Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're right here every day bringing you the
Speaker 1: latest news from the world's of business and finance, plus technology, politics, economics,
Speaker 1: all harnessing the power of Business Week reporters and editors,
Speaker 1: and of course Carol that's part of a team of
Speaker 1: twenty seven hundred journalists and analysts more than a hundred
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Speaker 1: Week on iTunes, SoundCloud, bl Bloomberg dot com. You can
Speaker 1: also listen to our radio show at two pm Eastern
Speaker 1: on Bloomberg Radio every weekday, or watch us on YouTube
Speaker 1: by searching Bloomberg Global News. This is a story that
Speaker 1: we really started talking about last week with our next guest,
Speaker 1: and we've been talking about it with him for years now,
Speaker 1: and it's really ratcheted up even over the past forty
Speaker 1: eight hours. We're talking about Hong Kong and China. It's relationship,
Speaker 1: its relationship that crisis to the US and the man
Speaker 1: we're talking about. Andy Brown, editorial director for Bloomberg New Economy,
Speaker 1: joining us on the phone from New Hampshire. So Andy,
Speaker 1: help us understand what has happened of late, because it
Speaker 1: seems to have accelerated pretty quickly this week and with
Speaker 1: some moves that are going to be hard to walk back.
Speaker 1: What do we need to know about what's going on
Speaker 1: in Hong Kong. Yeah, well, acchanged, You're absolutely right. Things
Speaker 1: have come to a head UM in Hong Kong with
Speaker 1: the National People's Congress China's parliament passing UH national Security legislation,
Speaker 1: which is going to be imposed on Hong Kong bypassing
Speaker 1: the Hong Kong Legislature UM. And this is very clearly
Speaker 1: a prelude to a broad and very decisive crackdown on
Speaker 1: the democracy protests pro democracy protests UM in Hong Kong.
Speaker 1: And in response to that, the United States has determined
Speaker 1: that Hong Kong no longer enjoys or autonomy or a
Speaker 1: sufficient level of autonomy from China UM. And we don't
Speaker 1: quite know what the implication of that is, but it
Speaker 1: could mean anything from the U S revoking Hong Kong
Speaker 1: Special trading status with the United States to going after
Speaker 1: the assets of individuals responsible for that legislation, or indeed
Speaker 1: something broader like you know, an even broader decoupling in
Speaker 1: the financial sector. Choking off the flow of funds into China,
Speaker 1: many of which a mediated through Hong Kong, which of
Speaker 1: course is one of the world's largest financial centers. And
Speaker 1: as you know, Hong Kong leader Carrie Lamb, she defended
Speaker 1: the legislation earlier this week and she said, quote, it
Speaker 1: will not affect the legitimate rights and freedoms enjoyed by
Speaker 1: Hong Kong residents. Is she right? That's my first question?
Speaker 1: And what about this timing? Why is this happening? Is
Speaker 1: it because just of the protests or was this, you know,
Speaker 1: something that was going to come from China at some point? Well,
Speaker 1: actually it was supposed to have come from Hong Kong.
Speaker 1: You know, Hong Kong administration was supposed that we put
Speaker 1: in place a national security law many many years ago, UM,
Speaker 1: but has been putting it off in the face of, of
Speaker 1: of course, massive widespread opposition from all segments of Hong
Speaker 1: Kong society. Hence it was imposed, um, you know, with
Speaker 1: with without any form of review um by by the
Speaker 1: the the territories legislature. UM. So as far as Carry
Speaker 1: Lamb is concerned, saying that you know, this isn't a
Speaker 1: threat to the rule of law. We heard something similar
Speaker 1: from her predecessor, Um Ton Chi Hua. UM. So you
Speaker 1: see that the the the essence of this law is
Speaker 1: it's going after UM secession, terrorism, UM, you know, UH sedition, UM,
Speaker 1: collusion with foreign forces UM. And so Ton Chihua said, well,
Speaker 1: you know, as long as you're not engaged in acts terrorism,
Speaker 1: you're going to be fine, which essentially what Carrie Lamb
Speaker 1: seems to be saying. UM. Problem is that these terms
Speaker 1: in the Chinese judicial lexicon can mean just about anything
Speaker 1: that the authorities want them to mean, and they're used
Speaker 1: in China to go after a huge broad array of
Speaker 1: dissidents UM, you know, Ngo people, the Wagers, the Tibetans,
Speaker 1: you know, UM and so these are catch all terms. Furthermore,
Speaker 1: the legislation is going to be accompanied by a physical
Speaker 1: presence in Hong Kong of the security services from agencies
Speaker 1: from China Ministry of State Security, Ministry of Public Security.
Speaker 1: So you know, it's not clear what degree of oversight
Speaker 1: or interpretation, if if any, that Hong Kong courts will
Speaker 1: have over this new National Security ages at law. At
Speaker 1: the very minimum, you can say that it will it
Speaker 1: will exist side by side with law. That is the
Speaker 1: term that is there to protect freedom in Hong Kong,
Speaker 1: and it will also include this shadowy parallel presence of
Speaker 1: Chinese security forces operating side by side with the Hong
Speaker 1: Kong Police Force. So andy to be a little bit
Speaker 1: parochial about this. From from my perspective, I think about
Speaker 1: our listeners, many of whom work in and around Wall Street.
Speaker 1: They work in the financial industry, the financial services industry.
Speaker 1: If you're sitting at JP Morgan Morgan, Stanley, Goldman, Sachs,
Speaker 1: any number of global banks, you have a big presence
Speaker 1: in Hong Kong. What are you thinking about right now
Speaker 1: in terms of your people who are there now? And
Speaker 1: maybe more importantly, how do you think about Hong Kong
Speaker 1: and the near the midterm future. Yeah, so you know,
Speaker 1: many details of this legislation, Uh, you know I yet
Speaker 1: to be revealed. We don't know how it's going to
Speaker 1: be implemented. Um, you know, will it be swift, will
Speaker 1: it be brutal? Will it be hard? Will it be
Speaker 1: you know? We we we don't know. UM. I think
Speaker 1: probably if you're investing in Hong Kong right now, your
Speaker 1: immediate confirm is about street violence, is about the chaos
Speaker 1: that's bringing the Hong Kong economy to its knees. You
Speaker 1: may even be somewhat relieved that there's legislation coming which
Speaker 1: could potent potentially snuffed that out and and sort of
Speaker 1: revive Hong Kong as a as a business center if
Speaker 1: you're looking for if you're looking at it long term,
Speaker 1: and you're thinking the degree to which Hong Kong is
Speaker 1: a financial center, and they say one of the world's
Speaker 1: great financial centers, the degree to which it is founded
Speaker 1: upon the rule of law, and the extent to which
Speaker 1: this national security legislation undermines that rule of law, then
Speaker 1: I think you're going to be very alarmed. And at
Speaker 1: the very least, I think what you're going to see
Speaker 1: is a hedging behavior now by companies, financial services companies, UM.
Speaker 1: The ones that don't have to be there are probably
Speaker 1: going to start leaving. The big banks have to be there.
Speaker 1: They can't, they can't just take off and and leave.
Speaker 1: But I think you will see a drain of businesses.
Speaker 1: You'll certainly see a brain a drain of talent. The
Speaker 1: United Kingdom just just a day or yesterday announced that
Speaker 1: it was going to give addition will visa rights to
Speaker 1: three thousand Hong Kong British uh possiblet hold is not
Speaker 1: full residency but additional visa rights. Um. Taiwan has said
Speaker 1: that it will it will offers shelve to the Hong
Speaker 1: Kong people. So I think you write a real outflow
Speaker 1: of tawer. All right, Well, we appreciate your context. As always,
Speaker 1: Andy Brownie knows so much about this. Editorial director for
Speaker 1: Bloomberg New Economy Jonny is on the phone from New Hampshire.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. He has threatened to shut them
Speaker 1: down now. President Trump says this will be a big
Speaker 1: day for social media and fairness, as he's expected to
Speaker 1: sign an executive order aimed at Twitter and other tech giants.
Speaker 1: He's also singled out one specific Twitter employee for those
Speaker 1: fact checking tweets. Let's get into this story because it
Speaker 1: just gets more interesting and kind of a hotter story
Speaker 1: each day, goes by. Bloomberg News White House correspondent Josh
Speaker 1: wind Grove joining us on the phone on this Thursday. So, Josh,
Speaker 1: we're gonna get this executive order. It sounds like it's
Speaker 1: in flux. The press briefing is ongoing at the Press
Speaker 1: Secretary just said that they're continuing to work on this.
Speaker 1: You remember yesterday, it was supposed to come last night,
Speaker 1: and today they haven't really given a time, So it
Speaker 1: sounds like they're still working on at the draft that
Speaker 1: is floating out publicly right now. Uh, sort of targets
Speaker 1: social media companies by kind of taking aim at that
Speaker 1: shield that they have on liability, the Section to thirty
Speaker 1: protections that treat them as sort of a conduit rather
Speaker 1: than a publisher. It sounds like they're going to try
Speaker 1: to rattle the cage somehow on it. But executive orders
Speaker 1: have murky authority at best. It is well short of legislation,
Speaker 1: and so you know, the actual impact is going to
Speaker 1: depend a lot on that sort of fine text, and
Speaker 1: again we just don't know where it's gonna land. Well,
Speaker 1: without being too silly about this, Josh, if I think
Speaker 1: about the relationship that the President of the United States,
Speaker 1: both as a candidate and now as the leader of
Speaker 1: the free world, has with social media and specifically with Twitter,
Speaker 1: you might say it's complicated. Um, he has relied heavily
Speaker 1: on it, to say the least, and certainly has galvanized
Speaker 1: a lot of support, but also galvanized a lot of opposition.
Speaker 1: I mean, help us understand the politics of this, because
Speaker 1: the net effect might be good for him, might not be.
Speaker 1: How are folks around inside the Beltway and outside considering this.
Speaker 1: There is a long running grievance among conservatives that they
Speaker 1: think that social media and big text treat them unfairly
Speaker 1: and target conservative voices unfairly. Trump has been sort of,
Speaker 1: you know, circling this issue on and off since the
Speaker 1: start is presidency, and this sort of fact check label
Speaker 1: that came on for the first time this week sort
Speaker 1: of blewed up again and pushed it to the hit
Speaker 1: front of his mind. But it's been there for a while,
Speaker 1: and so we've seen We've seen, for instance, them target
Speaker 1: this particular Twitter employee, Old Roth, who's the head of
Speaker 1: site integrity, essentially like protecting Twitter against blots and misuse. Uh.
Speaker 1: He's tweeted negative things in the administration about the administration,
Speaker 1: and they're saying, look, how do you have an employee
Speaker 1: doing that while you're coming at us for for lying.
Speaker 1: So I think you know, Twitter has I guess, uh
Speaker 1: taken steps to I guess fact check some of the
Speaker 1: President's tweets, you know, the ones that effectively accused Joe Scarborough,
Speaker 1: the MSNBC host, of murder, have so far fart not
Speaker 1: been fact checked at all. So you know, this is
Speaker 1: I guess, in some ways a red meat based issue
Speaker 1: for the President because many of his voters and supporters
Speaker 1: believe the Twitter and other sites, uh just you know,
Speaker 1: aren't giving them a fair shake. What's amazing is I
Speaker 1: think some would say it's long overdue for these social
Speaker 1: media sites to be responsible about what's on their site,
Speaker 1: right and do fact checking. At the same time, you
Speaker 1: do wonder, you know, what the slippery slope is that
Speaker 1: we maybe go down here, um, And I just do wonder.
Speaker 1: You know, it feels like regulators have backed off a
Speaker 1: little bit about, you know, focusing on social media companies.
Speaker 1: But I do wonder if we start to see Congress
Speaker 1: kind of jump back into the freight at this point.
Speaker 1: It's a great, great question. You know. One of the
Speaker 1: questions that's also been raised is, you know, is it
Speaker 1: these uh companies placed the police truth? And you know,
Speaker 1: I don't think that's necessarily part of the issue. And
Speaker 1: by that, I mean I think you'd find some Democrats
Speaker 1: who think that who might be uncomfortable with the idea
Speaker 1: of handing Twitter and Google and the likes even more
Speaker 1: power for our lives than they have now to start
Speaker 1: deciding what is true or not. You know, the way
Speaker 1: the Press Secretary put it, as the president today, she
Speaker 1: said he he wants to make sure big tech is
Speaker 1: not stifle free speech. Now, this kind of backs in
Speaker 1: into a bit of a corner because the President can't
Speaker 1: be seen to be targeting Twitter too much inciting for
Speaker 1: free speech, because of course he would amount to censorship
Speaker 1: of Twitter in his fight against censorship. But you know
Speaker 1: that hasn't necessarily stopped him in the past. So I
Speaker 1: think that we will see something come out this The
Speaker 1: draft order is not as harsh as as Trump has
Speaker 1: made it sound, and it sounds like they're still wrangling
Speaker 1: over it. So whether the final order is, you know,
Speaker 1: more watered down or more beefed up, I think remains
Speaker 1: to be seen. But I think it'll be a lobbying
Speaker 1: frenzy either way for big tech in Washington. I'm just
Speaker 1: gonna say, Josh, it's definitely an election year. Yeah, for sure,
Speaker 1: for sure. Sometimes we forget that amid everything else going on.
Speaker 1: All Right, Joshuayn Grove, White House correspondent for Bloomberg. We
Speaker 1: really appreciate it. I'm great political context there. You know,
Speaker 1: we talked to Sarah Fryar yesterday. You can check that
Speaker 1: out on our podcast feed. But this is important. It's
Speaker 1: important for us to understand this. Twitter shares, by the way,
Speaker 1: they're down about two point six percent today after being
Speaker 1: down about the same amount yesterday. This is Bloomberg Business
Speaker 1: Week with Carol Messer and Jason Kelly on Bloomberg Radio.
Speaker 1: So a group of super forecasters say a COVID nineteen
Speaker 1: vaccine is still a ways off in today's Business Week Economics.
Speaker 1: Business Week Economics editor Peter coy joins us along with
Speaker 1: the CEO of that group that pulls all of the
Speaker 1: super forecasters together. He's Warren Hatch, CEO of Good Judgment.
Speaker 1: It's a company that maintains a global network of forecasters
Speaker 1: to make predictions for clients based on publicly available evidence.
Speaker 1: Peter's on the phone in New Jersey, Warren in New
Speaker 1: York City. Peter set the stage for us. I love
Speaker 1: this story. Oh thanks you. You know everybody wants to
Speaker 1: know this. When are we gonna have a vaccine? It's
Speaker 1: a question on everybody's mind now. So I uh got
Speaker 1: a pitch actually from a PR person about good Judgment,
Speaker 1: a company I was aware of, but I hadn't really
Speaker 1: looked at their website to see what they were saying
Speaker 1: about COVID nineteen. I was really curious, and you know,
Speaker 1: I was surprised actually, and I saw the results how
Speaker 1: pessimistic they really were. It seems like they're on the
Speaker 1: pessimistic end of the stuff you're hearing. But I thought, well,
Speaker 1: maybe they're right. And all the you know, companies and
Speaker 1: epidemiologists and government officials are just champing at a bit
Speaker 1: a bit too much, getting a little over Robertimi, this
Speaker 1: sounds like a story, So put something out so Warren
Speaker 1: tell us about it. And by the way, I think
Speaker 1: super Forecaster is one of the greatest descriptions that I've
Speaker 1: ever heard, Like two title, you know, to have the
Speaker 1: title like, yeah, I'm a super forecast, Like do you
Speaker 1: actually have that on your business card? Or is that
Speaker 1: just something you sort of throw around at cocktail parties.
Speaker 1: I'm just giving you a hard time, but it is cool. Well,
Speaker 1: I'll want to know, do you have a cape? Uh, well,
Speaker 1: I think there is a cape on one of our
Speaker 1: stock photo images that we've used in the past. Uh.
Speaker 1: And I could tell you that the term um super
Speaker 1: forecast the SuperM orchastras themselves. They're a little uneasy with
Speaker 1: with with with with that. But now that I'm CEO
Speaker 1: of the commercial spinoff, I sure recognize the value of
Speaker 1: the term. I'm all for it. Putting it on my
Speaker 1: business cards a great idea. So what what did you
Speaker 1: find help us understand? You know, as you guys dug
Speaker 1: into this, because as Peter you know rightly said, this
Speaker 1: is running, you know, counter to what a lot of
Speaker 1: us are, you know, hearing and reading from maybe more
Speaker 1: optimistic folks. Yeah. So the way we approach these kinds
Speaker 1: of questions for a clients and government and private sector
Speaker 1: and finances is we think in terms of probabilities. So
Speaker 1: rather than saying, well, a vaccine is unlikely or likely
Speaker 1: or absolutely for sure those sorts of things. Uh, but
Speaker 1: they're really hard to track, to evaluate, to interpret. So
Speaker 1: we use probabilities numbers that you can compare across different
Speaker 1: kinds of questions. When will the US economy recover? Were
Speaker 1: less optimistic than my old friend Steve Raschudo Uh. But
Speaker 1: also when is of what vaccine going to be widely available?
Speaker 1: And then we create ranges so we can get a
Speaker 1: little bit more nuance. What's the probability that a vaccine
Speaker 1: will be in wide distribution by the end of this year?
Speaker 1: Right now, the super forecasters have pretty low odds in
Speaker 1: the single digits that that's going to occur. Now, that
Speaker 1: doesn't mean it won't. In a world of probabilities, you know,
Speaker 1: it's low, we may see it. Uh, But then by may,
Speaker 1: I mean like six percent probability. Um, So it's not zero,
Speaker 1: but the probabilities are much higher for a vaccine and
Speaker 1: wide circulation about a year from now. And I can
Speaker 1: also say that the pessimism or the skepticism is less
Speaker 1: than what it was. One of the things that super
Speaker 1: forecasters will do is follow the news flow like we
Speaker 1: all do and and uh, and then antify the impact
Speaker 1: of that news flow on their forecasts. And so some
Speaker 1: of the news that we have been seeing about possible
Speaker 1: successes and some of the vaccine research has been reflected
Speaker 1: in that now they're not seeing much movement in the
Speaker 1: probability that we'll get a vaccine by the end of
Speaker 1: this year, but a vaccine by this time next year
Speaker 1: has moved up. Well, it's so fascinating, you know, Peter,
Speaker 1: I feel like Jason likes to make references like this
Speaker 1: is going to be in billions, But I could see
Speaker 1: this being in billions, you know, down the road. It's like,
Speaker 1: you know, figuring out what's the likelihood of something happening
Speaker 1: or not happening. But I do think in a world
Speaker 1: where I was just in a conversation with a bunch
Speaker 1: of CEOs, there's just no data and folks are saying
Speaker 1: you've got to throw out the old data points because
Speaker 1: they just don't apply to the future. You know, this
Speaker 1: kind of information can be very useful. Yeah, I mean information.
Speaker 1: It's not like this is the answer. I mean the
Speaker 1: good judgment incorporated is how to share mistakes too. And
Speaker 1: when I talk to Philip pet Luck was a co
Speaker 1: founder University of Pennsylvania professor, and he was the first
Speaker 1: to say, look, it's rare that we're gonna have We're
Speaker 1: gonna be way on one end, everybody will be way
Speaker 1: on the other We'll be right and they'll be wrong.
Speaker 1: And but another hand, if you're right, fifty two of
Speaker 1: the time in the stock market for example, you can
Speaker 1: make a lot of money, so uh, you don't again
Speaker 1: the the goals. The measure of success is not perfection.
Speaker 1: It's just being having a little bit of an edge.
Speaker 1: And I you know, I'm willing to say that, you know,
Speaker 1: maybe these people just because of their disciplined way of thinking,
Speaker 1: the fact that they don't have they're not emotionally tied
Speaker 1: to a particular answer or financially invested in their particular answer,
Speaker 1: but they just want to make the very best estimate
Speaker 1: makes them worth listening to. Yeah, well, and weren't it.
Speaker 1: And we should note you know your background is in
Speaker 1: hedge funds. I mean you you helped co found a
Speaker 1: head fund. You understand the research element and so from
Speaker 1: an investment perspective, exactly the framing, uh that Peter just
Speaker 1: laid out is I think important for people to keep
Speaker 1: in mind. Right, I couldn't agree more. And I wish
Speaker 1: I knew twenty years ago when I got started and
Speaker 1: find in Morgan Stanley what I know now, because they
Speaker 1: are all these wonderful tools that can give you just
Speaker 1: a little bit of an edge here and there. And
Speaker 1: it's these little things that when you add them all together,
Speaker 1: can add up to a pretty significant outperformance relative to
Speaker 1: your peers. And that's that's what it's all about. All right, Well,
Speaker 1: we really appreciate both of your time. Warren Hatches, the
Speaker 1: CEO of Good Judgment, joining us on the phone from
Speaker 1: New York City. Read more about him and his firm.
Speaker 1: He's a super forecaster. You can follow him on Twitter
Speaker 1: at super Forecaster. Peter Coy wrote the story in Business
Speaker 1: Week Online Peter Coy, of Course Economics Ceter for Bloomberg Week.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. Huawei continues to be in the
Speaker 1: news and owing in Part two are continued attention that
Speaker 1: we're paying to cybersecurity and also some headlines yesterday coming
Speaker 1: out of Canada. Here to discuss all that. Andy Purty's
Speaker 1: chief security officer for Huawei Technologies USA, joining us on
Speaker 1: the phone from But that's the Andy. Really nice to
Speaker 1: have you back with us. Thank you pleasure. All right,
Speaker 1: so let's start in the news if we can. UH
Speaker 1: the CFO of Huawei, the parent company UH continues to
Speaker 1: be part of a big legal fight in Canada. Help
Speaker 1: us understand what's going on and candidly beyond the the
Speaker 1: legal issue here sort of what it means for business,
Speaker 1: what it means for the brand at this point, well,
Speaker 1: the effort against Miss Mong, our chief financial officer, is
Speaker 1: part of the overall effort the last couple of years
Speaker 1: by the US government to carpet BOMBAWE out of existence.
Speaker 1: And in terms of the impact on the company, the
Speaker 1: decision involving Miss mom and the process for extradition will
Speaker 1: take quite a number of months, if not years, before
Speaker 1: there might be a actual trial in the Eastern District
Speaker 1: of New York. And we have great confidence in the
Speaker 1: legal systems of Canada and the US, so we feel
Speaker 1: like I shall be vindicated in the end. But right now,
Speaker 1: this this campaign against Wahwei, the recent ramping up of
Speaker 1: pressure on American company's ability to sell to Wawa, even
Speaker 1: through international companies, is going to have a tremendous negative
Speaker 1: impact on American jobs. You know, it's interesting, you know
Speaker 1: that this is going on amid a week or two
Speaker 1: where we are seeing once again heightened tensions UH and
Speaker 1: back and forth between the head of the United States,
Speaker 1: President Trump and of course Chinese President j and Ping.
Speaker 1: And what how do you see this? Uh? You know,
Speaker 1: you've got to run your business amid kind of all
Speaker 1: of this fury, and we're trying to figure out is
Speaker 1: that rhetoric or is it going to turn into actions
Speaker 1: at all? The mainly impact both China and the United States. Well,
Speaker 1: there's certainly been an impact on our company. The impact
Speaker 1: US about twelve million dollars last year, and we haven't
Speaker 1: been able to estimate what the impact will be this year.
Speaker 1: Of course, it's it's complicated by the added factor of
Speaker 1: the pandemic, but you look at the overall situation. The
Speaker 1: geopolitical situation between China and the US is what we're
Speaker 1: talking about, and that's exacerbated now by the US presidential campaign.
Speaker 1: So the the the competition among President Trump and a
Speaker 1: former vice President Biden to out maneuver the other in
Speaker 1: terms of anti China rhetoric, kind of a new red
Speaker 1: Scare kind of thing. Um indicates that this battle is
Speaker 1: going to go on at least through the election. And
Speaker 1: there doesn't seem to be rational discussion and people don't
Speaker 1: seem to care about the fact that American jobs are
Speaker 1: going to be lost as a result, and can you
Speaker 1: quantify you know, the job's piece of this I understand
Speaker 1: that obviously things are complicated, but of the pandemic, and
Speaker 1: it remains to be seen what the total economic impact is.
Speaker 1: But help us understand. You know, you guys have several
Speaker 1: offices around the country here what is it meant? And
Speaker 1: and maybe help us understand sort of the one two
Speaker 1: punches that were of this action and this UH confrontation
Speaker 1: between the United States and China as well as the pandemic.
Speaker 1: It synthesized that for us, if you can andy well,
Speaker 1: in terms of within the US, we have two issues.
Speaker 1: We have the issue of whether or not Huawei can
Speaker 1: sell to American companies and right now we're serving parts
Speaker 1: of rural America. UH. And the other issue is the
Speaker 1: ability of American companies. Nearly three want to be able
Speaker 1: to sell to Walwi. So in terms of our global revenues,
Speaker 1: which last year or despite all this, we're up about UM.
Speaker 1: You know, we were impacted about twelve billion dollars. But
Speaker 1: the UH, the the annual amount that we procure from
Speaker 1: American companies is not just to serve our customers in America,
Speaker 1: it's our global market. At its height, we had about
Speaker 1: thirty or thirty two percent of all Walwi global components
Speaker 1: came from American companies and they're primarily in the semiconductor industry.
Speaker 1: And you can see in the last couple of months, uh,
Speaker 1: and they can speak for it a lot better than
Speaker 1: that I can that American UM semiconductor companies and their
Speaker 1: association's trade associations have basically been saying, look, the limitations
Speaker 1: on the ability of American companies to sell a Walways
Speaker 1: averaging about twelve billion a year that is estimated to
Speaker 1: be between forty and fifty thousand direct jobs, not to
Speaker 1: count the indirect jobs. And so the fact is, well,
Speaker 1: you know, we're fighting for our survival. Um, We're gonna
Speaker 1: be okay, and we would like to continue to buy
Speaker 1: from a Meritan companies and buy as an American want
Speaker 1: to be able to see those jobs continue. If we
Speaker 1: have to, will go elsewhere and then we won't come
Speaker 1: back and those American jobs will go away, and and
Speaker 1: that's not going to help America and the long term,
Speaker 1: it's not going to hurt WALWI. And the strategy you
Speaker 1: talked about the bigger pick. Sure, the strategy is that
Speaker 1: the US wants to hurt Wally, to hurt China because
Speaker 1: they are afraid of the rise of China economically and militarily.
Speaker 1: So so that's really at the heart of it. And
Speaker 1: so instead of promoting greater innovation technology by America, they're
Speaker 1: trying to hurt Wally and that's not going to help America.
Speaker 1: The Sadney China in terms of a long term competition,
Speaker 1: which is which is very important Andy to be fair,
Speaker 1: And unfortunately we've only got about forty five seconds here.
Speaker 1: But I mean, nothing ever happens in a vacuum, right,
Speaker 1: And I know as part of the latest you know,
Speaker 1: trade agreement, China was supposed to be buying a certain
Speaker 1: amount of energy products and so and so forth, and
Speaker 1: that not isn't necessarily happening. And you see China now,
Speaker 1: you know, in terms of what it's doing in Hong Kong,
Speaker 1: there's a lot of uncertainty and moves on both sides.
Speaker 1: What's the responsibility of China and all of this And
Speaker 1: unfortunately just got about thirty seconds here. Well, I mean
Speaker 1: we're independent of the China government. We're an independent company
Speaker 1: probably the largest tridal young company in in uh China, right,
Speaker 1: so we can contribute the competition and job growth. So
Speaker 1: the conduct of the of the China government is different
Speaker 1: than US, and I may not like what they do
Speaker 1: and I may not like with the US government. Okay,
Speaker 1: suffer from well. I wish we had more time. And Andy, Um,
Speaker 1: you've been so gracious to you know, keep coming back
Speaker 1: so we can continue this conversation. So I look forward
Speaker 1: to engaging with you in the future. Andy Purty at
Speaker 1: Huawei Technologies USA. I'm roam a journal now, but you
Speaker 1: let me drive. Oh no, no, no no, no, drive honey, please,
Speaker 1: I'll do the riding drivel let me. I want to drive.
Speaker 1: Just drive, baby, the questions trying. This is the drive
Speaker 1: to the globe that funkimmu. Thanks, We'll drying us on
Speaker 1: Bloomberg Radio. It is time for the drive to the
Speaker 1: clothes back with us. I'm excited to at back with us.
Speaker 1: Dog CEO, CEO and partner at Covar Capital Partners roughly
Speaker 1: seven seventy five million in assets under management, based in Leewood, Kansas,
Speaker 1: and that's where we find him on the phone on
Speaker 1: this Thursday. So, Doug, how are you? How's it going? Wow?
Speaker 1: How are you? And Jason? We're doing okay? Well here
Speaker 1: we are, Yeah, we eleven. We're making our way through it.
Speaker 1: What's the what's the scene on the ground in Kansas.
Speaker 1: The ceiling ground is good. I mean it's it's wet today,
Speaker 1: but but that's pretty par for the course this time
Speaker 1: of year. And and uh, but things are good, you know.
Speaker 1: I I think, um, you know, in general, broadly speaking,
Speaker 1: clients are are are well, They're they're optimistic, and I
Speaker 1: think deservedly so. There's a lot of good things that
Speaker 1: have developed. I think I was on you guys in
Speaker 1: the first week April, and so much has happened since then.
Speaker 1: And I think by and large, very possibly predisposed well, okay,
Speaker 1: until President Trump in President g started going at it
Speaker 1: again when it comes to US China. You know, a
Speaker 1: headline cross the Bloomberg at three seventeen pm Eastern, Trump
Speaker 1: says he's going to hold a news conference on China Friday.
Speaker 1: And the rally that we saw, UH stocks went from
Speaker 1: their highs and took a leg down. We're just a
Speaker 1: little bit lower. But nonetheless investors are nervous about this.
Speaker 1: Um here's another big macro thing, macro story that we've
Speaker 1: had to deal with a lot. I feel like Doug
Speaker 1: over the last couple of years, big deal in your world,
Speaker 1: or how do you see it? Well, I think incrementally sure.
Speaker 1: I mean you have to figure that last year we
Speaker 1: did see some spa of the China US tensions in
Speaker 1: coordination with a said that it reversed course from its
Speaker 1: more Hawker's posture the end its thousand eighteen, and that
Speaker 1: combination really lit an explosive, broad based rally. So now
Speaker 1: geo political tensions are escalating, I mean literally as of
Speaker 1: the last few weeks, maybe a couple of months, and
Speaker 1: certainly the blame game at the start of the pandemic.
Speaker 1: But if the geopledge political tensions are escalating, but we
Speaker 1: still have a FED that's firmly committed to loose monetary policy,
Speaker 1: then I think the outcome of that um tension point
Speaker 1: is more than equal and opposite in favors of FED.
Speaker 1: But keep in mind, I mean this is a budding
Speaker 1: impediment that it is likely to be more of a
Speaker 1: conflagration at least is partially politically motivated, right, because it
Speaker 1: seems like the one thing that both sides agree on
Speaker 1: is China is now public enemy number one in the
Speaker 1: United States, So who can be more hawkish While Trump's
Speaker 1: in office, He's not going to miss an opportunity to
Speaker 1: be coordinated that title m And so do you just
Speaker 1: sort of stay put and ride this out here, Doug,
Speaker 1: or what do you do as you're looking towards I mean,
Speaker 1: we're almost to the point where we really are talking
Speaker 1: about the back half of the year. How do you
Speaker 1: synthesize this and feather it in with you know what
Speaker 1: we have still, which is a pandemic and a crisis
Speaker 1: and a health crisis and economy that has largely ground
Speaker 1: to a halt. Yeah, the economy has ground to a
Speaker 1: hall Obviously, the market has just the opposite, right, And
Speaker 1: I think and the recovery is taken on almost warp
Speaker 1: speed proportions, And it's really the speed but not the
Speaker 1: magnitude that's surprising, just given the historical context of the
Speaker 1: market being a leading indicator of the economy. So you
Speaker 1: get to the point now when you say we've had
Speaker 1: fantastic monetary policy intervention, we've had fantastic ciscal policy intervention.
Speaker 1: We're kind of at a middling range, right, A lot
Speaker 1: of the early games have clearly been made. Now we're
Speaker 1: at a point of inflection of where does the economy
Speaker 1: go from here to corroborate the markets move, So are
Speaker 1: there sectors of the market that still offer opportunity in
Speaker 1: strong consideration what's taking place still on the geopolitical side.
Speaker 1: So it's just another element that has to go into
Speaker 1: the calculus of identifying strong expected return sectors within the
Speaker 1: stock and bond markets. Feel like we think it's time
Speaker 1: reverse course and raise cash. I feel like there's a
Speaker 1: lot they're dug in that calculus right now. Oh, there's
Speaker 1: no question, there's no question. I mean, I think, right
Speaker 1: there's not only the economic, but the emotional. And I
Speaker 1: think when you go through in in that the type
Speaker 1: of pandemic and in that sort of that combination or
Speaker 1: or um coordination of fear that we experience, it made
Speaker 1: it difficult to compartmentalize and sort of see through opportunity
Speaker 1: from the headlines which were undoubtedly and deservedly very negative.
Speaker 1: So I think that's the thing that people are still
Speaker 1: struggling with, is they look to commit new capital. And
Speaker 1: so what worries you the most here? Um? You know,
Speaker 1: I don't know that I prioritize any of the set
Speaker 1: of worries. I think more than anything, complacency. You know,
Speaker 1: complacency is a problem from the steampoint of um false
Speaker 1: confidence in the curve flaging that's taken place too quick.
Speaker 1: Is it relates to reopening economies, UM being negligent or
Speaker 1: ignoring data points that would obviously be in the in
Speaker 1: the in the broad based best interests of the collective
Speaker 1: American populist to go very slow. And I think what
Speaker 1: happens right is we all have this pent up energy
Speaker 1: and optimism and for again is it earlier with good reason?
Speaker 1: Spots like being very measured in sort of the allocation
Speaker 1: of our energy and our efforts, as well as the
Speaker 1: allocation of our capital. So I'm curious, did you were
Speaker 1: are you putting a lot of money to get you know,
Speaker 1: to work our new money put to work, you know,
Speaker 1: Doug Win, we saw the sell off and have you
Speaker 1: Are you just kind of marking time right now? No,
Speaker 1: A little bit of it. It's a little bit of both.
Speaker 1: So like we put money to work, but never with
Speaker 1: any probably in hindsight care on not enough speed, right,
Speaker 1: I mean, certainly the March twenty three bottom which is held,
Speaker 1: we think it's going to hold. Uh, it's very obvious
Speaker 1: in hindsight where it was, you know, did we back
Speaker 1: up the truck to equities on the March twenty four
Speaker 1: We didn't, but in a very measured fashion as it
Speaker 1: was appropriate for clients and sort of their risk profile
Speaker 1: and their ultimate long term objectives. But we're by no
Speaker 1: means falling off the throttle because if you think about
Speaker 1: what's happened, and certainly when you look at the attribute
Speaker 1: of the index, with the smps down six or seven
Speaker 1: percent for the year, but the average stock of the
Speaker 1: SMP is still down twelve or four and those are
Speaker 1: still the biggest five companies in the world. So there's
Speaker 1: a whole subset of companies, particularly small cap international, where
Speaker 1: they've seen considerably larger draw downs, which we think make
Speaker 1: for even more attractive entry point. Yeah, especially if if
Speaker 1: once we get on the other side of this, if
Speaker 1: if consumers do come back, if the economy starts to
Speaker 1: reopen um with some kind of momentum, we certainly could
Speaker 1: see something more play out when it comes to the
Speaker 1: equity markets. Um, I will right, I mean, did you
Speaker 1: think about did we mentioned being optimistic, like we're so
Speaker 1: optimistic on the science, were so optimistic on the American
Speaker 1: spirit or so optimistic on US economy two point or
Speaker 1: three point. We're gonna call this post COVID construct. But
Speaker 1: they're gonna be lots of changes in business and therefore
Speaker 1: changes in investment opportunities. But we always want to think
Speaker 1: in terms of marginality. Right, how many people took on
Speaker 1: your program and said, you know, we're never gonna need
Speaker 1: commercial office space again, or we're never gonna have an
Speaker 1: attraction of living intercommuting to a big city. I don't
Speaker 1: agree with any of those statements in totality, but there
Speaker 1: are going to be subtle changes in that effect. And
Speaker 1: those shut up being very very positive. Yeah, now it's
Speaker 1: a it's a really uh it's a really interesting point.
Speaker 1: And uh, we always love your optimism, Doug. It's really good.
Speaker 1: It's really good to hear Doug Cioca, chief executive US
Speaker 1: certain partner for cav Our Capital Partners Journeys on the
Speaker 1: phone from Leewood, Kansas, Carol realism, right, like you know
Speaker 1: you do, Like I I kind of get up this morning,
Speaker 1: I'm like, God, I'm I'm mistaking trips. Like I was
Speaker 1: really thinking about it and thought, is it as we
Speaker 1: can figure this out? You know, I kind of want
Speaker 1: to resume that part of our world. So it's just
Speaker 1: a case of figuring it out, making it safe, and
Speaker 1: I do think it'll be smarter and more constructive. I
Speaker 1: don't think people will necessarily, at least initially jump on
Speaker 1: planes as quickly as they used to. Thanks so much
Speaker 1: for listening to Bloomberg Business Week. Download the podcast on iTunes, Southcloud,
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