1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the APAC region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,120 Speaker 2: Bloomberg Business App. 8 00:00:27,240 --> 00:00:29,720 Speaker 3: Joining us now in our studios right here in Hong 9 00:00:29,840 --> 00:00:33,559 Speaker 3: Kong is Ekaterina Bighosch, who is CIO of Core Investment 10 00:00:33,640 --> 00:00:37,880 Speaker 3: Asia ex Japan at Axa Investment Managers. Y Katerina, thanks 11 00:00:37,960 --> 00:00:40,160 Speaker 3: very much for coming in. So I had this little 12 00:00:40,200 --> 00:00:44,199 Speaker 3: tidbit here from Ming Boun newspaper this morning that the 13 00:00:44,280 --> 00:00:47,879 Speaker 3: number of transactions for the ten biggest residential estates in 14 00:00:47,920 --> 00:00:51,400 Speaker 3: Hong Kong jumped over the weekend, up some eighty seven 15 00:00:51,479 --> 00:00:54,760 Speaker 3: and a half percent from a week ago to the 16 00:00:54,840 --> 00:00:57,440 Speaker 3: highest level since the latter part of market. The reason 17 00:00:57,480 --> 00:00:59,280 Speaker 3: I bring this up is because it kind of raises 18 00:00:59,320 --> 00:01:01,880 Speaker 3: this notion as to whether or not what the FED 19 00:01:02,000 --> 00:01:04,560 Speaker 3: is about ready to do is fully priced into markets. 20 00:01:04,600 --> 00:01:06,760 Speaker 3: Everybody knows you're going to cut, or at least that's 21 00:01:06,800 --> 00:01:09,480 Speaker 3: the presumption. So I'm wondering whether or not it is 22 00:01:09,520 --> 00:01:11,760 Speaker 3: priced or when you see a story like this, you say, well, 23 00:01:11,760 --> 00:01:12,160 Speaker 3: maybe not. 24 00:01:13,360 --> 00:01:16,360 Speaker 4: Yeah, I think it's probably priced in, and I would 25 00:01:16,400 --> 00:01:19,679 Speaker 4: say is priced in more than the current environment is 26 00:01:19,720 --> 00:01:23,960 Speaker 4: showing us. I'd say probably the indications or the probabilities 27 00:01:23,959 --> 00:01:26,679 Speaker 4: of cuts or the magnitude of cuts around two hundred 28 00:01:26,680 --> 00:01:29,520 Speaker 4: basis points over the next twelve to eighteen months, which 29 00:01:29,520 --> 00:01:32,280 Speaker 4: I would say it is more indicative of a recessionary 30 00:01:32,360 --> 00:01:35,920 Speaker 4: environment rather than the current market environment. And as we've 31 00:01:35,959 --> 00:01:38,600 Speaker 4: heard earlier, you know, the resilience in the ESA economy 32 00:01:38,640 --> 00:01:42,520 Speaker 4: is still present in terms of overall consumption, the investment 33 00:01:42,640 --> 00:01:46,399 Speaker 4: is still recovering slowly by recovering. And then if you 34 00:01:46,400 --> 00:01:50,840 Speaker 4: look at Atlanta GDP, now GDP is the probability or 35 00:01:50,880 --> 00:01:54,800 Speaker 4: the estimates for US growth for next quarter is around 36 00:01:54,840 --> 00:01:57,760 Speaker 4: two point five. So I would say broadly US economy 37 00:01:57,760 --> 00:02:01,400 Speaker 4: is stay more resilient, it's not indicating a recessionary environment, 38 00:02:01,520 --> 00:02:04,720 Speaker 4: and certainly the cuts that are priced in at the 39 00:02:04,720 --> 00:02:09,120 Speaker 4: moment are more conducive or indicating of that recession environment. 40 00:02:09,160 --> 00:02:12,640 Speaker 4: So I'd say it's probably more priced than the current 41 00:02:12,680 --> 00:02:13,520 Speaker 4: environment indicates. 42 00:02:13,639 --> 00:02:16,320 Speaker 2: Can we talk about China. Next, we had this disappointing 43 00:02:16,360 --> 00:02:21,239 Speaker 2: data dump over the weekend retail sales, factory output, fixed 44 00:02:21,240 --> 00:02:23,919 Speaker 2: asset investment. We've got a spike in the jobless rate 45 00:02:23,960 --> 00:02:27,200 Speaker 2: to a six month high, home prices falling from the 46 00:02:27,200 --> 00:02:30,040 Speaker 2: previous month. What is the government to do in a 47 00:02:30,080 --> 00:02:31,000 Speaker 2: situation like this. 48 00:02:32,240 --> 00:02:34,679 Speaker 4: It's a complex situation and we've talked extensively about in 49 00:02:34,720 --> 00:02:38,080 Speaker 4: the previous sessions. You know, obviously the challenge for Chinese 50 00:02:38,120 --> 00:02:41,000 Speaker 4: economy at the moment is that the consumer sentiment is 51 00:02:41,040 --> 00:02:44,639 Speaker 4: subdued and the investment sentiment is subdued. It's a private 52 00:02:44,680 --> 00:02:47,640 Speaker 4: investment and foreign investment. Also, it's been one of the 53 00:02:47,720 --> 00:02:52,960 Speaker 4: historical lows for China. Certainly the market has been calling 54 00:02:53,080 --> 00:02:56,280 Speaker 4: for a more stimulus, whatever that's monitor or fiscal, but 55 00:02:56,320 --> 00:02:59,600 Speaker 4: it's not a straightforward exercise when you look at MONITOR. 56 00:02:59,680 --> 00:03:04,120 Speaker 4: Similar obviously, their restrictions around how far can the PBOC 57 00:03:04,200 --> 00:03:07,800 Speaker 4: go to cut rates again considering the banks net interest 58 00:03:07,840 --> 00:03:10,160 Speaker 4: margins and they need to protect that to protect the 59 00:03:10,160 --> 00:03:13,280 Speaker 4: financial stability. And also they've been restricted in the past 60 00:03:13,280 --> 00:03:15,920 Speaker 4: by the Fed monetary policy and now the FED moving 61 00:03:17,160 --> 00:03:20,520 Speaker 4: in this week's meeting, we certainly see a little bit 62 00:03:20,520 --> 00:03:23,960 Speaker 4: more room for them to adjust that monetary policy. When 63 00:03:24,000 --> 00:03:26,400 Speaker 4: it comes to fiscal as well, that's lagged for this year, 64 00:03:26,680 --> 00:03:28,560 Speaker 4: and I think one of the challenges that we observed 65 00:03:28,720 --> 00:03:30,960 Speaker 4: is that as much as they have room to do 66 00:03:31,040 --> 00:03:34,720 Speaker 4: more of regards to fiscal policy, there's less projects that 67 00:03:34,800 --> 00:03:38,040 Speaker 4: they see deem to be providing a return for the investment. 68 00:03:38,080 --> 00:03:40,960 Speaker 4: So I think the projects that they deployed in the 69 00:03:41,000 --> 00:03:44,360 Speaker 4: past has been infrastructure, and those are just less to 70 00:03:44,360 --> 00:03:47,080 Speaker 4: come by, so I think it's not as straightforward exercise 71 00:03:47,080 --> 00:03:50,080 Speaker 4: as where they could adjust. I think the one part 72 00:03:50,120 --> 00:03:52,240 Speaker 4: that the market has been calling off is more to 73 00:03:52,240 --> 00:03:54,960 Speaker 4: be done with regards to the property market as well. 74 00:03:55,040 --> 00:03:58,920 Speaker 4: Know that is a closely attached to consumer sentiment and 75 00:03:59,080 --> 00:04:02,280 Speaker 4: to the wealth of act in China, and selling more 76 00:04:02,320 --> 00:04:05,240 Speaker 4: measures in that space would be obviously very welcome by 77 00:04:05,240 --> 00:04:05,640 Speaker 4: the market. 78 00:04:05,960 --> 00:04:09,160 Speaker 3: Well, colin is an interesting market because it's very much 79 00:04:09,240 --> 00:04:13,080 Speaker 3: interest rate dependent, so it really is watching the FED 80 00:04:13,160 --> 00:04:15,720 Speaker 3: very closely, and we'll move and groove a lot by 81 00:04:15,720 --> 00:04:18,960 Speaker 3: what the Fed does. However, it's also very exposed to China, 82 00:04:19,560 --> 00:04:21,839 Speaker 3: so in some ways we might bear the brunt today 83 00:04:21,880 --> 00:04:23,600 Speaker 3: when we get trading. We got the futures down a 84 00:04:23,640 --> 00:04:26,680 Speaker 3: little bit here we may take some of the brunt 85 00:04:26,680 --> 00:04:29,240 Speaker 3: of the weaker economy in China, but then there is 86 00:04:29,240 --> 00:04:32,880 Speaker 3: that positivity, and particularly if you say that the US 87 00:04:32,960 --> 00:04:35,680 Speaker 3: economy looks like it's well positioned to be able to 88 00:04:35,720 --> 00:04:39,919 Speaker 3: handle rate cuts here and to benefit because of that. 89 00:04:40,760 --> 00:04:40,960 Speaker 5: Yeah. 90 00:04:40,960 --> 00:04:43,800 Speaker 4: So I mean, I think the trajectory from here it's positive, 91 00:04:43,839 --> 00:04:46,839 Speaker 4: but I think we need to look at various elements 92 00:04:46,880 --> 00:04:49,560 Speaker 4: of it. The volatility is expected across the board in 93 00:04:49,600 --> 00:04:52,200 Speaker 4: all markets. As I said earlier, the market is pricing 94 00:04:52,240 --> 00:04:54,240 Speaker 4: in a lot more cuts than the current environment or 95 00:04:54,320 --> 00:04:58,320 Speaker 4: the data indicates, so volatility. If the FED, of course moves, 96 00:04:58,839 --> 00:05:01,720 Speaker 4: you will move on this meeting. But I think that 97 00:05:01,760 --> 00:05:03,839 Speaker 4: the market is still undivided. Whatever it's a fifty or 98 00:05:03,839 --> 00:05:06,799 Speaker 4: twenty five our view, there's going to be at twenty 99 00:05:06,839 --> 00:05:10,480 Speaker 4: five with somewhat a dovish chiled indications that they're ready 100 00:05:10,480 --> 00:05:13,080 Speaker 4: to move more aggressively than they need to, and I 101 00:05:13,080 --> 00:05:15,600 Speaker 4: think that's positive. One other part that you have considered 102 00:05:15,640 --> 00:05:18,719 Speaker 4: with regards to markets is that coming into this meeting, 103 00:05:19,040 --> 00:05:22,040 Speaker 4: the markets have rallied quite a lot, again a narrow rally, 104 00:05:22,320 --> 00:05:25,760 Speaker 4: but we had a lot of market performance across the board, 105 00:05:25,760 --> 00:05:31,320 Speaker 4: particularly in the US and certainly, any elements of hawkishness 106 00:05:31,400 --> 00:05:34,200 Speaker 4: or any signs that the FED will have to pair 107 00:05:34,279 --> 00:05:37,839 Speaker 4: back some of those expectations or the market will have 108 00:05:37,880 --> 00:05:40,480 Speaker 4: to pair back some of those expectations of cuts will 109 00:05:40,480 --> 00:05:43,000 Speaker 4: certainly bring additional volatility to the markets. 110 00:05:43,040 --> 00:05:46,120 Speaker 2: But if there is the perception that financial conditions overall 111 00:05:46,160 --> 00:05:48,359 Speaker 2: may be a little too easy for the Fed's comfort, 112 00:05:48,360 --> 00:05:51,360 Speaker 2: I mean to be somewhat hawkish or at least conservative, 113 00:05:51,440 --> 00:05:53,040 Speaker 2: may not be a bad step. 114 00:05:53,160 --> 00:05:56,359 Speaker 4: Right, That's right, and you rightly said so when you 115 00:05:56,400 --> 00:05:59,919 Speaker 4: look at the FED, it's not the financial conditions that 116 00:06:00,160 --> 00:06:01,760 Speaker 4: driver of growth. So I think that's what we need 117 00:06:01,800 --> 00:06:04,560 Speaker 4: to pay attention to, and that is driven by the 118 00:06:04,560 --> 00:06:07,599 Speaker 4: FED decision, but also other elements like of the markets, 119 00:06:07,839 --> 00:06:10,640 Speaker 4: credit spreads, and as I said earlier, the market has 120 00:06:10,680 --> 00:06:14,600 Speaker 4: been quite constructive and I would say bullish this year, 121 00:06:15,200 --> 00:06:17,200 Speaker 4: and the financial conditions have eased. So we are in 122 00:06:17,200 --> 00:06:19,919 Speaker 4: a situation where we're coming to a FED cut, but 123 00:06:20,040 --> 00:06:24,039 Speaker 4: the financial conditions are easy. They're easy, so they're not 124 00:06:24,080 --> 00:06:27,320 Speaker 4: as restrictive. So again, seeing a FED cutting with fifty 125 00:06:27,360 --> 00:06:30,840 Speaker 4: basis points when the data is still resilient, that that 126 00:06:30,880 --> 00:06:33,080 Speaker 4: fifty basis point is not in the data and we 127 00:06:33,120 --> 00:06:37,880 Speaker 4: have financial conditions that are somewhat less restrictive. Again, it's 128 00:06:37,880 --> 00:06:39,520 Speaker 4: going to be somedly's less. 129 00:06:39,360 --> 00:06:41,480 Speaker 3: Like It's interesting because what you're saying and what you're 130 00:06:41,480 --> 00:06:44,360 Speaker 3: describing might not be so good for markets going forward, 131 00:06:44,360 --> 00:06:46,640 Speaker 3: but it could be very good for the economy. If 132 00:06:46,640 --> 00:06:49,080 Speaker 3: you say the economy doesn't need you know, twenty five 133 00:06:49,160 --> 00:06:51,280 Speaker 3: or fifty basis points or the positioning of the FED, 134 00:06:51,320 --> 00:06:53,760 Speaker 3: and that the Fed may deliver to a certain extent, 135 00:06:53,920 --> 00:06:54,520 Speaker 3: that could be good. 136 00:06:55,080 --> 00:06:56,000 Speaker 5: And I agree with that. 137 00:06:56,240 --> 00:07:00,440 Speaker 4: I think a normalization, worldly normalization of Fed of the 138 00:07:00,480 --> 00:07:02,800 Speaker 4: monetary policy, I think is more constructive for the market 139 00:07:03,120 --> 00:07:05,720 Speaker 4: as much as market. We want of fifty basis points cut, 140 00:07:05,760 --> 00:07:09,760 Speaker 4: and they positively have priced that in a normal circumstances. 141 00:07:09,800 --> 00:07:12,680 Speaker 4: A cut of fifty basis points we indicate that US 142 00:07:13,120 --> 00:07:15,760 Speaker 4: or the FED is worried about the economy and they 143 00:07:15,760 --> 00:07:18,520 Speaker 4: have to cut a lot quicker at twenty five is 144 00:07:18,560 --> 00:07:22,160 Speaker 4: more normal pace of normalization that monetary policy, which we 145 00:07:22,200 --> 00:07:25,000 Speaker 4: do think is constructive for risk US, is constructive for 146 00:07:25,680 --> 00:07:28,440 Speaker 4: a broader economy and certainly of places like credit and 147 00:07:28,960 --> 00:07:30,679 Speaker 4: parts of equity market as well. 148 00:07:30,760 --> 00:07:33,600 Speaker 2: So what parts of the equity market appear attractive to 149 00:07:33,640 --> 00:07:35,960 Speaker 2: you if you had to put capital to work in 150 00:07:36,000 --> 00:07:38,480 Speaker 2: the APEC region X Japan right now, how would you 151 00:07:38,520 --> 00:07:39,320 Speaker 2: go about doing that. 152 00:07:40,080 --> 00:07:42,080 Speaker 4: I think we've've been very constructive. I think from the 153 00:07:42,120 --> 00:07:45,640 Speaker 4: beginning of the year, instead of looking at market specifically, 154 00:07:45,720 --> 00:07:49,960 Speaker 4: is looking at themes that are supported by various drivers 155 00:07:49,960 --> 00:07:52,880 Speaker 4: in economy. And we've been constructive on tech. We've been 156 00:07:52,880 --> 00:07:55,840 Speaker 4: constructed on the carbonizational in givity, and I'll break down 157 00:07:55,960 --> 00:07:58,000 Speaker 4: that a little bit. When you look at tech that 158 00:07:58,080 --> 00:08:02,480 Speaker 4: had dramifications positive performance and equity markets in US, but 159 00:08:02,640 --> 00:08:04,520 Speaker 4: also a career if you look at Korea and Taiwan 160 00:08:04,600 --> 00:08:08,720 Speaker 4: that those have benefited quite significantly on that tech drive 161 00:08:08,800 --> 00:08:11,360 Speaker 4: and sertadly, particularly the semiconductor and the exposure of those 162 00:08:11,360 --> 00:08:16,160 Speaker 4: two countries to say semiconductor sector. When we look at it, 163 00:08:16,200 --> 00:08:18,120 Speaker 4: the next stage and I think this is I would 164 00:08:18,120 --> 00:08:22,200 Speaker 4: say next stage, we're talking about FED normalizing monetary policy 165 00:08:22,480 --> 00:08:24,920 Speaker 4: and then giving a clear guidance of the next steps 166 00:08:24,960 --> 00:08:26,920 Speaker 4: and the ability for the FED to continue with that 167 00:08:27,840 --> 00:08:33,600 Speaker 4: policy adjustment. We see the broader market recovering from their owners, 168 00:08:33,600 --> 00:08:35,720 Speaker 4: we need to see a leverage coming back in the economy, 169 00:08:35,800 --> 00:08:39,000 Speaker 4: and as just said earlier about the restrictiveness in Hong Kong, 170 00:08:39,040 --> 00:08:41,439 Speaker 4: particularly on that leverage. So the leverage have to come 171 00:08:41,480 --> 00:08:44,360 Speaker 4: back in the smaller companies. Businesses have to be able 172 00:08:44,440 --> 00:08:47,560 Speaker 4: to start borrowing again and deploying back into the economy 173 00:08:47,600 --> 00:08:49,480 Speaker 4: to see the broader market perform. 174 00:08:49,520 --> 00:08:51,640 Speaker 3: All right, e, Katerina, thanks very much for joining us. 175 00:08:51,640 --> 00:08:55,440 Speaker 3: See Katerina Bigos, who's CIO of Core Investment Asia, extra 176 00:08:55,520 --> 00:08:58,319 Speaker 3: PAN for ex investment managers. 177 00:09:05,559 --> 00:09:09,240 Speaker 2: Former President Trump now safe after his Secret Service detail 178 00:09:09,320 --> 00:09:12,000 Speaker 2: open fire on a man who was wielding an assault 179 00:09:12,120 --> 00:09:15,880 Speaker 2: rifle at Trump's West Palm Beach, Florida golf course. Joining 180 00:09:15,920 --> 00:09:19,480 Speaker 2: us now Jody Schneider. She is a political news director 181 00:09:19,480 --> 00:09:22,880 Speaker 2: for Bloomberg TV and Radio. Joining us on the line 182 00:09:22,880 --> 00:09:26,319 Speaker 2: from here in New York City, Jody, The FBI wasted 183 00:09:26,400 --> 00:09:30,680 Speaker 2: no time in calling this an apparent assassination attempt. It's amazing. 184 00:09:30,679 --> 00:09:32,319 Speaker 2: I mean, it was only two months ago we were 185 00:09:32,360 --> 00:09:36,559 Speaker 2: talking about this attempt on former President Trump's life in Butler, Pennsylvania. 186 00:09:36,640 --> 00:09:40,560 Speaker 2: Does this erase many more questions about the Secret Service 187 00:09:40,559 --> 00:09:42,760 Speaker 2: ability to protect candidates? 188 00:09:43,960 --> 00:09:46,840 Speaker 6: Well, it's certainly. Race has a number of questions, and 189 00:09:47,120 --> 00:09:50,800 Speaker 6: we will be hearing about investigations and looking into these 190 00:09:50,840 --> 00:09:53,679 Speaker 6: things in coming days and weeks. One of them is 191 00:09:53,800 --> 00:09:57,240 Speaker 6: how an individual like this was able to get an 192 00:09:57,360 --> 00:10:00,880 Speaker 6: estimated three hundred to five hundred yards away from the 193 00:10:00,920 --> 00:10:05,120 Speaker 6: former president while he was golfing. Obviously, the president, the 194 00:10:05,160 --> 00:10:08,840 Speaker 6: former president is unharmed. There was not the kind of 195 00:10:09,720 --> 00:10:13,520 Speaker 6: you know, incident that we had in Butler, Pennsylvania in 196 00:10:13,640 --> 00:10:19,040 Speaker 6: July where the former president was was injured and there 197 00:10:19,160 --> 00:10:21,559 Speaker 6: was you know, others were injured, others in the crowd, 198 00:10:21,600 --> 00:10:24,240 Speaker 6: and someone died as well. So it was a different 199 00:10:24,280 --> 00:10:28,360 Speaker 6: situation tonight. Actually, the Palm Beach County Sheriff UH said 200 00:10:28,400 --> 00:10:32,560 Speaker 6: that the UH Secret Service agent did a fantastic job 201 00:10:33,440 --> 00:10:38,160 Speaker 6: given that he basically, you know, engaged the man and 202 00:10:38,240 --> 00:10:40,800 Speaker 6: they were the man fled and then he was subsequently 203 00:10:40,800 --> 00:10:43,840 Speaker 6: stopped and taken into custody by local police on the highway. 204 00:10:44,160 --> 00:10:46,200 Speaker 6: So it was a different situation that occurred here. But 205 00:10:46,320 --> 00:10:49,240 Speaker 6: of course the question is why does this keep happening 206 00:10:49,480 --> 00:10:52,280 Speaker 6: and how was this individual allowed to get so close. 207 00:10:52,679 --> 00:10:57,760 Speaker 6: Golf courses are notoriously hard to you know, to defend it, 208 00:10:57,800 --> 00:11:00,600 Speaker 6: given that they're open spaces by their very in nature, 209 00:11:00,960 --> 00:11:05,280 Speaker 6: but still, given the increased security that the former president 210 00:11:05,280 --> 00:11:09,679 Speaker 6: has had in recent months, there's a lot of questions. 211 00:11:09,240 --> 00:11:12,800 Speaker 3: Here, Jody. Might we expect that security to be uh 212 00:11:13,000 --> 00:11:17,120 Speaker 3: to be heightened now going forward for both candidates. 213 00:11:16,920 --> 00:11:19,840 Speaker 6: Perhaps, but we have seen one of the things that 214 00:11:19,920 --> 00:11:22,840 Speaker 6: happened after about the Pennsylvania and which you may recall, 215 00:11:22,960 --> 00:11:26,400 Speaker 6: the Secret Service was you know, very uh you know, criticized, 216 00:11:26,440 --> 00:11:30,360 Speaker 6: harshly criticized both and by the campaign but also on 217 00:11:30,440 --> 00:11:34,200 Speaker 6: Capitol Hill, and the Secret Service director did was really 218 00:11:34,240 --> 00:11:39,600 Speaker 6: pushed to resign. We the security detail has been enhanced, 219 00:11:40,520 --> 00:11:42,520 Speaker 6: and as we go through the election and we get 220 00:11:42,520 --> 00:11:45,160 Speaker 6: closer to the election, there there that has been enhanced 221 00:11:45,200 --> 00:11:49,920 Speaker 6: even more so. There has been more attention paid uh 222 00:11:49,960 --> 00:11:54,959 Speaker 6: to the former president's security uh since then, and uh, 223 00:11:55,240 --> 00:11:57,880 Speaker 6: particularly in recent weeks, we've heard even you know of 224 00:11:57,960 --> 00:12:02,320 Speaker 6: even more secure detail. So I'm not I don't know 225 00:12:02,360 --> 00:12:05,640 Speaker 6: how much more they will be adding, but certainly questions 226 00:12:05,640 --> 00:12:08,040 Speaker 6: a protocol and again the very question of how this 227 00:12:08,080 --> 00:12:11,960 Speaker 6: individual got so close and seemed to know, you know, 228 00:12:12,360 --> 00:12:15,360 Speaker 6: about the president's movement, former president's movements at that point. 229 00:12:15,720 --> 00:12:17,600 Speaker 6: This is a concern and I'm sure we'll be hearing 230 00:12:17,640 --> 00:12:19,920 Speaker 6: about this on Capitol Hill as well. 231 00:12:19,960 --> 00:12:22,480 Speaker 2: And no indication at all that it's going to change 232 00:12:22,920 --> 00:12:24,920 Speaker 2: the campaigning of the former president. Correct. 233 00:12:25,760 --> 00:12:29,160 Speaker 6: Yeah, we have not heard from from the former president 234 00:12:29,520 --> 00:12:33,160 Speaker 6: this evening. We've heard from some close to him that 235 00:12:33,600 --> 00:12:36,640 Speaker 6: he's you know, there was no immediate comment from former 236 00:12:36,679 --> 00:12:39,120 Speaker 6: President Trump, but we did hear from Senator Lindsey Graham, 237 00:12:39,280 --> 00:12:42,240 Speaker 6: who's closely aligned with the former president, said he'd spoken 238 00:12:42,280 --> 00:12:45,200 Speaker 6: with him and found him in good spirits. But we 239 00:12:45,320 --> 00:12:50,080 Speaker 6: have not heard about any changes in his plans or campaigning. Obviously, 240 00:12:50,120 --> 00:12:53,120 Speaker 6: this is a critical time in the campaign, just seven 241 00:12:53,240 --> 00:12:56,600 Speaker 6: weeks this on Tuesday from election day. 242 00:12:57,120 --> 00:13:00,280 Speaker 3: Jody, a quick word about this, this person, Ryan Ruth, 243 00:13:00,280 --> 00:13:03,760 Speaker 3: who's been apprehended by authorities, aid arrests on his record 244 00:13:03,760 --> 00:13:07,160 Speaker 3: according to CNN. Do we know much about him and 245 00:13:07,360 --> 00:13:08,600 Speaker 3: anything about those offenses? 246 00:13:09,559 --> 00:13:09,679 Speaker 5: Now? 247 00:13:09,760 --> 00:13:12,679 Speaker 6: This information on him has just come out and within 248 00:13:12,720 --> 00:13:16,160 Speaker 6: the hour, as you note, CNN's reporting that he has 249 00:13:16,240 --> 00:13:20,200 Speaker 6: AID arrests in his record, apparently from minor offenses, and 250 00:13:20,240 --> 00:13:24,359 Speaker 6: he was identified as being in custody by federal officials. 251 00:13:24,720 --> 00:13:26,520 Speaker 6: That's really all we know at this time. 252 00:13:26,720 --> 00:13:29,520 Speaker 2: Very interesting that The New York Times pointed out that 253 00:13:29,559 --> 00:13:32,480 Speaker 2: mister Ruth was interviewed by The Times back in twenty 254 00:13:32,520 --> 00:13:36,760 Speaker 2: twenty three for an article about Americans volunteering to aid 255 00:13:36,840 --> 00:13:40,200 Speaker 2: the war effort in Ukraine. We'll leave it there, Jody, 256 00:13:40,360 --> 00:13:42,360 Speaker 2: thank you so much for being with us. Always a pleasure. 257 00:13:42,440 --> 00:13:46,040 Speaker 2: Jody Schneider, political news director for Bloomberg TV and Radio, 258 00:13:46,120 --> 00:13:49,160 Speaker 2: joining us at here on Daybreak Asia. 259 00:13:55,080 --> 00:13:58,920 Speaker 3: Dana Doria go ceiow It Investment to take a closer 260 00:13:58,920 --> 00:14:02,000 Speaker 3: look at markets, and Dane, let's talk a little bit 261 00:14:02,000 --> 00:14:05,320 Speaker 3: about the Fed this week. Is it clear now that 262 00:14:05,400 --> 00:14:09,840 Speaker 3: the inflation fight is kind of yesterday's story? 263 00:14:11,480 --> 00:14:14,480 Speaker 1: Hi, Yes, I would say, Actually, I don't. I don't 264 00:14:14,480 --> 00:14:17,760 Speaker 1: think it is clear. Unfortunately, you know, we did have 265 00:14:17,800 --> 00:14:21,240 Speaker 1: an inflation report that I think is gives the Fed 266 00:14:21,280 --> 00:14:23,480 Speaker 1: the ability to go either way on the rate cuts, 267 00:14:23,520 --> 00:14:26,080 Speaker 1: but the core number was a little higher than they 268 00:14:26,120 --> 00:14:29,160 Speaker 1: would like, and you know, immediate market response was, we're 269 00:14:29,160 --> 00:14:31,840 Speaker 1: probably not getting the fifty. I mean, I think now 270 00:14:31,880 --> 00:14:34,520 Speaker 1: we're a little bit more, you know, even between the two. 271 00:14:35,400 --> 00:14:37,440 Speaker 1: But no, I don't think it's I don't think that 272 00:14:37,480 --> 00:14:39,800 Speaker 1: we can say that the fight against inflation is really 273 00:14:40,120 --> 00:14:42,560 Speaker 1: one at this point. And we know historically inflation kind 274 00:14:42,560 --> 00:14:43,880 Speaker 1: of comes in waves. 275 00:14:44,640 --> 00:14:47,920 Speaker 2: So right now, Bloomberg data indicate about one hundred basis 276 00:14:47,960 --> 00:14:51,680 Speaker 2: points of cuts split across the next three meetings, obviously 277 00:14:51,720 --> 00:14:54,960 Speaker 2: this week, and then we have November and December. Higher 278 00:14:55,000 --> 00:14:57,440 Speaker 2: probability of a fifty basis point rate cut at the 279 00:14:57,440 --> 00:14:59,640 Speaker 2: December meeting. I think than what we're looking at right 280 00:14:59,640 --> 00:15:02,640 Speaker 2: now is that the way that you are seeing things 281 00:15:02,680 --> 00:15:07,560 Speaker 2: that the FED will be gradual but potentially delivering something 282 00:15:07,680 --> 00:15:09,360 Speaker 2: supersized at year's end. 283 00:15:10,600 --> 00:15:15,480 Speaker 1: So it's interesting that, Yeah, I see where that that 284 00:15:15,600 --> 00:15:18,480 Speaker 1: narrative comes. But if you think about why why would 285 00:15:18,520 --> 00:15:21,160 Speaker 1: we expect that, you have to have some expectation of 286 00:15:21,200 --> 00:15:24,160 Speaker 1: softness to go along with that, right, And it's interesting 287 00:15:24,200 --> 00:15:27,360 Speaker 1: because bond markets certainly seemed to be pricing in that yeah, 288 00:15:27,560 --> 00:15:29,720 Speaker 1: you know, things are starting to look a little worse. 289 00:15:29,960 --> 00:15:33,560 Speaker 1: The soft landing scenario maybe you know is not going 290 00:15:33,640 --> 00:15:36,400 Speaker 1: to hold. But equity markets certainly don't seem to be 291 00:15:36,480 --> 00:15:38,920 Speaker 1: trending that way. I mean, we have seen obviously the 292 00:15:39,000 --> 00:15:41,200 Speaker 1: S and B has had some bad days, you know, 293 00:15:41,240 --> 00:15:43,560 Speaker 1: over the course of the summer, but it has come back. 294 00:15:43,640 --> 00:15:45,240 Speaker 5: It's up eighteen percent for the. 295 00:15:45,240 --> 00:15:47,760 Speaker 1: Year, So I don't think and when you look at GDP, 296 00:15:48,360 --> 00:15:51,800 Speaker 1: you look at unemployment at four point two percent, Yes, 297 00:15:52,000 --> 00:15:55,000 Speaker 1: certainly some cooling there, but We're still not in a 298 00:15:55,040 --> 00:15:57,840 Speaker 1: place that you could call a crisis, and so it's 299 00:15:57,920 --> 00:16:01,160 Speaker 1: difficult for me to see us getting many rate cuts 300 00:16:01,160 --> 00:16:03,480 Speaker 1: at this stage of the game as what you're talking 301 00:16:03,520 --> 00:16:05,160 Speaker 1: about right, as what we're seeing in the data. 302 00:16:06,200 --> 00:16:07,840 Speaker 3: The reason I asked you that first question in the 303 00:16:07,880 --> 00:16:10,320 Speaker 3: way I did, I can see in your notes how 304 00:16:10,360 --> 00:16:13,720 Speaker 3: you feel is it kind of begs this fall event. 305 00:16:13,800 --> 00:16:17,360 Speaker 3: So would you not cut rates here? Would you keep 306 00:16:17,400 --> 00:16:17,960 Speaker 3: the fight up? 307 00:16:18,960 --> 00:16:19,000 Speaker 7: No? 308 00:16:19,240 --> 00:16:20,880 Speaker 1: I think I would cut, but I think it's got 309 00:16:20,920 --> 00:16:23,200 Speaker 1: to be twenty five. I think a fifty would be 310 00:16:23,280 --> 00:16:26,760 Speaker 1: too big. I don't think the economy is at a 311 00:16:26,840 --> 00:16:29,200 Speaker 1: place yet now. Of course, you know, there's a whole 312 00:16:29,640 --> 00:16:32,680 Speaker 1: narrative that, hey, look we're already really late on cuts, 313 00:16:32,760 --> 00:16:34,120 Speaker 1: right that these things. 314 00:16:33,880 --> 00:16:35,520 Speaker 5: You know, it all acts with a lag. 315 00:16:35,680 --> 00:16:40,080 Speaker 1: So waiting is you know, problematic, because the upshot is 316 00:16:40,120 --> 00:16:42,160 Speaker 1: that we're going to have weakness in the economy before 317 00:16:42,200 --> 00:16:44,040 Speaker 1: there's time for the rate cuts to do anything about it. 318 00:16:44,320 --> 00:16:46,360 Speaker 5: Yeah, that is one view. 319 00:16:46,120 --> 00:16:49,080 Speaker 1: But I think net net, you know, something like a 320 00:16:49,120 --> 00:16:51,800 Speaker 1: fifty basis point cut is kind of a bazooka right now. 321 00:16:52,120 --> 00:16:55,120 Speaker 2: So if we can agree that inflation is getting under control, 322 00:16:55,360 --> 00:16:58,440 Speaker 2: and we can also agree that the labor market is softening. 323 00:16:58,560 --> 00:17:00,360 Speaker 2: One of the things I'm wondering about is whether or 324 00:17:00,400 --> 00:17:02,600 Speaker 2: not the FED is trying to take some of the 325 00:17:02,640 --> 00:17:06,280 Speaker 2: stress out of certain financial conditions. Right now. You could 326 00:17:06,359 --> 00:17:08,440 Speaker 2: argue maybe that they're a little easy, but I'm thinking 327 00:17:08,520 --> 00:17:11,120 Speaker 2: about the degree to which some of the banks may 328 00:17:11,160 --> 00:17:14,760 Speaker 2: be exposed to higher rates in a way that's really 329 00:17:14,840 --> 00:17:16,440 Speaker 2: negatively impacting balance sheet. 330 00:17:16,520 --> 00:17:19,840 Speaker 1: Still, well, you know, you are seeing a lot of 331 00:17:20,119 --> 00:17:23,399 Speaker 1: a lot more breadth than what's succeeding in equity markets 332 00:17:23,440 --> 00:17:23,920 Speaker 1: right now. 333 00:17:24,080 --> 00:17:26,000 Speaker 5: And you know it's not just tech. Obviously, we know 334 00:17:26,040 --> 00:17:26,920 Speaker 5: that one of the big. 335 00:17:26,720 --> 00:17:29,679 Speaker 1: Stories right now is it is widening out to areas 336 00:17:29,720 --> 00:17:33,520 Speaker 1: like banks. And I do think that, you know, that's 337 00:17:33,600 --> 00:17:36,640 Speaker 1: obviously in part because of the expectation that look, we're 338 00:17:36,720 --> 00:17:39,439 Speaker 1: quibbling over is it fifty, is it twenty five? Is 339 00:17:39,440 --> 00:17:41,320 Speaker 1: it one hundred by year end? But we all know 340 00:17:41,400 --> 00:17:43,800 Speaker 1: rate cuts are coming. I think that much is clear, 341 00:17:44,200 --> 00:17:46,760 Speaker 1: and so I don't know, you know, it's a question 342 00:17:46,800 --> 00:17:50,119 Speaker 1: of increments. I think banks are you know, benefiting, and 343 00:17:50,160 --> 00:17:51,520 Speaker 1: we see small caps benefiting. 344 00:17:51,560 --> 00:17:51,720 Speaker 5: Right. 345 00:17:51,760 --> 00:17:55,200 Speaker 1: Interest rate part of the economy, that interest rate sensitive 346 00:17:55,200 --> 00:17:58,359 Speaker 1: parts of the economy that have been suffering are benefiting, 347 00:17:58,400 --> 00:18:00,200 Speaker 1: and you know that I would expect that. 348 00:18:00,240 --> 00:18:01,119 Speaker 5: To continue forward. 349 00:18:02,000 --> 00:18:04,439 Speaker 3: So would you be more attracted to the bond market 350 00:18:04,480 --> 00:18:06,040 Speaker 3: here or to equities? 351 00:18:07,560 --> 00:18:10,119 Speaker 1: So I would say that it's still a good time 352 00:18:10,320 --> 00:18:13,919 Speaker 1: to get into bonds. Obviously, you know, duration can be 353 00:18:14,000 --> 00:18:17,640 Speaker 1: good in markets like this. I think you know it's 354 00:18:17,680 --> 00:18:20,760 Speaker 1: not too late, right, And I'm you know, there's there's 355 00:18:20,840 --> 00:18:23,920 Speaker 1: kind of a chorus in the acid allocator space that's 356 00:18:24,040 --> 00:18:26,560 Speaker 1: come up around you know what good is fixed income 357 00:18:26,600 --> 00:18:27,200 Speaker 1: in general? 358 00:18:27,320 --> 00:18:29,560 Speaker 5: And you know I'm very much not in that camp. 359 00:18:29,600 --> 00:18:32,560 Speaker 1: I think fixed income is a very important ballast in 360 00:18:32,600 --> 00:18:35,840 Speaker 1: most portfolios. I think you still have an opportunity to 361 00:18:35,840 --> 00:18:39,440 Speaker 1: get in where rates are now. Yeah, we had a 362 00:18:39,440 --> 00:18:41,960 Speaker 1: lot of pain when we had to abruptly increase interest rates, 363 00:18:41,960 --> 00:18:44,560 Speaker 1: but obviously we're heading in the opposite direction one way 364 00:18:44,640 --> 00:18:46,720 Speaker 1: or the other. So I do think bonds are a 365 00:18:46,760 --> 00:18:48,639 Speaker 1: good place to be. I also think, look, I mean 366 00:18:48,680 --> 00:18:51,080 Speaker 1: your view on equity markets. If you think that we're 367 00:18:51,119 --> 00:18:53,880 Speaker 1: getting rate cuts because it's time, but that we're still 368 00:18:53,880 --> 00:18:56,760 Speaker 1: sticking the landing, you can really have a lot more 369 00:18:56,800 --> 00:19:00,480 Speaker 1: breadth than your portfolio and even tilt somewhat right lower 370 00:19:00,520 --> 00:19:03,280 Speaker 1: priced areas in the market. Small cap areas of the market. 371 00:19:03,480 --> 00:19:05,600 Speaker 1: But if you think we're heading into a recession, it 372 00:19:05,600 --> 00:19:08,639 Speaker 1: doesn't mean leave the market. Right, Taking that chance and 373 00:19:09,160 --> 00:19:11,479 Speaker 1: missing out on the potential and the equity markets is 374 00:19:11,600 --> 00:19:12,640 Speaker 1: always a fail. 375 00:19:12,480 --> 00:19:13,520 Speaker 5: In most portfolios. 376 00:19:13,680 --> 00:19:16,320 Speaker 1: But maybe it's tilt toward lower volatility stocks, right, or 377 00:19:16,359 --> 00:19:19,320 Speaker 1: higher quality stocks, Dana. 378 00:19:19,359 --> 00:19:22,439 Speaker 2: When you speak to clients and the subject of the 379 00:19:22,520 --> 00:19:26,120 Speaker 2: US presidential election comes up, well, the election more broadly, 380 00:19:26,160 --> 00:19:28,879 Speaker 2: even where Congress is concerned, what are you hearing? What 381 00:19:28,920 --> 00:19:30,360 Speaker 2: are people saying to you? 382 00:19:31,480 --> 00:19:34,520 Speaker 1: Yeah, there's always a ton of questions around what is 383 00:19:34,560 --> 00:19:37,280 Speaker 1: the impact going to be? And it's really interesting to 384 00:19:37,320 --> 00:19:40,399 Speaker 1: talk to people about it because it's obviously kind of 385 00:19:40,440 --> 00:19:44,040 Speaker 1: this really binomial outcome type of event. You know, one 386 00:19:44,119 --> 00:19:47,520 Speaker 1: side wins or the other side wins presidency in any rate, 387 00:19:47,600 --> 00:19:51,159 Speaker 1: right obviously, and then Congress to your point, but you know, 388 00:19:52,040 --> 00:19:54,200 Speaker 1: either the Senate goes. 389 00:19:54,000 --> 00:19:55,600 Speaker 5: One way or the other, right, the House goes one 390 00:19:55,600 --> 00:19:56,160 Speaker 5: way or the other. 391 00:19:56,280 --> 00:19:59,640 Speaker 1: So, you know, trying to figure that out and invest 392 00:19:59,640 --> 00:20:01,680 Speaker 1: against it is really difficult. 393 00:20:01,720 --> 00:20:03,720 Speaker 5: Right. The price in the market today. 394 00:20:03,400 --> 00:20:07,119 Speaker 1: Of any of any stock, of any security that's tied 395 00:20:07,160 --> 00:20:09,879 Speaker 1: to the outcome is going to price in some weighted 396 00:20:09,920 --> 00:20:10,960 Speaker 1: average if. 397 00:20:10,800 --> 00:20:13,080 Speaker 5: You're wrong, you know you're going to you're gonna lose 398 00:20:13,080 --> 00:20:13,520 Speaker 5: out from this. 399 00:20:13,680 --> 00:20:15,520 Speaker 1: So so what I talked to with clients when they 400 00:20:15,560 --> 00:20:18,400 Speaker 1: asked me about this is, look number one, there's good 401 00:20:18,440 --> 00:20:21,080 Speaker 1: evidence that it really doesn't matter much which party is 402 00:20:21,119 --> 00:20:23,800 Speaker 1: in power. There's all sorts of evidence around whether it's 403 00:20:23,840 --> 00:20:26,400 Speaker 1: you know, the presidency, if it's mixed, et cetera, et cetera, 404 00:20:26,600 --> 00:20:28,000 Speaker 1: markets still kind of go up. 405 00:20:28,080 --> 00:20:29,040 Speaker 5: So that's the good news. 406 00:20:29,640 --> 00:20:33,320 Speaker 1: Obviously, in within markets there's ties, there's ties to a 407 00:20:33,320 --> 00:20:34,560 Speaker 1: Democrat or Republican win. 408 00:20:35,440 --> 00:20:39,399 Speaker 3: So we mentioned earlier that China stumbled a little bit 409 00:20:39,440 --> 00:20:42,800 Speaker 3: in the last month and that's been a continuing process. 410 00:20:42,880 --> 00:20:45,800 Speaker 3: Europe is not faring all that well either. When we 411 00:20:45,840 --> 00:20:49,040 Speaker 3: look at the global economy and the job of the Fed, 412 00:20:49,400 --> 00:20:51,440 Speaker 3: do we have to factor that in that those two 413 00:20:51,680 --> 00:20:56,119 Speaker 3: major areas of business around the world are stumbling and 414 00:20:56,160 --> 00:20:57,760 Speaker 3: that they could drag the US down. 415 00:20:59,000 --> 00:21:01,879 Speaker 1: Yeah, Well, I mean for most portfolios, they're going to 416 00:21:02,000 --> 00:21:05,760 Speaker 1: drag you know, the investor down in and of themselves, right, 417 00:21:05,800 --> 00:21:10,200 Speaker 1: because most portfolios that you see retail advisors are allocating 418 00:21:10,240 --> 00:21:14,840 Speaker 1: to have a contingent that's international, developed and even emerging markets. 419 00:21:14,880 --> 00:21:18,040 Speaker 1: In fact, one of the things that I say often 420 00:21:18,080 --> 00:21:21,040 Speaker 1: from an acid allocation basis is, you know, China is 421 00:21:21,080 --> 00:21:24,640 Speaker 1: a huge piece of the Emerging Markets index. Consider having 422 00:21:24,680 --> 00:21:27,440 Speaker 1: some sort of cap not market cap weighted on China 423 00:21:27,560 --> 00:21:29,800 Speaker 1: for exactly the reasons that you're talking about, right, if 424 00:21:29,800 --> 00:21:32,480 Speaker 1: you if you go back the last several decades, I mean, 425 00:21:32,560 --> 00:21:36,160 Speaker 1: China is the promise is there, but it hasn't paid 426 00:21:36,160 --> 00:21:39,360 Speaker 1: off great for US investors. So I think starting point is, 427 00:21:39,960 --> 00:21:42,720 Speaker 1: you know, you have to look at the amount that 428 00:21:42,760 --> 00:21:45,359 Speaker 1: you allocate to international and emerging in general. And I 429 00:21:45,400 --> 00:21:48,760 Speaker 1: think that's you know, I'm a proponent of international diversification, 430 00:21:49,960 --> 00:21:51,640 Speaker 1: you know, but the client has to really look at 431 00:21:51,640 --> 00:21:54,000 Speaker 1: behaviorally can they tolerate, you know, how much of it 432 00:21:54,040 --> 00:21:57,960 Speaker 1: can they tolerate? And then secondarily yes, naturally the you know, 433 00:21:58,000 --> 00:22:01,040 Speaker 1: we just have seen nothing but correlation increases over time 434 00:22:01,080 --> 00:22:04,800 Speaker 1: across economies, and so where goes one certainly, I mean 435 00:22:04,880 --> 00:22:08,760 Speaker 1: you see, for example, with China, you know, European luxury 436 00:22:08,880 --> 00:22:12,399 Speaker 1: goods makers, you know, they get pulled down when China 437 00:22:12,560 --> 00:22:15,240 Speaker 1: is not doing well, and so yes, you know you're 438 00:22:15,240 --> 00:22:17,959 Speaker 1: going to see it across reverberate across the portfolio. 439 00:22:18,840 --> 00:22:21,679 Speaker 3: Yeah, I wonder if a question going forward, and we 440 00:22:21,680 --> 00:22:24,120 Speaker 3: don't have time now, Dana, but just as a way 441 00:22:24,200 --> 00:22:26,320 Speaker 3: to set up the next time we chat, I wonder 442 00:22:26,359 --> 00:22:29,640 Speaker 3: if going forward that correlation breaks down a little bit 443 00:22:30,080 --> 00:22:33,840 Speaker 3: as countries reshore and sort of focus more on things 444 00:22:33,880 --> 00:22:36,480 Speaker 3: at home. It a lot depends whether Donald Trump wins 445 00:22:36,600 --> 00:22:40,280 Speaker 3: or whether Kamala Harris wins in the United States, but 446 00:22:40,400 --> 00:22:42,240 Speaker 3: Dana will save that one for next time. Thank you 447 00:22:42,320 --> 00:22:45,359 Speaker 3: so much for joining us, Dana Doria, co cio x 448 00:22:45,480 --> 00:22:57,040 Speaker 3: invest neet Eric Lynch, Managing director at Sharp Investments. So, Eric, 449 00:22:57,080 --> 00:22:59,679 Speaker 3: I'm just curious whether or not you like the idea 450 00:22:59,720 --> 00:23:03,080 Speaker 3: of the FED saying to itself we won't be late again, 451 00:23:03,680 --> 00:23:07,200 Speaker 3: referring to its its slow response to the rapid rise 452 00:23:07,240 --> 00:23:10,080 Speaker 3: of inflation. Will they not want to be late in 453 00:23:10,160 --> 00:23:12,320 Speaker 3: addressing the rise in unemployment? 454 00:23:14,359 --> 00:23:16,280 Speaker 7: Yeah, that's a great question. Thanks for having me on 455 00:23:16,320 --> 00:23:20,720 Speaker 7: the show. They were certainly late obviously during the run up. 456 00:23:21,400 --> 00:23:23,920 Speaker 7: There's some that would claim that they're already late now. 457 00:23:24,520 --> 00:23:28,480 Speaker 7: You know, it seems to us that, you know, what's 458 00:23:28,560 --> 00:23:32,320 Speaker 7: really been an indicator of kind of a future contraction 459 00:23:32,600 --> 00:23:34,600 Speaker 7: has not been so much to unemployment rate in a 460 00:23:34,640 --> 00:23:37,960 Speaker 7: so called some role, our kind of recent obsession of 461 00:23:38,040 --> 00:23:41,720 Speaker 7: market participants about that, but more looking at the pace 462 00:23:41,920 --> 00:23:44,439 Speaker 7: of kind of new jobs that have been added, and 463 00:23:44,920 --> 00:23:48,520 Speaker 7: you know that obviously is clearly slowed. We've averaged about 464 00:23:48,520 --> 00:23:52,080 Speaker 7: one hundred thousand per month the last three months. We've 465 00:23:52,080 --> 00:23:56,600 Speaker 7: had pretty big revisions. Even though last week's monthly print 466 00:23:56,600 --> 00:23:58,960 Speaker 7: was one hundred and forty two thousand, the prior two 467 00:23:59,000 --> 00:24:01,280 Speaker 7: months were revised down back to about a hunter k. 468 00:24:01,480 --> 00:24:06,240 Speaker 7: So this tells to us that, okay, companies are concerned 469 00:24:06,280 --> 00:24:09,800 Speaker 7: about the trajectory, they're slowing things down. At the same time, 470 00:24:09,880 --> 00:24:11,680 Speaker 7: given what happened in the pandemic, they don't want to cut. 471 00:24:11,800 --> 00:24:16,440 Speaker 7: So it does seem like the FED has given inflations 472 00:24:16,480 --> 00:24:19,240 Speaker 7: coming down, although core you know, it's still kind of 473 00:24:19,320 --> 00:24:23,040 Speaker 7: quite sticky and problematic that the balance of risk is 474 00:24:23,080 --> 00:24:27,320 Speaker 7: now on you know, jobs, and I think they've certainly 475 00:24:27,359 --> 00:24:30,080 Speaker 7: got licensed to twenty five if not, if not fifty. 476 00:24:30,760 --> 00:24:33,840 Speaker 2: So what do things look like in Silicon Valley? You're 477 00:24:33,960 --> 00:24:37,680 Speaker 2: very nearby in Los Gatos. How is Silicon Valley holding 478 00:24:37,720 --> 00:24:38,359 Speaker 2: up these days? 479 00:24:39,640 --> 00:24:43,200 Speaker 7: It's still strong, of course, obviously, you know the Max 480 00:24:43,320 --> 00:24:46,520 Speaker 7: seven and a lot of the technology that's emanated from here. 481 00:24:46,560 --> 00:24:49,639 Speaker 7: You know, It's interesting because we're only about what a 482 00:24:49,680 --> 00:24:51,960 Speaker 7: couple months away from the two year anniversary of the 483 00:24:53,240 --> 00:24:56,399 Speaker 7: date that chat GBT cut you know, the World's imagination 484 00:24:56,560 --> 00:25:00,199 Speaker 7: November thirty. But you know we're here, we start. We 485 00:25:00,240 --> 00:25:03,920 Speaker 7: still see you know, healthy optimism. I will say this though, 486 00:25:04,119 --> 00:25:08,200 Speaker 7: you know, being headquartered here, a five billion dollars boutique 487 00:25:08,200 --> 00:25:12,440 Speaker 7: investment from great track record, well pedigree employees, It's been 488 00:25:12,760 --> 00:25:16,760 Speaker 7: very difficult to hire college grads for the last decade. 489 00:25:17,160 --> 00:25:18,840 Speaker 7: You know, we got a conference, you know, we go 490 00:25:18,920 --> 00:25:21,920 Speaker 7: to job fairs at Berkeley and we're just kind of 491 00:25:22,320 --> 00:25:25,880 Speaker 7: lonely folks standing at our booth. In the last year 492 00:25:25,920 --> 00:25:29,320 Speaker 7: that's changed. We've got ten twenty kids standing in line, 493 00:25:30,640 --> 00:25:33,680 Speaker 7: and you know, they're not finding jobs or interest from 494 00:25:33,680 --> 00:25:37,800 Speaker 7: the big tech. So certainly there are cracks even in tech. 495 00:25:38,760 --> 00:25:41,959 Speaker 7: You know, I would assert that they have done a 496 00:25:42,040 --> 00:25:45,159 Speaker 7: student body right from you know general tech kind of 497 00:25:45,200 --> 00:25:47,640 Speaker 7: spend as well as corporations are in the same and investment, 498 00:25:48,040 --> 00:25:50,760 Speaker 7: and they focus so much on AI that's kind of 499 00:25:50,800 --> 00:25:53,640 Speaker 7: sucking a lot of you know, business investment away front 500 00:25:53,640 --> 00:25:54,160 Speaker 7: of the areas. 501 00:25:54,600 --> 00:25:58,119 Speaker 3: Eric, you feel that conditions in the economy have changed 502 00:25:58,160 --> 00:25:59,680 Speaker 3: a lot to cause that, or do you think it's 503 00:25:59,760 --> 00:26:04,320 Speaker 3: just companies are maybe not clinging to their employees so much. 504 00:26:04,520 --> 00:26:06,960 Speaker 3: You know, there was a time when they were hoarding 505 00:26:07,040 --> 00:26:09,760 Speaker 3: employees because they were fearful of not being able to 506 00:26:09,800 --> 00:26:12,639 Speaker 3: find them. You even referenced that yourself, that it wasn't 507 00:26:12,680 --> 00:26:14,800 Speaker 3: easy there for a long period of time. So what 508 00:26:14,880 --> 00:26:18,040 Speaker 3: is it now, weakening economy or just maybe changing hiring 509 00:26:18,080 --> 00:26:19,680 Speaker 3: conditions at the companies. 510 00:26:21,080 --> 00:26:24,960 Speaker 7: It's probably concern about a weakening economy. You know, we've 511 00:26:25,000 --> 00:26:27,800 Speaker 7: had a lot of fiscal and monitary stimulus. At one 512 00:26:27,800 --> 00:26:29,960 Speaker 7: point in the US it was fifty percent of GDP 513 00:26:30,119 --> 00:26:32,800 Speaker 7: at the height of the pandemic that's coming off. I 514 00:26:32,800 --> 00:26:34,840 Speaker 7: think you have some concerns. I think you have concerns 515 00:26:34,840 --> 00:26:38,440 Speaker 7: about the ability of corporations to pass on nominal price 516 00:26:38,480 --> 00:26:42,879 Speaker 7: increases and kind of lever that into you know, higher 517 00:26:42,880 --> 00:26:46,720 Speaker 7: profit margins and profits now that you guys come down, 518 00:26:46,760 --> 00:26:49,199 Speaker 7: be careful. What you wish for is now obviously that 519 00:26:49,400 --> 00:26:53,400 Speaker 7: the revenue line is going to moderate for Corporate America certainly, 520 00:26:54,320 --> 00:26:57,000 Speaker 7: and so there's going to be probably some pushback on margins. Now, 521 00:26:57,040 --> 00:27:01,200 Speaker 7: margins came through quite strong on Q two or US corporations, 522 00:27:02,040 --> 00:27:04,679 Speaker 7: you know, it's kind of significant jump from year every year, actually, 523 00:27:05,040 --> 00:27:07,879 Speaker 7: but I think there's some consternation go forward that you 524 00:27:07,920 --> 00:27:11,400 Speaker 7: know that could be under pressure. And you've also got 525 00:27:11,480 --> 00:27:14,040 Speaker 7: kind of the election cycle kind of concerning some So 526 00:27:14,640 --> 00:27:16,639 Speaker 7: I think there are some real concerns. You see it 527 00:27:16,680 --> 00:27:19,400 Speaker 7: in im you see it in city Surprise index, you're 528 00:27:19,400 --> 00:27:23,399 Speaker 7: seeing in the jobs. There's a lot of clear evidence 529 00:27:23,640 --> 00:27:26,800 Speaker 7: that the economy is slow, not cracking, but it's certainly slowing. 530 00:27:26,960 --> 00:27:28,960 Speaker 2: Well, there's a lot of capital on the sidelines. I 531 00:27:29,000 --> 00:27:32,160 Speaker 2: think we can agree on that much. You mentioned that 532 00:27:32,200 --> 00:27:35,679 Speaker 2: we're approaching the second anniversary of chat GPT. We had 533 00:27:35,680 --> 00:27:38,600 Speaker 2: a story here last week about open Ai doing a 534 00:27:38,640 --> 00:27:41,879 Speaker 2: funding round and maybe evaluation of around one hundred and 535 00:27:41,920 --> 00:27:44,639 Speaker 2: fifty billion. Does that sound excessive to you? 536 00:27:46,720 --> 00:27:48,880 Speaker 7: It does, you know, I think one of the things 537 00:27:48,880 --> 00:27:51,800 Speaker 7: we've done, and we have the curse and the blessing 538 00:27:51,840 --> 00:27:56,000 Speaker 7: of being a value equity manager in Silicon Valley, it's 539 00:27:56,040 --> 00:27:58,359 Speaker 7: you know, you either keep your pricing discipline or you 540 00:27:58,440 --> 00:28:02,240 Speaker 7: melt because of the pressure. And so you know, we've 541 00:28:02,280 --> 00:28:04,760 Speaker 7: done a lot of look around that work around this 542 00:28:04,880 --> 00:28:08,439 Speaker 7: because there's no question this is a powerful technology. Is 543 00:28:08,520 --> 00:28:13,280 Speaker 7: no question chat GBT is very valuable, you know, given 544 00:28:13,320 --> 00:28:16,600 Speaker 7: the deals that's done with you know, huge platforms like 545 00:28:16,640 --> 00:28:19,679 Speaker 7: Apple and Alphabet. Of course, it's it's it's you know, 546 00:28:19,720 --> 00:28:22,960 Speaker 7: Google's growth a lot. How much is the question, right? 547 00:28:23,000 --> 00:28:26,280 Speaker 7: And that's what the great question on all the two 548 00:28:26,400 --> 00:28:29,600 Speaker 7: hundred three hundred million dollars of Capex and AI the 549 00:28:29,640 --> 00:28:32,640 Speaker 7: last couple of years, returns as it generated so far 550 00:28:32,800 --> 00:28:35,880 Speaker 7: very little now going forward, we expect that to happen, 551 00:28:35,960 --> 00:28:37,880 Speaker 7: but how how long does it take? And then how 552 00:28:37,880 --> 00:28:41,000 Speaker 7: you just count that back into present value profits? And 553 00:28:41,480 --> 00:28:43,280 Speaker 7: that's why a lot of these names down, you know, 554 00:28:43,360 --> 00:28:47,160 Speaker 7: toward to date, Q three IT sector is down heading 555 00:28:47,160 --> 00:28:50,360 Speaker 7: into this past week eight percent. Max Evan's been down. 556 00:28:50,560 --> 00:28:52,360 Speaker 7: It's been the rest of the four hundred and ninety 557 00:28:52,360 --> 00:28:55,680 Speaker 7: three that have been raising things. So there's some concern. 558 00:28:55,800 --> 00:28:59,280 Speaker 3: So that breadth feels pretty good to some people. The 559 00:28:59,280 --> 00:29:01,840 Speaker 3: figures that I made were, as you mentioned, the mag 560 00:29:01,920 --> 00:29:06,080 Speaker 3: seven index down five to eight percent, real estate utilities 561 00:29:06,120 --> 00:29:08,720 Speaker 3: gaining eleven percent. But just here of late, you know, 562 00:29:08,760 --> 00:29:13,480 Speaker 3: we have seen Megacap do pretty well. Do you like 563 00:29:13,480 --> 00:29:14,920 Speaker 3: the four ninety three at the moment or do you 564 00:29:14,920 --> 00:29:15,440 Speaker 3: like the seven? 565 00:29:17,200 --> 00:29:20,240 Speaker 7: Really like honestly, the four ninety three. Just because here's 566 00:29:20,280 --> 00:29:22,840 Speaker 7: why the major question, the major point to make here 567 00:29:22,960 --> 00:29:26,080 Speaker 7: on this topic, it's a great question. Is today the 568 00:29:26,120 --> 00:29:29,560 Speaker 7: MAX seven in particular responsible for over one hundred percent 569 00:29:29,600 --> 00:29:31,360 Speaker 7: of that's people have find our earnings for the last 570 00:29:31,400 --> 00:29:34,480 Speaker 7: six quarters until Q two they respilms over for less 571 00:29:34,520 --> 00:29:36,840 Speaker 7: than half and so it, you know, is still the 572 00:29:36,920 --> 00:29:40,200 Speaker 7: leader out of about twenty percent year over year and EPs. 573 00:29:40,720 --> 00:29:44,120 Speaker 7: But things like financials and healthcare we're up eighteen and 574 00:29:44,160 --> 00:29:50,719 Speaker 7: seventeen percent respectively. More interestingly, as consensus has that trend continuing, 575 00:29:50,760 --> 00:29:54,120 Speaker 7: so that growth scarcity problem seems to be abating. And 576 00:29:54,160 --> 00:29:57,640 Speaker 7: so what's happened is next year, things like the even 577 00:29:57,720 --> 00:30:01,880 Speaker 7: rust one thousand value consensus earnings growth, it's expected to 578 00:30:01,920 --> 00:30:05,360 Speaker 7: be fifteen percent year of a year. MAX seven is 579 00:30:05,400 --> 00:30:09,120 Speaker 7: down to sixteen, Max seven trading above thirty, Restaurant aven 580 00:30:09,200 --> 00:30:12,080 Speaker 7: values trading at fifteen. So it's all about just relative 581 00:30:12,160 --> 00:30:15,760 Speaker 7: risks versus reward. And I think that you know, if 582 00:30:15,840 --> 00:30:18,960 Speaker 7: we don't have a hard landing and you don't have 583 00:30:19,040 --> 00:30:22,480 Speaker 7: growth scarcity, the other four ninety three are very attractive. 584 00:30:22,520 --> 00:30:24,360 Speaker 7: We've got stocks in our portfolio that are up a 585 00:30:24,360 --> 00:30:27,120 Speaker 7: lot after you two season and you know, all they 586 00:30:27,120 --> 00:30:30,160 Speaker 7: did was grow ten, twelve, fifteen percent earnings. But because 587 00:30:30,160 --> 00:30:33,160 Speaker 7: they've been neglected for years, they've been catching a bit. 588 00:30:33,520 --> 00:30:36,600 Speaker 2: Eric, very quickly. Thirty seconds or so. It was about 589 00:30:36,640 --> 00:30:39,560 Speaker 2: eighteen months ago that Silicon Valley Bank collapsed. How is 590 00:30:39,600 --> 00:30:42,120 Speaker 2: commercial real estate holding up in the Bay Area. 591 00:30:43,880 --> 00:30:46,400 Speaker 7: It's still it's still struggling. You know, vacancy rates are 592 00:30:46,440 --> 00:30:48,720 Speaker 7: still quite high. You know, the return to the office 593 00:30:48,920 --> 00:30:51,640 Speaker 7: is slowest in the Bay Area as the function of 594 00:30:51,680 --> 00:30:54,640 Speaker 7: the tech kind of industry dominating here and the ability 595 00:30:54,680 --> 00:30:57,880 Speaker 7: to work remotely. So it's still struggling. It's going to 596 00:30:57,960 --> 00:30:59,600 Speaker 7: take a while and. 597 00:31:00,080 --> 00:31:02,480 Speaker 3: Flee in ten seconds. Drill, baby, drill. Does that mean 598 00:31:02,480 --> 00:31:05,560 Speaker 3: lower prices and lower profits or better conditions for the 599 00:31:05,600 --> 00:31:06,320 Speaker 3: oil companies? 600 00:31:07,600 --> 00:31:09,920 Speaker 7: That's a good question. You know, a lack of supply 601 00:31:10,000 --> 00:31:13,400 Speaker 7: has really helped companies damp up their capex and finally, 602 00:31:13,480 --> 00:31:16,960 Speaker 7: you know, generate real theod capital returns for investors until 603 00:31:17,280 --> 00:31:20,400 Speaker 7: oils kind of hit them. So yeah, it's tough to say. 604 00:31:20,720 --> 00:31:23,440 Speaker 3: I think, be careful what you wish for. I think 605 00:31:23,520 --> 00:31:26,240 Speaker 3: in some ways for the oil industry anyway, Eric, out 606 00:31:26,280 --> 00:31:29,520 Speaker 3: of time, Thank you, Eric Lynch from Sharp Investments. 607 00:31:32,520 --> 00:31:35,479 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 608 00:31:35,520 --> 00:31:38,640 Speaker 2: the stories making news and moving markets in the Asia Pacific. 609 00:31:39,160 --> 00:31:42,280 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 610 00:31:42,280 --> 00:31:45,880 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 611 00:31:45,920 --> 00:31:49,720 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen 612 00:31:49,840 --> 00:31:52,920 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 613 00:31:52,920 --> 00:31:54,000 Speaker 2: Bloomberg Business app.