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Speaker 1: Good morning, and welcome to the Bloomberg Daybreak Asia podcast.

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Speaker 1: I'm Doug Prisner. Here are the stories we're following today.

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Speaker 1: Israeli Prime Minister Benjamin Netnia, who held a series of

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Speaker 1: meetings with his top security aids over the weekend to

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Speaker 1: discuss the next attack on Iran. Now. These meetings came

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Speaker 1: a day after a Hesbalah drone penetrated Israel's defense airspace

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Speaker 1: and exploded next to the private home of Netanyahu north

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Speaker 1: of Tel Aviv. This attack, needless to say, stunned many Israelis.

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Speaker 1: Joining us now is John Jay Edwards. He is Bloomberg

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Speaker 1: Weekend America's managing editor, joining us here in New York.

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Speaker 2: So does this.

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Speaker 1: Necessarily raise the stakes for some type of retaliation against Iran?

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Speaker 3: I think it definitely furthers Israel's resolve to respond in

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Speaker 3: you know, some kind of way that we'll be seen

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Speaker 3: as firm and proportional, but you know, sending a message

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Speaker 3: to Iran that it and its proxies. You know, hopefully

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Speaker 3: from Israel's point of view, we'll see this response and

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Speaker 3: decide to go in a different direction.

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Speaker 1: Over the weekend, we also learned that at least the

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Speaker 1: Israeli military is going to take aim at some of

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Speaker 1: the financial arm of Hezbollah. What's happening here.

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Speaker 3: Yeah, it's a sort of bank with several branches, you know,

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Speaker 3: sort of throughout Lebanon, and the ideas that the Israelis

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Speaker 3: plan to strike several of these branches essentially to sort

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Speaker 3: of disrupt the financial side of hes blaw.

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Speaker 1: Support anytime there's been a conversation about Israeli retaliation against Iran,

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Speaker 1: the idea is kind of broken down into two distinct possibilities. One,

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Speaker 1: it's just military installations that will be targeted. The other

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Speaker 1: is that there's at least the potential for energy infrastructure

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Speaker 1: to be targeted as well. This is something that Biden

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Speaker 1: administration tried to weigh in, dissuading the Israelis from targeting

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Speaker 1: oil infrastructure. Do we know whether that's going to take

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Speaker 1: hold with Israeli leadership.

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Speaker 3: Yeah. What Naitan Yaho's office has said this weekend is

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Speaker 3: that it will take into account the advice given by

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Speaker 3: the US, but it will make its own decisions. So

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Speaker 3: the thought is that israel Is they don't want this

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Speaker 3: to spiral out of control. They don't want this to

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Speaker 3: turn into a broad regional war. So you know, it

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Speaker 3: is likely that any assurances they've given that targets are

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Speaker 3: likely to be military is probably the way it's going

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Speaker 3: to go. But they want to retain flexibility and not

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Speaker 3: feel like they're you know, sort of dancing to the US's.

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Speaker 1: Too, John, Can we pivot to the US presidential election?

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Speaker 1: Hard to believe? There are just two more sundays to

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Speaker 1: go amazing until election day. Where do things stand right now?

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Speaker 3: Well, it is extraordinarily tight, you know, really, polls in

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Speaker 3: the battleground states remain within the margin of error one

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Speaker 3: direction or another, so it's very hard to say either

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Speaker 3: candidate really has a firm lead at this point. Polling averages,

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Speaker 3: you know, I saw five thirty eight has Trump winning

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Speaker 3: fifty two times out of one hundred, and its you know,

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Speaker 3: simulations of ten thousand runnings of the election, which is

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Speaker 3: basically the same as you know, if it were you know,

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Speaker 3: Kamala Harris winning fifty two out of one hundred. So

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Speaker 3: it's really just a true toss up at this point.

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Speaker 3: And you know, the candidates are focusing on the battleground

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Speaker 3: states in the late going, obviously taking very different approaches

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Speaker 3: to how they're doing that.

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Speaker 1: So we're speaking Sunday afternoon, us, let's talk about the

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Speaker 1: Harris campaign Pennsylvania, right, yeah, very much in focus. Also

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Speaker 1: Georgia too.

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Speaker 3: Right exactly. Yes, Harris spent some time in Georgia targeting

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Speaker 3: black churches. You know, that's an area that they want

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Speaker 3: to make sure that they try to shore up their

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Speaker 3: support in the black community, which has been somewhat wavering

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Speaker 3: compared with Biden's support in twenty twenty and even Hillary

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Speaker 3: Clinton support in twenty sixteen. So that, you know, that's

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Speaker 3: a big focus. And Harris has an interview with Al

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Speaker 3: Sharpton on MSNBC coming up. You know, again part of

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Speaker 3: that that same effort.

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Speaker 1: What about former President Trump? What has he been up

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Speaker 1: to over the weekend.

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Speaker 3: He has been mainly in Pennsylvania, and you know, having

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Speaker 3: he's had a couple of rallies at which he has

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Speaker 3: made some outrageous statements that were outrageous even for him,

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Speaker 3: and you know, pulled a lot of attention away from

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Speaker 3: whatever his you know, more substantive closing argument might be

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Speaker 3: considered to be. So you know, there's I believe some

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Speaker 3: for frustration. You know, we saw it on the the

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Speaker 3: Sunday Political Talk shows today, there was some frustration among

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Speaker 3: Republicans you know, who are being asked about uh, you know,

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Speaker 3: these you know sort of o Trey comments by by

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Speaker 3: Trump and you know, not really able to focus on,

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Speaker 3: you know, policy issues that they want to hit.

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Speaker 1: Very doubtful that on the evening of the election we're

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Speaker 1: going to have a result, a definitive result, and I

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Speaker 1: would imagine a lot of litigation in the pipeline. Is

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Speaker 1: that not the case?

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Speaker 3: Yes, it seems quite likely. You know, both sides are

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Speaker 3: are marshaling their lawyers. You know, we've obviously seen the

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Speaker 3: Trump campaigns tendency to you know, challenge results broadly, uh,

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Speaker 3: you know throughout the states that they eventually lose. The

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Speaker 3: Harris campaign as well, uh, you know, is ready to

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Speaker 3: address what they see as any you know, sort of

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Speaker 3: regularities that emerge. But yes, it should be again, you know,

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Speaker 3: at least a few days if not, if not a

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Speaker 3: couple of weeks before we have a solid result.

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Speaker 1: So when these campaigns are asking for donations, sometimes we

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Speaker 1: think of political ads as being the primary driver of

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Speaker 1: that funding, but in this case it may be the

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Speaker 1: cost of litigation.

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Speaker 3: Yeah, I mean, you know, certainly the cost of litigation

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Speaker 3: is is going to be a major major factor, but

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Speaker 3: I believe it's it's both. It is still you know,

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Speaker 3: the advertising effort that is is major down the stretch

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Speaker 3: and as well as the on the ground get out

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Speaker 3: the vote effort. You know, we had a very good

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Speaker 3: story by our Ted man this weekend focusing on the

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Speaker 3: get out of the vote efforts in Pennsylvania, and the

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Speaker 3: Democrats do have a much more you know, robust operation

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Speaker 3: on the ground in most states, whereas the Republicans are

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Speaker 3: mainly outsourcing there on the ground efforts to political action

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Speaker 3: committees you know, like Elon Musks and others.

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Speaker 1: John will leave it there. Thanks for making the time

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Speaker 1: to chat with us. John Jay Edwards Weekend America is

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Speaker 1: managing editor for Bloomberg News. Joining us now is Thomas Hayes.

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Speaker 1: He is the chairman at Great Hill Capital. Joining us

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Speaker 1: from here in New York City. Tom, thanks for making

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Speaker 1: time to chat with us. You and I were talking

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Speaker 1: a little while ago about the fact that there seems

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Speaker 1: to be powerful momentum right now happening for the US

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Speaker 1: equity market. I think the S and P five hundred

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Speaker 1: closed Friday, yet another record. We have seen six straight

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Speaker 1: weeks of gains. Is this a little concerning.

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Speaker 2: To you a little bit, particularly because of the seasonality, Doug. So,

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Speaker 2: this is the seventh time in the last decade the

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Speaker 2: S and P has been up six weeks in a row,

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Speaker 2: and it's basically a coin flip based on history. Whether

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Speaker 2: we get a seventh up week this week about fifty

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Speaker 2: to fifty. So we'll see what happens. But I think

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Speaker 2: what you're seeing here, Doug, is a combination of complacency

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Speaker 2: plus liquidity, the most central bank cuts in the month

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Speaker 2: of September that we've seen since twenty twenty and prior

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Speaker 2: to that two thousand and nine. And then you couple

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Speaker 2: that with if you look at betting odds, if you

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Speaker 2: place any weight on betting odds, potentially the market may

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Speaker 2: be pricing in a shift to slightly more pro business policy.

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Speaker 2: Whether premature or not, it seems to be telling the story,

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Speaker 2: particularly when the market's going up and our earnings came

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Speaker 2: in a little bit lighter than expected so far.

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Speaker 1: So stocks are up, yields are down by and large,

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Speaker 1: and we had Raphael Bostic saying at the end of

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Speaker 1: last week he's not in a rush to lower interest rates.

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Speaker 1: Do you think the FED may be a little concerned

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Speaker 1: here put aside for the moment, the labor market, put

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Speaker 1: aside for a moment, this decline that we have seen

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Speaker 1: in the rate of inflation. Is the FED perhaps a

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Speaker 1: little concerned about easy financial conditions?

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Speaker 2: Well, you know, they have shifted to a dual sided risk,

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Speaker 2: and the labor market, as low as the unemployment rate is,

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Speaker 2: it is showing some signs of weakness. Now, are we

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Speaker 2: guaranteed getting six consecutive cuts in a row. The market's

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Speaker 2: been a little bit too optimistic, so I'm not sure

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Speaker 2: if November is a foregone conclusion. I think the market's

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Speaker 2: pricing into twenty five basis point cuts, but maybe we

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Speaker 2: only get one. I think that's perfectly fine given the

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Speaker 2: current conditions. You know. The other thing that I've really

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Speaker 2: had my ion, Doug, is last month we got a

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Speaker 2: record move out of bonds, a two standard deviation move

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Speaker 2: out of bonds. And you got to look back all

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Speaker 2: the way to two thousand and one to two thousand

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Speaker 2: three to see that level of move And if you remember,

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Speaker 2: and I think you've been you were around back then, Doug,

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Speaker 2: you had an unprecedented rally following that in small caps

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Speaker 2: versus large caps, in value versus growth, and in emerging

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Speaker 2: markets versus developed markets, three trades that very few people

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Speaker 2: are confidently positioned for. Right now, I.

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Speaker 1: Want to change gears. Talk a little bit about the

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Speaker 1: other side of the world, the Asia Pacific and the

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Speaker 1: week ahead markets in Asia gearing up for what is

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Speaker 1: likely to be the busiest week of new listings in

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Speaker 1: more than two years. Particularly it's China, it's India, it's Japan.

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Speaker 1: What does it say to you that developing markets are

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Speaker 1: in the process of raising a lot more capital.

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Speaker 2: Yeah, the game is back on. Animal spirits are coming in.

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Speaker 2: The Chinese government has flipped on the dime. Yes, investors

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Speaker 2: want more. Yes, investors are skeptical after a two year

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Speaker 2: beat down, And yes they are going to get more

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Speaker 2: because why because you can't be half pregnant. They've already

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Speaker 2: turned the corner. They are going full bore. They will

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Speaker 2: do more, and then they will do more, and then

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Speaker 2: they will do more. And the Chinese government, the game

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Speaker 2: is back on. We're going to see more fiscal stimulus

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Speaker 2: coupled with the monetary stimulus, coupled with backstopping the property market.

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Speaker 2: And when that happens, massive flows, and I think you

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Speaker 2: mentioned Japan there. You know some of these emerging markets

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Speaker 2: that have been the beneficiary of emerging market flows out

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Speaker 2: of China, like Japan, like India, that have gotten a

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Speaker 2: little bit heated. I think we're going to see a

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Speaker 2: little bit of weakness in those markets as money slowly

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Speaker 2: and more confidently over time moves back into China, particularly

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Speaker 2: the most high quality companies in China and the IPO

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Speaker 2: market to the slate that you mentioned tells you everything

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Speaker 2: you need to know about confidence recovering and starting to rebuild.

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Speaker 1: So are you a buyer of risk assets in China

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Speaker 1: right now?

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Speaker 2: Yes. One of our largest positions is Ali Baba. This

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Speaker 2: has been like watching paint dry. Has been dead money

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Speaker 2: for us for a year. We spent every red day

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Speaker 2: buying more stock. People looked at us like we had

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Speaker 2: three heads. But here's the fact, Doug. You can buy

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Speaker 2: Ali Baba today for the same price it was ten

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Speaker 2: years ago. The only difference is the revenues are up

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Speaker 2: thirteen hundred percent and the earnings and cash flow are

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Speaker 2: up six hundred and fifty percent. So what else do

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Speaker 2: you want to talk about? I mean, we see it

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Speaker 2: as one of the greatest prices. What you pay values

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Speaker 2: what you get and in terms of the cash generated,

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Speaker 2: they generate twenty to twenty five billion dollars a year

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Speaker 2: in cash. They got eighty billion dollars of cash on

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Speaker 2: the balance sheet. They've got a piece of Basically every

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Speaker 2: AI startup in China, they give them credits for compute

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Speaker 2: power in their cloud business in exchange for equity. I mean,

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Speaker 2: if you wanted to play an AI etf in China,

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Speaker 2: it's called Ali Baba, and that's got zero credit in

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Speaker 2: the price. Right now, couple that with AI, with the cloud,

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Speaker 2: and with the consumer coming back with the fiscal stimulus.

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Speaker 2: It's the it's the tollgate for China. So we like

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Speaker 2: that position, and we love the valuation at high single digits,

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Speaker 2: down from historic multiples of twenty twenty five times, and

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Speaker 2: they'll come back over time.

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Speaker 1: Let's talk about the US presidential election. We're a little

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Speaker 1: more than two weeks away from November fifth. Obviously it's

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Speaker 1: a critical day or will be. How are you feeling

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Speaker 1: about the election and what would Trump presidency mean versus

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Speaker 1: Harris presidency for the business environment in the US.

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Speaker 2: Yeah, it seems like the market is starting to price

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Speaker 2: in slightly more pro business policy, which implies a Trump win.

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Speaker 2: That's evidenced in the day in some of the polling data,

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Speaker 2: and certainly in some of the betting data, in some

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Speaker 2: of the betting pools that you look at, it's starting

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Speaker 2: to favor a Trump whin. I think betting on the

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Speaker 2: basis of who's elected is a fool's Errand if you

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Speaker 2: recall when Trump got elected, everyone said China stocks were

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Speaker 2: going to do horribly. From twenty sixteen to twenty eighteen,

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Speaker 2: China stocks did better than they've done in years. And

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Speaker 2: then when Biden was in they thought China was going

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Speaker 2: to do great, it did horribly, the worst it's done

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Speaker 2: in a decade. Furthermore, everyone said when Trump would get elected,

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Speaker 2: energy stocks would go to the moon. The exact opposite happened.

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Speaker 2: When you have more drilling, the price goes down and

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Speaker 2: the stocks went down with it. A lot of supply

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Speaker 2: was not good for energy stocks under Trump. So I

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Speaker 2: think that what the ideal outcome from a stock market standpoint,

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Speaker 2: Doug is just a split government. So whether Trump is

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Speaker 2: elected or Harris is elected in the executive brand, so

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Speaker 2: long as you have a different party in either the House,

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Speaker 2: or the Senate. The market loves gridlock, and empirically the

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Speaker 2: market does best with a split government. So that's what

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Speaker 2: I think we want to be focused on as market

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Speaker 2: participants in the next few weeks.

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Speaker 1: Okay, So, if you're reading the data properly or at

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Speaker 1: least these indicators that you're looking at right now, and

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Speaker 1: there is a higher probability of a Trump administration, do

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Speaker 1: you really believe that additional tariffs are pro business?

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Speaker 2: Well, look, I've seen some studies on the impact if

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Speaker 2: Trump actually put forth the sixty percent tariffs on China.

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Speaker 2: The data that I've looked at implies that that would

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Speaker 2: only reduce Chinese GDP by one percent, so we would

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Speaker 2: potentially in the short term bear the brunt of the

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Speaker 2: higher prices. However, as some of his selected potential Treasury

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Speaker 2: secretaries and raid negotiators in his formative administration have implied,

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Speaker 2: that is the ask. It is open to negotiation, and

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Speaker 2: Trump has said as much. We just want to do

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Speaker 2: a deal, so he'll hit them hard, bring them back

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Speaker 2: to the table, and try to get a pragmatic outcome.

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Speaker 2: As we saw in the early spot part of the

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Speaker 2: administration from prior to COVID that he did have some

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Speaker 2: success in doing that, and the subsequent administration actually followed

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Speaker 2: through and kept the tariffs he put in place active

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Speaker 2: during the during the Biden administration. So I think it's

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Speaker 2: more of a let's get to the table, but first

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Speaker 2: I'm gonna bop you, and then I'm gonna, you know,

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Speaker 2: hand you an ice pack to help heal together and

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Speaker 2: make something that works for both parties. And I think

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Speaker 2: we'll see a pragmatic move after the initial shock factor.

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Speaker 1: All right, we'll leave it there, Tom, thank you so much.

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Speaker 1: Thomas Hayes is chairman at Great Healed Capital. Joining us

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Speaker 1: here on the Daybreak Asia. Joining us now is George Sippaloni.

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Speaker 1: He is portfolio manager at Penn Mutual Asset Management, joining

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Speaker 1: us from outside Philadelphia. George, thanks for making time. We

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Speaker 1: can start with either the FED or a lot of

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Speaker 1: the earnings that the market's beginning to digest. What do

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Speaker 1: you think is the more important driver right now?

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Speaker 4: Yeah, it's great to talk to you again, Doug. I

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Speaker 4: think so so. Breaking it up in that context is

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Speaker 4: perfect because the FED has been very important. I think

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Speaker 4: Trucku Miller likes to state that the most important factor

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Speaker 4: for the markets is liquidity. And one of the things

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Speaker 4: we've seen more recently is, you know, the market has

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Speaker 4: you know, usually entering October we get a really volatile period,

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Speaker 4: and we did a little earlier in August, and then

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Speaker 4: the market's actually been up the last six weeks. So

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Speaker 4: it's been pretty surprising in terms of the run up

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Speaker 4: here recently during a traditionally volatile period, especially in an

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Speaker 4: election year, specially with a potential war in the Middle

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Speaker 4: East and port strikes and all this kind of stuff

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Speaker 4: going on. So, you know, the one thing we've noticed

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Speaker 4: in the numbers is that liquidity is coming into the

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Speaker 4: market globally, not just in the US, but in the

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Speaker 4: US too with the FED, with the FED rate cut

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Speaker 4: just about a month ago. And so that's the one

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Speaker 4: part of the equation. There is more liquidity, So that

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Speaker 4: is important. I think it is a factor the second

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Speaker 4: part now, and we see that so from a bottom

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Speaker 4: up standpoint, even though I like to talk top down,

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Speaker 4: I am a bottom up investor. And so now earnings

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Speaker 4: is the critical element here. And so what we're seeing is,

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Speaker 4: for example, the market broadening out, which is very good.

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Speaker 4: We've seen technology actually take a little bit of a

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Speaker 4: hit relative to everything else. So what that means for us,

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Speaker 4: because earnings have not followed through yet, is that pes

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Speaker 4: or up. Valuations are up. So now this earnings period

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Speaker 4: is important because as they all are, but this one

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Speaker 4: is important because now we want to see earnings follow

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Speaker 4: through and support these valuations. And that's where we're at today.

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Speaker 1: Are you taking a closer look these days at smaller

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Speaker 1: cap stocks since they're more closely tied to kind of

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Speaker 1: cycles in the economy.

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Speaker 4: We are, and so we're all cap investors with our

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Speaker 4: mutual fund. And one of the benefits of that is

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Speaker 4: that now now there's a challenge obviously, right when the

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Speaker 4: SMP has done as well as it's done for so long,

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Speaker 4: it's kind of tough to keep up. But just in

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Speaker 4: the past few months, we saw the market broad now

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Speaker 4: and that, you know, we just breathed a huge sigh

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Speaker 4: of relief because we did finally see small caps catch up,

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Speaker 4: and we did finally see value stocks catch up to growth,

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Speaker 4: which was great. But yes, we do, Dougall, and mainly

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Speaker 4: because so traditionally you don't use this market's a little strange,

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Speaker 4: you know. Basically the largest of the large companies are

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Speaker 4: growing the fastest, which tends to happen sometimes, but that's

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Speaker 4: hard to maintain. Again, there's just a law of big

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Speaker 4: numbers at some point that will kick in. We're in

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Speaker 4: small caps traditionally, if you can find a one hundred

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Speaker 4: or a two hundred or a five hundred million dollar

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Speaker 4: market cap company that can grow, you can maybe have

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Speaker 4: a runway of growth for maybe five or ten years.

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Speaker 4: And that's that is an area that we do like

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Speaker 4: to play in.

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Speaker 1: So the economy seems to be holding up reasonably well.

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Speaker 1: You're talking a moment ago about ample levels of liquidity,

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Speaker 1: and I'm wondering whether that's a little concerning for the

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Speaker 1: FED that financial conditions are so easy.

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Speaker 4: I think one of the things that FED really has

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Speaker 4: to be surprised about, because I know Ieshore was, and

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Speaker 4: I think most of the market was, is the fact

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Speaker 4: that if you look across the YO curve from Tuesday

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Speaker 4: thirties even, we've seen a rise of about thirty five

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Speaker 4: to forty basis points across the curve in an environment

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Speaker 4: where the FED was ready to cut. They were so

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Speaker 4: ready to cut they cut by fifty basis points. They

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Speaker 4: made a pretty large statement there. And so to see

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Speaker 4: the YO curve act in this way. There are a

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Speaker 4: few reasons why. To your point, the economy has been

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Speaker 4: stronger than anybody would have anticipated. The job market has

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Speaker 4: has remained strong, the economy has remained resilient, and if

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Speaker 4: you look at so Doug, I think the biggest thing

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Speaker 4: right now is going to be what happens with inflation.

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Speaker 4: And we have that example of the seventies and the

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Speaker 4: resurg and some inflation that came back after we really

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Speaker 4: thought it was beat. And at this point, I think

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Speaker 4: we really felt like inflation was beat, and there's so

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Speaker 4: many metrics that are showing that it's beat. But if

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Speaker 4: we do get a little tick back up, that's going

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Speaker 4: to cause some problems now for the Fed, given the

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Speaker 4: fact that they just cut by fifty and so we've

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Speaker 4: seen that in rate cut expectations which have come way down.

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Speaker 1: George, Can we talk about the election a little bit

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Speaker 1: and what it may mean for markets in your view?

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Speaker 3: Sure?

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Speaker 1: How do you handicap the situation?

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Speaker 4: So it's it is important and so it's funny. I

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Speaker 4: think one of the biggest takeaways I can have just

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Speaker 4: from reading history and you know, trying to think long term,

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Speaker 4: is to really just focus on the long term. I

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Speaker 4: think Munger said it best when he just said, politics

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Speaker 4: really can mess with you know, your minds and your

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Speaker 4: decisions and your behavior, and in terms of making investment decisions.

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Speaker 4: So I don't want to get too caught.

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Speaker 1: Up in that.

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Speaker 4: But to your point, there are some clearly important issues

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Speaker 4: that are going to that we were going to face,

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Speaker 4: and there's some clearly divergent paths that each each candidate,

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Speaker 4: then each party wants to take us on. And so

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Speaker 4: if you look at Trump, he wants to cut taxes

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Speaker 4: and he wants to grow our way out of this

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Speaker 4: debt problem that we have. And the interesting thing is

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Speaker 4: that neither party talks too much about that because it

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Speaker 4: is so much of a concern, at least it is

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Speaker 4: of mine. But again, so his path is going to be, hey,

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Speaker 4: look let's cut taxes and let's grow our way out

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Speaker 4: of it. That's certainly one way to do it. It

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Speaker 4: could again, you know, you think, thinking back to that

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Speaker 4: inflation point I brought up, it could be inflationary depending

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Speaker 4: on what he wants to do or how he implements it.

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Speaker 4: And then if you think about what Harris wants to do,

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Speaker 4: you know, maybe raise corporate taxes, which you know, could

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Speaker 4: be a you know, some people have said maybe a

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Speaker 4: five percent hit to EPs. I don't think the markets

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Speaker 4: in general.

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Speaker 1: Would like that.

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Speaker 4: So again, two very clearly divergent paths and important, you know,

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Speaker 4: importantly different paths at this point. And so yeah, it's

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Speaker 4: something we're cognizant of. I don't want to put too

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Speaker 4: much weight in either one, but I definitely want to

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Speaker 4: know again what their policy is and what it can

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Speaker 4: mean for stocks.

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Speaker 1: It's interesting that you mentioned US debt levels. I was

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Speaker 1: struck are the fact that interest cost now on us

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Speaker 1: dead climbed in the last fiscal year to the highest

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Speaker 1: level since the nineteen nineties. I think the Treasury spent

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Speaker 1: something around eight hundred and eighty two billion on net

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Speaker 1: interest payments in the fiscal year through September. Does the

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Speaker 1: bond market seem to be concerned by this in your view?

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Speaker 4: Yeah, I think I think, Doug, one of the clearest

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Speaker 4: things that we can see, and this is, you know,

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Speaker 4: so you have some people that are you know, clearly

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Speaker 4: troubled by the debt levels. Me just as a citizen,

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Speaker 4: you know, us as citizens, I do think it is

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Speaker 4: important we should be concerned about for our children and

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Speaker 4: grandchildren obviously. But one of the clear ways where we're

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Speaker 4: seeing at least some sort of change, I think, is

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Speaker 4: in where is the flight to quality? So historically the

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Speaker 4: flight to quality would be to US treasuries, and we're

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Speaker 4: not seeing that right now. Over the past year. If

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Speaker 4: you think about it, you know, bonds are still in

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Speaker 4: this you know, major drawdown bonds in general, treasury bonds.

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Speaker 4: I've had a pretty big drawdown over the last few years,

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Speaker 4: and that still holds true, even though there's been some swings.

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Speaker 4: But look at gold. Gold's gone from twenty to twenty

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Speaker 4: seven hundred up thirty five percent, silver up from twenty

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Speaker 4: three to thirty four up forty eight percent. Even bitcoin,

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Speaker 4: in which people are saying are digital gold up from

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00:24:13,560 --> 00:24:16,760
Speaker 4: forty six thousand to sixty nine thousand, up sixty four percent.

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00:24:17,160 --> 00:24:19,520
Speaker 4: So I do think that is you know, so from

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Speaker 4: a you know, look, I invest in companies, but I

439
00:24:22,600 --> 00:24:25,200
Speaker 4: do want to know this and I do want to

440
00:24:25,200 --> 00:24:27,840
Speaker 4: be aware of this because I do think it's important.

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00:24:27,880 --> 00:24:30,520
Speaker 4: You know, has do we have a new flight to quality?

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00:24:30,680 --> 00:24:32,400
Speaker 4: And I think that's a question that we should ask

443
00:24:32,440 --> 00:24:34,040
Speaker 4: now given the levels of debt that we have.

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00:24:34,480 --> 00:24:38,639
Speaker 1: I'm curious as to how you're evaluating opportunities offshore, particularly China,

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00:24:38,720 --> 00:24:42,560
Speaker 1: with this bazooka of economic stimulus, whether it's on the

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00:24:42,600 --> 00:24:45,159
Speaker 1: monetary side, whether it's on the fiscal side, There's no

447
00:24:45,320 --> 00:24:49,479
Speaker 1: doubt that Beijing is intent on solving this problem of

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Speaker 1: not only weak growth, but this deflationary trap that China

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00:24:53,320 --> 00:24:56,440
Speaker 1: has been in. I mean, how are you evaluating opportunities

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00:24:56,440 --> 00:24:56,919
Speaker 1: in Asia?

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00:24:57,600 --> 00:24:59,600
Speaker 4: So one of the things I'll mention is that if

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00:24:59,600 --> 00:25:03,040
Speaker 4: you look at a ratio of international stocks to US stocks,

453
00:25:03,080 --> 00:25:05,240
Speaker 4: or I wish I should say US to international stocks,

454
00:25:05,320 --> 00:25:07,320
Speaker 4: is it's hides it's ever been. The US has been

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00:25:07,800 --> 00:25:11,199
Speaker 4: absolutely dominant across the globe as a market, and one

456
00:25:11,240 --> 00:25:13,919
Speaker 4: of the major reasons why. Obviously we have the largest

457
00:25:13,960 --> 00:25:16,800
Speaker 4: of tech companies, and AI is a big global phenomenon,

458
00:25:17,160 --> 00:25:20,760
Speaker 4: and we have benefited more than just about anybody else.

459
00:25:21,080 --> 00:25:23,240
Speaker 4: So to your point, when I look at my screens

460
00:25:23,280 --> 00:25:25,159
Speaker 4: and I'm looking for cheap stocks, which is what I

461
00:25:25,200 --> 00:25:28,760
Speaker 4: do first, obviously international stocks show up a lot, and

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00:25:28,880 --> 00:25:31,119
Speaker 4: Chinese stocks do show up a lot. Now we tend

463
00:25:31,119 --> 00:25:34,080
Speaker 4: not to invest in a lot of Chinese stocks quite frankly,

464
00:25:34,119 --> 00:25:37,239
Speaker 4: because I'm not sure if we could. And this has

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00:25:37,240 --> 00:25:40,320
Speaker 4: been a common you know, a common argument against Chinese stocks.

466
00:25:40,320 --> 00:25:42,160
Speaker 4: I'm not sure if we can actually trust the accounting

467
00:25:42,440 --> 00:25:45,399
Speaker 4: or the numbers or the government. But they've done a

468
00:25:45,440 --> 00:25:48,000
Speaker 4: great job over a long period of time growing and

469
00:25:48,040 --> 00:25:50,560
Speaker 4: now that consumer is weak. You know that they have

470
00:25:50,840 --> 00:25:53,880
Speaker 4: so much debt, whether it's in the real estate markets. Look,

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00:25:53,920 --> 00:25:55,840
Speaker 4: the US does too, but if you look at the

472
00:25:55,880 --> 00:25:58,600
Speaker 4: real estate market and now their consumer behavior. So here's

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00:25:58,640 --> 00:26:01,760
Speaker 4: one interesting, really interesting thing, Doug. If you listen to

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00:26:01,800 --> 00:26:05,000
Speaker 4: company earnings reports, whether it's you know, and the clearest

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00:26:05,000 --> 00:26:09,080
Speaker 4: one are European luxury companies, they feasted on a growing

476
00:26:09,119 --> 00:26:12,560
Speaker 4: consumer base out of China and that's completely changed. Consumer

477
00:26:12,600 --> 00:26:15,400
Speaker 4: behavior in China feels so different today than it did

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00:26:15,520 --> 00:26:17,639
Speaker 4: just a year or two ago, and that's been a

479
00:26:17,640 --> 00:26:21,400
Speaker 4: big concern. So, right, so China is throwing a ton

480
00:26:21,400 --> 00:26:23,640
Speaker 4: of money into it, and we saw all those stocks

481
00:26:23,680 --> 00:26:27,120
Speaker 4: really spike in a short period of time, and quite frankly,

482
00:26:27,640 --> 00:26:29,440
Speaker 4: I'm not sure if we can trust that move yet,

483
00:26:29,520 --> 00:26:31,640
Speaker 4: or I'm not sure if the consumer behavior will change

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00:26:31,680 --> 00:26:33,720
Speaker 4: as much as China wants it to change. Now, the

485
00:26:33,800 --> 00:26:37,640
Speaker 4: liquidity factor changed then that went up, and we do

486
00:26:37,720 --> 00:26:40,000
Speaker 4: see that, so you can just maybe bank on that,

487
00:26:40,520 --> 00:26:42,800
Speaker 4: but I think at the end of the day, look,

488
00:26:42,840 --> 00:26:45,640
Speaker 4: we have to find good companies that can grow sustainably

489
00:26:45,680 --> 00:26:48,520
Speaker 4: well in all environments or at least from where they

490
00:26:48,520 --> 00:26:50,879
Speaker 4: are here, and that's just a really tricky one to

491
00:26:50,920 --> 00:26:51,800
Speaker 4: tell at this point.

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00:26:51,920 --> 00:26:53,840
Speaker 1: George, thanks so much. It's always a pleasure to have

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00:26:53,880 --> 00:26:57,320
Speaker 1: a chance to chat. George Sipaloni, portfolio manager at Pen

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00:26:57,440 --> 00:27:02,640
Speaker 1: Mutual Asset Management. This is Bloomberg day Break Asia, your

495
00:27:02,720 --> 00:27:05,600
Speaker 1: morning brief on the stories making news from Hong Kong

496
00:27:05,640 --> 00:27:08,520
Speaker 1: to Singapore and Wall Street. Look for us on your

497
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00:27:29,400 --> 00:27:32,040
Speaker 1: I'm Doug Krisner. Join us again tomorrow for all the

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