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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

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Speaker 1: Asia podcast time. Doug Prisoner Equity markets in the APAC

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Speaker 1: region are hired today after a rally in US stocks,

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Speaker 1: we saw plenty of positivity stateside to what appears to

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Speaker 1: be an end to the US government shutdown, and in

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Speaker 1: a moment we'll check in on the US side of

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Speaker 1: things with Chuck Camelo of Essex Financial. We begin in

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Speaker 1: Australia where the UBS Australasia Conference is underway, and it's

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Speaker 1: there we caught up with Kurt Campbell. He is co

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Speaker 1: founder and chairman of the Asia Group. He's also a

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Speaker 1: former US Deputy Secretary of State. Campbell spoke with Bloomberg's

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Speaker 1: Paul Allen and they began the discussion by looking at

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Speaker 1: the prospects of a trade deal between the US and India.

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Speaker 2: We heard some remarks from President Trump saying, they don't

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Speaker 2: love me at the moment, but they'll love me again,

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Speaker 2: even the difficulties, the tension in this relationship. But do

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Speaker 2: you see any lasting damage that's been done.

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Speaker 3: Well, it's a very important question.

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Speaker 4: After the election last year, I would say the government

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Speaker 4: that I worked with that was most confident that they

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Speaker 4: could manage President Trump given the first term successes was India,

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Speaker 4: and of course what we've seen in recent months is

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Speaker 4: really a whole scale collapse in relations at the highest levels,

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Speaker 4: Lots of tension and very little communication between President Trump

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Speaker 4: and Prime Minister Moody. I think some misunderstandings about who

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Speaker 4: gets nominated for a Nobel Prize and some of the

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Speaker 4: issues associated with the US role and what went on

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Speaker 4: between the fighting between Indian Pakistan earlier in the year,

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Speaker 4: but let's put that aside.

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Speaker 3: Now.

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Speaker 4: It's clear that both countries want to try to rebuild relations.

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Speaker 4: Each leader is sensitive about how to do that. But

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Speaker 4: in the background, trade negotiators have really hammered what I

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Speaker 4: think hammered out what I think is a very substantial

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Speaker 4: trade agreement between India and the United States that will

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Speaker 4: take tariffs down from almost forty percent to I think

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Speaker 4: a livable range, and you'll see substantial areas where India's

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Speaker 4: markets will open to further cooperation with American tech firms,

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Speaker 4: manufacturing and the like.

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Speaker 3: So I'm optimistic about this.

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Speaker 4: I would simply say that the most important element of

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Speaker 4: our Indo Pacific strategy is a strong and growing relationship

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Speaker 4: with India. I was very troubled that relations had fallen

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Speaker 4: to such a low level. Your important question really is

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Speaker 4: will there be lasting damage? And the honest answer is

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Speaker 4: probably some. But we'll just have to see how deep

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Speaker 4: that is.

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Speaker 2: Well, I know it's an appealing idea to stait aside

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Speaker 2: the India Pakistan conflict, but at the same time President

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Speaker 2: Trump is also trying to nurture relationship with Pakistan, inviting

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Speaker 2: an army chief to visit the White House as well.

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Speaker 2: So how to balance that relationship?

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Speaker 4: Well, look, I would say almost all our strategic interests

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Speaker 4: lie with India, and I think our engagement with Pakistan

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Speaker 4: is substantially different and much less significant since the Cold

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Speaker 4: War and the period thereafter.

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Speaker 2: Nurturing that relationship does risk alienating India.

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Speaker 4: It does, and it is also the case, and I

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Speaker 4: think we just have to be honest about this, Paul.

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Speaker 4: Really it is Pakistan that is more, shall we say,

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Speaker 4: effectively engage the Trump family with a variety of engagements

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Speaker 4: on cryptocurrency and resorts and the like, But still the

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Speaker 4: most important relationship for US is India. We should not

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Speaker 4: just tilt towards India. We should fundamentally embrace India, and.

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Speaker 2: Of course in the background is China. This geopolitical positioning

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Speaker 2: has China family in mind. Do you see a new

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Speaker 2: Cold War style narrative beginning to emerge in South Asia?

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Speaker 4: I don't know if it's a Cold War style narrative,

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Speaker 4: but I would simply say that for US strategy, a

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Speaker 4: close relationship with India is absolutely essential. I think increasingly

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Speaker 4: you see China's support for Pakistan, which is really of

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Speaker 4: central significance military and nuclear support, and that is the

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Speaker 4: subject of real concern for Indian interlocketors. I think the

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Speaker 4: real issue is this enduring relationship with Russia that causes problems.

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Speaker 3: With the United States.

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Speaker 4: India tends to be loyal to countries that have stood

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Speaker 4: with it for decades, but at the same time, I

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Speaker 4: think behind the scenes, India knows and understands that this

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Speaker 4: horrible conflict in Ukraine has alienated Russia from most countries

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Speaker 4: across the world, and frankly, India has to be more

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Speaker 4: responsible about that relationship.

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Speaker 2: I want to talk a little bit about the US

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Speaker 2: China relationship as well, because I do wonder what you

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Speaker 2: make of China's pushback against the US. With a China

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Speaker 2: had a stronger hand than perhaps President Trump anticipated, and

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Speaker 2: has the balance of pound between the two countries shifted

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Speaker 2: a little.

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Speaker 3: Well.

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Speaker 4: Look, I will simply say this, at the beginning of

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Speaker 4: the first term, Paul, no country was thrown af ba

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Speaker 4: Hans more than China. They anticipated a different electoral outcome.

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Speaker 4: That's not the case for this second term. They come

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Speaker 4: in with a plan. They're very strategic about how they

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Speaker 4: are engaging the United States and President Trump. You'll note

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Speaker 4: President she senior interlocktors in China treat President Trump with

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Speaker 4: great personal respect, but at the same time, every step

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Speaker 4: that the United States has taken with respect to tariffs

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Speaker 4: or sanctions, or any step against Chinese firm or practices,

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Speaker 4: China responds immediately, and their responses tend to be highly

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Speaker 4: carefully designed for specific damage or signaling for the United States.

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Speaker 4: And for instance, rare magnets were shot across our bow,

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Speaker 4: making clear the vulnerabilities and key areas of technology. China

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Speaker 4: is prepared to match US step for step, and it

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Speaker 4: is also the case that China is stepping up in

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Speaker 4: a variety of vectors, building closer relations with a number

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Speaker 4: of countries. Just a few years ago, they were busy

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Speaker 4: alienating countries like Australia, Japan, South Korea, and India. Now

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Speaker 4: they are again on a kind of modest charm offensive,

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Speaker 4: and they realize that much of what President Trump has

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Speaker 4: done has been disruptive to traditional relations.

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Speaker 3: They see an opportunity they're trying to seize it. Now.

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Speaker 4: Hopefully, the I think relatively positive trip of President Trump

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Speaker 4: to the Endo Pacific goods stops in Japan and Malaysia

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Speaker 4: and South Korea, and at least initial engagements with China

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Speaker 4: were somewhat reassuring to Indo Pacific partners, and the hope

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Speaker 4: will be we'll be able to build on that into

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Speaker 4: the future. But I think it is undeniable that in

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Speaker 4: terms of the Great Game, China has made some important

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Speaker 4: steps and has some advantages.

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Speaker 2: I just want to end on some of your thoughts

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Speaker 2: about how supply chains have been reorganized as well, and

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Speaker 2: particularly for the Bloomberg audience. What do you see this

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Speaker 2: meaning in terms of capital allocation, location and manufacturing hubs, etc.

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Speaker 3: Well, look, I will say this, Paul.

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Speaker 4: You know, there's obviously a lot of talk about, you know,

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Speaker 4: in each of the stops that the President made, first

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Speaker 4: with the visit of Prime Minister Albenizi to the United States,

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Speaker 4: but also Malaysia, Japan, and South Korea. The President signed

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Speaker 4: minerals deals. He's launched on a major program in the

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Speaker 4: United States that will look at new investments in areas

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Speaker 4: of refinement, also looking at recycling for some of these capabilities.

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Speaker 4: The truth of the matter is that if you look

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Speaker 4: at the vast majority of rare earths and critical minerals

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Speaker 4: of the ninety or so that are important to industrial

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Speaker 4: and technological pursuits, China has an overriding advantage and dominance

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Speaker 4: both in terms of supply and refinement, and it will

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Speaker 4: take years, if not decades for the United States and.

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Speaker 3: Partners to match that.

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Speaker 4: And so this is a vulnerability that has been built

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Speaker 4: up over years and it will take years to resolve.

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Speaker 4: I'm grateful that the United States, working with Australia, has

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Speaker 4: committed to attack this problem, but it will take time, resources,

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Speaker 4: and substantial commitment, not just this administration but next administrations.

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Speaker 3: Just very quickly. We w had got a few seconds left.

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Speaker 2: But since you hear in Australia, I wondered, did you

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Speaker 2: get a school for Anthony Albanezi in the way he's

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Speaker 2: balancing the relationship with China, the largest trading popped on

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Speaker 2: the US such an important la. Just a quick score

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Speaker 2: and a comment.

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Speaker 4: Look, the truth is it's hard for Australians to hear

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Speaker 4: positive news. They immediately tend to dismiss it or think, oh,

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Speaker 4: someone's exaggerating. I think Primister Albinizi handled himself extraordinarily well

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Speaker 4: on his visit to Washington.

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Speaker 3: He walked that fine line.

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Speaker 4: He has challenges at home in terms of a population

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Speaker 4: that's skeptical of President Trump, but also a country that

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Speaker 4: wants a close relationship.

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Speaker 3: Over the trenchion with Washington.

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Speaker 4: He secured Aucus a variety of areas of common purpose.

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Speaker 3: Critical minerals technology AI.

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Speaker 4: I thought it was a very good meeting and it

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Speaker 4: keeps US Australian relations on a positive trajector.

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Speaker 1: That is Kurt Campbell, co founder and chairman of the

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Speaker 1: Asia Group, speaking earlier with Bloomberg TV host Paul Allen

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Speaker 1: at the UBS Australasia Conference. Welcome back to the Daybreak

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Speaker 1: Asia podcast. I'm deg Krisner. Stateside, it appears we're nearing

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Speaker 1: an end to the US government shutdown. On Sunday evening,

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Speaker 1: eight senators in the Democratic Caucus broke with the party

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Speaker 1: to vote with Republicans and advanced legislation to end the shutdown,

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Speaker 1: And now the Senate is taking a series of votes

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Speaker 1: on a package to fund the government. This will lead

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Speaker 1: up to final passage of the bill. Now, the legislation

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Speaker 1: would still need to clear the House of Representatives before

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Speaker 1: the government will be able to reopen. Nonetheless, markets took

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Speaker 1: these developments as a breakthrough, since ending the shutdown would

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Speaker 1: remove a major growth headwind and a lot of uncertainty

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Speaker 1: over the outlook. For a closer look now at where

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Speaker 1: things stand, I'm joined by Chuck Camello. He is president

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Speaker 1: and CEO of Essex Financial. Chuck joins from Connecticut. Thank

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Speaker 1: you so much, sir for making time to chat with me.

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Speaker 1: Can we focus on this rally that we had in

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Speaker 1: the chip complex today. I think the semis have become

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Speaker 1: this proxy for the AI trade, and the Philadelphia Semiconductor

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Speaker 1: Index was up three percent today. With that, though, volatility

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Speaker 1: came crashing back down. I know we typically don't use

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Speaker 1: percentages when we track the VIX, but today the index

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Speaker 1: fell seven point eight percent. The VIX is sitting right

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Speaker 1: around seventeen point six. Is everything fine in the equity

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Speaker 1: market so long as AI is fine.

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Speaker 5: Well, I think AI is a very very big theme,

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Speaker 5: but it certainly isn't everything. Right, So if you look

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Speaker 5: at what drove the market down last week, right, So

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Speaker 5: last week we had NASTAC down three percent. Today Monday,

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Speaker 5: two days later, three days later, it's up two percent.

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Speaker 5: So AI is a big part of it which is

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Speaker 5: driving the market, especially all the capital expenditures and any

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Speaker 5: concerns that might sort of upset that. But there's bigger

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Speaker 5: macro themes at play here. I mean, big driver today

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Speaker 5: of the market was the positive news on the government reopening.

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Speaker 5: That was a big uncertainty hanging over the market, and

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Speaker 5: it was you know, again you start messing with people's

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Speaker 5: vacations and airplanes and things of that nature, starts to

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Speaker 5: get more attention. That was a big one. And you know,

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Speaker 5: you just got the more positive news and sort of

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Speaker 5: open AI statement last week about the government maybe coming in.

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Speaker 6: I mean they walk that back.

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Speaker 5: So I think you had a couple of big blankets

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Speaker 5: come off the market today and you saw a nice rally.

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Speaker 1: So I get the fact that there is optimism today

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Speaker 1: with the fact that we're likely to have an end

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Speaker 1: to the government shutdown. That removes a growth headwind, which

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Speaker 1: in and of itself seems to argue for at least

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Speaker 1: stable interest rates. But one of the things that's striking

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Speaker 1: is when you look at the equity market, this knee

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Speaker 1: jerk response is to go right away to the riskier

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Speaker 1: corner of the market.

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Speaker 5: Well, I think that's where people think the growth is

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Speaker 5: and that's where they can, you know, try to make

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Speaker 5: the most money in the market. But that opportunity comes

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Speaker 5: with a much much higher risk, and we're we're living

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Speaker 5: and watching that in real time. You know, when you

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Speaker 5: start talking about AI and we start talking about the

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Speaker 5: riskiest parts of the market, you know, we're talking about tech,

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Speaker 5: we're talking about cutting edge tech from for the most part, right,

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Speaker 5: you're also talking about big companies, you know, with really

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Speaker 5: good profit margins and making a ton of money, and

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Speaker 5: you certainly still have the startup side of that. But

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Speaker 5: we're in this potentially transformative stage of the Again, you've

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Speaker 5: heard AI called the next Industrial revolution, and it is

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Speaker 5: just it is just right for tremendous amounts of volatility.

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Speaker 5: And again, this market's been on edge, so it doesn't

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Speaker 5: take much to move it one way or the other.

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Speaker 5: And we're and honestly we're living that. You think back

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Speaker 5: until all of twenty twenty five, so far, we've we've

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Speaker 5: seen a tremendous amount of volatility, and look, I just

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Speaker 5: looked back to last week, what the market did last

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Speaker 5: week versus what it did today, And who the heck

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Speaker 5: knows we will be by Friday of this week, but

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Speaker 5: it will certainly be bouncing around a lot.

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Speaker 1: So I'm curious, Chuck, do you want to d risk

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Speaker 1: a bit on a day like today when the direction

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Speaker 1: of the market is expressing so much positivity?

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Speaker 5: Well, you know, I think the whole concept of d risking,

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Speaker 5: which which quite candle these is a conversation we're having

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Speaker 5: with more and more clients given this really strong run

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Speaker 5: on the market, you know, twenty three, twenty four and

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Speaker 5: now to twenty five andison, There's there's nothing wrong with

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Speaker 5: trimming some winners, like we've seem to have gotten away

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Speaker 5: from that. But there's there's nothing wrong with looking at

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Speaker 5: each of our clients and reminding them of what their

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Speaker 5: risk tolerance is, what their overall asset allocation should be.

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Speaker 5: And the challenge is is like tech now makes up

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Speaker 5: like thirty some odd percent of the SMP five hundred, Right,

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Speaker 5: So if you've done nothing, you've become undiversified, and you know,

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Speaker 5: taking a little bit off money off the table is

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Speaker 5: not a bad idea. Now, we're not doing that based

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Speaker 5: upon Friday, the market did this, and today the market's up.

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Speaker 5: I mean, if you look at the trend, obviously that

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Speaker 5: correction last week was off of a very high level,

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Speaker 5: so you know, we've sort of got to put it

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Speaker 5: in perspective. But we do think that long term trend

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Speaker 5: is bullish. And then again, when you start to talk

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Speaker 5: about de risking, well it's like, essentially, are you just

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Speaker 5: moving equities from one bucket to another?

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Speaker 6: Are you taking it from growth to.

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Speaker 5: Value, or are you moving more to fixed income to

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Speaker 5: really really give you some dipversification. But those are the

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Speaker 5: types of conversations we're having with clients every day.

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Speaker 1: So ending the shutdown obviously means a return of economic

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Speaker 1: data that's been sorely lacking. It will also help maybe

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Speaker 1: give the markets a little bit of insight into what

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Speaker 1: the Fed may do next. Where are you right now

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Speaker 1: in terms of the Fed outlook?

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Speaker 5: Well, I think it's you know, the most recent pronouncement

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Speaker 5: we had one we had you know, jer Powell saying

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Speaker 5: that he was driving in a fog, right, So hopefully

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Speaker 5: that fog lifts a little bit with some data that

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Speaker 5: comes back out. But the data itself has sort of

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Speaker 5: been all over the place, so I mean not to

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Speaker 5: hedge it, but the labor market, I think, is really

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Speaker 5: what's going to drive what the Fed does in December.

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Speaker 5: And if you get I think labor at best is muddled,

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Speaker 5: and if we get some really weak employment reports, then

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Speaker 5: I think the Fed will cut. Inflation seems to be

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Speaker 5: you know, muted slash, sort of anchored right now, So

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Speaker 5: I really think it's going to be excuse me, it's

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Speaker 5: going to be labor and the employment reports that will

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Speaker 5: drive what the Fed does in December. And honestly, you've

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Speaker 5: gotten sort of conflicting data on that, so I don't

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Speaker 5: want to call it fifty to fifty, but I think

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Speaker 5: you're darn close at this point.

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Speaker 1: So you were talking a moment ago about diversification maybe

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Speaker 1: into the fixed income space. Are there opportunities that you

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Speaker 1: want to share right now in terms of maybe maybe

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Speaker 1: it's the corporate segment of the bond market. Maybe you're

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Speaker 1: looking at US treasuries. How are you playing fixed income.

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Speaker 6: Yeah, well, you some bonds are behaving like bonds.

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Speaker 5: So you know, you've got your average intermediate you know,

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Speaker 5: core investment grade bond funder bond ETF is up about

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Speaker 5: seven percent year to date. And in an environment where

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Speaker 5: the Fed, you know, is going to be being more accommodata,

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Speaker 5: that generally is a rosy picture for fixed income and

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Speaker 5: you've seen that. And again you're seeing people that have

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Speaker 5: been in treasuries for a while and really they probably

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Speaker 5: would have been better off in the past couple of

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Speaker 5: years in either you know, ultra short short INTERMD term

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Speaker 5: bond fund. So we do think there's opportunity there. Mortgage

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Speaker 5: backed securities, you know, right now, based on some conversation

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Speaker 5: we had with a really solid PM, seems to provide

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Speaker 5: an opportunity. And you know, we diversify, We diversify with

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Speaker 5: credit quality and we diversify with duration.

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Speaker 6: But you know that's that party.

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Speaker 5: Someone's portfolio is really doing darn wells so far this year.

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Speaker 1: Are you fully invested right now or maybe you're sitting

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Speaker 1: on a little bit of dry powder?

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Speaker 3: Which is it?

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Speaker 5: Well, you know, as a firm, that question really is

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Speaker 5: more driven towards you know what are our where are

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Speaker 5: our clients sitting right? So as a firm, we're not

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Speaker 5: really investing firm capital. But what I can tell you

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Speaker 5: is there is still a fair amount of cash sitting

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Speaker 5: on the sidelines. Now you're you know what direction that's going, right,

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Speaker 5: So money markets right now or you know, three point

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Speaker 5: seven three point eight percent down from four and change

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Speaker 5: so that the Fed keeps cutting, we know which direction

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Speaker 5: that is going to go. But you know, we generally

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Speaker 5: have a plan for clients to get them invested. It's

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Speaker 5: one of the challenges, quite candidly right now, is getting

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Speaker 5: new money to work given these elevated levels of the

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Speaker 5: market and elevated levels of pes.

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Speaker 6: So sort of using.

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Speaker 5: Dollar cost averaging, legging into the market, or if you've

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Speaker 5: got a solid plan and all of a sudden the

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Speaker 5: market drops, you know, you get a rollboll of a week,

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Speaker 5: maybe accelerate that plan a little bit. But it is

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Speaker 5: interesting because you know, we see politics and people's political

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Speaker 5: leanings really drive a lot of their thoughts about whether

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Speaker 5: this is a good market, bad market, you know, a

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Speaker 5: wonderful time the end of days. So it's it's really

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Speaker 5: an interesting conversation depending upon which way someone is leaning politically.

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Speaker 1: So if you're expecting more volatility in big cap tech,

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Speaker 1: do you necessarily think that we may be on the

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Speaker 1: verge of a pullback that would then give you an

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Speaker 1: opportunity to jump back in.

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Speaker 5: Well, look, we just saw one right and two thirds

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Speaker 5: of it got it got taken back in the day today,

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Speaker 5: So I think nobody would be surprised given that sort

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Speaker 5: of how you know, it almost feels like this market

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Speaker 5: is a rubber band that's especially tech large growth has

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Speaker 5: been is a rubber band that's been built very tight,

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Speaker 5: and any little thing can sort of snap it or

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Speaker 5: cause it to snap back. So I don't think anybody

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Speaker 5: would be shocked or surprised with, you know, take out

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Speaker 5: of the picture like some a geopolitical event or something

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Speaker 5: like that. Let's just sort of stay with the financial markets.

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Speaker 6: Who knows.

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Speaker 5: You get some new government data and all of a sudden,

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Speaker 5: employment's really strong and it doesn't look like the Fed's

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Speaker 5: going to cut rates and that might upset the markets.

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Speaker 6: It's going to be an opportunity.

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Speaker 5: So I mean, we have been trying and have for

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Speaker 5: a couple of years now, if not many many years,

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Speaker 5: trying to set the right expectations with client to expect

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Speaker 5: now volatility, Good lord, look at what happened back in April, right,

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Speaker 5: and use that to your advantage and realize that it's

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Speaker 5: the normal functioning of a market.

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Speaker 6: But for the folks that.

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Speaker 5: Have money in cash, you know, and if you know,

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Speaker 5: you think back to April when in the video was

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Speaker 5: traded below one hundred and I got up to two hundred.

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Speaker 6: Now I don't know where it closed today, one eighty something.

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Speaker 5: I'm guessing you know, the market will give you an opportunity,

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Speaker 5: and you just have to have the discipline and quite candidly,

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Speaker 5: sometimes the intestinal fortitude to stick it out and put

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Speaker 5: money into the market when psychologically and emotionally it feels

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Speaker 5: like the worst time to put money in the market.

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Speaker 1: So Chuck, what is your view on the use of leverage?

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Speaker 1: Give me your philosophy in applying leverage to a trade.

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Speaker 5: We're generally not fans, you know. I think you're you know,

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Speaker 5: you generally will understand the bite of leverage.

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Speaker 6: You want to.

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Speaker 5: Appreciate it many times on the upside, but good lord,

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Speaker 5: when it works against you, you will feel every ounce

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Speaker 5: of it. And really, I think leverage certainly does have

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Speaker 5: a role with certain different types of investment strategies.

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Speaker 6: But you really need to make sure.

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Speaker 5: That because again you're levering up the risk in the

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Speaker 5: hopes of a greater return, and so you know, you

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Speaker 5: just got to be really careful with it. So for

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Speaker 5: the average client, it's not something where, you know, we

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Speaker 5: recommend for more sophisticated clients. If it's a know, an

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Speaker 5: interval fund or private investment that uses leverage and the

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Speaker 5: clients are more sophisticated in nature and understand the risks

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Speaker 5: and the returns of it, then certainly we do invest

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Speaker 5: in certain things like that. But by and large, for

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Speaker 5: the average investor, you know, the leverage, you don't really

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Speaker 5: ever appreciate the full upside of it.

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Speaker 6: But boy, when it moves against you, you feel it.

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Speaker 5: And a lot of bad market stories start with, oh,

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Speaker 5: they were highly levered, and those stories generally don't end well.

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Speaker 1: You're right about that, Chuck. Always a pleasure, Thank you, sir,

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Speaker 1: very much. Chuck Camillo there. He is the president and

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Speaker 1: CEO at Essex Financial, joining us from Essex, Connecticut here

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Speaker 1: on the Daybreak Asia podcast. Thanks for listening to today's

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Speaker 1: episode of the Bloomberg Daybreak Asia edition. Podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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00:21:55,280 --> 00:21:58,800
Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 1: and this is Bloomberg