Speaker 1: This is Bloomberg Business Week. I'm Carol Masser. Every day
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Speaker 1: listening to Bloomberg Business Week Carol Masser along with Kaylee Lines.
Speaker 1: And we do want to get into the latest on
Speaker 1: the virus because we've had a bunch of headlines. Certainly
Speaker 1: today we know Europe is seeing more cases and getting
Speaker 1: into another shutdown, if you will. Astro Zenica saying it's
Speaker 1: vaccine candidate produced a robust immune response and elderly people,
Speaker 1: Jane Jay saying the first batches of its shot could
Speaker 1: be available in January. So there's a lot going on.
Speaker 1: So back with us for our daily check on COVID
Speaker 1: nineteen and with his perspective, Dr Sandra Galaia he's Dina
Speaker 1: Professor at Boston University School of Public Health. He's author
Speaker 1: of Pained Uncomfortable Conversations about the Public's health, and he
Speaker 1: joins us once again on the phone from Boston. Dr
Speaker 1: Galay and nice to have you here with Kayley and myself.
Speaker 1: How are you, um well, Thank you Carol, Thank you
Speaker 1: Kayley for having me again. I am doing as well
Speaker 1: as can be adjusted for coronavirus times, I know. Tell me,
Speaker 1: tell us what Boston is like right now. Well, I
Speaker 1: think Boston right now is a little bit anxious. I
Speaker 1: think I feel like we are and everybody is on
Speaker 1: the edge of their seat. We're seeing cases slowly creep up.
Speaker 1: They're going up, they go down, but the general slow
Speaker 1: increase in trend. And I think the mayor and the
Speaker 1: governor have been appropriately increasingly cautious, and the and the
Speaker 1: urging all citizens to be careful, and I think businesses
Speaker 1: have been doing the same. So I think it's a
Speaker 1: little bit of a balancing act between knowing that cases
Speaker 1: are slowly trending up, but taking precautions to double down
Speaker 1: on the on the things that we are all doing,
Speaker 1: wearing masks and being careful with test thing with contact
Speaker 1: racing to avoid these cases from becoming another surge. And
Speaker 1: that's in the greater city of Boston. Dr GLA. But
Speaker 1: what about at Boston University. How is the university, How
Speaker 1: are your students, how are you handling this? Yeah, it's
Speaker 1: actually quite quite remarkable how well we are doing in
Speaker 1: the university. And obviously the university is it's vulnerable to
Speaker 1: changes in the city around it. But we have had
Speaker 1: a fairly low case positivity in tool right now, which
Speaker 1: about point two percent, which is two per thousand, while
Speaker 1: in Brookline around it we're about two percents, almost tenfold more.
Speaker 1: And I think the reason for that is that within
Speaker 1: the university we have a very big university, but you're
Speaker 1: able to control things a little bit more. We test
Speaker 1: all our students twice a week or once a week,
Speaker 1: depending on their contact. We have very sophisticated and robust
Speaker 1: contact racing that if somebody tests positive, we talk to
Speaker 1: them right away, we isolate them, we isolate their contact.
Speaker 1: So in some respects, the universe like a city within
Speaker 1: a city, but one where you have a lot more control.
Speaker 1: So we have been so far touched with doing well.
Speaker 1: I think there is a lot of anxiety I have
Speaker 1: and a lot of us have about whether the larger
Speaker 1: city will end up affecting the university, and obviously, if
Speaker 1: it does, will have to change course as to what
Speaker 1: we're doing. But so far, the university, frankly, it's a
Speaker 1: safer place to be than the than the city around. Yeah.
Speaker 1: It's kind of interesting, right, I think, you know, center
Speaker 1: that as we've opened up all kinds of educational systems, um,
Speaker 1: you know, from K through you know, of course going
Speaker 1: into colleges and universities, I think we've had some success
Speaker 1: stories and then we've had certainly some problem areas, especially
Speaker 1: when it comes to college sports reopening. I mean, do
Speaker 1: you still feel like it's important that we continue to
Speaker 1: reopen educational areas and keep them open. Yeah, And I
Speaker 1: think the answer is yes. But it's a it's a
Speaker 1: qualified yes. It's a it's qualified by two things. Number
Speaker 1: one is that I don't think opening some that means
Speaker 1: opening and sort of going to back to business as
Speaker 1: usual like it was October. Opening means having a lot
Speaker 1: of precautions in place. Everybody wearing masks, people are being
Speaker 1: careful not to go into work if they're sick, self attestation,
Speaker 1: everyday systems of testing, simple systems of isolating people who
Speaker 1: have positive tests, isolating their contact, and the entire really
Speaker 1: the entire range of efforts to mitigate the virus. So
Speaker 1: I think yes, with those measures in place, I think
Speaker 1: the second caveat to the yes is that we simply
Speaker 1: need to have the humility to say today on October
Speaker 1: the answer should be yes. But I don't know what
Speaker 1: the answer should be tomorrow October, which is a bit unnerving,
Speaker 1: of course, as as you can both appreciate. But I
Speaker 1: think simply if the data change, we should change. And
Speaker 1: I think we as a university, I think we as
Speaker 1: a city, as a state, as a country, should have
Speaker 1: the humility to realize that that the virus may become
Speaker 1: bigger than us, and we we need to change what
Speaker 1: we're doing. Well, I have to look ahead then further
Speaker 1: into to fall into the winter. Dr Elia. I mean
Speaker 1: it's pretty bad right now, we're seeing record cases, and
Speaker 1: then when it is dark and cold, no one wants
Speaker 1: to be outside. Everyone is forced inside. Are you bracing
Speaker 1: yourself for that? M hm, yeah, I am man. I
Speaker 1: suppose the big question for the winter is as people
Speaker 1: are all forced inside, will they continue to congregate inside,
Speaker 1: which is which we know is what's driving most of
Speaker 1: the cases. And here in Massachusetts, analyzes show very clearly
Speaker 1: that a lot of the case spread comes from indoor
Speaker 1: house parties and gatherings where people are not being careful
Speaker 1: with protective equipment. So the question is are people going
Speaker 1: to go inside and in the congregate, which is then
Speaker 1: going to result in viral spread. The truth is, Carol
Speaker 1: and Kyley, if if each of us stayed inside, just
Speaker 1: on our couch, without contacting anybody, then there will be
Speaker 1: no spread of coronavirus. So it really depends on what
Speaker 1: we do by being inside. If we are inside, taking precautions,
Speaker 1: will be fine. But if being inside means congregation broadly
Speaker 1: what we saw happen in the Southern States in the summer, right,
Speaker 1: So happened in Southern states in the summer as things
Speaker 1: got hot, people went inside where there's air conditioning, and
Speaker 1: there was all sorts of congregation which resulted in the
Speaker 1: spread of the virus. So I think it really depends.
Speaker 1: But but the answer to your question, am I looking
Speaker 1: at aggrehensively is unqualifiedly yes, Dr Galiah. You know, Charlie
Speaker 1: Pellett was just talking about we also check in with
Speaker 1: the folks and the teams over at Johns Hopkins. You know,
Speaker 1: we've often seen people come out and say, well, there's
Speaker 1: more cases of COVID nineteen because we're doing more testing. Um,
Speaker 1: is that true or that's not the case. No, it's
Speaker 1: not the case. I heard non Professor Sharpstein talk about
Speaker 1: this and the clip and he's still is right, it's
Speaker 1: not the case. I mean, there's no question we're doing
Speaker 1: more testing and as a result, you do find more cases.
Speaker 1: But there's plenty of evidence that this is a real
Speaker 1: rise in cases. Is not just do the testing. We're
Speaker 1: seeing a rise in all age groups. And the professor
Speaker 1: Sharstein noted, we are seeing a rise in hospitalizations. If
Speaker 1: it was simply due to testing and do the testing
Speaker 1: of healthier people, there would not be a rise in hospitalizations. Well,
Speaker 1: and that's a really smart point, right, And I also
Speaker 1: think about the cases that do end up in the hospital.
Speaker 1: Are they how severe are they and how are we
Speaker 1: or what we have we learned about treating those cases
Speaker 1: because we have been fighting the virus now for six
Speaker 1: or seven months, well we've learned quite a bit actually,
Speaker 1: And when you look at mortality you'll see that mortality
Speaker 1: per person is quite a bit down. In fact, we're
Speaker 1: about one quarter of the case mortality um that we
Speaker 1: had in the first way, which was in March and April.
Speaker 1: Largely that because we've gotten better at treating the disease
Speaker 1: in hospital. We've learned how it manifests, we've learned when
Speaker 1: to oxygenate went to north so we are getting much
Speaker 1: better at dealing with an hospital mother doesn't change the
Speaker 1: fact that if there is a really big surge, it
Speaker 1: may overwhelm hospitals and I see, which is what one
Speaker 1: always worries about. But on a case by case basis,
Speaker 1: COVID is now much less fatal than it was when
Speaker 1: we first learned about that six seven months ago. So
Speaker 1: we're making progress on the therapy portion of this dr calia.
Speaker 1: But of course we are still all eyes looking on
Speaker 1: the race for a vaccine, astra Zenica, seeming to have
Speaker 1: good news out overnight finding it worked for older population specifically,
Speaker 1: which we know are the most vulnerable in this. But
Speaker 1: it's not just about getting a vaccine that works and
Speaker 1: gets approved. You have to scale it, you have to
Speaker 1: distribute it. How far away are we from me actually
Speaker 1: being able to get a shot in my arm. Yeah, well,
Speaker 1: I think that's the question we all want to know.
Speaker 1: I think most people who have following this carefully are
Speaker 1: expecting announcements from several of the of the Phase three
Speaker 1: trials in the next month. I think we'll have announcement
Speaker 1: the next month or two that that some of these
Speaker 1: Phase three trials are ready to move forward and then
Speaker 1: go to market. But of course the scale up and
Speaker 1: the manufacture and getting it to the people who need
Speaker 1: it in some way that first gets it to people
Speaker 1: who are at higher risk is going to be the
Speaker 1: biggest question. And I think, you know, Carol, for you
Speaker 1: and me to get it in the arms, how much, sure,
Speaker 1: but probably we are. We should not be first in line.
Speaker 1: The people should the first in line are people who
Speaker 1: are elderly, people who hire the risk people, the groups
Speaker 1: that have been suffering disproportionately from this virus. So it's
Speaker 1: going to require a real logistical effort, and I think
Speaker 1: and hope that we will do this in such a
Speaker 1: way that is done equitably that the people who have
Speaker 1: borne the greatest burden of COVID niting are the wants
Speaker 1: to get vaccinated first. Well, and that's what I mean,
Speaker 1: this is so much of the work you've done, um
Speaker 1: Dr Galleia, you know, and I think about the people.
Speaker 1: You know, one of the things the virus laid there
Speaker 1: right is the inequities out there in um certain populations,
Speaker 1: a lot of minority population, certainly blacks within the United States.
Speaker 1: Are you hopeful that we will make sure that that
Speaker 1: gets distributed to those people who are the most vulnerable,
Speaker 1: you know, who might not be closest to the health
Speaker 1: care facilities or you know, we've seen the stories you
Speaker 1: know already before. Are you hopeful? Are you do you
Speaker 1: have any kind of certainty that the vaccine will get
Speaker 1: to those people? Well, hope in certainty are different matters.
Speaker 1: I am, I am, I am, I am. I am
Speaker 1: hopeful simply because I think there's been so much attention,
Speaker 1: so much conversation, including through shows like yours, to this issue,
Speaker 1: that I think it has risen in our consciousness and
Speaker 1: it has become clear to everybody it is important that
Speaker 1: we do this right. It is fair that we do
Speaker 1: this right. There have been reports. National Academy Medicine recently
Speaker 1: had a report of a commission that articulated some very
Speaker 1: clear principles about how we should distribute vaccines. So I'm
Speaker 1: hopeful that the administration will be sensitive to and responsive
Speaker 1: to these guidelines and implement the distribution in a way
Speaker 1: that is fair and bright and reasonable. And I do
Speaker 1: not think, by the way, that that has to come
Speaker 1: necessarily at the expense of getting the vaccine out quickly.
Speaker 1: It is simply a matter of how we treage and
Speaker 1: how we create algorithms for vaccine delivery. It's not just
Speaker 1: about the vaccine though, Dr Galia, right. I mean, there's
Speaker 1: a reason that all of these communities have been more,
Speaker 1: it's hit them harder. You've done a lot of work
Speaker 1: on health inequality. You think we do a better job
Speaker 1: of this coming out of this and just quickly just
Speaker 1: going back to hope. I hope so because if if
Speaker 1: we if we don't have learn from this moment about
Speaker 1: how torow some some of thecent equities, truly, twenty will
Speaker 1: have been a year wasted. Yeah, gosh, um, I always
Speaker 1: love when we get some time with you, as Sandra,
Speaker 1: Thank you so much. Dr Sandra Glea din at the
Speaker 1: Boston University School of Public Health. Check out his book
Speaker 1: Paining Uncomfortable Conversations about the public's Health. This is Bloomberg
Speaker 1: Business Week with Carol Messer from Bloomberg Radio. Michael, you're
Speaker 1: with us. I'm hoping on the phone from Miami. That's okay,
Speaker 1: Hey listen, it's our New World Order. Um, good to
Speaker 1: have you here with us. As Kaylee said, uh, this
Speaker 1: is a store. It's just bananas. So tell us a
Speaker 1: little bit about how this came to your attention. Well,
Speaker 1: we were investigating the whole issue of chemicals that go
Speaker 1: into making narcotics um and we wanted to find out
Speaker 1: where they were coming from because these are chemicals that
Speaker 1: are in the global market. They are used for many
Speaker 1: legal things, but they're also critical for making narcotics. And
Speaker 1: one leave that we had to investigate the chemists going
Speaker 1: into Columbia via Ecuador. Ecuador sort of a transit point
Speaker 1: for the supplies that are needed to make cocaine and
Speaker 1: also transit point to get cocaine out to the world
Speaker 1: from Columbia because of its strategic location. So that's kind
Speaker 1: of how it started. And I basically went there and
Speaker 1: began to interview police and people in the in the industry,
Speaker 1: in the government, and that's how I came upon this story.
Speaker 1: It's fascinating. Jill, come on in on us. I think
Speaker 1: we've got your line nice and clear. Now this is
Speaker 1: just a wild story. Yeah, And and just major prompts
Speaker 1: to UH, to Mike and Cam Simpson for the reporting
Speaker 1: on the story. Cam had a very similar story, um,
Speaker 1: just a couple of weeks ago. And and this is
Speaker 1: almost a continuation of it because what we're really looking
Speaker 1: at here are US companies that are caught up in
Speaker 1: the international drug trade effectively. And it's not in the
Speaker 1: same ways that you would think of of like you know,
Speaker 1: distributing cocaine or anything like that. It's really about the
Speaker 1: raw ingredients, and in this case it's this Texas company, Tetra,
Speaker 1: and and Mike give us a sense how big of
Speaker 1: a portfolio does Tetra have in terms of all the
Speaker 1: various chemicals that makes yeah well. Tetra specializes in supplying
Speaker 1: the chemicals that go into sort of the liquids that
Speaker 1: you need to drill an oil well or to do fracking.
Speaker 1: And this particular ingredient, which is called calcium chloride, is
Speaker 1: one of the one of the things that goes into
Speaker 1: these fluids that are really critical for finishing oil wells.
Speaker 1: They also sell it to all kinds of crazy stuff
Speaker 1: like de icing roads, UH, keeping dust down on tennis courts,
Speaker 1: processing cheese, drying out cheese astistic. It's an agent that
Speaker 1: drives stuff out. So they're among the biggest producers in
Speaker 1: the world in this particular chemical, and they started to
Speaker 1: sort of expand sales around the world into other markets
Speaker 1: because the oil industry was sort of getting weaker for
Speaker 1: them over the last several years, and they started shipping
Speaker 1: and selling some of this stuff into South America and
Speaker 1: that's how it got diverted um into the hands of
Speaker 1: the of the cocaine labs. UH should know that the
Speaker 1: I'm sorry one thing, you know, they haven't been accused
Speaker 1: of any crime, but their product has been just flooding
Speaker 1: into this market somehow um for for years and they
Speaker 1: haven't really been able to stop it or even known
Speaker 1: about it. So bring that bring us up to speed
Speaker 1: in terms of what we know about how this unfolds
Speaker 1: in South America. Well, so the chemicals actually manufactured in
Speaker 1: Finland and sold to Tucher sells it to a single
Speaker 1: supplier distributor in Lima, Peru. So once it gets to Lima,
Speaker 1: it goes out into the local market there and they
Speaker 1: that supplier does what they want with it, they resell
Speaker 1: it wherever they want and we don't really know exactly how,
Speaker 1: but basically buyers working on behalf of the cocaine traffickers
Speaker 1: in Colombia are just buying this stuff up who bring
Speaker 1: it up by the ton by the truckload and finding
Speaker 1: ways to smuggle it all the way up to Columbia. Uh.
Speaker 1: There are laws in place that are supposed to stop this,
Speaker 1: but it just doesn't work and there's just too much
Speaker 1: and you know it keeps getting through. Michael, I have
Speaker 1: to hop in here first. I have to commend you
Speaker 1: on this story. It had me at the edge of
Speaker 1: my seat, and the kicker of it, I think is
Speaker 1: one of the best parts. You say, this is a
Speaker 1: US company who knows you informed them that it's booming.
Speaker 1: Exports to Peru are being used for cocaine production. They
Speaker 1: wouldn't tell you anything any action that they plan to take.
Speaker 1: How much of the onus is on them and how
Speaker 1: much is it on these governments? Well, they say they're
Speaker 1: complying with all the laws. They're using license their customer
Speaker 1: and Peru that's buying it all is licensed to do
Speaker 1: business in Peru, which is true technically, UM they say
Speaker 1: their customers, says Sweares, they're not going to break any laws,
Speaker 1: which means they're not going to sell it to Cernarco's UM.
Speaker 1: But the point is massive volunce that this has been
Speaker 1: going into that market at the same time that the
Speaker 1: United Nations and other UH international organizations have been warning
Speaker 1: that this product is being diverted in Peru UH to
Speaker 1: agents for cocaine traffickers. UH. So there's been plenty of
Speaker 1: warnings out there. We found it without having to look
Speaker 1: too hard, and all, you know, all I had to
Speaker 1: do was go to actually go to Ecuador and start
Speaker 1: interviewing the police because they have a special unit it
Speaker 1: does nothing but but sees illicit chemicals coming through the
Speaker 1: country to try to keep them from getting to the traffickers.
Speaker 1: And the more I talked to the more this this
Speaker 1: brand name kept coming up, and you know, they and
Speaker 1: so it just became an endemic thing. So this company
Speaker 1: when I when I asked them about that, that's basically
Speaker 1: what they said, we comply with the laws. And I said, well,
Speaker 1: now that I've told you, UM, what are you gonna
Speaker 1: do about it? And they just they would, they declined
Speaker 1: to comment any further interesting And so calcium chloride is
Speaker 1: ultimately the chemical that we're talking about in in this application, Mike.
Speaker 1: And that's also pretty basic chemical that know, lots of
Speaker 1: people make other than tetra. Uh. And what's happened when
Speaker 1: when the narcos get their hands on products other than tetras. Well, yes,
Speaker 1: I was a curious part of this reporting. Uh. One
Speaker 1: of the police officers in Ecuador I interviewed about this.
Speaker 1: He's a he's an expert, he's a chemical engineer, and
Speaker 1: he told me that UH, Tetra makes the purest and
Speaker 1: best quality calcium chlorid that does its job best. And
Speaker 1: he said he knows this because they arrested some of
Speaker 1: the smugglers and interrogated them and they said, yeah, this
Speaker 1: is sort of a brand of choice. And the fact
Speaker 1: once I bought a truckload of of calcium florid made
Speaker 1: in China and the my client, the narcotics lab, said
Speaker 1: I don't we want this stuff, it's horrible. Bring us Tetra.
Speaker 1: So they even, you know, it's sort of has become
Speaker 1: the brand of choice for all these uh, these labs
Speaker 1: because of its quality. Well, this is a great story
Speaker 1: and I highly recommend that every and check it out
Speaker 1: at Bloomberg dot com. I'll put it out on Twitter
Speaker 1: and and as Joel mentioned, UH they have done a
Speaker 1: bunch of coverage in the magazine. They did another story
Speaker 1: on heroin UH and the US companies that are making
Speaker 1: kind of the hidden agreement ingredient in heroin. So there's
Speaker 1: some great, great coverage on the drug trade and US
Speaker 1: companies that are caught up in this story. Though. Check
Speaker 1: it out by Mike Michael Smith. He's Bloomberg News uh
Speaker 1: P and I reporter and he joined us on the
Speaker 1: phone from Miami along with Bloomberg Business Week editor Joel Webber.
Speaker 1: You're listening to Bloomberg Business Week Carol Master along with
Speaker 1: kay Ley Lines. This is Bloomberg Business Week with Carol
Speaker 1: Master on Bloomberg Radio. All right, you are listening to
Speaker 1: Bloomberg Business Week Carol Master along with Kaylee Lines on
Speaker 1: this Monday. One of our top stories today about President
Speaker 1: g opening up a meeting in Beijing this week to
Speaker 1: map out the next phase of economic development. It's the
Speaker 1: country's fourteenth five year plan. It's expected to include a
Speaker 1: focus around technological innovation and economic self for lines, and
Speaker 1: that includes China having access to the latest and greatest
Speaker 1: when it comes to semi conductors. As our Bloomberg New
Speaker 1: Economy Editorial director Andy Brown writes in his weekly column,
Speaker 1: this is China's economic choke point. I love this story.
Speaker 1: Andy joins us from our Bloomberg Interactive Broker studio along
Speaker 1: with Kayley, who's also back there. Uh Andy, Um, you know,
Speaker 1: we've been talking a lot about the semi conductor area,
Speaker 1: and I think this is just an interesting way when
Speaker 1: we look at kind of what China needs, certainly going
Speaker 1: forward as it tries to be a mite when it
Speaker 1: comes to the world of technology. Exactly right. You talked
Speaker 1: about the five year Plan, the fourteen five year plan.
Speaker 1: We're expecting something like one point four trillion dollars to
Speaker 1: be devoted to technology, of which quite a bit is
Speaker 1: going to be an effort to develop semi conductors. Don't
Speaker 1: think that they've already spent about two hundred billion dollars
Speaker 1: already trying to make advanced chips and they haven't actually
Speaker 1: mastered it yet. And that in real terms, by the way,
Speaker 1: to a billion dollars is actually more than the United
Speaker 1: States spent on the Moon shot, the Apollo moon shot.
Speaker 1: It's quite a lot of money. I have to feel
Speaker 1: bad for semis and semi companies here, right, They've just
Speaker 1: been pawns in this battle between the US and China
Speaker 1: when it comes to trade, when it comes to everything,
Speaker 1: they are just so uh. They go with the fluctuations
Speaker 1: and geopolitics. I mean, how can we feasibly get out
Speaker 1: of the circle. How do you diversify the supply chain
Speaker 1: so that either one of these countries can operate and
Speaker 1: use chips without needing to interfere with the other. It's
Speaker 1: a real problem, not just for the chip companies. As
Speaker 1: you know, UM China is the biggest market. Their output
Speaker 1: goes to China. It's a problem for them because if
Speaker 1: they lose the China market, they lose the revenue that
Speaker 1: they need to develop new chips. And as I said
Speaker 1: in the in my newsletter, you know um uh Moore's
Speaker 1: law states that you know, every couple of years you
Speaker 1: double the number of transistors on a chip. The investment
Speaker 1: required to do this, uh is enormous. So if you
Speaker 1: actually choke US semiconductors off from the largest customers, you're
Speaker 1: going to severely limit their ability to innovate. And that's
Speaker 1: as an implication not just for those companies, but for
Speaker 1: the entire U S economy we do with all those
Speaker 1: five G I phones, right, So, you know, Andy, we
Speaker 1: talked so much about how the US needs China, China
Speaker 1: needs the US. I mean, this is really um a
Speaker 1: great example of it in many ways. Correct. It is um.
Speaker 1: You know, China is the largest supplier of electronic goods
Speaker 1: and the United States has um the best technology. UM
Speaker 1: it it is, you know, it's it's it's a technological
Speaker 1: problem for the Chinese leadership. I mean, here you are
Speaker 1: right on the edge of a huge revolution UH in
Speaker 1: technology powered by five G by you know, quantum computing
Speaker 1: UM uh and and the precondition of this is that
Speaker 1: you have semi conductors. China actually imports its Its biggest
Speaker 1: import item is semi conductors, not oil. Um and and
Speaker 1: the most advanced use US technology. It's it's a political
Speaker 1: problem to China wants to say, you know, we are independent,
Speaker 1: we we ah, we we control our own destiny. We're
Speaker 1: not going to get pushed around by anybody. But actually,
Speaker 1: when it comes to semi conductors, they are getting pushed around.
Speaker 1: The United States is pretty much crippled Huawei, which is
Speaker 1: China's technology leader. Right, So what about though, what Andy,
Speaker 1: what China can do? Because I think about you write
Speaker 1: about this, you know, the supply of rare earth's. You know,
Speaker 1: will China use that as kind of a weapon or
Speaker 1: a leverage to get the US to do what it
Speaker 1: wants to do or you know what, how do you
Speaker 1: see that playing out? It's very difficult for them to
Speaker 1: pull that lever. They really need foreign investment right now
Speaker 1: in the economy. Uh, and you know, taking a hardline
Speaker 1: against for instance, a you know, an apple would send
Speaker 1: entirely the wrong signal to the entire foreign investment community.
Speaker 1: So they're really reluctant to do that. Um, you know,
Speaker 1: they don't really have much option except to keep plugging
Speaker 1: away and trying to catch up. And the problem there
Speaker 1: is that it's not just a question of money. Money
Speaker 1: actually doesn't get you there. China has spent way more
Speaker 1: money than South Korea and in subsidies in Taiwan has
Speaker 1: and of course the industry is concentrated in those two places. Um,
Speaker 1: it's really about experience in the end, and that's something
Speaker 1: that you can't buy. Right. Well, so then how quickly
Speaker 1: can China make this happen and hold their own in this?
Speaker 1: I mean, the story of China is one of just
Speaker 1: a rapid growth trajectory, both in terms of economic growth
Speaker 1: but also in their technological capacity. Um So, I feel
Speaker 1: like we've come to have a lot of faith in
Speaker 1: just the speed in which China can get things. Is done.
Speaker 1: Not the case for this specifically, Well, it's not because
Speaker 1: it it isn't. I mean, if if you could poach talent,
Speaker 1: if you could spend money and you know, build the capability,
Speaker 1: it would be one thing. But you can't. I mean,
Speaker 1: it's cumulative and and and experience can't be bought. For
Speaker 1: the for the foreseeable future, we're talking about ten twenty years,
Speaker 1: China is going to be highly dependent on US technology
Speaker 1: for a core part um of its of its of
Speaker 1: its development in semiconductors. And and that's the that's the
Speaker 1: hard truth that Chinese leaders now face. And I do
Speaker 1: think you know, longer term, and you write about this
Speaker 1: as well, and we've talked about this is decoupling where
Speaker 1: we have kind of two you know technology world, right,
Speaker 1: one aligned with China and the other aligned with the US. Yeah,
Speaker 1: people now talk about two supply chains, the blue supply chain,
Speaker 1: the American one, the red supply chain, the Chinese one.
Speaker 1: And of course, you know, if if that's the way
Speaker 1: it's going to work out, the whole world is going
Speaker 1: to be a loser. I mean, it's gonna it's gonna
Speaker 1: raise costs, it's gonna undermine innovation. Um, and it will
Speaker 1: cripple the ability, will undermine, will limit the ability of
Speaker 1: US companies, semi conducted companies to innovate. Yeah, it's really
Speaker 1: raining in globalization and the benefits of that. UM. Andy,
Speaker 1: thank you as always always love to check in with you.
Speaker 1: Of course, are Bloomberg New Economy Editorial Director Andy Brown
Speaker 1: in his weekly column check it out at Bloomberg dot com.
Speaker 1: But certainly one of the big stories is we continue
Speaker 1: to watch China and doing its longer term planning uh
Speaker 1: and what it will focus on in the next decade.
Speaker 1: This is Bloomberg Business Week with Carol Messer from Bloomberg Radio. Well,
Speaker 1: it is Kaylee Lines about to be the biggest I
Speaker 1: p O ever. I mean, this is just kind of wild.
Speaker 1: Are Andy Brown, who we just talked to about China
Speaker 1: in the semi area. He um, We've had him on
Speaker 1: and he's talked about how this company is kind of
Speaker 1: a cross between jpmorget and pay Power talking about Jack
Speaker 1: mas Ant Group. It's expected to raise about thirty four
Speaker 1: point five billion dollars through an I p O right
Speaker 1: in Shanghai and Hong Kong. Uh And here's a little
Speaker 1: perspective for you. That's about the same valuation as JP
Speaker 1: Morgan Chase, four times larger than Goldman Sachs. How about that. Um,
Speaker 1: let's get more on this company and why it's cornering
Speaker 1: so much attention and its role in the global financial landscape.
Speaker 1: Blueberg News Deals reporter Crystal sees with us. She's on
Speaker 1: the phone in New York City. Crystal, good to have
Speaker 1: you here with us. I mean, this is a blockbuster. Yeah,
Speaker 1: it is the biggest IPO ever. We expected, you know,
Speaker 1: a Ramco last year to be the biggest. It turned
Speaker 1: out to be a twenty nine billion view and then
Speaker 1: here we come sevy five billion. So this really would
Speaker 1: be the biggest deal. It would be a monster deal.
Speaker 1: Why do people want to invest in it? Where's the
Speaker 1: appetite coming from? So this this, this is the story
Speaker 1: of a very much more player in the fintech space
Speaker 1: and not only is it a fintech player, it is
Speaker 1: a complition like you said, and it's a paper plus
Speaker 1: the Venmore plus the JP Morgan. So really it has
Speaker 1: a lot of influence in China because there's somehow take
Speaker 1: over the ships market. Ships of traditional blanks path Um
Speaker 1: E Wallace is super popular in China, and Ali paid,
Speaker 1: which is the product that and operate, is where it's
Speaker 1: probably the biggest player in China. So I mean that's
Speaker 1: on its own. Just to share volume that they process
Speaker 1: gives them this valuation in this race that they can justify.
Speaker 1: So Chrystal, is it a company that will continue to
Speaker 1: dominate in China and in Asia specifically, or is it
Speaker 1: something a company that we're going to see spread throughout
Speaker 1: the globe. Ultimately, interestingly, forty of the use of proceeds
Speaker 1: is actually going to be used for um overseas payment extensions.
Speaker 1: And although that's that sounds like they're expanding out of China,
Speaker 1: it's still very much focused on Neese customers. What it
Speaker 1: really means is that they will try to expand into
Speaker 1: merchants in in in places where Chinese tourists like to visit,
Speaker 1: Like you know, when you go to I guess like
Speaker 1: the Hudson Yards when you would a pair as you
Speaker 1: would see you would see the luxury stores with an
Speaker 1: Alipay QR code. So um, that is that is what
Speaker 1: there is what that's what their expansion is focusing on.
Speaker 1: But it's very much so a China specific play, and
Speaker 1: not even within Asia. It's very much a China pel player.
Speaker 1: Well in Crystal, it's also a Chinese listing. I feel
Speaker 1: like it's not lost on any of us, any of
Speaker 1: us that this wasn't a US listing. They're not on
Speaker 1: the NICE either, They're not on the Nasdaq. The I
Speaker 1: p oed in Hong Kong and Shanghai. I'm assuming in
Speaker 1: large part that's because of the scrutiny Chinese listed firms
Speaker 1: are under here in the US. But how significant is
Speaker 1: it that this thing did not price in New York City. Yeah,
Speaker 1: the biggest deal ever is not a US listing. Is
Speaker 1: also is a Chinese company that is listing in China
Speaker 1: and Hong Kong. That the concurrent listing is interesting. This
Speaker 1: has not been on before. Some companies have tried to
Speaker 1: do a simultaneous listening, but and will be the first
Speaker 1: thing to pull it off. But more importantly, and Ali
Speaker 1: Pay and we Chad Pay we're under White House scrutiny.
Speaker 1: Just last months, White House was trying to ban both
Speaker 1: products in the US. So I think that just that
Speaker 1: also explains why US is not a friendly environment for
Speaker 1: this IPA. Yeah, are we expected to see an a
Speaker 1: d R at any point? It could happen, but with
Speaker 1: thirty five billion, I don't think that is the immediate
Speaker 1: next step for them. So what what should we take
Speaker 1: this as a signal? We have this massive company that
Speaker 1: is going to have a market valuation bigger than JPMorgan
Speaker 1: not listed in the United States. Is this going to
Speaker 1: be the future of Chinese technology companies? Are really Asian
Speaker 1: technology to be companies avoiding US listings. There hasn't a
Speaker 1: lot of talks about Chinese businesses going to you know,
Speaker 1: focus on their domestic market, domestic capital markets going forward.
Speaker 1: And we saw this last year or earlier this year
Speaker 1: with Ali baba Uh doing this homecoming list thing, doing
Speaker 1: a second listing in Hong Kong instead, although they were
Speaker 1: already listed in the US. So we will continue to
Speaker 1: see more of that um trying to capture Chinese customers.
Speaker 1: After all, the products are only available in China almost
Speaker 1: exclusively and having that consumer base and the investor base
Speaker 1: that understand the product really does help with the valuation.
Speaker 1: So what does a company like and Financial mean for
Speaker 1: some of the established players, global banking players, whether it's
Speaker 1: a JP Morgan, whether it's a Goldman, you know, whether
Speaker 1: it's a European global banking giant. What does it mean
Speaker 1: potentially the impact on them? It does look like a threat,
Speaker 1: but it really isn't because I mean, for Stata, we
Speaker 1: we don't really see and Financial or Alie pay or
Speaker 1: we chap pay even being a popular, you know product globally.
Speaker 1: First of all, it's very much the marketing is very
Speaker 1: much focused on China. You have to have a Chinese
Speaker 1: bank account to open UH, to open a ali pay
Speaker 1: to ALP service. But also those JP Morgan's proto bus
Speaker 1: this aren't going into China anytime soon because there's a
Speaker 1: very strict um regulation regarding banking licenses and all all
Speaker 1: sorts of thin tag uh regulations that you need to
Speaker 1: get permits from the Chinese government. So, I mean, it's
Speaker 1: two very different worlds. Just looking at the evaluation and
Speaker 1: the scale, it looks like we can we can say
Speaker 1: that there would be some sort of competition, but at
Speaker 1: the stage, like with the very segregated business environment in
Speaker 1: both countries, like we don't. I don't really think that's
Speaker 1: like the top of mind competition, right, but you have
Speaker 1: to go. But you have to think that those big
Speaker 1: banks are certainly watching because the financial landscape is evolving
Speaker 1: and disrupting pretty quickly. Um, thank you so much, Crystal.
Speaker 1: See she's one of News deals reporters. She's joining us
Speaker 1: on the phone in New York City. Um, what is
Speaker 1: expected to be the largest I p O. It feels
Speaker 1: like we talked so much about a Ramco when it
Speaker 1: was I p O and this one like just kind
Speaker 1: of crypt behind us, and it's like significantly bigger. Six
Speaker 1: billion dollars, Carol, that's quite a chunk of change. Yeah,
Speaker 1: it is, and it is interesting that it's not it's
Speaker 1: a listing over in China, that dual listing exclusively. I'm
Speaker 1: brother journal. Yeah, but you let me drive, no, no, no, no,
Speaker 1: drive home, honey, please, I'll do the riding drivel. I
Speaker 1: want to drive, just drive, baby, it's the questions trying.
Speaker 1: This is the drive to the globe. Give me thanks.
Speaker 1: We'll drying up down on Bloomberg Radio. It is time
Speaker 1: for the drive to the clothes right here on Bloomberg
Speaker 1: Business Week, Carol Master along with Kaylee Lines. We've just
Speaker 1: got about eleven minutes left in today's trading session. Back
Speaker 1: with us, and great to have back with us. As
Speaker 1: Randy Watty's chief Investments strogist at O'Neil Global Advice Isiser's.
Speaker 1: He's with us on the phone in Washington, d C. Randy,
Speaker 1: how are you. I'm good. I hope you and Kayleie
Speaker 1: are are are healthy and safe in New York and
Speaker 1: everybody's all right up there, Yeah, doing okay, thank you,
Speaker 1: thank you. Um. We're watching the markets though, investors. Definitely,
Speaker 1: it's a risk off trade kind of day. I think disappointments,
Speaker 1: safe to say, concerns about those rising virus numbers that
Speaker 1: you just mentioned, Randy, and then concerns that we haven't
Speaker 1: gotten some kind of aid package through. Again. How do
Speaker 1: you see the current trade right now? I mean I
Speaker 1: would agree with the first two things you said what
Speaker 1: you said. I would add a third, which we've talked
Speaker 1: about previously, which is the election. The election is going
Speaker 1: to be close. There's a lot of uncertainty about about
Speaker 1: what's going to happen. I think people again are nervous
Speaker 1: that when we wake up on November four, we may
Speaker 1: not know who who won the presidential election, and then
Speaker 1: there's a question of how long is it going to
Speaker 1: take to figure that out. Markets don't like uncertainty. Fiscal
Speaker 1: stimulus uncertain election uncertain and COVID ramping up again another uncertainty.
Speaker 1: I think all of that really gives investors a reason
Speaker 1: to take profits after a heck of a run for
Speaker 1: flows in March, Randy, what makes you most nervous? Is
Speaker 1: it the prospect of a contested election or is it
Speaker 1: the ultimate result? How do you think about a blue
Speaker 1: wave or a second Trump presidency? Um? I mean historically, mathematically,
Speaker 1: the market does a little bit better, uh, in the
Speaker 1: in the first year of a second term president than
Speaker 1: in the first year of a first term president. So
Speaker 1: I think a lot of that is because normally if
Speaker 1: an incumbent president loses, he or she loses because the
Speaker 1: economy is weak, right, uh. I think what makes me
Speaker 1: nervous is not the result of the election. It's the
Speaker 1: idea that we could have an extended period of time
Speaker 1: of uncertainty, not knowing who one I know there's been
Speaker 1: some speculation from states like Michigan that it could take
Speaker 1: him a week to to to to count all the votes,
Speaker 1: and I think the market would not like that. Well, well,
Speaker 1: so how do you or what are you thinking about
Speaker 1: in terms of positioning ahead of the election because of that?
Speaker 1: Or are you Randy, Well, well, you know, normally the market,
Speaker 1: the market is actually following the script today. What's funny
Speaker 1: is it hasn't been following the script up to this
Speaker 1: point for the month. Normally, the market is down in September, October,
Speaker 1: going into the election. After the election, starts to rally
Speaker 1: in November and has a strong December. So what's really
Speaker 1: unusual is the fact that the NASDAC and the SMP
Speaker 1: are both up month to date and actually still are
Speaker 1: going into today. Normal action is for investors to take
Speaker 1: some profits off the table before the election occurs. Right,
Speaker 1: And of course, in addition to the election, in addition
Speaker 1: to stimulus, in addition to a pandemic, it is also
Speaker 1: earning season. It's the biggest week of earnings. UH this week,
Speaker 1: Randy fifteen trillion dollars in market cap reporting. Do we
Speaker 1: care or is it all about those first three things?
Speaker 1: I just mentioned we we do care. Earning season has
Speaker 1: gone pretty well. The SMP has reported so far of
Speaker 1: come in positive so ahead of x bigtations, thirteen have
Speaker 1: coming below in one percent in line, I would say,
Speaker 1: of note, forward estimates are not moving a great deal
Speaker 1: right now. I think the thing that is most important
Speaker 1: with earnings is that Q one and Q two of
Speaker 1: next year are supposed to see a very large celeration
Speaker 1: in earnings, especially Q two and next year, which is
Speaker 1: projected to be by Wall Street analysts in earnings for
Speaker 1: the S and P five hundred. And I think the
Speaker 1: fear is are those numbers too high because this economy
Speaker 1: is going to stall, because there is no fiscal stimulus yet,
Speaker 1: and because the virus is ramping up again. Personally, the
Speaker 1: thing I'm most troubled by, and you see it all
Speaker 1: the time if you walk around Manhattan, is the hitlet
Speaker 1: small business is taking and the number of small businesses
Speaker 1: that are closing. We still have about eight percent of
Speaker 1: the country out of work. You know, I think that
Speaker 1: that's still a problem. Well, right, because as much as
Speaker 1: we focus on the large cap and publicly held companies
Speaker 1: Randy that ultimately the backbone is those small companies, and
Speaker 1: ultimately if they come undone, which we have already seen
Speaker 1: a lot come undone, if that continues and the trends
Speaker 1: get worse, ultimately that will impact the big cap guys also, absolutely,
Speaker 1: because it will affect consumers ability to spend, and that
Speaker 1: that's one of the reasons we need a stimulus package
Speaker 1: out of Washington. I think you know they owe it
Speaker 1: too small small and mid sized businesses, and I think
Speaker 1: the market and investors are frustrated that they haven't been
Speaker 1: able to to come to some kind of agreement. So
Speaker 1: talk to me about small caps. As looking crunching the numbers,
Speaker 1: the Russell is down about four percent so far this year.
Speaker 1: You've got the S and P up about five percent
Speaker 1: this year. You've got the Nastack up about this year Russell.
Speaker 1: Though the small cap names have had quite a rally,
Speaker 1: up about six from that March low. Um, what's your
Speaker 1: take on this group? What are you seeing is their
Speaker 1: opportunity here? We think there is opportunity. Normally, small caps
Speaker 1: are are more cyclical than some of than some of
Speaker 1: the larger companies because they get a bigger portion of
Speaker 1: their revenues from the US versus overseas. The fact that
Speaker 1: small cap has started to pick up is actually quite positive.
Speaker 1: It's actually quite positive sign for the market usually means
Speaker 1: good things further ahead. I think investors, you know, are
Speaker 1: starting to get more optimistic that there is going to
Speaker 1: be a stronger economic recovery next year. I would note
Speaker 1: small cap is greatly underperformed large cap the last couple
Speaker 1: of years. Small cap used to trade out a premium
Speaker 1: to large cap and now trades a kind of parody
Speaker 1: to a discount. So on a relative valuation basis, right now,
Speaker 1: small caps actually pretty cheap. So if you feel that
Speaker 1: the economy is going to pick up next year, you
Speaker 1: would want to start allocating some money going forward as
Speaker 1: a small cap versus large Do you think the economy
Speaker 1: is going to pick up next year? I think I
Speaker 1: think it is going to pick up next year. My
Speaker 1: question is when I am nervous that it's going to
Speaker 1: be a tough winner, and I'm pretty nervous about Q
Speaker 1: one earnings to be blunt. So then Randy call a
Speaker 1: value rotation for me? When does it happen? I think
Speaker 1: it's the second half of next year. For value to
Speaker 1: get going, you really need two things to occur. You
Speaker 1: need you need basic materials and energy to do better,
Speaker 1: and you need you need financials, particularly banks to do better.
Speaker 1: Now the curve has has steepened a little bit recently,
Speaker 1: but you know, rates are still very very low. So
Speaker 1: I think you've got to feel better about banks and
Speaker 1: about energy prices to get to get more bullish on
Speaker 1: on value because there's such a big part of the
Speaker 1: of the of the index. Until we start to see
Speaker 1: those signs, we still want to stick with growth. And frankly,
Speaker 1: we still like technology, all right. I know it's hard.
Speaker 1: It's hard not to. I mean not just because it
Speaker 1: just keeps trending high and higher, but even the stories,
Speaker 1: the fundamental stories behind it, Randy, makes sense, right. I
Speaker 1: think the key on technology is do you feel more
Speaker 1: comfortable that technology companies next year are going to hit
Speaker 1: their earnings estimates? Or let the overall S and P
Speaker 1: is going to hit its earnings estimates. Right now, technology
Speaker 1: as a group is forecast to have the same earnings
Speaker 1: growth as the S and P. I think it has
Speaker 1: a better chance of making those numbers. All right, good
Speaker 1: stuff as always, Randy, Thank you so much for while
Speaker 1: Randy Watt's chief investment strategies at O'Neil Global Advisors, joining
Speaker 1: us on the phone from Washington, d C. Thanks so
Speaker 1: much for listening to Bloomberg Business Week. Download the podcast
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