1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall Street Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,760 Speaker 1: economy continues to send mixed signals to the financial stories 4 00:00:09,800 --> 00:00:12,680 Speaker 1: that cheap our world fed action to con concerns over 5 00:00:12,760 --> 00:00:16,240 Speaker 1: dollar liquidity and encouraging China data. The five hundred wealthiest 6 00:00:16,239 --> 00:00:18,360 Speaker 1: people in the world. Through the eyes of the most 7 00:00:18,480 --> 00:00:22,520 Speaker 1: influential voices Larry Summers, the former Treasury Secretary, Star Wars CEO, 8 00:00:22,640 --> 00:00:26,360 Speaker 1: Kevin Johnson sec Chairman j Clayton, Bloomberg wool Street Week 9 00:00:26,480 --> 00:00:31,200 Speaker 1: with David Weston from Bloomberg Radio. First and foremost, it's 10 00:00:31,240 --> 00:00:34,000 Speaker 1: been a human tragedy, with mounting numbers for the ill 11 00:00:34,200 --> 00:00:36,640 Speaker 1: and the dying, But at least the beginning, it seemed 12 00:00:36,680 --> 00:00:39,440 Speaker 1: to be largely limited to the human toll. That is 13 00:00:39,520 --> 00:00:41,800 Speaker 1: until this week, when Apple was the first to say 14 00:00:41,880 --> 00:00:44,640 Speaker 1: what we all more or less expected, that the epidemic 15 00:00:44,760 --> 00:00:47,800 Speaker 1: is also going to hurt business and the economy, maybe 16 00:00:47,840 --> 00:00:50,879 Speaker 1: in ways we're only beginning to appreciate. But just as 17 00:00:50,920 --> 00:00:54,800 Speaker 1: the disease hits some and leaves others untouched, some companies 18 00:00:54,800 --> 00:00:57,680 Speaker 1: and sectors may be hurt worse than others. Walmart says 19 00:00:57,720 --> 00:01:00,240 Speaker 1: it won't join Apple and taking down its forecast at 20 00:01:00,320 --> 00:01:03,240 Speaker 1: least not yet, while concerns for the auto industry have 21 00:01:03,320 --> 00:01:05,840 Speaker 1: led Japan to create a task force to deal with 22 00:01:05,840 --> 00:01:10,080 Speaker 1: the potential hit to demand four and supply of cars. 23 00:01:10,120 --> 00:01:12,640 Speaker 1: So which isn't a temporary blip in the first quarter 24 00:01:13,000 --> 00:01:15,720 Speaker 1: or the start of something more troubling that could last longer, 25 00:01:16,080 --> 00:01:19,880 Speaker 1: and which business sectors are the most vulnerable? For Wall 26 00:01:19,920 --> 00:01:22,680 Speaker 1: Street Week Round Table, we welcome now Jillian Ted she's 27 00:01:22,760 --> 00:01:25,199 Speaker 1: chair of the editorial board and US editor at large 28 00:01:25,200 --> 00:01:28,560 Speaker 1: for The Financial Times. And Seema Hingarani, she's managing director 29 00:01:28,640 --> 00:01:31,360 Speaker 1: at Morgan Stanley Investment Management. So welcome both of you. 30 00:01:31,400 --> 00:01:33,399 Speaker 1: It's great to have you here. So answer the question 31 00:01:33,440 --> 00:01:36,520 Speaker 1: for us, Julian, are we underestimate? Are the equity markets, 32 00:01:36,560 --> 00:01:40,760 Speaker 1: in particular underestimating the potential effect of coronavirus. The reaction 33 00:01:40,800 --> 00:01:44,040 Speaker 1: for the equity markets has been really quite stark and straordinary, 34 00:01:44,080 --> 00:01:46,840 Speaker 1: because if you think back to what happened with SAWS, 35 00:01:46,959 --> 00:01:50,360 Speaker 1: you had quite a significant draw down in the equity markets. 36 00:01:50,720 --> 00:01:53,160 Speaker 1: What you've had this time around has barely been one 37 00:01:53,240 --> 00:01:56,800 Speaker 1: week of dual down of reaction before the markets bounced back. 38 00:01:57,320 --> 00:02:01,200 Speaker 1: And what's doobly significant. Is not only as coronavirus still 39 00:02:01,360 --> 00:02:04,400 Speaker 1: considerably unknown in terms of its bigger economic impact and 40 00:02:04,560 --> 00:02:08,040 Speaker 1: human toll, but of course China these days it's dramatically 41 00:02:08,040 --> 00:02:11,440 Speaker 1: more important for the global economy and for most Western 42 00:02:11,440 --> 00:02:14,000 Speaker 1: companies than it was in the time of Stars. So 43 00:02:14,440 --> 00:02:17,919 Speaker 1: very stark difference, and in my view, there's an awful 44 00:02:17,960 --> 00:02:20,920 Speaker 1: lot of correction yet left to come. So, Sima, what 45 00:02:20,919 --> 00:02:23,000 Speaker 1: are you hearing from investors? How are they looking at this? 46 00:02:23,120 --> 00:02:24,800 Speaker 1: I mean, is this driven largely by liquidity in the 47 00:02:24,840 --> 00:02:26,960 Speaker 1: marketplace where people aren't thinking about it? Or are they 48 00:02:26,960 --> 00:02:28,400 Speaker 1: taking a hard look and say we think it's not 49 00:02:28,440 --> 00:02:31,400 Speaker 1: that bad? Well, I think, um, like a lot of 50 00:02:31,400 --> 00:02:35,080 Speaker 1: our clients are long term investors, were long term investors. Um, 51 00:02:35,160 --> 00:02:37,440 Speaker 1: we are clearly talking about this with our clients, about 52 00:02:37,440 --> 00:02:41,600 Speaker 1: the coronavirus top of mind, but we're sort of still 53 00:02:41,639 --> 00:02:43,600 Speaker 1: in wait and see mode. I think, you know, I 54 00:02:43,639 --> 00:02:46,920 Speaker 1: think we are. Even Apple said this that that production 55 00:02:47,000 --> 00:02:49,800 Speaker 1: starting to come back on, come back on slowly. You know. 56 00:02:49,800 --> 00:02:52,280 Speaker 1: Our thought is there's still that into March we could 57 00:02:52,280 --> 00:02:54,639 Speaker 1: be back to capacity. It's true that in the tech 58 00:02:54,680 --> 00:02:57,840 Speaker 1: supply chain, where China has become a much larger part 59 00:02:58,160 --> 00:03:01,480 Speaker 1: of a business for a lot of technology companies. I 60 00:03:01,480 --> 00:03:06,760 Speaker 1: mean of assembly now happens in China, of components are 61 00:03:06,800 --> 00:03:09,440 Speaker 1: produced in China. I think it's too early to tell, 62 00:03:09,520 --> 00:03:12,160 Speaker 1: and that's that's what we're talking with. Any sense about 63 00:03:12,960 --> 00:03:15,480 Speaker 1: who's hit worse and who's hit less well badly, I mean, 64 00:03:15,480 --> 00:03:18,000 Speaker 1: for example, tech as you mentioned Apple, but also chip 65 00:03:18,000 --> 00:03:20,400 Speaker 1: makers and things have really been hit. We also have 66 00:03:20,440 --> 00:03:23,600 Speaker 1: retail reports you know, that are mixed. Frankly Walmart saying 67 00:03:23,600 --> 00:03:26,160 Speaker 1: we're not We're worried about a puma got killed. Basically, 68 00:03:26,280 --> 00:03:28,200 Speaker 1: so who's going to hit worse and not so much. 69 00:03:28,440 --> 00:03:30,720 Speaker 1: One of the very interesting things that's happened as a 70 00:03:30,760 --> 00:03:34,400 Speaker 1: result of the US China trade war is that many 71 00:03:34,560 --> 00:03:37,840 Speaker 1: large C suites and companies have been forced to significantly 72 00:03:37,920 --> 00:03:41,560 Speaker 1: reassess their supply chains. They weren't taking that much paying 73 00:03:41,560 --> 00:03:43,480 Speaker 1: that was attention, that's way to the minute, show that 74 00:03:43,840 --> 00:03:47,000 Speaker 1: before a couple of years back. So some of them 75 00:03:47,040 --> 00:03:49,440 Speaker 1: have actually built in a more flexibility than is immediately 76 00:03:49,520 --> 00:03:52,440 Speaker 1: visible to the outside eye, and that may be shielding 77 00:03:52,480 --> 00:03:55,160 Speaker 1: some of them. Walmart surprising, so I didn't think there 78 00:03:55,200 --> 00:03:57,800 Speaker 1: was going to be any significant hit. However, we have 79 00:03:57,960 --> 00:04:00,320 Speaker 1: story you know, with Puma and added as by sickly 80 00:04:00,320 --> 00:04:03,040 Speaker 1: having quite a big hit in terms of whether feeding 81 00:04:03,080 --> 00:04:06,080 Speaker 1: the pain right now, and um, I suspect we're going 82 00:04:06,120 --> 00:04:08,560 Speaker 1: to see more companies coming out, particularly those with big 83 00:04:08,640 --> 00:04:12,600 Speaker 1: China based sales operations, and saying it's hurting their ownings. 84 00:04:12,800 --> 00:04:14,440 Speaker 1: What do I see? Are there some areas that you're 85 00:04:14,440 --> 00:04:17,200 Speaker 1: more concerned about some not so much? I would agree 86 00:04:17,240 --> 00:04:20,880 Speaker 1: with Jillian. I think retail, apparel and semiconductors, you know, 87 00:04:21,040 --> 00:04:23,640 Speaker 1: really are the prime ones that we're looking at. Perhaps 88 00:04:23,720 --> 00:04:26,640 Speaker 1: travel to take a look at airline so you take 89 00:04:26,640 --> 00:04:29,039 Speaker 1: a look at hotels, you take a look of goodness knows, 90 00:04:29,080 --> 00:04:34,000 Speaker 1: cruise ships, oh, exactly. The whole consumer area is something, yeah, 91 00:04:34,040 --> 00:04:38,200 Speaker 1: I we clearly have to watch out for. But again, um, 92 00:04:38,240 --> 00:04:41,400 Speaker 1: a lot of China's economy now is driven by local 93 00:04:41,440 --> 00:04:44,280 Speaker 1: demand and consumer demand there So when you think about 94 00:04:44,279 --> 00:04:48,320 Speaker 1: the impact globally, I would say again, I think it's 95 00:04:48,320 --> 00:04:51,040 Speaker 1: still too early to tell about the impact globally. Clearly 96 00:04:51,040 --> 00:04:53,680 Speaker 1: for the Chinese economy it's a significant issue. I mean, 97 00:04:53,680 --> 00:04:56,400 Speaker 1: the bigger question is why I'll stop market so buoyant 98 00:04:56,400 --> 00:04:59,640 Speaker 1: and seemingly so completely impervious to any kind of shocks 99 00:05:00,040 --> 00:05:01,520 Speaker 1: and a lot of that's to do with the fact 100 00:05:01,560 --> 00:05:04,080 Speaker 1: that it really is the central bankers who are the 101 00:05:04,160 --> 00:05:06,680 Speaker 1: only game in town to quite made Lari and all 102 00:05:06,720 --> 00:05:10,120 Speaker 1: those years ago, um and in so far as things 103 00:05:10,160 --> 00:05:13,480 Speaker 1: like the coronavirus and leading investors thinking, actually central banks 104 00:05:13,480 --> 00:05:16,320 Speaker 1: are going to leave rates lower for longer, that's actually 105 00:05:16,320 --> 00:05:19,679 Speaker 1: boosting equity markets. So you have this phenomenon whereby bad 106 00:05:19,760 --> 00:05:21,640 Speaker 1: news it's actually turning out to be good news for 107 00:05:21,680 --> 00:05:25,080 Speaker 1: equity and bomb prices. Well, I think, I mean, we've 108 00:05:25,080 --> 00:05:28,520 Speaker 1: read about that China is ready and prepared to implement 109 00:05:28,560 --> 00:05:32,839 Speaker 1: fiscal easing. We swept monetary using everywhere, so I think 110 00:05:32,839 --> 00:05:35,040 Speaker 1: the markets reacting to that as well, knowing that China 111 00:05:35,120 --> 00:05:36,960 Speaker 1: is ready to step up, and if in doubt, do 112 00:05:37,200 --> 00:05:38,840 Speaker 1: chuck a bit more fuel on the fire and keep 113 00:05:38,839 --> 00:05:42,880 Speaker 1: it going as long as the music keeps playing. If 114 00:05:42,880 --> 00:05:45,479 Speaker 1: it starts, there raises in royal challenges exactly. There's no 115 00:05:45,560 --> 00:05:47,719 Speaker 1: signs of anybody actually thinking what might happen one it 116 00:05:47,720 --> 00:05:50,200 Speaker 1: will stop right now, or any sign that central bankers 117 00:05:50,240 --> 00:05:52,360 Speaker 1: are willing to stop. But it's such a stimulus it's 118 00:05:52,360 --> 00:05:54,880 Speaker 1: really supporting this seem How is an investor to draw 119 00:05:55,040 --> 00:05:57,679 Speaker 1: distinctions between good investments. And that's so good investments because 120 00:05:57,880 --> 00:06:01,400 Speaker 1: the sort that rising tide effect, right, So a lot 121 00:06:01,440 --> 00:06:05,440 Speaker 1: of what we talk about our franchises and owning franchise 122 00:06:05,480 --> 00:06:09,599 Speaker 1: businesses that can navigate you through the noise, you know, 123 00:06:09,680 --> 00:06:12,279 Speaker 1: and this could be loud noise and longer term noise. 124 00:06:12,320 --> 00:06:15,120 Speaker 1: We'll we'll see. But but clearly again when you think 125 00:06:15,160 --> 00:06:18,839 Speaker 1: out investing over ten, fifteen, twenty years, the focus we 126 00:06:19,000 --> 00:06:23,320 Speaker 1: like to have is on franchise businesses globally. But that's 127 00:06:23,360 --> 00:06:25,200 Speaker 1: a bo light way of saying. We're trying to get 128 00:06:25,240 --> 00:06:28,640 Speaker 1: into the business of zombie spotting, zombie screening, and trying 129 00:06:28,640 --> 00:06:31,040 Speaker 1: to work out, you know, which prisonesses and sectors essentially 130 00:06:31,080 --> 00:06:33,760 Speaker 1: being kept alive longer they should be by this tidal 131 00:06:33,800 --> 00:06:35,599 Speaker 1: way of cheat money. But don't we want to do 132 00:06:35,680 --> 00:06:38,120 Speaker 1: exactly that to some extent it might be hard exactly 133 00:06:38,200 --> 00:06:42,159 Speaker 1: anyone anyone who's going to go around wearing a zombie 134 00:06:42,160 --> 00:06:44,480 Speaker 1: BBus a T shirt, you know, to go to bust 135 00:06:44,480 --> 00:06:46,719 Speaker 1: the music. That's going to be the big theme with us. Yeah, 136 00:06:46,720 --> 00:06:50,840 Speaker 1: exactly'd like to you finding your zombies avoiding exactly not 137 00:06:50,880 --> 00:06:52,440 Speaker 1: only the United States but also in China as well. 138 00:06:52,440 --> 00:06:56,560 Speaker 1: I suspect for him even more in China. Exactly exactly. Okay, 139 00:06:56,560 --> 00:06:59,200 Speaker 1: we're gonna be back with our contributes shortly. Next here 140 00:06:59,279 --> 00:07:03,080 Speaker 1: a conversation with Muhammad al Arian, Alan's chief economic advisor 141 00:07:03,160 --> 00:07:10,400 Speaker 1: and Bloomberg opinion columnist. This is Wall Street Week. This 142 00:07:10,680 --> 00:07:15,200 Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 143 00:07:15,600 --> 00:07:18,680 Speaker 1: When markets bounced back from the initial shock of the coronavirus, 144 00:07:18,880 --> 00:07:21,920 Speaker 1: some economists were quick to jump on the bandwagon. This 145 00:07:21,960 --> 00:07:23,880 Speaker 1: looked like the sort of v dip we saw with 146 00:07:23,960 --> 00:07:26,200 Speaker 1: stars back in two three, and for that matter, just 147 00:07:26,320 --> 00:07:28,720 Speaker 1: last year with the attack on a Saudi oil facility 148 00:07:28,960 --> 00:07:32,320 Speaker 1: and the US missile attack that killed Cosum Salimony. But 149 00:07:32,720 --> 00:07:35,120 Speaker 1: the markets giving us an accurate read of the deeper 150 00:07:35,120 --> 00:07:38,320 Speaker 1: potential effects of the coronavirus on the global economy. We 151 00:07:38,400 --> 00:07:41,480 Speaker 1: have special contributor Mohammed el Arian, So it doesn't tell 152 00:07:41,520 --> 00:07:46,320 Speaker 1: you very much. The market has treated this as a containable, temporary, 153 00:07:46,400 --> 00:07:52,080 Speaker 1: reversible shock, just like the US attack on an Iranian general, 154 00:07:52,480 --> 00:07:56,560 Speaker 1: just like the attack on the saudio production. That's how 155 00:07:56,600 --> 00:07:59,240 Speaker 1: the market sees it, and it's supported in that view. 156 00:08:00,560 --> 00:08:04,720 Speaker 1: Nice comments about fiscal and monetary expansion. However, when you 157 00:08:04,720 --> 00:08:07,840 Speaker 1: look at what's happening on the ground, David, it's completely different. 158 00:08:08,400 --> 00:08:12,560 Speaker 1: You're getting sudden stops to various parts of the economy. 159 00:08:12,600 --> 00:08:15,320 Speaker 1: It started in the province and spreading out. Now you're 160 00:08:15,360 --> 00:08:18,520 Speaker 1: hearing companies in Europe and the US, Apple being the 161 00:08:18,600 --> 00:08:22,200 Speaker 1: latest having the supply chain disrupted. So I worried that 162 00:08:22,280 --> 00:08:24,040 Speaker 1: the economic effects are not going to be a v 163 00:08:25,360 --> 00:08:28,840 Speaker 1: The hope is there, you but there is an possibility 164 00:08:29,000 --> 00:08:31,360 Speaker 1: of something worse than that. It also affects both supply 165 00:08:31,480 --> 00:08:34,400 Speaker 1: and demand. People are not manufacturing things, particularly who based 166 00:08:34,400 --> 00:08:37,000 Speaker 1: it called province, but also Chinese people can't go to 167 00:08:37,040 --> 00:08:39,480 Speaker 1: the store by things. They can't even get out a lot. Yes, 168 00:08:39,520 --> 00:08:43,040 Speaker 1: and and China company off. The company is now announcing 169 00:08:43,080 --> 00:08:45,680 Speaker 1: that they may layoff people and not pay them, and 170 00:08:45,720 --> 00:08:47,400 Speaker 1: the government is going to have to step in and 171 00:08:47,400 --> 00:08:50,560 Speaker 1: save some of the more highly indebted companies. Absolutely, like 172 00:08:50,679 --> 00:08:53,440 Speaker 1: you say, and that's critical. It is both a demand 173 00:08:53,480 --> 00:08:57,480 Speaker 1: shock and a supply shock. It affects trade and services. 174 00:08:57,640 --> 00:09:01,319 Speaker 1: It is internal and external. So I think it's consequential. 175 00:09:01,760 --> 00:09:03,280 Speaker 1: And it's not as if as you know that the 176 00:09:03,280 --> 00:09:05,160 Speaker 1: global economy was in a great place to begin with. 177 00:09:05,840 --> 00:09:08,520 Speaker 1: We we got the data out of Japan six point 178 00:09:08,559 --> 00:09:12,720 Speaker 1: three percent contraction. Germany was stagnant. So I think for 179 00:09:12,920 --> 00:09:15,400 Speaker 1: the for the economy is a bigger deal than it 180 00:09:15,440 --> 00:09:17,000 Speaker 1: has been for the markets. Yeah, if you listen to 181 00:09:17,080 --> 00:09:20,280 Speaker 1: most economic commentaries, not just market people, but economic commentaries, 182 00:09:20,320 --> 00:09:21,720 Speaker 1: a lot of them sort of say we'll get past 183 00:09:21,720 --> 00:09:24,160 Speaker 1: the first quarter, will be find into the second. If 184 00:09:24,200 --> 00:09:28,600 Speaker 1: they are overly sanguine. Why because we've been deeply conditioned 185 00:09:28,880 --> 00:09:33,120 Speaker 1: that that's what happens. I think that slowly the markets 186 00:09:33,280 --> 00:09:37,360 Speaker 1: have increasingly determined two things. One is central bank policy. 187 00:09:37,440 --> 00:09:39,520 Speaker 1: So in the old days it was central banks leading 188 00:09:39,520 --> 00:09:42,920 Speaker 1: the markets. Now it's markets leading central banks. And I 189 00:09:42,960 --> 00:09:48,200 Speaker 1: think now also ironically, after analysts got the Saudi wrong, 190 00:09:48,280 --> 00:09:51,280 Speaker 1: after allan has got the attack that killed the Iranian 191 00:09:51,320 --> 00:09:54,719 Speaker 1: general wrong, that now the markets are leading analysts as well. 192 00:09:54,840 --> 00:09:57,800 Speaker 1: Now we've seen it often in the stock market, this 193 00:09:57,880 --> 00:10:00,240 Speaker 1: is the first time we see economic analysts influen so 194 00:10:00,320 --> 00:10:03,439 Speaker 1: much by price action. So we have no idea how 195 00:10:03,480 --> 00:10:05,760 Speaker 1: loyal take to get back up and running in China. 196 00:10:05,840 --> 00:10:08,439 Speaker 1: That could be some extended period time, but might there 197 00:10:08,440 --> 00:10:12,040 Speaker 1: be even longer potential rafications for example, But I'm a 198 00:10:12,080 --> 00:10:15,840 Speaker 1: company I'm relying upon UBE problems for my supply might 199 00:10:15,840 --> 00:10:18,360 Speaker 1: I think twice about really investing very much UBE problems 200 00:10:18,400 --> 00:10:21,400 Speaker 1: going forward? Yeah, because if your company, you've realized what 201 00:10:21,520 --> 00:10:25,320 Speaker 1: most of us know is your strength can become your weakness. 202 00:10:25,320 --> 00:10:28,560 Speaker 1: So global supply chains are wonderful just in time management, 203 00:10:29,120 --> 00:10:33,520 Speaker 1: cheapest production, et cetera. But when they get disrupted, they 204 00:10:33,559 --> 00:10:37,360 Speaker 1: are really really problematic. And I think increasingly companies are 205 00:10:37,400 --> 00:10:43,640 Speaker 1: going to realize it's efficiency versus predictability, and that tradeoff 206 00:10:43,840 --> 00:10:45,959 Speaker 1: in the past has gone way too far in terms 207 00:10:45,960 --> 00:10:47,880 Speaker 1: of efficiency. So I think you're gonna see if we're 208 00:10:47,960 --> 00:10:53,000 Speaker 1: visiting of this whole globalization narrative. That was our special 209 00:10:53,000 --> 00:10:57,040 Speaker 1: contributor of Muhammad Arian Alliance for Wall Street Week Round Table. 210 00:10:57,080 --> 00:10:59,959 Speaker 1: We welcome now Jillian Ted She's chair of the Editory Award, 211 00:11:00,000 --> 00:11:02,079 Speaker 1: a u S editor at large for The Financial Times, 212 00:11:02,280 --> 00:11:06,640 Speaker 1: and Seema Hingarani, she's managing director at Morgan Stanley Investment Management. 213 00:11:06,640 --> 00:11:08,760 Speaker 1: So Jillian, as we listen to Mohammed, it was a 214 00:11:08,760 --> 00:11:12,440 Speaker 1: fairly sobering take on the underlying economy. I think deeply depressing. 215 00:11:13,480 --> 00:11:15,120 Speaker 1: But at the same time we've talked about the equity 216 00:11:15,120 --> 00:11:17,080 Speaker 1: markets don't reflect that, and you have a fascinating piece 217 00:11:17,080 --> 00:11:19,360 Speaker 1: out in the ft actually about the University of Michigan, 218 00:11:19,360 --> 00:11:22,480 Speaker 1: Mayama mater their consumer sentiment on equities that are like 219 00:11:22,720 --> 00:11:25,920 Speaker 1: way up. Well, here's something that's fascinating. We had obviously 220 00:11:25,960 --> 00:11:29,439 Speaker 1: equity markets hidden records. This week in America, Donald Trump 221 00:11:29,480 --> 00:11:33,880 Speaker 1: tweeting out best market in history. Um, here's one number 222 00:11:33,880 --> 00:11:36,559 Speaker 1: I hope that the president doesn't see, which is the 223 00:11:36,640 --> 00:11:39,400 Speaker 1: University of Michigan releases a consumer surver each month about 224 00:11:39,440 --> 00:11:43,199 Speaker 1: where stocks are going. Sixty six percent of consumers right 225 00:11:43,200 --> 00:11:46,199 Speaker 1: now apparently think that equity markets are going to keep 226 00:11:46,280 --> 00:11:49,599 Speaker 1: rallying over the next year. That's up from fifty a 227 00:11:49,679 --> 00:11:52,920 Speaker 1: year ago, which sounds good. It beats even the two 228 00:11:52,920 --> 00:11:55,959 Speaker 1: thousand and seven boom. The problem is that, as Larry 229 00:11:56,000 --> 00:12:00,680 Speaker 1: McDonald Trapped Report has written very astute lee, every single 230 00:12:00,800 --> 00:12:04,280 Speaker 1: time that index has jumped above sixty in the last 231 00:12:04,320 --> 00:12:07,720 Speaker 1: fifteen years, there has then been equity market correction, ranging 232 00:12:07,760 --> 00:12:10,280 Speaker 1: from tempa cent in two thousand and eighteen through to 233 00:12:11,320 --> 00:12:14,280 Speaker 1: in two thousand and eight. So if Donald Trump starts 234 00:12:14,280 --> 00:12:17,680 Speaker 1: crowing about the start of bringing that number, the reality 235 00:12:17,880 --> 00:12:20,160 Speaker 1: is it probably suggests we're heading for something of the correction. 236 00:12:20,240 --> 00:12:22,359 Speaker 1: So see what what's an investor to do in that situation. 237 00:12:22,960 --> 00:12:26,319 Speaker 1: You know, you need to sort of separate what's buy 238 00:12:26,400 --> 00:12:30,040 Speaker 1: on the dip and what is get out of the way, um. 239 00:12:30,679 --> 00:12:33,719 Speaker 1: And I mean we we have those dialogues internally all 240 00:12:33,720 --> 00:12:38,800 Speaker 1: the time with every position and across the portfolios. And 241 00:12:38,840 --> 00:12:43,960 Speaker 1: so look at an active debate, you have to focus 242 00:12:44,000 --> 00:12:46,720 Speaker 1: on it when you look at these numbers, clearly. But 243 00:12:46,920 --> 00:12:49,000 Speaker 1: you know, going back to what Muhammad Larian was talking 244 00:12:49,000 --> 00:12:54,280 Speaker 1: about in terms of economic reality versus politics, UM, it's 245 00:12:54,320 --> 00:12:56,760 Speaker 1: hard to pass through that now, especially what's going on 246 00:12:56,800 --> 00:12:59,280 Speaker 1: in our country when you hear these tweets and see 247 00:12:59,280 --> 00:13:02,800 Speaker 1: these tweets. UM. So again we focus on the long term. 248 00:13:02,800 --> 00:13:05,000 Speaker 1: A lot of our big clients are long term investors. 249 00:13:05,040 --> 00:13:06,800 Speaker 1: A lot of them are U s public pension plans 250 00:13:06,800 --> 00:13:10,080 Speaker 1: that invest over thirty year periods. So we look to 251 00:13:11,000 --> 00:13:14,400 Speaker 1: think longer term valuations if you think about it, aren't 252 00:13:14,440 --> 00:13:17,360 Speaker 1: as stretched, um, you know, relative to the past. And 253 00:13:17,400 --> 00:13:21,000 Speaker 1: so again we're just sort of monitoring everything that's happening, 254 00:13:21,040 --> 00:13:23,360 Speaker 1: but there's no hand on the trigger right now. Those 255 00:13:23,360 --> 00:13:26,920 Speaker 1: plants I suspect are globally invested. So if you're trying 256 00:13:26,920 --> 00:13:28,720 Speaker 1: to get some of the upside but not take the risk. 257 00:13:28,840 --> 00:13:31,400 Speaker 1: What does that tell you? Yeah, so again, when I 258 00:13:31,480 --> 00:13:33,400 Speaker 1: was the chief invest's officer of the New York City 259 00:13:33,400 --> 00:13:36,520 Speaker 1: Pension Fund many years ago, UM, we had those conversations 260 00:13:36,520 --> 00:13:40,200 Speaker 1: with our trustees, and you're right. We do invest globally, 261 00:13:40,240 --> 00:13:44,200 Speaker 1: and we invest over the long term emerging markets. We 262 00:13:44,360 --> 00:13:46,360 Speaker 1: put a lot of emphasis on that. And again you 263 00:13:46,360 --> 00:13:48,280 Speaker 1: can argue that the last several years have not been 264 00:13:48,280 --> 00:13:50,640 Speaker 1: great to be an investor in emerging markets. But when 265 00:13:50,679 --> 00:13:52,560 Speaker 1: you think about the long term and where the growth is. 266 00:13:53,160 --> 00:13:55,440 Speaker 1: Even while China may go from six percent from Q 267 00:13:55,920 --> 00:13:58,120 Speaker 1: four last year down to four percent in Q one 268 00:13:58,160 --> 00:13:59,680 Speaker 1: of this year, because of what's been going on, what 269 00:13:59,720 --> 00:14:02,559 Speaker 1: we've been talking about, UM, it's still growing a lot 270 00:14:02,600 --> 00:14:04,160 Speaker 1: faster than we are, and a lot of parts of 271 00:14:04,160 --> 00:14:05,880 Speaker 1: the world, and like in India, is going to grow 272 00:14:05,920 --> 00:14:09,520 Speaker 1: even faster than China. And so again you made the 273 00:14:09,559 --> 00:14:12,760 Speaker 1: valuations clearly have discounted emerging market equities. But does that 274 00:14:12,800 --> 00:14:15,280 Speaker 1: mean you don't look at that as a long term 275 00:14:15,360 --> 00:14:18,199 Speaker 1: investment opportunity. I mean the problem is in a world 276 00:14:18,240 --> 00:14:21,240 Speaker 1: where rates are so low and equity divnated yields for 277 00:14:21,280 --> 00:14:24,320 Speaker 1: the SMB five hundred higher than bond yields, where you've 278 00:14:24,400 --> 00:14:28,600 Speaker 1: essentially got companies buying backstock wherever they can because money 279 00:14:28,680 --> 00:14:30,560 Speaker 1: so cheap, it's very tough to say out of the 280 00:14:30,560 --> 00:14:33,560 Speaker 1: equity market. Okay, we're gonna be back with our contributors shortly, 281 00:14:33,680 --> 00:14:35,480 Speaker 1: and you can check out what's coming up next week 282 00:14:35,520 --> 00:14:38,120 Speaker 1: on Wall Street Week by heading to Bloomberg Market's official 283 00:14:38,320 --> 00:14:41,040 Speaker 1: Twitter account. We'll have a poll each week focus on 284 00:14:41,080 --> 00:14:43,480 Speaker 1: what you'd like to hear from our contributors. The results 285 00:14:43,520 --> 00:14:46,160 Speaker 1: for this week are in Europe is looking to put 286 00:14:46,320 --> 00:14:50,400 Speaker 1: limits on big tech companies? Which area should regulars focus on? First? 287 00:14:50,680 --> 00:14:55,440 Speaker 1: A modest plurality voted for breaking up monopolies. We'll talk 288 00:14:55,480 --> 00:14:58,280 Speaker 1: big tech and regulation later in the program. This is 289 00:14:58,320 --> 00:15:11,920 Speaker 1: Wall Street Week. This is Bloomberg Wall Street Week with 290 00:15:12,080 --> 00:15:16,600 Speaker 1: David Weston from Bloomberg Radio. I'm happy to report that 291 00:15:16,720 --> 00:15:20,600 Speaker 1: the death of the transit Clohoetic Alliance is grossly over exaggerated. 292 00:15:21,920 --> 00:15:26,000 Speaker 1: The West is winning, we are collectively winning. That was 293 00:15:26,080 --> 00:15:28,840 Speaker 1: Secretary of State Mike Pompere addressing the security conference over 294 00:15:28,840 --> 00:15:31,200 Speaker 1: in Munich this week. But even as the Secretary was 295 00:15:31,240 --> 00:15:33,920 Speaker 1: reporting how strong the barns are across the Atlantic, the 296 00:15:33,960 --> 00:15:37,400 Speaker 1: United States was simultaneously thriving to cut off European allies 297 00:15:37,440 --> 00:15:40,160 Speaker 1: from intelligence sharing if they insist on doing business with 298 00:15:40,240 --> 00:15:44,000 Speaker 1: Chinese tech company Huawei. For Wall Street Week Roundtable, we 299 00:15:44,080 --> 00:15:46,880 Speaker 1: welcome now Jillian Tet, she's chair of the editorial board 300 00:15:46,880 --> 00:15:49,240 Speaker 1: and US editor at large for the Financial Times, and 301 00:15:49,280 --> 00:15:52,920 Speaker 1: Seema Hingarani, she's managing director at Morgan Stanley. Are Wall 302 00:15:52,960 --> 00:15:55,600 Speaker 1: Street Week interview today is with Ian Bremer, one of 303 00:15:55,640 --> 00:15:58,360 Speaker 1: those attending the Munich conference. Ian is the founder and 304 00:15:58,440 --> 00:16:00,960 Speaker 1: president of the Eurasia Group, and we welcome now. Great 305 00:16:01,000 --> 00:16:03,920 Speaker 1: to have you here, so so square that circle for me. 306 00:16:04,120 --> 00:16:06,000 Speaker 1: You know, we're all against China and we're all together 307 00:16:06,040 --> 00:16:07,360 Speaker 1: on this. At the same time, we might cut you 308 00:16:07,360 --> 00:16:10,640 Speaker 1: off if you keep doing this is China, where are we? Well? 309 00:16:10,680 --> 00:16:13,160 Speaker 1: I mean, the trans Atlantic relationship is not dead, but 310 00:16:13,240 --> 00:16:19,040 Speaker 1: let's be clear, this is the most fundamental structural divide 311 00:16:19,360 --> 00:16:22,760 Speaker 1: that we've seen since the creation of NATO. The Americans 312 00:16:22,760 --> 00:16:26,240 Speaker 1: in attendance, not just the Trump administration, but the Democrats, 313 00:16:26,280 --> 00:16:31,200 Speaker 1: the Code, the Congressional Delegation, the Senators Pelosi, all of 314 00:16:31,240 --> 00:16:36,080 Speaker 1: them were saying, you, Europeans, China is the most significant 315 00:16:36,120 --> 00:16:38,600 Speaker 1: national security threat for the United States. This is a 316 00:16:38,640 --> 00:16:43,160 Speaker 1: wholesale pivot of the Americans towards Asia. Were worried about China. 317 00:16:43,720 --> 00:16:46,200 Speaker 1: There were no Europeans in agreement, so they were not 318 00:16:46,360 --> 00:16:48,560 Speaker 1: So I saw the Nancy Pelosi state, which was quite strong, 319 00:16:48,640 --> 00:16:51,760 Speaker 1: actually came out. So are they right? I mean, it 320 00:16:51,840 --> 00:16:54,040 Speaker 1: is a Trump administration and the Democrats and Hill right 321 00:16:54,080 --> 00:16:57,240 Speaker 1: that Huawei is that perilous a threat the United States 322 00:16:57,280 --> 00:17:02,640 Speaker 1: national security. I certainly believe that the reality of a 323 00:17:02,840 --> 00:17:06,920 Speaker 1: decoupling in technology of the United States in China from 324 00:17:07,119 --> 00:17:10,840 Speaker 1: one another. That are tech companies like Google and Amazon 325 00:17:10,840 --> 00:17:14,400 Speaker 1: and Facebook don't have access into China. Their companies are 326 00:17:14,440 --> 00:17:16,159 Speaker 1: not going to get access into the U S. And 327 00:17:16,200 --> 00:17:20,720 Speaker 1: the Chinese will work to export their data, their standards, 328 00:17:20,760 --> 00:17:24,600 Speaker 1: their surveillance to other countries. That's a shift away from 329 00:17:24,600 --> 00:17:29,920 Speaker 1: globalization that has precipitous implications for the geopolitical balance. Clearly, 330 00:17:30,040 --> 00:17:32,960 Speaker 1: I would argue that the rise of China as a 331 00:17:33,040 --> 00:17:36,560 Speaker 1: committed state, capitalist authoritie nation is the most important strategic 332 00:17:36,560 --> 00:17:39,040 Speaker 1: threat to the US. But the fact that the Europeans 333 00:17:39,080 --> 00:17:41,600 Speaker 1: want none of it, the fact that they don't trust 334 00:17:41,600 --> 00:17:44,600 Speaker 1: the Americans because the background of snowdon for example, in 335 00:17:44,600 --> 00:17:49,280 Speaker 1: our own surveillance, are unilateralism, Trump's orientation towards them on trade, 336 00:17:49,600 --> 00:17:52,200 Speaker 1: the fact that we don't necessarily have a really strong 337 00:17:52,280 --> 00:17:55,119 Speaker 1: alternative to Huawei right now in the United States. The 338 00:17:55,160 --> 00:17:58,280 Speaker 1: Europeans were saying, We're just not going there. And I 339 00:17:58,320 --> 00:18:00,480 Speaker 1: have to say that if the Europeans and prepared to 340 00:18:00,480 --> 00:18:02,520 Speaker 1: support the United States for what we consider to be 341 00:18:02,560 --> 00:18:05,000 Speaker 1: the most important national security threat, you have to ask 342 00:18:05,280 --> 00:18:08,320 Speaker 1: yourself why the Americans down the road would be providing 343 00:18:08,359 --> 00:18:12,679 Speaker 1: the kind of security umbrella that we have heretofore and 344 00:18:12,680 --> 00:18:15,800 Speaker 1: putting the money in to help the Europeans visa vias Russia. 345 00:18:16,080 --> 00:18:18,560 Speaker 1: And I think that's a legitimate question is gonna be 346 00:18:18,560 --> 00:18:21,960 Speaker 1: asked by Americans. I'd love to ask you, as someone 347 00:18:22,000 --> 00:18:23,919 Speaker 1: who moves back and between Europe and the US. I 348 00:18:23,960 --> 00:18:25,760 Speaker 1: live in New York, but I obviously in London quite 349 00:18:25,760 --> 00:18:28,360 Speaker 1: a lot as well. What do you think, as someone 350 00:18:28,400 --> 00:18:31,600 Speaker 1: who knows China well about the level of danger around Huawei? 351 00:18:31,800 --> 00:18:35,760 Speaker 1: Is it really a tool of the Chinese government as 352 00:18:36,000 --> 00:18:40,880 Speaker 1: Americans in Washington would all say, I certainly believe that 353 00:18:41,640 --> 00:18:45,000 Speaker 1: the data that Huawei has access to will be made 354 00:18:45,000 --> 00:18:47,639 Speaker 1: available to the Chinese government as they find that useful. 355 00:18:47,920 --> 00:18:50,560 Speaker 1: So the strategic alignment, the idea of the Huawei is 356 00:18:50,600 --> 00:18:53,080 Speaker 1: a national champion in the way that Lockheed Martin has 357 00:18:53,080 --> 00:18:55,600 Speaker 1: been a national champion of the US government historically. At 358 00:18:55,600 --> 00:18:59,720 Speaker 1: the very least, Yes, I do believe that. But more importantly, 359 00:19:00,200 --> 00:19:02,879 Speaker 1: I think when we talk about five G, we're not 360 00:19:02,960 --> 00:19:05,480 Speaker 1: just talking about smartphones. We're talking, as you know, about 361 00:19:05,480 --> 00:19:09,400 Speaker 1: the Internet of things. That's the entire data infrastructure around 362 00:19:09,640 --> 00:19:12,520 Speaker 1: smart cities, anything with a chip in it. And the 363 00:19:12,680 --> 00:19:15,760 Speaker 1: idea that that would be aligned to a Chinese set 364 00:19:15,800 --> 00:19:18,080 Speaker 1: of standards as opposed to an American set of standards 365 00:19:18,119 --> 00:19:21,200 Speaker 1: with our allies, even though it's cheaper, even though it's 366 00:19:21,240 --> 00:19:23,760 Speaker 1: rolling out more quickly, does strike me as something the 367 00:19:23,800 --> 00:19:26,399 Speaker 1: Americans need to take very seriously. And this is what 368 00:19:26,480 --> 00:19:29,080 Speaker 1: I don't get. That's far I've only heard stick. If 369 00:19:29,119 --> 00:19:30,720 Speaker 1: you don't play our game the way we want them, 370 00:19:30,720 --> 00:19:33,720 Speaker 1: we're gonna cut you off. Right. Where's the carrot? I mean, 371 00:19:33,720 --> 00:19:35,600 Speaker 1: part of the problem is you said there's not alternatives 372 00:19:35,640 --> 00:19:37,720 Speaker 1: in the United States from five G. Why doesn't the 373 00:19:37,760 --> 00:19:40,200 Speaker 1: United States invest in Nokia? Why doesn't invest in erics 374 00:19:40,200 --> 00:19:41,960 Speaker 1: and things like that, where we could together to go 375 00:19:42,160 --> 00:19:44,240 Speaker 1: five G and not need wha way. Well, of course, 376 00:19:44,280 --> 00:19:47,080 Speaker 1: this was the speech that was given by Attorney General 377 00:19:47,320 --> 00:19:50,240 Speaker 1: Bill Barr, who has a telecom background among other things, 378 00:19:50,320 --> 00:19:53,080 Speaker 1: just two weeks ago, and he suggested in addition to 379 00:19:53,320 --> 00:19:56,760 Speaker 1: some urgent FCC decisions that would need to be made 380 00:19:56,760 --> 00:19:59,120 Speaker 1: in terms of bandwidth made available to make five G work. 381 00:19:59,400 --> 00:20:02,840 Speaker 1: But all so, the idea that the Americans a public 382 00:20:02,880 --> 00:20:07,360 Speaker 1: sector supported consortium industrial policy dirty word for most Republicans 383 00:20:07,960 --> 00:20:14,520 Speaker 1: from a Republican government, except Republican governments during the Cold 384 00:20:14,560 --> 00:20:18,119 Speaker 1: War were very supportive of the military industrial complex. So 385 00:20:18,200 --> 00:20:20,720 Speaker 1: what you have Bar saying is we need a military 386 00:20:20,720 --> 00:20:23,640 Speaker 1: industrial technological complex because the Chinese are fighting the Cold 387 00:20:23,640 --> 00:20:27,560 Speaker 1: War very differently. And I understand that, but that's his 388 00:20:27,840 --> 00:20:30,880 Speaker 1: one speech, is not a policy. And you're absolutely right 389 00:20:31,200 --> 00:20:33,480 Speaker 1: that the Europeans see a lot of money coming from 390 00:20:33,480 --> 00:20:36,520 Speaker 1: Belton Road, particularly in the seventeen plus one, the eastern 391 00:20:36,560 --> 00:20:39,959 Speaker 1: southern Europeans, with the Chinese, the even the Italians right 392 00:20:40,080 --> 00:20:43,320 Speaker 1: joined Belton Road for a reason. The Brits are saying, 393 00:20:43,600 --> 00:20:46,240 Speaker 1: it's a cheaper system. Why are we going to come 394 00:20:46,280 --> 00:20:48,040 Speaker 1: to the U s unless with something at us. They 395 00:20:48,040 --> 00:20:50,760 Speaker 1: don't have the companies, So unless we're finding a way 396 00:20:50,760 --> 00:20:54,280 Speaker 1: to help build up the Europeans as well. It's hard 397 00:20:54,359 --> 00:20:57,520 Speaker 1: to imagine that they're going to simply say, yeah, we're 398 00:20:57,520 --> 00:21:00,720 Speaker 1: gonna go with you. America First, Trump give many thanks 399 00:21:00,720 --> 00:21:03,040 Speaker 1: to Ian Bremer from eur Asia Group. Coming up here, 400 00:21:03,200 --> 00:21:05,040 Speaker 1: we're gonna get a second opinion on the future of 401 00:21:05,080 --> 00:21:08,880 Speaker 1: tech from Kim lu Carneian Corporation, Chief investment Officer. This 402 00:21:09,000 --> 00:21:17,920 Speaker 1: is Wall Street Week. This is Bloomberg Wall Street Week 403 00:21:18,119 --> 00:21:22,160 Speaker 1: with David Weston from Bloomberg Radio. We continue our roundtable 404 00:21:22,160 --> 00:21:25,040 Speaker 1: with Jillian Tet, Chair of the Editorial Board and US 405 00:21:25,200 --> 00:21:29,280 Speaker 1: editor at Large for The Financial Times, and Seema Hingarani, 406 00:21:29,600 --> 00:21:34,200 Speaker 1: Managing director at Morgan Stanley Investment Management. Tech wars seemed 407 00:21:34,200 --> 00:21:36,720 Speaker 1: to be breaking out around the world, everything from the 408 00:21:36,760 --> 00:21:39,600 Speaker 1: European Commission going after the likes of Facebook and Google 409 00:21:39,600 --> 00:21:41,840 Speaker 1: and Twitter to and I'd stay it's going after Whahwei. 410 00:21:42,280 --> 00:21:45,120 Speaker 1: The goose that's laid the golden egg of tech looks 411 00:21:45,119 --> 00:21:48,040 Speaker 1: to be turning into a global prey, raising questions for 412 00:21:48,080 --> 00:21:51,320 Speaker 1: investors about whether past performance in the tech industry can 413 00:21:51,359 --> 00:21:54,919 Speaker 1: be relied upon and forecasting future results. For a second opinion, 414 00:21:54,960 --> 00:21:57,280 Speaker 1: we welcome back and investor with a long term perspective. 415 00:21:57,320 --> 00:22:00,399 Speaker 1: She is Kim lu She's Chief Investment Officer of the 416 00:22:00,440 --> 00:22:03,000 Speaker 1: Carnegie Foundation. Welcome back him. Great to have you here. 417 00:22:03,119 --> 00:22:04,960 Speaker 1: Nice to be here. So you are a longer term 418 00:22:04,960 --> 00:22:06,919 Speaker 1: investor as you look at tech, which has driven so 419 00:22:07,000 --> 00:22:10,280 Speaker 1: much or investment over recent years, can you project it 420 00:22:10,280 --> 00:22:12,480 Speaker 1: will keep growing that way? Given all the things that 421 00:22:12,520 --> 00:22:15,880 Speaker 1: we've talked about geopolitical risk, regulatory risk. I think one 422 00:22:15,880 --> 00:22:18,479 Speaker 1: of the things that I think about both rest respect 423 00:22:18,480 --> 00:22:21,000 Speaker 1: to tech is the fact that tech is everything. It's 424 00:22:21,040 --> 00:22:23,639 Speaker 1: not just one sector. There's not a single sector you 425 00:22:23,680 --> 00:22:27,120 Speaker 1: can think of that has not been affected by technology. 426 00:22:27,400 --> 00:22:31,040 Speaker 1: So what exactly is the tech sector? Is it information technology? 427 00:22:31,119 --> 00:22:33,040 Speaker 1: Or is it real estate? I mean real estate is 428 00:22:33,080 --> 00:22:35,400 Speaker 1: affected by tech. So I don't think that that the 429 00:22:35,440 --> 00:22:38,639 Speaker 1: tech trends are changing. I think, um, how you invest 430 00:22:38,680 --> 00:22:41,680 Speaker 1: in it and the ways you it's implemented may change. 431 00:22:41,720 --> 00:22:45,280 Speaker 1: But tech is here and it is changing the dynamics 432 00:22:45,359 --> 00:22:47,720 Speaker 1: in ways that are really important. And I think that 433 00:22:48,560 --> 00:22:51,520 Speaker 1: our regulations, the governments, the way we think of things 434 00:22:51,560 --> 00:22:54,840 Speaker 1: haven't kept up with technology, and that's causing the ripples, 435 00:22:54,880 --> 00:22:58,159 Speaker 1: and that's causing the problems because how exactly do you 436 00:22:58,200 --> 00:23:01,640 Speaker 1: control technology? We we're struggling with how to do that. 437 00:23:01,840 --> 00:23:03,760 Speaker 1: But I think one thing we've seen in tech is 438 00:23:03,960 --> 00:23:07,680 Speaker 1: the network effect and the scale that benefits so enormously, 439 00:23:07,720 --> 00:23:10,320 Speaker 1: whether it's a Google or it's a Facebook, or perhaps 440 00:23:10,320 --> 00:23:12,520 Speaker 1: we're seeing now in the cloud really with Amazon and 441 00:23:12,560 --> 00:23:15,720 Speaker 1: Microsofts like that, where it's unusual typically when you get 442 00:23:15,800 --> 00:23:18,280 Speaker 1: too big, it starts to get too expensive. That doesn't 443 00:23:18,320 --> 00:23:20,640 Speaker 1: seem to happen in tech. That's a different phenomenon. Yeah, 444 00:23:20,720 --> 00:23:22,240 Speaker 1: I think that has a lot to do with another 445 00:23:22,280 --> 00:23:24,800 Speaker 1: problem we're having, which is the lack of inflation, right. 446 00:23:25,160 --> 00:23:27,679 Speaker 1: I mean it puts a lot of pressure on a 447 00:23:27,720 --> 00:23:30,239 Speaker 1: lot of things that have sort of underpinned how long 448 00:23:30,359 --> 00:23:33,199 Speaker 1: term investors invest. There's certain things we rely on to 449 00:23:33,280 --> 00:23:36,199 Speaker 1: make decisions as long term investors, and the way we 450 00:23:36,240 --> 00:23:38,480 Speaker 1: construct our portfolios have a lot to do with what 451 00:23:38,480 --> 00:23:41,520 Speaker 1: what we think will happen with different industries, with different governments, 452 00:23:41,520 --> 00:23:44,480 Speaker 1: with regulations, and a lot of that's coming undone and 453 00:23:44,560 --> 00:23:46,200 Speaker 1: a lot of it has to do with technology, and 454 00:23:46,240 --> 00:23:47,920 Speaker 1: a lot of if it has to do with how 455 00:23:47,960 --> 00:23:51,399 Speaker 1: people um included in their portfolios and think about it 456 00:23:51,440 --> 00:23:54,040 Speaker 1: and how governments are thinking about regulating it. And I 457 00:23:54,040 --> 00:23:57,000 Speaker 1: think that's going to be interesting to watch, but it's 458 00:23:57,119 --> 00:23:59,879 Speaker 1: I don't think the end up that we're looking for 459 00:24:00,000 --> 00:24:02,960 Speaker 1: and into technology either or the impact that technology is 460 00:24:03,000 --> 00:24:05,280 Speaker 1: going to have our markets um and I think it's 461 00:24:05,280 --> 00:24:07,080 Speaker 1: it's going to be a fundamental part of it, and 462 00:24:07,119 --> 00:24:09,760 Speaker 1: if people don't understand it or have an opinion on 463 00:24:09,800 --> 00:24:14,320 Speaker 1: how it will affect different industries, different countries, the relationships 464 00:24:14,359 --> 00:24:18,040 Speaker 1: between countries, the relationships between governments. I think you know, 465 00:24:18,080 --> 00:24:20,520 Speaker 1: you spent a lot of time earlier talking about China 466 00:24:20,640 --> 00:24:23,679 Speaker 1: versus the United States and the two systems that they're 467 00:24:23,680 --> 00:24:28,320 Speaker 1: gonna have to force other countries to choose between. That's real, right, 468 00:24:28,440 --> 00:24:30,640 Speaker 1: that's going to be a real significant part of how 469 00:24:31,480 --> 00:24:33,879 Speaker 1: we think about investing because we used to think about 470 00:24:34,000 --> 00:24:35,720 Speaker 1: it globally, and now we're going to have to think 471 00:24:35,720 --> 00:24:39,440 Speaker 1: about the countries that choose to align themselves with China 472 00:24:39,640 --> 00:24:41,720 Speaker 1: versus the countries that choose to align themselves with the 473 00:24:41,760 --> 00:24:46,600 Speaker 1: United States. And arguably those two different um factions will 474 00:24:46,680 --> 00:24:49,840 Speaker 1: be diversifiers for each other. But that's not exactly the 475 00:24:49,840 --> 00:24:51,199 Speaker 1: way we've thought about it in the past, and so 476 00:24:51,240 --> 00:24:53,160 Speaker 1: we're gonna have to rethink and I think that's gonna 477 00:24:53,160 --> 00:24:55,719 Speaker 1: be interesting to see who does it well and who doesn't. 478 00:24:55,880 --> 00:24:59,639 Speaker 1: I think there's also you, um I think with a 479 00:24:59,640 --> 00:25:02,680 Speaker 1: great and that in technology. I mean over ten years 480 00:25:02,720 --> 00:25:05,960 Speaker 1: ago there where was a Facebook, where where some of 481 00:25:06,000 --> 00:25:08,920 Speaker 1: these companies and Microsoft seems to be the one constant 482 00:25:09,080 --> 00:25:11,960 Speaker 1: in technology throughout this time. So over the next decade 483 00:25:12,400 --> 00:25:14,320 Speaker 1: you could argue, who's going to be the next big 484 00:25:14,320 --> 00:25:17,560 Speaker 1: tech tech tech company. You mentioned the cloud, that's a 485 00:25:17,640 --> 00:25:20,520 Speaker 1: huge thing. Now you've got all these other companies, these 486 00:25:20,520 --> 00:25:23,200 Speaker 1: smaller companies that can grow because of the cloud, because 487 00:25:23,200 --> 00:25:26,200 Speaker 1: the costs were too prohibitive for these smaller companies to grow. 488 00:25:26,280 --> 00:25:29,280 Speaker 1: So I think ten years from now, who knows will 489 00:25:29,320 --> 00:25:31,680 Speaker 1: be the bigger tech company. The fundamental challenges is there 490 00:25:31,680 --> 00:25:34,480 Speaker 1: going to be a platform shift before there's a regulatory 491 00:25:34,480 --> 00:25:36,720 Speaker 1: tipping point where governments come in to actually try and 492 00:25:36,760 --> 00:25:40,440 Speaker 1: break down some of these large companies, or whether national 493 00:25:40,440 --> 00:25:44,080 Speaker 1: security interests are going to predominate. But I think investors 494 00:25:44,080 --> 00:25:46,640 Speaker 1: and economists and policy makers are really struggling to get 495 00:25:46,640 --> 00:25:48,960 Speaker 1: their heads around this because I'm actually trained as the 496 00:25:48,960 --> 00:25:53,280 Speaker 1: cultural anthropologist, not an economist, and the tech sector is 497 00:25:53,440 --> 00:25:56,879 Speaker 1: very hard to measure or track using traditional economic tools 498 00:25:56,920 --> 00:25:59,919 Speaker 1: that look at money because so much of the transaction 499 00:26:00,440 --> 00:26:03,840 Speaker 1: are based on barter of services for data which are 500 00:26:03,840 --> 00:26:08,000 Speaker 1: not captured through money and antitroth Regulators can't really cope 501 00:26:08,000 --> 00:26:10,800 Speaker 1: with this because all of the methodology is based on 502 00:26:10,800 --> 00:26:12,960 Speaker 1: where the consumer prices are rising or falling to see 503 00:26:13,040 --> 00:26:16,320 Speaker 1: there's a monopoly. Economists can't count this stuff, so our 504 00:26:16,400 --> 00:26:19,120 Speaker 1: GDP figures, that our inflation figures could be completely out 505 00:26:19,119 --> 00:26:22,560 Speaker 1: of whack. And I think also investors are having trouble 506 00:26:22,600 --> 00:26:24,560 Speaker 1: trying to work out what is actually the value of 507 00:26:24,600 --> 00:26:29,120 Speaker 1: a company where almost everything is intangible and based on 508 00:26:29,160 --> 00:26:32,919 Speaker 1: things like barter rather than actual economic numbers. It's a 509 00:26:32,960 --> 00:26:34,919 Speaker 1: really powerful point I had not thought of before. In 510 00:26:34,920 --> 00:26:36,880 Speaker 1: this sense. Some people are saying we have rate regulation. 511 00:26:36,960 --> 00:26:39,119 Speaker 1: It's like the railroads, where you just start regulating the 512 00:26:39,200 --> 00:26:41,240 Speaker 1: rates because they're so big you cantu your Amazon. But 513 00:26:41,240 --> 00:26:44,000 Speaker 1: if it's really barter, it's much much harder rate regulation 514 00:26:44,040 --> 00:26:46,359 Speaker 1: if it's not not denominated in dollars and cents. I 515 00:26:46,359 --> 00:26:48,879 Speaker 1: couldn't agree more and I am firmly of the obinion 516 00:26:48,960 --> 00:26:51,200 Speaker 1: opinion that we have to turn around and say very clearly, 517 00:26:51,240 --> 00:26:53,960 Speaker 1: this is barter, and we have to recognize the real 518 00:26:54,000 --> 00:26:57,440 Speaker 1: problem today is actually not that it's an entirely one 519 00:26:57,480 --> 00:27:00,480 Speaker 1: way trade because it's not we're giving up data for services, 520 00:27:00,760 --> 00:27:03,760 Speaker 1: but it's all the terms of trade for regulators clear 521 00:27:03,920 --> 00:27:06,959 Speaker 1: to both sides, and are they fair. And at the 522 00:27:06,960 --> 00:27:09,359 Speaker 1: moment there's so much opacity and confusion around the debate 523 00:27:09,480 --> 00:27:12,560 Speaker 1: that issue isn't even being discussed properly. I think that right. 524 00:27:12,600 --> 00:27:14,359 Speaker 1: I think that's a lot exactly right, because we we 525 00:27:14,440 --> 00:27:17,080 Speaker 1: absolutely looked at these companies, and we looked at these 526 00:27:17,080 --> 00:27:20,920 Speaker 1: industries from a traditional lens and then realize later, oh, 527 00:27:20,960 --> 00:27:23,520 Speaker 1: I was trading something that I didn't realize I was 528 00:27:23,560 --> 00:27:26,480 Speaker 1: trading right. And and when you and then you're like, 529 00:27:26,520 --> 00:27:29,000 Speaker 1: I priced it wrong because I should have. I should 530 00:27:29,000 --> 00:27:31,119 Speaker 1: have made them pay more for this thing that I 531 00:27:31,200 --> 00:27:34,080 Speaker 1: was giving them. Um, but now it's too late, Right, 532 00:27:34,920 --> 00:27:37,760 Speaker 1: You construct and reconstruct your portfolio and look at the 533 00:27:37,840 --> 00:27:40,840 Speaker 1: longer term returns. How do you take into account the 534 00:27:40,840 --> 00:27:42,359 Speaker 1: fact that everything is tech? As you said, it is 535 00:27:42,400 --> 00:27:44,960 Speaker 1: a sense everything is tech? But how does it influence 536 00:27:44,960 --> 00:27:46,679 Speaker 1: your decisions about what to invest in and what not 537 00:27:46,800 --> 00:27:49,960 Speaker 1: to invest in. I think what I what we're trying 538 00:27:50,000 --> 00:27:53,640 Speaker 1: to do is think about where there's going to be value, 539 00:27:53,920 --> 00:27:57,040 Speaker 1: because ultimately, I do think at some point the market 540 00:27:57,119 --> 00:28:00,919 Speaker 1: recognizes value. And so technology is going to destroy value 541 00:28:00,960 --> 00:28:03,280 Speaker 1: from for some industries and it's going to create value 542 00:28:03,320 --> 00:28:06,400 Speaker 1: for others. And so we're trying to figure out which 543 00:28:06,440 --> 00:28:10,320 Speaker 1: which companies, which countries, which industries are going to benefit 544 00:28:10,520 --> 00:28:13,800 Speaker 1: from the fact that technology is pervasive versus which ones 545 00:28:13,840 --> 00:28:16,359 Speaker 1: are going to come undone as a result of technology. 546 00:28:16,400 --> 00:28:20,359 Speaker 1: And and as a long term investor, that predictability becomes important. 547 00:28:20,640 --> 00:28:22,679 Speaker 1: And so there is a little bit, you know, to 548 00:28:22,760 --> 00:28:25,320 Speaker 1: the point of you guys were talking about E. S 549 00:28:25,400 --> 00:28:28,399 Speaker 1: G earlier, and that's an industry that for sure is 550 00:28:28,440 --> 00:28:31,600 Speaker 1: going to be swayed pretty significantly because of technology, because 551 00:28:31,600 --> 00:28:33,800 Speaker 1: that's what's going to make it possible for people to 552 00:28:33,840 --> 00:28:37,600 Speaker 1: get comfortable with solutions to climate change. So where do 553 00:28:37,640 --> 00:28:41,480 Speaker 1: you find value as an investor at Morgan Stanley UM. 554 00:28:41,600 --> 00:28:44,840 Speaker 1: So again we uh we talked to our clients about 555 00:28:45,440 --> 00:28:47,920 Speaker 1: long term investment because they're all long term investors, similar 556 00:28:47,920 --> 00:28:52,320 Speaker 1: to how Kim is um and you know, from that standpoint, 557 00:28:52,360 --> 00:28:54,800 Speaker 1: we try to invest through a lot of the ups 558 00:28:54,840 --> 00:28:56,760 Speaker 1: and downs of the market. So again we focus on 559 00:28:56,800 --> 00:29:01,640 Speaker 1: global companies, global franchises that you know, build value over time, 560 00:29:01,680 --> 00:29:07,400 Speaker 1: compound over time, that have will consistently have pricing power 561 00:29:07,520 --> 00:29:12,000 Speaker 1: because of that, you know marketplace uh stance that they 562 00:29:12,040 --> 00:29:17,120 Speaker 1: have globally. Um, and that we think it's just a 563 00:29:17,160 --> 00:29:21,320 Speaker 1: better long term way to think about investing, and uh, 564 00:29:21,520 --> 00:29:23,320 Speaker 1: you know, it's a it's a lot easier to talk 565 00:29:23,320 --> 00:29:26,200 Speaker 1: to clients about the long term than try to get 566 00:29:26,240 --> 00:29:28,880 Speaker 1: them focused on these short term vibrations in the market, 567 00:29:28,960 --> 00:29:32,560 Speaker 1: which you need to pay attention to clearly. But um, 568 00:29:32,600 --> 00:29:35,120 Speaker 1: but again, you know, we're investors over the long term. 569 00:29:35,240 --> 00:29:39,160 Speaker 1: I love the word vibration. Get a very happy feeling 570 00:29:39,240 --> 00:29:41,720 Speaker 1: to the stock market, and don't worry about the crash. 571 00:29:41,760 --> 00:29:45,000 Speaker 1: It's just a vibration. Yeah, it seemsally when we're talking 572 00:29:45,000 --> 00:29:47,440 Speaker 1: about value, you're not talking about value versus growth. You're 573 00:29:47,440 --> 00:29:50,200 Speaker 1: talking about intrinsic value. So you're not saying something that 574 00:29:50,240 --> 00:29:52,640 Speaker 1: you're going for value stocks rather than growth stock. No, 575 00:29:52,880 --> 00:29:56,400 Speaker 1: I'm talking about the fact that there there is underlying 576 00:29:56,520 --> 00:29:59,600 Speaker 1: value that that's worth owning, that's going to be created 577 00:29:59,680 --> 00:30:01,920 Speaker 1: by of technologies, and there's going to be some destroying 578 00:30:01,920 --> 00:30:04,720 Speaker 1: a value. It was an really interesting conversation I had 579 00:30:04,800 --> 00:30:07,720 Speaker 1: with a young man recently where he was telling me 580 00:30:07,920 --> 00:30:09,840 Speaker 1: and I love talking to young people because they give 581 00:30:09,840 --> 00:30:12,800 Speaker 1: you a totally different perspective. And his perspective was that 582 00:30:13,400 --> 00:30:17,680 Speaker 1: the companies who don't make very much profits are the 583 00:30:17,720 --> 00:30:21,240 Speaker 1: ones that have the moat because it reduces competition. That's 584 00:30:21,280 --> 00:30:24,800 Speaker 1: why Amazon's winning, right, because who wants who can compete 585 00:30:24,800 --> 00:30:27,720 Speaker 1: against them when their margins are so thin? And that 586 00:30:27,840 --> 00:30:31,320 Speaker 1: so it's an interesting dynamic that's been made by technology. 587 00:30:31,360 --> 00:30:33,920 Speaker 1: I mean, technology has made that possible for them to 588 00:30:33,960 --> 00:30:37,640 Speaker 1: create a moat around themselves that way, right, And Amazon, 589 00:30:37,680 --> 00:30:40,160 Speaker 1: I mean, really, what is it? It's a logistics and 590 00:30:40,280 --> 00:30:44,080 Speaker 1: a logistics company, right, retailer. Maybe it wasn't the beginning, 591 00:30:44,120 --> 00:30:46,960 Speaker 1: but clearly it's a logistics company. Who would have thought, Okay, 592 00:30:47,120 --> 00:30:49,600 Speaker 1: many thanks that I can move from Carnegie. We've taken 593 00:30:49,600 --> 00:30:52,120 Speaker 1: a look at the week just passed on Global Wall Street. 594 00:30:52,360 --> 00:30:54,640 Speaker 1: Now let's look forward to what's coming up next week 595 00:30:54,680 --> 00:30:56,880 Speaker 1: in the world of business and finance. So seem I'm 596 00:30:56,880 --> 00:30:58,600 Speaker 1: gonna start with retail because we have a lot of 597 00:30:58,600 --> 00:31:00,720 Speaker 1: retail earnings coming out. We'll get some sense of how 598 00:31:00,760 --> 00:31:03,360 Speaker 1: retailers are doing. What are you predicting we'll see this 599 00:31:03,560 --> 00:31:07,640 Speaker 1: week in terms of the strength of retail and the consumer. Um, 600 00:31:07,680 --> 00:31:11,280 Speaker 1: I could say broadly, the US consumers seems to be 601 00:31:11,320 --> 00:31:15,680 Speaker 1: in pretty good shape still. Um, we've got very low unemployment, 602 00:31:15,720 --> 00:31:18,280 Speaker 1: we've got rising wages. That's all good for the U 603 00:31:18,320 --> 00:31:22,960 Speaker 1: S consumer. Um, But we're likely to see differential amongst 604 00:31:23,120 --> 00:31:27,040 Speaker 1: the retailers out there in terms of their performance, especially 605 00:31:27,040 --> 00:31:29,400 Speaker 1: when you have Amazon Prime coming out with their one 606 00:31:29,480 --> 00:31:32,000 Speaker 1: day delivery. Well, that's one of the questions is what 607 00:31:32,120 --> 00:31:34,960 Speaker 1: the bifurcation between as they say, brooks and mortar and 608 00:31:35,000 --> 00:31:37,280 Speaker 1: online are. Although that's getting merged to some extent, and 609 00:31:37,320 --> 00:31:39,600 Speaker 1: I think I think it gets even bigger than that, 610 00:31:39,640 --> 00:31:42,640 Speaker 1: where the big just keep getting bigger, right, the bigger 611 00:31:42,680 --> 00:31:44,840 Speaker 1: retailers just kid well, this is a really good point. 612 00:31:44,880 --> 00:31:46,920 Speaker 1: And then it applies to Walmart and Target and stuff 613 00:31:46,960 --> 00:31:50,000 Speaker 1: as well as to Amazon. Absolutely. I mean Walmart has 614 00:31:50,040 --> 00:31:53,680 Speaker 1: certainly cost a bit of a chill on the market 615 00:31:54,160 --> 00:31:57,240 Speaker 1: because it is not done as well as people have hoped. Um, 616 00:31:57,280 --> 00:31:59,240 Speaker 1: there's a lot of people are in the consumer pretty 617 00:31:59,280 --> 00:32:02,840 Speaker 1: nervously these days because all roads have led to the consumer. 618 00:32:03,280 --> 00:32:06,800 Speaker 1: In the global economy. Frankly, in the last year, American 619 00:32:06,960 --> 00:32:09,920 Speaker 1: capex has been pretty weak. Businesses have not been flying, 620 00:32:10,240 --> 00:32:13,000 Speaker 1: but consumer is essentially what's kept to the American economy 621 00:32:13,360 --> 00:32:16,000 Speaker 1: so buoyant, and if there's any sign that that's starting 622 00:32:16,040 --> 00:32:18,239 Speaker 1: to come off the boil in any way, that's going 623 00:32:18,240 --> 00:32:22,600 Speaker 1: to create reverberations around the world potentially. Um so it's 624 00:32:22,600 --> 00:32:26,080 Speaker 1: gonna very and sin. See what happens to the retail sector. Okay, 625 00:32:26,120 --> 00:32:28,360 Speaker 1: this week we'll find out what happened in the retail sector. 626 00:32:28,520 --> 00:32:32,040 Speaker 1: Many thanks now to our contributors Seema Hingarani and Jillian Ted. 627 00:32:32,320 --> 00:32:34,880 Speaker 1: This has been another edition of Wall Street Week. See 628 00:32:34,920 --> 00:32:36,840 Speaker 1: you next week.