1 00:00:13,560 --> 00:00:17,760 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:18,120 --> 00:00:20,319 Speaker 1: My name is Mike Reagan, and I'm a senior editor 3 00:00:20,320 --> 00:00:23,680 Speaker 1: at Bloomberg. This week on the show, while the attention 4 00:00:23,720 --> 00:00:27,800 Speaker 1: of global investors has once again returned to China, but 5 00:00:27,960 --> 00:00:30,120 Speaker 1: this time it wasn't because of the trade tensions with 6 00:00:30,160 --> 00:00:33,680 Speaker 1: the US. Rather, it was China's own domestic crackdown on 7 00:00:33,760 --> 00:00:37,800 Speaker 1: the for profit education industry, spooking investors to the tune 8 00:00:37,840 --> 00:00:40,320 Speaker 1: of more than ten percent drop in the MSc I 9 00:00:40,520 --> 00:00:44,120 Speaker 1: China Index in just two days. It was so shocking 10 00:00:44,159 --> 00:00:46,640 Speaker 1: that Golden Sacks strategists actually came out with a note 11 00:00:46,680 --> 00:00:50,520 Speaker 1: saying clients were asking them if China had become uninvestable? 12 00:00:50,920 --> 00:00:53,080 Speaker 1: Well has it. We'll get into it with a chief 13 00:00:53,120 --> 00:00:57,800 Speaker 1: investment officer who's currently in China, But first Charlie Pellett 14 00:00:57,960 --> 00:01:01,480 Speaker 1: talls through this week's mystery co hosted is This week's 15 00:01:01,520 --> 00:01:04,959 Speaker 1: mystery co host is Ye She. He is a markets 16 00:01:04,959 --> 00:01:08,320 Speaker 1: reporter of Bloomberg and was a go chess champion as 17 00:01:08,319 --> 00:01:12,440 Speaker 1: a kid in his hometown of woo Sheet, China. Since 18 00:01:12,520 --> 00:01:15,319 Speaker 1: moving to the U S sixteen years ago, he's become 19 00:01:15,360 --> 00:01:20,160 Speaker 1: a Seinfeld fanatic and still listens to reruns on his 20 00:01:20,240 --> 00:01:25,360 Speaker 1: iPhone every night to help him understand close talkers like Reagan. 21 00:01:26,640 --> 00:01:30,040 Speaker 1: He I to him as Seinfeld fanatic. As you know, 22 00:01:30,160 --> 00:01:33,560 Speaker 1: I hopefully in the if Bloomberger Seinfeld, I'm thinking I'm 23 00:01:33,600 --> 00:01:37,480 Speaker 1: probably the Kramer character. I don't I don't know, hopefully 24 00:01:37,480 --> 00:01:42,440 Speaker 1: not the Newman character. What do you think? Yeah, my 25 00:01:42,600 --> 00:01:49,320 Speaker 1: favorite is Geosh Castenda, Absolutely absolutely, I think he's everyone's favorite. 26 00:01:49,320 --> 00:01:51,640 Speaker 1: And you also have now have been intrigued with go Chess. 27 00:01:51,640 --> 00:01:52,960 Speaker 1: I'm gonna you're gonna have to teach me how to 28 00:01:52,960 --> 00:01:56,160 Speaker 1: play that sometime, right. It's uh, it's like one of 29 00:01:56,200 --> 00:02:00,560 Speaker 1: the Asian most ancient chess game, very popularly in China, 30 00:02:00,680 --> 00:02:05,120 Speaker 1: South Korea and Japan. And I just taught myself at 31 00:02:05,120 --> 00:02:08,160 Speaker 1: the age of the probably five six, and just uh 32 00:02:08,680 --> 00:02:12,760 Speaker 1: really obsessed that he was playing it. But I want 33 00:02:12,840 --> 00:02:16,080 Speaker 1: the the champion in the city when I was in 34 00:02:16,160 --> 00:02:19,600 Speaker 1: middle school. Um, but I stopped playing in high school 35 00:02:19,880 --> 00:02:23,880 Speaker 1: because I'm so busy. It was a study. So I'm 36 00:02:24,000 --> 00:02:28,160 Speaker 1: sympathetic about the crackdown of the cram schools. I'm sure 37 00:02:28,200 --> 00:02:30,960 Speaker 1: we all talk about on the show. That's a That's 38 00:02:31,000 --> 00:02:33,079 Speaker 1: a good segue into our guest here and what's going 39 00:02:33,120 --> 00:02:36,120 Speaker 1: on in China the gram schools UM and let's bring 40 00:02:36,200 --> 00:02:39,320 Speaker 1: in our guest. He's uh really had a quite a 41 00:02:39,320 --> 00:02:42,359 Speaker 1: resume in the financial industry. In the investing industry, it's 42 00:02:42,400 --> 00:02:45,760 Speaker 1: one of the co founders of Research Affiliates, and more 43 00:02:45,840 --> 00:02:49,040 Speaker 1: recently he is the founder and chief investment officer of 44 00:02:49,320 --> 00:02:53,280 Speaker 1: Raylean Global Advisors. His name is Jason Sue. Jason, Welcome 45 00:02:53,320 --> 00:02:56,440 Speaker 1: to the show. Glad to be here at Jason, I 46 00:02:56,480 --> 00:02:58,639 Speaker 1: wanted to get into that idea about the the for 47 00:02:58,880 --> 00:03:02,240 Speaker 1: profit educ asian industry in China. Now, luckily I know 48 00:03:02,280 --> 00:03:04,440 Speaker 1: a little bit about this. I edity every day, so 49 00:03:04,520 --> 00:03:06,919 Speaker 1: I've I'm able to read his insights on China, so 50 00:03:06,919 --> 00:03:08,600 Speaker 1: so I know a little bit. But I think for 51 00:03:08,680 --> 00:03:12,040 Speaker 1: a lot of Americans this seems like a strange thing 52 00:03:12,120 --> 00:03:16,600 Speaker 1: for a market sell off, a crackdown on the education industry. 53 00:03:16,960 --> 00:03:20,840 Speaker 1: But walk us through, um, you know, basically, what problem 54 00:03:21,080 --> 00:03:24,480 Speaker 1: is China trying to solve here with this crackdown on 55 00:03:24,600 --> 00:03:28,440 Speaker 1: for profit education and why such a dramatic impact on 56 00:03:28,480 --> 00:03:32,440 Speaker 1: the market in China. Absolutely so this is a little 57 00:03:32,480 --> 00:03:36,680 Speaker 1: difficult for I think Westerners understand because CRAM School, the 58 00:03:36,760 --> 00:03:41,600 Speaker 1: for profit educational sector is something very foreign to Westerners, 59 00:03:41,600 --> 00:03:44,560 Speaker 1: but it's a part of the Asian culture, not just Chinese, 60 00:03:44,640 --> 00:03:47,800 Speaker 1: but really I think it is just a part of 61 00:03:47,960 --> 00:03:53,680 Speaker 1: you know, the Korean, the Japanese and the Chinese culture. Essentially, 62 00:03:54,520 --> 00:03:58,880 Speaker 1: CRAM schools offer you additional after school tutoring, and it 63 00:03:59,040 --> 00:04:03,840 Speaker 1: often occurs in the form of sort of UH regurgitation 64 00:04:04,480 --> 00:04:10,200 Speaker 1: UH memorization of a vast test bank of questions are 65 00:04:10,280 --> 00:04:13,960 Speaker 1: likely to be on the next national entrance exam. Right 66 00:04:14,040 --> 00:04:18,280 Speaker 1: in in Asia, gain gaining emissions into the top high 67 00:04:18,279 --> 00:04:23,000 Speaker 1: schools and eventually from their top universities requires one scoring 68 00:04:23,640 --> 00:04:27,680 Speaker 1: at the top of the list a national entrance exam. UH. 69 00:04:27,720 --> 00:04:32,719 Speaker 1: So most students spend all of their days essentially preparing 70 00:04:32,760 --> 00:04:36,880 Speaker 1: for that big exam. And the easiest way to to 71 00:04:37,000 --> 00:04:39,679 Speaker 1: get a high score is not by doing well in school, 72 00:04:39,839 --> 00:04:42,679 Speaker 1: not by just you know, by by understanding the actual 73 00:04:42,760 --> 00:04:45,480 Speaker 1: knowledge UH. The easiest way to gain emissions is to 74 00:04:45,560 --> 00:04:49,800 Speaker 1: practice test exams over and over and over and over again. 75 00:04:50,320 --> 00:04:52,359 Speaker 1: And if you pay to go to one of the 76 00:04:52,440 --> 00:04:58,000 Speaker 1: more UH premium UH tutoring programs, you just have access 77 00:04:58,040 --> 00:05:01,440 Speaker 1: to the latest test banks. You have access to experts 78 00:05:01,520 --> 00:05:05,520 Speaker 1: who may have UH greater ability to predict what's going 79 00:05:05,560 --> 00:05:08,559 Speaker 1: to be on the exams. Uh and and thereby gaining 80 00:05:08,720 --> 00:05:12,240 Speaker 1: enormous advantage. And so in Asia, it's a very expensive 81 00:05:12,279 --> 00:05:15,680 Speaker 1: exercise to to go through these cram schools. They're they're costly, 82 00:05:15,680 --> 00:05:18,279 Speaker 1: they're expensive, but it's also in terms of the hours 83 00:05:18,279 --> 00:05:23,880 Speaker 1: that children commit to additional memorization and studying. I think 84 00:05:23,880 --> 00:05:26,720 Speaker 1: this has become such a social problem. If you cite 85 00:05:26,760 --> 00:05:31,080 Speaker 1: the the number one reason for for teens committing suicide, 86 00:05:31,120 --> 00:05:34,440 Speaker 1: it's because of the just the unbearable hours that that 87 00:05:34,520 --> 00:05:37,279 Speaker 1: they have to commit to this. And also for a 88 00:05:37,279 --> 00:05:39,599 Speaker 1: lot of parents, it's it's it's very expensive and it 89 00:05:39,600 --> 00:05:43,200 Speaker 1: feels very unfair because, uh, the premium programs that give 90 00:05:43,240 --> 00:05:46,000 Speaker 1: you the highest chance of scoring high on the Nastal 91 00:05:46,040 --> 00:05:50,359 Speaker 1: exams are quite expensive. So it's it's broadly understood and 92 00:05:50,440 --> 00:05:53,640 Speaker 1: viewed as a social program problem. Uh. You know, Taiwan 93 00:05:53,720 --> 00:05:55,960 Speaker 1: has tried to fix that. I think Japan has tried 94 00:05:55,960 --> 00:05:58,040 Speaker 1: to fix that. Again. You know, as I mentioned, the 95 00:05:58,040 --> 00:06:00,640 Speaker 1: the high suicide rate is really a problem, and I 96 00:06:00,640 --> 00:06:03,200 Speaker 1: guess China has come down with its own way to 97 00:06:03,200 --> 00:06:07,560 Speaker 1: fix the problem by essentially making these CRAM schools nonprofit 98 00:06:07,600 --> 00:06:11,720 Speaker 1: and hopefully uh taking them out of the equation and 99 00:06:11,800 --> 00:06:14,960 Speaker 1: never a pretty big chunk of equity involved in this. 100 00:06:15,080 --> 00:06:17,080 Speaker 1: I guess you know, these companies have grown so large 101 00:06:17,080 --> 00:06:19,320 Speaker 1: because of all those well absolutely, I mean the for 102 00:06:19,720 --> 00:06:24,240 Speaker 1: profit cram schools are incredibly profitable. Their massive I mean, 103 00:06:24,560 --> 00:06:26,960 Speaker 1: there was a point in time in China that the 104 00:06:27,240 --> 00:06:31,960 Speaker 1: for profit educational sector is viewed as the most important 105 00:06:32,400 --> 00:06:36,160 Speaker 1: consumption demand. Right like people are with would stop paying rents, 106 00:06:36,200 --> 00:06:38,520 Speaker 1: they would stop eating just so they could keep paying 107 00:06:38,560 --> 00:06:41,240 Speaker 1: for cram schools for their kids. And so you know, 108 00:06:41,440 --> 00:06:44,359 Speaker 1: it was viewed by investors as one of the you know, 109 00:06:45,120 --> 00:06:52,680 Speaker 1: probably safest industry to investent. The joking Chinese people asking 110 00:06:52,760 --> 00:06:58,240 Speaker 1: why cracked um education companies are the cramp schools will 111 00:06:58,240 --> 00:07:00,720 Speaker 1: bring down the whole market. Um. The joke was, I 112 00:07:00,839 --> 00:07:03,440 Speaker 1: think about this way. If there's ten birds on a tree, 113 00:07:03,560 --> 00:07:06,159 Speaker 1: you shoot down one, how many birds are left on 114 00:07:06,200 --> 00:07:09,440 Speaker 1: the tree. I thought this is a good analogy to 115 00:07:09,520 --> 00:07:12,720 Speaker 1: explain the fear. People are worried about who's the next 116 00:07:12,840 --> 00:07:17,240 Speaker 1: target from for as you mentioned that Jason that for 117 00:07:17,440 --> 00:07:21,240 Speaker 1: a lot of like foreign observers or investors, they don't 118 00:07:21,320 --> 00:07:25,560 Speaker 1: quite understand Chinese policies. It seems quite random ad hoc 119 00:07:25,720 --> 00:07:29,440 Speaker 1: in terms of policies and regulation changes. If we think 120 00:07:29,480 --> 00:07:32,160 Speaker 1: about it, it it started with end Group in November when 121 00:07:32,280 --> 00:07:36,040 Speaker 1: China put down their listing at the last minute. Then 122 00:07:36,120 --> 00:07:39,600 Speaker 1: we start to have um government targeting Ali Baba Tennis 123 00:07:39,680 --> 00:07:43,400 Speaker 1: and all these big internet companies for their acknowledged behavior. 124 00:07:43,920 --> 00:07:46,320 Speaker 1: Then we have the d d UM the government banned 125 00:07:46,360 --> 00:07:49,440 Speaker 1: their apps soon after the I p O in the US. 126 00:07:49,880 --> 00:07:53,400 Speaker 1: Now we now we have the education companies. Is any 127 00:07:53,640 --> 00:07:58,800 Speaker 1: coherent logic of all these government actions? Is any ultimate 128 00:07:58,920 --> 00:08:03,480 Speaker 1: goal China is trying to achieve? Absolutely. I think the 129 00:08:03,520 --> 00:08:07,680 Speaker 1: best analogy uh and hopefully one I think the the 130 00:08:07,840 --> 00:08:12,040 Speaker 1: West will be more sympathetic to is you know the 131 00:08:12,160 --> 00:08:17,160 Speaker 1: Chinese regulators. Uh. They see themselves as you know, part 132 00:08:17,240 --> 00:08:19,880 Speaker 1: of the global E S G trend right. Um. You know, 133 00:08:19,960 --> 00:08:23,280 Speaker 1: part of it is saying that, look, the free market 134 00:08:23,880 --> 00:08:27,400 Speaker 1: doesn't solve all problems, so you can't just leave problems, 135 00:08:27,480 --> 00:08:31,120 Speaker 1: especially social once the free market very much, you know, 136 00:08:31,200 --> 00:08:35,160 Speaker 1: in line with the E S G. Uh, I think philosophy, 137 00:08:35,280 --> 00:08:41,040 Speaker 1: which is you need regulators, you need socially minded individuals investors, 138 00:08:41,559 --> 00:08:45,000 Speaker 1: uh to to sort of come and undo some of 139 00:08:45,000 --> 00:08:49,920 Speaker 1: the excessis you know, some of the negative externalities of 140 00:08:50,720 --> 00:08:53,480 Speaker 1: free market competition. And so I think the Chinese regulators 141 00:08:53,559 --> 00:08:56,040 Speaker 1: very much I've been looking at, you know, what are 142 00:08:57,320 --> 00:09:01,480 Speaker 1: the problems that perhaps we know profit maximization has created 143 00:09:01,520 --> 00:09:06,079 Speaker 1: that they they think needs fixing, that that society can't 144 00:09:06,120 --> 00:09:09,560 Speaker 1: tolerate anymore. So if you take the the educational sector, 145 00:09:09,640 --> 00:09:11,800 Speaker 1: I think, as I mentioned, you know, that's that's been 146 00:09:11,840 --> 00:09:15,360 Speaker 1: a social problem that a lot of Asian regulators, a 147 00:09:15,360 --> 00:09:17,840 Speaker 1: lot of Asian economies have been trying to to fix. 148 00:09:18,640 --> 00:09:22,560 Speaker 1: But if you even look back further right in in 149 00:09:22,640 --> 00:09:27,040 Speaker 1: the recent month, as you mentioned, where it is um 150 00:09:27,160 --> 00:09:30,800 Speaker 1: sort of cracking down on some of the big consumer 151 00:09:30,920 --> 00:09:35,680 Speaker 1: tech where the monopoly power has made both war conditions 152 00:09:35,800 --> 00:09:38,880 Speaker 1: very very bad for labors and also made it uncompetitive 153 00:09:38,880 --> 00:09:42,440 Speaker 1: for smaller business to get in. For example, you know Maton, Uh, 154 00:09:42,480 --> 00:09:45,280 Speaker 1: They're share price also took a beating when when the 155 00:09:45,280 --> 00:09:48,720 Speaker 1: regulator announced that it is not acceptable for them to 156 00:09:49,679 --> 00:09:53,000 Speaker 1: treat all of their employees as contractors and not pay 157 00:09:53,040 --> 00:09:57,160 Speaker 1: a century social security for them. Um. So you know 158 00:09:57,200 --> 00:10:00,800 Speaker 1: that's very much uh, something that that that's been talked 159 00:10:00,800 --> 00:10:03,679 Speaker 1: about in the US, you know, with uber would lift 160 00:10:04,440 --> 00:10:08,679 Speaker 1: where essence you regulars. As you know, the businesses are 161 00:10:08,679 --> 00:10:11,960 Speaker 1: being unfair and not paying their fair share for uh 162 00:10:12,000 --> 00:10:14,640 Speaker 1: you know what, other you know, for profit businesses have 163 00:10:14,640 --> 00:10:17,679 Speaker 1: always paid. We just pay into the Social Security for 164 00:10:17,679 --> 00:10:21,920 Speaker 1: for employees instead of treating them as contractors. So if 165 00:10:21,920 --> 00:10:26,000 Speaker 1: you look at um these issues and understand them and 166 00:10:26,040 --> 00:10:29,440 Speaker 1: clearly just they're gonna be idiosyncratic to each economy and markets, 167 00:10:29,760 --> 00:10:32,079 Speaker 1: you'll start to be able to predict at least the 168 00:10:32,160 --> 00:10:35,760 Speaker 1: Chinese regulators behaviors when it comes to what are the 169 00:10:35,800 --> 00:10:38,960 Speaker 1: important E s G. Issues that they're grappling with and 170 00:10:38,960 --> 00:10:42,640 Speaker 1: they're likely to act on, you know, Uh, Jason, It's 171 00:10:42,679 --> 00:10:45,280 Speaker 1: one of those times I wish this podcast was on video. 172 00:10:45,520 --> 00:10:47,440 Speaker 1: I just want to set the scene for listeners here. 173 00:10:48,160 --> 00:10:51,240 Speaker 1: Jason is appearing to us from what looks like the 174 00:10:51,240 --> 00:10:55,199 Speaker 1: Starship Enterprise from from from Star Check. Absolutely my favorite 175 00:10:55,280 --> 00:10:57,080 Speaker 1: zoom background I've seen in a lot of these. I 176 00:10:57,160 --> 00:10:59,680 Speaker 1: keep expecting to get a call from Scotty, you know, 177 00:10:59,760 --> 00:11:02,240 Speaker 1: saying we we ain't got no power captain or something. 178 00:11:02,360 --> 00:11:06,480 Speaker 1: But Jason wins the best zoon background of in what 179 00:11:06,520 --> 00:11:08,839 Speaker 1: goes up History. I'm gonna say say it here right now, 180 00:11:09,200 --> 00:11:12,200 Speaker 1: but Jason I in that intro, I said, I mentioned 181 00:11:12,240 --> 00:11:14,360 Speaker 1: that note from Goldman that was out this week saying, 182 00:11:14,400 --> 00:11:17,120 Speaker 1: you know, their clients are calling them up saying is 183 00:11:17,280 --> 00:11:20,439 Speaker 1: UH is China uninvestable right now? And I know you're 184 00:11:20,480 --> 00:11:24,920 Speaker 1: managing a active ETF with charity stock. So I'm assuming 185 00:11:24,920 --> 00:11:27,080 Speaker 1: your answer is so, I hope not at least you know. 186 00:11:27,160 --> 00:11:31,520 Speaker 1: But but but given this sort of you know, regulatory 187 00:11:31,640 --> 00:11:33,320 Speaker 1: risk that we're talking about, how do you how would 188 00:11:33,320 --> 00:11:35,440 Speaker 1: you answer that question? You know, you sort of hinted 189 00:11:35,480 --> 00:11:38,040 Speaker 1: at the idea of trying to put your head in 190 00:11:38,040 --> 00:11:40,800 Speaker 1: the mind of Chinese regulators and get ahead of what 191 00:11:41,080 --> 00:11:43,560 Speaker 1: might come next. But what is sort of a good 192 00:11:43,600 --> 00:11:48,280 Speaker 1: industry that in China is a beneficial to society that 193 00:11:48,320 --> 00:11:50,360 Speaker 1: you don't have to worry about the government sort of 194 00:11:50,960 --> 00:11:54,160 Speaker 1: turning off overnight like we saw in the education industry. Well, 195 00:11:54,200 --> 00:11:58,559 Speaker 1: I would say now that the government has sat down 196 00:11:58,600 --> 00:12:01,640 Speaker 1: and had a good talking to with the big financial 197 00:12:02,600 --> 00:12:05,720 Speaker 1: I guess, with the big finn tax and the consumer 198 00:12:05,800 --> 00:12:10,640 Speaker 1: tax uh, and then warned them about wielding monopoly power. UH. 199 00:12:11,160 --> 00:12:15,040 Speaker 1: I think you know, for firms that truly have innovated 200 00:12:15,120 --> 00:12:18,080 Speaker 1: and that have brought products and services that have made 201 00:12:18,120 --> 00:12:24,600 Speaker 1: things better and easier, Uh, certainly benefited the consumers created large, 202 00:12:25,240 --> 00:12:27,000 Speaker 1: you know, large number of jobs. You know. I think 203 00:12:27,040 --> 00:12:30,080 Speaker 1: governments are are generally globally and and then certainly in 204 00:12:30,160 --> 00:12:34,400 Speaker 1: China supportive of businesses and industries like that. So I 205 00:12:34,400 --> 00:12:37,679 Speaker 1: would say, you know, broadly, you know, most of the 206 00:12:37,720 --> 00:12:41,720 Speaker 1: firms that have sold off are probably good buying opportunities today, 207 00:12:42,080 --> 00:12:44,199 Speaker 1: just pay attention to those are likely to be in 208 00:12:44,240 --> 00:12:47,080 Speaker 1: a cross here of the regulators. Right so, uh, you know, 209 00:12:47,120 --> 00:12:50,800 Speaker 1: firms are uh you know, continue to wheel monopoly powers 210 00:12:50,920 --> 00:12:53,400 Speaker 1: and uh and and don't seem to sort of get 211 00:12:53,440 --> 00:12:57,400 Speaker 1: the memo with regard to um, you know, the government's 212 00:12:57,400 --> 00:13:01,120 Speaker 1: sort of displeasure with with monopoly hours and and anti 213 00:13:01,160 --> 00:13:04,480 Speaker 1: competitive behaviors. Uh. And certainly, And I would say industries 214 00:13:04,559 --> 00:13:07,559 Speaker 1: that traditionally in the West that we're more concerned about, 215 00:13:07,559 --> 00:13:12,080 Speaker 1: you know, the liquor the tobacco, those are all likely 216 00:13:12,160 --> 00:13:14,800 Speaker 1: to be issues as industries that are big polluters, that 217 00:13:14,920 --> 00:13:18,040 Speaker 1: are anti green and being given that carbon neutral is 218 00:13:18,080 --> 00:13:23,480 Speaker 1: now big initiative for for China. So those industries I 219 00:13:23,520 --> 00:13:28,200 Speaker 1: think that that traditionally are more of the negative or 220 00:13:28,240 --> 00:13:31,880 Speaker 1: low e s g uh firms and industries I think 221 00:13:31,880 --> 00:13:34,600 Speaker 1: those sort of big risks in China. Uh and uh. 222 00:13:34,640 --> 00:13:38,280 Speaker 1: And again you know this is partly because you know, 223 00:13:38,360 --> 00:13:41,640 Speaker 1: Chinese regulators and the Chinese societies no different to the 224 00:13:41,679 --> 00:13:45,240 Speaker 1: Western societies. As they become wealthier and can afford it, Uh, 225 00:13:45,320 --> 00:13:47,400 Speaker 1: they do demand some of the very same sort of 226 00:13:47,440 --> 00:13:49,520 Speaker 1: E s G issues to be taken care of as 227 00:13:49,600 --> 00:14:01,160 Speaker 1: as that we in the West do. So there's this 228 00:14:01,320 --> 00:14:05,080 Speaker 1: sort of a perception um from the investors, especially after 229 00:14:05,120 --> 00:14:08,920 Speaker 1: the recent events, that it looks like the Chinese has 230 00:14:09,000 --> 00:14:13,559 Speaker 1: become anti capital now they are moving backwards. At least 231 00:14:13,600 --> 00:14:16,960 Speaker 1: there's there's a perception there. I guess that's why Goldman 232 00:14:17,080 --> 00:14:20,040 Speaker 1: had feeded so many calls from their clients, whether Chinese 233 00:14:20,480 --> 00:14:23,360 Speaker 1: investment or not. It looks like there should be a 234 00:14:23,560 --> 00:14:27,680 Speaker 1: China discount because people don't understand the rule anymore. People 235 00:14:27,680 --> 00:14:32,000 Speaker 1: don't understand the boundaries anymore. Um and Uh. I saw 236 00:14:32,600 --> 00:14:36,200 Speaker 1: there article from Steven Roach, his long term China boar. 237 00:14:36,360 --> 00:14:40,120 Speaker 1: He he said he's been optism optimistic about China for 238 00:14:40,120 --> 00:14:43,440 Speaker 1: the last twenty five years. Now he started doubt whether 239 00:14:43,600 --> 00:14:46,400 Speaker 1: this is a this is a moment he should have 240 00:14:46,520 --> 00:14:49,760 Speaker 1: a have a second sought, So, do you think that 241 00:14:49,880 --> 00:14:54,760 Speaker 1: China is doing the right thing. Well, uh, I think 242 00:14:55,640 --> 00:14:59,800 Speaker 1: you know, execution can always be better. I think, you know, 243 00:15:00,000 --> 00:15:02,520 Speaker 1: lot more pre communication, being a lot more clear about 244 00:15:02,520 --> 00:15:06,800 Speaker 1: what the regulators I want to accomplish, being much more 245 00:15:07,680 --> 00:15:11,480 Speaker 1: I would say transparent with regard to the sort of 246 00:15:11,560 --> 00:15:14,400 Speaker 1: E s G agenda especially, I would say, you know, 247 00:15:14,600 --> 00:15:17,240 Speaker 1: carbon neutrality will be a good one. China's been signaling that, 248 00:15:17,560 --> 00:15:20,800 Speaker 1: signaling its path or green. Uh. And and I think 249 00:15:20,840 --> 00:15:22,440 Speaker 1: that's helped out the market a lot in terms of 250 00:15:22,520 --> 00:15:25,600 Speaker 1: understanding where to direct capital, what to expect. If if 251 00:15:25,680 --> 00:15:28,560 Speaker 1: China sort of shares that same kind of transparency with 252 00:15:28,640 --> 00:15:32,440 Speaker 1: regard to perhaps more of the negative E S G issues, 253 00:15:32,480 --> 00:15:35,040 Speaker 1: that would help the market out a bit as well. 254 00:15:35,120 --> 00:15:37,160 Speaker 1: And certainly I think the investors got to do the 255 00:15:37,160 --> 00:15:39,280 Speaker 1: other half right because actually it's it's been in the 256 00:15:39,360 --> 00:15:42,960 Speaker 1: number of policy speeches given by presidents She going all 257 00:15:43,000 --> 00:15:47,080 Speaker 1: the way back to late eighteen with regard to his 258 00:15:47,240 --> 00:15:51,160 Speaker 1: concern about the inequity in the educational feel and and 259 00:15:51,200 --> 00:15:54,200 Speaker 1: really the pain created by the crams schools on on 260 00:15:54,280 --> 00:15:56,920 Speaker 1: the children's and their parents. So I think investors also 261 00:15:56,960 --> 00:16:00,600 Speaker 1: have to to you know, listen a bit more tentatively 262 00:16:01,200 --> 00:16:03,800 Speaker 1: to to sort of some of these policy pre signaling, 263 00:16:04,480 --> 00:16:07,240 Speaker 1: but I would say yes, in terms of execution, it 264 00:16:07,280 --> 00:16:10,600 Speaker 1: can always be be better understanding how markets can lose 265 00:16:10,640 --> 00:16:16,120 Speaker 1: confidence um from from even the slightest I think surprises 266 00:16:16,120 --> 00:16:19,160 Speaker 1: coming from regulators, especially when it comes to China and 267 00:16:19,600 --> 00:16:23,040 Speaker 1: especially in this current environment. So yes, you know, much 268 00:16:23,080 --> 00:16:25,480 Speaker 1: can be improved upon. But I would say that the 269 00:16:25,480 --> 00:16:28,560 Speaker 1: work goes on both sides, by both the regulators in 270 00:16:28,640 --> 00:16:32,160 Speaker 1: China but also investors looking to invest in China, because 271 00:16:32,200 --> 00:16:34,520 Speaker 1: we've got to recognize it is a more foreign market. 272 00:16:35,320 --> 00:16:38,960 Speaker 1: Our access to information is a little bit more challenged 273 00:16:39,080 --> 00:16:42,119 Speaker 1: versus our access to information when dealing with say us 274 00:16:42,240 --> 00:16:46,160 Speaker 1: UH than the ICY, and so investors really do have 275 00:16:46,200 --> 00:16:48,720 Speaker 1: to work a little harder as well. Right, It's not 276 00:16:49,040 --> 00:16:52,440 Speaker 1: a responsible approach for for managers and investors to to 277 00:16:52,480 --> 00:16:56,480 Speaker 1: simply just blame Chinese policymakers in this case. You know, Jason, 278 00:16:56,520 --> 00:16:59,200 Speaker 1: you have such a strong background and sort of the 279 00:16:59,200 --> 00:17:02,800 Speaker 1: the academic quantitative approach to to investing, you know, at 280 00:17:02,800 --> 00:17:07,159 Speaker 1: research affiliates and presumably now at this firm, and at 281 00:17:07,240 --> 00:17:09,120 Speaker 1: risk of repeating a joke I think I've already made 282 00:17:09,160 --> 00:17:12,080 Speaker 1: on a previous episode of the podcast, but you know, 283 00:17:12,200 --> 00:17:14,399 Speaker 1: to me, it's like being a quant in the market 284 00:17:14,560 --> 00:17:17,040 Speaker 1: is is sort of taking the you know, being like 285 00:17:17,080 --> 00:17:21,240 Speaker 1: in the college classroom approach to markets where the retail 286 00:17:21,440 --> 00:17:24,520 Speaker 1: trader has taken over and it's it's now more like 287 00:17:24,520 --> 00:17:28,159 Speaker 1: a market that's a fraternity party rather than a classroom setting, 288 00:17:28,200 --> 00:17:30,919 Speaker 1: you know. And I know in China it has that 289 00:17:31,000 --> 00:17:34,240 Speaker 1: reputation for being a such a retail driven market. I've 290 00:17:34,280 --> 00:17:38,359 Speaker 1: seen stats something like correct me if I'm wrong, something 291 00:17:38,359 --> 00:17:43,800 Speaker 1: like volume is China is retail driven and and very 292 00:17:43,880 --> 00:17:47,280 Speaker 1: much a sort of a gambler's ethos rather than a 293 00:17:47,600 --> 00:17:51,080 Speaker 1: you know, buy and hold investors approach to the market. 294 00:17:51,720 --> 00:17:53,640 Speaker 1: So I want to ask you a two part question 295 00:17:53,720 --> 00:17:56,800 Speaker 1: about that, and feel lucky sometimes I asked twelve part questions, 296 00:17:56,800 --> 00:17:59,679 Speaker 1: So two parts let you off easy. But uh so, 297 00:17:59,760 --> 00:18:03,879 Speaker 1: how is a quant approach China given that type of 298 00:18:03,880 --> 00:18:10,200 Speaker 1: of dominance in the market among the retail set. And secondly, um, 299 00:18:10,280 --> 00:18:14,040 Speaker 1: you know, are there lessons to be learned from analyzing 300 00:18:14,280 --> 00:18:17,480 Speaker 1: that cohort of the Chinese market for what we're now 301 00:18:17,480 --> 00:18:20,480 Speaker 1: seeing in the US where this growing dominance of of 302 00:18:20,600 --> 00:18:26,080 Speaker 1: retail investors and kind of their unpredictability and they're sort 303 00:18:26,119 --> 00:18:30,159 Speaker 1: of you know, investing on whims and message boards. I'm 304 00:18:30,200 --> 00:18:34,960 Speaker 1: guessing momentum probably is a factor that that translates regardless. 305 00:18:35,000 --> 00:18:37,240 Speaker 1: But I'm just curious, you know, as as a quant 306 00:18:37,280 --> 00:18:39,600 Speaker 1: how do you how do you approach a retail driven 307 00:18:39,640 --> 00:18:43,000 Speaker 1: market like China? And you know, are there lessons to 308 00:18:43,240 --> 00:18:46,000 Speaker 1: apply to the US market as the retail trader sort 309 00:18:46,000 --> 00:18:48,840 Speaker 1: of takes over. Absolutely, So, first of all, you're absolutely 310 00:18:48,960 --> 00:18:53,560 Speaker 1: right that China is a retail dominatant market and because 311 00:18:53,600 --> 00:18:56,800 Speaker 1: of that, there is a very much casino feel to 312 00:18:56,920 --> 00:19:01,080 Speaker 1: it and rader than a loan term investment, retirement um 313 00:19:01,200 --> 00:19:06,080 Speaker 1: investment based um feel too to that market. The result 314 00:19:06,119 --> 00:19:11,239 Speaker 1: of which is, in a short run, prices can feel random, right, 315 00:19:11,359 --> 00:19:16,399 Speaker 1: Prices don't seem to rationally respond to either news or 316 00:19:16,560 --> 00:19:19,920 Speaker 1: sort of changes and developments in the fundamentals of companies. 317 00:19:20,160 --> 00:19:23,359 Speaker 1: Now that's of course not a China specific issue. Any 318 00:19:23,440 --> 00:19:26,040 Speaker 1: market that's heavily retail, for example, in the US has 319 00:19:26,080 --> 00:19:29,200 Speaker 1: gone from three percent retail to now closer to thirty 320 00:19:29,280 --> 00:19:32,960 Speaker 1: percent retail with you know robin Hood free trading and 321 00:19:32,960 --> 00:19:36,320 Speaker 1: and you know Wall Street bet dot com, Uh, you 322 00:19:36,359 --> 00:19:39,639 Speaker 1: know type type of activities and uh, and you know 323 00:19:39,680 --> 00:19:42,399 Speaker 1: in China, it's just you know, three times the the 324 00:19:42,400 --> 00:19:45,119 Speaker 1: the the magnitude right because they they're they're closer to 325 00:19:46,520 --> 00:19:49,879 Speaker 1: or thirty. So I think as an investor in the 326 00:19:50,000 --> 00:19:53,600 Speaker 1: short run, what will help you be successful is actually 327 00:19:54,480 --> 00:19:57,359 Speaker 1: focusing more on what drive sentiment, right, so be it 328 00:19:57,440 --> 00:20:00,200 Speaker 1: the news cycle orright, be it what is capt doing 329 00:20:00,240 --> 00:20:06,000 Speaker 1: the attention of media, of major influencers on on blogs 330 00:20:06,200 --> 00:20:08,840 Speaker 1: and and podcasts. Those are probably likely to give you 331 00:20:08,880 --> 00:20:10,840 Speaker 1: more of an edge trading in that market. So in 332 00:20:10,880 --> 00:20:15,200 Speaker 1: some ways, UH think of you know, short term signals, 333 00:20:15,440 --> 00:20:18,800 Speaker 1: betting out short term momentum, short term mean reversion, looking 334 00:20:18,840 --> 00:20:23,800 Speaker 1: at almost you know, technical pattern UH type analysis are 335 00:20:23,800 --> 00:20:26,080 Speaker 1: going to give you an edge more so than looking 336 00:20:26,240 --> 00:20:30,159 Speaker 1: at long term fundamentals understanding industries and firms. Uh. And 337 00:20:30,200 --> 00:20:33,399 Speaker 1: in fact, you know, the most successful investors in China today, 338 00:20:33,920 --> 00:20:38,080 Speaker 1: you know, are not the stock pickers who understand casual discounting, 339 00:20:38,240 --> 00:20:42,080 Speaker 1: not the quantz who understand sort of these long term 340 00:20:42,160 --> 00:20:46,360 Speaker 1: factors I predict earnings growth, but really people who employ 341 00:20:46,560 --> 00:20:50,000 Speaker 1: technical analysis on a on a daily basis, you know, 342 00:20:50,080 --> 00:20:52,520 Speaker 1: the you know, I would say more of the high 343 00:20:52,520 --> 00:20:57,920 Speaker 1: frequency market maker type of investors and strategies uh and yeah, 344 00:20:58,119 --> 00:21:00,760 Speaker 1: So in that type of market, uh, or you simply 345 00:21:00,880 --> 00:21:03,879 Speaker 1: have to bring into play a lot more of the 346 00:21:04,000 --> 00:21:08,439 Speaker 1: non fundamental, more of the sentiment based analysis to um 347 00:21:08,440 --> 00:21:10,840 Speaker 1: to really have short term success. But I think in 348 00:21:10,880 --> 00:21:13,320 Speaker 1: the long run markets always converge and come back to 349 00:21:13,359 --> 00:21:16,080 Speaker 1: fundamental and China is no difference. It just means you 350 00:21:16,119 --> 00:21:18,080 Speaker 1: have to put up with more of the short term noises. 351 00:21:35,240 --> 00:21:37,480 Speaker 1: I just I'm I want to let you talk to 352 00:21:37,480 --> 00:21:39,880 Speaker 1: your book a little bit here and uh to talk 353 00:21:39,920 --> 00:21:43,639 Speaker 1: to me about the Railian quantamount old China e t 354 00:21:44,000 --> 00:21:52,160 Speaker 1: F rayqu was the ticket right? And tell me race race? Okay? Good? 355 00:21:52,280 --> 00:21:53,880 Speaker 1: That was a test. I'm just making sure you got 356 00:21:53,880 --> 00:21:57,000 Speaker 1: your ticketres right there. So say say, I'm a guy 357 00:21:57,080 --> 00:21:59,719 Speaker 1: in the elevator there on the Starship Enterprise with you 358 00:21:59,800 --> 00:22:03,119 Speaker 1: when and you've got two minutes to to tell me? Uh, 359 00:22:03,200 --> 00:22:05,480 Speaker 1: you know, sell me on the CTF. What it's an 360 00:22:05,520 --> 00:22:08,760 Speaker 1: active ETF, So what you know, what's the selling point 361 00:22:09,400 --> 00:22:12,199 Speaker 1: for it? As far as your methodology and how you 362 00:22:12,240 --> 00:22:15,440 Speaker 1: construct the portfolio compared to say the f x I, 363 00:22:15,680 --> 00:22:19,000 Speaker 1: you know, the index tracking passive ETF. That's US investors 364 00:22:19,080 --> 00:22:23,560 Speaker 1: are pretty familiar with. What's what's your sales pitch. Well, 365 00:22:24,400 --> 00:22:28,120 Speaker 1: if you want to access China right, UH, you want 366 00:22:28,160 --> 00:22:32,840 Speaker 1: to access China actively. And that's because a capweight to 367 00:22:32,960 --> 00:22:37,960 Speaker 1: passive index UH doesn't make sense for a very inefficient 368 00:22:37,960 --> 00:22:40,800 Speaker 1: market where in the short run, lots of great companies 369 00:22:40,840 --> 00:22:44,240 Speaker 1: are underprised and lots of back companies are overprized UH, 370 00:22:44,280 --> 00:22:46,840 Speaker 1: and where you know, giving you know, doing some research 371 00:22:46,920 --> 00:22:49,159 Speaker 1: is going to give you an edge in terms of 372 00:22:49,320 --> 00:22:52,199 Speaker 1: knowing what the informed institutions are buying, perhaps knowing what 373 00:22:52,320 --> 00:22:56,080 Speaker 1: the informed UH and and well plugged in people who 374 00:22:56,119 --> 00:23:00,000 Speaker 1: understand policy shoots are buying and doing so the active 375 00:23:00,000 --> 00:23:03,199 Speaker 1: approach is certainly going to help you. Additionally, by the 376 00:23:03,720 --> 00:23:06,120 Speaker 1: you know, low price, good quality firms that will grow 377 00:23:06,520 --> 00:23:08,560 Speaker 1: and avoid I think a lot of the hype, a 378 00:23:08,600 --> 00:23:11,440 Speaker 1: lot of stories, a lot of firms that do eventually 379 00:23:11,440 --> 00:23:14,840 Speaker 1: become regulatory risk, either because of poor governance or because 380 00:23:15,600 --> 00:23:19,520 Speaker 1: you know, sort of just general pool compliance with the 381 00:23:19,600 --> 00:23:22,720 Speaker 1: regulatory environment. So you gotta go active in the market. 382 00:23:22,760 --> 00:23:30,439 Speaker 1: That's retail traded, Jason. One of the rationales I heard 383 00:23:31,040 --> 00:23:34,320 Speaker 1: for the crackdown on the CRAM schools was tryinga's three 384 00:23:34,400 --> 00:23:37,640 Speaker 1: child policy. You know, they want to encourage UH families 385 00:23:37,680 --> 00:23:39,560 Speaker 1: to have three children, and obviously if you have to 386 00:23:39,600 --> 00:23:42,080 Speaker 1: pay for three sets of cram schools, that's gonna get 387 00:23:42,240 --> 00:23:46,840 Speaker 1: gonna get pretty expensive. Um. But I wonder that's a 388 00:23:46,840 --> 00:23:49,040 Speaker 1: fascinating concept to me because here in the US, we 389 00:23:49,119 --> 00:23:51,760 Speaker 1: have a hard time getting people to wear a mask, 390 00:23:51,960 --> 00:23:54,919 Speaker 1: you know, to to stop a virus or get a 391 00:23:54,920 --> 00:23:58,480 Speaker 1: free vaccination. Uh, you know, we have a hard time 392 00:23:58,720 --> 00:24:01,680 Speaker 1: having the government getting people to to anything. But in China, 393 00:24:01,760 --> 00:24:05,760 Speaker 1: you know, I wonder is it harder to get couples 394 00:24:05,760 --> 00:24:10,440 Speaker 1: to have three kids than to say the wonder child policy? 395 00:24:10,640 --> 00:24:14,320 Speaker 1: And how important is that of apolicies? First, the economy 396 00:24:14,359 --> 00:24:17,400 Speaker 1: and how you're thinking about investments, does it play into 397 00:24:17,440 --> 00:24:20,040 Speaker 1: it at all, this potential for for a sort of 398 00:24:20,040 --> 00:24:22,760 Speaker 1: a baby boom relative to what China has seen in 399 00:24:22,800 --> 00:24:26,560 Speaker 1: recent generations. Okay, so first of all, you're absolutely right. 400 00:24:26,840 --> 00:24:31,040 Speaker 1: I think it is probably far more difficult today to 401 00:24:31,200 --> 00:24:34,639 Speaker 1: ask you know, Chinese couples to have kids than to 402 00:24:34,800 --> 00:24:37,520 Speaker 1: not have kids. And then again, and that's more of 403 00:24:37,560 --> 00:24:40,280 Speaker 1: an Asian phenomenon today, right, if you look at Taiwan 404 00:24:40,280 --> 00:24:43,160 Speaker 1: and you look at South Korea, like the birthrate per 405 00:24:43,280 --> 00:24:45,920 Speaker 1: couple is is less than one, right, So that's that's 406 00:24:45,960 --> 00:24:48,600 Speaker 1: obviously very bad for demographics. Right, that's very bad for 407 00:24:48,720 --> 00:24:51,320 Speaker 1: looking at consumption growth, you know, ten twenty years down 408 00:24:51,359 --> 00:24:53,199 Speaker 1: a row. When when you have such a you know, 409 00:24:53,560 --> 00:24:59,400 Speaker 1: rapidly dropping population, kids are very expensive. As a father 410 00:24:59,480 --> 00:25:03,560 Speaker 1: of freaking I will tell you you met your quota 411 00:25:03,680 --> 00:25:11,320 Speaker 1: and talking about you done well, done well, yeah, and 412 00:25:11,359 --> 00:25:14,679 Speaker 1: as the kids are very expensive from both a financial 413 00:25:14,760 --> 00:25:18,879 Speaker 1: resourcing perspective, but also for young couples in China today 414 00:25:18,960 --> 00:25:22,920 Speaker 1: right where there's a lot more I think opportunities to 415 00:25:22,960 --> 00:25:26,880 Speaker 1: make more money change your quality of life. So you 416 00:25:26,920 --> 00:25:29,680 Speaker 1: start to think about, hey, you know I have opportunity costs. 417 00:25:29,760 --> 00:25:32,840 Speaker 1: Right when I'm raising kids, I I'm maybe not out 418 00:25:32,880 --> 00:25:35,440 Speaker 1: there making money or spending money, given that I'm able 419 00:25:35,480 --> 00:25:38,000 Speaker 1: to make a lot more money now. So I think 420 00:25:38,000 --> 00:25:40,399 Speaker 1: what we're seeing is really an issue we see in 421 00:25:40,520 --> 00:25:45,040 Speaker 1: developed markets, right, you know, as as economy evolves developed um, 422 00:25:45,240 --> 00:25:48,560 Speaker 1: people's willingness or the need to have more children simply 423 00:25:48,760 --> 00:25:51,760 Speaker 1: have declined. So that's just something I don't think you 424 00:25:51,800 --> 00:25:54,760 Speaker 1: could mandate easily and change now. Of course, you know 425 00:25:54,760 --> 00:25:56,399 Speaker 1: the government has sort of gone out and try to 426 00:25:56,440 --> 00:26:00,240 Speaker 1: research what's stopping young couples from having to you know, 427 00:26:00,280 --> 00:26:02,359 Speaker 1: having kids or wanting to have kids, and you know 428 00:26:02,480 --> 00:26:06,320 Speaker 1: that the responses, unsurprisingly have been so expensive. Race kids 429 00:26:06,320 --> 00:26:09,679 Speaker 1: are part of the cram school. Part of it is 430 00:26:10,040 --> 00:26:13,040 Speaker 1: um uh, you know, real estate, right because if you 431 00:26:13,080 --> 00:26:16,720 Speaker 1: want to be in areas that are safer, nicer, better 432 00:26:16,880 --> 00:26:20,680 Speaker 1: school um that real estate is expensive. Of the government's 433 00:26:20,720 --> 00:26:22,639 Speaker 1: also been talking about, you know, how to how to 434 00:26:23,440 --> 00:26:27,680 Speaker 1: change or you know, influence real estate prices so that 435 00:26:27,680 --> 00:26:30,119 Speaker 1: that it's not so expensive for for for people to 436 00:26:30,160 --> 00:26:32,399 Speaker 1: have access to good school districts and so on and 437 00:26:32,440 --> 00:26:35,760 Speaker 1: so forth. But I don't think that will solve everything, 438 00:26:35,840 --> 00:26:38,440 Speaker 1: right d These are on the margin issues, but they're 439 00:26:38,480 --> 00:26:41,040 Speaker 1: not all the totality of the issues. Um So, I 440 00:26:41,080 --> 00:26:44,359 Speaker 1: think the regulators and then the policymakers in China are 441 00:26:44,480 --> 00:26:48,520 Speaker 1: going to find it frustrating that they're they're they're trying 442 00:26:48,520 --> 00:26:52,200 Speaker 1: to do so much, but the the the out the outputs, 443 00:26:52,200 --> 00:26:54,920 Speaker 1: the outcomes may not may not actually be as meaningful. 444 00:26:54,960 --> 00:26:59,840 Speaker 1: Let's say they're hoping to achieve play some romantic music 445 00:27:00,000 --> 00:27:03,720 Speaker 1: over loudspeakers or something. I don't know, I don't know. Yeah, 446 00:27:03,840 --> 00:27:09,040 Speaker 1: we'll see what stand clear. Of the craziest things we 447 00:27:09,080 --> 00:27:12,719 Speaker 1: saw in markets this week, well, With that said, guys, 448 00:27:13,200 --> 00:27:16,600 Speaker 1: I can't let you go without partaking in our tradition. 449 00:27:16,680 --> 00:27:18,520 Speaker 1: And Jason, I hope they weren't about this, but we 450 00:27:18,560 --> 00:27:21,119 Speaker 1: have a tradition here. We we end each show with 451 00:27:21,160 --> 00:27:24,840 Speaker 1: the craziest things we saw in markets during the week. Yeah, 452 00:27:24,840 --> 00:27:28,040 Speaker 1: I have a feeling you got something crazy for us. 453 00:27:28,280 --> 00:27:31,959 Speaker 1: I want to start with you. Yes, it's actually related 454 00:27:32,000 --> 00:27:36,480 Speaker 1: to the three child policy. Um So Punjuhuan City, which 455 00:27:36,520 --> 00:27:38,879 Speaker 1: is the city of one point two million people in 456 00:27:39,040 --> 00:27:44,080 Speaker 1: southwest China's Trains province, is giving each couple each baby 457 00:27:44,200 --> 00:27:48,359 Speaker 1: actually um essentially fine hundred you one, which is eighty 458 00:27:48,440 --> 00:27:52,600 Speaker 1: dollars and months for families that have um second child 459 00:27:52,760 --> 00:27:55,919 Speaker 1: or third child until other babies ten three. So this 460 00:27:56,040 --> 00:27:58,200 Speaker 1: is the first time. It's first of China city offer 461 00:27:58,320 --> 00:28:01,439 Speaker 1: cash for people to have more baby East. It's probably 462 00:28:01,840 --> 00:28:05,480 Speaker 1: pretty standards in the western countries to have child subsidies, 463 00:28:05,720 --> 00:28:09,080 Speaker 1: but not long ago. China. At one point China policy 464 00:28:09,200 --> 00:28:12,080 Speaker 1: and into certainly attended into two China policy, and now 465 00:28:12,119 --> 00:28:14,520 Speaker 1: we have a three side of policy and people are 466 00:28:14,520 --> 00:28:18,720 Speaker 1: offering cash to have people who have more babies. I 467 00:28:18,760 --> 00:28:22,000 Speaker 1: think that's pretty crazy. That's that that will work better 468 00:28:22,000 --> 00:28:26,040 Speaker 1: than my romantic music idea. I think that's how you 469 00:28:26,080 --> 00:28:29,680 Speaker 1: do it. I just offer cash. Yeah, how about you, Jason? 470 00:28:29,720 --> 00:28:33,280 Speaker 1: Have you seen anything crazy in markets this week? Well? 471 00:28:33,320 --> 00:28:37,679 Speaker 1: I think the craziest thing I saw was the massive rebound, 472 00:28:38,200 --> 00:28:41,960 Speaker 1: uh you know in the educational sector. Well, essentially, if 473 00:28:41,960 --> 00:28:44,920 Speaker 1: you read the policy announcement, these firms should be worth 474 00:28:45,000 --> 00:28:48,360 Speaker 1: pretty dying close to zero. But somehow there's still people 475 00:28:48,400 --> 00:28:50,320 Speaker 1: who are willing to jump in and catch a falling 476 00:28:50,400 --> 00:28:54,320 Speaker 1: knife hoping there is a rebound, right, And so I 477 00:28:54,320 --> 00:28:56,640 Speaker 1: found that pretty crazy, right, you know, people are not 478 00:28:56,680 --> 00:28:59,320 Speaker 1: doing their homeboorking. That is pretty good. Yeah, I mean 479 00:28:59,360 --> 00:29:02,080 Speaker 1: I wonder how long it's gonna take to sort of, 480 00:29:02,440 --> 00:29:06,080 Speaker 1: you know, remove the profitability from these companies. It's that 481 00:29:06,240 --> 00:29:08,160 Speaker 1: is crazy though that Yeah, you're right though, why would 482 00:29:08,200 --> 00:29:11,040 Speaker 1: they why would anyone pay anything for them? At this point? 483 00:29:11,040 --> 00:29:14,400 Speaker 1: If literally that the regulator says, like the firm you're buying, 484 00:29:14,560 --> 00:29:17,040 Speaker 1: we are going to make them into nonprofits, meaning they're 485 00:29:17,040 --> 00:29:20,160 Speaker 1: not going to pay a dividend, right, they're not allowed 486 00:29:20,160 --> 00:29:22,560 Speaker 1: to make up profit. But somehow you still want to 487 00:29:22,560 --> 00:29:25,320 Speaker 1: become a shareholder. Yeah, that's just good. That's a good one. 488 00:29:25,560 --> 00:29:27,520 Speaker 1: That's a crazy one. All right, I'll give you guys 489 00:29:27,560 --> 00:29:31,000 Speaker 1: mine I uh listeners know, I like the alternative assets, 490 00:29:31,000 --> 00:29:33,680 Speaker 1: and the more alternative the asset class, the better. So 491 00:29:34,160 --> 00:29:36,600 Speaker 1: I bring to an auction that's going to happen next 492 00:29:36,640 --> 00:29:42,040 Speaker 1: month in Great Britain. They're auctioning off one slice of 493 00:29:42,120 --> 00:29:46,160 Speaker 1: wedding cake from the wedding of Prince Charles and Princess 494 00:29:46,240 --> 00:29:52,520 Speaker 1: Diana forty years ago. Someone's still available. Yes, yes, someone 495 00:29:52,640 --> 00:29:55,800 Speaker 1: saved one piece of wedding cake. I'll just and I 496 00:29:55,800 --> 00:29:57,080 Speaker 1: hate to say it to you, guys. We have to 497 00:29:57,080 --> 00:29:59,040 Speaker 1: play prices right with me now here, I'm gonna ask 498 00:29:59,080 --> 00:30:01,840 Speaker 1: you each what you think the expected bid is for 499 00:30:01,880 --> 00:30:05,080 Speaker 1: this piece of wedding cake. Put those quad skills to work, Jason, 500 00:30:05,120 --> 00:30:09,360 Speaker 1: and let you know here it's ice came from. They're 501 00:30:09,360 --> 00:30:12,080 Speaker 1: actually twenty three and as far as supply goes, there 502 00:30:12,080 --> 00:30:15,200 Speaker 1: were twenty three official wedding cakes for that wedding. Pretty 503 00:30:15,200 --> 00:30:21,560 Speaker 1: amazing happened almost forty years ago, exactly. Uh July one 504 00:30:22,440 --> 00:30:25,280 Speaker 1: features a Marza pan bass and a sugar on like 505 00:30:25,480 --> 00:30:29,360 Speaker 1: coat of arms colored in gold, red, blue and silver 506 00:30:29,480 --> 00:30:32,959 Speaker 1: on top. I was given to Uh, one of the 507 00:30:33,000 --> 00:30:36,160 Speaker 1: household servants of the Queen Mother and she kept this 508 00:30:36,200 --> 00:30:40,120 Speaker 1: thing for all these years. Um, so it hasn't got 509 00:30:40,120 --> 00:30:42,160 Speaker 1: on auction yet, so who knows what the actual price 510 00:30:42,160 --> 00:30:44,640 Speaker 1: will be? But what do you guys think to two 511 00:30:44,640 --> 00:30:49,360 Speaker 1: part question again start with you what do you think 512 00:30:49,680 --> 00:30:52,960 Speaker 1: that the expected bid is for this in British pounds? 513 00:30:53,160 --> 00:30:55,360 Speaker 1: And second part is would you take a taste of 514 00:30:55,360 --> 00:30:59,840 Speaker 1: this wedding cake? I was trying to say ten bitcoins, 515 00:30:59,840 --> 00:31:02,080 Speaker 1: and so we are talking about alternate to that assets, 516 00:31:02,760 --> 00:31:06,760 Speaker 1: but we can't do the conversion to the British pounds. No, 517 00:31:07,200 --> 00:31:09,160 Speaker 1: and no, I won't take a bite on the bit 518 00:31:09,560 --> 00:31:13,280 Speaker 1: to the cake. Smart man. Ten bitcoins? That that puts 519 00:31:13,280 --> 00:31:19,080 Speaker 1: it up the posts thirty thousand British pounds. Jason, how 520 00:31:19,080 --> 00:31:23,440 Speaker 1: about you? You're going over under that? Oh? I well, 521 00:31:23,440 --> 00:31:26,080 Speaker 1: I think he's a ten bitcoin so that that makes 522 00:31:26,120 --> 00:31:32,080 Speaker 1: about three three hundred of thousand pounds. You know, being 523 00:31:32,160 --> 00:31:35,480 Speaker 1: being from Boston where I I track, you know Tom 524 00:31:35,520 --> 00:31:39,120 Speaker 1: Brady's progression, even though he's moved on to a different city. 525 00:31:39,120 --> 00:31:44,240 Speaker 1: Now I know his his rookie his rookie card fetch 526 00:31:44,320 --> 00:31:47,240 Speaker 1: something like one point three million. Uh last time I 527 00:31:47,280 --> 00:31:50,160 Speaker 1: got auction. Uh. And then it's it's not the only 528 00:31:50,400 --> 00:31:52,400 Speaker 1: car left in the world unlike this, this piece of 529 00:31:52,400 --> 00:31:54,080 Speaker 1: wedding cake. Right, so I gotta I gotta say the 530 00:31:54,080 --> 00:31:57,480 Speaker 1: wedding cakes gotta fit something like let's just say one 531 00:31:57,600 --> 00:32:03,000 Speaker 1: point five million pounds. How's that? And when it's that expensive, 532 00:32:03,040 --> 00:32:09,040 Speaker 1: I'm not going to take a bite. I will say 533 00:32:09,120 --> 00:32:13,560 Speaker 1: it's Dominic Winter auctioneers. I imagine they would like both 534 00:32:13,640 --> 00:32:15,760 Speaker 1: of you two to be bidding in this auction, because 535 00:32:16,360 --> 00:32:20,280 Speaker 1: not about this up is the surprising low value they think. 536 00:32:20,320 --> 00:32:24,240 Speaker 1: They're thinking only five pounds. I think it's gonna go 537 00:32:24,520 --> 00:32:26,400 Speaker 1: We're gonna have to check back on this in August 538 00:32:26,400 --> 00:32:28,560 Speaker 1: when it actually goes up, because I think it's gonna 539 00:32:28,600 --> 00:32:30,880 Speaker 1: go for a lot more than five five pounds. I 540 00:32:30,920 --> 00:32:34,840 Speaker 1: might buy the thing myself. I think they're way off, 541 00:32:34,880 --> 00:32:36,760 Speaker 1: and they're expected bid on that. Maybe that's a way 542 00:32:36,800 --> 00:32:39,320 Speaker 1: to drum up interest and get get people up bidding 543 00:32:39,320 --> 00:32:42,160 Speaker 1: on it. But a similar piece of cake sold in 544 00:32:42,360 --> 00:32:48,280 Speaker 1: nineteen I think, um, right after Princess Diana died for 545 00:32:48,360 --> 00:32:52,719 Speaker 1: like a hundred and fifty thousand pounds, So depreciating asset. 546 00:32:52,800 --> 00:32:56,960 Speaker 1: Wedding wedding takes are appreciating asset. The only question I 547 00:32:57,240 --> 00:33:01,400 Speaker 1: have is how do they'll send that cake. How do 548 00:33:01,440 --> 00:33:05,880 Speaker 1: you very fine from the wedding they well, they have 549 00:33:06,080 --> 00:33:08,200 Speaker 1: it comes with some kind of documentation. I'd have to 550 00:33:08,200 --> 00:33:11,480 Speaker 1: look up the story, but there is um the the 551 00:33:11,560 --> 00:33:14,200 Speaker 1: servant who collected it. It was given to her. I 552 00:33:14,200 --> 00:33:16,240 Speaker 1: think i's just leftovers, like here, you want some cake? 553 00:33:16,280 --> 00:33:18,200 Speaker 1: And she knew that this might be worth a few bucks, 554 00:33:18,240 --> 00:33:20,680 Speaker 1: so she tucked it away and she wrote on top 555 00:33:20,720 --> 00:33:22,920 Speaker 1: of it, wedding cake from Princess Diinas. So there's some 556 00:33:23,000 --> 00:33:26,720 Speaker 1: kind of These auction houses are good at authenticating this stuff. 557 00:33:26,720 --> 00:33:29,480 Speaker 1: I'm not I'm not sure how, but I it would 558 00:33:29,480 --> 00:33:31,280 Speaker 1: be a pretty good scam to have a forty year 559 00:33:31,280 --> 00:33:36,440 Speaker 1: old piece of wedding cake was not Actually they somehow 560 00:33:36,480 --> 00:33:38,160 Speaker 1: turned us into an n f T. It might be 561 00:33:38,240 --> 00:33:42,120 Speaker 1: what even more right and NC is someone actually eating 562 00:33:42,160 --> 00:33:44,840 Speaker 1: the thing? And then you saw that for that? Might 563 00:33:44,880 --> 00:33:46,520 Speaker 1: that you might get your million and a half for that, 564 00:33:46,680 --> 00:33:49,200 Speaker 1: But we'll see. I'm gonna check back because I think 565 00:33:49,240 --> 00:33:51,160 Speaker 1: you guys were in the right direction. I think it's 566 00:33:51,200 --> 00:33:54,880 Speaker 1: gonna go a lot more than what they expected, right, 567 00:33:55,000 --> 00:33:58,240 Speaker 1: because people pay crazy money for crazy things. Is that's 568 00:33:58,680 --> 00:34:01,760 Speaker 1: that's the lesson of this segment. I think, so but 569 00:34:01,880 --> 00:34:06,160 Speaker 1: guys really enjoyed this conversation. Jason, Sue and yees She. 570 00:34:06,400 --> 00:34:08,359 Speaker 1: Thank you both for your time. Jason, I know it's 571 00:34:08,360 --> 00:34:10,160 Speaker 1: earlier where you are, so thank you for getting up 572 00:34:10,200 --> 00:34:13,239 Speaker 1: early for us. And uh, absolutely and get back to 573 00:34:13,280 --> 00:34:15,320 Speaker 1: the flight deck there of the U S S Enterprise 574 00:34:24,920 --> 00:34:26,880 Speaker 1: What Goes Up. 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What Goes Up is produced 584 00:34:54,800 --> 00:34:58,399 Speaker 1: by Tofur forheas the head of Bloomberg Podcasts is Francesco Levi. 585 00:34:59,160 --> 00:35:00,759 Speaker 1: Thanks for listening, See you next time.