WEBVTT - Rising Rates, China, and Markets (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.600 --> 0:00:18.439 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.280 at Bloomberg dot com slash podcast Now. I'm very happy 0:00:22.280 --> 0:00:24.799 to have Neil Grossman here with me in the studio. 0:00:24.920 --> 0:00:27.680 He is the co founder UM and a former c 0:00:27.920 --> 0:00:31.080 i O of t KNNG Capital. He's spent two decades 0:00:31.120 --> 0:00:34.800 in the financial industry as a prop trader, asset manager, 0:00:34.920 --> 0:00:39.520 market maker. UM advised the Norwegian Central Bank, among other things. 0:00:39.920 --> 0:00:44.080 UM and UH, I want to just start the conversation 0:00:44.120 --> 0:00:47.600 off on what happened that we're at this point before 0:00:47.600 --> 0:00:49.960 we get to what we need to do to fix it, 0:00:49.960 --> 0:00:51.640 because a lot of people have been saying it's the 0:00:51.640 --> 0:00:56.000 COVID stimulus that drove this inflation that got us here, UM, 0:00:56.040 --> 0:00:59.720 but a new friend of mine, from an anarchist from Twitter, 0:00:59.800 --> 0:01:03.280 has suggested, and I think she's right, that it's really 0:01:03.360 --> 0:01:08.240 the original quantitative easing that got us in this spot. 0:01:08.240 --> 0:01:12.160 We've never gotten the hangover from that high. Um, I 0:01:12.160 --> 0:01:13.920 would say you have to actually go back a little further. 0:01:14.000 --> 0:01:17.680 Mat The original sin honestly was Alan Greenspan and the 0:01:17.880 --> 0:01:22.840 irrational exuberant speech and the concept and the concept that 0:01:22.920 --> 0:01:26.039 you were going to give the market a put if 0:01:26.080 --> 0:01:28.800 they weren't if the stock market went down. And so 0:01:28.880 --> 0:01:31.399 the FED moved into a situation where I call them 0:01:31.400 --> 0:01:34.959 a central asset manager, They're not a central bank, and 0:01:35.080 --> 0:01:41.720 so policy became asymmetrically accommodating, and they were very reluctant 0:01:42.000 --> 0:01:44.960 to to to to remove it. Is that over? Now? 0:01:45.040 --> 0:01:47.800 Is the Fed put done? Because that's what everyone's saying, Well, 0:01:47.840 --> 0:01:50.800 I mean it's still there right now. Seventy basis points 0:01:50.880 --> 0:01:53.200 is not? Is still? I mean they should have gone 0:01:53.280 --> 0:01:57.640 probably three yesterday. I mean, let's let's take I know 0:01:57.640 --> 0:02:00.600 we're getting off subject quickly, but um, the idea that 0:02:00.640 --> 0:02:02.160 you have a two to two and a half percent 0:02:02.240 --> 0:02:04.440 neutral rate at this point within not eight or nine 0:02:04.480 --> 0:02:07.200 percent as they quote the inflation rate. If you want 0:02:07.240 --> 0:02:09.920 to compare this to the seventies, by the way, and 0:02:09.919 --> 0:02:12.680 and use the methodology that was in place back then, 0:02:12.720 --> 0:02:14.440 this rate would be a lot higher. In any event, 0:02:15.480 --> 0:02:19.000 neutral depending on you know who you want to speak to. 0:02:19.720 --> 0:02:22.960 Using more objective measures would probably be between at this 0:02:23.000 --> 0:02:26.639 point five and seven. And given the type of inflation 0:02:26.680 --> 0:02:30.239 we have, in theory, it's supposed to be restrictive. So 0:02:30.360 --> 0:02:33.680 they are still providing accommodation. They still have not started 0:02:33.680 --> 0:02:37.200 to see their balance sheet reduced. So, you know, seventy 0:02:37.240 --> 0:02:40.880 five was nice, but it's not enough. So so neil Um, 0:02:41.240 --> 0:02:43.480 if you think about something more aggressive, you suggested maybe 0:02:44.120 --> 0:02:47.200 basis points or something along those lines. Clearly, this Federal 0:02:47.240 --> 0:02:50.560 Reserve is trying to I guess balance, you know, fighting 0:02:50.600 --> 0:02:54.359 inflation without pushing the country into a recession or two 0:02:54.400 --> 0:02:56.880 deep of a recession. How do you think about that 0:02:56.919 --> 0:02:59.200 balancing act? Well, I think the fact is that at 0:02:59.200 --> 0:03:01.280 this point it's very late to worry about the the 0:03:01.320 --> 0:03:05.640 economic concept quinces to growth and employment. As a general matter, 0:03:05.960 --> 0:03:08.480 they have a dual mandate and basically, and this is 0:03:08.520 --> 0:03:10.080 one of the things that have gone over time, they've 0:03:10.120 --> 0:03:13.040 totally thrown that out the door. We have an enormous 0:03:13.120 --> 0:03:15.560 rate of inflation and if you want to measure the 0:03:15.639 --> 0:03:18.160 impact of what eight or nine percent or I guess 0:03:18.160 --> 0:03:20.120 we'll have probably six to seven percent in place in 0:03:20.200 --> 0:03:22.640 two years in a row. I mean, that's a couple 0:03:22.639 --> 0:03:26.040 of trillion dollar consequence to this economy. And the longer 0:03:26.080 --> 0:03:30.680 you go without allowing, without removing the price pressures of that, 0:03:30.720 --> 0:03:33.680 the worstest is going to get. In my view, to 0:03:33.720 --> 0:03:35.960 be honest with you, UM, I think what they should 0:03:36.000 --> 0:03:40.120 have done yesterday would have been maybe one percent, honestly 0:03:40.120 --> 0:03:42.120 three percent someone extreme. But I think they should have 0:03:42.160 --> 0:03:44.880 started immediately reducing the balance sheet and announced it could 0:03:44.880 --> 0:03:47.000 have been done at a slower pace. Remember, they haven't 0:03:47.000 --> 0:03:50.280 even started to to indicate they're going to sell. They're 0:03:50.320 --> 0:03:52.640 gonna let it run off. At this point, the balance 0:03:52.680 --> 0:03:55.240 sheet is and that goes back to Matt's first question. 0:03:55.960 --> 0:03:58.880 Quantitative easing, which I apologize I use referred to as 0:03:58.960 --> 0:04:03.200 q s UM is a very bad idea. The only 0:04:03.280 --> 0:04:06.920 reason for for that, in my opinion, is to actually 0:04:06.960 --> 0:04:09.840 deal with a freezing of liquidity in the market. And 0:04:09.920 --> 0:04:11.880 that happened to no way, and that's fine, but they 0:04:11.880 --> 0:04:15.560 should have immediately begun to remove that as soon as 0:04:15.760 --> 0:04:18.560 as soon as the liquidity mechanism began to function. I mean, 0:04:18.600 --> 0:04:21.280 I think we can all we can appreciate, maybe not all, 0:04:21.320 --> 0:04:24.480 but Paul and I can appreciate your ideology here. However, 0:04:24.680 --> 0:04:29.039 given the political constraints that this independent FED faces and 0:04:29.080 --> 0:04:31.360 I'm using air quotes for those of you can't see me, 0:04:31.839 --> 0:04:35.719 which is all of you, given those political constraints, Uh, 0:04:36.040 --> 0:04:38.560 how do you respond as an investor? You know they're 0:04:38.560 --> 0:04:40.880 not going to raise three basis points? Now, this isn't 0:04:40.880 --> 0:04:43.400 Paul Volker, It's not the seventies or eighties, right, So 0:04:43.800 --> 0:04:46.360 what what do you do as an investor right now? Well, 0:04:46.560 --> 0:04:49.000 it's a general metal. Look, it's funny I've started that 0:04:49.120 --> 0:04:52.080 I've been short. I wasn't short enough, but I've certainly 0:04:52.120 --> 0:04:54.880 had a reasonable protection on, but not as much as 0:04:54.880 --> 0:04:56.680 I wanted. Because I call the FED the enemy of 0:04:56.720 --> 0:05:00.080 the rational, They've been very, very difficult to a is 0:05:00.200 --> 0:05:03.800 to pate if you wanted to behave and and minimize 0:05:03.920 --> 0:05:07.120 or you know, have a reasonable risk profile. At this point, 0:05:07.640 --> 0:05:10.800 I think there are things that are opportunistically available if 0:05:10.839 --> 0:05:12.800 you want a little bit of risk. Um, if you 0:05:12.839 --> 0:05:14.839 have too much risk on, you better be careful because 0:05:14.839 --> 0:05:17.800 there's certainly a reasonable chance we keep going down in 0:05:17.839 --> 0:05:20.480 the short run. How much further do you think, by 0:05:20.480 --> 0:05:22.200 the way, Neil, I mean, considering the fact that I 0:05:22.240 --> 0:05:24.240 think we're probably close to the shorter term bottom with 0:05:24.400 --> 0:05:26.279 me my view, if you want to take my view 0:05:26.279 --> 0:05:29.400 on longer term, I tell people I have a patriotically 0:05:29.480 --> 0:05:33.200 optimistic target for the for the SMP of seventeen seventy six, 0:05:34.640 --> 0:05:37.080 which is way off right, I mean, But but let 0:05:37.080 --> 0:05:39.680 me just say one thing on that mat just for 0:05:39.760 --> 0:05:41.840 listeners who don't know. Right now we're looking at SMP, 0:05:43.160 --> 0:05:45.200 so it's it's a long way down. But but you 0:05:45.200 --> 0:05:47.200 have to understand. One of the main factors and how 0:05:47.240 --> 0:05:50.239 you value with stock or an asset is the cost 0:05:50.320 --> 0:05:54.200 of money. And for equities, which are the longest duration asset. Theoretically, 0:05:54.200 --> 0:05:58.080 the twenty year bond is a very good indicator of 0:05:58.080 --> 0:05:59.960 the type of discount. Right, you can throw a spread 0:06:00.000 --> 0:06:03.360 on if you want. The long bond is still about 0:06:03.800 --> 0:06:06.600 one thirty, which means your thirty percent just a potential 0:06:06.680 --> 0:06:08.920 drop just to get to a six percent yield, which 0:06:08.920 --> 0:06:10.800 is at least where it belongs to. Now, all right, now, 0:06:10.839 --> 0:06:13.800 we gotta have you back on UM very soon. Really 0:06:13.839 --> 0:06:18.360 appreciate you coming into the Bloomberg Interactive Broker Studio. Neil Grossman, 0:06:18.440 --> 0:06:20.720 their co founder and former ciot t K A N 0:06:20.760 --> 0:06:27.839 g Capital, also advisor to the Nougust Bank. All right, 0:06:27.880 --> 0:06:30.120 let's bring in Brett Downley. He is a president of 0:06:30.240 --> 0:06:33.960 Spectr Markets. UH. A lot going on in the marketplace here, Brent. 0:06:34.080 --> 0:06:35.760 Just in the last forty eight hours we've had to 0:06:35.880 --> 0:06:39.440 central banks really moving pretty aggressively here, So let's start 0:06:39.440 --> 0:06:42.799 with this US Federal Reserve seventy five basis points yesterday 0:06:43.200 --> 0:06:45.919 can perceive by I think many market participants as a 0:06:45.920 --> 0:06:48.320 pretty bold move. But we had a recent guest on 0:06:48.360 --> 0:06:50.680 Brent that said they should have been even more aggressive. 0:06:51.080 --> 0:06:53.960 What did you make of yesterday's news? Sure, well, I 0:06:54.000 --> 0:06:56.000 agree with that, but the reason the market is not 0:06:56.080 --> 0:06:58.880 really reacting is that that was leaked, um a couple 0:06:58.880 --> 0:07:01.880 of days in advance. So it's You've actually caught me 0:07:01.880 --> 0:07:05.440 at a really interesting time because I've been bullished the 0:07:05.480 --> 0:07:09.240 dollar for about the last three months, mostly on central 0:07:09.240 --> 0:07:12.880 bank divergence. So what you had was a very hawkish 0:07:12.920 --> 0:07:15.640 FED pivoting doing q T, and then you had a 0:07:15.640 --> 0:07:17.920 lot of other central banks that were very reticent to 0:07:17.960 --> 0:07:21.559 do anything um. For example, even the Bank of England 0:07:21.600 --> 0:07:24.760 who was hiking, was doing so in a very hesitant way. 0:07:24.800 --> 0:07:27.360 You had the b O J not doing anything, Swiss 0:07:27.480 --> 0:07:31.680 National Bank not doing anything. And now actually my view 0:07:31.760 --> 0:07:35.440 has changed today. Um, I think we're we could be 0:07:35.520 --> 0:07:37.679 at the peak for the dollar as now we're getting 0:07:38.120 --> 0:07:41.880 We had divergence before and now we're getting convergence. So 0:07:42.200 --> 0:07:45.040 we had the SNB, the Swiss National Bank hiked fifty 0:07:45.040 --> 0:07:49.200 basis points overnight, which was a big surprise. And then 0:07:49.320 --> 0:07:52.280 we also have the b o J tonight potentially moving 0:07:52.280 --> 0:07:55.720 their yield curve target um. And then you also have 0:07:55.840 --> 0:07:58.360 the e c B saying they don't really want any 0:07:58.360 --> 0:08:01.080 more currency weakness and they're trying to build some kind 0:08:01.120 --> 0:08:04.600 of anti fragmentation tool so that they can high rate 0:08:04.760 --> 0:08:08.280 while keeping the peripheral debt um sell off in check. 0:08:08.760 --> 0:08:11.800 So what you have now is convergence and that that 0:08:11.960 --> 0:08:14.280 I think could be bad for the dollar. Now, did 0:08:14.320 --> 0:08:17.040 you say you've been short the dollar for three months? No, 0:08:17.160 --> 0:08:20.000 I've been bullish. Okay, okay, So you've been bullish dollar 0:08:20.040 --> 0:08:24.240 and now you might be ready to turn I'm just wondering, mechanically, Brent, 0:08:24.320 --> 0:08:28.760 how you put that trade on. So the simplest way, 0:08:28.800 --> 0:08:32.840 I mean, I've been trading spot currency since really the 0:08:32.880 --> 0:08:35.839 simplest way to do the trades is simply to just 0:08:36.360 --> 0:08:39.360 buy or sell the currency outright. UM. So you can 0:08:39.360 --> 0:08:42.920 do it through futures, through cash on retail broker systems. 0:08:43.280 --> 0:08:46.080 You know, institutions tend to do it UM in the 0:08:46.080 --> 0:08:49.040 wholesale market, in the OTC market. But you don't need 0:08:49.120 --> 0:08:51.760 to do anything complicated. You just to me. You just 0:08:51.840 --> 0:08:55.040 can simply sell dollars. People will also do it through 0:08:55.559 --> 0:08:59.400 derivatives like options. But because the moves have been so 0:08:59.520 --> 0:09:03.320 wild lately, um EFX ball is very high right now. 0:09:03.320 --> 0:09:08.080 It's it's a multi month highs so it's very expensive. UM. 0:09:08.120 --> 0:09:10.040 Just to give you a flavor. Even if this doesn't 0:09:10.040 --> 0:09:13.840 mean anything, it should mean something relatively speaking, that overnight 0:09:13.920 --> 0:09:17.800 deli and volatility usually trades around ten percent, and right 0:09:17.800 --> 0:09:20.959 now overnight it's trading at because of the Bank of 0:09:21.040 --> 0:09:24.160 Japan meeting, and because everything's just been going wild in 0:09:24.200 --> 0:09:26.199 the up. By the way, what do you expect from 0:09:26.200 --> 0:09:29.880 the Bank of Japan? This has been so fascinating to watch, 0:09:29.920 --> 0:09:32.920 And I regret getting a mortgage from my new house 0:09:32.920 --> 0:09:34.520 at three and a quarter percent. I should have just 0:09:34.520 --> 0:09:39.320 shorted ggbs. Yeah, so short g gbs is a popular 0:09:39.360 --> 0:09:42.880 trade right now. But it also makes sense because very 0:09:42.920 --> 0:09:45.839 similar to the Reserve Bank of Australia. The Bank of 0:09:45.920 --> 0:09:49.160 Japan's trying to hold interest rates at an out of 0:09:49.160 --> 0:09:52.640 equilibrium rate, So they're trying to hold the tenure rate 0:09:52.640 --> 0:09:55.720 at twenty five basis points, and really it should probably 0:09:55.760 --> 0:09:58.680 be triple that. There should be at seventy five basis points. 0:09:59.120 --> 0:10:02.720 And there's a point where the central banks eventually lose 0:10:02.800 --> 0:10:05.000 the battle. So the rb A lost the battle, the 0:10:05.000 --> 0:10:08.200 Swiss National Bank lost the battle. The central banks are 0:10:08.320 --> 0:10:11.640 very powerful, but they're not omnipotent. So I think we're 0:10:11.679 --> 0:10:14.000 at the point now where the Bank of Japan is 0:10:14.000 --> 0:10:16.839 going to have to ease off. There's no theoretical limit. 0:10:16.920 --> 0:10:20.199 They can do it forever, but the release valve if 0:10:20.240 --> 0:10:23.240 they keep rates here is a weak er en. And 0:10:23.360 --> 0:10:26.320 now they've explicitly said that they no longer favor a 0:10:26.320 --> 0:10:29.080 week or en, which is something new. I mean, we've 0:10:29.080 --> 0:10:32.560 had all kinds of historic stuff happening in central banks 0:10:32.600 --> 0:10:36.199 and and in the FX market, and so if you recall, 0:10:36.400 --> 0:10:40.320 starting in Japan was trying to weaken the end that 0:10:40.400 --> 0:10:43.840 was the abonomics plan, and they've succeeded, you know, with 0:10:43.880 --> 0:10:49.080 flying colors. They took delien from thirty five, and now 0:10:49.120 --> 0:10:52.520 they're kind of saying enough is enough, no moss. So 0:10:52.800 --> 0:10:55.400 to me that means that they need to move. Uh, 0:10:55.520 --> 0:10:58.800 they need to allow yields to go higher. And so 0:10:58.920 --> 0:11:01.280 whether that happens to night or not, I mean then 0:11:01.320 --> 0:11:03.640 it comes down to more of a tactical decision by 0:11:03.679 --> 0:11:06.400 the b o J. So there seems to be I 0:11:06.400 --> 0:11:09.000 would say about a thirty chance they do it tonight, 0:11:09.520 --> 0:11:12.200 but I think it's almost locked in that they do 0:11:12.240 --> 0:11:14.640 it in the next three months. And so the timing 0:11:14.679 --> 0:11:18.400 almost doesn't matter because even if they are pinning that 0:11:18.440 --> 0:11:21.640 one ten year yield, the rest um the rest of 0:11:21.679 --> 0:11:24.640 the market will just completely come unhinted, so people will 0:11:24.679 --> 0:11:27.959 sell g GB futures and anything that's not nailed down 0:11:27.960 --> 0:11:30.679 by the b o J. Hey, Brent, just real quick, 0:11:30.720 --> 0:11:33.760 thirty seconds. How long would a dollar weakness call be? 0:11:34.000 --> 0:11:38.000 Do you think so? I think it could be protracted. 0:11:38.120 --> 0:11:42.280 So the dollar strength started with the there is no 0:11:42.360 --> 0:11:46.240 alternative to US tech um and obviously that's over, and 0:11:46.280 --> 0:11:48.920 then it continued because US rates were moving so much 0:11:48.920 --> 0:11:51.439 more than the rest of the world. So now neither 0:11:51.559 --> 0:11:55.400 of the drivers of dollar strength really are are happening 0:11:55.480 --> 0:11:57.520 right now. So I think this could be a meaningful 0:11:57.720 --> 0:12:00.640 turn in the dollar for H. It could us all 0:12:00.679 --> 0:12:04.000 of age two. Alright, good stuff, Brent Donley, really appreciate 0:12:04.000 --> 0:12:07.200 you coming on. I learned a lot UH today Brent Donley, 0:12:07.240 --> 0:12:10.480 President UH Spector Markets. He had been bullish on the 0:12:10.559 --> 0:12:15.760 US dollar turning negative just today actually UH in response 0:12:15.800 --> 0:12:18.119 to what we've seen from a lot of the UH 0:12:18.160 --> 0:12:20.600 central banks across the world. Again, the Swiss National Bank 0:12:20.640 --> 0:12:25.280 kind of surprising the marketplace. Totally totally surprising. Yeah. Absolutely, 0:12:25.280 --> 0:12:27.040 that's kind of what I woke up to here listening 0:12:27.040 --> 0:12:32.280 to surveillance UH so again concerted effort to raise rates here. 0:12:32.320 --> 0:12:37.120 So we'll have to see how that plays out. You're 0:12:37.160 --> 0:12:39.959 alive from the Gaylord Texan Convention Center in Dallas, Texas. 0:12:40.559 --> 0:12:43.840 Ben Y Melon Pershing Insight Conference here joining us today 0:12:44.040 --> 0:12:48.440 Anthony Sessin, Senior Investment Strategistic Crane Chairs and we so 0:12:48.520 --> 0:12:51.520 happy to have Anthony here with us in the huge 0:12:51.559 --> 0:12:53.400 exhibition hall here because we want to switch gears a 0:12:53.400 --> 0:12:56.400 little bit and talk about China. We've been so focused 0:12:56.400 --> 0:12:58.880 on the US, the Federal Reserve, other central banks, what's 0:12:58.880 --> 0:13:01.440 going on with inflation. But we gotta get an update, 0:13:01.480 --> 0:13:03.880 gotta get a handle on what's going on in China, 0:13:03.960 --> 0:13:05.880 and Anthony, I love where to give us your thirty 0:13:05.880 --> 0:13:08.680 thousand foot view with what's going on in China with 0:13:08.760 --> 0:13:12.040 their economy, with COVID, with we know we have a 0:13:12.040 --> 0:13:15.439 presidential election coming up, a lot going on there. As 0:13:15.480 --> 0:13:17.079 you said, thank you Paul for having me. There's a 0:13:17.160 --> 0:13:19.880 lot going on, a lot to unpack in China. That's 0:13:19.880 --> 0:13:21.760 why you have to keep on top of it. Right. So, 0:13:21.760 --> 0:13:25.280 so all the global uh events we're seeing now with 0:13:25.280 --> 0:13:29.640 regards to rates, it's definitely impacting markets globally, especially with 0:13:29.679 --> 0:13:31.880 regards to currency. Right. But but if you look at 0:13:31.960 --> 0:13:35.200 China specifically, and China entered this year with with the 0:13:35.240 --> 0:13:38.080 world to stimulate and lift growth. It's an important here 0:13:38.080 --> 0:13:41.280 for China, and it was working. They cut rates, They 0:13:41.280 --> 0:13:46.520 did many uh stimulative actions uh throughout the year, throughout 0:13:46.600 --> 0:13:48.720 the beginning of the year to kind of lift growth 0:13:48.800 --> 0:13:53.400 in many different ways, cutting taxes, lifting property, uh, you know, 0:13:53.960 --> 0:13:58.080 giving facilities for property. But then when the lockdowns happened, 0:13:58.080 --> 0:14:00.280 it kind of uh you know, hit prog rest a 0:14:00.320 --> 0:14:03.400 little bit. So we're seeing now China stimulate even more. Right. 0:14:03.520 --> 0:14:07.000 In addition to that, uh, you know, the consumer is 0:14:07.000 --> 0:14:09.800 is now kind of rebounding a little bit. And um 0:14:09.880 --> 0:14:12.760 and uh, you know, the lockdowns has impacted growth, but 0:14:12.880 --> 0:14:15.040 now we're starting to see more pent up demand because 0:14:15.320 --> 0:14:18.520 income has not been impacted in China as much. Last 0:14:18.640 --> 0:14:20.400 year it grew at nine percent. This year is growing 0:14:20.400 --> 0:14:22.880 at six percent. So you're gonna see that money kind 0:14:22.880 --> 0:14:27.200 of trickle into the economy as lockdowns cease and at 0:14:27.320 --> 0:14:29.840 stimulus kind of trickle in. Well, Anthony, today you and 0:14:29.880 --> 0:14:33.080 I heard this Grapevine, Texas at this huge convention, lots 0:14:33.120 --> 0:14:36.920 of people, very few to no mask seems to be 0:14:37.040 --> 0:14:40.840 kind of back to normal. Yet in China, Um, they're 0:14:40.880 --> 0:14:45.480 not there. And what is the I guess the strategy 0:14:45.560 --> 0:14:49.000 behind the government's handling of COVID And how do you 0:14:49.000 --> 0:14:51.560 think it may evolve? Yeah, no, absolutely, that's the big 0:14:51.560 --> 0:14:53.560 wild card a little bit in China. Right, So China 0:14:53.640 --> 0:14:56.360 have a very strict policy with regards to to COVID. 0:14:56.400 --> 0:14:59.040 It started with a zero policy where kind of lockdown 0:14:59.160 --> 0:15:02.400 Shanghahi for sixty days or more that kind of impacted 0:15:02.440 --> 0:15:05.560 people living in the area, impact its supply chains across 0:15:05.600 --> 0:15:09.720 the board, especially with the electric vehicles and another supply 0:15:09.840 --> 0:15:12.560 chains that are located in in Chunk High. But then 0:15:12.600 --> 0:15:14.360 when it happened in Beijing, that kind of moved to 0:15:14.440 --> 0:15:17.440 this dynamic policy right where they were kind of targeting 0:15:17.720 --> 0:15:21.920 specific areas, you know, doing testing proactively, trying to be 0:15:22.560 --> 0:15:26.000 more cognizant of the economic impact. Right, But that's still 0:15:26.040 --> 0:15:28.000 still causing a lot of issues. Right. Omicron is a 0:15:28.040 --> 0:15:31.600 little bit different. It passes through very quickly. It's really hard. 0:15:31.640 --> 0:15:33.600 Like in Beijing, we had this one party at a 0:15:33.600 --> 0:15:36.800 pub that kind of uh, you know, resulting in twenty 0:15:36.880 --> 0:15:38.920 six cases, right, and that's gonna be hard to contain 0:15:38.960 --> 0:15:41.280 without a lockdown. So so, you know, it's a little 0:15:41.320 --> 0:15:43.960 bit hard situation, especially in a political year where China 0:15:44.040 --> 0:15:47.240 doesn't want to see people you know, uh sick or 0:15:47.320 --> 0:15:50.240 lined up at the hospital. Right. So but I believe 0:15:50.280 --> 0:15:53.240 they're going to have to adjust that policy soon, uh, 0:15:53.280 --> 0:15:54.840 you know, in order to be able to to meet 0:15:54.880 --> 0:15:57.360 their economic targets. How easy is it for China to 0:15:57.400 --> 0:16:04.160 control economic growth? It is, It is easier than other places. 0:16:04.240 --> 0:16:06.680 If you were right, it's a command economy. China has 0:16:06.720 --> 0:16:10.480 the ability to kind of redirect resources, redirect capital to 0:16:10.600 --> 0:16:13.440 specific industries they want in an easier way than we 0:16:13.480 --> 0:16:16.160 have it here in the US or or kind of 0:16:16.240 --> 0:16:18.680 in Europe. They have a lot of tools, huge reserves, 0:16:18.720 --> 0:16:21.400 they have a lot of policy levers to pull, right, 0:16:21.440 --> 0:16:23.920 and they have a vibrant consumer economy, right, so if 0:16:23.920 --> 0:16:25.600 they want to, they've done it in the past, they 0:16:25.600 --> 0:16:28.000 can do it in the future. Although you know, as 0:16:28.000 --> 0:16:31.120 the economy becomes bigger, it becomes harder. Right. But we've 0:16:31.160 --> 0:16:33.880 seen this year's numbers start to turn around, right, Like 0:16:33.960 --> 0:16:37.160 property prices which were declining since the summer, we started 0:16:37.160 --> 0:16:39.840 to see that turning around. We started seeing fixed acid 0:16:39.880 --> 0:16:43.520 investments turning around. We started to see you know, a 0:16:43.560 --> 0:16:46.040 lot of more interest in the economy, more people getting loans, 0:16:46.200 --> 0:16:48.920 aggregate financing turning up. So China has a lot of 0:16:49.000 --> 0:16:51.960 levers that can pull in terms of supporting its growth, 0:16:52.200 --> 0:16:56.040 but lockdowns definitely kind of shuts down these levers very 0:16:56.120 --> 0:16:59.000 quickly for an extended period of time. You know, at 0:16:59.000 --> 0:17:02.040 any global Wall Street it's been focusing right fully so 0:17:02.200 --> 0:17:04.720 on global energy prices and you know, we get w 0:17:04.760 --> 0:17:08.240 tech cood oil was it over barrel? Uh it's now 0:17:08.320 --> 0:17:11.800 pulled back here. But boy, if China fully reopens, that 0:17:11.960 --> 0:17:15.800 adds a big source of demand there. How do you 0:17:15.880 --> 0:17:19.040 view Chinese economy now in terms of how much of 0:17:19.080 --> 0:17:20.679 it is reopened? How far do we have to go 0:17:20.760 --> 0:17:23.840 to get fully reopened? Kind of where are we there? Yeah? 0:17:23.840 --> 0:17:27.159 I know so so at some point I think thirty 0:17:28.240 --> 0:17:33.400 GDP of of cities that contribute GDP was shut down, right, 0:17:33.440 --> 0:17:36.520 So now it's a lot less Shanghai reopened, Beijing is 0:17:36.560 --> 0:17:39.080 there's there are some spots there. So now we're probably 0:17:39.119 --> 0:17:41.480 at like five to ten percent of GDP kind of 0:17:41.880 --> 0:17:43.879 a little bit in in a in a lockdown, right, 0:17:43.920 --> 0:17:45.520 So how far do we have to go? One is 0:17:45.560 --> 0:17:48.160 you have to relax the policy just like here, right, 0:17:48.240 --> 0:17:50.480 you kind of have to accept that that you know, 0:17:50.520 --> 0:17:52.960 there's COVID, it's it's it's going to get people sick. 0:17:53.000 --> 0:17:55.520 But with a vaccine, uh, you know, the symptoms are 0:17:55.520 --> 0:17:57.000 going to be less. And the second thing, I think 0:17:57.119 --> 0:17:59.679 China is going to need to push a vaccine that 0:17:59.840 --> 0:18:02.640 is based on MR and a technology. Right today, their 0:18:02.680 --> 0:18:04.879 cinovac is based on the on the previous, on the 0:18:04.880 --> 0:18:09.520 past vaccine technologies, which is not as effective. And there 0:18:09.520 --> 0:18:13.119 are multiple now companies by technology companies who are working 0:18:13.160 --> 0:18:16.280 on this, but they're not there yet right. But but 0:18:16.440 --> 0:18:18.919 other than that, we're seeing a lot of work from China. 0:18:19.080 --> 0:18:22.000 Like now they're trying to under regulations on a platform economy, 0:18:22.080 --> 0:18:24.800 so that's very good for China internet companies. They're pushing 0:18:24.960 --> 0:18:28.199 with the policies green tech, green technology, They're pushing the 0:18:28.240 --> 0:18:31.400 healthcare industry. So so they're putting a lot of work 0:18:31.440 --> 0:18:34.800 into the new economy, into directing their economy to be positioned, 0:18:34.840 --> 0:18:37.119 well positioned for the future. Right. And one of the 0:18:37.119 --> 0:18:39.520 big things we're seeing now more interested it's trying to 0:18:39.640 --> 0:18:42.439 China Internet. Yeah, it's interesting. You know, a lot of 0:18:42.520 --> 0:18:45.000 US investors, through Ali Baba and through ten Cent, they 0:18:45.040 --> 0:18:48.840 became very invested in exposed to China tech. It was 0:18:48.880 --> 0:18:50.960 a great way to play the growth of the middle class. 0:18:50.960 --> 0:18:53.679 And Ali Baba for example, Boy did they get a 0:18:53.760 --> 0:18:57.119 rude awakening to what we all call China risk in 0:18:57.160 --> 0:18:59.719 the you know, on the risk section of the perspectives. 0:19:00.600 --> 0:19:03.440 That took me off guard how aggressively they clamped down 0:19:03.480 --> 0:19:07.919 on the jack Miles of the world. Are they give 0:19:08.000 --> 0:19:09.239 us a sense of where they are now? Are they 0:19:09.240 --> 0:19:11.800 gonna lighten up here materially or is this the new 0:19:11.840 --> 0:19:15.480 world order? You know? Absolutely so so look, uh, you know, 0:19:15.520 --> 0:19:18.680 if you you have to understand China's culture and China's 0:19:18.720 --> 0:19:21.280 view of how society of how they won't decide to 0:19:21.359 --> 0:19:23.520 look right, and they have a very virtuous view of 0:19:23.560 --> 0:19:25.359 how sight you should look like. They want to provide 0:19:25.400 --> 0:19:29.040 free education, they want to provide free healthcare. Uh, you know, 0:19:29.119 --> 0:19:31.720 they really care about about their their people, that want 0:19:31.760 --> 0:19:34.600 to provide fairness because the gap between rich and poor 0:19:35.280 --> 0:19:37.360 has been has been, you know, has widened a lot. 0:19:37.640 --> 0:19:40.480 And they want to control this, not control, but regularly 0:19:40.560 --> 0:19:43.800 this this digital economy that became huge, right and became 0:19:43.840 --> 0:19:45.960 kind of too big to fail at some point. We're 0:19:45.960 --> 0:19:48.159 trying to do that here right, Like we're seeing all 0:19:48.200 --> 0:19:52.720 these bills come through through antitrust against Google, Amazon, right, Facebook. 0:19:53.080 --> 0:19:55.359 We're seeing the same thing happening in Europe. But but China, 0:19:55.400 --> 0:19:58.320 as a command economy, they're able to do it. Yeah. 0:19:58.359 --> 0:20:01.000 So one thing we under estimated less or how aggressive 0:20:01.000 --> 0:20:02.960 they were going to be, right, but they wanted to 0:20:03.000 --> 0:20:05.040 go as far and get everything set up, and now 0:20:05.200 --> 0:20:07.560 it looks like work. This is concluding and we've heard 0:20:07.600 --> 0:20:10.320 it from multiple people high up to the chain to 0:20:10.400 --> 0:20:12.960 the president chooching pit Okay, that's good stuff. Good stuff 0:20:12.960 --> 0:20:15.400 in the Ali Bob and the other Chinese uh tech 0:20:15.440 --> 0:20:17.439 owners as well. Anthony Saissein, thank you so much for 0:20:17.480 --> 0:20:20.840 joining us here. Anthony Sacsen, Senior investment strategist at Crane 0:20:20.840 --> 0:20:23.399 Share sign. You come to places that put a lot 0:20:23.480 --> 0:20:25.400 of smart people together, you get to meet a lot 0:20:25.440 --> 0:20:27.159 of smart, interesting people. So that was great to have 0:20:27.200 --> 0:20:33.320 Anthony join us here. Probin, thanks so much for joining 0:20:33.400 --> 0:20:35.399 us here. This is your first interview with American media 0:20:35.440 --> 0:20:39.760 since becoming CEO elect. So congratulations there, good luck with 0:20:39.800 --> 0:20:42.879 this economy. Um, tell us about as you come into 0:20:42.920 --> 0:20:45.480 your new role here, what is your strategy? What's your 0:20:45.520 --> 0:20:48.560