WEBVTT - P&L: Yahoo Security Breach Could Cost Shareholders $1 Billion 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 0:00:08.119 --> 0:00:11.159 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg pm L podcast on iTunes, 0:00:20.840 --> 0:00:29.880 SoundCloud and at Bloomberg dot com. Yahoo shares were down 0:00:30.040 --> 0:00:33.760 more than six percent after Yahoo disclosed after hours on 0:00:33.800 --> 0:00:39.360 Wednesday that cyber thieves in two siphoned information from more 0:00:39.400 --> 0:00:43.560 than one billion Yahoo accounts, including users, email addresses, scrambled 0:00:43.560 --> 0:00:46.279 account passwords, and dates of birth. In other words, all 0:00:46.280 --> 0:00:48.640 the information that they could use to hack into other 0:00:48.760 --> 0:00:52.600 areas and steal people's information and uh and possibly more. 0:00:52.920 --> 0:00:55.440 I want to bring in Shia Overday, my fellow cad 0:00:55.440 --> 0:00:58.960 Fly columnist here at Bloomberg, to give a sense of what, Yeah, 0:00:59.000 --> 0:01:02.240 who could have and should have done to prevent this 0:01:02.560 --> 0:01:06.759 from growing into such an extensive problem? Sara, Could Yahoo 0:01:06.840 --> 0:01:10.839 have done anything prevent this? Yeah? I mean the issue 0:01:10.880 --> 0:01:12.880 is that some of this is ancient history, right. The 0:01:13.280 --> 0:01:16.679 two now cyber attacks that Yahoo is disclosed in the 0:01:16.720 --> 0:01:20.640 last few months affected more than a billion accounts and 0:01:20.680 --> 0:01:23.279 then the one day disclosed in September a separate cyber 0:01:23.280 --> 0:01:27.920 attack also from that affected more than five million accounts. 0:01:27.959 --> 0:01:30.720 So in some sense this is a little bit old news, 0:01:31.080 --> 0:01:34.440 but it's very clear from the two hacks, this is 0:01:34.440 --> 0:01:37.080 a company that had a hard time, um, you know, 0:01:37.120 --> 0:01:41.280 securing information on its users, and in some by some accounts, 0:01:41.600 --> 0:01:45.520 they did things that bolstered its business that put its 0:01:45.640 --> 0:01:49.080 user information in jeopardy and ignored warnings from whose own 0:01:49.160 --> 0:01:52.800 security staff when they did things that that put the 0:01:52.840 --> 0:01:57.920 information at risk. This also has created or highlights the 0:01:58.000 --> 0:02:00.760 creation of a market for the stolen data. I understand 0:02:00.800 --> 0:02:04.280 about the price tech about three hundred thousand dollars for 0:02:04.440 --> 0:02:08.720 a complete set of this data that includes personal information, 0:02:08.720 --> 0:02:13.000 as you said, sell security numbers, passwords. Yeah. I mean 0:02:13.040 --> 0:02:15.120 this is the scary thing, obviously for all of us 0:02:15.160 --> 0:02:18.040 who live our lives online and have all this personal 0:02:18.120 --> 0:02:21.760 data online, is that you know, there's a criminal enterprise 0:02:21.919 --> 0:02:26.799 that makes money from selling stolen digital information to other 0:02:26.840 --> 0:02:29.840 cyber thieves who can use it to kind of delve 0:02:29.880 --> 0:02:34.360 deeper into our digital and physical lives. Ransomware, for example, 0:02:34.720 --> 0:02:37.200 a recent I were just talking earlier this morning about 0:02:37.240 --> 0:02:40.280 an attack that occurred in the San Francisco public transit 0:02:40.320 --> 0:02:42.720 system at the end of November, where it was shut 0:02:42.720 --> 0:02:46.040 down because thieves managed to get or hackers rather managed 0:02:46.080 --> 0:02:49.200 to get into the electronic technology system. Yeah, I mean 0:02:49.200 --> 0:02:53.359 this is sort of a cost of doing business online, right, 0:02:54.120 --> 0:02:57.800 is that cyber attacks and the consequence of cyber attacks 0:02:57.800 --> 0:03:03.480 have become sadly in place. So Verizon has previously had 0:03:03.480 --> 0:03:08.760 agreed to purchase uh Yahoo. Um, you wrote about how 0:03:08.840 --> 0:03:12.640 this cyber fail could cut one billion dollars from the 0:03:12.680 --> 0:03:15.519 price tag the Verizon was willing to pay for Yahoo. 0:03:16.360 --> 0:03:21.000 Why would Verizons still want Yahoo given how tainted its 0:03:21.000 --> 0:03:24.840 reputation has become. Yeah, that's a fair question. So just 0:03:24.880 --> 0:03:28.680 to clarify, Verizon is is agreed to buy Yahoo's core 0:03:28.800 --> 0:03:31.720 internet businesses. The weird thing about Yahoo is that the 0:03:31.760 --> 0:03:35.000 majority of the company's market value is tied up in 0:03:35.520 --> 0:03:39.640 these stakes. It owns in two independent internet companies, Ali 0:03:39.720 --> 0:03:43.560 Baba of China and Yahoo Japan. So the core bits 0:03:43.560 --> 0:03:46.800 of Yahoo, the parts of the company that we all know, um, 0:03:46.840 --> 0:03:49.600 are the ones that Verizon has agreed to buy. Verizon's 0:03:49.680 --> 0:03:53.120 logic here to do the deal hasn't really changed basically, 0:03:53.200 --> 0:03:57.080 what they want to do is create um do two things. 0:03:57.240 --> 0:04:00.440 One is to create a digital advertising company can be 0:04:00.480 --> 0:04:04.640 a real kind of counterweight to Google and Facebook, which 0:04:04.720 --> 0:04:08.280 right now dominate all of the advertising online more than 0:04:08.320 --> 0:04:12.240 half of all advertising digital advertising in the US. The 0:04:12.400 --> 0:04:15.320 dollars are collected by those two companies. So Verizon wants 0:04:15.320 --> 0:04:18.000 to be a third player here. And Verizon also wants 0:04:18.440 --> 0:04:23.440 content including all you know, Yahoo Finance and Yahoo Email 0:04:23.640 --> 0:04:27.200 and other Yahoo websites that, while they're not as popular 0:04:27.240 --> 0:04:29.440 as they used to be, still have hundreds of millions 0:04:29.440 --> 0:04:32.400 of users every month. So they think the combination of 0:04:32.440 --> 0:04:36.920 your Verizon cell phones and UH programming digital programming owned 0:04:37.040 --> 0:04:40.120 by Yahoo and A O L and other Verizon assets 0:04:40.400 --> 0:04:44.279 can be a real attraction to their to their mobile business. 0:04:44.279 --> 0:04:47.479 One share, just quickly, you afraid of being hacked? Do 0:04:47.480 --> 0:04:51.080 you put any personal information online? I have become super 0:04:51.120 --> 0:04:55.320 paranoid about hacking. Yes, I not to invite any thieves, 0:04:55.360 --> 0:04:59.400 but I am aware of clicking on any email. I 0:04:59.480 --> 0:05:02.920 try not to start accounts with companies that I don't 0:05:03.040 --> 0:05:07.159 trust online. Our row is basically a bunker. Yeah, firewalls 0:05:07.200 --> 0:05:10.240 everywhere where. The row of paranoia, the row of paranoia, 0:05:10.320 --> 0:05:12.560 that's a strange rink to it, but I guess it's 0:05:12.560 --> 0:05:14.919 not going to be alone. Thank you very much. Shara 0:05:15.000 --> 0:05:18.760 over there a Bloomberg gadfly, a technology columnist giving us 0:05:18.800 --> 0:05:32.919 a lowdown on Yahoo. The US housing market took a 0:05:32.920 --> 0:05:35.919 little bit of a breather this last month. Housing starts 0:05:35.920 --> 0:05:40.120 in the United States housing Yes, new housing construction declining 0:05:40.240 --> 0:05:42.320 more than a forecast. And here to tell us more 0:05:42.320 --> 0:05:45.440 about the housing industry is the chief executive of Realty 0:05:45.480 --> 0:05:48.520 Shares nav off Wall. No, thanks very much for coming in. 0:05:48.640 --> 0:05:51.200 Thanks for having me, Pim and Lisa tell people what 0:05:51.440 --> 0:05:54.560 is realty shares just before we get into details. Sure 0:05:54.640 --> 0:05:57.280 Realty Shares is an online market place for real estate 0:05:57.279 --> 0:06:01.000 investing in capital. We help individual high net worth investors 0:06:01.640 --> 0:06:05.360 deploy capital into private real estate investments across the US. 0:06:05.520 --> 0:06:08.480 We've helped raise over three million dollars of capital um 0:06:08.520 --> 0:06:12.280 for these private deals and multifamily projects, single family projects, 0:06:12.600 --> 0:06:15.760 and on the other end of our marketplace are underserved 0:06:15.800 --> 0:06:18.440 borrowers and companies that are looking for more efficient ways 0:06:18.480 --> 0:06:21.600 to raise capital or more cost effective capital and can 0:06:21.640 --> 0:06:23.800 come to realty Shares and get financing in as little 0:06:23.839 --> 0:06:25.880 as ten days, so really much more efficient than a 0:06:25.920 --> 0:06:28.440 bank on the one hand, in a more direct way 0:06:28.440 --> 0:06:30.400 to invest in real estate than a public on the 0:06:30.440 --> 0:06:33.240 other hand. So here the peer to peer lender that 0:06:33.320 --> 0:06:35.760 a lot of people think will take over the future 0:06:35.839 --> 0:06:38.360 of lending, and I imagine that you're among those hoping 0:06:38.440 --> 0:06:43.200 for that. I'm wondering from your perspective, have the applications 0:06:43.240 --> 0:06:47.080 that have been coming in has it shown a deterioration 0:06:47.120 --> 0:06:50.080 and consumer credit worthiness of late? We noticed in your 0:06:50.480 --> 0:06:53.520 you mentioned in your notes that the pace of foreclosures 0:06:53.560 --> 0:06:56.040 has ticked up a bit recently. Yeah, we've seen in 0:06:56.080 --> 0:06:59.040 some markets the pace of foreclosure take up. There's been 0:06:59.080 --> 0:07:02.640 a tremendous amount home price appreciation UM over the last 0:07:02.640 --> 0:07:05.080 five six years since the Great Recession, and I think 0:07:05.120 --> 0:07:09.320 that's resulted in some consumers over leveraging themselves and markets 0:07:09.360 --> 0:07:12.080 like Arizona, even in Denver, So there has been an 0:07:12.160 --> 0:07:15.560 uptick in in UM foreclosures. But you're also seeing other 0:07:15.640 --> 0:07:19.360 counterbalancing things and happening in the market. You're seeing the 0:07:19.480 --> 0:07:22.680 n h B, which is the home builder UM home 0:07:22.680 --> 0:07:26.280 Builder Index on on housing actually be much higher than 0:07:26.320 --> 0:07:28.520 it was you know too three years ago, and hit 0:07:28.560 --> 0:07:30.560 an all time high in September. So yeah, you are 0:07:30.560 --> 0:07:34.080 seeing some deterioration um. And you're also seeing a drop 0:07:34.080 --> 0:07:37.080 in just home buyer applications because of rising interests. Right, 0:07:37.080 --> 0:07:38.760 so there's all kinds of crazy stuff happen. Well, I 0:07:38.800 --> 0:07:40.280 want to pick up on that really quickly. I mean, 0:07:40.320 --> 0:07:43.120 do you think that the recent rise in UH mortgage 0:07:43.200 --> 0:07:46.520 rates is going to substantially slow the market potentially put 0:07:46.520 --> 0:07:49.480 a whole invaluations. I think the rise in interest rates 0:07:49.520 --> 0:07:53.040 is definitely going to reduce the number of applications that 0:07:53.200 --> 0:07:55.880 folks are filing for refinances and new home purchases. We 0:07:55.920 --> 0:07:58.840 already saw a week over week decline of five and 0:07:58.840 --> 0:08:01.840 a half percent for refinance and three percent for new 0:08:02.480 --> 0:08:05.760 new home purchases. UM. So definitely it's gonna it's gonna 0:08:05.760 --> 0:08:09.400 impact home buyer activity. But I think the bigger impact 0:08:09.520 --> 0:08:12.480 is home prices um and just supply. There's a lot 0:08:12.560 --> 0:08:15.480 of supply constraint out there for new home purchases. So 0:08:15.600 --> 0:08:18.600 despite rising in interest rates, I think those other factors 0:08:18.840 --> 0:08:20.520 are going to be a bigger impact on the on 0:08:20.560 --> 0:08:23.080 the home buying activity. Is that one of the reasons 0:08:23.200 --> 0:08:26.360 why you have raised money to do pre funded deals. 0:08:26.360 --> 0:08:29.520 In other words, you're putting your own balance sheet to work. Yeah, well, 0:08:29.560 --> 0:08:32.920 we we really serve the non owner occupied borrowers. So 0:08:33.160 --> 0:08:35.680 we serve investment borrows. We serve folks that are buying 0:08:35.720 --> 0:08:37.480 real estate not to live in it, but to for 0:08:37.520 --> 0:08:40.280 an investment purpose. And that part of the market's very 0:08:40.360 --> 0:08:43.360 underserved by banks and private equity. So we're really focused 0:08:43.400 --> 0:08:45.480 on that part of the market. But yes, a part 0:08:45.520 --> 0:08:47.320 portion of the deals we do we pre fund on 0:08:47.320 --> 0:08:50.040 our own balance sheet and then we'll then syndicate them 0:08:50.040 --> 0:08:52.680 out on the marketplace to high net worth investors that 0:08:52.720 --> 0:08:56.600 want to participate. We also have large institutions using the platform. Uh. 0:08:56.760 --> 0:08:58.920 You know, coming out of the Great Recession, generating yield 0:08:58.920 --> 0:09:01.000 has been very very differ coal. You have hedge funds 0:09:01.040 --> 0:09:04.079 looking to you know, return their investors mid team returns, 0:09:04.080 --> 0:09:05.920 and they can't do that in the bond market. So 0:09:06.040 --> 0:09:08.440 we do have a wide variety of investors trying to 0:09:08.480 --> 0:09:11.400 access an underserved part of the real estate capital markets. 0:09:11.400 --> 0:09:15.680 It's pretty exciting um as as a fintech company right now. 0:09:15.960 --> 0:09:19.760 Um I know that some of the more the larger, 0:09:19.880 --> 0:09:22.920 more established fintech companies, peer to peer lenders have run 0:09:22.960 --> 0:09:25.800 into a little bit of a pause in in their 0:09:25.840 --> 0:09:28.320 growth trajectory. What have you experience when it comes to 0:09:28.360 --> 0:09:31.400 fundraising and sort of people's skepticism around peer to peer 0:09:31.520 --> 0:09:34.800 or acceptance of it. There's a tremendous amount of skepticism, 0:09:34.840 --> 0:09:37.320 and I think that's healthy in any new industry. I 0:09:37.360 --> 0:09:40.120 was at a conference with you with the ubs UH 0:09:40.200 --> 0:09:42.680 the yesterday actually, and there was a half the room 0:09:42.720 --> 0:09:44.680 was very bullish on the market, and that was the 0:09:44.760 --> 0:09:47.320 you know, the maybe the younger population where you were 0:09:47.360 --> 0:09:50.920 hanging out. But I like hanging around with the skeptics 0:09:50.960 --> 0:09:53.760 because they bring a tremendous amount of really good information 0:09:53.800 --> 0:09:55.440 because they've been there, they've done that, they've been in 0:09:55.440 --> 0:09:57.720 the market for a while, and you know, it's healthy 0:09:57.760 --> 0:10:00.439 to be skeptical of a new industry and technology. UM. 0:10:00.480 --> 0:10:02.240 So it's really good to listen to the folks that 0:10:02.280 --> 0:10:05.720 are skeptical and why they're skeptical. Obviously, I'm very bullish. 0:10:05.760 --> 0:10:08.720 I wouldn't be running the company, um, but there's a 0:10:08.800 --> 0:10:11.600 very large amount of skepticism still in this industry, and 0:10:11.600 --> 0:10:13.480 we're just I think education is the best way to 0:10:13.480 --> 0:10:17.280 deal with it. What's the specific skepticism about Well, I 0:10:17.280 --> 0:10:19.959 think you know, people are thinking they equate this too. Oh, 0:10:20.000 --> 0:10:21.840 this is going to lead to the next great recession. 0:10:21.920 --> 0:10:24.080 It's like the savings and loan industry. So there's so 0:10:24.080 --> 0:10:26.480 many analogies that are being used to describe peer to 0:10:26.520 --> 0:10:29.000 peer lending. But I think the biggest thing that they 0:10:29.040 --> 0:10:31.880 say is, you know, banks are they? They are they? 0:10:32.080 --> 0:10:34.880 They already have this established base of customers. That's going 0:10:34.920 --> 0:10:36.960 to be really hard for these lenders to compete for 0:10:37.320 --> 0:10:40.320 the largest spend item for like a lending club is 0:10:40.480 --> 0:10:44.600 acquiring customers right and banks already have these customers, and 0:10:44.640 --> 0:10:46.920 they could at any point in time enter the market 0:10:46.960 --> 0:10:49.360 and take market share away from these companies. But what 0:10:49.400 --> 0:10:52.400 they don't realize is these tech companies are doing business 0:10:52.440 --> 0:10:54.319 in a much more cost effective way, so they can 0:10:54.360 --> 0:10:58.320 offer cheaper credit to otherwise capable borrowers with high ficos 0:10:58.679 --> 0:11:01.360 because they have lower opera any costs. So I think 0:11:01.360 --> 0:11:03.640 that's the answer I typically give is just there there 0:11:03.760 --> 0:11:06.200 is a place for these lenders, and I think the 0:11:06.240 --> 0:11:08.880 smart banks are finding a way to work with them 0:11:08.960 --> 0:11:10.480 rather than to say you're just going to go away 0:11:10.520 --> 0:11:13.200 in three to five years. Fascinating stuff. Thank you so 0:11:13.280 --> 0:11:16.400 much for joining us. NAVAF Well, founder and chief executive 0:11:16.440 --> 0:11:19.360 officer of Realty Shares, which is based in San Francisco. 0:11:20.000 --> 0:11:33.160 Really really great, Thank you so much. This is a 0:11:33.200 --> 0:11:35.400 conversation I've been waiting to have. I want to bring 0:11:35.440 --> 0:11:42.079 in Constance Hunter, Chief Economistic KPMGH. I'm particularly interested in China. 0:11:42.160 --> 0:11:45.240 The bond market's been selling off. The People's Bank of 0:11:45.320 --> 0:11:49.280 China has been pumping billions of dollars into the financial 0:11:49.280 --> 0:11:51.840 system in the past few days in order to bolster 0:11:51.960 --> 0:11:56.720 it as the currency continues to decline after the FED 0:11:57.080 --> 0:12:01.000 rate height. Constants, can you explain why the People's Bank 0:12:01.040 --> 0:12:03.439 of China I have found it necessary to pump so 0:12:03.520 --> 0:12:08.199 much money into the economy in the immediate aftermath of 0:12:08.200 --> 0:12:12.160 the Federate hike. Well, the China Chinese currency, the REM 0:12:12.200 --> 0:12:15.199 and B is still largely pegged to the dollar. I mean, 0:12:15.240 --> 0:12:18.079 of course they'll say it's it's a basket of currencies, 0:12:18.120 --> 0:12:22.080 but the US dollar makes up a far larger portion 0:12:22.120 --> 0:12:24.319 of the basket than any other currency. It means about 0:12:24.880 --> 0:12:28.440 of the basket. So we're looking at a situation where 0:12:28.679 --> 0:12:31.440 their policy is basically pegged to the U S policy, 0:12:31.520 --> 0:12:34.880 and if the FED hikes rates um and they sterilize 0:12:34.880 --> 0:12:38.560 that change, then they're basically experiencing a rate hike. And 0:12:38.600 --> 0:12:40.320 what they're saying is, we're not quite ready for a 0:12:40.400 --> 0:12:42.560 rate hike just yet, so we're going to increase money 0:12:42.559 --> 0:12:45.400 supply constance. I wonder if you could tell us what 0:12:45.440 --> 0:12:49.280 you believe that will have an effect on policy in 0:12:49.640 --> 0:12:53.320 China as much as it depends on exports still to 0:12:53.600 --> 0:12:58.280 power its economy. Yeah so, um, I mean, insomuch as 0:12:58.400 --> 0:13:02.320 the Federate hike increase is the value of the dollar um, 0:13:02.400 --> 0:13:04.840 and that the rem and by has also been falling, 0:13:05.520 --> 0:13:08.840 that would actually help Chinese exports not just to the US, 0:13:08.920 --> 0:13:14.120 but really to to other countries as well. Um. Uh So, 0:13:14.120 --> 0:13:16.760 so we do see, we do see a somewhat neutral 0:13:16.800 --> 0:13:19.480 to positive impact from from the weaker rem and by. 0:13:19.960 --> 0:13:22.480 But but of course there's so many things happening right 0:13:22.480 --> 0:13:25.480 now within the global economy um, and of course within 0:13:25.520 --> 0:13:29.439 the within within the political economy. So when you think 0:13:29.480 --> 0:13:31.880 about um some of the potential tax a lot changes 0:13:31.960 --> 0:13:35.560 here in the US as well as as trump suggestion 0:13:35.679 --> 0:13:39.119 that that he would slap tariffs on China if necessary 0:13:39.160 --> 0:13:43.120 if negotiations didn't yield better access for US companies, then 0:13:43.440 --> 0:13:45.680 we really have a lot more going on than just 0:13:45.760 --> 0:13:49.520 the currency situation. You know, constance the idea that China 0:13:49.640 --> 0:13:52.040 is burning through its foreign currency reserves. We saw the 0:13:52.120 --> 0:13:56.360 data showing that they've sold a good proportion of their treasuries. 0:13:56.400 --> 0:13:58.480 Their treasury holdings are now down to the lowest since 0:13:58.960 --> 0:14:02.160 uh in more than six years, basically in order to 0:14:02.200 --> 0:14:05.400 fortify to to have money to fortify their financial system. 0:14:05.440 --> 0:14:08.240 Are we looking at a potentially risk your situation heading 0:14:08.240 --> 0:14:12.199 into and is the potential for some sort of disorderly 0:14:12.320 --> 0:14:15.400 unwind of of China's boom in the in the first 0:14:15.400 --> 0:14:18.440 half of next year. So I think people have been 0:14:18.440 --> 0:14:21.680 worried about this for for years, really that the unruly, 0:14:21.800 --> 0:14:25.080 the hard landing versus the soft landing, the unruly unwind 0:14:25.680 --> 0:14:28.840 um and so um. That isn't to say that it 0:14:28.840 --> 0:14:31.160 couldn't happen next year, but this has been sort of 0:14:31.160 --> 0:14:34.040 a lingering worry if you were out there looking for 0:14:34.080 --> 0:14:37.480 things to be nervous about within the within the global economy. 0:14:37.600 --> 0:14:39.360 One thing that I that I will say that that 0:14:39.400 --> 0:14:43.800 I've heard anecdotally is a really big pickup in um 0:14:43.920 --> 0:14:46.720 the amount of money that Chinese are really willing to 0:14:46.760 --> 0:14:50.280 try to get out of the country. So the way 0:14:50.320 --> 0:14:52.400 it works is there's a limit on how much each 0:14:52.440 --> 0:14:55.320 individual can can take out of the country, and so 0:14:55.480 --> 0:14:58.320 they're effectively or or what I would call money mules 0:14:58.760 --> 0:15:01.720 that the people hire uh to to take out their 0:15:01.720 --> 0:15:04.120 money and if if if it comes back to them 0:15:04.120 --> 0:15:06.800 in Hong Kong, then great. But people recognize if that's 0:15:06.880 --> 0:15:09.320 risky and the money could get stolen. But but when 0:15:09.320 --> 0:15:12.560 I talk to wealthy Chinese, they are willing to take 0:15:12.560 --> 0:15:14.480 that risk because they want to continue to get money 0:15:14.520 --> 0:15:16.640 out of the country. And that is never really a 0:15:16.720 --> 0:15:20.320 very good sign that there is faith in the in 0:15:20.400 --> 0:15:24.160 the regime that's in power. So it's interesting to me 0:15:24.200 --> 0:15:28.520 that while Shijipang has has consolidated and increased his power, 0:15:29.120 --> 0:15:33.120 um you see this phenomenon from private citizens. Where is 0:15:33.200 --> 0:15:35.520 much of that money going. Is it being invested in 0:15:35.560 --> 0:15:39.920 places like Australia and the United States or in real estate? 0:15:40.160 --> 0:15:42.760 In real estate it's been it's being it's being left 0:15:42.760 --> 0:15:45.240 in cash in some cases, but real estate is a 0:15:45.360 --> 0:15:49.440 very very popular investment and in Canada as well, in 0:15:49.440 --> 0:15:52.520 Canadian real estate. So going forward, what are you watching? 0:15:52.600 --> 0:15:55.960 What measures are you watching to figure out whether China 0:15:56.160 --> 0:16:03.480 is managing their slowdown well or poorly. Well, it's not 0:16:03.560 --> 0:16:06.800 so it's not so easy. Um. So for example, if 0:16:06.840 --> 0:16:08.840 if I look at what I did, what I looked 0:16:08.880 --> 0:16:10.520 at in the run up to the to the US 0:16:10.640 --> 0:16:14.360 crisis and the UM and the bubble bursting here, we 0:16:14.400 --> 0:16:16.560 had a lot of great data that the FED collects, 0:16:16.600 --> 0:16:20.480 things like mortgage actually withdrawal statistics which really went through 0:16:20.520 --> 0:16:23.640 the roof UM in the run up to the crisis here, 0:16:24.320 --> 0:16:27.720 things like the rate of change of of leverage. So 0:16:27.760 --> 0:16:29.560 we have some of that. We can see that the 0:16:29.720 --> 0:16:35.080 corporate um borrowing is still continuing at very significantly high rates. 0:16:35.840 --> 0:16:39.160 We can see that that remany loans are still increasing, 0:16:39.600 --> 0:16:41.720 so we we have some data, but there's also a 0:16:41.720 --> 0:16:45.680 lot of off balance sheet UM loans that are being created, 0:16:45.720 --> 0:16:48.920 which is more difficult to track. One of the things 0:16:48.920 --> 0:16:51.440 that I think is interesting with China if you look 0:16:51.480 --> 0:16:55.160 at just something simple like their industrial production statistics. We 0:16:55.280 --> 0:16:58.440 used to see double digit industrial production statistics and and 0:16:58.480 --> 0:17:00.920 think that that was normal because China was playing catchup. 0:17:01.240 --> 0:17:03.520 And now we look at the annual the year a 0:17:03.600 --> 0:17:06.199 year industrial production, it's running in about six percent and 0:17:06.240 --> 0:17:10.280 it has been for the last six months. So Uh, 0:17:10.320 --> 0:17:12.800 this is this is definitely puts them in a different gear. 0:17:13.440 --> 0:17:15.720 So whether or not they get that six point seven 0:17:15.720 --> 0:17:19.040 percent growth next year, it really depends upon how stable 0:17:19.080 --> 0:17:22.200 the economy is and and so things like industrial production 0:17:22.240 --> 0:17:24.040 are are interesting to look at. If we see that 0:17:24.119 --> 0:17:27.160 falling off, it's going to be a flag, a red 0:17:27.160 --> 0:17:30.200 flag that the the economy is slowing more than they 0:17:30.200 --> 0:17:34.760 intend constance. Uh, from the perspective of a US investor, 0:17:35.320 --> 0:17:40.639 what assets are most vulnerable to a China slowdown? M 0:17:41.520 --> 0:17:45.080 That is an excellent question. And you mentioned something earlier 0:17:45.080 --> 0:17:48.359 which I think people worry about, but it perhaps is 0:17:48.359 --> 0:17:52.600 an over over or unfounded fear, and that is their 0:17:52.800 --> 0:17:55.360 US treasury holdings. So you you you noted a really 0:17:55.359 --> 0:17:57.480 important fact, which is that the treasury holdings are at 0:17:57.480 --> 0:18:00.000 the lowest they've been in six years. So this idea 0:18:00.000 --> 0:18:01.600 that we're going to have a surge up and interest 0:18:01.680 --> 0:18:04.960 rates when China um withdraw us their support of US treasuries, 0:18:05.240 --> 0:18:06.879 that may have already happened, and that could be a 0:18:06.880 --> 0:18:10.080 big contributing factor to the rising eels we've seen since 0:18:10.080 --> 0:18:14.800 September and the hundred basis points we've seen since the election. Uh. 0:18:15.080 --> 0:18:17.960 But in terms of other assets. Obviously real estate is 0:18:18.040 --> 0:18:20.600 a big one. So if if the Chinese, if if 0:18:20.600 --> 0:18:25.679 you really have UM a crash in China's economy, what 0:18:25.800 --> 0:18:28.000 happens then is that value gets destroyed. So if you 0:18:28.080 --> 0:18:30.920 have a bubble that's been fueled by debt, when that 0:18:30.960 --> 0:18:33.600 comes home to roost and the debt is no longer good, 0:18:34.119 --> 0:18:37.320 then there really is literally a destruction of cash, a 0:18:37.359 --> 0:18:40.480 destruction of values. There would be less money to invest 0:18:40.520 --> 0:18:44.120 in things like real estate and other assets. UM, those 0:18:44.160 --> 0:18:48.240 other other assets like art wine, UM I would see 0:18:48.280 --> 0:18:51.040 softness in those those markets as well. And then in 0:18:51.119 --> 0:18:54.960 terms of forecasting, UM, where the softness comes within the 0:18:55.000 --> 0:18:57.480 equity market that that is across the board. I mean 0:18:57.520 --> 0:19:01.159 it would, it would. It would depend on individual stocks 0:19:01.720 --> 0:19:04.600 and how much Chinese investment there is in them. Thanks 0:19:04.720 --> 0:19:09.160 very much. Constance Hunter is the chief economist at a KPMG. 0:19:21.560 --> 0:19:24.200 This is one of the questions that I have been wondering. 0:19:24.600 --> 0:19:27.719 You know, President elect Donald Trump has taken to Twitter 0:19:28.440 --> 0:19:33.439 with many different announcements of a variety of topics. UM. 0:19:33.600 --> 0:19:36.200 The ones having to do with business, though, particularly targeting 0:19:36.359 --> 0:19:41.560 companies such as boeing UM have had pretty substantial market effects. 0:19:41.560 --> 0:19:43.480 I want to bring in Rob Trick and Elly, senior 0:19:43.560 --> 0:19:45.879 legal editor for Bloomberg b n A, and with the 0:19:45.880 --> 0:19:49.159 potential consequences of that could be Rob, thank you so 0:19:49.240 --> 0:19:53.080 much for joining us. So is this something? Is President 0:19:53.080 --> 0:19:57.080 elect Trump's Twitter activity with respect to corporate America potential 0:19:57.960 --> 0:20:02.320 I don't know, point of investigation for the SEC? He Uh, yeah, 0:20:02.359 --> 0:20:06.320 well thanks for having me first. I think, Um, there's 0:20:06.400 --> 0:20:10.400 politics involved to write because if the SEC, uh would 0:20:10.480 --> 0:20:13.480 investigate this, Um, you have to bear in mind that 0:20:13.520 --> 0:20:17.560 the SEC chairman is someone that Donald Trump would have appointed, 0:20:17.840 --> 0:20:21.760 and you know, so there is that to consider. But um, 0:20:21.800 --> 0:20:24.880 there's there's really a lot here. Uh. Trump has said 0:20:24.920 --> 0:20:27.840 he's sold all his stocks, so maybe he's you know, 0:20:27.880 --> 0:20:30.240 there's nothing for him personally, but maybe you would look 0:20:30.240 --> 0:20:31.960 to what his if his you know, some of his 0:20:32.000 --> 0:20:34.520 inner circle are trading on what they know he's about 0:20:34.560 --> 0:20:36.879 to tweet. But I mean you can look at this 0:20:37.040 --> 0:20:40.439 a lot of different ways. But from the SEC angle, Um, 0:20:40.920 --> 0:20:43.560 they are interested in you know, if someone has a 0:20:43.640 --> 0:20:46.240 duty to keep information confidential and not trade on it 0:20:46.280 --> 0:20:48.800 and they breached that duty, the SEC is interested in 0:20:48.800 --> 0:20:54.119 investigating that. Rob, If these tweets and these messages that 0:20:54.160 --> 0:20:57.560 have made public were not being made public by either 0:20:57.760 --> 0:21:01.639 the president elect or a top government official. What would 0:21:01.640 --> 0:21:06.760 be the SEC stance on something that is moving markets 0:21:06.800 --> 0:21:11.439 If somebody tweets something or says something in public and 0:21:11.520 --> 0:21:14.560 it changes the value of a stock or or changes 0:21:14.560 --> 0:21:17.560 the direction of the market, what would the SEC say, Well, 0:21:17.640 --> 0:21:20.400 you would make an analogy to a company here for example. 0:21:20.440 --> 0:21:25.560 So there are SEC regulations for public companies when they 0:21:25.920 --> 0:21:29.080 introduce new information about what's going on with their business 0:21:29.080 --> 0:21:31.199 that they kind of they have to make that information 0:21:31.480 --> 0:21:34.640 public and kind of presented in a fair way for 0:21:34.640 --> 0:21:36.639 for anyone to trade on it. And there are you know, 0:21:36.640 --> 0:21:39.720 there are procedures regulating that for companies, and you also 0:21:39.760 --> 0:21:43.200 have procedures regulating it for the government too, I mean 0:21:43.280 --> 0:21:47.400 FED releases, SEC Enforcement actions, Bureau of Labor statistics data. 0:21:47.440 --> 0:21:49.520 They all have to be presented in a way that 0:21:49.880 --> 0:21:51.800 kind of everyone has access to it all at the 0:21:51.840 --> 0:21:54.639 same time. And so if you start having these market 0:21:54.720 --> 0:21:58.800 moving opinions behind closed doors but people know about it, 0:21:59.160 --> 0:22:02.960 um that that can be problematic too. Is there any 0:22:03.040 --> 0:22:10.360 precedent for this type of specific corporate UH discussions by 0:22:10.640 --> 0:22:13.919 a president elect or a standing president? I mean has 0:22:13.960 --> 0:22:16.320 there ever been a president that has specifically gone after 0:22:16.400 --> 0:22:23.840 companies publicly about certain contracts and uh and policies and jobs. Uh, 0:22:23.880 --> 0:22:25.879 I mean is this is there anything? Is there any 0:22:26.000 --> 0:22:29.520 historical president whatsoever? Uh? Not recently. I mean you would 0:22:29.520 --> 0:22:32.800 have to go back to UM. You know, maybe like 0:22:32.880 --> 0:22:36.720 President Johnson would would would speak about you know, kind 0:22:36.760 --> 0:22:39.320 of more you know, industry more generally or something like that. 0:22:39.359 --> 0:22:42.320