WEBVTT - Dollar is Fundamentally Overvalued, Dennis Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.000 Bloomberg dot Com, and of course, on the Bloomberg We 0:00:34.120 --> 0:00:36.800 begin with the top story, A big question. Is Washington's 0:00:36.800 --> 0:00:39.600 trade war with Beijing go on a potentially irreversible course. 0:00:39.640 --> 0:00:43.040 The Treasury Department is planning to heighten scrutiny of Chinese 0:00:43.080 --> 0:00:48.000 investments in sensitive US industries under an emergency law. Prepared 0:00:48.040 --> 0:00:50.240 to hear a whole lot more about this story through 0:00:50.280 --> 0:00:52.320 the week. We can begin by heading over to Ways 0:00:52.479 --> 0:00:54.480 and catching up with and acar In, our chief Asia 0:00:54.560 --> 0:00:57.560 economics correspondent for Bloomberg News. And I'm really pleased to 0:00:57.560 --> 0:01:00.320 say he's joined with us late in the evening over 0:01:00.560 --> 0:01:02.160 in Hong Kong. So and the great to have you 0:01:02.160 --> 0:01:04.120 with us on the program this morning here in New York. 0:01:04.280 --> 0:01:06.319 Get us up to Spain and what's about to happen 0:01:06.520 --> 0:01:09.600 this week. So it looks like Jonathan, at the very least, 0:01:09.600 --> 0:01:11.600 the US are going to step up their scrutiny of 0:01:11.680 --> 0:01:14.880 Chinese investment in the US itself. Now this matter is 0:01:14.920 --> 0:01:17.080 because it goes to the heart of the U s 0:01:17.120 --> 0:01:21.600 conterterns concerns about China's future industrial strategy. Remember, China wants 0:01:21.640 --> 0:01:24.880 to create this high tech world leading economy and technology 0:01:25.160 --> 0:01:27.400 with a little help from the state, and the US 0:01:27.480 --> 0:01:29.160 is going to please about it. But for China to 0:01:29.240 --> 0:01:31.039 do that, they of course need to source a lot 0:01:31.040 --> 0:01:33.679 of technology from the US itself. So it seems like 0:01:33.880 --> 0:01:36.800 the US are going to block office channel of the 0:01:36.920 --> 0:01:39.520 U of Chinese companies buying big tech companies are buying 0:01:39.520 --> 0:01:41.880 their components from the US at the very least, trying 0:01:41.880 --> 0:01:43.960 to slow down at that advancement. So I think it 0:01:44.000 --> 0:01:47.200 illustrates that this trade spat is getting ever deeper by 0:01:47.240 --> 0:01:50.040 the week. So we've got the external pressures on the Chinese, 0:01:50.040 --> 0:01:53.000 we've got the internal pressures they're responding to as well. 0:01:53.280 --> 0:01:55.560 And to what extent was the triple our cut the 0:01:55.640 --> 0:01:58.960 reserve requirement ratio cut over the weekend to address the 0:01:59.120 --> 0:02:02.200 softer on his economy. Yeah, I think benefit of the 0:02:02.240 --> 0:02:03.680 doubt in this one. I think it was more driven 0:02:03.680 --> 0:02:06.720 by domestic issues, Jonathan, rather than external per se. They 0:02:06.720 --> 0:02:09.360 have been saying for some time now that smaller companies 0:02:09.400 --> 0:02:12.760 medium sized companies are facing higher boring costs. It's not 0:02:12.800 --> 0:02:16.800 that they're explicitly easing policy are looking to juice up 0:02:16.800 --> 0:02:19.600 growth overall. It's a fairly targeted, modest to measure. But 0:02:19.639 --> 0:02:22.400 at the same time, though, it's hard to completely ignore 0:02:22.440 --> 0:02:25.720 the broader macro backdrop of a slowing Chinese economy at 0:02:25.760 --> 0:02:28.040 the same time that the trade tensions are getting ever worse. 0:02:28.120 --> 0:02:30.679 So it's an indication that the policy makers are ready 0:02:30.720 --> 0:02:34.120 and willing to active need be. And there's a Harley 0:02:34.240 --> 0:02:38.040 Davidson's store. You know, if you're on the Boon and 0:02:38.160 --> 0:02:42.240 you go back towards where the residential sections are in Shanghai, 0:02:42.280 --> 0:02:46.320 I'm going to butcher the pronunciation, but near put to Oh, 0:02:46.400 --> 0:02:50.000 there's one of three Harley Davidson's stores in Shanghai. So 0:02:50.720 --> 0:02:55.240 is the basic theme here They're gonna stop selling Harley Davidson's. Well. 0:02:55.320 --> 0:02:58.520 The US companies operating in China are considered the vulnerable 0:02:58.560 --> 0:03:00.560 in all of this, Tom, There's no doubt about it. 0:03:00.639 --> 0:03:04.000 And the auto sector especially you mentioned motor bike sector 0:03:04.080 --> 0:03:07.880 especially is vulnerable because GM and Ford have expanded big 0:03:07.919 --> 0:03:10.919 plants across China. Tesla wants to Tesla wants to set 0:03:10.960 --> 0:03:13.440 up a big, big manufacturing plant in China. So if 0:03:13.440 --> 0:03:15.079 the trade tension, to read the point, reach a point 0:03:15.120 --> 0:03:17.360 where China is striking back, well, then life will be 0:03:17.360 --> 0:03:19.079 made a lot more awkward for those you has companies, 0:03:19.200 --> 0:03:21.520 including Harley and the Current. We've gotta let you run. 0:03:21.560 --> 0:03:23.799 So thank you very much for joining the program later 0:03:23.840 --> 0:03:25.200 on in Hong Kong to get us up to speed 0:03:25.240 --> 0:03:41.520 on what is happening in China. Sonny Krasinski, I'm ready 0:03:41.520 --> 0:03:43.400 placed to say joined us in the New York studio. 0:03:43.480 --> 0:03:47.120 But Pimco's executive vice president and market strategist Tony can 0:03:47.160 --> 0:03:50.320 you imagine that Tom and a Harley, Well, I have 0:03:50.480 --> 0:03:54.000 a honder if he wants to take a ride, but 0:03:54.040 --> 0:03:57.280 it's a dirt bike, I wouldn't be really yeah like 0:03:57.400 --> 0:03:59.840 it since my youth. It's the thing, one of my 0:04:00.040 --> 0:04:02.920 things on Staten Island at least, But there's less and 0:04:03.000 --> 0:04:05.760 less land to ride on. Very cool, very cool. Let's 0:04:05.760 --> 0:04:08.160 talk about China. I haven't really heard many people talking 0:04:08.160 --> 0:04:11.760 about a slower Chinese economy. You lays a focused on 0:04:11.800 --> 0:04:14.880 that at the moment. Yes, it matters a lot. Global 0:04:14.920 --> 0:04:17.720 nominal GDP this year will be in the low sixes. 0:04:17.800 --> 0:04:21.440 It matters. It means double digit earnings growth for global corporations, 0:04:21.480 --> 0:04:24.159 which is supportive of the equity markets and the credit markets, 0:04:24.240 --> 0:04:27.560 and it's uh it's vitally important for those assets. I 0:04:27.920 --> 0:04:30.480 think of China's economy's thirteen trillion in size grows near 0:04:30.520 --> 0:04:33.080 seven percent, so it's near nine billions of new GDP 0:04:33.240 --> 0:04:35.120 for the world. What does the U S economy grow 0:04:35.120 --> 0:04:38.960 at low two's twenty trillion dollar economy about half a 0:04:38.960 --> 0:04:42.080 little more than half the amount of China's growth in GDP. 0:04:42.200 --> 0:04:45.320 So the major contribution to world GDP growth is China. 0:04:45.600 --> 0:04:47.320 When you think of the various things that have happened 0:04:47.320 --> 0:04:51.640 in recent years, the stabilizing force has been China's China 0:04:51.680 --> 0:04:54.440 and its economy, So it matters a lot. What we 0:04:54.600 --> 0:04:56.839 are looking at, of course, is that these are these 0:04:56.880 --> 0:05:00.359 trade tensions small so far. Think of the fifth the 0:05:00.400 --> 0:05:03.440 tariff of put on fifty billions of goods. What is 0:05:03.480 --> 0:05:07.640 that billion dollars of price change for US consumers peanuts 0:05:07.680 --> 0:05:10.039 to a global economy that this year will grow about 0:05:10.080 --> 0:05:13.480 ninety five trillion dollars. And to put in perspective for 0:05:13.520 --> 0:05:16.039 a long term investor, think of the next three years, 0:05:16.360 --> 0:05:20.800 three trillion dollars of world gdp uh and these tariffs 0:05:20.800 --> 0:05:23.599 are you can't even mentioning. How do you respond to 0:05:23.640 --> 0:05:26.560 the fact that China has so much of our marginal growth. 0:05:28.040 --> 0:05:30.520 It's not It is for the world, but not of 0:05:30.560 --> 0:05:34.080 course the United States. And that's Donald Trump's issue. He 0:05:34.120 --> 0:05:36.520 wants to see China buy more from US. China purchases 0:05:36.520 --> 0:05:39.360 about one fifty billion dollars of goods from US each year, 0:05:39.480 --> 0:05:43.719 but we buy about US Americans five So we're not 0:05:43.760 --> 0:05:47.280 getting These policies are not going to lead to boosted 0:05:47.839 --> 0:05:51.000 US exports, are they? They're not likely to, but they 0:05:51.080 --> 0:05:54.359 probably actually they will, but the magnitude won't be great. 0:05:54.600 --> 0:05:56.960 There will be more of this soul than that salt. 0:05:57.000 --> 0:05:59.320 And if these trade tensions side, what are you watching 0:05:59.320 --> 0:06:01.200 in the short term market? When you walk in the door, 0:06:01.279 --> 0:06:03.960 you've got three log in Bloomberg's, you've got twelve screens. 0:06:04.279 --> 0:06:06.479 What do you look at when you when you walk 0:06:06.520 --> 0:06:09.320 into the well? The initials? Of course, any money market 0:06:09.320 --> 0:06:12.240 trader was interested in where repo is for the day. 0:06:12.520 --> 0:06:15.919 Where it is that large investors are putting the money overnight, 0:06:16.400 --> 0:06:23.839 and that's un England. But in the well, I'm not 0:06:23.880 --> 0:06:27.320 looking because it'll the mother nation Italy is not in it, 0:06:27.360 --> 0:06:30.159 So I'm not tough times. It's tough times, but we 0:06:30.240 --> 0:06:32.360 look more when we think about the money market more generally, 0:06:32.440 --> 0:06:34.400 we're thinking of where is it that the market thinks 0:06:34.400 --> 0:06:36.839 the path will be for the federal funds rate, the 0:06:36.839 --> 0:06:41.000 FEDS policy rate? Is it changing that would only happen glacially, 0:06:41.600 --> 0:06:43.840 meaning it we take a lot of data and new 0:06:43.880 --> 0:06:46.000 information to change the markets. For you on where the 0:06:46.040 --> 0:06:49.800 federal angry with its path? What is that data that 0:06:49.880 --> 0:06:51.840 you're going to glee? What what do you want to 0:06:52.080 --> 0:06:54.960 see that will allow you to know what German deal 0:06:55.120 --> 0:06:57.839 is going to do? The catalyst would be a change 0:06:57.920 --> 0:07:01.520 in inflation. He essentially in the last press conference after 0:07:01.560 --> 0:07:03.800 the last f O m C meeting, the Fed's policy 0:07:03.839 --> 0:07:09.279 meeting tossed out nairu, meaning where the Fed thinks inflation 0:07:09.360 --> 0:07:13.360 won't accelerate anymore, the job is raised three percent. Typically, 0:07:13.960 --> 0:07:16.880 an economist historically would say, well, job is rates low 0:07:17.000 --> 0:07:20.440 three point eight, but anything below x would mean higher 0:07:20.480 --> 0:07:24.600 inflation rate. That hasn't happened. So we watched John Tucker. 0:07:24.640 --> 0:07:27.560 You'll know this, Tony KRESSENDSI with his dirt bike when 0:07:27.560 --> 0:07:30.240 he when he was a kid on Staten Island. They 0:07:30.280 --> 0:07:33.760 went out pass Western Avenue to the container turn. He 0:07:33.880 --> 0:07:38.560 tried to do the Evil Kanevil, but evil Kanevil toy. 0:07:38.800 --> 0:07:41.320 He wind him up and he jump anything. To the 0:07:41.440 --> 0:07:44.160 few places in New York City you can actually ride 0:07:44.160 --> 0:07:47.080 a dirt bike. I didn't know that. I like to 0:07:47.080 --> 0:07:50.240 do donuts and wheelies and go through over the Grant 0:07:50.320 --> 0:07:52.960 ramps like parents just said, you're not going over the 0:07:52.960 --> 0:07:56.960 Elizabeth Port as long as I stay off as Pimcock 0:07:56.960 --> 0:08:01.000 got a special insurance plan for It's funny. We don't 0:08:01.000 --> 0:08:03.320 thought too fast doing a doughnut in the dirt. So 0:08:03.880 --> 0:08:06.080 I think we'll see Sonny CHRISTENTI gray to have you 0:08:06.120 --> 0:08:11.080 with us. What's Italy need to do to get back 0:08:11.080 --> 0:08:13.960 into the World Cup? Is it like youth organization thing 0:08:14.000 --> 0:08:16.000 they need to do? Yes, we have need to invest 0:08:16.400 --> 0:08:38.000 in human capital. Jeffrey Dennas with us would ubs out 0:08:38.000 --> 0:08:41.040 of Boston this morning. On a merging market, jeff, how 0:08:41.040 --> 0:08:43.719 do you define dollars strength? Is it through d x 0:08:43.880 --> 0:08:47.360 Y that blended trading number? Is there a certain currency 0:08:47.400 --> 0:08:50.720 pair that you're watching that was your indication of future 0:08:50.720 --> 0:08:55.120 dollar strength. We tend to follow dollar euro as being 0:08:55.200 --> 0:08:58.440 the best indicator could have quit dollar strength. But of 0:08:58.440 --> 0:09:01.120 course technically you're right, Tom that you should be looking 0:09:01.120 --> 0:09:03.720 at the dollar trade wag. But I think the world 0:09:03.720 --> 0:09:06.960 will tends to look at as I say, dollar euros. 0:09:07.000 --> 0:09:09.800 Your your best indicators don't really mean by dollar strength, 0:09:09.880 --> 0:09:12.680 but that the dollar euro euro dollar rather doesn't have 0:09:12.800 --> 0:09:15.760 em and it doesn't. No, no, no, But I think 0:09:15.800 --> 0:09:19.080 the point the point obviously as far as the virgin 0:09:19.160 --> 0:09:21.280 market to concern, we have our own way of looking 0:09:21.280 --> 0:09:24.360 at it because we compare the emerging market indexting dollars 0:09:24.360 --> 0:09:26.520 with the emerging index and local currency, and that gives 0:09:26.559 --> 0:09:29.480 you a measure of EM currencies overall. But if the 0:09:29.559 --> 0:09:34.040 question was about what the generalized trend in in and 0:09:34.160 --> 0:09:36.320 then the dollar is around the world, I think the 0:09:36.360 --> 0:09:38.679 best way to read that in terms of his money 0:09:38.679 --> 0:09:40.440 coming into the U S Dollar out of the US 0:09:40.480 --> 0:09:44.120 dollar is versus the euro. How reliable is this CFTC 0:09:44.360 --> 0:09:46.960 data Just to get a broader sort of idea of 0:09:46.960 --> 0:09:49.400 what's having in the FX market in terms of positioning, Jeff, 0:09:49.440 --> 0:09:52.520 and what have we learned over the last week? Well, 0:09:52.559 --> 0:09:56.520 I mean this is this sort of position. Data is 0:09:56.559 --> 0:09:59.760 the sort of thing that you know, it's it's as 0:09:59.760 --> 0:10:02.160 good we've got, so we probably try to use it 0:10:02.200 --> 0:10:04.400 as best as we can, even though of course it's 0:10:04.440 --> 0:10:07.200 it's not perfect. But you know, when when something is 0:10:07.240 --> 0:10:09.560 there and you don't have much alternative, you tend to 0:10:09.640 --> 0:10:12.439 use that as a as an idea. I mean, I 0:10:12.480 --> 0:10:15.640 think what we would be we were beginning to think 0:10:15.760 --> 0:10:18.280 that the dollar strength was beginning to run out of 0:10:18.320 --> 0:10:20.760 steam a little bit um, you know, around the one 0:10:21.960 --> 0:10:24.800 level against the euro. I think probably there is a 0:10:24.840 --> 0:10:27.000 little bit of a reduction at the margin in terms 0:10:27.040 --> 0:10:30.240 of dollar longs going on over the last couple of weeks, 0:10:30.240 --> 0:10:32.760 because the dollar has started to flatten out. But the 0:10:32.840 --> 0:10:36.560 point is you're not seeing people going along the euro yet, 0:10:37.040 --> 0:10:39.679 let alone of course long emerging my occurrences which you 0:10:39.679 --> 0:10:42.200 would need to see as as you know, as the 0:10:42.240 --> 0:10:44.400 equivalent or they couldn't moved to it to a week 0:10:44.440 --> 0:10:47.079 of dollar going forward. So dollar may be peaking, I'm 0:10:47.080 --> 0:10:48.640 not sure it's going down yet. Well, that's what I 0:10:48.679 --> 0:10:50.520 was going to last Jeff. I mean, in the initial phase, 0:10:50.559 --> 0:10:52.720 you get the unwinding of the shorts, the capitulation of 0:10:52.720 --> 0:10:54.680 the shorts, and then you start a question whether we 0:10:54.679 --> 0:10:57.720 can build fundamental longs here on the US dollar. Have 0:10:57.760 --> 0:11:00.000 we even reached that phase where people are really building 0:11:00.280 --> 0:11:03.160 long term fundamental longs in the U S. Dollar. Oh, 0:11:03.240 --> 0:11:05.960 I suspect they are. I mean, clearly, if you go 0:11:06.040 --> 0:11:08.000 back to the early part of the year when dollar 0:11:08.040 --> 0:11:11.720 euros at one five, briefly everyone was long euro. That's 0:11:11.800 --> 0:11:14.640 now unwind itself. I think people have moved along dollar 0:11:15.040 --> 0:11:17.120 because the U. S. Economy has been so strong and 0:11:17.200 --> 0:11:20.079 Europe has been has been disappointing. So I think from 0:11:20.120 --> 0:11:22.440 a technical point of view, all this is above my 0:11:22.480 --> 0:11:25.160 pay grade. From a technical point of view, my guess 0:11:25.200 --> 0:11:28.640 is that the market is slightly long dollar. Our view 0:11:28.800 --> 0:11:31.800 is the dollar is fundamentally overvalued. Our view is the 0:11:31.800 --> 0:11:35.400 fattest broadly priced in Now. We think gradually the ECB 0:11:35.679 --> 0:11:40.040 is going to withdraw excessive stimulus. They're going to start 0:11:40.040 --> 0:11:42.720 to raise rates probably in the third quarter of next year. 0:11:43.160 --> 0:11:45.280 And the blip of the European economies in the first 0:11:45.360 --> 0:11:47.680 quarter was probably just a blip, and we see decent 0:11:47.679 --> 0:11:50.160 growth going forward. Those are all the reasons why ultimately 0:11:50.640 --> 0:11:53.199 we would be sellers of the dollar, not buys of 0:11:53.240 --> 0:11:55.319 the dollar. But obviously, frankly the market is trying to 0:11:55.360 --> 0:11:57.199 work out which way we go from here. What about 0:11:57.360 --> 0:12:01.160 EM equities, I mean the ever run, I mean they 0:12:01.160 --> 0:12:03.560 do what they do there, I guess there. You know, 0:12:03.679 --> 0:12:08.320 they're uh, the cyclical and they down down, down, they 0:12:08.320 --> 0:12:12.240 go up. What about now, Jeff, Well, we're we're inclined 0:12:12.280 --> 0:12:15.240 to be positive from here, even though there's a flood 0:12:15.240 --> 0:12:17.360 of negative news at the moment. The reason we're inclined 0:12:17.400 --> 0:12:19.720 to be positive is partly because of our of that 0:12:19.840 --> 0:12:22.640 dollar view. We expect to see um, you know, the 0:12:22.679 --> 0:12:24.920 dollar going lower that will start to push money back 0:12:24.920 --> 0:12:28.280 towards the emerging markets going forward. We've made the comment 0:12:28.320 --> 0:12:31.840 to people that in fact, the fundamental damage to the 0:12:31.880 --> 0:12:34.559 after class from the sell off recently has not been 0:12:34.559 --> 0:12:36.440 that great. We've seen very little in the way of 0:12:36.480 --> 0:12:40.160 global I'm sorry, of of economic growth downgrades in EM 0:12:40.200 --> 0:12:42.599 We've cut Brazil with cut South Africa and Ansia a 0:12:42.640 --> 0:12:46.240 little bit, but you're not seeing broad downgrades. Also, earnings 0:12:46.320 --> 0:12:48.439 numbers are holding up pretty well, and that means some 0:12:48.559 --> 0:12:51.920 valuation opportunities have opened up in them. But the key 0:12:52.000 --> 0:12:54.560 from here is are we anywhere near right as far 0:12:54.559 --> 0:12:57.400 as the dollars concerned. And now I think we've got 0:12:57.440 --> 0:13:02.040 to worry about what the impact of this trade rhetoric 0:13:02.160 --> 0:13:04.840 and the ratch ng up of this trade action will 0:13:04.880 --> 0:13:06.760 have on the Chinese economy. And I think that's all 0:13:06.760 --> 0:13:09.400 people are worrying about today. With the cutting reserve requires 0:13:09.400 --> 0:13:11.680 doesn't mean the Chinese economy is weaker than we all think. 0:13:12.000 --> 0:13:13.200 If the Chinese is going to be a a word, a 0:13:13.200 --> 0:13:15.920 weak and significantly that was, that would would have put 0:13:15.920 --> 0:13:19.160 downward pressure on the Chinese currency. That would be a 0:13:19.200 --> 0:13:21.440 reason why people would hold off from buying a mergant 0:13:21.520 --> 0:13:24.840 markets merge market equities at this point in time. So, Jeffy, 0:13:24.840 --> 0:13:27.000 you see in the weakness in the currency, and you 0:13:27.040 --> 0:13:29.880 see a Chinese establishment are beginning to use the ex 0:13:29.960 --> 0:13:33.800 channel as a policy tool to address the softening that 0:13:33.840 --> 0:13:37.080 we're seeing in the economy. I don't think so. I 0:13:37.120 --> 0:13:39.920 think you assume the currency move today is in reaction 0:13:39.960 --> 0:13:42.800 to the reserve requirement cuts. I think what you've got 0:13:42.800 --> 0:13:46.000 to assume is the reserve requirement cut is partly a 0:13:46.040 --> 0:13:48.880 response to the concerns over the economy slowing down at 0:13:48.880 --> 0:13:51.800 the second quarter, and of course the potential impact down 0:13:51.800 --> 0:13:55.120 the road of trade action from the US on the 0:13:55.200 --> 0:13:58.360 Chinese economy. Although to be fair, our economists have argued 0:13:58.400 --> 0:14:01.720 all the year that you will see some liquidity injection 0:14:01.880 --> 0:14:06.080 into the economy from the Chinese authorities through lower reserve crimes. 0:14:06.080 --> 0:14:07.880 Have not been looking for a rape cut, So in 0:14:07.920 --> 0:14:11.479 some sense this is actually pretty much what what was expected. 0:14:11.520 --> 0:14:13.640 But I think what's happening here is is causing the 0:14:13.640 --> 0:14:16.920 market to worry about Chinese growth, and it's that that's 0:14:16.920 --> 0:14:20.480 bringing the currency down, and there's no sign whatsoever of 0:14:20.600 --> 0:14:24.400 the Chinese authorities wanting to use the current directly as 0:14:24.400 --> 0:14:27.840 a weapon if you like to to find the impact 0:14:28.000 --> 0:14:30.360 of of a U S trade war. Jeff dons very 0:14:30.440 --> 0:14:32.960 quickly her Eastern Europe. It's something John and I have 0:14:33.000 --> 0:14:36.440 been remissing talking about with the focus on Pacific room 0:14:36.480 --> 0:14:40.760 trade wards Eastern Europe. Where is the opportunity there, without 0:14:40.800 --> 0:14:44.360 any question. We we like Polish equities, we like Hungarian equities, 0:14:44.360 --> 0:14:47.320 are both very small markets, especially Hungary, But at the 0:14:47.400 --> 0:14:50.400 point there is that these economies are very closely tied 0:14:50.440 --> 0:14:52.400 to Europe, and we think what you saw in the 0:14:52.400 --> 0:14:56.880 first quarter weak to European growth is almost certainly temporary. Also, 0:14:57.000 --> 0:14:59.240 currency that current you tend to go double wamy in 0:14:59.240 --> 0:15:01.560 both directions on the currency that when the Euro starts 0:15:01.600 --> 0:15:04.000 to go back up again against the dollar, which is 0:15:04.040 --> 0:15:07.360 all longer term view, the best metters these currencies will 0:15:07.400 --> 0:15:11.840 even appreciate again the Euro itself. The Poland for example, 0:15:11.920 --> 0:15:14.960 is growing it over four. We like the market had 0:15:14.960 --> 0:15:17.120 a tough start to the year. We think there are 0:15:17.160 --> 0:15:20.240 opportunities they're going forward. Thank you so much, Jeff Don's 0:15:20.280 --> 0:15:37.200 greatly appreciate it. With ubs em Primer today. This is 0:15:37.200 --> 0:15:39.400 a joy. Deverora Lair with us who was with the 0:15:39.480 --> 0:15:43.120 Paulson Institute as a vice chairman, and Deborah Lair brings 0:15:43.160 --> 0:15:49.680 a really interesting and nuanced thinking to this relationship Secretary 0:15:49.720 --> 0:15:53.160 Paulson has done of America and China. Deborah, I want 0:15:53.200 --> 0:15:55.640 to go to your Twitter feed where you retweet Eric 0:15:55.680 --> 0:15:58.840 Fish with a Reuter's story, and this has been something 0:15:58.880 --> 0:16:01.280 in my mind. It comes off Elizabeth Economies work at 0:16:01.320 --> 0:16:05.600 the Council on Foreign Relations, Does the President and does 0:16:05.840 --> 0:16:11.680 all of America understand that China is heading towards She 0:16:12.000 --> 0:16:16.320 thought that there's going to be a new almost zeitgeist 0:16:16.440 --> 0:16:22.360 that permeates Chinese politics. Well, that's really an excellent question. 0:16:22.400 --> 0:16:26.440 I don't think probably all of America understands, but I 0:16:26.480 --> 0:16:30.000 think there's a concern within the administration and this is 0:16:30.080 --> 0:16:34.800 part of what's driving I think the use of National 0:16:34.880 --> 0:16:41.560 Security UM legislation or policies to look at economic security 0:16:41.680 --> 0:16:44.720 and seeing the two because of these concerns. For example, 0:16:44.800 --> 0:16:48.960 President she shared a very important meeting this past week 0:16:49.160 --> 0:16:54.120 on foreign policy and was outlining a very aggressive foreign 0:16:54.160 --> 0:17:01.320 policy that has internationally and domestic implications. Secretary Paulson's heritage 0:17:01.360 --> 0:17:04.919 at Treasury and where the Posti Institute has been to 0:17:05.160 --> 0:17:08.800 speak to China to develop a dialogue. I literally was 0:17:08.880 --> 0:17:11.560 with him the day this start. I can't recall the event, 0:17:11.600 --> 0:17:14.480 but it was a Treasury event in Washington where he 0:17:14.520 --> 0:17:19.240 really tried to jump start a discussion. Has that been destroyed? 0:17:19.359 --> 0:17:23.480 Has been the Paulson initiative of eight nine years ago? 0:17:23.720 --> 0:17:28.120 Is it? Is it just gone well in its current form? Yes. 0:17:28.240 --> 0:17:32.200 I mean that we started the Strategic Economic Dialogue as 0:17:32.240 --> 0:17:35.479 a way to fit within China's decision making process so 0:17:35.560 --> 0:17:38.119 that we could get basic agreement on some of the 0:17:38.160 --> 0:17:41.520 big issues that would be facing the United States in China, 0:17:41.680 --> 0:17:43.600 and once they had the guidance from the top, it 0:17:43.640 --> 0:17:45.760 would be much easier at the working level to sort 0:17:45.760 --> 0:17:49.600 out the details. At this stage, most of the dialogue 0:17:49.640 --> 0:17:53.320 appears to be occurring at the cabinet secretary level to 0:17:53.359 --> 0:17:56.680 the vice premiers in China, with literally at working level, 0:17:57.400 --> 0:18:00.240 well to Richard McGregor's working the Communist Party. Is it 0:18:00.280 --> 0:18:04.240 a new Communist party? Is president she really running a 0:18:04.600 --> 0:18:07.480 not a reaffirmation of MAO. I think that's too simplistic. 0:18:07.920 --> 0:18:11.439 But is it a reaffirmation of a stronger dominant Communist Party? 0:18:11.760 --> 0:18:16.320 Whatever American elites think. Well, certainly Richard McGregor's book really 0:18:16.440 --> 0:18:21.360 was excellent and still is very relevant today. The what 0:18:21.359 --> 0:18:24.639 what She's biggest challenge in coming into office was that 0:18:24.760 --> 0:18:27.920 he did not have the tools to govern his country 0:18:28.400 --> 0:18:30.840 on a day to day basis. He could reach down 0:18:30.880 --> 0:18:34.280 into the system to grab a dissident or something like that, 0:18:34.320 --> 0:18:38.360 but he could not ensure that mayors and um provincial 0:18:38.400 --> 0:18:42.399 governors were implementing his policies consistently. In fact, it was 0:18:42.440 --> 0:18:46.120 so bad that he continues to send out UM policy 0:18:46.240 --> 0:18:49.480 enforcement teams to go check that they're actually local officials 0:18:49.480 --> 0:18:52.000 are actually implementing and doing what they're supposed to be doing, 0:18:52.600 --> 0:18:55.320 and he viewed and this is why the anti corruption 0:18:55.400 --> 0:19:00.240 campaign ended up being seminal to his first term. His 0:19:00.359 --> 0:19:02.919 view was, I need to get back those tools of 0:19:02.960 --> 0:19:06.679 government to to govern my country, and I'm going to 0:19:06.720 --> 0:19:08.720 do it through the Communist Party. And we see the 0:19:08.760 --> 0:19:12.480 Communist Party playing a much bigger role than it has 0:19:12.720 --> 0:19:17.919 historically since before done. And it's not only involved in 0:19:18.080 --> 0:19:21.560 party matters, but it's in the economy, it's in private business, 0:19:22.440 --> 0:19:25.280 and it's something that American companies are going to have 0:19:25.359 --> 0:19:27.639 to face as they go forward. So, Deborah, just as 0:19:27.640 --> 0:19:31.040 a final question, what is the concentration of power in 0:19:31.160 --> 0:19:34.600 China ultimately mean for these Tride discussions, the Tride negotiations 0:19:34.600 --> 0:19:38.320 with the United States, Well, ironically, it might make it 0:19:38.520 --> 0:19:42.000 a little bit easier since the President she is very 0:19:42.080 --> 0:19:45.040 much calling the shots in terms of what can be done, 0:19:45.040 --> 0:19:50.760 and he's put some very sophisticated UM bureaucrats around him, 0:19:50.760 --> 0:19:53.679 with one she Sean and Leoho, who really understand how 0:19:53.720 --> 0:19:57.280 markets work, who understand and have a long background with 0:19:57.320 --> 0:20:01.040 the United States, have ties with a broad range of 0:20:01.119 --> 0:20:05.639 government officials, former government officials, and business leaders. But she 0:20:05.960 --> 0:20:10.520 and the President have a very good working relationship, and 0:20:10.640 --> 0:20:12.639 ultimately I think that this deal is going to be 0:20:12.680 --> 0:20:15.440 done between the two presidents. Debora, thank you so much. 0:20:15.480 --> 0:20:17.840 We look forward to speaking to you against soon. Debra Laver, 0:20:17.920 --> 0:20:20.359 the Paulson Institute of the story is not going to 0:20:20.440 --> 0:20:25.719 go away, and we really appreciate her international relations perspective. 0:20:43.280 --> 0:20:46.040 We go to London, now, Karen Noble heart with us 0:20:46.280 --> 0:20:48.760 is General Electric breaks up and up? How many more 0:20:48.800 --> 0:20:51.879 of these transactions, Karen are there? This is a three 0:20:51.920 --> 0:20:55.119 billion dollar bolt off, not a bolt on, a bolt off. 0:20:55.400 --> 0:20:59.560 How many more bolt offs are there? For? G Well, 0:20:59.560 --> 0:21:02.280 I think, Um, what they've been signaling is that they're 0:21:02.280 --> 0:21:05.280 going deep down and and uh there's not a lot 0:21:05.320 --> 0:21:07.960 of big segments left to sell, but they're going within 0:21:08.080 --> 0:21:10.560 segments and looking for pieces. And this is rather small. 0:21:11.040 --> 0:21:13.240 You know, all of Powers thirty six billion and this 0:21:13.480 --> 0:21:16.280 in sales, and this has a billion in sales. So 0:21:16.480 --> 0:21:18.720 they're getting deep down and dirty to try to get 0:21:18.760 --> 0:21:22.240 pieces of of UM the company that and uh, you 0:21:22.280 --> 0:21:24.840 know they sold the whole transportation business. That's probably the 0:21:24.920 --> 0:21:27.640 last that is the last big unit in my opinion, 0:21:28.040 --> 0:21:30.520 UM that they'll sell. Uh. They have a lighting business, 0:21:30.640 --> 0:21:33.320 very small, not going to get them much money um 0:21:33.359 --> 0:21:35.919 and then they'll do something with UM. You know, Baker 0:21:36.000 --> 0:21:39.639 used ge um at some point as well. So I 0:21:39.640 --> 0:21:41.480 think they're telling you, you know, like the g E 0:21:41.600 --> 0:21:44.119 power is a huge business. They're big problems are in 0:21:44.160 --> 0:21:47.080 the big turbines. But there's stuff that they're going to 0:21:47.240 --> 0:21:50.200 sell around the margin. Does this really matter? It doesn't 0:21:50.200 --> 0:21:54.679 look like the investors are really twelve cents. I mean, okay, 0:21:54.720 --> 0:21:58.399 so you sell the these this business based in Austria 0:21:58.480 --> 0:22:05.480 making reciprocating engines and generator sets right diesel engines as well. Uh, 0:22:05.840 --> 0:22:08.600 why bother to do this? Well, you know when he 0:22:08.640 --> 0:22:10.879 came out with his first twenty billion dollars you know 0:22:11.200 --> 0:22:13.960 UM in asset sales and the and the stock went 0:22:14.000 --> 0:22:17.120 down like six percent. This was this was in that 0:22:17.280 --> 0:22:20.680 And he's looking at all small things and it's not enough. 0:22:20.800 --> 0:22:23.159 We knew it wasn't enough when he announced the twenty billion. 0:22:23.440 --> 0:22:26.560 But he's methodically chipping off these little pieces. And the 0:22:26.600 --> 0:22:29.720 one good thing is everything he's sold so far he's 0:22:29.760 --> 0:22:33.400