WEBVTT - Eric Wiegand, Senior Portfolio Manageron markets and investing 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.800 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. As 0:00:33.840 --> 0:00:37.519 we talk about potential tariffs and trade skirmishes, it's important 0:00:37.560 --> 0:00:40.720 to take a look at the industries that are being affected, 0:00:40.760 --> 0:00:43.080 and joining US now has pretty intimate looked at this 0:00:43.479 --> 0:00:48.240 with respect to the apparel and footwear industries. Rick Helfenvine 0:00:48.280 --> 0:00:50.760 he joins US now. He's president chief executive of the 0:00:50.800 --> 0:00:54.040 American Apparel and Footwear Association and he joins us here 0:00:54.040 --> 0:00:56.160 in our eleven three oh studios. And just to give 0:00:56.200 --> 0:00:59.760 people a sense of what the A A F A is, 0:01:00.320 --> 0:01:02.880 UH is sort of the voice of the industry that 0:01:02.920 --> 0:01:05.880 includes everyone from Levi to Ralph Lauren and Gap to 0:01:05.959 --> 0:01:10.840 Target in Washington wearing clothes. If you're wearing clothes right, 0:01:11.200 --> 0:01:13.880 this is this is the person who is representing your 0:01:13.920 --> 0:01:16.880 clothes in Washington. Rix. I want to start with you 0:01:16.920 --> 0:01:20.479 know what you're hearing from your members with respect to 0:01:21.160 --> 0:01:25.240 the tariff talk and the trade tensions. Have any of 0:01:25.280 --> 0:01:28.040 their business has already been affected? All of our businesses 0:01:28.040 --> 0:01:30.399 have been affected, and our members are talking to us, 0:01:31.240 --> 0:01:33.160 I have to say, more than they've ever talked to 0:01:33.240 --> 0:01:35.440 us before. A lot of it is trying to figure 0:01:35.440 --> 0:01:39.080 out exactly what's going on in Washington, what's the policy? 0:01:39.120 --> 0:01:42.720 What do they want to do? What is Washington trying 0:01:42.720 --> 0:01:45.600 to do to their business? They're having enough trouble just 0:01:45.760 --> 0:01:48.920 running their own businesses. Do they really want to have 0:01:48.960 --> 0:01:51.680 added burdens? Do they want to change their global supply? 0:01:51.800 --> 0:01:53.720 Change weld? It's like this is important. I mean, how 0:01:53.800 --> 0:01:57.960 much has the trade tension actually reduced from their bottom 0:01:58.000 --> 0:02:01.600 line so far? I think that the reduction in bottom 0:02:01.640 --> 0:02:05.640 line is is uh fast forward. It's coming. People are 0:02:05.680 --> 0:02:08.760 aware of it. Prices will go up, sales will go down, 0:02:09.040 --> 0:02:13.679 margins will be more difficult to attain. We don't understand 0:02:14.160 --> 0:02:17.240 why the administration is pushing so hard to take a 0:02:17.320 --> 0:02:19.840 business that is it's still in recovery mode for the 0:02:19.840 --> 0:02:24.040 whole his whole host of reasons, and trying to add 0:02:24.120 --> 0:02:28.000 burden to it. They're not really helping us Rick, I 0:02:28.080 --> 0:02:30.079 just want to give you the opportunity to share a 0:02:30.160 --> 0:02:34.320 little bit of your background, because, uh, this speaks to 0:02:34.400 --> 0:02:41.040 your experience at USA textile mills, also working for an 0:02:41.080 --> 0:02:45.480 overseas Hong Kong manufacturer of of apparel. Just give people 0:02:45.480 --> 0:02:47.840 a little bit of your background so they understand that 0:02:47.880 --> 0:02:50.760 you're coming to this not from a political point of view, 0:02:51.240 --> 0:02:55.440 but you're coming to this from a real business perspective. Absolutely. 0:02:55.560 --> 0:02:58.200 I mean, I grew up in the textile industry. My 0:02:58.280 --> 0:03:01.360 father was in the textile industry. I worked for a 0:03:01.440 --> 0:03:05.680 wonderful company out of Cleveland, Ohio called Campus Water and Sportswear, 0:03:05.720 --> 0:03:09.400 which was owned by inter COO. They taught me everything. 0:03:09.440 --> 0:03:13.680 I was down in the mills. I was dying, finishing, weaving, 0:03:14.400 --> 0:03:16.760 you name it. I was involved in it from the 0:03:16.800 --> 0:03:22.680 ground floor. Later, we also had nineteen US UM manufacturing facilities, 0:03:22.680 --> 0:03:25.480 so I know how to manufacture product in the US. However, 0:03:26.280 --> 0:03:30.359 later on the industry morphed and more of it went overseas. 0:03:30.440 --> 0:03:32.560 That happened pretty much in the nineties. So I got 0:03:32.639 --> 0:03:35.440 involved with a company who was based in Hong Kong. 0:03:35.480 --> 0:03:39.520 We manufactured overseas and I got to see all aspects 0:03:39.520 --> 0:03:43.320 of the industry, which now as it relates to trade, 0:03:43.600 --> 0:03:46.920 I personally feel the pain. I understand what our members 0:03:46.920 --> 0:03:50.240 are going through, and it is it is hurtful, we 0:03:50.600 --> 0:03:54.240 believe it or not. In our industry, Um, we were 0:03:54.520 --> 0:04:01.600 six percent of all imports. Keep in mindent of for well, 0:04:01.600 --> 0:04:06.200 apparel is imported, so we're six percent of all the 0:04:06.320 --> 0:04:12.880 US's imports. But we pay of all the duties collected consequently, Uh, 0:04:13.160 --> 0:04:16.159 any additional burden to that, We've learned to live with 0:04:16.200 --> 0:04:20.520 that burden. But any additional burden is downright painful. Well, 0:04:20.640 --> 0:04:22.520 just to play Devil's advocate here, I mean you talk 0:04:22.560 --> 0:04:25.800 about the shift in the nineties where the manufacturing what overseas? 0:04:26.320 --> 0:04:29.280 I mean President Trump is kind of responding to that. 0:04:29.800 --> 0:04:33.159 Perhaps you know, a decade or so too late, but 0:04:33.720 --> 0:04:37.080 I'm wondering, you know, what would happen if those jobs 0:04:37.080 --> 0:04:40.960 did come back to the US and manufacturing could return. Well, 0:04:41.560 --> 0:04:44.240 we always ask the question because we also represent all 0:04:44.279 --> 0:04:48.000 the domestic manufacturers, which is quite frankly, about three percent 0:04:48.080 --> 0:04:51.760 of the market and growing and growing, but still only 0:04:51.800 --> 0:04:55.040 three percent of the market. Look, when you're making apparel, 0:04:55.080 --> 0:04:57.560 there are two aspects of it. One is the raw material, 0:04:58.200 --> 0:05:04.080 fabric raw material is capital intensive, not labor intensive. Assembling 0:05:04.080 --> 0:05:06.400 a garment as labor intensive, takes a lot of people, 0:05:06.440 --> 0:05:09.160 and that's why a lot of this has morphed overseas. 0:05:09.279 --> 0:05:12.919 We can't really get enough people to assemble garments, and 0:05:12.960 --> 0:05:15.240 we can't compete on a global scale, which is what 0:05:15.279 --> 0:05:18.919 America is about now, trading and competing on a global scale. 0:05:19.480 --> 0:05:20.840 One thing I'm wondering, you know, you speak to a 0:05:20.920 --> 0:05:24.400 lot of people in Washington, d C. Is there unanimated 0:05:24.520 --> 0:05:29.000 unanimity in anything that you hear when you talk to Congressman. Yeah, 0:05:29.040 --> 0:05:35.599 there's unanimity because people are really questioning why, in a sense, 0:05:35.640 --> 0:05:39.960 we're misusing these tariffs that you hear about. They're misdirected. 0:05:40.000 --> 0:05:43.480 They are directives of the White House. They are powers 0:05:43.480 --> 0:05:47.440 that the White House can use without consulting Congress, and Congress, 0:05:47.480 --> 0:05:51.720 by the Constitution, is in charge of trade. I'm starting 0:05:51.800 --> 0:05:55.240 to think that maybe the FDA should get involved because 0:05:56.120 --> 0:05:58.960 the White House. Think about this. The White House is 0:05:59.000 --> 0:06:02.640 recommending metas in the form of tariffs for a disease 0:06:02.720 --> 0:06:06.799 that it can't cure. Think about that these tariffs won't 0:06:06.839 --> 0:06:10.239 cure our problems. They were wrong and they've been proven 0:06:10.320 --> 0:06:14.000 wrong before. The whole history of tariffs is very interesting. 0:06:14.200 --> 0:06:18.400 First time we heard about smooth holy precipitated the Great 0:06:18.440 --> 0:06:21.920 Depression um President Bush tried it in two thousand two 0:06:21.920 --> 0:06:25.600 lines steal with tariff, Remember that one lasted one year, 0:06:25.640 --> 0:06:28.440 was supposed to be three years. And then President Obama 0:06:28.480 --> 0:06:33.000 tried it with tires. It was a disaster, absolute disaster. 0:06:33.360 --> 0:06:36.919 Tariffs don't work. They're hidden tax on the American consumer. 0:06:37.360 --> 0:06:39.560 Thank you very much for being with us. Rick Health 0:06:39.640 --> 0:06:42.400 and Bind is the president and the chief executive of 0:06:42.480 --> 0:06:46.520 the American Apparel and Footwear Association talking about tariffs, and 0:06:46.560 --> 0:06:48.919 we look forward to having you on the program in 0:06:48.920 --> 0:07:06.040 the future. Much appreciated. Warren Buffett, the chief executive of 0:07:06.120 --> 0:07:09.680 Berkshire Hathaway, and Jamie Diamond, the chief executive of JP 0:07:09.800 --> 0:07:12.760 Morgan Chase, are looking for some radical changes to the 0:07:12.760 --> 0:07:17.320 way public companies disclose financial information. They have said that 0:07:17.440 --> 0:07:22.120 quarterly financial guidance encourages short term thinking and that it 0:07:22.280 --> 0:07:26.760 stifles growth and limits innovation in the economy. Here to 0:07:26.800 --> 0:07:29.640 tell us more about this proposed change is Andrew Stoultman, 0:07:29.800 --> 0:07:34.120 securities fraud attorney at Stoutman Law Offices. Andrew, thank you 0:07:34.160 --> 0:07:37.760 for being with us. What's your first reaction to these 0:07:37.800 --> 0:07:42.280 comments by both the Jamie Diamond and Warren Buffett. Maybe 0:07:42.320 --> 0:07:44.560 I'm a little biased, but to me, it kind of 0:07:44.560 --> 0:07:47.880 sounds like the worst idea since the Kardashian credit card. 0:07:48.240 --> 0:07:50.600 I mean, it's just a bad idea. It's kind of 0:07:50.640 --> 0:07:55.280 an existential question. I mean, what information our investors entitled to, 0:07:55.440 --> 0:07:58.960 and under the federal securities laws, they are all predicated 0:07:59.040 --> 0:08:02.280 on full and complete disclosure. And if we go from 0:08:02.320 --> 0:08:05.800 releasing this information four times a year to maybe only 0:08:05.920 --> 0:08:09.360 two times or even one time a year, I just 0:08:09.520 --> 0:08:14.160 don't see how that's good for investors, and especially the 0:08:14.240 --> 0:08:17.160 retail investors, because large investors will still be able to 0:08:17.200 --> 0:08:21.280 get access to this information, but smaller investors won't. So 0:08:21.560 --> 0:08:24.440 I just think it's a prior a priority issue. Are 0:08:24.440 --> 0:08:29.360 we placing corporate interests ahead of the interests of small investors? Well, Andrew, 0:08:29.480 --> 0:08:31.040 just to push back a little bit, I mean, the 0:08:31.120 --> 0:08:34.520 argument here is that these sort of short termism, or 0:08:34.559 --> 0:08:38.280 the concept that the chief executives of these companies have 0:08:38.400 --> 0:08:40.720 to play to their just the most immediate quarter and 0:08:40.800 --> 0:08:43.120 giving the best guidance possible that they don't take some 0:08:43.200 --> 0:08:45.960 of the extra money that they have invested back in 0:08:46.040 --> 0:08:49.800 their business, build more plans, take more risks. I mean 0:08:50.040 --> 0:08:52.000 not only that, but you could argue, and this is 0:08:52.040 --> 0:08:54.600 something else that Warren Buffett and James and Diamond were arguing, 0:08:54.600 --> 0:08:58.800 which is that this requirement to continually forecast earnings is 0:08:58.840 --> 0:09:00.800 one reason why there are many are companies that have 0:09:00.880 --> 0:09:04.080 gone public, which also isn't necessarily in the best interest 0:09:04.120 --> 0:09:07.200 of retail investors. How do you respond to those issues, Well, 0:09:07.200 --> 0:09:10.400 I think that's on companies. I mean, if companies are 0:09:10.440 --> 0:09:14.000 spending an inordinate amount of time making certain that quarterly 0:09:14.080 --> 0:09:17.280 earnings are met instead of a year or two years 0:09:17.400 --> 0:09:20.000 or five years out, that's on them. I mean, there's 0:09:20.120 --> 0:09:25.920 no obligation to to basically meet those quarterly numbers. And yes, 0:09:25.960 --> 0:09:29.320 you can argue that volatility will be increased to the 0:09:29.360 --> 0:09:32.679 extent companies have to release this information quarterly. But there 0:09:32.679 --> 0:09:35.680 are plenty of companies out there, including Warren Buffett, that 0:09:35.760 --> 0:09:40.080 basically remind investors, don't look at our quarterly information. We 0:09:40.160 --> 0:09:42.120 are on a year to year or five or ten 0:09:42.240 --> 0:09:44.920 year track. And I feel like the you know, the 0:09:45.000 --> 0:09:49.360 pressures it's self inflicted on CEOs to meet those quarterly numbers. 0:09:49.640 --> 0:09:52.000 I just I don't get it. Well, you know, Andrew, 0:09:52.040 --> 0:09:55.000 I wanted to follow up with the last point that 0:09:55.040 --> 0:09:57.400 I was making, which is that many fewer companies have 0:09:57.440 --> 0:09:59.560 been going public, and then part it is because of 0:09:59.600 --> 0:10:04.199 these requirements to continually forecast data. And people are arguing 0:10:04.280 --> 0:10:06.920 that this is also really bad for retail investors because 0:10:06.920 --> 0:10:10.320 they have a fewer, smaller pool of companies to invest in. 0:10:10.440 --> 0:10:12.560 What do you say to that. I think there are 0:10:12.559 --> 0:10:16.040 a whole bunch of reasons why there are less companies listed. 0:10:16.559 --> 0:10:19.040 I don't think that the you know, the pressure of 0:10:19.120 --> 0:10:24.320 releasing quarterly earnings or quarterly revenue or that guidance is 0:10:24.360 --> 0:10:27.959 the sort of thing that would cause UH companies to say, 0:10:28.000 --> 0:10:30.160 you know what, we're going to remain private, We're not 0:10:30.200 --> 0:10:32.360 going to go public. I just, you know, I don't 0:10:32.400 --> 0:10:35.720 buy it. And look, if companies are that concerned about 0:10:35.760 --> 0:10:39.160 having to release information that I, you know, I've argued 0:10:39.200 --> 0:10:42.000 they have a finuciary duty to release and provide guidance on, 0:10:42.400 --> 0:10:46.000 maybe they shouldn't be public companies. Alright, I'm just wonder 0:10:46.040 --> 0:10:50.040 if we could just tease apart this idea that releasing 0:10:50.160 --> 0:10:54.960 information that is pertinent to public shareholders is one thing. 0:10:55.920 --> 0:11:00.400 But then that three month ninety days cycle of having 0:11:00.559 --> 0:11:04.920 to meet estimates that are put together based on the 0:11:05.040 --> 0:11:08.200 limited information that you are legally allowed to offer the 0:11:08.840 --> 0:11:14.439 analyst community. Do you not see that there's a difference. No, 0:11:14.720 --> 0:11:17.000 I mean okay, So all right, No, all right, So 0:11:17.160 --> 0:11:18.880 let me ask you then, Have you worked for a 0:11:18.920 --> 0:11:22.959 public or a public company? No? I haven't. Okay, So 0:11:23.720 --> 0:11:27.160 if someone came to you and said, working for a 0:11:27.200 --> 0:11:30.920 publicly traded company is very different than working for a 0:11:31.000 --> 0:11:37.280 privately held company, would you accept that? Well, yes, I 0:11:37.320 --> 0:11:40.080 would accept that it is radically different. But once you 0:11:40.200 --> 0:11:45.400 take public, public money, you have fiduciary duties to those investors. No. No, 0:11:45.480 --> 0:11:48.320 I understand that, But I mean, but but but it 0:11:48.360 --> 0:11:50.480 doesn't seem like people do because people are taking a 0:11:50.520 --> 0:11:53.160 position that, g it's such a it's such a pain 0:11:53.240 --> 0:11:56.640 for us to release information to the shareholders who have 0:11:56.720 --> 0:11:59.960 placed their money with our company, and we all fiduciary 0:12:00.160 --> 0:12:03.679 duties to those investors, and if it's burdensome, if it's 0:12:03.720 --> 0:12:07.200 too difficult, then they probably shouldn't be publicly traded companies. 0:12:07.360 --> 0:12:10.120 I guess i'd ask you this question in September two 0:12:10.160 --> 0:12:12.920 thousand and eight, do you want to know whether Merrill 0:12:13.000 --> 0:12:18.000 Lynch and Morgan Stanley's revenues are dramatically declining or increasing 0:12:18.120 --> 0:12:21.880 or staying or basically staying neutral. I mean, that's important 0:12:21.920 --> 0:12:24.160 information for you to decide whether you want to keep 0:12:24.200 --> 0:12:27.600 your money or invest your money in these companies. Yeah, Um, 0:12:27.600 --> 0:12:30.160 and Andrew, I'm wondering. No one thing that struck me. 0:12:30.200 --> 0:12:32.240 And some of the stories that were written about this, 0:12:32.920 --> 0:12:36.800 uh many noted that the number of companies that actually 0:12:36.880 --> 0:12:41.520 do give forecasts earning earnings per share forecasts has fallen 0:12:41.679 --> 0:12:45.240 over the past eight years to less than a third 0:12:45.480 --> 0:12:48.400 from about thirty six in two thousand and ten. Have 0:12:48.559 --> 0:12:52.960 you seen the companies that release less guidance get treated 0:12:53.120 --> 0:12:57.720 better than the other companies are worse by investors? That's 0:12:57.720 --> 0:13:00.720 a that's a really hard question, and I don't you know, 0:13:00.760 --> 0:13:03.160 I don't know the answer to it, and I'm afraid 0:13:03.200 --> 0:13:04.840 to kind of go out on a limb and and 0:13:04.840 --> 0:13:08.720 and give an opinion on that. But so I'm just 0:13:08.800 --> 0:13:11.360 not comfortable going out on that branch because I haven't 0:13:11.400 --> 0:13:14.280 studied that quite as intensely as I would need to 0:13:14.360 --> 0:13:17.800 in order to make an opinion on it. Okay, let's 0:13:17.800 --> 0:13:20.240 just to go back to this idea of quarterly information. 0:13:20.720 --> 0:13:24.319 The idea of being not being that they would uh 0:13:24.640 --> 0:13:29.080 decrease the amount of information that they would offer the 0:13:29.160 --> 0:13:36.440 shareholding public, but this idea of offering guidance, and then 0:13:36.480 --> 0:13:40.559 that guidance, as you well know, gets used by Wall 0:13:40.600 --> 0:13:47.600 Street analysts in order to estimate what will or won't happen. 0:13:48.240 --> 0:13:50.720 And I'm sure you're well aware of what happens on 0:13:50.800 --> 0:13:54.840 those earnings days when the company meets estimates, when it 0:13:55.480 --> 0:13:59.959 uh doesn't meet estimates? Do you believe that that increase 0:14:00.000 --> 0:14:05.200 east volatility is good for their business? Well, I guess 0:14:05.240 --> 0:14:08.600 I would flip it and say the opposite of that is, 0:14:08.679 --> 0:14:13.480 what if you're only uh disclosing numbers uh twice a 0:14:13.559 --> 0:14:18.840 year or even once a year, disclosed them every quarter? Great? 0:14:19.200 --> 0:14:21.920 Great disclosed, right, And that's what we're arguing that these 0:14:21.960 --> 0:14:25.400 numbers should have to be disclosed every single quarter. And 0:14:25.440 --> 0:14:28.800 the fact that Jamie Diamond and and and Warren Buffett 0:14:28.840 --> 0:14:31.600 don't want to do it isn't a valid reason when 0:14:31.600 --> 0:14:34.360 you're weighing the impact that that would have, especially on 0:14:34.480 --> 0:14:38.080 small retail investors. Look, I personally think it's kind of 0:14:38.120 --> 0:14:41.320 ironic that Warren Buffett is advocating for this position, given 0:14:41.360 --> 0:14:45.120 he's the biggest shareholder in Wells Fargo. And if I'm 0:14:45.160 --> 0:14:49.120 contemplating investing or staying invested in Wells Fargo, I want 0:14:49.160 --> 0:14:52.000 to know what sort of impact have all of these 0:14:52.040 --> 0:14:55.520 scandals had on earnings and revenues for the company. And 0:14:55.520 --> 0:14:58.640 if I'm not getting that in a timely fashioned four 0:14:58.680 --> 0:15:01.480 times a year, I that kind of creates a vacuum 0:15:01.520 --> 0:15:05.320 of information now, Andrew, Unfortunately we have to leave it there, 0:15:05.320 --> 0:15:07.560 but thank you so much. A really good discussion and 0:15:07.800 --> 0:15:09.960 hashing in a lot of the issues. Andrew Stoultman is 0:15:10.040 --> 0:15:29.960 securities for an attorney at Stoultman Law Offices. The credibility 0:15:30.160 --> 0:15:34.160 of central banks in emerging markets? Is it on the line? Well, 0:15:34.240 --> 0:15:37.119 here to tell us more is Damian sass Our Bloomberg 0:15:37.160 --> 0:15:43.440 Intelligence is fixed income strategist. All right, Damien, emerging markets. 0:15:43.800 --> 0:15:49.440 There's a currency issue Turkey, Argentina, Brazil. Need I go on? Uh? 0:15:50.440 --> 0:15:53.120 Is there going to be a moment where the central 0:15:53.120 --> 0:15:56.280 banks of countries such as those realize that they're pushing 0:15:56.320 --> 0:15:59.200 against the string? Yeah? No, I mean we are. We 0:15:59.280 --> 0:16:01.240 are in the midst of a crisis of confidence here 0:16:01.280 --> 0:16:03.760 PIM and so what what we were just talking about. 0:16:03.800 --> 0:16:07.040 What's interesting is inflation is actually stable or declining in 0:16:07.080 --> 0:16:10.040 most emerging markets. Yet you know, it's it's I mean, 0:16:10.560 --> 0:16:14.360 markets are rushing to price in considerable um rate hikes 0:16:14.400 --> 0:16:17.040 in each of these markets, you know, over the next 0:16:17.120 --> 0:16:18.840 three months. You know, we have a lot of central 0:16:18.880 --> 0:16:21.120 bank meetings coming on the heels of the FED next week, 0:16:21.160 --> 0:16:24.840 and Brazil, Mexico, the Philippines, I mean, most of these 0:16:24.880 --> 0:16:28.480 markets are are now pricing in additional tightening. Just you know, 0:16:28.760 --> 0:16:31.480 it's it's it's pretty unbelievable just how quickly things have changed, 0:16:31.520 --> 0:16:34.400 and only the last month. Well, um, first of all, 0:16:34.440 --> 0:16:36.240 I mean it's it's hard to sort of speak about 0:16:36.240 --> 0:16:39.120 emerging markets as and monolith because there is some, uh, 0:16:39.160 --> 0:16:42.160 some spots where there is considerable inflation. I mean Turkey, 0:16:42.360 --> 0:16:45.760 for example, being a poster child for that. But I 0:16:45.840 --> 0:16:49.480 have to wonder whether this is all a byproduct of 0:16:49.600 --> 0:16:52.640 the FEDS tightening and the fact that you're not seeing 0:16:52.960 --> 0:16:55.960 the acceleration in stimulus from the e c B and 0:16:56.000 --> 0:16:57.560 the b o J that you had in the past. 0:16:57.600 --> 0:16:59.480 You're still seeing same of that's just not the acceleration. 0:17:00.120 --> 0:17:02.360 So they can't offset the fact that the FED has 0:17:02.360 --> 0:17:04.560 started to shrink its balance sheet and that it is 0:17:04.640 --> 0:17:07.000 raising rates. Well, it's a relative value game, right, I 0:17:07.000 --> 0:17:10.199 mean you carry so well in the short end of 0:17:10.240 --> 0:17:12.600 the U S. Treasury curve. Now, I mean money markets, right, 0:17:12.640 --> 0:17:14.160 I mean it's an asset class all of a sudden, 0:17:14.200 --> 0:17:16.239 all over again. Right, that's what everybody's talking about, and 0:17:16.280 --> 0:17:19.080 so E M has to compete with that. And you know, 0:17:19.119 --> 0:17:21.280 there are easier ways, I guess, to make money than 0:17:21.320 --> 0:17:24.240 investing in emerging markets with all of the currency volatility 0:17:24.280 --> 0:17:26.680 to your point, and that's going on right now. Now. 0:17:26.720 --> 0:17:29.479 It used to be that if you had an emergent, 0:17:29.560 --> 0:17:32.399 let's say you were a country that was export driven, 0:17:32.560 --> 0:17:36.840 maybe commodity export driven, right, it was perfectly fine for 0:17:36.880 --> 0:17:39.720 you to have your currency devalue against the US dollar 0:17:39.880 --> 0:17:45.040 because that made you much more competitive. Cheaper exports, you 0:17:45.200 --> 0:17:48.840 take over markets. But now you've got trade barriers going 0:17:48.920 --> 0:17:51.720 up around the world. Yeah yeah, now, I mean we 0:17:51.720 --> 0:17:53.560 we we were just talking about that the other day. 0:17:53.600 --> 0:17:55.919 So you know what's interesting is most people, you know, 0:17:56.560 --> 0:17:59.800 ascribe all the pain to China. Right, the China has 0:17:59.840 --> 0:18:03.119 BA basically, um, you know Chinese imports, right, or you 0:18:03.160 --> 0:18:04.800 know the trade depths at the U S has with 0:18:04.920 --> 0:18:06.960 China and how that kind of filters through into Mexico 0:18:06.960 --> 0:18:08.760 and a lot of their you know, the U S 0:18:08.800 --> 0:18:11.840 has other trade partners, etcetera. But what's really interesting here 0:18:11.840 --> 0:18:13.720 is with these trade barriers coming up, and even you 0:18:13.720 --> 0:18:17.000 know President Trump's kind of closet proposal to slap withcent 0:18:17.040 --> 0:18:20.520 tax on auto imports, I mean this, I mean, think 0:18:20.520 --> 0:18:23.199 about what that would do to Germany and to the 0:18:23.280 --> 0:18:26.880 CE three, poland hungry check. I mean, people aren't really 0:18:26.880 --> 0:18:29.680 talking about this, but you know, I mean those economies 0:18:29.720 --> 0:18:32.040 would I mean, it would just be it would be devastating, right, 0:18:32.119 --> 0:18:33.800 And you know, we look at so we were looking 0:18:33.800 --> 0:18:37.359 at basically which emerging market countries are most at risk 0:18:37.640 --> 0:18:40.080 given their bilateral trade and balances and the two that 0:18:40.160 --> 0:18:42.720 kind of pop up if indeed China needs to concede 0:18:43.200 --> 0:18:46.160 to to to US demands or South Korea and Brazil. Right, 0:18:46.440 --> 0:18:49.520 Brazil is a huge exporter of soy and and and 0:18:49.560 --> 0:18:51.760 soybeans and all that kind of stuff. Yet the US 0:18:51.840 --> 0:18:53.720 is the leading producer of that globally. So where do 0:18:53.720 --> 0:18:57.240 you think, you know, the twenty five billion dollars you 0:18:57.280 --> 0:18:59.280 know that China's proposing to to kind of give to 0:18:59.359 --> 0:19:01.120 the US is going to come from right and South 0:19:01.200 --> 0:19:04.800 Korea's machine it's it's chips, it's semi conducting semiconductor chips. 0:19:04.800 --> 0:19:08.320 So you can definitely see China begin to may begin 0:19:08.359 --> 0:19:11.080 to kind of substitute away from you know, from from 0:19:11.119 --> 0:19:13.640 dealing with those two countries and maybe you know, uh, 0:19:13.800 --> 0:19:15.680 you know, spend a little bit more money in terms 0:19:15.720 --> 0:19:18.720 of importing from the US in those two areas. Are 0:19:18.720 --> 0:19:23.440 we seeing contagion? I mean, contagions a dirty word, but yes, 0:19:23.480 --> 0:19:25.239 this is exactly what we're seeing right now. I mean 0:19:25.280 --> 0:19:27.439 we're seeing you know, we're seeing things spread. And I 0:19:27.440 --> 0:19:30.159 think it's more a fact of the liquid currencies, you know, 0:19:30.240 --> 0:19:33.800 the rand now and uh and the Mexican paste, which 0:19:33.800 --> 0:19:35.879 are basically being used as a hedge for a lot 0:19:35.920 --> 0:19:37.679 of macro players here to kind of all set their 0:19:37.720 --> 0:19:40.199 emerging market currency risks. So so yeah, I mean what 0:19:40.240 --> 0:19:42.720 you're seeing is contagion only because people are in search 0:19:42.760 --> 0:19:46.080 of a liquid hedge through which the kind of to 0:19:46.160 --> 0:19:48.200 play what's going on now in a m The reason 0:19:48.280 --> 0:19:52.000 why I ask is because you're not seeing massive flows 0:19:52.119 --> 0:19:55.960 out of the broad based indexed emerging markets debt funds. 0:19:56.520 --> 0:19:59.960 So if this is contagion, I just in wondering. You know, 0:20:00.080 --> 0:20:01.800 also when you talk to people, they say, these are 0:20:01.840 --> 0:20:05.359 idiosyncratic stories and they point to, uh, problems in the 0:20:05.440 --> 0:20:08.399 underlying economies. But you know, is there a degree at 0:20:08.400 --> 0:20:10.440 which you could always find issues and sort of a 0:20:10.520 --> 0:20:13.679 tribute the moves to them. But really what we're seeing 0:20:13.960 --> 0:20:16.640 is just macro plays that are that are playing out. 0:20:16.680 --> 0:20:19.199 Well yeah, I mean, okay, so contagions there. I mean, 0:20:19.240 --> 0:20:21.280 there are two ways of defining it. Right. There's you know, 0:20:21.280 --> 0:20:23.720 financial market contagion, which is what we're seeing here, which 0:20:23.760 --> 0:20:26.359 is merely you know, price action. Right, You're not really 0:20:26.359 --> 0:20:29.320 seeing it affect the real economies yet to your point, 0:20:29.400 --> 0:20:32.639 you know, you're not seeing you know, real economies, real 0:20:32.680 --> 0:20:35.879 growth declining, you know, um, real inflation picking up in 0:20:35.920 --> 0:20:38.600 a lot of these economies. Um, you know. But but 0:20:38.600 --> 0:20:41.280 but I think you're definitely seeing financial market contagion, and 0:20:41.320 --> 0:20:43.200 that is a function of the fact that, hey, people 0:20:43.240 --> 0:20:46.520 are rushing to protect their interests in a lot of 0:20:46.520 --> 0:20:48.959 these markets, and they're just aren't a lot of liquid 0:20:48.960 --> 0:20:51.959 mechanisms out there, uh, to do it. So people are 0:20:52.000 --> 0:20:54.000 kind of going to the rand, they're going to the rail, 0:20:54.119 --> 0:20:56.160 they're going to you know, they're going to the Lira 0:20:56.240 --> 0:20:58.239 for example. I mean just to basically try and you know, 0:20:59.320 --> 0:21:01.480 offset some of the weakness and um and so that 0:21:01.880 --> 0:21:04.440 from that perspective, that's the type of contagion that we're seeing. 0:21:05.640 --> 0:21:08.200 Do we need to also go visit places like Miami? 0:21:10.920 --> 0:21:15.800 I mean talk about capital moving just look at home prices, yeah, 0:21:15.800 --> 0:21:18.760 look at where look at where the money comes from. Yeah, no, 0:21:18.880 --> 0:21:20.520 I mean there's a lot of I mean there's there's 0:21:20.560 --> 0:21:23.320 a lot of I mean what we look at, I 0:21:23.320 --> 0:21:27.480 guess in e m IS is remittances and repatriation of assets, 0:21:27.480 --> 0:21:29.720 and a lot of that data, unfortunately is in real time. 0:21:29.760 --> 0:21:31.479 It's hard to kind of get your arms around it. 0:21:31.880 --> 0:21:35.600 But um, there are a lot of us um um 0:21:35.680 --> 0:21:39.400 let's call it, you know, us vested interests in emerging 0:21:39.440 --> 0:21:41.800 markets that are based in places like Florida and so yeah, 0:21:41.800 --> 0:21:43.040 I know it's your point. You know, you see a 0:21:43.040 --> 0:21:45.720 lot of Latin American kind of expats, you know, who 0:21:45.720 --> 0:21:48.880 are who who might very well be looking at at 0:21:48.960 --> 0:21:51.040 at at putting money to work there hopefully in the 0:21:51.119 --> 0:21:53.760 NATI distant future. Davian Sassaur, thank you so much for 0:21:53.800 --> 0:21:55.680 being with us. It's always enlightening to speak with you. 0:21:55.760 --> 0:21:59.359 Damian Sasaur is a fixed income strategist for Bloomberg Intelligence, 0:21:59.480 --> 0:22:03.480 focusing on emerging markets. He's great follow his research reports. 0:22:03.480 --> 0:22:20.560 They're insightful and deep. You know him. A constant theme 0:22:20.920 --> 0:22:24.359 is as we watch these headlines roll out about some 0:22:24.480 --> 0:22:28.239 of the trade tensions, how much should investors care? And 0:22:28.440 --> 0:22:30.600 I think it's an important question and I'm glad that 0:22:30.640 --> 0:22:33.000 we have Eric Weakend here with us to answer it. 0:22:33.280 --> 0:22:36.159 Eric weigand a senior portfolio manager at US Bank Private 0:22:36.200 --> 0:22:39.280 Wealth Management overseeing about a hundred and fifty four billion dollars, 0:22:39.280 --> 0:22:42.400 who joins us here in our eleven three oh studios. Eric, 0:22:42.600 --> 0:22:46.200 you talk with a lot of wealthy individuals, business owners. 0:22:46.760 --> 0:22:50.040 What's the main question they ask you? And what do 0:22:50.040 --> 0:22:53.320 you tell them? You know, it's particularly regarding the you know, 0:22:53.400 --> 0:22:57.720 the trade issues. Those individuals that are business owners are 0:22:58.600 --> 0:23:03.720 are genuinely uh sensitive about the you know, the notion 0:23:03.880 --> 0:23:08.200 that trade is not currently fair. Uh. They may be 0:23:08.600 --> 0:23:11.959 troubled and have a lot of anxiety about how uh 0:23:12.640 --> 0:23:15.720 uh you know. The discussion continues to you know, evolve, 0:23:15.800 --> 0:23:19.720 particularly regarding you know, isolating what have been our major 0:23:19.760 --> 0:23:24.600 trading partners and being somewhat antagonistic to to our allies. 0:23:25.920 --> 0:23:29.960