence is very important. I think we
Speaker 1: look around the world, we see a number of cases
Speaker 1: where uh, the central bank is not an attendant, and
Speaker 1: you see rampant inflation and flower growth. Dana, thank you.
Speaker 1: So Dana Peterson was City Group and update here more
Speaker 1: towards fiscal and fixed incomes as as you would do
Speaker 1: with the market move then economics him I want you
Speaker 1: to bring in our esteem, guest, but there's two ideas
Speaker 1: here that are really important. First, anybody out of the
Speaker 1: combine at California San Diego is Wayne Matthew, Waste statistics
Speaker 1: like James Hamilton's and time series analysis and all that stuff,
Speaker 1: which is really cool. A bunch of they like grow
Speaker 1: Nobel Laureates out there and in how things move. And
Speaker 1: then you combine that with I think the gross misreporting
Speaker 1: of the Chinese technology companies, including ten Cents. I make
Speaker 1: jokes about it. So we finally have in front of
Speaker 1: us a real authority on that consumer juggernaut in Asia,
Speaker 1: in China and on ten Cent as well. Why don't
Speaker 1: you want justin? Guest? Justin Leverenz is the director of
Speaker 1: Emerging Market Equities portfolio manager of op and Heimer's Developing
Speaker 1: Markets Fund and the Emerging Markets Innovators Fund, and he
Speaker 1: joins us here at beautiful Oppenheimer Funds Studios. Thanks very
Speaker 1: much for being with us, Justin. All right, as Tomas describing,
Speaker 1: We're going to use this as a point for you
Speaker 1: to talk a little bit about Chinese equities and in
Speaker 1: particular ten Cents. I think just before we went on,
Speaker 1: you said you've been buying ten Cent for how long?
Speaker 1: Been in the main dynasty for years? Okay? What is
Speaker 1: going on with that kind of commerce in China? And
Speaker 1: I know in the fund you've also got Ali Baba
Speaker 1: in a variety of other stocks. But what what's the
Speaker 1: thesis for ten Cent for owning it? Now? Sure? Well,
Speaker 1: the thesis for ten Cent is slightly different than commerce.
Speaker 1: Commerce would be Ali Baba or Pindo Door or those companies,
Speaker 1: some of which are related to wehe Chat, the super
Speaker 1: app that ten Cent owns as a property to distribute.
Speaker 1: Does everybody use wheat Chat in China? We Chat has
Speaker 1: a billion subscribers, you know, so slight the smaller than
Speaker 1: Facebook of course, but we're talking about one particular geography,
Speaker 1: so you know, effectively all of organized China has whet Chat.
Speaker 1: Is that something that they have already monetized completely? Absolutely not.
Speaker 1: So if you think about what ten Cent was when
Speaker 1: I invested twelve or thirteen years ago, was kind of
Speaker 1: speculative bet that a large user base would eventually be monetized.
Speaker 1: That got monetized in a way that I had not anticipated,
Speaker 1: which will come to in the moment. I had anticipated
Speaker 1: it was going to become a massive platform for advertising.
Speaker 1: What it became was a massive platform from content. So
Speaker 1: you know, this is the company with the largest music
Speaker 1: of course, the company's going public at the moment, the
Speaker 1: largest literature base, and really the core of the company
Speaker 1: from profitability perspective is games. You know, the largest game
Speaker 1: market in the world, and ten Cent complete dominates games.
Speaker 1: Then four or five years ago they came out with
Speaker 1: wheat Chat, which all of a sudden became a billion
Speaker 1: of users, and is this super app platform that we've
Speaker 1: never seen in the rest of the world that lots
Speaker 1: of the ecosystem, and ten Cents invested in all of
Speaker 1: those companies, whether it's j D or Pindo, a Door
Speaker 1: or may Twin, d mping have invested in all those
Speaker 1: companies which create distribution capabilities for all of these things.
Speaker 1: And that, to your your direct question, is absolutely not
Speaker 1: monetized properly yet because unlike Facebook, in my particular view,
Speaker 1: this company has been very deliberated about user engagement and
Speaker 1: making sure that they don't put ad loads that start
Speaker 1: to disrupt the entire ecosystem. So very cautious. Okay, to
Speaker 1: cut to the chase. You own this thing at two
Speaker 1: dollars sixty seven cents. Yes, I'm still trading a two hundred.
Speaker 1: He said that with a straight face. Okay, well that's
Speaker 1: why he takes twelve weeks off in a row, and
Speaker 1: I don't. Okay, it's gone from two dollars to two
Speaker 1: hundred sixty seven dollars. I'm looking at a log moving
Speaker 1: average and I've had one, two, maybe three, and now
Speaker 1: four times to buy the long term moving average? Is
Speaker 1: this the mother of all buying opportunities? To enter ten cents?
Speaker 1: If I know the boat left the dock fifteen years ago, Well,
Speaker 1: our horizon is the long term. I think you know
Speaker 1: the reason why the largest actively manage emerging market investor
Speaker 1: in the world, just because we're all about the long term.
Speaker 1: So things like the last couple of days don't really
Speaker 1: when you get when you get a pull back to it,
Speaker 1: when you get let's go. Well, I'm not a technical investor,
Speaker 1: so I'm not sure about moving averages, but I would agree,
Speaker 1: But I would agree with you. You know, three thirty
Speaker 1: billion dollars, this is a company that's gonna be a
Speaker 1: trillion dollars in the next five or ten years. You
Speaker 1: know him. There are no charts in the building of
Speaker 1: a minami. There's no charts here, no charts. They do
Speaker 1: no technical analysis here. I got a charter to Mamani
Speaker 1: might do technical analysis. I do not. Yes, okay, we'll
Speaker 1: go with that, all right. I want to ask you
Speaker 1: about innovation because, as I described the title of one
Speaker 1: of the funds, do you believe innovation is going to
Speaker 1: reap profits for investors in China? Absolutely so. If you
Speaker 1: think about the developed world in the last ten or
Speaker 1: twenty years, significant disproportionate returns have come out of disruption.
Speaker 1: If you think about emerging markets in the twenty five
Speaker 1: years I've been involved, it's largely bent about mean reversion
Speaker 1: sort of investment opportunities. I think the emerging markets have
Speaker 1: completely shifted in the last decade in the sense that
Speaker 1: actually disruption is becoming a very common theme and developing
Speaker 1: in the emerging markets as well. So if you look
Speaker 1: kind of across the globe, there are really two pools
Speaker 1: of significant talent, two pools of continental size sort of
Speaker 1: tech opportunities. One, of course, we know it is in
Speaker 1: the United States and the second, which most didn't believe
Speaker 1: me five years ago, is actually China. You know, if
Speaker 1: you look at unicorns around the world, almost unicorns are
Speaker 1: in China. The top seven of the largest market capitalization companies,
Speaker 1: seven of the ten or in China. Your comments on Facebook,
Speaker 1: what can Mr Zuckerberg learn from ten Cent? What does
Speaker 1: the ten Cent best practice that he needs to learn
Speaker 1: in Facebook? I think the issue is about sustainability. You know,
Speaker 1: ten Cent is a company that's enormously cautious about sustainability
Speaker 1: and not over monetizing in the short term. Is that
Speaker 1: because there's a cultural bias in China to look at
Speaker 1: time as something that is very powerful and you can
Speaker 1: look ten fifty years into the future. I think it's
Speaker 1: about governance. You know, it's not distinctively ready to ten
Speaker 1: Cent in Facebook, but one of the things that we
Speaker 1: constantly think about is governance. You know, most companies are
Speaker 1: run by people are not either intelligent or they follow
Speaker 1: ten cents of very clever company. That's got why they
Speaker 1: distributed set of management that that thanks for the longer.
Speaker 1: Within every book in China, there's a red phone linked
Speaker 1: to the Communist Party on every s oes desk, every
Speaker 1: industrial justice is ten Cent linked into the government. Can
Speaker 1: you be so bold as to say that? Well, what
Speaker 1: I can say is all companies have to operate in
Speaker 1: a particular context, whether it's Russia, which we invest in,
Speaker 1: or China or the United States. And absolutely ten Cents,
Speaker 1: the largest content company in China has to be very
Speaker 1: careful about things like content rules. And this has been
Speaker 1: the most intelligent conversation hit on China Intencent. Yeah, I
Speaker 1: think so shy. You know, let's let's have them back
Speaker 1: at China. No, I just see, I see all this
Speaker 1: techie polming at the most enthusiasm about making money Intencent
Speaker 1: over the next sixteen weeks. And the fact is two
Speaker 1: dollars sixty seven cents to two sixty seven dollars move
Speaker 1: the decimals, you know, that's what we're talking of. All
Speaker 1: the unicorns are in China. What's the unicorn? He acquired
Speaker 1: a company above billion dollars and the market valuation and
Speaker 1: private markets we few as well see the way you
Speaker 1: did that. Okay, Yeah, thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane. Before the podcast, you can always catch just worldwide.
Speaker 1: I'm Bloomberg Radio