1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast on Paul Swing You. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:27,080 Speaker 1: at Bloomberg dot com. Earlier today, the European Commission cut 8 00:00:27,080 --> 00:00:30,240 Speaker 1: its growth forecasts for the euro Area and slashed its projection, 9 00:00:30,280 --> 00:00:34,479 Speaker 1: in particular for Germany, warning that escalating trade tensions threatened 10 00:00:34,520 --> 00:00:37,480 Speaker 1: to make the outlook even worse. Not a huge surprise, 11 00:00:37,680 --> 00:00:40,640 Speaker 1: and yet there definitely was a market response, with guilds 12 00:00:40,680 --> 00:00:44,200 Speaker 1: going even lower in Germany. Joining us now Alberto Galla, 13 00:00:44,320 --> 00:00:47,800 Speaker 1: partner in folio manager for the Algebras Macro Credit Fund 14 00:00:47,880 --> 00:00:51,159 Speaker 1: as well as a Bloomberg Opinion calumnist. Alberto, what was 15 00:00:51,200 --> 00:00:56,040 Speaker 1: your take on the European Commission's forecast that was cut 16 00:00:56,120 --> 00:00:59,480 Speaker 1: yet again and the fact that the market moved on it. 17 00:01:02,280 --> 00:01:08,080 Speaker 1: The European region is clearly um into a Japan like 18 00:01:08,319 --> 00:01:13,600 Speaker 1: environment for growth, so we have had repetitive downgrades on 19 00:01:13,760 --> 00:01:18,800 Speaker 1: growth over the last month with limited fiscal stimulus. Um. 20 00:01:18,840 --> 00:01:21,080 Speaker 1: Only some countries have been able to do it, but 21 00:01:21,240 --> 00:01:25,160 Speaker 1: the core countries remained very conservative. And we are in 22 00:01:25,200 --> 00:01:27,080 Speaker 1: the run up to European elections at the end of 23 00:01:27,120 --> 00:01:31,000 Speaker 1: this month, so that could be perhaps a game changer. 24 00:01:31,280 --> 00:01:35,759 Speaker 1: UM we could see maybe after European elections some reaction 25 00:01:35,880 --> 00:01:39,200 Speaker 1: to these luggish growth environment which we have had. But 26 00:01:39,280 --> 00:01:42,720 Speaker 1: you know, so far it's just the ECB has been 27 00:01:43,120 --> 00:01:45,840 Speaker 1: doing most of the stimulus and marty policy on its 28 00:01:45,880 --> 00:01:50,680 Speaker 1: own cannot really lift growth. We have seen that across 29 00:01:50,880 --> 00:01:54,120 Speaker 1: several countries. You actually end up having the opposite results. 30 00:01:54,120 --> 00:01:57,120 Speaker 1: You go into liquidity trap if you only have monetary 31 00:01:57,160 --> 00:02:00,440 Speaker 1: policy keeping interest rates negative for too long. So we 32 00:02:00,480 --> 00:02:03,680 Speaker 1: need a fiscal boost, but we don't have the willingness. 33 00:02:03,720 --> 00:02:07,120 Speaker 1: Germany is still on the sided, and the other countries 34 00:02:07,120 --> 00:02:10,000 Speaker 1: don't have a lot of ammunition we better. You mentioned 35 00:02:10,040 --> 00:02:11,920 Speaker 1: in Germany, and that's kind of what surprised me the 36 00:02:11,919 --> 00:02:14,679 Speaker 1: most out of this morning's data, the e c B 37 00:02:14,880 --> 00:02:19,040 Speaker 1: slashing the growth projection to just zero point five from 38 00:02:19,080 --> 00:02:23,480 Speaker 1: one point one. What's really driving that deceleration in Germany. 39 00:02:25,080 --> 00:02:27,119 Speaker 1: There is a number of theories, So I would say 40 00:02:27,120 --> 00:02:33,040 Speaker 1: first there's been a global desileration with Chinese orders for 41 00:02:32,120 --> 00:02:36,399 Speaker 1: UM for important goods including cars, you know, falling very 42 00:02:36,440 --> 00:02:39,960 Speaker 1: sharply at the end of last year. This hasn't recovered. 43 00:02:40,080 --> 00:02:43,560 Speaker 1: Then there's a second factor specific to Germany, which is Turkey. 44 00:02:43,560 --> 00:02:47,120 Speaker 1: You know, the Turkish economies under pressure. UM. Turkey and 45 00:02:47,120 --> 00:02:50,480 Speaker 1: Germany are very close import expert partners. You know, the 46 00:02:50,560 --> 00:02:53,360 Speaker 1: President Erdogan is just called for the rerun of the 47 00:02:53,400 --> 00:02:56,360 Speaker 1: Istanbul elections and this is creating a lot of volatility 48 00:02:56,440 --> 00:02:59,960 Speaker 1: in the Turkish lira and in in generally in busines 49 00:03:00,000 --> 00:03:05,639 Speaker 1: as flows to Turkey UM, which affects affects Germany being 50 00:03:05,680 --> 00:03:09,360 Speaker 1: part of the supply chain UM. But there's also a 51 00:03:09,480 --> 00:03:12,960 Speaker 1: lack of domestic demand UH in Europe. UM. There is 52 00:03:13,400 --> 00:03:15,680 Speaker 1: a rebound from last year for short p M I 53 00:03:15,840 --> 00:03:18,600 Speaker 1: have gone back to positive. We're not in a recession, 54 00:03:18,880 --> 00:03:22,200 Speaker 1: but we also don't have a V shaped rebound. It's 55 00:03:22,360 --> 00:03:26,040 Speaker 1: it's something between a U shaped and an L shaped rebound. Now, 56 00:03:26,080 --> 00:03:30,200 Speaker 1: to re accelerate an economy in in an late stage 57 00:03:30,400 --> 00:03:33,720 Speaker 1: in you know, in the late stage of an expansion, UM, 58 00:03:33,760 --> 00:03:37,280 Speaker 1: you need some physical stimulus. You don't, it just doesn't 59 00:03:37,280 --> 00:03:39,560 Speaker 1: happen on its own. Well, you know, if you just 60 00:03:39,680 --> 00:03:42,560 Speaker 1: had a recession and you tend to grow much faster 61 00:03:42,640 --> 00:03:45,120 Speaker 1: because you have pent up demand. You have you know, 62 00:03:45,160 --> 00:03:48,560 Speaker 1: consumers that haven't spent for many years and companies that 63 00:03:48,600 --> 00:03:50,960 Speaker 1: haven't invested. Here where the late at late stage of 64 00:03:51,000 --> 00:03:55,800 Speaker 1: the cycle, and we need some some government top down 65 00:03:55,800 --> 00:04:01,000 Speaker 1: decision um either from Germany or or broadly from China. 66 00:04:01,040 --> 00:04:03,119 Speaker 1: But we have seen that the Chinese stimulus is relatively 67 00:04:03,160 --> 00:04:08,160 Speaker 1: smaller compared to what they did in on nine. So Alberto, 68 00:04:08,280 --> 00:04:11,600 Speaker 1: as an investor, is this a time to stay away 69 00:04:11,640 --> 00:04:15,480 Speaker 1: from European assets in particularly in Germany? Or from a 70 00:04:15,480 --> 00:04:18,279 Speaker 1: credit standpoint, is this a positive because it means the 71 00:04:18,320 --> 00:04:20,919 Speaker 1: ECB isn't going to be backing away from its stimulus 72 00:04:20,960 --> 00:04:25,919 Speaker 1: anytime soon. So exactly, if you take Japan as an example, 73 00:04:26,000 --> 00:04:30,360 Speaker 1: So what happened over fifteen years, twenty years? Rates remained 74 00:04:30,360 --> 00:04:34,640 Speaker 1: relatively low. UM equities didn't do much. They you know, 75 00:04:34,680 --> 00:04:37,520 Speaker 1: they kept going down. You could trade some rallies, but 76 00:04:37,600 --> 00:04:41,359 Speaker 1: they kept going down. Credit was fine except the worst 77 00:04:41,480 --> 00:04:48,039 Speaker 1: banks and corporates UH. Credit UH survived because once you 78 00:04:48,080 --> 00:04:50,479 Speaker 1: are you know, the definition is you are in a UM. 79 00:04:50,720 --> 00:04:53,480 Speaker 1: You're in a slow growth environment with persistent lower rates, 80 00:04:53,600 --> 00:04:56,520 Speaker 1: companies kick the can. You may have don't be firms, 81 00:04:56,600 --> 00:04:59,359 Speaker 1: don't be banks that survived because of lower rates. So 82 00:04:59,520 --> 00:05:03,880 Speaker 1: essentially credit is okay in a Japan like environment, it's 83 00:05:03,880 --> 00:05:07,200 Speaker 1: not extremely exciting. But actually in Europe you have yields 84 00:05:07,200 --> 00:05:10,320 Speaker 1: which are you know, in dollar terms, close to high 85 00:05:10,360 --> 00:05:13,440 Speaker 1: single digit sometimes double digit UM. You don't want to 86 00:05:13,440 --> 00:05:15,720 Speaker 1: go in the lowest rated names in the you know, 87 00:05:15,760 --> 00:05:18,799 Speaker 1: in the triple c's or lower rated smaller single bees. 88 00:05:18,880 --> 00:05:22,600 Speaker 1: But overall the stimulus from this b will stay there, 89 00:05:22,960 --> 00:05:25,600 Speaker 1: and that's part that's been part of our view. Where 90 00:05:25,640 --> 00:05:28,400 Speaker 1: we go for growth. Where there's upside risk is some 91 00:05:28,520 --> 00:05:31,640 Speaker 1: other countries outside of Europe, in emerging markets or in 92 00:05:31,640 --> 00:05:35,040 Speaker 1: the US UM. But I think Europe for now seems 93 00:05:35,880 --> 00:05:38,880 Speaker 1: very much in a very stable, lower rate environment, good 94 00:05:38,920 --> 00:05:42,080 Speaker 1: for fixing, good for corporate bonds, not so good for 95 00:05:42,120 --> 00:05:45,560 Speaker 1: equities in the medium term. So abrot to what extent 96 00:05:45,720 --> 00:05:50,880 Speaker 1: is the ongoing Brexit uncertainty impacting the economies across your 97 00:05:51,080 --> 00:05:54,080 Speaker 1: you know, we saw again that big down grade for German, 98 00:05:54,240 --> 00:05:59,760 Speaker 1: Just wondering is that uncertainty still an issue a meaningful issue. 99 00:06:00,240 --> 00:06:03,080 Speaker 1: I would say that in the investment world, in markets 100 00:06:03,120 --> 00:06:06,680 Speaker 1: there has been a lot of fears. UM, there have 101 00:06:06,760 --> 00:06:09,680 Speaker 1: been a lot of fears about Brexit and also European elections, 102 00:06:09,640 --> 00:06:13,120 Speaker 1: so there's a lot of investors that are disengaged from Europe. 103 00:06:13,760 --> 00:06:16,279 Speaker 1: So on the one hand, yes, fundamentals are not great. 104 00:06:16,400 --> 00:06:20,680 Speaker 1: Growth is very slow compared to em or or the US, 105 00:06:20,680 --> 00:06:23,400 Speaker 1: But on the other hand, positioning is very very light. 106 00:06:23,760 --> 00:06:27,680 Speaker 1: According to the Bank America's Fund Managers Survey, short in 107 00:06:27,720 --> 00:06:31,880 Speaker 1: European equities the most crowded trade across global portfolio managers. 108 00:06:31,920 --> 00:06:35,480 Speaker 1: So if you have a bit of positive news, you 109 00:06:35,640 --> 00:06:40,080 Speaker 1: can you know, prices can rise relatively quickly, both in 110 00:06:40,080 --> 00:06:43,240 Speaker 1: in in in bonds and in UM in corporate bonds 111 00:06:43,279 --> 00:06:45,840 Speaker 1: and in an inequities. So you know, we do have 112 00:06:46,000 --> 00:06:49,440 Speaker 1: an unexciting fundamental view. We are stuck in a low 113 00:06:49,520 --> 00:06:53,400 Speaker 1: growth f loor rate environment. But um there's also very 114 00:06:53,440 --> 00:06:57,960 Speaker 1: little um lungs at the moment, so we sometimes like 115 00:06:58,040 --> 00:07:00,760 Speaker 1: to be contrarian, we don't go into the warst areas. 116 00:07:01,800 --> 00:07:05,000 Speaker 1: But there is still some value. And I think European 117 00:07:05,000 --> 00:07:07,479 Speaker 1: elections are going to be a non event because the 118 00:07:07,520 --> 00:07:10,320 Speaker 1: populace just may win a quarter of the European Parliament, 119 00:07:10,320 --> 00:07:12,960 Speaker 1: but then all the other parties will we'll create a 120 00:07:13,000 --> 00:07:15,360 Speaker 1: pro European coalition. In the end, you're in the European 121 00:07:15,400 --> 00:07:19,280 Speaker 1: Parliament and the pro Europeans are the majority. Brexit will 122 00:07:19,360 --> 00:07:24,320 Speaker 1: have to see what happens, you know, towards the end 123 00:07:24,320 --> 00:07:26,760 Speaker 1: of the extension period in the in the second half 124 00:07:26,760 --> 00:07:30,600 Speaker 1: of the year, after the summer um. We do think that, 125 00:07:30,680 --> 00:07:34,640 Speaker 1: you know, the base case remains either a longer extension 126 00:07:35,680 --> 00:07:40,160 Speaker 1: or a Norway style deal. So a deal soft deal, 127 00:07:40,480 --> 00:07:43,600 Speaker 1: yea very good Alberto Gallo, thank you so much. Alberta, 128 00:07:43,600 --> 00:07:46,640 Speaker 1: as a partner and portfolio manager for the Algebras Macro 129 00:07:46,800 --> 00:07:51,000 Speaker 1: Credit Fund with about twelve point three billion pounds under management, 130 00:07:51,040 --> 00:08:03,520 Speaker 1: is also a Bloomberg Opinion calumnist. Well, US and China 131 00:08:03,600 --> 00:08:07,000 Speaker 1: trade negotiations are back on investors radar, that's for sure. 132 00:08:07,240 --> 00:08:11,000 Speaker 1: Definitely a risk off day today after a very volatile 133 00:08:11,080 --> 00:08:14,520 Speaker 1: day yesterday, driven in part by some of the tariff concerns. 134 00:08:14,720 --> 00:08:16,440 Speaker 1: To get the latest on what these may mean for 135 00:08:16,480 --> 00:08:19,760 Speaker 1: the market, we welcome Matt Mally Matts, managing director and 136 00:08:19,800 --> 00:08:23,280 Speaker 1: equity strategist at Miller tebec Um. Matt, thanks so much 137 00:08:23,320 --> 00:08:25,640 Speaker 1: for joining us again taking a look at what's happened 138 00:08:25,680 --> 00:08:28,520 Speaker 1: over the past couple of days following President Trump's tweets 139 00:08:28,520 --> 00:08:33,840 Speaker 1: about the tariffs. Clearly the market is rightfully concerned about 140 00:08:33,880 --> 00:08:37,080 Speaker 1: some of these issues. What is your call, Well, you know, 141 00:08:37,160 --> 00:08:39,160 Speaker 1: it's funny. I I think that you know, yes, I 142 00:08:39,200 --> 00:08:41,920 Speaker 1: totally agree they should be at least a little bit concerned. 143 00:08:42,200 --> 00:08:43,560 Speaker 1: And we also have to look at what was the 144 00:08:43,600 --> 00:08:46,439 Speaker 1: market doing before this came Before this news came out. 145 00:08:46,480 --> 00:08:49,160 Speaker 1: I mean, this is negative news. And even if you 146 00:08:49,280 --> 00:08:51,280 Speaker 1: believe that you know, we're we're going to get a 147 00:08:51,360 --> 00:08:55,200 Speaker 1: deal eventually, Uh, the odds of that, odds of having 148 00:08:55,200 --> 00:08:57,920 Speaker 1: a being it pushed out further or you know, more 149 00:08:57,960 --> 00:09:01,360 Speaker 1: strains within that situation have bob the risen. And when 150 00:09:01,400 --> 00:09:04,480 Speaker 1: you have a situation where the stock markets rally twenty 151 00:09:04,559 --> 00:09:07,599 Speaker 1: five percent in just four months, had become quite overbought 152 00:09:08,360 --> 00:09:10,880 Speaker 1: on a near term basis. Anyway, when you get negative news, 153 00:09:10,960 --> 00:09:12,760 Speaker 1: it should pull back. And to be honest with you, 154 00:09:12,880 --> 00:09:15,959 Speaker 1: yesterday's reaction where it rallied back so strongly, that made 155 00:09:16,000 --> 00:09:17,880 Speaker 1: me a little worried about. But there's a little bit 156 00:09:18,200 --> 00:09:20,520 Speaker 1: too much complacency in the market. I think this is 157 00:09:20,520 --> 00:09:23,400 Speaker 1: a natural and healthy things that that that the market 158 00:09:23,520 --> 00:09:25,880 Speaker 1: is coming back down and we could fall a little 159 00:09:25,880 --> 00:09:29,200 Speaker 1: bit further again after rally. Not the worst thing in 160 00:09:29,240 --> 00:09:31,520 Speaker 1: the world. Yeah, and we should note that actually the 161 00:09:31,559 --> 00:09:36,000 Speaker 1: losses are deepening near session lows negative one point four 162 00:09:36,080 --> 00:09:39,480 Speaker 1: percent on the NASDAC. I'm just wondering, uh, you know, 163 00:09:39,520 --> 00:09:42,680 Speaker 1: you look at the technical underpinnings here and I'm wondering, 164 00:09:42,880 --> 00:09:46,760 Speaker 1: if the trade talks were really fundamentally break down and 165 00:09:46,800 --> 00:09:49,720 Speaker 1: put on ice for a while, how big of a 166 00:09:49,760 --> 00:09:53,480 Speaker 1: down draft could we see. Well, I think it could be, 167 00:09:53,640 --> 00:09:55,760 Speaker 1: you know, a fairly decent one. I mean, certainly in 168 00:09:55,760 --> 00:09:59,560 Speaker 1: the uh uh, you know, kind of the five to 169 00:09:59,640 --> 00:10:02,040 Speaker 1: seven p sent pullback. Uh. And even you know, in 170 00:10:02,320 --> 00:10:05,760 Speaker 1: today's markets where where the you know, mechanized tracing, the 171 00:10:05,800 --> 00:10:08,800 Speaker 1: algal mechanized trading and the algales and things like that 172 00:10:09,400 --> 00:10:11,280 Speaker 1: have a big impact on the market, it could take 173 00:10:11,559 --> 00:10:14,360 Speaker 1: even down towards correction territory. And the reason why I 174 00:10:14,400 --> 00:10:16,559 Speaker 1: say that is it is it because a lot of 175 00:10:16,600 --> 00:10:19,760 Speaker 1: the turnaround in or at least people literally looking for 176 00:10:19,800 --> 00:10:22,640 Speaker 1: earnings to pick up on the second half, uh, And 177 00:10:22,679 --> 00:10:24,160 Speaker 1: a lot of that has to do with with a 178 00:10:25,200 --> 00:10:27,920 Speaker 1: you know, an agreement had being made sometime in the 179 00:10:27,960 --> 00:10:30,040 Speaker 1: near future. So if that doesn't happen, some of those 180 00:10:30,040 --> 00:10:32,560 Speaker 1: earnings forecasts are going to come down, and uh, I 181 00:10:32,559 --> 00:10:33,800 Speaker 1: think that would put a little bit of a dent 182 00:10:33,880 --> 00:10:36,240 Speaker 1: in the market. So, Matt, you're just talking about earnings. 183 00:10:36,240 --> 00:10:38,959 Speaker 1: What is your takeaway from the first quarter here? Seems 184 00:10:38,960 --> 00:10:42,160 Speaker 1: to have come in better than expected? Um? What is 185 00:10:42,200 --> 00:10:46,400 Speaker 1: your take? Well, that is true and and and the 186 00:10:46,400 --> 00:10:49,680 Speaker 1: one problem, of course, though is that they always beat expectations. Uh, 187 00:10:49,760 --> 00:10:52,040 Speaker 1: this time a little bit more than expected and and 188 00:10:52,040 --> 00:10:54,440 Speaker 1: and it's very good that it went from expectations of 189 00:10:54,480 --> 00:10:57,520 Speaker 1: a negative earning season to one that is a positive one, 190 00:10:57,559 --> 00:11:00,400 Speaker 1: which you know, takes an earnings recession off the table. 191 00:11:00,720 --> 00:11:03,640 Speaker 1: And that's good. But the my my concern a little 192 00:11:03,640 --> 00:11:06,920 Speaker 1: bit here is that the guidance wasn't really raised. In fact, 193 00:11:06,920 --> 00:11:09,079 Speaker 1: that it's come down a little bit for future quarters 194 00:11:09,360 --> 00:11:12,160 Speaker 1: and we're really relying heavily on this, uh on a 195 00:11:12,240 --> 00:11:14,880 Speaker 1: big fourth quarter where estimates are now at a plus 196 00:11:15,679 --> 00:11:18,080 Speaker 1: eight and nine percent, where most of the other quarters 197 00:11:18,080 --> 00:11:19,840 Speaker 1: are start of the second and third quarters are down 198 00:11:19,840 --> 00:11:23,520 Speaker 1: in the one to three percent range. Uh So, Uh, yes, 199 00:11:23,559 --> 00:11:27,600 Speaker 1: it's been a good earning season. Um, but I wouldn't 200 00:11:27,640 --> 00:11:29,280 Speaker 1: like to see if much better, if we've been raising 201 00:11:29,280 --> 00:11:32,560 Speaker 1: expectations a little bit more. And Lori Kelvicina over at 202 00:11:32,640 --> 00:11:35,640 Speaker 1: RBC Capital had a really interesting point today saying that 203 00:11:36,040 --> 00:11:38,959 Speaker 1: UH earnings really weren't even as good as many people 204 00:11:38,960 --> 00:11:41,720 Speaker 1: are putting them out as because you did see the 205 00:11:41,760 --> 00:11:45,160 Speaker 1: earnings per share beats UH. Seventy six percent of companies 206 00:11:45,200 --> 00:11:47,880 Speaker 1: that have reported so far as something about that have 207 00:11:48,120 --> 00:11:50,840 Speaker 1: beaten on the EPs side. On sales side, it's about 208 00:11:50,840 --> 00:11:54,439 Speaker 1: half UH, and that's harder to engineer, whereas EPs were 209 00:11:54,440 --> 00:11:57,240 Speaker 1: engineered by things like share buybacks, which were actually at 210 00:11:57,240 --> 00:12:00,600 Speaker 1: the highest level post crisis in the first quarter. And 211 00:12:00,640 --> 00:12:02,920 Speaker 1: I'm just wondering, from your perspective, how much of a 212 00:12:03,000 --> 00:12:06,320 Speaker 1: sort of warning flag is that UH that companies pulled 213 00:12:06,360 --> 00:12:08,440 Speaker 1: out all the stops in the first quarter and really 214 00:12:08,480 --> 00:12:10,840 Speaker 1: cannot do a repeat of that when it comes to 215 00:12:10,880 --> 00:12:15,480 Speaker 1: engineering the EPs beats later in the year. Yeah, I mean, obviously, 216 00:12:15,600 --> 00:12:18,520 Speaker 1: you know, the quote unquote quality of earnings UH has 217 00:12:18,559 --> 00:12:21,080 Speaker 1: been something that people were worried about for a while now. 218 00:12:21,280 --> 00:12:23,400 Speaker 1: And the thing is, the quality of earnings were quite 219 00:12:23,400 --> 00:12:25,360 Speaker 1: good last year, UM, and I say that they were 220 00:12:25,360 --> 00:12:27,200 Speaker 1: worried about it, you know before you know, in two 221 00:12:27,200 --> 00:12:30,280 Speaker 1: thousand and fourteen fifteen sixteen, we were worried about that. Uh. 222 00:12:30,360 --> 00:12:32,280 Speaker 1: Last year they were you know, they were quite good. 223 00:12:32,520 --> 00:12:34,280 Speaker 1: But now the quality again it seems to be more 224 00:12:34,280 --> 00:12:36,720 Speaker 1: financial engineering. Now that the tax that has been pushed 225 00:12:36,960 --> 00:12:38,959 Speaker 1: to the to the side, and now that will we 226 00:12:39,000 --> 00:12:43,040 Speaker 1: get a problem again with this agreement on the tax side. 227 00:12:43,200 --> 00:12:46,440 Speaker 1: It definitely lowers that, uh, not just the stated earnings, 228 00:12:46,480 --> 00:12:48,840 Speaker 1: but the quality of earnings. And and again when the 229 00:12:48,880 --> 00:12:51,600 Speaker 1: market has moved as much as it has, it doesn't 230 00:12:51,640 --> 00:12:54,160 Speaker 1: just you know, uh, it doesn't necessarily mean that we're 231 00:12:54,160 --> 00:12:55,959 Speaker 1: gonna have a disaster here, you know, any kind of 232 00:12:56,000 --> 00:12:58,120 Speaker 1: a repeat of two thousand eight or two thousand, but 233 00:12:58,200 --> 00:13:00,960 Speaker 1: it does begin to get people to worry about, you know, 234 00:13:01,000 --> 00:13:03,800 Speaker 1: that we could have another a down draft something like 235 00:13:03,840 --> 00:13:05,320 Speaker 1: we had in the fourth quarter. I'm not not calling 236 00:13:05,320 --> 00:13:08,439 Speaker 1: for correction, but I wouldn't be surprised at all if 237 00:13:08,480 --> 00:13:10,360 Speaker 1: we saw something in the five to seven percent range. 238 00:13:10,720 --> 00:13:12,560 Speaker 1: Matt Malie, thank you so much for being with us. 239 00:13:12,600 --> 00:13:15,800 Speaker 1: Matt Malie as chief equity strategist for Miller, Tabac and Co. 240 00:13:16,160 --> 00:13:35,520 Speaker 1: Talking about market, it is time for a public service announcement. 241 00:13:35,720 --> 00:13:39,080 Speaker 1: If you have a mother or a wife who has 242 00:13:39,200 --> 00:13:43,160 Speaker 1: a children or a grandmother. This Sunday is Mother's Day. 243 00:13:43,280 --> 00:13:46,000 Speaker 1: You might want to remember that. Paul Sweeney, what are 244 00:13:46,000 --> 00:13:48,320 Speaker 1: you doing for Mother's Day? Um, we are having brunch 245 00:13:48,440 --> 00:13:51,040 Speaker 1: and there'll probably be some type of flower thing involved, 246 00:13:51,160 --> 00:13:54,120 Speaker 1: some type of flower gifting going on, a lot of 247 00:13:54,160 --> 00:13:56,560 Speaker 1: people giving flowers. We are so lucky to have Chris McGann, 248 00:13:56,720 --> 00:14:00,360 Speaker 1: chief executive officer of one flowers dot Com. I'm here 249 00:14:00,400 --> 00:14:03,360 Speaker 1: with us in our bloombergett to Active Broker's studios. So, Chris, 250 00:14:03,400 --> 00:14:07,000 Speaker 1: how important is Mother's Day to your business? Well? How 251 00:14:07,040 --> 00:14:10,600 Speaker 1: important is Mother's Day to you? In other words, how 252 00:14:10,600 --> 00:14:13,760 Speaker 1: many flowers am I hoping to get? I mean, you know, 253 00:14:14,040 --> 00:14:16,080 Speaker 1: I'm one of those people. If my kids make a 254 00:14:16,120 --> 00:14:19,760 Speaker 1: handmade card and they, you know, put some effort into it, 255 00:14:20,360 --> 00:14:22,320 Speaker 1: I'll be happy. Well, we'll take it up a step. 256 00:14:24,040 --> 00:14:26,840 Speaker 1: So some Mother's Days are very important holiday for our business. 257 00:14:26,880 --> 00:14:29,080 Speaker 1: You know, if you really look at our business overall 258 00:14:29,160 --> 00:14:32,240 Speaker 1: on an annual basis, because we're driven by such everyday 259 00:14:32,240 --> 00:14:35,960 Speaker 1: occasions like birthdays, anniversaries, Mother's Day is only about six 260 00:14:36,000 --> 00:14:37,840 Speaker 1: percent of our business. But if you look at the 261 00:14:37,840 --> 00:14:40,640 Speaker 1: floral side of our business for this quarter, Mother's Day 262 00:14:40,600 --> 00:14:44,200 Speaker 1: can counsel for about about consumer floral business in this 263 00:14:44,280 --> 00:14:47,960 Speaker 1: quarter about fiscal fourth quarter. So it's an important day 264 00:14:47,960 --> 00:14:50,200 Speaker 1: and it's an important day to celebrate. Yeah, well I'm 265 00:14:50,240 --> 00:14:52,320 Speaker 1: looking I like to celebrate the stock. The stock is 266 00:14:52,360 --> 00:14:59,400 Speaker 1: of about sixty eight percent this year. Of let's get 267 00:14:59,400 --> 00:15:01,560 Speaker 1: down to the you know, the dollarsand cents in the stock. 268 00:15:01,960 --> 00:15:03,680 Speaker 1: So I mean, even on a day when the markets 269 00:15:03,720 --> 00:15:05,440 Speaker 1: down one and a half percent, your stock is up 270 00:15:05,440 --> 00:15:07,880 Speaker 1: one and a half percent. So what's the story behind 271 00:15:08,080 --> 00:15:11,200 Speaker 1: your company's great stock race performance this year? I think 272 00:15:11,200 --> 00:15:13,880 Speaker 1: it's driven mostly by mothers investing in our stock right now, 273 00:15:15,880 --> 00:15:18,200 Speaker 1: and take it back to the sentimental I don't think so. 274 00:15:19,680 --> 00:15:22,480 Speaker 1: But really what's been happening and what we the investment 275 00:15:22,520 --> 00:15:25,080 Speaker 1: community is recognizing that we're doing what we said we 276 00:15:25,080 --> 00:15:26,560 Speaker 1: were going to do and we laid out for the 277 00:15:26,600 --> 00:15:29,800 Speaker 1: last couple of years. Actually, when we've been accelerating our growth. 278 00:15:29,800 --> 00:15:32,200 Speaker 1: We took the growth rate from three percent two years 279 00:15:32,200 --> 00:15:34,760 Speaker 1: ago to four percent. This year, we came out, we 280 00:15:34,800 --> 00:15:38,120 Speaker 1: guided the five to seven percent growth. We raised our 281 00:15:38,120 --> 00:15:41,280 Speaker 1: guidance after the holiday season to seven to eight percent. 282 00:15:41,560 --> 00:15:43,800 Speaker 1: We just raised our guidance again two weeks ago to 283 00:15:43,800 --> 00:15:46,160 Speaker 1: the high end of that range. So our growth rate 284 00:15:46,200 --> 00:15:49,240 Speaker 1: is accelerating as customers are becoming more and more aware 285 00:15:49,240 --> 00:15:52,040 Speaker 1: of our family of brands and ordering from more than 286 00:15:52,120 --> 00:15:56,160 Speaker 1: one brand. What's the highest margin aspect of your business? 287 00:15:56,160 --> 00:15:59,040 Speaker 1: The food? The Flowers going may food side of our business, 288 00:15:59,040 --> 00:16:01,080 Speaker 1: we're probably get in the mid to hire uh to 289 00:16:01,360 --> 00:16:04,160 Speaker 1: up at range margin. The one in a hundred of 290 00:16:04,160 --> 00:16:07,720 Speaker 1: Flowers business is usually around that thirty. That's where it's 291 00:16:07,720 --> 00:16:10,200 Speaker 1: going to stay. But really the higher margin products are 292 00:16:10,200 --> 00:16:12,240 Speaker 1: goingmet food side for us. I'm looking at the p 293 00:16:12,360 --> 00:16:15,080 Speaker 1: g O function on the Bloomberg terminal, which gives a 294 00:16:15,120 --> 00:16:17,640 Speaker 1: breakdown of kind of where your revenue comes from, and 295 00:16:17,680 --> 00:16:19,960 Speaker 1: I was shocked to see that the gourmet food and 296 00:16:20,000 --> 00:16:22,760 Speaker 1: get baskets is over fifty percent of your business and 297 00:16:22,760 --> 00:16:25,680 Speaker 1: Flowers are about forty of your business. Is a time 298 00:16:25,720 --> 00:16:28,160 Speaker 1: to rename the company? Because you're more than Flowers, You're 299 00:16:28,200 --> 00:16:33,560 Speaker 1: kind of all year round, lots of gifts and sat foods. Yeah, 300 00:16:33,600 --> 00:16:36,560 Speaker 1: that's right, But we get that question all the time, Paul, 301 00:16:36,600 --> 00:16:39,760 Speaker 1: should we rename the company? As we've become really this 302 00:16:39,840 --> 00:16:42,480 Speaker 1: company of celebrations. But when we look at it from 303 00:16:42,520 --> 00:16:45,560 Speaker 1: a marketing perspective, we have such iconic brands, especially the 304 00:16:45,640 --> 00:16:48,280 Speaker 1: two lead ones one in a hundred flowers dot com, 305 00:16:48,280 --> 00:16:50,960 Speaker 1: Harry and David, and they bring in such great traffic. 306 00:16:51,160 --> 00:16:53,960 Speaker 1: We'd only be renaming it really for the investment community. 307 00:16:54,280 --> 00:16:56,520 Speaker 1: And I think one hundred Flowers and Harry and David 308 00:16:56,560 --> 00:16:59,080 Speaker 1: both has such brand equity, will stay with this multi 309 00:16:59,080 --> 00:17:02,400 Speaker 1: brand strategy. I love the idea also though of calling 310 00:17:02,640 --> 00:17:05,359 Speaker 1: it to order something is also an athema to people 311 00:17:05,440 --> 00:17:07,719 Speaker 1: under a certain age. But just do it online. So 312 00:17:07,760 --> 00:17:10,920 Speaker 1: it's not only is it also more food than than 313 00:17:10,960 --> 00:17:13,919 Speaker 1: it is flowers, but also the concept of one hundred 314 00:17:14,000 --> 00:17:16,480 Speaker 1: is probably going to be obsolete in about ten years. 315 00:17:16,880 --> 00:17:19,240 Speaker 1: So I mean, from that perspective, how much of the 316 00:17:19,680 --> 00:17:22,919 Speaker 1: how much of the sales come online? Well, we're predominantly 317 00:17:22,920 --> 00:17:25,160 Speaker 1: an e commerce driven company, and even if you look 318 00:17:25,160 --> 00:17:28,560 Speaker 1: at one eight hundred of Flowers brand itself, of the 319 00:17:28,560 --> 00:17:31,760 Speaker 1: businesses e commerce mobile commerce driven. So I think the 320 00:17:31,840 --> 00:17:35,000 Speaker 1: brand has become so well known most younger people don't 321 00:17:35,000 --> 00:17:39,399 Speaker 1: even realize it was named after a telephone number. So 322 00:17:39,440 --> 00:17:41,360 Speaker 1: all right, I'll go back sentimental a little bit more. 323 00:17:41,440 --> 00:17:45,199 Speaker 1: What are the most popular flowers for Mother's Day? That's 324 00:17:45,200 --> 00:17:49,840 Speaker 1: how sentimental? Yet that's impressive. So for Mother's Day, I 325 00:17:49,880 --> 00:17:54,040 Speaker 1: think we see mix of vibrant colors. So it's roses, lilies, daisies, carnations, 326 00:17:54,040 --> 00:17:55,879 Speaker 1: which have made a nice comeback, which are one of 327 00:17:55,920 --> 00:17:59,880 Speaker 1: my favorites. They last forever, I love them. But really 328 00:17:59,880 --> 00:18:02,440 Speaker 1: a mix of vibrant colors. And one of the great 329 00:18:02,480 --> 00:18:05,360 Speaker 1: products that we sell is called Mother's Embrace and it's 330 00:18:05,440 --> 00:18:08,119 Speaker 1: named after what's the most comforting thing you can get 331 00:18:08,200 --> 00:18:10,359 Speaker 1: from your mom but a hug. So we turn that 332 00:18:10,400 --> 00:18:15,360 Speaker 1: around and one of our creative one of our creative 333 00:18:15,359 --> 00:18:18,719 Speaker 1: florists and Stafford, Virginia, Devil and Reid, created this Mother's 334 00:18:18,720 --> 00:18:21,639 Speaker 1: Embrace product and it's just a fantastic product, one of 335 00:18:21,640 --> 00:18:26,880 Speaker 1: our top selling. What are you getting your wife? Flowers? Actually? 336 00:18:26,880 --> 00:18:29,080 Speaker 1: This this this Mother's Day, I won't be because we'll 337 00:18:29,119 --> 00:18:34,560 Speaker 1: be celebrating my daughter's graduation from William and Mary. So no, 338 00:18:34,720 --> 00:18:36,320 Speaker 1: so I won't be able to have flowers there. Well, 339 00:18:36,320 --> 00:18:38,919 Speaker 1: well down Williamsburg, Virginia. What's the growth area for you? 340 00:18:39,520 --> 00:18:42,480 Speaker 1: The growth area is both really right now, all three 341 00:18:42,520 --> 00:18:45,160 Speaker 1: areas of our business are growing. The gourmet food side 342 00:18:45,200 --> 00:18:47,800 Speaker 1: is growing nicely to consume, a floral business is growing. 343 00:18:48,040 --> 00:18:50,600 Speaker 1: What's driving the gomet food side is the acquisition of 344 00:18:50,640 --> 00:18:52,640 Speaker 1: Harry and David that we did a number of years ago. 345 00:18:53,040 --> 00:18:55,520 Speaker 1: You take a business like Harry and David that went 346 00:18:55,560 --> 00:18:58,560 Speaker 1: through a bankruptcy, was stagnant for three years. Coming out 347 00:18:58,600 --> 00:19:01,760 Speaker 1: of the bankruptcy, we we put it on our platform. 348 00:19:02,040 --> 00:19:04,760 Speaker 1: We take out over twenty million dollars of operating costs 349 00:19:04,760 --> 00:19:07,359 Speaker 1: doing so, and now we have the e commerce business 350 00:19:08,119 --> 00:19:12,159 Speaker 1: Joe growing about eight right now. That's that shows the 351 00:19:12,200 --> 00:19:15,479 Speaker 1: benefits of the platform for growth that we've created. Well, 352 00:19:15,520 --> 00:19:18,080 Speaker 1: my favorite study here is about twenty million stems for 353 00:19:18,200 --> 00:19:21,399 Speaker 1: Mother's Day alone will be delivered. That's a lot, some 354 00:19:21,520 --> 00:19:25,479 Speaker 1: of them to the Sweeney House hopefully yea Christmas can 355 00:19:25,560 --> 00:19:28,720 Speaker 1: President CEO Flowers dot com does trade on the NaSTA 356 00:19:28,720 --> 00:19:31,840 Speaker 1: act onto the symbol f LWS. Based in Long Island. 357 00:19:31,920 --> 00:19:34,640 Speaker 1: Joining us here in our Bloomberg Interactive Broker studio, Chris, 358 00:19:34,640 --> 00:19:51,800 Speaker 1: thanks so much for joining us. Well. US markets are 359 00:19:51,800 --> 00:19:55,320 Speaker 1: going lower led by the NAZAC down one point six percent, 360 00:19:55,480 --> 00:20:00,520 Speaker 1: driven really by the increasing question around whether the US 361 00:20:00,600 --> 00:20:03,520 Speaker 1: and China will come to a trade agreement after all. 362 00:20:03,640 --> 00:20:06,640 Speaker 1: Joining US, I'm very pleased to say, is Dr Henry Wong. 363 00:20:06,800 --> 00:20:09,240 Speaker 1: He is founder and president of the Center for China 364 00:20:09,320 --> 00:20:13,080 Speaker 1: and Globalization based in Beijing, but joining us here in 365 00:20:13,119 --> 00:20:16,280 Speaker 1: our boombergadda active broker studios in New York. Dr Wong, 366 00:20:16,400 --> 00:20:19,200 Speaker 1: thank you so much for being here. Just how much 367 00:20:19,359 --> 00:20:22,600 Speaker 1: of a disagreement seems to be going on right now 368 00:20:22,640 --> 00:20:25,399 Speaker 1: between the US and China that's impeding some sort of 369 00:20:26,280 --> 00:20:29,520 Speaker 1: trade trade pact here. Thank you, thank you for having me. 370 00:20:29,600 --> 00:20:32,840 Speaker 1: I actually I think that all along we have been 371 00:20:32,880 --> 00:20:36,879 Speaker 1: seeing President Trump giving tweets and Secretary Lightheiser and the 372 00:20:36,920 --> 00:20:41,199 Speaker 1: minutul talking about all positive news about negotiations. If according 373 00:20:41,280 --> 00:20:43,880 Speaker 1: to the Secretary, that has been done well, I think 374 00:20:43,880 --> 00:20:47,640 Speaker 1: that's already very great achievement. So so so I think 375 00:20:47,680 --> 00:20:50,040 Speaker 1: that there may be some finalizing when they put into 376 00:20:50,119 --> 00:20:53,159 Speaker 1: the printing and put into the details, that could be 377 00:20:53,200 --> 00:20:56,480 Speaker 1: a little I think still negotiation going on on the 378 00:20:56,480 --> 00:20:59,359 Speaker 1: final awarding of that. So I think that probably needs 379 00:20:59,359 --> 00:21:03,760 Speaker 1: both and oak sides to really take the wisdom and leadership, 380 00:21:04,320 --> 00:21:07,640 Speaker 1: you know, a role in finalize they Still I think 381 00:21:07,680 --> 00:21:10,960 Speaker 1: it's it will be highly irresponsible to to to really 382 00:21:11,600 --> 00:21:14,080 Speaker 1: uh to not having this do because not only the 383 00:21:14,119 --> 00:21:16,560 Speaker 1: business community in China and the US wants days, but 384 00:21:16,600 --> 00:21:18,200 Speaker 1: also the rest of the world and whole world is 385 00:21:18,320 --> 00:21:20,600 Speaker 1: highly watching on this. I don't think both countire can 386 00:21:20,680 --> 00:21:24,040 Speaker 1: forward now that trade tiiff war going on, and I 387 00:21:24,080 --> 00:21:28,119 Speaker 1: think this this, this final differences could be solved, you know, 388 00:21:28,240 --> 00:21:30,560 Speaker 1: Cervier consultation and a friend that they discussion rather than 389 00:21:30,840 --> 00:21:33,320 Speaker 1: really hostile and the maker, you know, force people to 390 00:21:33,359 --> 00:21:35,600 Speaker 1: the corner, which I think with backfire maybe in the end. 391 00:21:35,880 --> 00:21:38,600 Speaker 1: So dr One, you mentioned that both sides, certainly from 392 00:21:38,640 --> 00:21:41,440 Speaker 1: the business community, would like to have a trade deal 393 00:21:41,520 --> 00:21:45,119 Speaker 1: done in China. From the Chinese perspective, Um, is that 394 00:21:45,200 --> 00:21:47,760 Speaker 1: consistent with what the government wants? Is the government and 395 00:21:47,880 --> 00:21:52,240 Speaker 1: business are they on the same page or is there 396 00:21:52,280 --> 00:21:54,800 Speaker 1: just a fundamental problem from the government's perspective about some 397 00:21:54,840 --> 00:21:57,560 Speaker 1: of the bigger issues about trade. I think it's it's 398 00:21:57,600 --> 00:22:00,680 Speaker 1: finally clear enough in China, you know, after this Tradelo 399 00:22:00,760 --> 00:22:02,359 Speaker 1: has already started for a year or not in its 400 00:22:02,400 --> 00:22:06,119 Speaker 1: friction going on, and we all go through ups and 401 00:22:06,240 --> 00:22:09,639 Speaker 1: downs and uh and the rollercoaster of both economies. And 402 00:22:09,720 --> 00:22:13,320 Speaker 1: I think particularly in China, I think we um, you know, 403 00:22:13,400 --> 00:22:15,440 Speaker 1: I have our councilors for a lunchier time. I think 404 00:22:15,480 --> 00:22:18,359 Speaker 1: the government actually foreign spokesperson said that, you know, we 405 00:22:18,400 --> 00:22:21,920 Speaker 1: want the stability, We want to be responsible, We want 406 00:22:21,960 --> 00:22:25,320 Speaker 1: to really finish this deal. We want to be reasonable 407 00:22:25,400 --> 00:22:27,359 Speaker 1: to not until Chinese beings, but also US and the 408 00:22:27,400 --> 00:22:29,320 Speaker 1: rest of the war. So so I think the governors 409 00:22:29,520 --> 00:22:32,240 Speaker 1: in the same wavelens with the business community, and I 410 00:22:32,280 --> 00:22:35,040 Speaker 1: think that's not only for Chinese perspective, but also for 411 00:22:35,080 --> 00:22:37,720 Speaker 1: the US perspective as well. So Robert light Hazard, the 412 00:22:37,840 --> 00:22:41,560 Speaker 1: chief negotiator for the US with China over some of 413 00:22:41,600 --> 00:22:45,920 Speaker 1: these trade parameters, he came out and he confirmed that 414 00:22:45,960 --> 00:22:48,800 Speaker 1: there is some sort of back peddling by the Chinese 415 00:22:48,800 --> 00:22:52,720 Speaker 1: government on some agreements that they had made previously, including 416 00:22:53,119 --> 00:22:56,680 Speaker 1: changing Chinese law having to do with intellectual property, among 417 00:22:56,760 --> 00:23:00,760 Speaker 1: other things. I'm just wondering if that's true. That seems 418 00:23:00,760 --> 00:23:03,960 Speaker 1: like a more fundamental breach that perhaps everybody wants to 419 00:23:04,000 --> 00:23:05,800 Speaker 1: deal in sis saying Kumbai yah, but it's going to 420 00:23:05,840 --> 00:23:09,640 Speaker 1: be very hard to get beyond. Yes, you know, I'm 421 00:23:09,680 --> 00:23:12,040 Speaker 1: not involving in the detail of this, but for what 422 00:23:12,080 --> 00:23:14,320 Speaker 1: I heard, you know, what the secretary is said, Uh 423 00:23:14,320 --> 00:23:17,639 Speaker 1: that you know, uh possible. But but there's also a 424 00:23:17,680 --> 00:23:21,080 Speaker 1: culture issue there, you know, like if as Chinese law 425 00:23:21,200 --> 00:23:22,919 Speaker 1: is already there then if you want to change that, 426 00:23:22,960 --> 00:23:25,600 Speaker 1: it takes you know, takes the process. I mean, the 427 00:23:25,720 --> 00:23:27,960 Speaker 1: national paper's con has to go through that, and then 428 00:23:28,000 --> 00:23:30,919 Speaker 1: that a lot of consens consensus building. So it's not 429 00:23:30,960 --> 00:23:34,800 Speaker 1: acting absolute to say immediately it can be done. Not 430 00:23:35,400 --> 00:23:37,960 Speaker 1: So I think if there's a macadium there to to 431 00:23:38,560 --> 00:23:41,159 Speaker 1: walk towards that direction, let's give a little a patient 432 00:23:41,200 --> 00:23:43,600 Speaker 1: on that, not really push you know, right away and 433 00:23:44,080 --> 00:23:46,240 Speaker 1: you know, or interpret that is a refused. So I 434 00:23:46,240 --> 00:23:48,880 Speaker 1: think that's probably important. This is really an interesting point 435 00:23:49,000 --> 00:23:50,800 Speaker 1: dr wrong and I think it's it's one that that 436 00:23:50,800 --> 00:23:54,240 Speaker 1: that we really need to emphasize, which is uh, Robert Leitheiser, 437 00:23:54,320 --> 00:23:59,000 Speaker 1: President Trump. They have not been talking with leh Is recently, right, 438 00:23:59,000 --> 00:24:01,959 Speaker 1: so this has been over you know, through other people 439 00:24:02,280 --> 00:24:05,600 Speaker 1: or or not necessarily discussed. Could this just simply be 440 00:24:05,760 --> 00:24:08,879 Speaker 1: a communication error where the Chinese government said, well, we 441 00:24:08,960 --> 00:24:11,879 Speaker 1: can't change the law overnight, uh, you know, and then 442 00:24:11,920 --> 00:24:14,479 Speaker 1: then they're saying, well, you guys are back peddling, and 443 00:24:14,520 --> 00:24:17,679 Speaker 1: that's the breaching communication. Absolutely, that's that's quite possible. I mean, 444 00:24:17,800 --> 00:24:20,280 Speaker 1: from from my experience and talking with the people in 445 00:24:20,320 --> 00:24:23,159 Speaker 1: the in the multinational past, there could be a culture 446 00:24:23,680 --> 00:24:27,240 Speaker 1: misinterpretation sometimes taken only the process to do things in China, 447 00:24:27,480 --> 00:24:29,159 Speaker 1: like I can give examples, you know, I mean the 448 00:24:29,480 --> 00:24:33,040 Speaker 1: Foreign Investment law just passed in March. It takes quite 449 00:24:33,080 --> 00:24:35,800 Speaker 1: a while to discuss that. So so they don't mention 450 00:24:36,080 --> 00:24:38,720 Speaker 1: China twenty five anymore. They are actually saying, you know, 451 00:24:38,720 --> 00:24:41,280 Speaker 1: they got guaranteed the form right of and there's no 452 00:24:41,359 --> 00:24:44,960 Speaker 1: force technology transfer and if IPR violation will be punished, 453 00:24:45,000 --> 00:24:47,520 Speaker 1: would be persecuted. That'd been written into the law. So 454 00:24:47,680 --> 00:24:49,840 Speaker 1: you see, Chinese law is also accommodating a lot of 455 00:24:50,640 --> 00:24:54,960 Speaker 1: complaints that multinational West country complain us, particularly in the past. 456 00:24:55,240 --> 00:24:57,240 Speaker 1: So I think, you know, the attigies of Chinese always, 457 00:24:57,440 --> 00:24:59,600 Speaker 1: you know, they are very a common y thing. As 458 00:24:59,640 --> 00:25:02,280 Speaker 1: a matter of I think that to to black you know, 459 00:25:02,440 --> 00:25:06,000 Speaker 1: to frankly say oh China is delying or restow, I 460 00:25:06,000 --> 00:25:07,920 Speaker 1: don't think that that is two If they are ready 461 00:25:07,960 --> 00:25:10,680 Speaker 1: grade in principle, let's find out detail how to implement that, 462 00:25:10,760 --> 00:25:13,040 Speaker 1: rather than say, oh, China has been uh you know, 463 00:25:13,400 --> 00:25:15,439 Speaker 1: taking all the things back. So that may be for 464 00:25:15,480 --> 00:25:18,159 Speaker 1: the political purpose, I mean, very very useful and generate 465 00:25:18,200 --> 00:25:20,080 Speaker 1: a lot of hype on that, but but it's not 466 00:25:20,119 --> 00:25:23,240 Speaker 1: I don't think it's a real situation, probably so dr wrong. 467 00:25:23,359 --> 00:25:25,280 Speaker 1: Just be clear that the two big issues is I 468 00:25:25,280 --> 00:25:29,400 Speaker 1: think the that we understand it our intellectual property, uh, 469 00:25:29,480 --> 00:25:32,879 Speaker 1: forced transfer, technology trans transfer. That seems to be the 470 00:25:32,920 --> 00:25:35,919 Speaker 1: area where there's either disagreement or there's no agreement. What 471 00:25:36,200 --> 00:25:38,840 Speaker 1: is the stance of China on those two key issues. 472 00:25:38,840 --> 00:25:42,440 Speaker 1: Are you saying that they will be addressed? Well, actually, 473 00:25:42,520 --> 00:25:44,720 Speaker 1: you know, China just passed the law and the last 474 00:25:45,000 --> 00:25:50,240 Speaker 1: National People's Congress which in March, and that in no 475 00:25:50,400 --> 00:25:53,240 Speaker 1: new investment law. China has a stupid In that law 476 00:25:53,560 --> 00:25:56,080 Speaker 1: there will be normal forced time transferred and not allow 477 00:25:56,440 --> 00:25:59,080 Speaker 1: any any government at any level. And also on the 478 00:25:59,119 --> 00:26:01,639 Speaker 1: i PR to like the property protection and then there 479 00:26:01,640 --> 00:26:05,160 Speaker 1: will be no violace. Cannot be a violation of that, 480 00:26:05,400 --> 00:26:08,560 Speaker 1: cannot be forcetanking transfer if if anybody doing that to 481 00:26:08,640 --> 00:26:12,000 Speaker 1: be punished, to prosecute it. So that already written into 482 00:26:12,080 --> 00:26:16,000 Speaker 1: Chinese law past in much this year. So you can 483 00:26:16,000 --> 00:26:19,359 Speaker 1: see Chinese attitudes towards that. It is quite forescoming actually 484 00:26:19,400 --> 00:26:22,320 Speaker 1: not avoiding those kind of you know challenges. One of 485 00:26:22,320 --> 00:26:25,399 Speaker 1: the big other issues is enforcement of the agreement. And 486 00:26:25,880 --> 00:26:29,840 Speaker 1: I'm wondering, you know, you're saying Dr Wong that this 487 00:26:29,920 --> 00:26:32,880 Speaker 1: could be a communication error and law takes a while 488 00:26:32,920 --> 00:26:36,840 Speaker 1: to change, But what's sort of the recourse if the 489 00:26:36,920 --> 00:26:41,280 Speaker 1: law doesn't change in time? Yeah, No, I think that. 490 00:26:42,119 --> 00:26:45,120 Speaker 1: I I think that the government is now it's very serious. 491 00:26:45,320 --> 00:26:47,320 Speaker 1: I read there's going to be a pub because a 492 00:26:47,359 --> 00:26:50,800 Speaker 1: hundred people to come. It's very very very real. All 493 00:26:50,800 --> 00:26:53,119 Speaker 1: the details going to be problely backed up, and you know, 494 00:26:53,280 --> 00:26:56,520 Speaker 1: looking into the final really in the conclusion of this too, 495 00:26:56,560 --> 00:26:59,479 Speaker 1: but very seriously. Is such a large delegation, and I 496 00:26:59,560 --> 00:27:01,879 Speaker 1: think that to you know, let's put it there, we 497 00:27:01,920 --> 00:27:03,920 Speaker 1: have we have not on the US, but those international 498 00:27:03,920 --> 00:27:06,200 Speaker 1: commitities to watch this. This is such a high profile 499 00:27:06,240 --> 00:27:08,960 Speaker 1: trade fiction and we have a you know, World Intellectual 500 00:27:08,960 --> 00:27:13,560 Speaker 1: Property Organization, we have you know WT. All those people 501 00:27:13,560 --> 00:27:15,840 Speaker 1: are watching this. So so I don't think that if 502 00:27:15,920 --> 00:27:18,119 Speaker 1: China deliberately saying something and then it said, oh, we 503 00:27:18,240 --> 00:27:20,560 Speaker 1: need to take it back, I don't think China, you know, 504 00:27:20,880 --> 00:27:24,639 Speaker 1: it's still of course honor its commitments and and so whatever. 505 00:27:25,040 --> 00:27:27,320 Speaker 1: I think one, if finalizing is still there could be 506 00:27:27,359 --> 00:27:29,920 Speaker 1: a lot of discussion going on. And also there's a 507 00:27:29,960 --> 00:27:32,960 Speaker 1: culture differences, uh, in terms of understanding of each other. 508 00:27:33,000 --> 00:27:36,000 Speaker 1: But I think in the end um the world needs this, 509 00:27:36,200 --> 00:27:39,800 Speaker 1: the Chinese needs, the US needs, and multinational needs. After all, 510 00:27:39,840 --> 00:27:41,720 Speaker 1: you know, the U. S Company have a six or 511 00:27:41,720 --> 00:27:44,800 Speaker 1: eight thousand of them in China making five billion revenue 512 00:27:44,800 --> 00:27:48,439 Speaker 1: a year. I mean, both sides much larger than the 513 00:27:48,480 --> 00:27:52,280 Speaker 1: than than the deficit. And China and US actually expert 514 00:27:52,280 --> 00:27:55,200 Speaker 1: to US US Martina accounts half of that. So so 515 00:27:55,280 --> 00:27:57,800 Speaker 1: that's right, Dr Henry Wan. Thank you so much. Dr 516 00:27:57,840 --> 00:27:59,960 Speaker 1: Wang as founder and president of the Center for China 517 00:28:00,160 --> 00:28:04,360 Speaker 1: and Globalization giving us his thoughts on the ongoing trade 518 00:28:04,440 --> 00:28:08,160 Speaker 1: negotiations between the United States and China. Trade delegation arrives 519 00:28:08,320 --> 00:28:11,720 Speaker 1: later this week from China to Washington. Thanks for listening 520 00:28:11,760 --> 00:28:14,160 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 521 00:28:14,160 --> 00:28:17,000 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 522 00:28:17,000 --> 00:28:20,479 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 523 00:28:20,600 --> 00:28:23,119 Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram 524 00:28:23,119 --> 00:28:25,679 Speaker 1: woits one before the podcast. You can always catch us 525 00:28:25,800 --> 00:28:27,359 Speaker 1: worldwide on Bloomberg Radio.