WEBVTT - China's Crackdown On Crypto Continues 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.840 at Bloomberg dot com slash podcast. Now, I want to 0:00:21.840 --> 0:00:24.479 go over to John wu. He is the president of 0:00:24.520 --> 0:00:28.520 Ava Labs. We talked to him before about the crypto world, 0:00:28.720 --> 0:00:32.280 and John is great to have you back on this morning. Um, 0:00:32.400 --> 0:00:35.600 we were almost caught off guard by a p d 0:00:35.760 --> 0:00:40.920 o C headline saying that all bitcoin, all crypto transactions 0:00:40.960 --> 0:00:45.400 in China will henceforth be considered illegal. What exactly does 0:00:45.440 --> 0:00:48.600 that mean? Everything having to do with crypto except for 0:00:48.680 --> 0:00:52.320 just holding it is against the law, Hi, Paulhaim Matt. 0:00:52.720 --> 0:00:57.480 So it is not clear how they define transactions, and 0:00:57.960 --> 0:01:01.280 a lot of this is actually left as a signal 0:01:01.440 --> 0:01:04.440 so that people realize that they don't like this stuff 0:01:04.760 --> 0:01:07.280 and that you should be wary as opposed to having 0:01:07.319 --> 0:01:10.720 specifics out. But really this is nothing new from what 0:01:10.760 --> 0:01:12.680 they've been doing all year in terms of what they 0:01:12.720 --> 0:01:15.480 were doing with technology and um what they've done in 0:01:15.520 --> 0:01:20.760 crypto Basically in thirteen they restricted banks from handling bitcoin, 0:01:21.319 --> 0:01:25.800 seventeen they banned exchanges. Nineteen and twenty they were even 0:01:25.840 --> 0:01:29.400 the same thing to bitcoin mining. What they are against 0:01:29.959 --> 0:01:34.679 is basically losing control of their monetary system and worried 0:01:34.720 --> 0:01:38.520 about capital flight. All right, John, how should we really 0:01:38.640 --> 0:01:43.119 step back and think about this here? Uh? Anytime China, 0:01:43.400 --> 0:01:48.120 you know, makes a move, it has global repercussions. What 0:01:48.160 --> 0:01:49.400 do you think I know we have a lot of 0:01:49.400 --> 0:01:52.320 time to really ponder this, but what do you think 0:01:52.360 --> 0:01:55.920 this means for just the crypto space in general? If 0:01:56.000 --> 0:01:59.040 China is going to be perhaps way more restricted than 0:01:59.080 --> 0:02:03.960 we thought, there's a lot of resilience in the crypto space. 0:02:04.320 --> 0:02:08.160 When they were banning China was banning mining UM in 0:02:08.520 --> 0:02:12.840 nineteen and two thousand twenty, their mining in China was 0:02:12.840 --> 0:02:16.560 about seventy s the global mining for bitcoin it is 0:02:16.600 --> 0:02:19.959 down to but nothing is slowed down because a lot 0:02:20.040 --> 0:02:23.200 of that is now in West Texas. So the US 0:02:23.320 --> 0:02:27.560 we have benefited from some of their authoritative actions, if 0:02:27.560 --> 0:02:32.600 you will, and even locally, individual China nationalists have found 0:02:32.639 --> 0:02:36.120 ways to ultimately be involved in the space whether as 0:02:36.160 --> 0:02:40.960 a developer or as an investor in various uh you 0:02:41.000 --> 0:02:45.919 know tokens. They've all of every resilient users and developers 0:02:45.960 --> 0:02:49.840 and miners ultimately find some way to do it properly 0:02:50.400 --> 0:02:53.919 and hopefully we in the US can continue to benefit 0:02:54.240 --> 0:02:58.680 from their harsh rules. What is the problem? I mean, 0:02:58.720 --> 0:03:01.720 are they concerned that too many people are going to 0:03:01.840 --> 0:03:05.840 speculate and may um, you know, lose their savings. Are 0:03:05.880 --> 0:03:08.919 the concerned that wealthy people are going to use crypto 0:03:09.120 --> 0:03:12.000 to move assets out of the country. Why is China 0:03:12.120 --> 0:03:18.160 so veriantly anti anti bitcoin, anti crypto? So that's the 0:03:18.520 --> 0:03:21.600 last point is correct in my opinion, they're worried about 0:03:21.639 --> 0:03:25.919 capital flight. Don't forget they actually love the technology there. 0:03:25.960 --> 0:03:29.400 I mean, people forget there is a Chinese central bank 0:03:29.480 --> 0:03:34.160 back digital you want that, There are CBD you know wallets, 0:03:34.440 --> 0:03:37.600 central bank wallets that they have air drop and distributed 0:03:37.840 --> 0:03:42.200 the digital you want to individuals. They love the technology. 0:03:42.280 --> 0:03:44.560 They are just against loose and control of the monitoring 0:03:44.600 --> 0:03:49.360 system and giving up too much freedom. Well, I mean, Johnny, 0:03:49.440 --> 0:03:51.920 are you should chinying to be concerned that they will 0:03:51.960 --> 0:03:54.440 lose their ability if they're not really part of the 0:03:54.440 --> 0:03:58.280 crypto market, they might lose their positioning in there. They 0:03:58.320 --> 0:04:01.920 should and we should, um. And this is why you know, 0:04:02.000 --> 0:04:10.440 decentralization is so powerful in this world of blockchain and crypto. Investors, developers, 0:04:11.080 --> 0:04:14.440 users are all able to find a way to continue 0:04:14.480 --> 0:04:17.880 to grow the ecosystem and the ecosystems at the point 0:04:17.920 --> 0:04:21.560 now where it's not just about capital in the sense 0:04:21.600 --> 0:04:24.240 of bitcoin, the way China is looking at bitcoin and 0:04:24.560 --> 0:04:28.240 as a possible digital flight mechanism or store value or 0:04:28.320 --> 0:04:32.599 medium exchange. There's actually real utility now, utility in terms 0:04:32.640 --> 0:04:35.560 of a decentralized finance system. I've been on talking to 0:04:35.560 --> 0:04:38.400 you guys about n f t s and it's utilization 0:04:38.440 --> 0:04:43.800 of not just cryptal native people, but also traditional people, artists, entertainers, 0:04:44.160 --> 0:04:47.680 and financial services professionals. Interesting, all right, John, It was 0:04:47.720 --> 0:04:49.760 great to get you on. Here are lots of news 0:04:49.760 --> 0:04:52.320 shaping this space right now. John Wu, President of Ava 0:04:52.400 --> 0:04:59.040 Labs based in New York. We have been talking a 0:04:59.080 --> 0:05:02.520 little bit about the infrastructure build, the possibility that that 0:05:02.560 --> 0:05:05.640 gets past or maybe watered down a little bit. Let's 0:05:05.640 --> 0:05:10.520 bring in someone who um relies on knowledge of this 0:05:10.640 --> 0:05:13.880 for his living. Josh Diets, a senior portfolio manager over 0:05:13.920 --> 0:05:18.720 at Aberdeen Standard Investments and he is specifically the manager 0:05:18.839 --> 0:05:23.080 of the Aberdeen Standard Global Infrastructure Income Fund. So, Josh, 0:05:23.120 --> 0:05:26.680 what do you know about where we stand in regards 0:05:26.720 --> 0:05:32.640 to Biden's spending plans. It seems like right now, um, 0:05:32.680 --> 0:05:34.680 you know, a lot of discussions take place next week 0:05:34.760 --> 0:05:36.480 on it, and they're trying to group the three point 0:05:36.520 --> 0:05:39.960 five trillion new plan with the one point to trillion 0:05:40.120 --> 0:05:42.720 true infrastructure plan. Now, we view at one point two 0:05:42.760 --> 0:05:47.880 trillion as a true infrastructure plan with spending on important 0:05:47.920 --> 0:05:51.400 infrastructure assets for the future, such as the power grid 0:05:51.880 --> 0:05:55.360 for broadband. The three point five trillion we don't really 0:05:55.400 --> 0:05:58.840 view as infrastructure, and that's really to me much more 0:05:59.520 --> 0:06:04.039 uh typical on spending package. Right then infrastructure? All right, 0:06:04.120 --> 0:06:05.960 josh I, I personally went down to d C and 0:06:05.960 --> 0:06:08.240 made my pitch for the gateway plan that is so 0:06:08.360 --> 0:06:12.440 critical for the metro New York area. So beside the gateway, 0:06:12.480 --> 0:06:16.239 what are some of the interesting areas you're looking at 0:06:16.279 --> 0:06:21.320 in this bill? Again, it's the new tunnel underneath the 0:06:21.360 --> 0:06:25.640 Hudson River to replace the one year old railway tunnels 0:06:25.680 --> 0:06:28.800 for Amtrak and New Jersey Transit. You know, like people 0:06:28.800 --> 0:06:30.559 a day and go through. So they built like three 0:06:30.720 --> 0:06:33.000 in the last hundred years, don't I don't know. I 0:06:33.000 --> 0:06:34.760 don't know. It's New Jersey, New York. That's all you 0:06:34.800 --> 0:06:39.000 need to know. So, um, Josh, So beside my beloved gateway, 0:06:39.040 --> 0:06:41.000 what else is in this bill that you're focusing on? 0:06:42.040 --> 0:06:44.919 So there's two areas that we think are prying for 0:06:45.000 --> 0:06:47.680 growth and are happening with or without the bill, but 0:06:48.080 --> 0:06:51.280 it's just really a catalyst. On one is a sixty 0:06:51.640 --> 0:06:54.560 billion dollars for the power grid, and that we need 0:06:54.600 --> 0:06:58.240 an updated power grid because of all the renewable energy 0:06:58.240 --> 0:07:01.240 we're starting to produce here in the United States. Last year, 0:07:01.279 --> 0:07:04.600 for example, we spent about twenty five billion dollars just 0:07:04.640 --> 0:07:08.200 on wind alone. Solar makes up about three of our 0:07:08.320 --> 0:07:13.440 US production that could grow at about so we need 0:07:13.520 --> 0:07:17.160 an updated power grid for the transmission lines to transmit 0:07:17.200 --> 0:07:20.960 that energy produced. The other part is for the broadband. 0:07:20.960 --> 0:07:24.880 Were spent about sixty billion dollars extremely important to make 0:07:24.920 --> 0:07:28.520 sure that rural areas, low income communities have access to 0:07:29.120 --> 0:07:31.920 four and then five j So we we really believe 0:07:32.000 --> 0:07:34.920 that's the two areas of growth for infrastructure, one on 0:07:34.960 --> 0:07:39.040 the renewable side and two in towers four five G. 0:07:40.320 --> 0:07:42.560 So who makes money off this or what what are 0:07:42.560 --> 0:07:45.160 you investing in UM? Who do you think the winners 0:07:45.200 --> 0:07:48.880 are going to be? The winners are to be clear 0:07:49.000 --> 0:07:53.120 as day for when we talk about the transformation from 0:07:53.120 --> 0:07:55.800 four to G to five G, we should invest in 0:07:55.840 --> 0:08:00.480 the towers. We've seen percent data growth. It's only going 0:08:00.520 --> 0:08:03.120 to accelerate when we have five G. Just as a 0:08:03.240 --> 0:08:06.480 data point, if we get to autonomous vehicles and they're 0:08:06.480 --> 0:08:10.120 gonna generate as much data per hour as the equivalent 0:08:10.160 --> 0:08:13.880 of an iPhones used over three thousand years. So we 0:08:13.920 --> 0:08:19.640 need UM more dense, more dense towers globally. So we 0:08:19.760 --> 0:08:22.480 like companies like ant here in the U S and 0:08:22.560 --> 0:08:25.800 c c I in Europe. We like companies like some big, 0:08:25.840 --> 0:08:30.040 big beneficiaries going forward up for five G, and we 0:08:30.080 --> 0:08:32.280 think we're in the early stages of that growth. It's 0:08:32.280 --> 0:08:34.960 gonna last a decade or so. In order to identify 0:08:35.080 --> 0:08:37.560 the towers. The other side, as I mentioned on the 0:08:37.600 --> 0:08:40.840 renewable energy, we're spending more and more, not only here 0:08:40.880 --> 0:08:43.800 in the United States but also in Europe. In Europe 0:08:44.360 --> 0:08:48.200 they spend fifty billion dollars on building wind last year. 0:08:48.520 --> 0:08:51.800 That's only going to accelebrate, accelerate. If you look at 0:08:51.800 --> 0:08:55.160 the EU, they proposed a fit for fifty five, which 0:08:55.200 --> 0:08:59.840 basically means that there are two thousand in the emissions 0:08:59.840 --> 0:09:07.360 to arguts are going from. Beneficiaries of that are next 0:09:07.480 --> 0:09:10.920 terror here in the United States, are WU in Europe, 0:09:10.960 --> 0:09:13.360 Email in Europe, so we think there's a lot of 0:09:13.400 --> 0:09:17.360 beneficiaries for that. Matt I worked on those I p 0:09:17.480 --> 0:09:19.280 O s of Crown Castle in American Tower and those 0:09:19.280 --> 0:09:23.280 are which is really awesome. Uh, companies, awesome businesses. Man, 0:09:23.320 --> 0:09:25.200 It's just a nice It's almost like a real estate 0:09:25.200 --> 0:09:28.080 play and the driver is five G and just increasing 0:09:28.160 --> 0:09:31.960 use of data. So how is the sector performed in general? Josh, 0:09:32.000 --> 0:09:34.679 I'm just talking infrastructure. How is your sector over the 0:09:34.760 --> 0:09:39.640 last several years performed. So we have one fund that's 0:09:39.640 --> 0:09:42.120 been around for thirteen years, a s g I, and 0:09:42.160 --> 0:09:47.800 that's performed extremely well, roughly twelve and it returns. Infrastructure 0:09:47.880 --> 0:09:50.120 is fairly wide. So when you ask how the infrastructure 0:09:50.160 --> 0:09:53.640 sector has performed as a fund, it's performed well. There's 0:09:53.679 --> 0:09:57.480 different sectors within infrastructure. There's the communications sector, as we mentioned, 0:09:57.480 --> 0:10:00.800 the towers have done extremely well. Renewable energy plays within 0:10:00.920 --> 0:10:04.680 utilities have done well in the in the transport fector 0:10:04.760 --> 0:10:08.280 that's not done as well because, especially because of COVID, 0:10:08.559 --> 0:10:11.200 when we've seen people not flyings we own airports and 0:10:11.320 --> 0:10:16.480 roads globally, that hasn't performed as well recently. Hey, Josh, 0:10:16.480 --> 0:10:19.600 thanks so much for joining us. Really appreciated great timing 0:10:19.600 --> 0:10:22.240 here with this infrastructure bill winding its way through Congress. 0:10:22.280 --> 0:10:24.760 To kind of get your thoughts here, Josh Deed's senior 0:10:24.800 --> 0:10:29.559 portfolio manager for Aberdeen Standard Investments. He specific portfolio manager 0:10:29.600 --> 0:10:33.080 the Aberdeen Standard Global Infrastructure Income Fund, so he knows 0:10:33.080 --> 0:10:36.400 a thing or two about what's happening there on infrastructure. 0:10:36.840 --> 0:10:40.000 And again, that bill winding its way through Congress, a 0:10:40.040 --> 0:10:42.800 lot of pieces surrounding whether it's gonna be tied to 0:10:42.840 --> 0:10:46.120 the Greater Spending bill uh, and that may slow it down, 0:10:46.160 --> 0:10:49.880 but the expectation is that bill is bipartisan support and 0:10:50.000 --> 0:10:55.520 we'll get through well. The whole concept of a globalization, 0:10:55.559 --> 0:10:58.280 at least my mind, seems to maybe have lost some 0:10:58.440 --> 0:11:02.199 momentum over the last were five years as many countries 0:11:02.600 --> 0:11:07.000 look more inward. Uh. Maybe perhaps led by the United 0:11:07.040 --> 0:11:10.160 States itself. Let's check in with Tracy McMillan, head of 0:11:10.160 --> 0:11:14.760 Global asset Allocation Strategy for the Wells Fargo Investment Institute. 0:11:14.760 --> 0:11:20.280 They've got a new report out that looks at globalization. So, Tracy, again, 0:11:20.360 --> 0:11:22.480 maybe it's just me, but it feels like it's lost 0:11:22.520 --> 0:11:25.840 a little bit of momentum. You know, America first, all 0:11:25.880 --> 0:11:28.280 that kind of thing, lots of nationalism across Europe and 0:11:28.280 --> 0:11:32.240 Brexit Brexit, thank you very much. Uh what do you think, Tracy? 0:11:32.320 --> 0:11:36.360 What did you find? Yes? And thank you for having 0:11:36.360 --> 0:11:41.720 me today. So what we found was that globalization is 0:11:42.160 --> 0:11:46.960 definitely changing, but we don't think that it's ending. You know. 0:11:47.040 --> 0:11:49.920 We we don't think that all production of goods for 0:11:50.040 --> 0:11:54.000 US consumers will return to the United States, and we 0:11:54.040 --> 0:11:58.080 don't think that all good ideas um are located within 0:11:58.520 --> 0:12:02.840 uh certain geographic border. But we do think that countries 0:12:03.240 --> 0:12:06.240 are going to continue to trade and the cost of 0:12:06.360 --> 0:12:10.240 that trade, though, it's going to include more than just 0:12:10.360 --> 0:12:13.760 the pure cost of the goods. So in in other words, 0:12:13.800 --> 0:12:16.439 you know, some of those um, some of those things 0:12:16.480 --> 0:12:22.559 that are blocking globalism, populist sentiment, separatist movements, internet control, 0:12:23.520 --> 0:12:26.360 media censorship, you know, some of the things you're alluding 0:12:26.440 --> 0:12:30.240 to their are are definitely going to add costs to 0:12:30.480 --> 0:12:34.920 globalization as we know it. I mean, the President of 0:12:34.960 --> 0:12:38.680 the United States, Great Britain. These are things that we're 0:12:38.720 --> 0:12:41.560 block globalization as well, right, But now you can add 0:12:41.600 --> 0:12:46.400 supply chain issues. Are aren't more companies trying to bring 0:12:47.240 --> 0:12:51.000 their production home or make it local to where they 0:12:51.040 --> 0:12:55.480 sell their goods? Yeah, you're you're exactly right about that. 0:12:55.600 --> 0:13:00.640 Supply chains are definitely evolving. And you know the admented 0:13:00.920 --> 0:13:04.440 supply chains that we've grown accustomed to, you know, those 0:13:04.600 --> 0:13:08.480 that are across a lot of different low wage producers 0:13:08.559 --> 0:13:14.040 um production centers, those are becoming more concentrated. We think, 0:13:14.160 --> 0:13:16.600 we think they are going to be more high tech 0:13:16.920 --> 0:13:21.079 and more regionalized. And we think a great example of 0:13:21.080 --> 0:13:25.240 that is clothing. So you think about how uh, you know, 0:13:25.320 --> 0:13:28.640 the fibers used to be put together in material and 0:13:28.679 --> 0:13:33.000 a certain group of countries, and then that fabric would 0:13:33.040 --> 0:13:36.960 be sent to China, China would construct the garment, and 0:13:37.000 --> 0:13:39.080 then it would be sent to the United States. And 0:13:39.440 --> 0:13:43.839 so now we think that those supply chains um that 0:13:43.960 --> 0:13:48.320 created vulnerabilities and dependencies are are going to start to 0:13:48.840 --> 0:13:53.680 coalesce around the major consumption centers of the world and 0:13:53.760 --> 0:13:58.840 that's going to be the US and China in India. So, Tracy, 0:13:58.880 --> 0:14:02.120 how much does it's It seems really over the last 0:14:02.120 --> 0:14:05.280 twenty five years that globalization has just been a just 0:14:05.440 --> 0:14:09.880 a given and it's technology. It's just how businesses are evolving, 0:14:09.920 --> 0:14:13.839 are becoming more interconnected. Can that be stopped? I mean, 0:14:13.960 --> 0:14:17.480 it just seems like it's just a natural evolution, even 0:14:17.520 --> 0:14:20.200 if for a period of time the United States doesn't 0:14:20.240 --> 0:14:23.160 want to lead, or even if the UK doesn't want 0:14:23.160 --> 0:14:25.240 to be part of a bigger EU, is it something 0:14:25.320 --> 0:14:30.640 that's just natural? Yeah? So, um, you know, one of 0:14:30.680 --> 0:14:33.800 the things we observed is that trade of goods as 0:14:33.840 --> 0:14:37.320 a percent of global GDP has been falling. So if 0:14:37.360 --> 0:14:40.120 you think about you know, manufactured goods, that's what most 0:14:40.160 --> 0:14:43.240 of us think about when we think about globalization, but 0:14:43.400 --> 0:14:46.680 that has indeed been falling as a percent of GDP 0:14:47.840 --> 0:14:51.520 since two thousand and eight, and that's as those production 0:14:51.600 --> 0:14:55.560 facilities do start to locate closer to the end market. 0:14:56.320 --> 0:15:00.640 But the interesting thing here is that digital technology are 0:15:00.880 --> 0:15:06.160 spurring future trade growth and that's mostly in services. And 0:15:06.480 --> 0:15:13.400 the services you know, include things um that are you know, 0:15:13.520 --> 0:15:16.640 considered anything as a service, so you know, we're looking 0:15:16.640 --> 0:15:20.920 at things like UH people and companies that purchase capital 0:15:21.000 --> 0:15:25.640 resources and then loan out. The UM productive capacity of 0:15:25.680 --> 0:15:30.760 those UH capital resources. Trade in services is twenty three 0:15:30.800 --> 0:15:34.200 times higher since Steen seventy six, and it's doubling every 0:15:34.240 --> 0:15:39.440 five years. So by some estimates are that services could 0:15:39.440 --> 0:15:44.640 represent fifty per cent of globalized trade. So it's really 0:15:44.640 --> 0:15:47.400 all about digital then, I mean not all, but the 0:15:47.440 --> 0:15:50.480 lion share of what you see as the future of 0:15:50.480 --> 0:15:58.120 globalization depends on the Internet. A lot of it does, yes, UM, 0:15:58.400 --> 0:16:04.400 so it will depend on information technology. We think consumer 0:16:04.440 --> 0:16:09.280 discretionary companies and healthcare companies are also poised well to 0:16:09.400 --> 0:16:14.720 benefit UM from this evolving trend. And we think that 0:16:14.880 --> 0:16:19.160 US companies are poised well to benefit from this UM. 0:16:19.240 --> 0:16:26.920 You know, US companies benefit from UM having different differentiation UM. 0:16:27.160 --> 0:16:33.200 They are also very innovative, and they are prepared for 0:16:33.240 --> 0:16:36.680 a world where we think that there could be big 0:16:36.720 --> 0:16:41.160 shifts and production centers and they'll need to have a 0:16:41.240 --> 0:16:46.800 deeper knowledge of local consumers. So that's where that digitalization 0:16:47.520 --> 0:16:53.360 information that instantaneously crosses borders all come into play. How 0:16:53.360 --> 0:16:56.200 about China, I'm sorry, how about India? Because it seems 0:16:56.240 --> 0:16:59.280 like China perhaps isn't necessarily going to be as welcoming 0:16:59.320 --> 0:17:02.320 as perhaps some business leader's thought over the last decade 0:17:02.400 --> 0:17:07.439 or so. Is India the next big thing? So we 0:17:07.560 --> 0:17:10.120 do think that India is going to play a significant 0:17:10.160 --> 0:17:14.159 role in globalization going forward. They already have a competitive 0:17:14.280 --> 0:17:17.520 advantage and services, whereas you know, China may have that 0:17:17.600 --> 0:17:21.639 competitive vantage in production. We think that India has the 0:17:21.640 --> 0:17:25.640 competitive advantage and services and will continue to have that. 0:17:26.320 --> 0:17:29.960 Um We also think that because the population in India 0:17:30.200 --> 0:17:34.640 is young and growing, and they also have a growing 0:17:34.720 --> 0:17:39.240 middle class, that there are quite a bit uh of 0:17:39.560 --> 0:17:47.600 investment opportunities associated with India. Alright, very cool stuff, really 0:17:47.600 --> 0:17:50.920 cool report. Tracy McMillan, thanks so much for your time. 0:17:51.240 --> 0:17:54.760 Tracy McMillan is the head of Global Asset Allocation Strategy 0:17:55.119 --> 0:17:58.040 at the Wells Fargo Investment Institute, and she's talking to 0:17:58.160 --> 0:18:04.400 us about the Investment Institutes Globalization report, which is I mean, 0:18:04.440 --> 0:18:09.040 it's suffered I think to some extent under President Trump 0:18:09.080 --> 0:18:13.200 and and Brexit and the nationalism that we see across Europe. 0:18:13.240 --> 0:18:18.520 But then again, obviously because of the coronavirus pandemic, maybe 0:18:18.560 --> 0:18:23.040 even worse because of the supply chains that were tripped 0:18:23.119 --> 0:18:31.760 up amidst lockdowns globally. This is Bloomberg. Kind of a 0:18:31.800 --> 0:18:34.040 mixed morning here, but coming off of some of those 0:18:34.400 --> 0:18:37.200 early trading session lows, let's get a sense of where 0:18:37.200 --> 0:18:40.400 we are here when this market tremendous amount of volatility 0:18:40.680 --> 0:18:44.200 this week. Welcome Dave Harden. He's a CEO and chief 0:18:44.240 --> 0:18:47.199 investment officer of Summit Global Investments. They have approximately one 0:18:47.240 --> 0:18:50.760 point eight billion dollars in assets under management, So Dave, 0:18:50.960 --> 0:18:52.720 kind of a wild week here. We started off with 0:18:52.760 --> 0:18:55.280 a big, big sell off, maybe a little contagion coming 0:18:55.280 --> 0:18:58.040 out of China some of those fears. But boy, this 0:18:58.200 --> 0:19:00.959 market has bounced back and the by the dip folks 0:19:01.080 --> 0:19:03.600 seem to have won the day. What do you make 0:19:03.640 --> 0:19:07.800 of this week in this market? Well, thanks for having me, 0:19:07.840 --> 0:19:10.000 glad to be here, and it has been a very 0:19:10.320 --> 0:19:14.760 volatile week, right, and I think the volatility continues, and 0:19:14.840 --> 0:19:18.320 so yes, by the dip one. But the story is 0:19:18.359 --> 0:19:21.760 not written yet. It's we're not over yet, and you 0:19:21.800 --> 0:19:24.679 saw the wall of worry just getting higher now with 0:19:24.760 --> 0:19:27.440 China and the crackdown in crypto. Um, I don't think 0:19:27.440 --> 0:19:32.040 the evergreendly is over yet. The technically, conditions are extremely 0:19:32.119 --> 0:19:35.600 high right now, um, and so I think there's a 0:19:35.600 --> 0:19:38.359 lot more volatility to come. So if you're holding a 0:19:38.440 --> 0:19:41.760 stock and it's not where you wanted to have it, 0:19:42.040 --> 0:19:45.240 just wait a little while a might get there right 0:19:45.680 --> 0:19:49.120 total um, which is by the way, I guess in China, 0:19:49.119 --> 0:19:51.920 if you're holding bigcoin, that's your only choice right now 0:19:52.440 --> 0:19:55.399 because you can't make any transactions in terms of the 0:19:55.440 --> 0:20:00.600 evergrand issue. What are your big concerns? Well, contagious going 0:20:00.680 --> 0:20:04.400 to HSBC, going to other stocks that have the exposure 0:20:04.480 --> 0:20:07.639 over into China. Um, you know, nights down today, but 0:20:07.680 --> 0:20:10.320 it's really not the same situation. It's the Vietnam issue. 0:20:10.440 --> 0:20:14.200 So what I'm worried about is the contagion of other 0:20:14.359 --> 0:20:17.879 issues coming into stocks that have no play whatsoever in 0:20:17.920 --> 0:20:22.880 that area. That's what I'm worried about. So all right, Dave, 0:20:22.960 --> 0:20:24.560 where you know, there's a lot of people that are, 0:20:24.560 --> 0:20:27.600 in fact, we're concerned about this market kind of you know, 0:20:27.640 --> 0:20:31.520 whether it's evaluation concern, whether it's just a frothiness concern 0:20:31.560 --> 0:20:34.679 when they look at certain segments of the market. And 0:20:34.720 --> 0:20:37.719 we saw that on Monday, perhaps in some of that trading, 0:20:37.760 --> 0:20:41.440 certainly early in the day, where do you feel comfortable 0:20:41.680 --> 0:20:46.239 deploying capital? Uh in markets today? It just feels like, 0:20:46.280 --> 0:20:49.560 even with the tenure at one point four percent and change, 0:20:50.040 --> 0:20:52.600 that's not the place where are you thinking about your allocation? 0:20:53.880 --> 0:20:56.280 Well that's a really good point. And it's funny how 0:20:56.359 --> 0:21:00.960 finally investors are carrying about risk. No one cared about 0:21:01.040 --> 0:21:03.000 risk for a long time. And so when you think 0:21:03.000 --> 0:21:06.320 of risk management and deploying capital right now, you know, 0:21:06.400 --> 0:21:07.880 some of the things that come right in my mind 0:21:08.000 --> 0:21:11.280 is like Costco. So Costco here's a very fine stock. 0:21:11.400 --> 0:21:13.760 Everybody knows about it, or if not, they're members of 0:21:13.760 --> 0:21:16.880 the stock that you know, members of themselves and shopping there. 0:21:17.200 --> 0:21:19.720 But it's a stock that's done tremendously well. If you 0:21:19.760 --> 0:21:23.000 look over the last year, it's basically been the same 0:21:23.040 --> 0:21:25.879 return as the SMP five hundreds, but it's a significant 0:21:25.920 --> 0:21:28.840 less risk. We're talking about a sixty eight beta, so 0:21:28.960 --> 0:21:33.080 a lot less volatility, good equity returns, and moving forward, 0:21:33.680 --> 0:21:37.359 I would say outperforms the market going forward. Domestic, so 0:21:37.400 --> 0:21:40.720 we we know the domestic situation extremely well. With COVID. 0:21:41.119 --> 0:21:44.240 You think emerging markets, Vietnam, you know, China, we don't 0:21:44.240 --> 0:21:47.800 know those situations as well. So you understand this very 0:21:47.880 --> 0:21:50.840 very well. You shop there. This is a very good 0:21:50.880 --> 0:21:57.680 stock to own. Right now, what about consumer um? We've 0:21:57.680 --> 0:22:00.679 seen consumer confidence fall drastic. I'm not saying that's going 0:22:00.720 --> 0:22:03.560 to hit cost code necessarily, maybe even a boon to 0:22:04.640 --> 0:22:07.639 a company like Costco. But what what about the effects 0:22:07.680 --> 0:22:11.320 on the economy. Are you concerned? Well, yes we are, 0:22:11.680 --> 0:22:14.679 but I think that people there's still money that's being spent, 0:22:15.359 --> 0:22:18.040 and that money that's being spent I think has to 0:22:18.080 --> 0:22:21.600 be smarter. I think it has to go online, and 0:22:21.680 --> 0:22:25.600 so they have great numbers um. I think their online 0:22:25.600 --> 0:22:28.880 presence continues to grow. They have a loyal membership as well. 0:22:29.040 --> 0:22:31.280 So I see the same thing out of Target. Even 0:22:31.320 --> 0:22:35.840 though worried about retail, yes, worried again about consumer confidence, yes, 0:22:36.000 --> 0:22:38.639 but they have a history of beating their earnings, earnings 0:22:38.680 --> 0:22:41.640 top and bottom line. The back to school looked good. 0:22:42.560 --> 0:22:45.000 I really think that. You know, that's another good place 0:22:45.040 --> 0:22:48.000 to put money. You understand the story. Don't have to 0:22:48.000 --> 0:22:52.840 worry about unforeseen risks and downside risks. Just watch COVID 0:22:53.280 --> 0:22:55.760 and continue to do what you do, which is the 0:22:55.800 --> 0:22:59.240 consumer shops David. In these two faces, I feel comfortable. 0:22:59.600 --> 0:23:02.000 A couple places you seem less comfortable, and that would 0:23:02.000 --> 0:23:04.439 be kind of what I would call kind of reopening trades. 0:23:04.480 --> 0:23:07.960 You have cells on Southwest and Zoom. Is that just 0:23:08.040 --> 0:23:10.880 a call that, hey, Delta is here and you better 0:23:10.880 --> 0:23:14.119 put the brakes on the reopening trade. Not really. I 0:23:14.160 --> 0:23:16.520 think there's some more of that in Zoom. I think 0:23:16.520 --> 0:23:19.359 it continues to struggle with growth because of the EU 0:23:19.440 --> 0:23:23.879 opening trade, but more competitors come into play. Microsoft teams 0:23:23.960 --> 0:23:28.360 is is used heavily and is rolling out new webinar 0:23:28.400 --> 0:23:31.080 features and rolling out new conference call features, and so 0:23:31.359 --> 0:23:33.960 I see go to Connect and Google and other players 0:23:33.960 --> 0:23:37.520 there that I don't see them that gross story. Everybody 0:23:37.640 --> 0:23:40.680 was buying them for really turning out and let's face it, 0:23:40.680 --> 0:23:43.119 it's underperformed the S and P FI Earth in this 0:23:43.160 --> 0:23:45.679 case the Russell too. But you know the index if 0:23:45.720 --> 0:23:49.199 you will, by about over the last one year, and 0:23:49.240 --> 0:23:51.520 I don't see that bouncing back. That's not the right time. 0:23:51.880 --> 0:23:54.440 Southwest a little bit different. Yeah, there's a COVID story 0:23:54.480 --> 0:23:57.560 with all airlines, and all airlines have struggled over the 0:23:57.600 --> 0:24:00.000 last three months. Recently, over the last maybe two or three, 0:24:00.000 --> 0:24:02.840 eek is doing okay. But Southwest here you have an 0:24:02.880 --> 0:24:07.800 abrupt quick from senior management. Uh, you have some business 0:24:07.800 --> 0:24:12.320 travel extreme going on that's not coming back. So I 0:24:12.359 --> 0:24:15.040 think that over the long term, I'm not negative on 0:24:15.080 --> 0:24:17.480 airlines are reopening there as much as I would say 0:24:17.560 --> 0:24:23.119 Southwest with the downside risk, I'd rather own Delta. I 0:24:23.160 --> 0:24:28.080 actually traveled for business recently. It was the worst experience 0:24:28.160 --> 0:24:31.639 I have ever had. I never want to do it again, 0:24:32.080 --> 0:24:34.119 but you're probably gonna have to. I will do it 0:24:34.200 --> 0:24:36.960 one more time when I moved back to New York. 0:24:37.800 --> 0:24:41.000 Until airlines just generally improved, Like, is there any mode 0:24:41.000 --> 0:24:44.240 of transportation that's worse than an airline? I would rather 0:24:44.320 --> 0:24:48.680 ride this subway than an airline. Just subway rocks. Yeah, 0:24:48.920 --> 0:24:51.080 especially I love the four five all right, David, You've 0:24:51.119 --> 0:24:53.159 got to buy on on Exon here? Is this a 0:24:53.320 --> 0:24:55.680 dividend play because I mean again looking at the ten 0:24:55.760 --> 0:24:57.959 year one point four or five. Yes, that's higher than 0:24:57.960 --> 0:25:01.240 what we've seen recently, but still a very low yield 0:25:01.440 --> 0:25:04.800