WEBVTT - 'Missing Inflation' Is Seen In Asset Prices: Shalett 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.000 at Bloomberg dot com. Well, after that big sell off yesterday, 0:00:22.000 --> 0:00:25.680 we're seeing markets rebound pretty strongly here with the the 0:00:25.800 --> 0:00:29.040 SNP up about one percent. We had some good, very 0:00:29.040 --> 0:00:31.159 good consumer confidence day to come out this morning, so 0:00:31.160 --> 0:00:32.960 that's clearly supporting the market. To get a sense of 0:00:33.000 --> 0:00:35.440 kind of where we are right now, we welcome at 0:00:35.479 --> 0:00:38.159 Lisa Chalotte. She's a chief investment officer Wealth Management and 0:00:38.200 --> 0:00:41.559 Morgan Stanley. They got like a gazillion dollars under management 0:00:41.560 --> 0:00:44.840 two point for eight trillion to be more precise. Lisa, 0:00:44.880 --> 0:00:46.919 thanks so much for joining us on our Bloomberg Interactive 0:00:46.920 --> 0:00:49.560 Broker studio. So how do you put yesterday in today 0:00:49.680 --> 0:00:52.920 kind of in context? Because folks out there driving around 0:00:52.920 --> 0:00:56.560 there saying, wow, yesterday was really ugly, but what's costing 0:00:56.600 --> 0:01:00.000 today's bounce? Back. Yeah, So yesterday was very much about 0:01:00.000 --> 0:01:04.080 out a classical global growth scare UH. And we get 0:01:04.120 --> 0:01:07.000 these every now and then, UH, and they very often 0:01:07.120 --> 0:01:10.440 lead to market sell offs. And you know, the idea, 0:01:11.040 --> 0:01:16.280 UH is basically that UH, the nascent rebound that we 0:01:16.360 --> 0:01:21.760 have potentially we're beginning to see might get curtailed by 0:01:21.840 --> 0:01:25.520 the spread of coronavirus and and the idea that the 0:01:25.560 --> 0:01:30.280 rebound that may have begun in China gets stalled. And 0:01:30.319 --> 0:01:32.640 I think that that's really what the markets were obsessed 0:01:32.680 --> 0:01:36.920 with yesterday. All that being said, when the dust settles 0:01:36.959 --> 0:01:40.360 and the markets, UM, you know, sold off. I think 0:01:40.800 --> 0:01:45.280 there are a lot of investors who believe, UH rightfully 0:01:45.319 --> 0:01:48.880 that the US is disconnected in many ways from the 0:01:48.880 --> 0:01:53.800 global economy is kind of UH in oasis. Only nine 0:01:53.840 --> 0:01:59.160 percent of net GDP, of net trade UH is related 0:01:59.520 --> 0:02:02.400 UH do DP is related to trade UH, And so 0:02:02.480 --> 0:02:04.600 in many ways, the US is very much a domestic 0:02:04.640 --> 0:02:08.359 oriented economy. And so you come into today UH with 0:02:08.560 --> 0:02:14.880 ample liquidity UM still extraordinary sentiment and positioning people wanting 0:02:14.880 --> 0:02:17.440 to be long this market. UH, and you get a 0:02:17.480 --> 0:02:19.800 little piece of data that says the US consumer, which 0:02:19.800 --> 0:02:23.880 is of the mix, is UM still feeling good. Uh, 0:02:23.919 --> 0:02:26.160 and people are willing to say, yeah, we're gonna weather 0:02:26.240 --> 0:02:28.520 this storm to yeah, this storm being a one point 0:02:28.520 --> 0:02:31.560 six percent decline yesterday and today we're up almost a percent. 0:02:31.720 --> 0:02:34.840 So uh, these these huge moves are are sort of 0:02:34.840 --> 0:02:38.960 infantestable and historical perspective, But nowadays, I guess volatility has 0:02:38.960 --> 0:02:41.760 been killed. But I am curious. Right now we're seeing uh, 0:02:41.919 --> 0:02:46.560 financial conditions at all time the easiest ever based on 0:02:46.600 --> 0:02:50.119 a Chicago FED and St. Louis FED measures coming out 0:02:50.160 --> 0:02:53.480 in the past few weeks. Capex, though continuing to trend lower. 0:02:53.560 --> 0:02:57.680 US GDP growth still only two percent. I'm trying to 0:02:57.720 --> 0:03:01.400 square the idea of relatively slow ish growth, lack of 0:03:01.480 --> 0:03:06.320 wage inflation, lack of capital expenditures on the part of companies, 0:03:06.680 --> 0:03:10.960 with this incredibly strong job confidence and and just really 0:03:11.040 --> 0:03:13.760 low jobless rates. What am I missing? These pieces don't 0:03:13.760 --> 0:03:17.519 seem to go together. Yes, they don't. UM. And so 0:03:17.639 --> 0:03:20.040 you know what we have very often said is, look, 0:03:20.120 --> 0:03:22.919 the lack of inflation in the real economy UM has 0:03:22.960 --> 0:03:26.480 completely shown up in financial asset markets. UM. We know 0:03:26.600 --> 0:03:28.720 that for the past eleven years we've been in a 0:03:28.919 --> 0:03:32.560 pretty profound bowl market UM where U s docks have 0:03:32.680 --> 0:03:36.640 compounded at about four which is two times normal. UM. 0:03:36.760 --> 0:03:39.640 We think a lot of the provision of FED liquidity, 0:03:40.120 --> 0:03:44.240 and you noted financial conditions among the easiest they've ever been. UM. 0:03:44.280 --> 0:03:48.839 That liquidity has found its way to financial assets UH 0:03:48.880 --> 0:03:53.160 and been recycled not into fundamental capital spending and fundamental 0:03:53.200 --> 0:03:56.560 capital formation, but into share repurchases and a return of 0:03:56.640 --> 0:03:59.960 capital UH to UH to shareholders. So there's been the 0:04:00.200 --> 0:04:03.400 huge wealth transfer UH and many of our clients and 0:04:03.480 --> 0:04:06.200 certainly investors in the stock markets have benefited from that. 0:04:06.720 --> 0:04:10.440 But that's where the inflation is UM. In the real economy. UH. 0:04:10.480 --> 0:04:15.960 The real economy itself has really been struggling over this 0:04:16.040 --> 0:04:20.800 last decade with UM reasonably weak UH working age population 0:04:20.839 --> 0:04:24.680 growth UM and reasonably weak productivity growth UH. And so 0:04:24.760 --> 0:04:27.640 we've kind of been bouncing around this two to three 0:04:27.640 --> 0:04:32.239 percent UH. And even though we have UM low unemployment UM, 0:04:32.240 --> 0:04:36.560 we have not seen wage pressures UH. And so as 0:04:36.600 --> 0:04:40.599 a result, UM, we haven't seen the classical capital for 0:04:40.760 --> 0:04:46.279 labor substitution effects that you typically get UH end of cycle. 0:04:46.720 --> 0:04:49.240 What we've seen is companies saying, hey, I can get 0:04:49.240 --> 0:04:51.640 away with hiring people. I don't really pay them anything. 0:04:51.680 --> 0:04:54.560 I don't give them wage increases. UM. So I'll just 0:04:54.720 --> 0:04:56.560 you know, I'll hold them in there as long as 0:04:56.680 --> 0:04:59.520 as the cycle holds up as good enough. And that's 0:04:59.520 --> 0:05:02.400 what we've been this good enough. So I'm looking at 0:05:02.400 --> 0:05:06.960 your tactical asset allocation UH, and the global equities underweight 0:05:07.000 --> 0:05:10.520 the US but overweight emerging markets international. What's your thoughts 0:05:10.560 --> 0:05:13.200 behind that? So look, our our thoughts there are really 0:05:13.240 --> 0:05:16.080 around relative valuation. You know, we've been in at this 0:05:16.120 --> 0:05:19.239 period as we talked about for the last eleven years 0:05:19.240 --> 0:05:24.159 where US markets have profound the outperformed um the other regions, 0:05:24.200 --> 0:05:26.320 and as a result, we have a very very strong 0:05:26.480 --> 0:05:31.120 US dollar UM. So as we look at relative valuations today, UM, 0:05:31.200 --> 0:05:33.440 you know, we see the US and and really the 0:05:33.480 --> 0:05:37.720 top decile of p ratios for the last hundred years, 0:05:37.760 --> 0:05:41.040 it's it's getting to be an expensive market. UM. We 0:05:41.120 --> 0:05:44.479 know that on an equity risk premium basis or adjusted 0:05:44.480 --> 0:05:48.480 for low interest rates, you know, evaluations are not yet extreme. 0:05:48.560 --> 0:05:51.240 But in terms of nominal ps UM, the US market 0:05:51.320 --> 0:05:54.800 is really um, you know, getting expensive at at nine 0:05:54.880 --> 0:05:58.159 times at nineteen times forward. So our view is that 0:05:58.560 --> 0:06:02.760 as we look into t any the improvement in global 0:06:02.800 --> 0:06:05.280 growth that we thought was going to come both cyclically 0:06:05.360 --> 0:06:08.360 and from the trade deal. Really we think has the 0:06:08.440 --> 0:06:11.760 highest beta outside the US. We just talked about the 0:06:11.760 --> 0:06:15.640 fact that the US is kind of an isolated economy. Um, well, 0:06:15.680 --> 0:06:17.640 you can't have it both ways. You can't say, oh, 0:06:17.720 --> 0:06:19.800 global growth and global trade are gonna pick up and 0:06:19.839 --> 0:06:22.960 the US is gonna benefit. Um when you just said, hey, 0:06:23.040 --> 0:06:26.479 you know, the US is its own um story. So, Um, 0:06:26.560 --> 0:06:29.960 we have favored non US markets this year basically believing 0:06:29.960 --> 0:06:33.080 that there's more operating leverage and better valuations. How long 0:06:33.160 --> 0:06:36.320 can this disconnect continue where the inflation really is in 0:06:36.440 --> 0:06:40.480 assets and not in the real economy. Um. So I 0:06:40.520 --> 0:06:43.119 think we're starting to approach, um, the point of pain, 0:06:43.160 --> 0:06:47.000 and and that's where you know, valuations start um, you know, 0:06:47.160 --> 0:06:52.400 begging uh um, you know belief uh and and our 0:06:52.440 --> 0:06:56.120 senses were starting to see examples of that. Um. We 0:06:56.240 --> 0:07:00.000 think you know that the history books are gonna reflect um, 0:07:00.080 --> 0:07:03.520 you know that we work debacle as maybe you know 0:07:03.640 --> 0:07:09.479 an example of valuations becoming disconnected. And certainly a lot 0:07:09.560 --> 0:07:11.120 of folks have said, oh no, no, no, that's just 0:07:11.120 --> 0:07:15.520 an idiosyncratic situation. But we see examples of it, whether 0:07:15.560 --> 0:07:19.600 we're looking at um valuations in VC or we're looking 0:07:19.640 --> 0:07:21.840 at valuations some of the valuations that are being paid 0:07:21.840 --> 0:07:26.440 in the private equity markets, etcetera. That's fascinating. This is 0:07:26.520 --> 0:07:39.640 really really interesting, Lisa Chellette, thank you. Apple shares up 0:07:39.680 --> 0:07:42.440 more than two percent ahead of reporting earnings after the 0:07:42.480 --> 0:07:45.240 bell today. A lot of questions about just how robust 0:07:45.280 --> 0:07:49.160 their growth has been, whether it can justify the tremendous 0:07:49.240 --> 0:07:51.000 rally that we saw last year and some of the 0:07:51.120 --> 0:07:54.440 estimates that analysts have across Wall Street. But I want 0:07:54.440 --> 0:07:57.360 to turn our focus to what actually is going on 0:07:57.640 --> 0:07:59.440 right now and help us do that. As John Butler, 0:07:59.440 --> 0:08:03.200 Senior tell Services and Equipment analyst for Bloomberg Intelligence, and 0:08:03.280 --> 0:08:06.679 that is the effect of the coronavirus on its supply chain, 0:08:07.080 --> 0:08:09.280 which may or may not be in the front and 0:08:09.360 --> 0:08:12.640 center today as the report earnings. But you think it 0:08:12.640 --> 0:08:16.280 could be potentially substantial, right I do. I want to 0:08:16.320 --> 0:08:19.400 stress I view it sort of as a near term risk. 0:08:19.640 --> 0:08:23.720 So Bloomberg did a great piece last night on m 0:08:23.760 --> 0:08:28.360 Live blog where they talked about epidemics and the typical 0:08:28.480 --> 0:08:32.520 bell curve that goes with that. So uh from beginning 0:08:32.600 --> 0:08:35.440 to peak, it's typically ten weeks, call it two and 0:08:35.440 --> 0:08:39.760 a half months, and that's sort of the before the 0:08:40.840 --> 0:08:44.800 number of cases begins to decline. And so my thought 0:08:44.920 --> 0:08:48.360 in reading that was that that's the risk, that's the 0:08:48.440 --> 0:08:54.480 window where Beijing could remain proactive about closing down factories, 0:08:54.559 --> 0:08:59.839 restricting travel and in general doing the right thing, but 0:09:00.000 --> 0:09:03.319 putting measures in place that could threaten the Apple supply chain. 0:09:03.559 --> 0:09:07.800 So looking ahead to the coming year for Apple, they 0:09:07.880 --> 0:09:12.720 reportedly are set to launch a lower cost replacement to 0:09:12.760 --> 0:09:15.400 the old iPhone. See if you remember that, So it's 0:09:15.400 --> 0:09:18.920 a lower cost iPhone sort of positioned at the high 0:09:19.080 --> 0:09:21.760 end of the mid price market, which is a big segment. 0:09:22.559 --> 0:09:25.520 But if you're gonna launch that in March, you got 0:09:25.520 --> 0:09:28.840 to start building it in February at the latest. So 0:09:29.760 --> 0:09:32.480 in my mind, that sets up a near term risk 0:09:32.600 --> 0:09:34.680 for them. It could lead to a push out of 0:09:34.720 --> 0:09:38.400 the introduction of that phone, and god, if this whole 0:09:38.840 --> 0:09:43.160 scenario plays out longer than that ten week peak, then 0:09:43.320 --> 0:09:48.600 ultimately it could may even threaten the September refresh, although 0:09:48.640 --> 0:09:52.360 to be clear, I don't see that happening. Um. I 0:09:52.400 --> 0:09:58.160 think this whole scenario with coronavirus is probably going to 0:09:58.360 --> 0:10:01.600 play out over a typical bell curve. So John is, 0:10:01.640 --> 0:10:04.840 as Apple or any other technology companies that have a 0:10:04.840 --> 0:10:08.960 big president in China, they talked about any supply chain disruptions. 0:10:09.720 --> 0:10:13.160 They have not, and so I think a lot of 0:10:13.200 --> 0:10:16.240 people are going to be coming into tonight's Apple report 0:10:16.320 --> 0:10:20.040 and the earnings call anxious to hear something. I would 0:10:20.040 --> 0:10:23.839 be amazed if they didn't address it already in China. 0:10:23.880 --> 0:10:26.120 If you look at the retail store base, they have 0:10:26.600 --> 0:10:29.800 limited the number of hours those stores are open across 0:10:29.920 --> 0:10:33.640 all of China. So clearly it's on Apple's mind and 0:10:33.679 --> 0:10:38.000 they're already taking measures to address the the thread of 0:10:38.000 --> 0:10:40.520 this virus. All right, So let's get to the big, 0:10:40.679 --> 0:10:44.000 the big kuna here, which is the earnings, right, the 0:10:44.040 --> 0:10:48.240 first two trillion dollar company, right. Yeah, it's interesting they're 0:10:48.480 --> 0:10:52.520 set up for this great year. You know, the iPhone tennis, 0:10:52.600 --> 0:10:55.920 which sold throughout last year, did not really resonate well 0:10:55.960 --> 0:11:00.079 with people, and every quarter last year they booked to 0:11:00.160 --> 0:11:03.720 a double digit decline in iPhone sales. So we have 0:11:04.040 --> 0:11:07.000 very low hurdle set up for this year. Every quarter 0:11:07.120 --> 0:11:12.240 this year, and the iPhone eleven that they introduced in 0:11:12.280 --> 0:11:17.520 September last year has done really well, um by any measure. 0:11:17.600 --> 0:11:20.560 You know, we're hearing from third party researchers as well 0:11:20.559 --> 0:11:24.720 as the tech community. Uh, just in general. I'm seeing 0:11:24.720 --> 0:11:27.199 a lot of it out there, a lot of iPhone 0:11:27.360 --> 0:11:30.640 elevens in in people's hands. What I think they got 0:11:30.720 --> 0:11:34.600 so right is they introduced a new camera system. So 0:11:34.880 --> 0:11:37.240 you've got sort of a hit on your hands, some 0:11:37.320 --> 0:11:42.640 new devices coming to market and a lot of selfies. 0:11:42.679 --> 0:11:45.720 He likes the filters, he likes the multiple cameras. I 0:11:45.720 --> 0:11:48.240 looked at Tom Keene. Tom Keine posts some amazing photos 0:11:48.320 --> 0:11:52.240 on Twitter from his phone eleven, so he's really been efficient. 0:11:52.840 --> 0:11:55.360 I just point and pushed a little point. He spends 0:11:55.400 --> 0:11:59.520 He spends entire radio segments filming said videos. You know, 0:11:59.600 --> 0:12:02.000 it is interesting though, and it's just the idea of 0:12:02.280 --> 0:12:06.840 phone camera. I mean, that's essentially what's happening. Cameras have 0:12:07.000 --> 0:12:12.640 become digital digital. I'm sorry, today's smartphones are digital cameras 0:12:12.679 --> 0:12:16.280 with a phone app basically, and so the phone is 0:12:16.720 --> 0:12:20.559 honestly no all kidding aside is it's the most important 0:12:20.600 --> 0:12:24.800 feature on any smartphone. And I really think Apple did 0:12:24.880 --> 0:12:27.839 a lights out job with the iPhone eleven. And they 0:12:27.920 --> 0:12:31.959 lowered the starting price by fifty dollars. So it just 0:12:32.080 --> 0:12:34.480 has done very well and I think we're gonna hear 0:12:34.559 --> 0:12:37.240 that tonight and it sets them up for a great 0:12:37.320 --> 0:12:41.160 year where you have this low bar set from how 0:12:41.200 --> 0:12:44.280 we performance. How important is that five G story to Apple? 0:12:44.280 --> 0:12:45.880 A lot of bulls are out there saying this is 0:12:45.880 --> 0:12:51.360 the next major refresh cycle. I think I think they're right, 0:12:51.480 --> 0:12:53.280 but I think it's going to play out over a 0:12:53.280 --> 0:12:56.880 longer period of time than they think. People don't upgrade 0:12:56.920 --> 0:12:59.920 immediately to the new technology, so if you look at 0:13:00.040 --> 0:13:03.360 four G, it was sort of a multi year ramp 0:13:03.440 --> 0:13:07.600 to the point where sat uh not saturation penetration levels 0:13:07.640 --> 0:13:11.920 in the US we're really meaningful. So I think we'll 0:13:11.920 --> 0:13:14.560 see the same thing happened this year, where we have 0:13:14.720 --> 0:13:18.719 a decent year of early adopters. The iPhone five G 0:13:19.000 --> 0:13:21.080 coming out in September, I think is going to be 0:13:21.120 --> 0:13:24.320 a popular device, but it will take a couple of 0:13:24.400 --> 0:13:27.280 years to really get out there, so to speak. I 0:13:27.320 --> 0:13:29.560 feel like sociologists are going to look at this period 0:13:29.559 --> 0:13:32.920 of time where it's no longer about the conversation, it's 0:13:32.960 --> 0:13:35.200 just about how you look. I mean, honestly, I do 0:13:35.280 --> 0:13:37.520 think that this is going to be a transformation that people, 0:13:37.800 --> 0:13:40.000 you know, just want to see themselves others, but they 0:13:40.040 --> 0:13:45.200 don't actually want to have and conversations have gone to 0:13:45.320 --> 0:13:51.280 texting yes for the most guilty. By the way, John Butler, 0:13:51.320 --> 0:13:53.920 thanks so much for joining us. John Butler, Senior Telecom 0:13:53.960 --> 0:13:57.280 Services and Equipment Annals also is the ace on Apple 0:13:57.360 --> 0:14:09.200 for Bloomberg Intelligence. There is a big question right now 0:14:09.520 --> 0:14:13.000 as US equity is rebound after yesterday sell off, how 0:14:13.040 --> 0:14:16.840 will China's market respond in the wake of the closure 0:14:17.160 --> 0:14:19.720 of the Wuhan City How how big it is it 0:14:19.720 --> 0:14:23.080 accounts for one point six percent of the total GDP 0:14:23.360 --> 0:14:27.200 of China, as well as the potential ramifications for JN 0:14:27.280 --> 0:14:30.120 paying the president of the country. Christopher Balton joining us 0:14:30.120 --> 0:14:34.640 now Associate professor at Fullbright University, Vietnam. Also a Bloomberg 0:14:34.640 --> 0:14:39.360 Opinion columnist, joining us from Saigon in Vietnam. Christopher, can 0:14:39.400 --> 0:14:41.680 you give us just a sense, uh, first of all, 0:14:41.880 --> 0:14:44.240 just what the response has been like on the ground 0:14:44.240 --> 0:14:48.320 where you are right now. Um, what we're basically seeing 0:14:48.400 --> 0:14:50.520 is is that even though it's a typically busy time 0:14:50.520 --> 0:14:55.040 when people are out in restaurants with families, enjoying Chinese 0:14:55.080 --> 0:14:58.000 New Year. What we're really seeing is people saying indoors 0:14:58.000 --> 0:15:01.480 and ordering lots of food and grocery. We're actually seeing 0:15:01.520 --> 0:15:06.240 reports of heavy buying in in grocery stores UM, and 0:15:06.760 --> 0:15:09.320 cities working to make sure that they can guarantee residents 0:15:09.360 --> 0:15:12.760 that they continue to have enough food. People are stocking up, 0:15:13.200 --> 0:15:16.080 But we're not seeing panic buying from from the people 0:15:16.080 --> 0:15:19.360 I've been talking to. So it seems that even though 0:15:20.240 --> 0:15:22.800 the impact on the economy is basically going to be 0:15:23.040 --> 0:15:25.440 even though people might not be eating at restaurants, they 0:15:25.440 --> 0:15:27.480 seem to be making sure that they're getting a lot 0:15:27.520 --> 0:15:32.280 of food UH and doing a lot of online shopping elsewhere. So, Christopher, 0:15:32.480 --> 0:15:36.000 how important is it for presidents she here to get 0:15:36.760 --> 0:15:39.760 you know, to handle this successfully, to get it out 0:15:39.800 --> 0:15:42.280 in front of it? What's the risk for President g 0:15:42.720 --> 0:15:46.760 with the coronavirus there, there's a lot of risk. And 0:15:46.800 --> 0:15:51.440 it's it's it's no coincidence that that President Lee was 0:15:51.480 --> 0:15:54.320 actually appointed to lead the working group on on this 0:15:54.360 --> 0:15:58.560 issue primarily because it's it's she is does not want 0:15:58.560 --> 0:16:02.560 to be seen as as in charge of this UH debacle. UM. 0:16:02.560 --> 0:16:04.600 And I think what you're seeing inside of China right now, 0:16:04.640 --> 0:16:07.160 and everything that that you're hearing is is that there's 0:16:07.200 --> 0:16:12.040 deep frustration at the level of competence in handling and 0:16:12.080 --> 0:16:14.720 really getting out and addressing this um. There was a 0:16:14.760 --> 0:16:17.200 there was a something that's gone viral on Leach had 0:16:17.320 --> 0:16:22.320 a very important event where the mayor of Wuhan is 0:16:22.360 --> 0:16:26.520 holding this UH press conference and he's talking about their 0:16:26.680 --> 0:16:30.080 their capacity to to make face masks, and he starts 0:16:30.120 --> 0:16:32.360 off saying, well, we can make one point eight billion, 0:16:32.400 --> 0:16:35.040 and then it's like, no, it's it's one point uh. 0:16:35.080 --> 0:16:39.200 It's it's one point zero eight, and then it's uh, 0:16:39.240 --> 0:16:41.680 and then it goes to an even lower number. And 0:16:41.720 --> 0:16:44.160 so I think there's this sense among the Chinese public 0:16:44.240 --> 0:16:47.840 that that their their government is not nearly as competent, 0:16:48.080 --> 0:16:50.480 and there's a lot of very deep frustration of the 0:16:50.520 --> 0:16:54.480 government because over the years they have a a history 0:16:54.560 --> 0:16:57.960 of not handling public health crisis well. And so there's 0:16:58.000 --> 0:17:01.800 kind of this mounting frustration going to connect the idea 0:17:01.840 --> 0:17:04.320 that in the US and elsewhere there seems to be 0:17:04.560 --> 0:17:07.679 a complacency about China's response, and there's been kind of 0:17:07.680 --> 0:17:09.800 a theme where people say, well, it's so much better 0:17:09.840 --> 0:17:13.480 than two thousand three when Stars was spreading this seems 0:17:13.520 --> 0:17:17.040 to actually be proactive. Where where well can you explain 0:17:17.080 --> 0:17:21.440 that disconnect? Well, it's it's difficult to say because you 0:17:21.960 --> 0:17:27.040 get so many conflicting responses about what the actual nature 0:17:27.119 --> 0:17:30.680 of preparedness and China's ability to act. They're clearly acting, 0:17:31.160 --> 0:17:35.000 that doesn't necessarily mean that they're acting well in in 0:17:35.119 --> 0:17:38.439 solving the problem. Um, you know, there's there's videos that 0:17:38.640 --> 0:17:41.480 and and I want to emphasize videos that you see 0:17:41.520 --> 0:17:45.359 on things like we chat or or other social media platforms. 0:17:45.560 --> 0:17:48.280 We don't always know how accurate they are, so it's 0:17:48.280 --> 0:17:50.520 difficult to say, well, are are they acting? You know, 0:17:50.560 --> 0:17:54.480 there's this there's this video of there's China has made 0:17:54.840 --> 0:17:58.000 a great fanfare that they're building a new hospital. Well, 0:17:58.040 --> 0:18:00.879 these types of the construction form that they're using is 0:18:00.920 --> 0:18:05.680 basically a type of reinforced heavy duty plastic cardboard. Uh, 0:18:05.680 --> 0:18:08.720 and they use these on Chinese construction sites. And so 0:18:09.280 --> 0:18:11.760 it's not really like a quality construction. There's not gonna 0:18:11.800 --> 0:18:14.880 be air filtering and sanitation standards and things like that. 0:18:15.119 --> 0:18:18.679 But they've clearly gone to the trouble of building something 0:18:18.720 --> 0:18:21.159 that they can put people in. So it's very very 0:18:21.160 --> 0:18:25.719 difficult to disentangle what is actually helping uh with regards 0:18:25.760 --> 0:18:27.600 to what China is doing and what is just action 0:18:27.720 --> 0:18:31.760 for the sake of appearing busy. Christopher, is it worthwhile 0:18:31.880 --> 0:18:35.000 making the analogy two stars as it relates to the 0:18:35.000 --> 0:18:39.200 potential impact on the Chinese economy which was material at 0:18:39.200 --> 0:18:43.960 the time? Um, I think it's still in a way 0:18:44.080 --> 0:18:48.160 very early, too early to to say with with significance. 0:18:48.400 --> 0:18:50.679 I think the first crack that we've really seen in 0:18:50.840 --> 0:18:53.000 how big an impact it's going to have on the 0:18:53.040 --> 0:18:57.000 economy is China has announced that they're actually pushing back 0:18:57.040 --> 0:19:00.760 the return to return to work date by one week. 0:19:00.800 --> 0:19:03.320 At the moment, um, I wouldn't be surprised if that 0:19:03.320 --> 0:19:06.640 flips another week or two. Um So, I think it's 0:19:06.640 --> 0:19:10.199 still really too early to just start making solid comparisons 0:19:10.240 --> 0:19:13.280 to stars or really anything else, because this is just 0:19:13.320 --> 0:19:16.880 so unprecedented at the moment. There's also an idea that 0:19:17.040 --> 0:19:19.440 Wuhana is a very big city, but it only accounts 0:19:19.440 --> 0:19:23.720 for one point six percent of China's entire GDP. Is 0:19:23.760 --> 0:19:27.760 the potential impact on the economy much greater Based on 0:19:27.960 --> 0:19:32.040 Wuhan's rule in terms of a node of transportation and 0:19:32.119 --> 0:19:35.680 manufacturing and a part of supply chains of companies both 0:19:35.720 --> 0:19:41.080 locally and internationally. Yes, absolutely, it's it's it's kind of 0:19:41.119 --> 0:19:44.000 like right in the middle in the center of China. 0:19:44.640 --> 0:19:48.320 It's it's a big rail hub, lots of manufacturing. And 0:19:48.400 --> 0:19:50.760 so what you've really seen is you've seen these you know, 0:19:50.800 --> 0:19:54.000 as people leave. And so when when this happened, right 0:19:54.040 --> 0:19:56.520 as people were leaving for Chinese New Year and so on, 0:19:56.520 --> 0:19:58.720 on some days, there were estimates that more than a 0:19:58.760 --> 0:20:02.159 million people we're leaving the city of Wuhan in a 0:20:02.200 --> 0:20:04.919 specific day. And if you've ever been in a city, 0:20:05.240 --> 0:20:07.920 a major Chinese city during Chinese New Year, you can 0:20:07.960 --> 0:20:10.639 have these cities that you know, of a fifteen million 0:20:10.680 --> 0:20:13.440 people that will literally you know, fifty in the population 0:20:13.480 --> 0:20:16.480 will leave. Um. That that's not that's not a crazy number. 0:20:16.480 --> 0:20:20.199 And imagine if Manhattan was suddenly fifty smaller by population 0:20:20.720 --> 0:20:23.760 um and dispersed all over the Eastern seaboard. That's kind 0:20:23.760 --> 0:20:26.480 of what we're talking about with Wuhan. And so all 0:20:26.520 --> 0:20:29.520 of a sudden, the risk that that virus gets transported 0:20:29.560 --> 0:20:32.520 all over the Eastern Seaboard, or in this case, all 0:20:32.560 --> 0:20:36.959 over China is much much greater and a very real possibility. Christopher, 0:20:37.040 --> 0:20:39.600 you're on the ground in Saigon in Vietnam right now. 0:20:39.640 --> 0:20:45.040 What's the feeling there. Um, there's absolutely lots of precautions 0:20:45.080 --> 0:20:47.560 being taken. I was actually at a health facility today 0:20:47.600 --> 0:20:50.199 on an on an unrelated matter, UM, and they had 0:20:50.240 --> 0:20:54.040 actually set up a tent outside of the facility where 0:20:54.040 --> 0:20:57.600 they were checking people. Everybody was given a mask and 0:20:57.640 --> 0:21:00.919 it was mandatory. UM. There was of course all types 0:21:01.000 --> 0:21:06.440 of all nature of sanitation available to people around. UM. 0:21:06.480 --> 0:21:10.320 They're absolutely tracking uh, any travelers that have been to 0:21:10.400 --> 0:21:13.520 China recently. UM. It's absolutely a lot of concern, but 0:21:13.560 --> 0:21:16.280 I think they're they're absolutely on top of things and 0:21:16.760 --> 0:21:20.040 tracking people that need to be tracked. Christopher Balding, thanks 0:21:20.040 --> 0:21:22.639 so much for that on the ground UH commentary. We 0:21:22.680 --> 0:21:27.840 really appreciated. Chris Balding, Associate Professor Fulbright University in Saigon, Vietnam. 0:21:27.840 --> 0:21:39.560 He's also Bloomberg Opinion Commism. Let's take a look at 0:21:39.600 --> 0:21:42.600 the coronavirus and how it relates to the global energy markets. 0:21:42.640 --> 0:21:45.840 We saw let's sell off in oil over the last 0:21:46.119 --> 0:21:50.040 several sessions and really off from the peak of early January. 0:21:50.200 --> 0:21:53.440 Here w T I today just to quote that that's 0:21:53.440 --> 0:21:55.320 actually staging a little bit of a rebound today up 0:21:55.320 --> 0:21:57.240 about one per cent. Do you get a sense of 0:21:57.320 --> 0:22:00.159 kind of global oil markets and the driver's on the 0:22:00.200 --> 0:22:03.160 supply and demand side. We welcome John killed Off, founding 0:22:03.200 --> 0:22:06.280 partner of Again Capital. So, John, how are you thinking 0:22:06.320 --> 0:22:10.680 about global oil markets given some of these issues as 0:22:10.680 --> 0:22:12.920 it relates to the coronavirus as well as some other 0:22:12.960 --> 0:22:16.119 geopolitical issues globally, well on the demand side of the 0:22:16.119 --> 0:22:19.359 equation right now, there's just a tremendous fragility as a 0:22:19.400 --> 0:22:23.680 result of this outbreak of the coronavirus. UM. You know, 0:22:23.720 --> 0:22:26.160 a lot of us were dusting off the charts from 0:22:26.200 --> 0:22:29.240 two thousand three when the stars epidemic hit and oil 0:22:29.320 --> 0:22:31.879 took quite a hit. Then oil prices were basically just 0:22:31.920 --> 0:22:34.960 about cut in half UM from about thirty eight dollars 0:22:34.960 --> 0:22:38.159 a barrel danto almost five, So quite a bit of 0:22:38.200 --> 0:22:40.199 a sell off because you know, when I talk to 0:22:40.240 --> 0:22:44.000 you guys about the price dynamic, it's always Asia, Asia, 0:22:44.080 --> 0:22:47.720 Asia and China in particular. UM. You know, there was 0:22:47.840 --> 0:22:49.679 had been some hope that they were getting back on 0:22:49.680 --> 0:22:53.240 their feed economically after the at least the partial resolution 0:22:53.280 --> 0:22:55.359 of the U S. China trade war and now this 0:22:55.440 --> 0:22:59.600 hits and it's just uh, you know, skewing the demand 0:22:59.600 --> 0:23:03.840 growth back to down to flat, if not down on 0:23:03.920 --> 0:23:05.960 the year, because this is still early days. If you 0:23:06.040 --> 0:23:08.960 ask me, I don't quite understand the rush to say 0:23:09.000 --> 0:23:11.200 the oil clear has been sounded. Here what we're seeing 0:23:11.200 --> 0:23:13.399 in the stock market today and and even oil to 0:23:13.440 --> 0:23:14.960 a degree, We've got a long way to go on this, 0:23:15.240 --> 0:23:16.919 you know, I want to pick up on that, because 0:23:16.920 --> 0:23:20.280 we are seeing a rally in equities almost completely erasing 0:23:20.359 --> 0:23:23.880 yesterday's declines at this point if it continues throughout the day. 0:23:23.920 --> 0:23:27.040 But oil it's just flat, I mean essentially, I mean 0:23:27.040 --> 0:23:29.480 it's it's a little up. We're not seeing that big 0:23:29.520 --> 0:23:31.440 of a price gain. What's going to tip the scales 0:23:31.480 --> 0:23:34.520 one way another? It's one percent, but still after losing 0:23:34.520 --> 0:23:37.400 what more than ten dollars in the past month. This 0:23:37.480 --> 0:23:40.639