1 00:00:11,080 --> 00:00:14,680 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,720 --> 00:00:20,360 Speaker 1: I'm Joe Wisn'tal and I'm Tracy allowit. So, Tracy, you're 3 00:00:20,360 --> 00:00:24,120 Speaker 1: in Hong Kong. Obviously we've been talking about some recent 4 00:00:24,160 --> 00:00:28,840 Speaker 1: episodes about some of the reemergence of the virus there, 5 00:00:29,280 --> 00:00:33,000 Speaker 1: but also virus aside, this is just a sort of 6 00:00:33,360 --> 00:00:36,960 Speaker 1: a big moment in time for Hong Kong. Previous reason, Yeah, 7 00:00:37,120 --> 00:00:39,880 Speaker 1: there's no shortage of news slow here in Hong Kong. 8 00:00:40,320 --> 00:00:44,320 Speaker 1: Aside from the virus. We've had a year of unrest 9 00:00:44,400 --> 00:00:48,800 Speaker 1: in the form of the big protests against extradition law, 10 00:00:49,080 --> 00:00:51,920 Speaker 1: and now most recently in the past month, we've had 11 00:00:52,120 --> 00:00:56,640 Speaker 1: the imposition of a new national security law which gives 12 00:00:56,760 --> 00:01:02,720 Speaker 1: China sweeping powers. I guess you'd say over Hong Kong. Right, 13 00:01:02,760 --> 00:01:05,119 Speaker 1: So I remember thinking, like, you know, a year ago. 14 00:01:05,680 --> 00:01:07,839 Speaker 1: You know, it's probably because a year ago, by now, 15 00:01:08,120 --> 00:01:11,880 Speaker 1: the sort of like the protests had really gathered steam, 16 00:01:11,920 --> 00:01:14,679 Speaker 1: Like it was like last summer when we really saw 17 00:01:14,800 --> 00:01:17,520 Speaker 1: the re acceleration of the protests, and you and I 18 00:01:17,560 --> 00:01:20,480 Speaker 1: would be on meetings pretty regularly and you'd have to 19 00:01:20,520 --> 00:01:23,000 Speaker 1: talk to us about how you were getting into work 20 00:01:23,040 --> 00:01:26,440 Speaker 1: and so forth and things like that. Hmm yep, that's right, 21 00:01:26,520 --> 00:01:31,880 Speaker 1: So you must be pretty exhausted. Yeah, I mean, look, 22 00:01:31,959 --> 00:01:35,319 Speaker 1: there's a lot going on in the world, um, but yeah, 23 00:01:35,440 --> 00:01:37,320 Speaker 1: definitely a lot going on in Hong Kong. And like 24 00:01:37,360 --> 00:01:42,039 Speaker 1: the mood is, the mood's pretty um morose at the moment, 25 00:01:42,160 --> 00:01:44,080 Speaker 1: I gotta say. And then beyond that, of course, we 26 00:01:44,120 --> 00:01:47,760 Speaker 1: have the economic situation, which is that Hong Kong just 27 00:01:47,800 --> 00:01:50,160 Speaker 1: can't catch a break. So we already saw the Hong 28 00:01:50,200 --> 00:01:54,120 Speaker 1: Kong economy affected by the protests. Lots of mainland tourists 29 00:01:54,160 --> 00:01:58,280 Speaker 1: and shoppers stopped coming into the city. And then of 30 00:01:58,320 --> 00:02:01,680 Speaker 1: course we had the virus cases is beginning to really 31 00:02:01,680 --> 00:02:04,080 Speaker 1: build up earlier in the year. Now we have the 32 00:02:04,120 --> 00:02:06,720 Speaker 1: third wave, so that continues to hit the economy. And 33 00:02:06,760 --> 00:02:09,680 Speaker 1: now we also have the National Security Law. And again 34 00:02:09,680 --> 00:02:13,720 Speaker 1: the question there is slightly different to viruses and protests, 35 00:02:13,800 --> 00:02:16,000 Speaker 1: which you know sort of hit the retail sector. Of 36 00:02:16,000 --> 00:02:19,280 Speaker 1: the hardest question about the National Security Law is whether 37 00:02:19,400 --> 00:02:23,800 Speaker 1: or not it's going to impact the international character of 38 00:02:23,840 --> 00:02:29,600 Speaker 1: Hong Kong as a financial center and international financial center. Right. 39 00:02:30,000 --> 00:02:33,280 Speaker 1: So obviously, seeing we've seen all this pressure build on 40 00:02:33,440 --> 00:02:36,840 Speaker 1: Hong Kong, which reminds me or which calls to mind 41 00:02:36,880 --> 00:02:40,360 Speaker 1: that essentially, for the last decade, I feel like every 42 00:02:40,440 --> 00:02:43,400 Speaker 1: year or every two years or something, there's some new 43 00:02:43,440 --> 00:02:48,600 Speaker 1: hedge funder coming out that predicts the imminent severing of 44 00:02:48,639 --> 00:02:51,120 Speaker 1: the link between the Hong Kong dollar and the US dollar. 45 00:02:51,600 --> 00:02:54,399 Speaker 1: And for those who don't know, for a long time, 46 00:02:54,400 --> 00:02:57,440 Speaker 1: the Hong Kong dollar has been pegged to be uh 47 00:02:57,600 --> 00:03:00,000 Speaker 1: stable with the U. S Dollar. What's it peg dot again? 48 00:03:00,040 --> 00:03:03,280 Speaker 1: Do you remember since nine eight three? And you know 49 00:03:03,320 --> 00:03:05,600 Speaker 1: I remember that because it's my birthday. I am the 50 00:03:05,639 --> 00:03:08,679 Speaker 1: same age as the Hong Kong dollar peg. So what's 51 00:03:08,680 --> 00:03:11,800 Speaker 1: a pet? Oh? What is it peg? Debt? Oh? Sorry, 52 00:03:11,840 --> 00:03:14,160 Speaker 1: I thought you said when was it pegg? I think 53 00:03:14,160 --> 00:03:18,400 Speaker 1: it was pegged between um seven point seven five to 54 00:03:18,680 --> 00:03:22,640 Speaker 1: seven point eight five something like that. There is Do 55 00:03:22,639 --> 00:03:25,359 Speaker 1: you have all these hedge funders and every year they're like, oh, 56 00:03:25,400 --> 00:03:27,560 Speaker 1: this is the year that the Hong Kong dollar peg 57 00:03:28,000 --> 00:03:31,040 Speaker 1: is finally gonna break. But as you point out, since 58 00:03:31,120 --> 00:03:35,040 Speaker 1: nineteen eighty three, it's a health quite front. Yeah. There's 59 00:03:35,040 --> 00:03:38,880 Speaker 1: been a couple of voices who have been especially vocal recently. 60 00:03:38,960 --> 00:03:41,200 Speaker 1: One of them is Kyle Bass, who I think has 61 00:03:41,240 --> 00:03:45,280 Speaker 1: actually started a whole new fund dedicated to betting on 62 00:03:45,320 --> 00:03:48,280 Speaker 1: a collapse in the peg. And it's an interesting one. 63 00:03:48,320 --> 00:03:51,400 Speaker 1: I feel like whenever you have a dollar peg, I 64 00:03:51,440 --> 00:03:53,680 Speaker 1: feel like people are always talking about the potential for 65 00:03:53,720 --> 00:03:55,760 Speaker 1: it to break for obvious reasons. When I was in 66 00:03:55,840 --> 00:03:58,400 Speaker 1: Abu Dhabi and do you buy, you know, there was 67 00:03:58,480 --> 00:04:01,560 Speaker 1: talk about the peg, the ua E that was always 68 00:04:01,680 --> 00:04:04,120 Speaker 1: under pressure and on the verge of collapse according to 69 00:04:04,160 --> 00:04:08,360 Speaker 1: some people. But the Hong Kong peg, it's an interesting one. 70 00:04:09,040 --> 00:04:10,960 Speaker 1: It is, and we're gonna be talking about it today. 71 00:04:11,000 --> 00:04:14,400 Speaker 1: And you know, obviously it's you know, we can't even 72 00:04:14,480 --> 00:04:16,279 Speaker 1: in the set up here and talking about all the 73 00:04:16,520 --> 00:04:20,280 Speaker 1: pressure on Hong Kong from various angles. You know, there's 74 00:04:20,279 --> 00:04:23,280 Speaker 1: all kinds of reasons to argue that the peg is 75 00:04:23,320 --> 00:04:26,600 Speaker 1: going to break, but we almost never hear the other side, 76 00:04:26,720 --> 00:04:29,440 Speaker 1: which is that the peg has been very durable and 77 00:04:29,480 --> 00:04:33,520 Speaker 1: why the peg won't necessarily break. Um. So that's what 78 00:04:33,600 --> 00:04:36,720 Speaker 1: we're going to discuss on the episode today. We're going 79 00:04:36,800 --> 00:04:39,680 Speaker 1: to be talking with Chris wigand he is the c 80 00:04:39,920 --> 00:04:43,280 Speaker 1: i O and co founder of Royal Bridge Capital, a 81 00:04:43,360 --> 00:04:46,120 Speaker 1: hedge fund. He used to be at Soros. So we 82 00:04:46,120 --> 00:04:48,200 Speaker 1: can talk about that, and we're going to talk about 83 00:04:48,600 --> 00:04:51,920 Speaker 1: the Hong Kong dollar peg, why why it's so stable, 84 00:04:52,000 --> 00:04:55,760 Speaker 1: and why the those betting on its imminent collapse may 85 00:04:55,800 --> 00:04:58,160 Speaker 1: have to wait. Awhile, So, Chris, thank you very much 86 00:04:58,160 --> 00:05:01,480 Speaker 1: for joining us. Oh Joe, thank you for Tracy, Thank 87 00:05:01,520 --> 00:05:04,200 Speaker 1: you for having me. So, Chris, let's talk a little 88 00:05:04,320 --> 00:05:07,680 Speaker 1: background from your perspective. And Tracy mentioned that the PEG 89 00:05:07,800 --> 00:05:11,760 Speaker 1: was established year for birth. I'm looking at a chart 90 00:05:11,760 --> 00:05:15,200 Speaker 1: of it right now. It's pretty remarkable. It's basically done nothing. 91 00:05:15,480 --> 00:05:19,480 Speaker 1: You know, the peg has been extremely solid since ninety three. 92 00:05:19,680 --> 00:05:24,479 Speaker 1: Why was it established in the first place. So the 93 00:05:24,520 --> 00:05:28,520 Speaker 1: peck was originally established in as Tracy said, and kind 94 00:05:28,520 --> 00:05:31,919 Speaker 1: of fall of of eighty three, largely because the currency 95 00:05:31,960 --> 00:05:36,839 Speaker 1: had started to come under pretty serious devaluations, slight depreciatory pressure. 96 00:05:37,320 --> 00:05:41,920 Speaker 1: As Lady Thatcher and then Chinese leader Don Jo Ping, 97 00:05:42,360 --> 00:05:46,679 Speaker 1: we're starting to talk about the handover of Hong Kong 98 00:05:46,839 --> 00:05:52,160 Speaker 1: back to China when the UK's year Least agreement extended. 99 00:05:52,400 --> 00:05:55,719 Speaker 1: And so those conversations had started in either late eighty 100 00:05:55,760 --> 00:05:59,039 Speaker 1: two or early eighty three, and they started to filter 101 00:05:59,160 --> 00:06:03,760 Speaker 1: out into the public domain over the course of three 102 00:06:04,320 --> 00:06:08,000 Speaker 1: and understandably, there started to be concerns in the marketplace 103 00:06:08,040 --> 00:06:11,200 Speaker 1: about whether China would maintain Hong Kong's rule of law, 104 00:06:11,240 --> 00:06:15,200 Speaker 1: whether the English common law system which underpinned all of 105 00:06:15,240 --> 00:06:18,240 Speaker 1: Hong Kong's contracts and made it such a uh an 106 00:06:18,279 --> 00:06:21,880 Speaker 1: important destination for international finance and trade, would be maintained. 107 00:06:22,200 --> 00:06:24,800 Speaker 1: And so you started to see risk premium wide in 108 00:06:25,120 --> 00:06:28,719 Speaker 1: UH in that manifested itself in a weaker Hong Kong dollar. 109 00:06:29,560 --> 00:06:33,200 Speaker 1: Hong Kong dollar depreciated ground numbers from something that was 110 00:06:33,240 --> 00:06:35,760 Speaker 1: sort of six and a half six sixty in the 111 00:06:35,800 --> 00:06:38,480 Speaker 1: summer all the way up to something that was about 112 00:06:38,720 --> 00:06:42,440 Speaker 1: eight fifty eight against the US dollar in a in 113 00:06:42,480 --> 00:06:45,240 Speaker 1: a pretty short period of time. And the UK decided 114 00:06:45,320 --> 00:06:48,400 Speaker 1: that as in an effort to try to restore stability 115 00:06:48,480 --> 00:06:53,760 Speaker 1: and and help underpin confidence in in Hong Kong, that 116 00:06:53,880 --> 00:06:56,360 Speaker 1: it would try to reap that it would try to 117 00:06:56,480 --> 00:07:00,359 Speaker 1: set a specific band for the currency against US dollar, 118 00:07:00,920 --> 00:07:04,680 Speaker 1: and it did. Um it's set seven eight is the 119 00:07:04,720 --> 00:07:07,960 Speaker 1: midpoint in a in a type band between seven seventy 120 00:07:08,000 --> 00:07:11,560 Speaker 1: five and five, and it's been successful now for almost 121 00:07:11,560 --> 00:07:15,280 Speaker 1: thirty seven full years. M I have a stupid question, 122 00:07:15,320 --> 00:07:18,920 Speaker 1: but when someone decides to create a currency peg, how 123 00:07:19,040 --> 00:07:22,760 Speaker 1: how did they actually go about doing it? Because nowadays, 124 00:07:22,800 --> 00:07:26,080 Speaker 1: when we talk about currency pegs in existence, whenever there's 125 00:07:26,120 --> 00:07:29,240 Speaker 1: pressure on them, we talk about, you know, the city 126 00:07:29,400 --> 00:07:33,040 Speaker 1: or the monetary authorities spending their reserves in order to 127 00:07:33,320 --> 00:07:36,720 Speaker 1: support the peg. So how does that work when they're 128 00:07:36,760 --> 00:07:39,520 Speaker 1: initially setting it up. Well, so it's it's a it's 129 00:07:39,520 --> 00:07:42,280 Speaker 1: a it's a very good question. And the answer is 130 00:07:42,320 --> 00:07:46,640 Speaker 1: it depends if if the market believes that the central 131 00:07:46,680 --> 00:07:50,080 Speaker 1: bank or the Finance ministry is committed to that peg. 132 00:07:50,400 --> 00:07:54,840 Speaker 1: It's possible that just the announcement effect could be successful 133 00:07:54,920 --> 00:07:57,840 Speaker 1: in in releveling that. I mean, we've seen that very recently, 134 00:07:58,400 --> 00:08:01,400 Speaker 1: UH in many respects with the reserves announcement that it 135 00:08:01,440 --> 00:08:06,560 Speaker 1: would start to purchase corporate bombs back in late March, 136 00:08:07,080 --> 00:08:10,400 Speaker 1: when it announced that it would it would buy bonds 137 00:08:10,760 --> 00:08:16,120 Speaker 1: of investment grade companies, the market immediately normalized without the 138 00:08:16,160 --> 00:08:20,320 Speaker 1: Federal reserve spending a single penny until recently, and so 139 00:08:21,080 --> 00:08:24,400 Speaker 1: UH in in the Hong Kong situation, you did get 140 00:08:24,440 --> 00:08:28,440 Speaker 1: a lot of um a sort of announcement effect as 141 00:08:28,440 --> 00:08:33,000 Speaker 1: it's often called, that helped to relevel the currency at 142 00:08:33,000 --> 00:08:36,640 Speaker 1: around the seven seventy band, and then there needed to 143 00:08:36,679 --> 00:08:39,839 Speaker 1: be some maintenance along the way in the early days 144 00:08:39,920 --> 00:08:42,920 Speaker 1: and at different points in time to h to maintain 145 00:08:42,960 --> 00:08:46,480 Speaker 1: that band. But the announcement effect is can be very 146 00:08:46,640 --> 00:08:49,680 Speaker 1: very powerful. Now, if you're a country like let's not 147 00:08:49,760 --> 00:08:52,280 Speaker 1: pick on Argentina, but you know, if they've had a 148 00:08:52,280 --> 00:08:55,560 Speaker 1: currency board in the past and they used to have 149 00:08:55,800 --> 00:08:58,560 Speaker 1: an arrangement similar to what Hong Kong has, and if 150 00:08:58,679 --> 00:09:02,800 Speaker 1: Argentina today tried to re establish a peg at a 151 00:09:02,800 --> 00:09:05,600 Speaker 1: at a stronger currency versus the US dollar than it 152 00:09:05,640 --> 00:09:08,280 Speaker 1: is now, in all likelihood that would be totally unsuccessful 153 00:09:08,280 --> 00:09:12,040 Speaker 1: because they don't have any credibility. But presumably, I mean 154 00:09:12,800 --> 00:09:15,320 Speaker 1: there needs to be more than credibility, right, You need 155 00:09:15,360 --> 00:09:19,280 Speaker 1: to have the balance sheet, You need to have reserves 156 00:09:19,360 --> 00:09:21,640 Speaker 1: so that you can go out into the market and 157 00:09:21,679 --> 00:09:25,720 Speaker 1: make purchases if your currency starts to weaken. You mentioned 158 00:09:25,760 --> 00:09:28,960 Speaker 1: the Fed corollary offering to buy bonds and not needing 159 00:09:29,000 --> 00:09:31,560 Speaker 1: to spend any money. But no one disputes that the 160 00:09:31,559 --> 00:09:34,840 Speaker 1: Federal Reserve has all the US dollars it needs to 161 00:09:34,840 --> 00:09:38,480 Speaker 1: buy bonds because it creates you can create U S dollars. 162 00:09:38,760 --> 00:09:43,240 Speaker 1: Presumably the credibility of a currency board also needs to 163 00:09:43,240 --> 00:09:49,360 Speaker 1: be accompanied by some level of actual casualty, oh absolutely, absolutely, 164 00:09:49,360 --> 00:09:52,760 Speaker 1: And it needs to be accompanied by some level of 165 00:09:53,040 --> 00:09:58,719 Speaker 1: firepower to maintain to maintain the link and for long 166 00:09:58,760 --> 00:10:01,560 Speaker 1: periods of time. You also need underlying fundamentals in the 167 00:10:02,040 --> 00:10:05,600 Speaker 1: in the macro economy to help be supportive of of 168 00:10:05,640 --> 00:10:09,040 Speaker 1: the PEG value now and and Hong Kong has benefited 169 00:10:09,080 --> 00:10:12,800 Speaker 1: from that in part because it has run a current 170 00:10:12,800 --> 00:10:17,360 Speaker 1: account surplus for decades um. Now it's straight straight positions 171 00:10:17,400 --> 00:10:20,440 Speaker 1: which we can get into have have shifted notably and 172 00:10:20,480 --> 00:10:24,040 Speaker 1: have become much more reliant upon exports of services to 173 00:10:24,160 --> 00:10:28,319 Speaker 1: help to maintain its international position. And that's a that's 174 00:10:28,320 --> 00:10:32,840 Speaker 1: an important potential weakness moving forward. But you need announcement 175 00:10:32,840 --> 00:10:35,800 Speaker 1: effect credibility, You need the firepower in the form of 176 00:10:35,880 --> 00:10:39,400 Speaker 1: reserves or other equivalents that can be turned into reserves. 177 00:10:39,640 --> 00:10:42,600 Speaker 1: And you need favorable underlying fundamentals that are consistent with 178 00:10:42,679 --> 00:10:45,280 Speaker 1: where you've where you've set the band for your for 179 00:10:45,320 --> 00:10:48,000 Speaker 1: your currency. And for thirty years, Hong Kong has been 180 00:10:48,000 --> 00:10:51,840 Speaker 1: able to you know, has largely had all of those 181 00:10:52,240 --> 00:10:54,040 Speaker 1: to maintain to help to maintain the pack. I mean 182 00:10:54,040 --> 00:10:55,800 Speaker 1: it hasn't been a smooth ride. That there was the 183 00:10:55,840 --> 00:10:58,319 Speaker 1: late nineteen nineties when there was the attack on the 184 00:10:58,200 --> 00:11:00,000 Speaker 1: on the currency and there was a lot of pressure 185 00:11:00,760 --> 00:11:05,160 Speaker 1: downward on the currency and required massive intervention to maintain 186 00:11:05,200 --> 00:11:07,679 Speaker 1: the peg. But again they had the firepower to do 187 00:11:07,760 --> 00:11:10,679 Speaker 1: so at that point and the commitment and the commitment 188 00:11:10,720 --> 00:11:28,000 Speaker 1: to Can we talk a little bit about the rate 189 00:11:28,040 --> 00:11:31,439 Speaker 1: differentials that you just mentioned, So when you set up 190 00:11:31,760 --> 00:11:37,000 Speaker 1: a currency peg, you're basically tying your fortunes to another 191 00:11:37,000 --> 00:11:40,840 Speaker 1: country's currency, and therefore it's monetary policy, and you know, 192 00:11:40,920 --> 00:11:45,000 Speaker 1: maybe the economic situation in your own country doesn't match 193 00:11:45,080 --> 00:11:48,400 Speaker 1: up with what's happening in the US at the same time. 194 00:11:48,720 --> 00:11:51,800 Speaker 1: How has that played out for Hong Kong and Hong Kong. 195 00:11:51,840 --> 00:11:54,600 Speaker 1: Of course, I guess the situation is even more complicated 196 00:11:54,679 --> 00:11:57,680 Speaker 1: because it's monetary policy is tied to the US, but 197 00:11:57,720 --> 00:12:00,720 Speaker 1: at the same time it's right on the doorstep of China, 198 00:12:00,880 --> 00:12:04,120 Speaker 1: which is growing at a very very different rate to 199 00:12:04,200 --> 00:12:07,760 Speaker 1: the US over the past few decades. No, that that's 200 00:12:07,840 --> 00:12:11,560 Speaker 1: that's right, And so you know, from a historical perspective, 201 00:12:11,920 --> 00:12:15,079 Speaker 1: you know, Hong Kong has sat in the middle of 202 00:12:15,160 --> 00:12:18,559 Speaker 1: the two most powerful trends that we've seen in economics 203 00:12:18,559 --> 00:12:20,960 Speaker 1: and finance for the past thirty years. Trend one being 204 00:12:21,000 --> 00:12:24,680 Speaker 1: that um U S interest rates have fallen secularly from 205 00:12:24,880 --> 00:12:27,880 Speaker 1: low double digits to zero, and so Hong Kong is 206 00:12:27,920 --> 00:12:33,200 Speaker 1: effectively imported UH those interest rates and in monetary policy, 207 00:12:33,280 --> 00:12:38,280 Speaker 1: helping to create a very favorable UH financial conditions in 208 00:12:38,360 --> 00:12:41,440 Speaker 1: Hong Kong. And Hong Kong has sat at the doorstep 209 00:12:41,600 --> 00:12:45,080 Speaker 1: is is you mentioned Tracy to China and has been 210 00:12:45,200 --> 00:12:48,079 Speaker 1: key in China's early development as its key southern port, 211 00:12:48,240 --> 00:12:52,480 Speaker 1: as its outlet for financial capital both into China and 212 00:12:52,840 --> 00:12:56,600 Speaker 1: out of China. And so it's reaped, it's uniquely reaped 213 00:12:56,760 --> 00:12:59,440 Speaker 1: the benefits of both of those major trends. Huge development 214 00:12:59,480 --> 00:13:02,520 Speaker 1: in China which has leaked into Hong Kong and been 215 00:13:02,880 --> 00:13:07,079 Speaker 1: very profitable, and the secular decline in interest rates um 216 00:13:07,240 --> 00:13:11,360 Speaker 1: in the United States, which has also leaked into Hong Kong. 217 00:13:11,400 --> 00:13:14,400 Speaker 1: And so what you've seen is you've seen a phenomenal 218 00:13:14,480 --> 00:13:18,160 Speaker 1: period of growth and development in Hong Kong by sitting 219 00:13:18,160 --> 00:13:21,120 Speaker 1: in the middle of those two trends. Hong Kong has 220 00:13:21,520 --> 00:13:24,520 Speaker 1: my most estimates, about the same number of billionaires as 221 00:13:24,559 --> 00:13:27,480 Speaker 1: New York City, does. For instance, it's per capita income 222 00:13:27,600 --> 00:13:31,600 Speaker 1: is nearly sixty thou among the highest and in the world. 223 00:13:32,160 --> 00:13:36,160 Speaker 1: But the downside of that is that you've started to see, 224 00:13:36,280 --> 00:13:38,960 Speaker 1: especially in the past decade, as rates in the US 225 00:13:39,040 --> 00:13:42,080 Speaker 1: were very low and you had a spectacular credit boom 226 00:13:42,120 --> 00:13:46,239 Speaker 1: in China that kept leaking into Hong Kong both overtly 227 00:13:46,320 --> 00:13:50,280 Speaker 1: and indirectly, you started to see misallocations start to form, 228 00:13:50,320 --> 00:13:53,120 Speaker 1: and in my judgment, in the Hong Kong economy, for instance, 229 00:13:54,040 --> 00:13:58,240 Speaker 1: property prices have surged since UH two thousand a property 230 00:13:58,280 --> 00:14:01,000 Speaker 1: prices on a per square meter basis we up roughly 231 00:14:01,000 --> 00:14:05,360 Speaker 1: two in the past ten to twelve years. Hasn't seen 232 00:14:05,360 --> 00:14:09,120 Speaker 1: a surge in credit and the non financial sector on 233 00:14:09,240 --> 00:14:12,040 Speaker 1: financial debt to GDP and Hong Kong is something like 234 00:14:12,080 --> 00:14:15,440 Speaker 1: three now up by more than a hundred and fifty 235 00:14:15,440 --> 00:14:18,840 Speaker 1: percentage points since the end of two thousand and eight. 236 00:14:19,400 --> 00:14:21,000 Speaker 1: So while Hong Kong has been able to reap a 237 00:14:21,000 --> 00:14:25,520 Speaker 1: lot of these benefits, it's also creating misallocations now, at 238 00:14:25,600 --> 00:14:29,800 Speaker 1: least in my judgment, potentially pretty serious misallocations in its 239 00:14:29,800 --> 00:14:34,920 Speaker 1: housing and UH housing and credit markets. Chris can, can 240 00:14:34,960 --> 00:14:38,520 Speaker 1: you give a slightly more color on the leakage points. 241 00:14:38,600 --> 00:14:42,120 Speaker 1: So the idea that you know, excess capital from China 242 00:14:42,280 --> 00:14:45,480 Speaker 1: sort of leaks out into Hong Kong, because I feel 243 00:14:45,520 --> 00:14:49,400 Speaker 1: like this is something that's quite unusual about Hong Kong specifically, 244 00:14:49,600 --> 00:14:53,600 Speaker 1: and not a lot of people who are living outside 245 00:14:53,680 --> 00:14:59,280 Speaker 1: of the area necessarily understand it. Sure, So, so there's 246 00:14:59,280 --> 00:15:01,920 Speaker 1: so it's happened in a variety ways. You know, let's 247 00:15:01,920 --> 00:15:05,560 Speaker 1: talk about sort of the the shadow ways first and 248 00:15:05,560 --> 00:15:08,560 Speaker 1: then and then get into the more legitimate ways. So 249 00:15:09,000 --> 00:15:13,520 Speaker 1: early on in the past decade kind of two thousand, ten, eleven, twelve, thirteen, 250 00:15:13,560 --> 00:15:17,720 Speaker 1: and even fourteen UM, when Hong Kong was still an 251 00:15:17,760 --> 00:15:24,400 Speaker 1: incredibly important export destination for export upport for for Chinese products, 252 00:15:24,680 --> 00:15:27,480 Speaker 1: you would see a lot of what what was often 253 00:15:27,480 --> 00:15:32,720 Speaker 1: described as over invoicing of UM export orders. So there's 254 00:15:32,760 --> 00:15:36,720 Speaker 1: no issue from with it's perfectly legal for mainland Chinese 255 00:15:36,720 --> 00:15:42,040 Speaker 1: company two move capital outside of China if it's being 256 00:15:42,080 --> 00:15:45,960 Speaker 1: done in the context of international trade. But what you 257 00:15:46,000 --> 00:15:48,240 Speaker 1: would see is a way to try to get money 258 00:15:48,280 --> 00:15:51,720 Speaker 1: out of China UM and into Hong Kong, where there 259 00:15:51,840 --> 00:15:55,560 Speaker 1: was the more traditional Western rule of law and possibly 260 00:15:55,840 --> 00:15:58,040 Speaker 1: the easier ability to move the money from Hong Kong 261 00:15:58,080 --> 00:16:01,520 Speaker 1: to elsewhere, be at the US, Canada, UH, Singapore, whatever. 262 00:16:01,720 --> 00:16:04,280 Speaker 1: You would see a lot of over invoicing of of 263 00:16:04,440 --> 00:16:07,640 Speaker 1: exports and imports. In other words, you know, maybe there 264 00:16:07,760 --> 00:16:11,360 Speaker 1: was the dollar value of goods moving was was ten 265 00:16:11,360 --> 00:16:14,160 Speaker 1: million dollars, but on the invoices it would be marked 266 00:16:14,200 --> 00:16:17,880 Speaker 1: for fifteen million dollars, so that you could basically keep 267 00:16:18,120 --> 00:16:21,360 Speaker 1: find a way to get five million extra dollars beyond 268 00:16:21,400 --> 00:16:23,680 Speaker 1: which you were actually trading. You can get that money 269 00:16:23,760 --> 00:16:26,600 Speaker 1: legally out of mainland China into Hong Kong and then 270 00:16:26,640 --> 00:16:30,480 Speaker 1: send it elsewhere. Now the mainland Chinese eventually caught authorities 271 00:16:30,480 --> 00:16:32,840 Speaker 1: eventually caught on and started to close that gap. But 272 00:16:32,880 --> 00:16:34,840 Speaker 1: that was one way that you saw tremendous kind of 273 00:16:34,880 --> 00:16:38,680 Speaker 1: leakage from mainland China with his close capital account into 274 00:16:38,680 --> 00:16:41,600 Speaker 1: Hong Kong in a in a sort of shadow way. 275 00:16:41,880 --> 00:16:46,240 Speaker 1: Then there's some more direct, explicit above boardways. As China 276 00:16:46,280 --> 00:16:49,560 Speaker 1: has become wealthier and wealthier, there's been more and more 277 00:16:49,920 --> 00:16:53,960 Speaker 1: increase in sophistication and financial services being offered to mainland 278 00:16:54,080 --> 00:16:56,720 Speaker 1: China Chinese people. So there's not much in the way 279 00:16:56,760 --> 00:17:00,600 Speaker 1: of life insurance in mainland China that's a only market 280 00:17:00,640 --> 00:17:03,200 Speaker 1: in Hong Kong where Hong Kong is able to sell 281 00:17:03,200 --> 00:17:08,119 Speaker 1: life insurance products to mainland Chinese. Asset management companies, both 282 00:17:08,200 --> 00:17:11,159 Speaker 1: stayed owned and privately owned have sprunt up in in 283 00:17:11,320 --> 00:17:15,880 Speaker 1: Hong Kong with the idea of servicing this huge population 284 00:17:16,080 --> 00:17:20,440 Speaker 1: in mainland China. So money is coming out of um, 285 00:17:20,440 --> 00:17:22,439 Speaker 1: out of the mainland into Hong Kong, and those asset 286 00:17:22,440 --> 00:17:25,520 Speaker 1: management programs again both totally above board, but also in 287 00:17:25,640 --> 00:17:30,879 Speaker 1: other ways to seek returns that are in non h 288 00:17:31,000 --> 00:17:35,159 Speaker 1: CNY type assets. So there's lots of things, you know 289 00:17:35,480 --> 00:17:39,760 Speaker 1: like that where because of the trade relationships and Hong 290 00:17:39,840 --> 00:17:43,920 Speaker 1: Kong's importance a support for China, both export and import, 291 00:17:44,320 --> 00:17:46,720 Speaker 1: there was a lot of sort of shadow ways that 292 00:17:46,960 --> 00:17:50,200 Speaker 1: the business people we find ways to get money out 293 00:17:50,200 --> 00:17:52,320 Speaker 1: of the country and into Hong Kong. And now there's 294 00:17:52,359 --> 00:17:55,399 Speaker 1: these these more traditional ways where Hong Kong is is 295 00:17:55,440 --> 00:18:00,480 Speaker 1: really pivoting from being a what has been mostly international 296 00:18:00,560 --> 00:18:04,240 Speaker 1: facing city, the one that's trying to take advantage of 297 00:18:04,440 --> 00:18:07,520 Speaker 1: the financial the better financial wherewith all of the mainland 298 00:18:07,600 --> 00:18:10,639 Speaker 1: Chinese people, and there's money that comes totally legally, and 299 00:18:10,640 --> 00:18:12,720 Speaker 1: then there's money that you know, continues to try to 300 00:18:12,760 --> 00:18:16,080 Speaker 1: leak aboard because of the perception that you can get 301 00:18:16,080 --> 00:18:18,480 Speaker 1: money from Hong Kong to other parts of the world 302 00:18:18,560 --> 00:18:23,120 Speaker 1: more easily than you can from mainland China. So if 303 00:18:23,280 --> 00:18:26,200 Speaker 1: I'm listening to you, and let's just say like I'm 304 00:18:26,200 --> 00:18:30,720 Speaker 1: your sort of typical macro tourist, kind of hedge fund guy, 305 00:18:31,080 --> 00:18:33,960 Speaker 1: I don't know. And I listened to that, and I say, oh, well, 306 00:18:34,240 --> 00:18:36,639 Speaker 1: part of the story with a big part of the 307 00:18:36,720 --> 00:18:40,159 Speaker 1: story with Hong Kong has been these ever decrease in 308 00:18:40,280 --> 00:18:44,679 Speaker 1: US rates and that's creating this huge potential boom in 309 00:18:44,880 --> 00:18:48,439 Speaker 1: um private sector dead and it's crazy housing market bubble. 310 00:18:48,880 --> 00:18:51,040 Speaker 1: And then on the other side, it's like, okay, Hong 311 00:18:51,119 --> 00:18:55,119 Speaker 1: Kong has benefited for years as being this destination for 312 00:18:55,359 --> 00:18:59,080 Speaker 1: Chinese capital in part because of the Western style rule 313 00:18:59,119 --> 00:19:01,000 Speaker 1: of law people wanting to get their money out of 314 00:19:01,480 --> 00:19:05,159 Speaker 1: un denominated asset. We have the National Security law, and 315 00:19:05,240 --> 00:19:07,919 Speaker 1: so maybe that's going to weekend, Okay, great time to 316 00:19:07,960 --> 00:19:10,320 Speaker 1: bet against the Hong Kong dollar peg. It looks like 317 00:19:10,359 --> 00:19:13,080 Speaker 1: all of these things are coming together and it's uh 318 00:19:13,160 --> 00:19:15,920 Speaker 1: that the clock must be ticking now. So what would 319 00:19:15,960 --> 00:19:19,560 Speaker 1: I be getting wrong in that formulation? Because the way 320 00:19:19,600 --> 00:19:22,119 Speaker 1: you set it up. I could certainly tell a story 321 00:19:22,200 --> 00:19:24,520 Speaker 1: for why this must be rough times ahead for the DOT, 322 00:19:24,600 --> 00:19:27,680 Speaker 1: for the PEG. No, I think it's I think it's 323 00:19:27,680 --> 00:19:30,600 Speaker 1: a very easy story to tell, in a very um 324 00:19:30,760 --> 00:19:34,480 Speaker 1: simple story to comprehend as as you laid it out, 325 00:19:34,600 --> 00:19:38,159 Speaker 1: and I think qualitatively got a lot of merits to it. 326 00:19:38,520 --> 00:19:40,680 Speaker 1: And let me stay right up front, you know, I've 327 00:19:40,720 --> 00:19:43,399 Speaker 1: been very surprised that in the past month or so 328 00:19:43,520 --> 00:19:46,880 Speaker 1: since the new National Security Law went into effect, that 329 00:19:47,119 --> 00:19:49,920 Speaker 1: the Hong Kong dollar has consistently traded on the strong 330 00:19:49,960 --> 00:19:51,760 Speaker 1: side of the band. It's been more or less at 331 00:19:52,119 --> 00:19:56,720 Speaker 1: at seven UM or thereabouts for the entire month, and 332 00:19:56,760 --> 00:20:03,359 Speaker 1: there's been no signs of depreciation pressure on the currency. Now, 333 00:20:03,520 --> 00:20:05,080 Speaker 1: some of that's probably that the dollar has been weak, 334 00:20:05,160 --> 00:20:10,160 Speaker 1: but still so, I think the situation, the circumstances are 335 00:20:10,200 --> 00:20:13,240 Speaker 1: are a lot more nuanced than um the high level 336 00:20:13,480 --> 00:20:16,399 Speaker 1: items that you know that you laid out, Joe, You know, 337 00:20:16,600 --> 00:20:20,879 Speaker 1: one we really don't know. No one knows what exactly 338 00:20:20,920 --> 00:20:24,399 Speaker 1: the new National Security Law is ultimately going to look like. 339 00:20:24,680 --> 00:20:28,159 Speaker 1: There's plenty of reasons to be very concerned about what 340 00:20:28,240 --> 00:20:33,240 Speaker 1: it implies for the rule of law. UH in contract law, 341 00:20:33,280 --> 00:20:36,760 Speaker 1: mare broadly in Hong Kong. But the reality is no 342 00:20:36,800 --> 00:20:40,720 Speaker 1: one self included UM has any idea how it's going 343 00:20:40,760 --> 00:20:44,400 Speaker 1: to actually manifest itself. And I think until you see 344 00:20:44,480 --> 00:20:49,159 Speaker 1: some signs that contract law is actually being challenged in 345 00:20:49,240 --> 00:20:52,040 Speaker 1: Hong Kong, that there probably will continue to be sort 346 00:20:52,040 --> 00:20:55,439 Speaker 1: of a sense of complacency. That's that's That's one point. 347 00:20:55,760 --> 00:21:00,280 Speaker 1: The second point is that right now there's still you know, 348 00:21:00,359 --> 00:21:05,320 Speaker 1: can Hong Kong still runs a current account surplus. That's helpful, 349 00:21:05,560 --> 00:21:10,400 Speaker 1: uh for the for the stability of the currency. One 350 00:21:10,440 --> 00:21:12,760 Speaker 1: thing to watch very very closely, and it ties in 351 00:21:13,560 --> 00:21:17,080 Speaker 1: closely with h with the National Security Law slash contract 352 00:21:17,119 --> 00:21:20,880 Speaker 1: law is what happens to exports or services. Hong Kong's 353 00:21:21,000 --> 00:21:24,840 Speaker 1: services exports have become a key part of its balance 354 00:21:24,880 --> 00:21:28,200 Speaker 1: of payments, and in particular one third of its services. 355 00:21:28,280 --> 00:21:33,320 Speaker 1: Exports can be broken into financial services, insurance and pension services, 356 00:21:33,400 --> 00:21:36,560 Speaker 1: and other business services so things like legal. If those 357 00:21:36,560 --> 00:21:40,320 Speaker 1: services start to decline again because of things that you 358 00:21:40,400 --> 00:21:43,520 Speaker 1: mentioned or other factors, then all of a sudden, the 359 00:21:43,560 --> 00:21:47,239 Speaker 1: balance of payments equation becomes a little bit trickier, and 360 00:21:47,280 --> 00:21:50,600 Speaker 1: I would start to expect to see some depreciation pressure 361 00:21:51,280 --> 00:21:53,720 Speaker 1: on the currency. But but the h k m A 362 00:21:53,800 --> 00:21:56,080 Speaker 1: still has tools, and we've seen them use them, including 363 00:21:56,119 --> 00:22:00,800 Speaker 1: in episode when there was tremendous noward pressure on the 364 00:22:00,840 --> 00:22:05,080 Speaker 1: Hong Kong currency. Reserves are four and fifty billion dollars now. 365 00:22:05,160 --> 00:22:09,000 Speaker 1: Not all of those are available for um for defending 366 00:22:09,000 --> 00:22:12,720 Speaker 1: the currency, but a large junk of them are. And 367 00:22:12,840 --> 00:22:17,400 Speaker 1: there's a large wild card in that, with safe up 368 00:22:17,400 --> 00:22:20,840 Speaker 1: in Beijing stitting on more than a trillion in NFX reserves, 369 00:22:21,320 --> 00:22:24,040 Speaker 1: if mainland China, and if Beijing believes that defending the 370 00:22:24,080 --> 00:22:28,480 Speaker 1: Hong Kong peg is is critically important, that there's also 371 00:22:28,520 --> 00:22:32,320 Speaker 1: those funds that could theoretically be be deployed to h 372 00:22:32,400 --> 00:22:35,520 Speaker 1: k m A and provide a massive amount of firepower 373 00:22:35,560 --> 00:22:39,320 Speaker 1: to lean against appreciation depreciation pressure. And then of course 374 00:22:39,320 --> 00:22:41,679 Speaker 1: there's the there's also the higher rates. You know we 375 00:22:41,720 --> 00:22:45,200 Speaker 1: saw where high bard Uh, the Hon Kong equivalent of 376 00:22:45,280 --> 00:22:48,160 Speaker 1: live war has has been has been pushed up very 377 00:22:48,160 --> 00:22:51,800 Speaker 1: sharply by the HKm A to make holding short currency 378 00:22:51,840 --> 00:22:55,600 Speaker 1: positions more expensive, to change the relative rates of return 379 00:22:55,680 --> 00:22:58,520 Speaker 1: on capital more in favor of holding Hong Kong dollars 380 00:22:58,600 --> 00:23:02,080 Speaker 1: versus other currencies. I think that would actually be counterproductive. 381 00:23:02,280 --> 00:23:05,399 Speaker 1: And if we start in the current situation, if we 382 00:23:05,480 --> 00:23:09,359 Speaker 1: start to see meaningful pressure on the Hong Kong dollar 383 00:23:09,800 --> 00:23:12,560 Speaker 1: because of what it would do to the property market. Um, 384 00:23:12,720 --> 00:23:16,280 Speaker 1: most Hong Kong mortgages are all Hong Kong mortgages are floating, right, 385 00:23:16,720 --> 00:23:20,159 Speaker 1: and an overvalued property market and an over leveled private sector. 386 00:23:20,200 --> 00:23:22,920 Speaker 1: Of all of a sudden, you hiked interest rates by 387 00:23:24,160 --> 00:23:28,720 Speaker 1: thousands basis points um to defend the currency, you would 388 00:23:28,760 --> 00:23:31,679 Speaker 1: have other problems that you would surface. So there's a 389 00:23:31,680 --> 00:23:34,480 Speaker 1: lot of fragility here. But it's more likely, in my opinion, 390 00:23:34,480 --> 00:23:38,080 Speaker 1: to be sort of a slow motion UM type development, 391 00:23:38,440 --> 00:23:41,879 Speaker 1: with the folk from being how does the market perceive 392 00:23:42,640 --> 00:23:45,960 Speaker 1: the new National Security law and its implications on contract 393 00:23:46,000 --> 00:23:49,080 Speaker 1: law and what that implies for the sanctity of of 394 00:23:49,119 --> 00:23:52,760 Speaker 1: assets in Hong Kong. That could happen very fast once 395 00:23:52,760 --> 00:23:56,080 Speaker 1: there's a trigger. It could also take an elongated time. 396 00:23:56,359 --> 00:23:59,359 Speaker 1: I think it's it's one of those situations where there 397 00:23:59,359 --> 00:24:03,280 Speaker 1: are imbalance is there's a potential trigger, but you need 398 00:24:03,320 --> 00:24:09,040 Speaker 1: another sort of catalyst to um crystallize the imbalances into 399 00:24:09,200 --> 00:24:13,040 Speaker 1: some sort of capital flight UM episode. I want to 400 00:24:13,080 --> 00:24:15,919 Speaker 1: press you on on what that catalyst might actually look like. 401 00:24:16,000 --> 00:24:19,520 Speaker 1: But before we do UM, you mentioned capital outflows. So 402 00:24:19,640 --> 00:24:23,080 Speaker 1: we we have the four fifty billion of foreign reserves 403 00:24:23,119 --> 00:24:26,119 Speaker 1: held by the Hong Kong Monetary Authority, plus you potentially 404 00:24:26,200 --> 00:24:29,679 Speaker 1: have all the firepower held by safe in China, you 405 00:24:29,720 --> 00:24:33,439 Speaker 1: have the possible lure of higher rates. But what about 406 00:24:33,560 --> 00:24:38,359 Speaker 1: just sort of stopping capital outflows and and plugging those 407 00:24:38,359 --> 00:24:42,639 Speaker 1: holes before they really get started. Is that something that 408 00:24:42,720 --> 00:24:44,879 Speaker 1: could be done in Hong Kong or would it just 409 00:24:44,920 --> 00:24:48,600 Speaker 1: be an atama to Hong Kong status as an international 410 00:24:48,640 --> 00:24:52,120 Speaker 1: financial center. So it's a great question. It's something that 411 00:24:52,520 --> 00:24:56,320 Speaker 1: can be done, likely would be done, and based on 412 00:24:57,200 --> 00:25:00,280 Speaker 1: UH anecdotes, I want to emphasize that their second hand, 413 00:25:00,359 --> 00:25:03,320 Speaker 1: but based on anecdotes. You know, we've already been hearing 414 00:25:03,359 --> 00:25:07,440 Speaker 1: about for the past twelve to eighteen months that UM, 415 00:25:07,480 --> 00:25:10,520 Speaker 1: the Hong Kong banking authorities or the Hong Kong certain 416 00:25:10,560 --> 00:25:13,880 Speaker 1: Hong Kong banks themselves have made it harder for capital 417 00:25:13,920 --> 00:25:17,080 Speaker 1: to be moved abroad. As a for instance, you know 418 00:25:17,160 --> 00:25:21,160 Speaker 1: our fund UM has a number of Hong Kong LPs 419 00:25:21,160 --> 00:25:26,119 Speaker 1: in it, and we have heard that they have the 420 00:25:26,280 --> 00:25:29,760 Speaker 1: Hong Kong select Hong Kong banks have made it difficult 421 00:25:30,280 --> 00:25:34,359 Speaker 1: to move money out of Hong Kong in in one transfer, 422 00:25:34,560 --> 00:25:36,680 Speaker 1: but basically putting a lot of sand in the gears 423 00:25:37,119 --> 00:25:39,520 Speaker 1: to to move money out of Hong Kong to to 424 00:25:39,680 --> 00:25:42,280 Speaker 1: the United States as a for instance. So that's already 425 00:25:42,280 --> 00:25:45,160 Speaker 1: going on to some extent um. It seems like it's 426 00:25:45,160 --> 00:25:49,280 Speaker 1: more concentrated in the Chinese banks as opposed to the 427 00:25:49,280 --> 00:25:52,920 Speaker 1: Western banks, But that's already taking place to some extent, 428 00:25:53,000 --> 00:25:56,240 Speaker 1: and that could easily be ratcheted up. The mainland Chinese 429 00:25:56,240 --> 00:26:02,600 Speaker 1: have authorities have have been able to slow capital outflows tremendously, 430 00:26:03,320 --> 00:26:06,800 Speaker 1: and Hong Kong could do it also by by limiting 431 00:26:08,119 --> 00:26:11,359 Speaker 1: wires outside the country. Now, I do think that that 432 00:26:11,359 --> 00:26:16,120 Speaker 1: would certainly damage it's it's position as an international financial 433 00:26:16,160 --> 00:26:20,160 Speaker 1: center in a crisis. Slowing that down or or putting 434 00:26:20,160 --> 00:26:23,400 Speaker 1: a moratorium on capital outflows from banks, I think it's 435 00:26:23,440 --> 00:26:28,280 Speaker 1: something that absolutely could happen. So from a reserve's cash standpoint, 436 00:26:28,359 --> 00:26:31,760 Speaker 1: there's no reason to think that there is a firepower shortage. 437 00:26:32,040 --> 00:26:35,040 Speaker 1: I guess the two the two components of a bet 438 00:26:35,080 --> 00:26:38,760 Speaker 1: on an ending the peg. Obviously there's the firepower, but 439 00:26:38,800 --> 00:26:42,840 Speaker 1: then also the commitment. Do you see anything in the 440 00:26:42,960 --> 00:26:46,720 Speaker 1: sort of short medium term with the changing legal structure 441 00:26:47,200 --> 00:26:49,600 Speaker 1: that would cause you to think that the commitment would 442 00:26:49,640 --> 00:26:52,320 Speaker 1: go with No, I don't think so, not not not 443 00:26:52,320 --> 00:26:55,040 Speaker 1: not in the in the short term. I think there 444 00:26:55,119 --> 00:26:58,000 Speaker 1: is this more do not think. I'm convinced there's this 445 00:26:58,080 --> 00:27:01,440 Speaker 1: more medium term issue of if Hong Kong is going 446 00:27:01,520 --> 00:27:05,960 Speaker 1: to be as Hong Kong is absorbed more into mainland China, 447 00:27:06,560 --> 00:27:10,320 Speaker 1: and if Hong Kong is going to become very imperfect analogy, 448 00:27:10,680 --> 00:27:14,120 Speaker 1: you know, Chicago, where Shanghai is New York for mainland 449 00:27:14,160 --> 00:27:18,280 Speaker 1: China and Hong Kong becomes, for instance, Chicago, then there 450 00:27:18,440 --> 00:27:21,760 Speaker 1: is the more existential question of why is the currency 451 00:27:21,800 --> 00:27:25,360 Speaker 1: peg to the U S Dollar at seventy five eighty five, 452 00:27:25,440 --> 00:27:28,480 Speaker 1: and why do we why do we need that, why 453 00:27:28,480 --> 00:27:31,080 Speaker 1: do we have that, Why are we spending our time, 454 00:27:31,520 --> 00:27:34,720 Speaker 1: you know, maintaining that relationship. And I think that's a 455 00:27:34,840 --> 00:27:38,480 Speaker 1: very real dynamic that will have to be dealt with 456 00:27:38,800 --> 00:27:40,600 Speaker 1: and will be dealt with by the Chinese. But is 457 00:27:40,640 --> 00:27:44,880 Speaker 1: that a twelve months, a five year, a tenure. Honestly, 458 00:27:44,960 --> 00:27:47,600 Speaker 1: who knows. But this is current to me, this current 459 00:27:47,800 --> 00:27:50,200 Speaker 1: situation where the Hong Kong dollars pack to the U. S. Dollar, 460 00:27:50,240 --> 00:27:53,639 Speaker 1: it's current rate. It's not something that's going to prevail forever. 461 00:27:53,880 --> 00:27:58,240 Speaker 1: It's just a question of of what are the circumstances 462 00:27:58,640 --> 00:28:02,119 Speaker 1: that force it to change? Is fundamental economic issues? Is 463 00:28:02,119 --> 00:28:06,080 Speaker 1: that active policy choice by Beijing. These are all things 464 00:28:06,119 --> 00:28:25,320 Speaker 1: that are very hard to foresee, to be sure. So 465 00:28:25,359 --> 00:28:28,280 Speaker 1: I guess the suggestion is if you have a sort 466 00:28:28,320 --> 00:28:33,440 Speaker 1: of slow grind towards an alternative system, like a currency 467 00:28:33,520 --> 00:28:37,000 Speaker 1: basket regime like they have in Singapore, or I guess 468 00:28:37,000 --> 00:28:40,440 Speaker 1: the dual currency system like in Macau, like, you could 469 00:28:40,520 --> 00:28:45,800 Speaker 1: have that path, but you could also have something major 470 00:28:45,880 --> 00:28:49,680 Speaker 1: that happens that really keeps pressure on the PEG and 471 00:28:49,920 --> 00:28:53,959 Speaker 1: causes policymakers to reconsider it in the short term. What 472 00:28:54,000 --> 00:28:59,200 Speaker 1: would be the thing that caused that outcome? Of course, 473 00:28:59,280 --> 00:29:02,600 Speaker 1: the honest answers who knows one never knows in advance 474 00:29:02,640 --> 00:29:05,200 Speaker 1: what the what the ultimate catalyst would be. Who would 475 00:29:05,200 --> 00:29:07,520 Speaker 1: have thought that the U S authorities would let Leaven 476 00:29:07,600 --> 00:29:11,160 Speaker 1: Brothers fail and would would trigger off the the mass 477 00:29:11,160 --> 00:29:14,840 Speaker 1: contagion recognizing they need to, you know, think about this 478 00:29:14,880 --> 00:29:17,280 Speaker 1: and have some sort of sense. I think the biggest 479 00:29:17,320 --> 00:29:20,120 Speaker 1: thing would be that if you started to see major 480 00:29:20,440 --> 00:29:24,480 Speaker 1: global corporations UM starting to pull out of Hong Kong, 481 00:29:25,040 --> 00:29:28,760 Speaker 1: that that would be a pretty strong catalyst for the 482 00:29:28,840 --> 00:29:33,280 Speaker 1: potential for other capital flight, both human and financial, and 483 00:29:33,320 --> 00:29:37,400 Speaker 1: that that is the most likely trigger in the sort 484 00:29:37,440 --> 00:29:41,200 Speaker 1: of three to twelve month horizon. Now, so far, we've 485 00:29:41,240 --> 00:29:44,280 Speaker 1: seen none of that, right, and in fact, the global 486 00:29:44,400 --> 00:29:48,240 Speaker 1: business community that has large presences in Hong Kong UM 487 00:29:48,280 --> 00:29:51,480 Speaker 1: has either been silent or welcome the new National Security 488 00:29:51,560 --> 00:29:55,400 Speaker 1: law because they would they think it will help calm 489 00:29:55,520 --> 00:29:58,560 Speaker 1: the political tensions in the city and they want to 490 00:29:58,600 --> 00:30:02,000 Speaker 1: continue to do business with mainland China. But I think 491 00:30:02,000 --> 00:30:04,480 Speaker 1: if you saw something like that, that that would start 492 00:30:04,520 --> 00:30:07,600 Speaker 1: to be a that would be a potential flashpoint for 493 00:30:07,600 --> 00:30:10,760 Speaker 1: for capital flight again both human and and financial, and 494 00:30:10,800 --> 00:30:13,960 Speaker 1: that would be a potential trigger. So I have one 495 00:30:13,960 --> 00:30:16,760 Speaker 1: more question, which is we started out this podcast, well, 496 00:30:16,920 --> 00:30:21,120 Speaker 1: Joe mentioned this idea that throughout history or the past 497 00:30:21,160 --> 00:30:24,320 Speaker 1: three decades, there have been speculators who have at various 498 00:30:24,360 --> 00:30:28,520 Speaker 1: times bet against the Hong Kong dollar peg, the most 499 00:30:28,600 --> 00:30:32,640 Speaker 1: recent or the most high profile being Kyle Bass. What's 500 00:30:32,680 --> 00:30:37,440 Speaker 1: the lure of betting against this particular peg. I know 501 00:30:37,520 --> 00:30:39,280 Speaker 1: we kind of went through the narrative earlier, but it 502 00:30:39,320 --> 00:30:42,160 Speaker 1: seems to happen over and over and over. And secondly, 503 00:30:42,400 --> 00:30:45,840 Speaker 1: how do you speculators actually go about betting against it? 504 00:30:45,960 --> 00:30:52,560 Speaker 1: And how expensive is it to keep that position going? Yep, 505 00:30:52,760 --> 00:30:56,120 Speaker 1: not great question. So so the lure or the attractiveness 506 00:30:56,360 --> 00:30:58,800 Speaker 1: is for the hot betting against the Hong Kong peg. 507 00:30:59,040 --> 00:31:01,400 Speaker 1: It's not this similar from petting against any peg currency. 508 00:31:01,880 --> 00:31:05,200 Speaker 1: History has shown that they're very hard to maintain. Number one. 509 00:31:05,640 --> 00:31:09,000 Speaker 1: Number two that the volatility in the currency, because it's 510 00:31:09,000 --> 00:31:11,520 Speaker 1: in a PEG band is very low, and so if 511 00:31:11,520 --> 00:31:15,160 Speaker 1: slash win the peg breaks, you're going to have an outside, 512 00:31:15,360 --> 00:31:19,720 Speaker 1: very disorderly move that's likely going to include not just 513 00:31:19,800 --> 00:31:23,040 Speaker 1: an outsized move and percentage terms from the band, but 514 00:31:23,200 --> 00:31:26,400 Speaker 1: potentially an explosion and volatility. So if you have some 515 00:31:26,480 --> 00:31:29,440 Speaker 1: sort of derivative strategy on, you're able to make both 516 00:31:29,480 --> 00:31:33,440 Speaker 1: money from um significance amounts of money from the delta 517 00:31:33,640 --> 00:31:36,200 Speaker 1: I either move in the percentage move, but also in 518 00:31:36,240 --> 00:31:39,840 Speaker 1: the volatility component. And so it offers the potential for 519 00:31:40,640 --> 00:31:44,920 Speaker 1: if it happens spectacular reterms. I think that is you know, 520 00:31:44,960 --> 00:31:48,360 Speaker 1: the the the appeal is no more complicated than that. 521 00:31:48,840 --> 00:31:51,040 Speaker 1: And then in the Hong Kong case, at least currently 522 00:31:51,040 --> 00:31:55,000 Speaker 1: it's augmented by the fact that, again as I mentioned earlier, 523 00:31:55,520 --> 00:31:59,280 Speaker 1: you've you've got an overvalued housing market and you've got 524 00:31:59,280 --> 00:32:02,200 Speaker 1: a huge build up in debt and interest rates are 525 00:32:02,240 --> 00:32:05,640 Speaker 1: at zero. So if there's any forced rise in interest rates, 526 00:32:05,640 --> 00:32:08,880 Speaker 1: it's gonna put pressure on on the housing market, on 527 00:32:08,960 --> 00:32:13,760 Speaker 1: that service, etcetera, etcetera. So but again really that in 528 00:32:13,760 --> 00:32:18,080 Speaker 1: a nutshell, it's fixed exchange rate possibility for very large returns. 529 00:32:18,280 --> 00:32:20,800 Speaker 1: The same reason people who are betting against the Saudi 530 00:32:20,880 --> 00:32:23,880 Speaker 1: peg or the Middle Eastern pegs. Uh, you know a 531 00:32:23,880 --> 00:32:26,920 Speaker 1: few a few years ago. In terms of you know, 532 00:32:27,000 --> 00:32:30,760 Speaker 1: being able to monetize it, it's not easy being law on. Uh. 533 00:32:30,800 --> 00:32:33,400 Speaker 1: You know, basically being law puts on the on the 534 00:32:33,440 --> 00:32:36,920 Speaker 1: currency is is a negative carry trade, and if you're on, 535 00:32:37,400 --> 00:32:39,560 Speaker 1: and you're on for a consistently long time, you're going 536 00:32:39,640 --> 00:32:42,880 Speaker 1: to bleed away your option premium um and end up 537 00:32:43,360 --> 00:32:46,560 Speaker 1: end up losing money. You know. The other alternative is 538 00:32:46,600 --> 00:32:49,400 Speaker 1: to have a huge cash position in the currency and 539 00:32:49,560 --> 00:32:52,560 Speaker 1: with things that the strong side of the band, there's 540 00:32:52,760 --> 00:32:55,520 Speaker 1: you know, there's some merit merit to that, but if 541 00:32:55,520 --> 00:32:58,840 Speaker 1: the band doesn't break make money by soaking it, you're 542 00:32:58,840 --> 00:33:00,400 Speaker 1: gonna take up a lot of your balance sheet or 543 00:33:00,400 --> 00:33:04,320 Speaker 1: your fund from moving from seven seventy five to The 544 00:33:04,360 --> 00:33:07,600 Speaker 1: returns are not that appealing, So it's very hard to 545 00:33:07,600 --> 00:33:11,640 Speaker 1: to structure trades that you can carry uh and not 546 00:33:11,840 --> 00:33:15,280 Speaker 1: to end up bleeding away a lot of your investors 547 00:33:15,320 --> 00:33:19,320 Speaker 1: money and maintain the maintain the option value of this break. 548 00:33:20,160 --> 00:33:22,920 Speaker 1: It just sounds like, you know, you have this situation 549 00:33:22,960 --> 00:33:24,600 Speaker 1: in which, if you get it right, you can make 550 00:33:24,640 --> 00:33:27,600 Speaker 1: an unbelievable amount of money in a short period of time. 551 00:33:28,480 --> 00:33:32,160 Speaker 1: And the stories are so good between and everything that 552 00:33:32,200 --> 00:33:36,400 Speaker 1: you've talked about about sort of these great narratives potentially 553 00:33:36,480 --> 00:33:39,880 Speaker 1: coming to an end, but pretty killer holding a position 554 00:33:40,400 --> 00:33:43,960 Speaker 1: waiting for it to happen. It's it's definitely tricky. And again, 555 00:33:43,960 --> 00:33:45,600 Speaker 1: you know, let me you know, let me be let 556 00:33:45,600 --> 00:33:48,160 Speaker 1: me be clear that with the fundamentals and the narrative 557 00:33:48,280 --> 00:33:50,120 Speaker 1: and the currency at the straw end of the band, 558 00:33:50,720 --> 00:33:53,680 Speaker 1: things are all really aligned for some sort of movement 559 00:33:53,760 --> 00:33:55,959 Speaker 1: at least to the weekend of the band. If it's 560 00:33:56,000 --> 00:33:58,120 Speaker 1: going to go beyond that, though, we're gonna need to 561 00:33:58,160 --> 00:34:00,640 Speaker 1: get something along the line. So one of these triggering 562 00:34:00,680 --> 00:34:03,400 Speaker 1: events that we've talked about, Chris before we go. I mean, 563 00:34:03,560 --> 00:34:05,920 Speaker 1: I want to just sort of get your bigger perspective. 564 00:34:05,960 --> 00:34:09,160 Speaker 1: Hong Kong aside and mentioned during the last crisis, you're 565 00:34:09,160 --> 00:34:13,880 Speaker 1: a strategist, strategist the three years that a Soros fund management. 566 00:34:14,600 --> 00:34:16,960 Speaker 1: What are sort of the big things you're thinking about 567 00:34:17,080 --> 00:34:19,840 Speaker 1: right now in terms of how this crisis is either 568 00:34:20,360 --> 00:34:24,440 Speaker 1: similar or different to the trading environment from about a 569 00:34:24,480 --> 00:34:29,640 Speaker 1: decade ago. I think the biggest difference. The two biggest 570 00:34:29,640 --> 00:34:33,400 Speaker 1: differences are are as follows. One. The crisis in in 571 00:34:33,520 --> 00:34:36,440 Speaker 1: oh eight was a financial crisis, and if you it 572 00:34:36,560 --> 00:34:40,040 Speaker 1: was very easy to understand the banks were bankrupt, we 573 00:34:40,080 --> 00:34:43,640 Speaker 1: had an event that forced the US government to save 574 00:34:43,719 --> 00:34:47,160 Speaker 1: the banks, and once the banks were saved, had a 575 00:34:47,160 --> 00:34:49,960 Speaker 1: pretty good understanding that there would be a recovery, recognizing 576 00:34:49,960 --> 00:34:51,880 Speaker 1: no one knows what it will look like in advance, 577 00:34:52,440 --> 00:34:56,879 Speaker 1: and asset prices had collapsed, and we're really attractive here. 578 00:34:57,680 --> 00:35:02,839 Speaker 1: The nature of this crisis is vastly different because it's 579 00:35:02,840 --> 00:35:07,120 Speaker 1: a public health crisis and no one, you know, I mean, 580 00:35:07,640 --> 00:35:11,560 Speaker 1: you know, even the world's leading you know, scientists don't 581 00:35:11,760 --> 00:35:15,120 Speaker 1: know how this is going to evolve over the next 582 00:35:15,160 --> 00:35:19,600 Speaker 1: one three, six, nine months, And so that's a huge 583 00:35:19,640 --> 00:35:25,840 Speaker 1: source of opacity UM for thinking about managing investor investor 584 00:35:25,920 --> 00:35:29,720 Speaker 1: capital you know, through that period and requires intense focus 585 00:35:29,760 --> 00:35:33,520 Speaker 1: on on the downside and protecting downside tails. On the 586 00:35:33,560 --> 00:35:37,759 Speaker 1: other hand, the Federal Reserve and other entities central banks 587 00:35:37,800 --> 00:35:41,200 Speaker 1: around the world have crossed over red lines that frankly 588 00:35:41,239 --> 00:35:43,400 Speaker 1: I never thought they would. They would cross over the 589 00:35:43,440 --> 00:35:47,080 Speaker 1: backstopping of the corporate bond market, for instance. You've got 590 00:35:47,080 --> 00:35:51,520 Speaker 1: these kind of competing issues of huge opacity and large 591 00:35:51,600 --> 00:35:55,560 Speaker 1: left side tail risk UM from the virus and what 592 00:35:55,680 --> 00:36:00,200 Speaker 1: it does to behavior, both business behavior consumer behavior you'r 593 00:36:00,680 --> 00:36:04,080 Speaker 1: and then you know or whatever it takes approach from 594 00:36:04,080 --> 00:36:07,400 Speaker 1: central banks that makes Mario drags whatever it takes in 595 00:36:09,000 --> 00:36:13,480 Speaker 1: look small by comparison. So you know, you're trying to 596 00:36:13,560 --> 00:36:16,319 Speaker 1: kind of balance, you know, those two things and and 597 00:36:16,360 --> 00:36:20,640 Speaker 1: find and find assets that, um you know, are are 598 00:36:20,800 --> 00:36:27,279 Speaker 1: likely to offer pretty attractive risk adjusted returns without a 599 00:36:27,280 --> 00:36:30,560 Speaker 1: lot of downside. And what does that mean. I think 600 00:36:30,640 --> 00:36:34,160 Speaker 1: it means that, you know, companies with near monopoly power 601 00:36:34,560 --> 00:36:37,120 Speaker 1: tech type companies they're going to continue to do well. 602 00:36:37,640 --> 00:36:40,239 Speaker 1: Companies with fortress balance sheets, they're going to continue to 603 00:36:40,320 --> 00:36:44,120 Speaker 1: do well. Companies that have to issue debt with um 604 00:36:44,200 --> 00:36:48,520 Speaker 1: special security pledges, i e. Where they're pledging collateral against 605 00:36:48,520 --> 00:36:53,440 Speaker 1: specific bond issues at high intertrates. That stuff pretty pretty appealing, 606 00:36:54,080 --> 00:36:56,000 Speaker 1: and so you've got to be very selective, I think 607 00:36:56,000 --> 00:37:00,280 Speaker 1: in terms of thinking about how you're allocating cap little 608 00:37:00,280 --> 00:37:02,799 Speaker 1: in this environment because of the opacity and the and 609 00:37:02,840 --> 00:37:06,800 Speaker 1: the unknown about that flows from the public health public 610 00:37:06,840 --> 00:37:11,880 Speaker 1: health crisis. Chris Wigan is a great chatting with you. 611 00:37:11,960 --> 00:37:14,040 Speaker 1: I think I've in my mind I've had all kinds 612 00:37:14,080 --> 00:37:16,719 Speaker 1: of questions for years and years about the Hong Kong 613 00:37:16,760 --> 00:37:19,799 Speaker 1: Dollar Peg, and I feel like I haven't heard any 614 00:37:19,880 --> 00:37:23,600 Speaker 1: sort of better explanation of all the things involved with 615 00:37:23,640 --> 00:37:26,239 Speaker 1: it than that. I really appreciate it coming out. Well, 616 00:37:26,280 --> 00:37:28,520 Speaker 1: thanks so much for having me on. There's a real pleasure. 617 00:37:29,000 --> 00:37:40,160 Speaker 1: Thanks Chris. That was really good. Thank you, Tracy. I 618 00:37:40,160 --> 00:37:44,479 Speaker 1: feel like after that conversation, a I really grasp why 619 00:37:44,640 --> 00:37:47,520 Speaker 1: people for years have bet that the peg was going 620 00:37:47,560 --> 00:37:51,200 Speaker 1: to end, and also I grasped why they've been wrong 621 00:37:51,239 --> 00:37:55,359 Speaker 1: all this time. It's true, it's one of those things 622 00:37:55,400 --> 00:37:58,439 Speaker 1: where you could see the logic of it, but I guess, uh, 623 00:37:58,760 --> 00:38:01,640 Speaker 1: it's it's sort of like you don't want to necessarily 624 00:38:01,680 --> 00:38:06,120 Speaker 1: go up against the might of four fifty billion in reserves, 625 00:38:06,239 --> 00:38:10,080 Speaker 1: plus potentially everything that's safe is holding. That'd be kind 626 00:38:10,080 --> 00:38:14,000 Speaker 1: of crazy. I feel like it markets in general, there's 627 00:38:14,080 --> 00:38:18,240 Speaker 1: just a lot of trends that have been called prematurely 628 00:38:18,480 --> 00:38:21,120 Speaker 1: over over for the last like several decades. I mean, 629 00:38:21,120 --> 00:38:23,760 Speaker 1: it's interesting that the PEG came out in the early eighties, 630 00:38:24,040 --> 00:38:26,440 Speaker 1: but there's so many other things, you know, whether it's 631 00:38:26,520 --> 00:38:31,000 Speaker 1: just the relent interest rates, short j g B s, 632 00:38:31,200 --> 00:38:35,799 Speaker 1: the grind lower in US interest rates, the incredible you 633 00:38:35,800 --> 00:38:39,240 Speaker 1: know now surge, and tech stocks, which again Chris actually 634 00:38:39,280 --> 00:38:42,000 Speaker 1: mentioned there in that last answer about you know, this 635 00:38:42,080 --> 00:38:45,399 Speaker 1: sort of re acceleration of the money into high tech, 636 00:38:45,680 --> 00:38:49,319 Speaker 1: strong balance sheet companies. It's like, one day, maybe a 637 00:38:49,320 --> 00:38:52,080 Speaker 1: bunch of these trends are gonna reverse. But you can 638 00:38:52,160 --> 00:38:56,120 Speaker 1: lose a lot of money getting that timing wrong. Yeah, 639 00:38:56,200 --> 00:38:58,960 Speaker 1: in the meantime. But I guess the flip side of 640 00:38:59,000 --> 00:39:01,280 Speaker 1: that is that you can make your name and become 641 00:39:01,400 --> 00:39:04,279 Speaker 1: instantly famous and very very wealthy if you managed to 642 00:39:04,320 --> 00:39:08,080 Speaker 1: call a reversal of one of those long run trends correctly. Yeah. 643 00:39:08,080 --> 00:39:09,399 Speaker 1: I mean that's a good point. I mean, you think 644 00:39:09,440 --> 00:39:12,960 Speaker 1: about like the few handful of people who nailed it 645 00:39:13,040 --> 00:39:15,840 Speaker 1: on the housing market. US houses were another one of 646 00:39:15,880 --> 00:39:18,839 Speaker 1: those multi decade trends where it's like houses always go up, 647 00:39:18,840 --> 00:39:22,279 Speaker 1: and a couple of people got h fabulously rich, sort 648 00:39:22,280 --> 00:39:24,960 Speaker 1: of betting that that was going to be unsustainable. It's 649 00:39:25,000 --> 00:39:28,880 Speaker 1: interesting that one of the people who scored huge on 650 00:39:28,960 --> 00:39:32,040 Speaker 1: the downtown housing was Kyle Bass and as you mentioned 651 00:39:32,520 --> 00:39:37,279 Speaker 1: during the discussion, obviously he could reap or sort of 652 00:39:37,320 --> 00:39:40,759 Speaker 1: repeat that performance and reap another huge windfall if he 653 00:39:40,800 --> 00:39:43,600 Speaker 1: gets it right on the Hong Kong dollar. Yeah, but 654 00:39:43,680 --> 00:39:45,960 Speaker 1: it's going to be a really fascinating one to watch. 655 00:39:46,000 --> 00:39:49,439 Speaker 1: And I think even if we don't get that thing 656 00:39:49,600 --> 00:39:55,200 Speaker 1: that instantaneously breaks the peg or forces policymakers to make 657 00:39:55,239 --> 00:39:57,640 Speaker 1: some sort of decision, Even if we don't get that, 658 00:39:57,800 --> 00:40:03,440 Speaker 1: just watching a oh development of potentially an alternative currency 659 00:40:03,480 --> 00:40:05,759 Speaker 1: regime is going to be really interesting. And there are 660 00:40:05,800 --> 00:40:08,680 Speaker 1: a lot of questions around what even that would look like. 661 00:40:08,840 --> 00:40:11,879 Speaker 1: You could get a basket like in Singapore, a dual 662 00:40:11,920 --> 00:40:15,560 Speaker 1: currency system like in Macau. You could, I guess this 663 00:40:15,600 --> 00:40:18,480 Speaker 1: is a remote possibility, but Hong Kong could just let 664 00:40:18,520 --> 00:40:22,359 Speaker 1: the dollar float. Um, It's going to be really fascinating. Yeah, 665 00:40:22,440 --> 00:40:26,280 Speaker 1: that point he made about well, Hong Kong become China's Chicago, 666 00:40:26,840 --> 00:40:29,799 Speaker 1: And it does raise a question, if you know, as 667 00:40:29,920 --> 00:40:33,240 Speaker 1: the two economies become more similar and the two legal 668 00:40:33,280 --> 00:40:37,000 Speaker 1: systems become more similar, doesn't make sense to have one 669 00:40:37,000 --> 00:40:42,239 Speaker 1: of the really important economic areas, uh, just use this 670 00:40:42,320 --> 00:40:45,879 Speaker 1: different currency regime At some point maybe that just won't 671 00:40:45,880 --> 00:40:51,000 Speaker 1: make any sense, But again, who knows when? Yeah, exactly, 672 00:40:51,360 --> 00:40:54,080 Speaker 1: all right, shall we leave it there? Let's leave it there. 673 00:40:55,280 --> 00:40:58,600 Speaker 1: This has been another episode of the All Thoughts podcast. 674 00:40:58,680 --> 00:41:01,399 Speaker 1: I'm Tracy Halloway. You can follow me on Twitter at 675 00:41:01,440 --> 00:41:05,360 Speaker 1: Tracy Halloway and I'm Joe Wisntal. You can follow me 676 00:41:05,520 --> 00:41:09,200 Speaker 1: on Twitter at the Stalwart. Follow our producer on Twitter, 677 00:41:09,320 --> 00:41:12,880 Speaker 1: Laura Carlston. She's at Laura M. Carlson. Follow The Bloomberg 678 00:41:12,880 --> 00:41:16,799 Speaker 1: had a podcast Francesca Leaving at Francesca Today and check 679 00:41:16,800 --> 00:41:20,319 Speaker 1: out all of our podcasts onto the handle at podcasts. 680 00:41:20,400 --> 00:41:21,160 Speaker 1: Thanks for listening.