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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: On today's episode, will break down the latest in the

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Speaker 2: US trade war with China as it enters a second week.

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Speaker 2: Stocks in the Asia Pacific as well as US equity

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Speaker 2: index futures pushing higher at this hour. This is after

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Speaker 2: President Trump exempted certain consumer electronic devices from the latest

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Speaker 2: reciprocal tariffs, but this relief is temporary. A specific tariff

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Speaker 2: on semiconductors will be announced in due course, and in

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Speaker 2: a moment we'll be hearing from Mark Matthews, head of

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Speaker 2: Asia Research at Julius Behar. But first is a conversation

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Speaker 2: with Chuck Camello. He is president and CEO of Essex

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Speaker 2: Financial Services. He joins us from Connecticut. Chuck, it's always

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Speaker 2: a pleasure to have the chance to benefit from your perspective.

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Speaker 2: It was quite a week we suffered through last week.

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Speaker 2: I think we can agree on that much. Things seem

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Speaker 2: to be stabilizing a bit more right now. I'm curious

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Speaker 2: as to what you're looking for in the next five

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Speaker 2: trading days.

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Speaker 3: Yeah, boy, it's first ball. It's very nice to be

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Speaker 3: with you so thank you so much for having me.

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Speaker 3: But yeah, you know, we're coming off one of the

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Speaker 3: most volatile and challenging weeks that I think, you know,

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Speaker 3: anybody who's been in this business for any length of time,

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Speaker 3: you know, was just shaking their head. It was certainly

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Speaker 3: a really really stressful one for you know, financial professionals

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Speaker 3: and clients alike. But you know, I think what we

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Speaker 3: wanted to see is a little bit of what we

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Speaker 3: got on Friday night and over the weekend.

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Speaker 4: Vic VI the reciprocal tariffs not.

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Speaker 3: Being applied to bones, ipadsnap tops, technology, things of that nature.

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Speaker 3: So they are still you know, getting hit with a

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Speaker 3: you know, I think believe they're in the twenty percent bucket.

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Speaker 3: But I think that was very very positive, and you know,

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Speaker 3: I think the futures are indicating that. But I think

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Speaker 3: certainly there's been so much uncertainty and you know, borderline

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Speaker 3: chaos that you know, anything that gives a little bit

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Speaker 3: of certainty to tear offfs or any type of certainty

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Speaker 3: of the policy coming out of Washington will be helpful.

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Speaker 3: And I think it will be very well well received

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Speaker 3: by the markets. And quite candidly, it's what they're crying

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Speaker 3: out for.

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Speaker 2: Do we need to still discuss recession risk? I mean,

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Speaker 2: right now looks as though the US equity market is

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Speaker 2: down about eleven percent from its high, and if there

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Speaker 2: is a recession on the horizon, I think that we're

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Speaker 2: going to see a significant repricing inequities. Do we still

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Speaker 2: need to consider that fact?

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Speaker 4: Well? I think you certainly do.

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Speaker 3: I mean there's you know, there's no shortage of folks,

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Speaker 3: you know, saying we're heading for recession or are in recession.

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Speaker 3: But you know a lot of those same folks have

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Speaker 3: called twelve the last seven recessions, So but this one

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Speaker 3: certainly feels different. I think the big difference here is

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Speaker 3: the overall sentiment. And you know, I think everybody feels it.

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Speaker 3: Everybody feels this uncertainty, everybody feels this sort of looming threat.

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Speaker 3: Terrorists are inflationary period, end of story. But you know,

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Speaker 3: there is the offset. There is maybe you know, some

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Speaker 3: some tax help and tax cuts coming out of Washington.

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Speaker 3: So you know, I've given up trying to predict the future.

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Speaker 4: But I certainly am not.

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Speaker 3: Going on in a lamb, nor am I being unique

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Speaker 3: in any way of saying the odds for recessions certainly

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Speaker 3: in the past. This is the crazy thing right over

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Speaker 3: the past just three weeks have risen, you know, substantially,

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Speaker 3: So check.

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Speaker 2: I'm curious about the extent to what you're using the

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Speaker 2: credit markets right now as a guide even to put

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Speaker 2: money to work on the equity side. What are you

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Speaker 2: seeing in the credit space?

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Speaker 3: Well, listen, I think the bond market, you know, and

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Speaker 3: again that was I think the big driver that you know,

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Speaker 3: got Wednesday's ninety day freeze because again in abnormal things

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Speaker 3: happen in abnormal times, and like Wednesday, was that right?

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Speaker 3: So the market market, you know, uh, market goes down

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Speaker 3: rather on Tuesday. Usually you're seeing bond prices, you know,

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Speaker 3: and yields moved down of you know, yields moved down

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Speaker 3: on fixed income that wasn't happening.

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Speaker 4: Dollar dropping as well.

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Speaker 3: And I think a lot of that is just the

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Speaker 3: overall concern from a lot of overseas buyers and holders

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Speaker 3: of just the instability in the US right now. So

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Speaker 3: the credit market was screaming out that there's a problem,

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Speaker 3: there's a big problem here, and I think that finally

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Speaker 3: got the President's attention. And I think that credit market

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Speaker 3: is a big barometer in terms of how things will

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Speaker 3: you know, how those winds are going to be blowing.

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Speaker 3: And I think they got to such an extent and

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Speaker 3: it got so much attention that it made the president pivot,

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Speaker 3: and that was obviously extremely helpful for the markets on

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Speaker 3: Wednesday when you saw these unbelievable increases. The challenge and

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Speaker 3: what we try to remind everybody is these huge increases

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Speaker 3: on Wednesday, Historically they're book ended, so we go back

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Speaker 3: in time and you look of when you've seen those

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Speaker 3: types of increases in percentage gained of those of the indexes.

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Speaker 3: They've happened in twenty twenty, and they've happened back in

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Speaker 3: two thousand, I think was two thousand and eight. So

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Speaker 3: you have to be very careful because none of us

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Speaker 3: want to revisit those periods of time. But that's where

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Speaker 3: you get these types of outsized moves in the market

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Speaker 3: of when things have just been so crazy, so scary,

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Speaker 3: and so valuable.

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Speaker 2: So I'm glad you brought up the notion of foreign

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Speaker 2: investors buying US treasuries and maybe what we saw last

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Speaker 2: week was just a lack of confidence in a lot

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Speaker 2: of the policies that the US is putting forward on

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Speaker 2: the trade side, obviously, but I'm wondering whether or not

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Speaker 2: there has been a significant breakage right now that maybe

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Speaker 2: it's going to take a lot more to restore confidence.

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Speaker 2: Is that a possibility.

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Speaker 4: I think it is.

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Speaker 3: I mean, I think there's a lot of things that

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Speaker 3: went into that into that you know, big rise in

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Speaker 3: the ten year and the thirty year last week. It

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Speaker 3: certainly overseas as part of it. But but you know,

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Speaker 3: from everything we see, you know, we haven't heard, nor

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Speaker 3: have we heard from a lot of the folks that

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Speaker 3: we work with, that that there's any you know, mass

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Speaker 3: selling going on.

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Speaker 4: You know, the huge hedge fund unwind of.

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Speaker 3: Treasuries, you know, the the treasuries you know, were hedge funds,

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Speaker 3: et cetera loaded up on treasuries with thought that you know,

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Speaker 3: there'd be a little bit more control coming out of Washington,

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Speaker 3: and that you know, sadly within when the tariff announcement

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Speaker 3: was made on Liberation Day at just those absurdly high rates,

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Speaker 3: it just shook everything. So I think between the you know,

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Speaker 3: very few things end well when the sentence starts with

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Speaker 3: leverage trades being unwound. So you know that that generally

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Speaker 3: got us in a pretty bad place as well in

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Speaker 3: terms of what was driving rates up.

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Speaker 2: So I'm curious, how are you approaching the equity side

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Speaker 2: right now in terms of an investment strategy. Are you

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Speaker 2: staying along the sidelines maybe and just hoarding a little

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Speaker 2: bit of cash at the moment, looking for maybe a

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Speaker 2: little bit more of a pullback and another entry point here,

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Speaker 2: or is there something else that I should know about

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Speaker 2: in terms of the way Chuck Camello is approaching the

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Speaker 2: market right now.

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Speaker 3: No, I think we've already had a pretty significant pullback

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Speaker 3: in and of itself, and there's a tremendous amount of

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Speaker 3: cash sitting on the sidelines. So I think for the

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Speaker 3: average investor, and one of the things obviously that this

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Speaker 3: type of period of time calls four is caution, right

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Speaker 3: and some patients and some prudence with how you're going

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Speaker 3: to invest money. So certainly I think, you know, dollar

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Speaker 3: cost averaging into the market has made sense in the past,

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Speaker 3: it is tremendously makes sense right now. But you also

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Speaker 3: have to realize that these periods of time when the

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Speaker 3: market does sell off like this, for longer term investors,

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Speaker 3: right it is an opportunity. It's an opportunity wherever. Listen,

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Speaker 3: if your time frames three or six months, you know,

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Speaker 3: flip a coin, I couldn't begin to guess where it's

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Speaker 3: going to be.

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Speaker 4: But if you're going out longer, and I think.

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Speaker 3: History also shows us when you have this, I mean,

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Speaker 3: you know, I think the vics last week, I think.

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Speaker 4: I saw the highest at fifty six, fifty seven. I

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Speaker 4: think you got the sixty.

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Speaker 3: But regardless, you look at these big sell offs, these

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Speaker 3: big corrections, that level of VIX, and you look out

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Speaker 3: historically of market returns looking forward there generally are very good.

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Speaker 3: So we certainly have been putting some money to work,

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Speaker 3: whether it's in ETFs or whether individual securities as well

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Speaker 3: that now have come down to a point, especially some

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Speaker 3: of these tech names, where you know there there certainly

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Speaker 3: are a little they're quite a bit more attractive than

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Speaker 3: they were a few weeks ago. And again we try

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Speaker 3: to stress you don't have to call the bottom, you

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Speaker 3: don't have to get it perfect. So right now there

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Speaker 3: are some pretty attractive entry points in the equity market.

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Speaker 3: But again we're bracing and we're you're setting the expectation

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Speaker 3: with clients. It is a volatile time. We expect the

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Speaker 3: volatility to continue. But for a long term investor, you know,

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Speaker 3: getting long term above average re urns, is the volatility

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Speaker 3: is the price you pay for that.

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Speaker 2: A moment ago we talked about the possibility of recession.

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Speaker 2: I would imagine that for that reason you want to

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Speaker 2: avoid anything that is particularly economically sensitive. And I'm curious

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Speaker 2: that you brought up tech because as part of this

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Speaker 2: consumer electronics story that we've been talking about today and

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Speaker 2: the pivot away from the latest reciprocal tariffs, maybe a

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Speaker 2: little bit of a temporary reprieve here, but what has

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Speaker 2: been very clear from the White House today is that

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Speaker 2: a specific tariff on semiconductors is on the horizon, maybe

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Speaker 2: the next month or two. So within tech, how do

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Speaker 2: you even play it.

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Speaker 3: Yeah, it's a great question, and it's it's not for

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Speaker 3: the faint of heart. But keep in mind, what comes

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Speaker 3: out of Washington, but what came out of Washington this

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Speaker 3: weekend versus what might come out of Washington Tuesday, Wednesday

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Speaker 3: or Thursday could be two very different things. And so

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Speaker 3: you know, we're in the business of trying to build

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Speaker 3: long term investment and wealth management plans for our clients,

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Speaker 3: and you know, we've had shakes in shocks that the

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Speaker 3: market is seen now, thankfully, not to the extent like

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Speaker 3: we've seen this past you know, a week and a

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Speaker 3: half or so, but with technology again, the way that

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Speaker 3: the market has pulled back, there are some pretty attractive

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Speaker 3: there can be some pretty attractive entry points. Now we're

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Speaker 3: not saying that you're buying now and you're going straight

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Speaker 3: back up. No, No, these are for long term investors.

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Speaker 3: And if you've got a long term timeframe, listen you

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Speaker 3: we might we might be looking at this market drop

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Speaker 3: another ten or fifteen percent. If it does, we'll put

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Speaker 3: a little bit more money to work at that time.

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Speaker 3: But you know, looking forward, looking long term, these are

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Speaker 3: the times where true wealth can be made.

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Speaker 2: Chuck, I'm cure as to whether or not you're seeing

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Speaker 2: opportunities in the bond market. We were talking about the

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Speaker 2: volatility and treasuries last week. Let's talk a little bit

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Speaker 2: about what your expectations from the Fed might be and

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Speaker 2: whether or not there are opportunities in credit.

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Speaker 3: Yeah, well, the Fed's in a tough spot, aren't they.

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Speaker 3: So you've got inflation, you know, inflation especially you know,

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Speaker 3: the most recent CPI PPI numbers came down, but again

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Speaker 3: quite candidly, what the heck does that mean at this point,

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Speaker 3: you know, looking at the tariffs that.

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Speaker 4: We might be dealing with in the future.

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Speaker 3: And then again you've got growth certainly slow, and so

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Speaker 3: they're betwixt and between. I think in the fixed income space,

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Speaker 3: you know, you know, if you asked me this this

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Speaker 3: question about a week and a half ago, two weeks ago,

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Speaker 3: you know, municipal bonds were doing just great and then

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Speaker 3: they completely blew up last week. And so we had

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Speaker 3: a great municipal bond manager in the office last week,

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Speaker 3: you know, talking to us about that. And you can

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Speaker 3: get close to five percent yields now on UNI. So

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Speaker 3: we certainly do think that there's an opportunity in the

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Speaker 3: municipal bond space. But again I think it's going to

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Speaker 3: be volatile there as well. And we here we go

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Speaker 3: all the way back to what policy comes out of

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Speaker 3: Washington is going to drive a lot of this kind

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Speaker 3: of stuff. And if there is this continuing lack of

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Speaker 3: confidence or this fear of instability in the US system

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Speaker 3: from overseas buyers, you know, we're we're going to see

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Speaker 3: more volatility in the ten and the thirty year. So

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Speaker 3: again it's it's, you know, somewhat of a similar story

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Speaker 3: of we're going to expect volatility, but again diversifying. I

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Speaker 3: think saying short to intermediate and duration is the way

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Speaker 3: to go better credit quality, you know, high yield acts

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Speaker 3: more like equities and times like this. But again the

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Speaker 3: similar story that it also provides an opportunity as you're

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Speaker 3: looking to put some money to work, and quite candidly,

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Speaker 3: now you're walking in some pretty pretty attractive returns. So

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Speaker 3: it isn't It is again for the right buyer and opportunity,

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Speaker 3: and good old cash is paying four percent, and so

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Speaker 3: you're certainly getting paid to wait until eventually, whenever, and

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Speaker 3: if the Fed does cut rates, you're at least getting

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Speaker 3: four percent to sit in cash and ride this out.

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Speaker 2: Chuck, thank you so much for joining us. Chuck Amillo there,

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Speaker 2: president and CEO of Essex Financial Services, joining us here

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Speaker 2: on the Daybreak Asia podcast. Welcome back to the Daybreak

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Speaker 2: Asia Podcast. I'm Derek Chrisner. Asian equities have advanced after

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Speaker 2: President Trump paused some import duties on a range of

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Speaker 2: consumer electronics. This appears to be lifting sentiment a bit

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Speaker 2: after a volatile week for markets last week. For more

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Speaker 2: we heard from Mark Matthews, he has head of Asia

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Speaker 2: research at the Bank, Julius Behar, he spoke with Bloomberg's

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Speaker 2: Cherry On and Heidi Stroud.

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Speaker 5: Watts very hard to know what the direction will be

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Speaker 5: because we just had Commerce Secretary Lutnik and the President

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Speaker 5: himself saying these exemptions are not temporary. We will have

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Speaker 5: permanent tariffs. And so it's a ping pong ball. It's

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Speaker 5: not being very well executed, but you never know what

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Speaker 5: they could say at the end of this week. I

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Speaker 5: think last week what was encouraging in a strange way,

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Speaker 5: if you want to make a positive out of a negative,

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Speaker 5: is the bond market forced a reaction from the White House,

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Speaker 5: and so it might do that again, and so many

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Speaker 5: other markets, like the currency market and the stock market,

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Speaker 5: and so it may be that tariffs that appear to

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Speaker 5: be permanent now actually do become not permanent over the

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Speaker 5: long term. But we don't know, and so in the

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Speaker 5: absence of any certainty, I'm not surprised that central banks

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Speaker 5: want to try to help economies along, because it does

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Speaker 5: look increasingly likely like the largest economy in the world

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Speaker 5: is heading into a recession in the United States.

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Speaker 6: As you say, It's kind of interesting seeing the reaction

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Speaker 6: that was prompted, presumably by what was really I guess

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Speaker 6: Trump's pain trade rob was happening in treasuries. Does that

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Speaker 6: give you more confidence in terms of pivoting to the

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Speaker 6: markets that the US has targeted?

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Speaker 2: Europe?

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Speaker 6: China, for example? Where do you see the diversification opportunities there? Now?

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Speaker 5: There are lots of good diversification opportunities because in those

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Speaker 5: places the authorities are starting to stimulate. And once again,

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Speaker 5: to make a positive out of a negative. I read

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Speaker 5: somewhere I can't remember who said it. I'm sorry I

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Speaker 5: can't give them credit that Donald Trump and Vladimir Putin

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Speaker 5: were the best thing that could have ever happened to

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Speaker 5: Europe because they've shooken it out of its torpor and

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Speaker 5: lethargy that it's been in for the last couple of decades.

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Speaker 5: And so there is lots of good value in Europe.

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Speaker 5: And now it seems like next year there's going to

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Speaker 5: be some growth there too, with Germany starting to stimulate

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Speaker 5: its economy, and it has the resources to do that,

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Speaker 5: and there's lots of things that German can spend on

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Speaker 5: which will not be wasteful spending. They actually could use

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Speaker 5: a lot of new infrastructure, and of course they'll be

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Speaker 5: increasing their defense spending as well. And in China there's

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Speaker 5: lots of room to stimulate the economy, and in other

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Speaker 5: parts of Asia as well. So yes, there are things

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Speaker 5: to do around the world. But what I have to

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Speaker 5: say is to the extent that the S and P

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Speaker 5: five hundred is the benchmark for the world, that index,

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Speaker 5: we believe is in a bear market, and I highly

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Speaker 5: suspect it'll be lower at the end of this year

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Speaker 5: than it was at the beginning of this year, and

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Speaker 5: so that acts as a weight on risk assets generally.

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Speaker 1: Yeah, especially for countries perhaps that are not really headed

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Speaker 1: towards the easing path, like Japan, which is an anomaly

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Speaker 1: is sort of among advanced economies. There was a lot

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Speaker 1: of optimism of our Japanese equities. But could we continue

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Speaker 1: to see that trend even when the bo is trying

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Speaker 1: to normalize policy at a time when the external environment

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Speaker 1: is so uncertain.

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Speaker 5: Yes, that's a very complicated situation. But I would say

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Speaker 5: that I like Japan because within Asia, it's the only

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Speaker 5: country that has really top quality global brand names, and

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Speaker 5: the overall return in equity of Japan is very low.

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Speaker 5: It's less than ten percent because it's dragged down by

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Speaker 5: conglomerates and banks. But because it's such a big market.

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Speaker 5: Over I believe, what seven thousand listed companies something like that,

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Speaker 5: you can construct a portfolio of a dozen or more

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Speaker 5: very high quality, global brand name, large and liquid companies

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Speaker 5: with returns on equity in the high teens or twenties.

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Speaker 5: And that's the way I would approach Japan because it

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Speaker 5: does have these really high quality companies that don't mean

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Speaker 5: to be nasty about the rest of Asia, but the

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Speaker 5: rest of Asia doesn't have that.

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Speaker 1: What about China? I mean you mentioned earlier that Europe

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Speaker 1: was really shaken into action because of this sense of crisis.

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Speaker 1: Could we actually see Beijing now trying to really boost

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Speaker 1: the economy and that's stimilars measures really filtering through the

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Speaker 1: stock market. But on the other hand, of course, you

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Speaker 1: have all of this pressure coming from tariffs.

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Speaker 5: Yes, I think so. Well, the major Chinese industries are

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Speaker 5: still well below they're all time highs. And when I

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Speaker 5: say well below, I mean you know, thirty forty fifty

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Speaker 5: percent or not expensively hang saying index still has something

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Speaker 5: like a four and a half percent dividend yield. You

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Speaker 5: don't pay taxes on dividends, by the way in Hong Kong.

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Speaker 5: And I think the major thing was deep seek back

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Speaker 5: in January, not only because it proved that China can

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Speaker 5: operate at the forefront of high technology globally and offer

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Speaker 5: very competitive products. But the government's response to that I

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Speaker 5: thought was very good in that it had kind of

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Speaker 5: been keeping the big technology stocks in the doghouse since

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Speaker 5: Jackmaw's infamous speech a few years ago, and it's clear

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Speaker 5: now the government views the big technology companies and technology

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Speaker 5: in general, and China's a positive force, is a soft

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Speaker 5: power for the world. So I think that mending offenses

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Speaker 5: between government and big tech in China is also very important.

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Speaker 2: That was Mark Matthews, head of research at the Bank

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Speaker 2: Julius Bear, speaking with Bloomberg's Sherry On and Heidi Stroud

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Speaker 2: Watts right here on the Daybreak Asia Podcast. Thanks for

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Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner and this is lumberm