WEBVTT - The Rise of Digital Banking 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 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.759 at Bloomberg dot com slash podcast. Let's get to Lovely 0:00:22.760 --> 0:00:25.919 in studio now. We've been talking about UM having her on, 0:00:26.000 --> 0:00:27.880 and we're excited to get you on Lovely. And you're 0:00:27.920 --> 0:00:32.080 the CEO of BM Technologies. It's among the largest digital 0:00:32.080 --> 0:00:35.640 banking platforms in the US. I wonder how much can 0:00:35.680 --> 0:00:38.480 be done, And I was thinking about this when coin 0:00:38.560 --> 0:00:42.680 Base went public, or at least had their had their 0:00:43.960 --> 0:00:46.600 direct listing last week. It'd be great if I could 0:00:47.159 --> 0:00:50.960 have my bank accounts somewhere, trade things like you know, 0:00:51.000 --> 0:00:56.160 digital currencies, stocks and bonds, and also somehow input my 0:00:57.000 --> 0:01:02.400 employment details so that my tack UH filings would be automatic. 0:01:02.560 --> 0:01:05.240 Can Can something like that ever happened with with an 0:01:05.240 --> 0:01:09.560 online with a digital banking platform? Yes? Absolutely, thanks so 0:01:09.640 --> 0:01:11.880 much for having me Um. I think a couple of 0:01:11.920 --> 0:01:14.839 years ago we saw a lot of exuberance and excitement 0:01:14.840 --> 0:01:17.880 about fintech. Spintech, we're really coming in and saying, hey, 0:01:17.920 --> 0:01:20.720 banking your your old school, you're not doing this in 0:01:20.720 --> 0:01:24.479 a consumer friendly way. We can come and, uh, really 0:01:24.920 --> 0:01:28.440 disrupt what's happening and provide a way better customer experience. 0:01:28.560 --> 0:01:31.560 And many um you know players came in, did that 0:01:31.880 --> 0:01:36.399 robin Hood coin based, you know, so Fi, chime et cetera, 0:01:36.760 --> 0:01:40.640 b M Technologies, etcetera. But what a lot of them 0:01:40.720 --> 0:01:44.039 started doing was really unbundling financial services where it was 0:01:44.080 --> 0:01:47.319 one product at a time. Someone's gonna do personal loans 0:01:47.400 --> 0:01:50.280 better than what exists today. Someone's gonna do you know, 0:01:50.360 --> 0:01:53.480 investing better than what exists today. Someone's gonna do banking 0:01:53.800 --> 0:01:56.960 better than what exists today. But it was all separate 0:01:57.360 --> 0:02:00.120 rather than you know, really creating a fulls of a 0:02:00.200 --> 0:02:03.840 digital banking platform. And what is now happening is the 0:02:03.840 --> 0:02:09.000 realization that we can create a technology platform where all 0:02:09.040 --> 0:02:12.160 of this is weep together. Maybe that institution doesn't even 0:02:12.200 --> 0:02:15.400 have to provide all of those services. They can plug 0:02:15.440 --> 0:02:18.680 in through a PI. Is the best in breeds from investing, 0:02:18.800 --> 0:02:22.520 from crypto trading, from banking for advice, um, and that 0:02:22.680 --> 0:02:25.919 is what we're seeing and that can absolutely happen. I'd 0:02:25.919 --> 0:02:27.519 love to get your thoughts, lovely in a kind of 0:02:27.600 --> 0:02:30.960 about how your business has been impacted, how it has 0:02:31.120 --> 0:02:33.959 changed over the past fourteen months with this pandemic. You know, 0:02:34.000 --> 0:02:36.440 we're hearing the obviously lots of stories that people are 0:02:36.440 --> 0:02:39.400 doing more and more of their banking digitally. How has 0:02:39.400 --> 0:02:43.960 it impacted your business? Absolutely? I think in general, the 0:02:44.040 --> 0:02:48.800 pandemic force and acceleration of digitization, the use of technology 0:02:49.320 --> 0:02:54.320 forcing all segments, all generations to begin using technology for 0:02:54.360 --> 0:02:58.920 all sorts of things, grocery and e commerce, uh and 0:02:59.040 --> 0:03:01.400 banking being one of them. And so as it relates 0:03:01.400 --> 0:03:04.320 to our business, we did see exponential growth last year 0:03:04.680 --> 0:03:07.959 in our new business lines. We saw si plus growth 0:03:07.960 --> 0:03:13.160 and deposits, we saw two plus growth and spend over 0:03:13.240 --> 0:03:15.760 the year, and so overall we saw a lot of 0:03:15.800 --> 0:03:18.680 consumers logging into their app, a lot more, using a 0:03:18.680 --> 0:03:22.480 lot of the features, the functionalities, the saving and budgeting tools, 0:03:22.880 --> 0:03:27.960 and obviously increased usage spend balances across the board. Does 0:03:27.960 --> 0:03:31.480 it matter what, um what platform people use or I 0:03:31.800 --> 0:03:35.680 mean like iOS versus Android, Are you agnostic or do 0:03:35.720 --> 0:03:40.520 you head for that? Absolutely agnostic? We have to move towards. 0:03:41.000 --> 0:03:43.240 You know, if if people want to have a truly 0:03:43.280 --> 0:03:46.640 better banking experience, you can't create barriers like that. And 0:03:46.720 --> 0:03:51.520 so not only iOS, Android, but really across different channels, 0:03:51.520 --> 0:03:55.120 whether that's your phone, whether that's you know, online mobile, 0:03:55.160 --> 0:03:58.200 whether that's being able to access through Alexa. You know, 0:03:58.240 --> 0:04:00.720 we're coming into a world where we use and access 0:04:00.760 --> 0:04:02.920 many different devices, and we should be able to do 0:04:02.960 --> 0:04:06.360 banking and everything else that's important to us through various 0:04:06.400 --> 0:04:09.280 different channels and devices. And I think that's the direction 0:04:09.320 --> 0:04:12.640 people are heading. And so as b M Technologies, BM 0:04:12.680 --> 0:04:15.400 Technologies lovely and love to get a sense of kind 0:04:15.400 --> 0:04:18.360 of where what's the kind of environment for your company 0:04:18.400 --> 0:04:22.400 and where do you see growth going forward? Yeah, so, 0:04:22.480 --> 0:04:24.280 as you had mentioned in the beginning, we are one 0:04:24.279 --> 0:04:27.680 of the largest digital banking platforms in the country today 0:04:27.760 --> 0:04:30.640 and we have over two million account holders and and 0:04:30.680 --> 0:04:33.920 we're growing quite rapidly. We did go public earlier this 0:04:34.000 --> 0:04:37.280 year through his fact vehicle where our tickers b M, 0:04:37.360 --> 0:04:40.960 t x UM and you know, for for us, it's 0:04:41.000 --> 0:04:43.680 it's really about how do you continue to expand the 0:04:43.720 --> 0:04:47.360 digital banking experience in the most profitable, high growth way 0:04:47.400 --> 0:04:50.760 while still addressing customer pain points, and so a lot 0:04:50.800 --> 0:04:53.640 of players out there are taking a director consumer approach. 0:04:53.960 --> 0:04:57.080 Bank Mobile is actually taking a bat data the approach 0:04:57.600 --> 0:05:00.800 and something called banking as a service. Our belief is 0:05:00.839 --> 0:05:04.640 that every single customer in this world, really, you know, 0:05:04.960 --> 0:05:08.720 would benefit from having access to financial services, and that 0:05:09.040 --> 0:05:12.440 banks shouldn't be the only one to have the ability 0:05:12.560 --> 0:05:16.120 to offer this service. You know, every business, every employer, 0:05:16.560 --> 0:05:20.520 every government entity should be able to offer banking. And 0:05:20.600 --> 0:05:22.559 that is where you get into the strategy of banking 0:05:22.640 --> 0:05:25.720 as a service. And that is uh the vertical that 0:05:25.880 --> 0:05:29.080 that we are most invested in creating and helping non 0:05:29.160 --> 0:05:32.279 banks get into the banking business with fully branded banking 0:05:32.360 --> 0:05:35.680 services to be able to create more loyalty, more engagement 0:05:35.800 --> 0:05:39.040 with their customers and with their employees. Lovely and thank 0:05:39.080 --> 0:05:41.400 you so much for joining us. They really appreciate that. 0:05:41.480 --> 0:05:44.960 A really interesting story, a growth story here on the 0:05:45.000 --> 0:05:49.039 consumer banking front as digital plays a bigger and bigger 0:05:49.160 --> 0:05:52.360 role in consumer banking. Lovely and sid Do chair CEO 0:05:52.440 --> 0:05:56.160 and founder of BM Technologies. Kind of a fascinating story there. 0:05:56.200 --> 0:05:59.080 I know, just speaking for myself, I'm doing much more 0:05:59.320 --> 0:06:02.239 of my day to day consumer banking on the digital 0:06:02.320 --> 0:06:04.920 platform that I did prior to the pandemic, and I 0:06:04.960 --> 0:06:06.960 think we're hearing from a lot of financial institutions that 0:06:07.400 --> 0:06:11.039 consumers across the border having a similar experience. So lots 0:06:11.080 --> 0:06:18.240 of opportunity for technological innovation. Matt let's switch gears talk 0:06:18.279 --> 0:06:21.200 about the fixed income markets. No better person to do 0:06:21.360 --> 0:06:24.960 that with than r J. Gallows, senior portfolio manager for 0:06:25.080 --> 0:06:27.440 fixed income is also ahead of the missile bond group 0:06:27.720 --> 0:06:30.000 at Federated Hermes. R J. Thanks so much for joining 0:06:30.080 --> 0:06:32.440 us once again. Here I'm looking at the ten year 0:06:32.960 --> 0:06:36.720 uh one point five eight percent. It doesn't scream inflation 0:06:36.800 --> 0:06:40.160 to me. Give us your thoughts here on the fixed 0:06:40.200 --> 0:06:44.160 income market and maybe some concerns creeping in about inflation. Yeah, well, 0:06:44.160 --> 0:06:46.960 good morning, thanks for having me back. Um. You know, 0:06:47.000 --> 0:06:49.039 if you just look at an interday charge, it wasn't 0:06:49.080 --> 0:06:51.400 all that terribly long ago, and the tenure peaked out 0:06:51.480 --> 0:06:54.280 on March thirtieth, I think it was or one around 0:06:54.320 --> 0:06:57.280 one seventy seven, so you know we've traced give a 0:06:57.320 --> 0:07:01.039 take twenty basis points since then. Um, at the time, 0:07:01.120 --> 0:07:04.240 the market was very focused on the reflation trade, let's 0:07:04.279 --> 0:07:07.480 call it, maybe even the inflation trade um and I 0:07:07.600 --> 0:07:10.840 think we still believe that that we're going to have 0:07:11.080 --> 0:07:14.400 a massive rate of growth as we come off the 0:07:14.800 --> 0:07:17.560 you know, difficulty economic period related to COVID that we've 0:07:17.600 --> 0:07:20.600 been through. And we do feel inflation is biased upwards. 0:07:20.640 --> 0:07:22.280 We've seen it in the year of a year numbers. 0:07:22.680 --> 0:07:24.360 I just think the market might have gotten a little 0:07:24.360 --> 0:07:26.280 ahead of itself. Maybe at the end of March. If 0:07:26.320 --> 0:07:28.480 you look on a year to day basis, you know 0:07:28.600 --> 0:07:31.679 that the ten year real yield is up about thirty 0:07:31.720 --> 0:07:34.240 basis point thirty two basis points call it, and then 0:07:34.280 --> 0:07:37.160 the break even on top of that is of about 0:07:37.200 --> 0:07:40.280 thirty six. So on the air real yields are up, 0:07:40.560 --> 0:07:43.240 they're still negatives very low. Probably we'll go up further, 0:07:43.680 --> 0:07:46.239 and inflation break evens are well north of two percent, 0:07:46.320 --> 0:07:48.560 which the ft has to like. We think that the 0:07:48.720 --> 0:07:51.400 retraceman yields we've seen so far is some of the 0:07:51.480 --> 0:07:53.280 fear came out of the market, but the trajectory is 0:07:53.360 --> 0:07:57.120 still upwards, and nominal yields, real yields break evens maybe 0:07:57.120 --> 0:07:59.960 a little less so because inflation is starting to perk up, 0:08:00.000 --> 0:08:02.520 than these break evens are pricing in well north of two. 0:08:03.080 --> 0:08:04.800 So we don't think that this most recent trade is 0:08:04.840 --> 0:08:07.600 time to get long bonds. We still like short. And 0:08:08.520 --> 0:08:10.960 on inflation, I mean, you see huge growth coming up, 0:08:11.680 --> 0:08:15.040 do we have huge inflation? And does it stick? I me, 0:08:15.080 --> 0:08:17.720 it's it's it's the key question. I think that everyone 0:08:17.840 --> 0:08:20.520 understands base effect. You know, the price level doesn't fall 0:08:20.640 --> 0:08:23.360 all that much in American history what it did last springs, 0:08:23.400 --> 0:08:26.040 the COVID shock set in so as we laugh that 0:08:26.160 --> 0:08:28.120 by twelve months the year of year numbers are high. 0:08:28.640 --> 0:08:31.000 But does it stick? And that's the key question. And 0:08:31.080 --> 0:08:34.320 everybody's debating. And I would say internally at our at 0:08:34.360 --> 0:08:37.120 our shop at Federated Herme's, we believe that the inflation 0:08:37.160 --> 0:08:40.000 trajectory is upwards. Now there's some people and I would 0:08:40.000 --> 0:08:42.720 say it's almost like a demographic difference. People who were 0:08:42.800 --> 0:08:45.599 in this business in the seventies and eighties, Uh, you know, 0:08:45.720 --> 0:08:47.480 they feel like we need another Paul volcra I mean, 0:08:47.480 --> 0:08:50.160 they're they're they're much more concerned the inflation is not 0:08:50.240 --> 0:08:53.400 only gonna stick, but accelerate. People who've been in this business, 0:08:53.559 --> 0:08:55.839 you know, called from the mid nineties on, you know, 0:08:56.320 --> 0:08:58.600 seem to be like, I'm not so worried, and then 0:08:58.640 --> 0:09:01.520 the younger people didn't worry about aation at all because 0:09:01.520 --> 0:09:03.800 they've never really seen it. Um Our view is is 0:09:03.840 --> 0:09:06.199 sort of in the middle. I think that inflation is 0:09:06.240 --> 0:09:08.040 going to have a tail wind. I don't think it's 0:09:08.040 --> 0:09:10.160 going to become unhinged. I don't think we're talking about three, 0:09:10.280 --> 0:09:12.760 four and five percent rates of inflation by any means. 0:09:12.840 --> 0:09:14.840 But I do think the Fed will have some success, 0:09:14.880 --> 0:09:18.640 some satisfaction after decades of being disappointed by inflation exceeding 0:09:18.720 --> 0:09:21.800 two percent. Their framework opens the door for them to 0:09:21.960 --> 0:09:25.240 react as opposed to be preemptive. That's a massive difference 0:09:25.280 --> 0:09:28.559 from Paul Bulker and the decades that followed him. All Right, So, 0:09:28.800 --> 0:09:31.640 if we're going to have inflation on any meaningful scale 0:09:31.760 --> 0:09:36.320 r J, presumably it has to come from wage inflation 0:09:36.400 --> 0:09:38.040 as opposed to some of the other commodities that we're 0:09:38.040 --> 0:09:39.600 going to see a base effect over the next couple 0:09:39.600 --> 0:09:42.120 of quarters and some of the reported numbers. So do 0:09:42.240 --> 0:09:46.400 you foresee presumably higher wage inflation in this economy of 0:09:46.400 --> 0:09:50.000 the next twelve eighty months. Well, I think that workers 0:09:50.720 --> 0:09:53.440 are going to be incentimized to come back in into 0:09:53.480 --> 0:09:55.680 the workplace, and some of that is going to involve 0:09:56.400 --> 0:09:59.040 enticing them with higher rates of pay. You know that 0:09:59.120 --> 0:10:02.720 translates to allery and wage increases, especially in the areas 0:10:02.760 --> 0:10:05.280 that were the most severely COVID effect of like travel 0:10:05.440 --> 0:10:08.880 and hospitality, etcetera. UM. I think over time, yeah, you 0:10:08.960 --> 0:10:13.199 will be seeing some higher rates of nominal pay increase. UM. Again, 0:10:13.240 --> 0:10:16.960 I'm not in the camp that it becomes an unhinged problem. 0:10:17.679 --> 0:10:19.719 I believe. I actually believe the FED when they say 0:10:19.760 --> 0:10:22.040 we know what to do if inflation gets too high, 0:10:22.440 --> 0:10:24.480 I think we all know what to do. They would tighten, 0:10:24.640 --> 0:10:26.920 and they would tighten in fifty to seventy five bases 0:10:26.960 --> 0:10:30.000 point increment, something that hasn't been done in like forever. 0:10:30.480 --> 0:10:32.160 And I think if they did, what do you think 0:10:32.160 --> 0:10:35.320 financial conditions would do? They would roll over. People would 0:10:35.320 --> 0:10:39.120 be very nervous if the FED suddenly was spiking real 0:10:39.240 --> 0:10:42.000 rates to Dallas inflation, and that's the tool they know works. 0:10:42.520 --> 0:10:45.080 There has been an asymmetry in the Fed's toolkit. They 0:10:45.120 --> 0:10:47.439 can't seem to get inflation up. They know how to 0:10:47.520 --> 0:10:50.599 douase it, so they change their framework class August to 0:10:50.720 --> 0:10:53.599 becoming reactive let the inflation show up. It's called the 0:10:53.640 --> 0:10:55.920 bunker hill, you know, don't tighten city, see the whites 0:10:55.960 --> 0:10:59.600 of inflations eyes. That's the new new approach, very different 0:10:59.640 --> 0:11:03.079 than the re emptive forward looking uh tightenings that we 0:11:03.120 --> 0:11:05.480 saw in the past. Well and even then, don't tighten right. 0:11:05.520 --> 0:11:07.440 The idea is that inflation is just gonna run right 0:11:07.480 --> 0:11:10.760 by you and be gone. Yeah, I mean I think not. 0:11:10.960 --> 0:11:13.280 So their framework is what they want inflation to rise 0:11:13.320 --> 0:11:15.480 above two. They wanted to have signs that it's going 0:11:15.520 --> 0:11:18.480 to stay above two before they tightened. So what if 0:11:18.520 --> 0:11:20.400 it goes above two and it hits two and a half, 0:11:20.520 --> 0:11:22.240 and I think one can infer the two and a 0:11:22.280 --> 0:11:24.599 half would be fine from the FED standpoint. If it 0:11:24.679 --> 0:11:26.040 just stays there for a month or two it starts 0:11:26.080 --> 0:11:28.839 to roll back over then yeah, and then you do 0:11:28.960 --> 0:11:31.400 have a problem. Their framework doesn't produce the tightening that 0:11:31.480 --> 0:11:34.360 they want. Um. That's why I think they're in a 0:11:34.440 --> 0:11:36.559 sense pouring some men around their feet and say no, 0:11:36.720 --> 0:11:39.839 we're standing here and we want you the market to 0:11:40.000 --> 0:11:42.240 believe inflation goes up. Because inflation is a little bit 0:11:42.240 --> 0:11:44.560 of a game theory concept. Right. If if price setters, 0:11:44.600 --> 0:11:48.360 those who charge prices for goods and services believe inflation 0:11:48.440 --> 0:11:50.559 is rising, they put it into their pricing decisions and 0:11:50.640 --> 0:11:53.400 it becomes self fulfilling. So if the Fed can allow 0:11:53.520 --> 0:11:57.000 that to happen without becoming you know, boiling over and 0:11:57.080 --> 0:12:00.439 too hot, then you get the inflation you want and 0:12:00.679 --> 0:12:03.079 you hopefully don't have a boiling over economy. If you 0:12:03.160 --> 0:12:05.200 do have the boiling over economy on the inflation front, 0:12:05.240 --> 0:12:07.560 the FED knows what to do. So, I mean people 0:12:07.679 --> 0:12:09.560 might criticize me. I used to work there a long 0:12:09.640 --> 0:12:12.640 time ago, the New York. I think it's gonna work right. 0:12:12.720 --> 0:12:14.400 It's gonna take time, and rates are heading up in 0:12:14.400 --> 0:12:16.280 the meantime. All right, r J, thanks so much for 0:12:16.360 --> 0:12:18.559 joining us. As always, we appreciate your thoughts and input. 0:12:18.679 --> 0:12:22.320 R J. Gallows, Senior portfolio manager Fixed Income, is also 0:12:22.320 --> 0:12:25.080 ahead of the amunicipal bond group at Federated HERM. He's 0:12:25.080 --> 0:12:28.880 giving us his thoughts on the credit markets and on inflation. 0:12:29.000 --> 0:12:34.040 Not too concerned here in the near term, Matt, let's 0:12:34.080 --> 0:12:37.760 talk about semiconductors here. If there's definitely been an issue 0:12:37.840 --> 0:12:40.439 with supply of these chips on a global scale, and 0:12:40.480 --> 0:12:44.800 that's happening ripple effects across the global economy, I'm talking 0:12:44.840 --> 0:12:47.559 about you know, just take global autos for example, a 0:12:47.640 --> 0:12:49.520 lot of the manufacturers saying that they can't meet the 0:12:49.600 --> 0:12:52.679 production goals because there aren't enough chips. Let's get the 0:12:52.760 --> 0:12:54.839 latest on what this means and how this might play out. 0:12:55.280 --> 0:12:58.120 We do that with Rory Green, China, economists at T. S. 0:12:58.240 --> 0:13:01.040 Lombard based in Soul South Rio. Rory, thanks so much 0:13:01.040 --> 0:13:03.800 for joining us here. Give us a sense of what's 0:13:03.880 --> 0:13:07.640 going on in the semiconductor market right now. What's the 0:13:07.679 --> 0:13:13.400 state of the market. Yea, COVID nineteen has really brought 0:13:13.480 --> 0:13:17.480 forward an acceleration in a structural demand shift. So it's 0:13:17.480 --> 0:13:22.200 not just autos, We're talking about demands for consumer products, 0:13:22.480 --> 0:13:27.320 data centers, um, whole range of different academies of demand 0:13:27.480 --> 0:13:30.960 really spiking off of COVID nineteen and likely to stay 0:13:31.080 --> 0:13:34.319 high for you know, a few years now. This is 0:13:34.360 --> 0:13:36.800 a structural shift we're looking at, which were in the 0:13:36.960 --> 0:13:40.760 very early early days on How do you expect it 0:13:40.800 --> 0:13:44.160 to hit GDP growth? I mean mostly I think of 0:13:44.280 --> 0:13:46.040 the US and Europe, but I guess you're you're thinking 0:13:46.080 --> 0:13:49.719 about it more globally obviously, Yeah, that that's right, I 0:13:49.760 --> 0:13:52.120 think mainly, and the main hit is going to be 0:13:52.240 --> 0:13:55.720 it's a quarterly hit rather than a moment rather than 0:13:55.760 --> 0:13:57.880 a hit to annual growth rates. So it will be 0:13:57.960 --> 0:14:01.240 a q on hit for the big auto producing nations 0:14:01.400 --> 0:14:07.240 from Germany, Mexico, slight slide drag in China, but over 0:14:07.320 --> 0:14:10.000 the course of the year, it's still expecting that these 0:14:10.280 --> 0:14:15.000 um the production lost in Guan will be made up 0:14:15.080 --> 0:14:20.920 throughout the subsequent subsequent quarters. So it's rory. You know, 0:14:21.000 --> 0:14:23.600 I'm here. I'm here in Berlin, so I mean we 0:14:23.800 --> 0:14:28.560 produce a ton of cars and motorcycles in this country obviously, 0:14:29.360 --> 0:14:32.440 and throughout Europe there big plants, and in the US, 0:14:32.520 --> 0:14:33.800 I know where all the plants are. I don't know 0:14:33.920 --> 0:14:36.240 much about the production in China except that you know, 0:14:36.320 --> 0:14:39.320 Elon Musk is making Tesla's there and everybody wants to 0:14:39.400 --> 0:14:42.320 have everybody's got a joint venture there. How much auto 0:14:42.440 --> 0:14:48.280 manufacturing is there actually in the world's second biggest economy. Yeah, 0:14:48.320 --> 0:14:52.880 it's it's a big manufacturing, big chunk of the economy. 0:14:53.400 --> 0:14:55.400 And they say everyone's got a joint venture there, and 0:14:55.400 --> 0:14:58.640 then you've got a huge, huge chunk which is just 0:14:58.760 --> 0:15:02.960 purely for the domestic domestic market as well. So it's 0:15:03.160 --> 0:15:06.120 it's a lot a lot of cars being made um 0:15:06.640 --> 0:15:10.880 and a big employer as well, so the intent of 0:15:10.920 --> 0:15:13.040 the labor intensity is very high. So it compared to 0:15:13.120 --> 0:15:15.920 Germany where it's all automated, in China it's still a 0:15:15.960 --> 0:15:19.520 big employer, So it's it's a very important sector in China. 0:15:20.440 --> 0:15:22.880 Or as we think about the global you know, the 0:15:23.040 --> 0:15:26.320 chip market, it's I guess what we've learned maybe starting 0:15:26.360 --> 0:15:29.040 with President Trump and some of the teriffs and then 0:15:29.120 --> 0:15:32.000 with the pandemic, is that you know a lot of 0:15:32.040 --> 0:15:37.160 countries are thinking about reassuring some of their chip manufacturing capabilities. 0:15:37.240 --> 0:15:38.840 Do you expect that to be a real trend? Or 0:15:38.880 --> 0:15:43.680 we go to see more semiconductor manufacturing sites, say on 0:15:43.920 --> 0:15:49.640 continental Europe, in North America, certainly in North America, and 0:15:49.880 --> 0:15:54.440 Europe's plan is still a bit lacking because what we're 0:15:54.440 --> 0:15:57.160 talking about here is it needs a lot of political 0:15:57.240 --> 0:16:00.160 and financial capsule to be invested to get it's a 0:16:00.240 --> 0:16:04.960 reassuring process underway. Recording talking about ten twenty billion dollars 0:16:05.040 --> 0:16:09.800 to build just one fabricane one semi conductor fab So 0:16:10.200 --> 0:16:14.880 it needs a lot of investment, and Biden, I think, 0:16:15.280 --> 0:16:18.760 is putting this in place. Intel has made a very 0:16:19.800 --> 0:16:23.520 big effort, made a large bid to become the West, 0:16:23.640 --> 0:16:27.680 not just the US, the West geo politically secure manufacture, 0:16:28.240 --> 0:16:31.480 and he's decided to make investments accordingly. So I think 0:16:31.520 --> 0:16:34.880 we are going to see this trend increasing going ahead. 0:16:34.960 --> 0:16:38.360 But Europe still seems a bit called. Whether they really 0:16:38.400 --> 0:16:41.000 are going to stump up enough money to to get 0:16:41.080 --> 0:16:44.600 some some more fabs there, Who's going to be hard 0:16:44.640 --> 0:16:47.080 to see. I don't know how to compare the announcements, 0:16:47.080 --> 0:16:50.080 but the Intel announcement you mentioned seemed big at twenty 0:16:50.120 --> 0:16:53.400 billion until I heard Taiwan Semiconductor say they want to 0:16:53.520 --> 0:16:57.760 invest a hundred billion. Is that just spin or is 0:16:57.840 --> 0:17:03.720 that legitimate investment in that size? That's as a legitimate 0:17:03.760 --> 0:17:08.840 investment um that over the next couple of years, so 0:17:09.160 --> 0:17:12.320 probably learning about twenty five to thirty billion a year 0:17:12.400 --> 0:17:17.600 in CAPEX. So it's a large investment and very positive 0:17:17.640 --> 0:17:19.800 signs for the industry at the whole. And this is 0:17:19.920 --> 0:17:22.640 the reason that t SMC and Samsung to a lesser 0:17:22.720 --> 0:17:27.200 extent or ahead of the intail it consistently just pumping 0:17:27.280 --> 0:17:32.000 money into both capacity and R and D, and that's 0:17:32.160 --> 0:17:35.399 what's enabled them to build leading edge that they have 0:17:35.640 --> 0:17:37.520 now ahead of the intail and the rest of the 0:17:37.560 --> 0:17:41.720 world in chip production. Alright, just real quick for thirty seconds, 0:17:41.920 --> 0:17:44.520 is Taiwana career? Are they still the leaders in global 0:17:44.640 --> 0:17:49.119 chip manufacturing? Yes, they are still the leaders and I 0:17:49.200 --> 0:17:51.200 think likely to stay that way for the next step. 0:17:53.160 --> 0:17:56.440 All right, very interesting stuff indeed, and that um, that 0:17:56.600 --> 0:18:00.560 investment really does put the size of US and European 0:18:00.640 --> 0:18:03.440 investment to shame. And maybe Biden will turn that around. 0:18:03.520 --> 0:18:06.040 Roy Rory points out he's behind a big part of 0:18:06.080 --> 0:18:08.159 the reassuring. I don't know who would be behind it 0:18:08.240 --> 0:18:11.240 here though, Paul, because the EU can't even agree on, like, 0:18:11.400 --> 0:18:14.480 you know, buying vaccines. Yeah, so exactly. I don't know 0:18:14.520 --> 0:18:16.880 how that works on over there on your scale there, 0:18:16.960 --> 0:18:20.280 matt Um, you know, and it kind of just makes 0:18:20.359 --> 0:18:23.439 the Brexit folks, uh, I guess feel a little bit 0:18:23.680 --> 0:18:26.840 smarter indicated. Yeah, absolutely, It's got to be done really 0:18:26.880 --> 0:18:28.760 on a national level here, I think is the lesson 0:18:29.440 --> 0:18:32.040 being learned in any case, Rory Green great to spend 0:18:32.080 --> 0:18:35.480 some time with him. China economist at TS Lombard staying 0:18:35.560 --> 0:18:38.800 up late in Seoul where it is what eleven thirty 0:18:38.840 --> 0:18:46.200 at night. This is Bloomberg One of the key stories 0:18:46.600 --> 0:18:50.040 of today is around global soccer, and a group of 0:18:50.040 --> 0:18:54.080 the world's richest soccer clubs, including Manchester United and Real Madrid, 0:18:54.119 --> 0:18:58.399 announced plans for a European breakaway league starting in August. 0:18:58.440 --> 0:19:00.600 And that's got people all up an arms, not just 0:19:00.680 --> 0:19:02.280 in Europe but around the world, as it is a 0:19:02.400 --> 0:19:05.440 global sport. Let's get the latest. We would do that 0:19:05.480 --> 0:19:09.680 with David Hellier, Bloomberg Reporter, David, I don't have a 0:19:09.760 --> 0:19:11.840 dog in this fight here. I'm not a huge fan 0:19:12.000 --> 0:19:14.600 of European soccer. I follow it, but I'm not passionate 0:19:14.720 --> 0:19:18.000 like so many people are. To me, this just looks 0:19:18.080 --> 0:19:20.359 like a money grab. Talk to us about what's going 0:19:20.440 --> 0:19:25.800 on here. Yeah, I mean, I'd agree with you it 0:19:25.920 --> 0:19:28.840 is a money grab. It's um. But there's lots of 0:19:28.880 --> 0:19:33.879 different layers to um. Businesses do because they wanted they 0:19:33.920 --> 0:19:38.280 want to make money. Yeah, you've got a group of owners, 0:19:39.280 --> 0:19:44.439 three of whom are American Arsenal Liverpool and Memphister United. UM. 0:19:44.720 --> 0:19:47.920 And you could argue a sen Land is Elliott, the 0:19:48.000 --> 0:19:51.600 Hedge Fund UM and uh they for a long time, 0:19:51.680 --> 0:19:56.399 the owners in Europe have been thinking about, you know, 0:19:56.520 --> 0:19:58.840 how do they how do they play more often amongst 0:19:58.880 --> 0:20:01.840 the bigger clubs. Um. They get a bit frustrated when 0:20:01.920 --> 0:20:05.080 they have to go to play in Denmark or you know, 0:20:05.400 --> 0:20:09.680 uh in Croatia, Uh, some club that they've probably never 0:20:09.760 --> 0:20:12.640 heard of. Um. And they think that for an international 0:20:12.680 --> 0:20:16.840 audience would be much more attractive if they could always 0:20:16.880 --> 0:20:19.560 play against the top clubs. And so they put this 0:20:19.720 --> 0:20:22.800 thing together. They've been doing it behind the scenes for 0:20:23.200 --> 0:20:26.359 for a while now. I mean we've been reporting about 0:20:26.440 --> 0:20:30.359 it since about a year ago, UM, and they finally 0:20:30.400 --> 0:20:32.399 come out of me open. And so they've got twelve 0:20:33.000 --> 0:20:36.959 teams to twelves, you know, absolutely top teams in Europe 0:20:37.480 --> 0:20:42.239 to sign up to it. But it is horrified everybody, Politicians, fans, uh, 0:20:42.800 --> 0:20:47.080 you know, leagues, everybody. UM. You know some of the 0:20:48.440 --> 0:20:52.840 I haven't I haven't seen such an extreme reaction. Uh. 0:20:53.600 --> 0:20:56.679 You know all the years I've been reporting on soccer, 0:20:57.320 --> 0:21:01.400 shouldn't we I mean I tend to have initial reactions 0:21:01.480 --> 0:21:04.359 to things that are maybe conservative and based in my 0:21:04.480 --> 0:21:07.120 free market upbringing. Often I'm wrong when I look back 0:21:07.160 --> 0:21:11.000 at my initial opinion. But my first take, um, David, 0:21:11.160 --> 0:21:13.800 is that let the market decide. Why do we have 0:21:13.880 --> 0:21:16.960 all these politicians jumping in. You know, if people don't 0:21:17.040 --> 0:21:20.480 want to watch a Super League, Um, then they won't write, 0:21:20.920 --> 0:21:24.440 and then the business venture will fail and the Champions 0:21:24.560 --> 0:21:27.879 League will continue. Everything that they that they want is 0:21:27.920 --> 0:21:29.560 going to be there, and the stuff they don't want 0:21:29.600 --> 0:21:33.440 they just don't tune into. Yeah, I mean, you know 0:21:33.560 --> 0:21:36.240 that's a it's a very good point, um, I think. 0:21:36.400 --> 0:21:39.360 I mean, you know, the politicians are jumping in. You've 0:21:39.359 --> 0:21:43.640 got Boris Johnson, who's who's a conservative politician. Uh, he's 0:21:43.720 --> 0:21:46.200 jumping in because he knows that a lot of his constituency, 0:21:47.119 --> 0:21:49.800 a lot of fans up in arms, and you know, 0:21:50.040 --> 0:21:52.960 just he's doing it for his own purposes. I think 0:21:53.040 --> 0:21:56.119 he probably believes exactly what you just said. Um, so 0:21:56.760 --> 0:21:59.679 I don't think he's been truth to his his word. Really, um, 0:22:01.000 --> 0:22:05.680 why not let it just go? I suppose, um for me? Anyway, 0:22:06.280 --> 0:22:08.760 the bit I haven't really explained is that what they're 0:22:08.840 --> 0:22:14.720 doing is so alien to the competitive element in sport 0:22:14.800 --> 0:22:19.080 in in Europe. Is trying to set up a league 0:22:19.119 --> 0:22:23.280