1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,520 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,760 --> 00:00:22,680 Speaker 1: All right, Emily grad Fai, thank you so much for 8 00:00:22,720 --> 00:00:25,599 Speaker 1: giving getting us up to date on those markets. Let's 9 00:00:25,600 --> 00:00:29,120 Speaker 1: talk about China here, Secretary Yellen there, four day visit. 10 00:00:29,240 --> 00:00:30,920 Speaker 1: Let's get the latest reporting. We've got a couple of 11 00:00:30,960 --> 00:00:34,120 Speaker 1: smart voices here, Eddie Vanderwaldt, Deputy Managing editor of the 12 00:00:34,159 --> 00:00:36,800 Speaker 1: Market's Live team with Bloomberg News, and Chris Condon, US 13 00:00:36,800 --> 00:00:41,040 Speaker 1: Treasury reporter with Bloomberg News. Hey, Chris, I know you 14 00:00:41,200 --> 00:00:44,680 Speaker 1: joined Secretary Yellen on the trip to China. 15 00:00:45,280 --> 00:00:48,000 Speaker 3: What's the takeaway from from ground zero there that you have? 16 00:00:48,640 --> 00:00:52,880 Speaker 4: Well, I apologize quick correction there, our colleague Victoria Dendron. 17 00:00:52,920 --> 00:00:54,560 Speaker 4: It was actually on the trip. 18 00:00:54,720 --> 00:00:54,840 Speaker 1: Oh. 19 00:00:55,080 --> 00:00:57,320 Speaker 4: I got to travel with her on her next trip, 20 00:00:57,360 --> 00:01:00,800 Speaker 4: but very good. But I've obviously been keeping close tabs 21 00:01:00,840 --> 00:01:03,800 Speaker 4: on this trip. It was I have to say first 22 00:01:04,560 --> 00:01:08,800 Speaker 4: and foremost, there were low expectations in terms of what 23 00:01:08,840 --> 00:01:13,120 Speaker 4: they call deliverables from this trip. The main goal was 24 00:01:13,160 --> 00:01:16,200 Speaker 4: to kind of stabilize the relationship and how the two 25 00:01:16,280 --> 00:01:20,000 Speaker 4: countries deal with each other on economic issues and re 26 00:01:21,120 --> 00:01:25,240 Speaker 4: establish regular lines of communication. You know, if you go 27 00:01:25,400 --> 00:01:29,520 Speaker 4: back before the Trump administration, US and China kept a 28 00:01:29,680 --> 00:01:33,840 Speaker 4: sort of pace of regular phone and in person meetings 29 00:01:33,880 --> 00:01:37,200 Speaker 4: with high level Chinese staffers on economic issues, and that 30 00:01:37,280 --> 00:01:40,679 Speaker 4: really fell apart due first of all to the more 31 00:01:40,720 --> 00:01:44,200 Speaker 4: confrontational tone of the Trump administration and then second just 32 00:01:44,240 --> 00:01:47,640 Speaker 4: because of COVID, and it's taken a long time to 33 00:01:47,760 --> 00:01:53,000 Speaker 4: re establish regular ties, and Yellen has been personally really 34 00:01:53,080 --> 00:01:57,720 Speaker 4: eager to get those reconnected, and I think on that front, 35 00:01:57,840 --> 00:02:01,080 Speaker 4: it was a pretty successful trip. From what I understand, 36 00:02:01,760 --> 00:02:04,440 Speaker 4: she and her staff were very pleased with the way 37 00:02:04,760 --> 00:02:08,800 Speaker 4: meetings went. They were a bit more informal as time 38 00:02:08,840 --> 00:02:12,519 Speaker 4: went on. They weren't as scripted as they thought they 39 00:02:12,639 --> 00:02:15,920 Speaker 4: might be, so that was a good thing, and she 40 00:02:16,120 --> 00:02:20,560 Speaker 4: does expect from here her staff will have that kind 41 00:02:20,600 --> 00:02:25,399 Speaker 4: of regular pace of contexts re established where high level 42 00:02:25,400 --> 00:02:27,320 Speaker 4: people can get on the phone with each other and 43 00:02:27,360 --> 00:02:31,160 Speaker 4: discuss concerns or just hit regular agenda items and discuss 44 00:02:31,200 --> 00:02:34,400 Speaker 4: them and that's a pretty healthy set of steps. 45 00:02:34,680 --> 00:02:36,320 Speaker 5: All right, Well, Eddie, I want to bring you in 46 00:02:36,680 --> 00:02:40,240 Speaker 5: and Eddie rementioning, you are our debuty managing editor of 47 00:02:40,280 --> 00:02:43,200 Speaker 5: the Markets Live team have all of the best quotes 48 00:02:43,240 --> 00:02:45,399 Speaker 5: that I steal throughout the day to say on air 49 00:02:45,520 --> 00:02:47,920 Speaker 5: to sound smart. So thank you for that, Eddie. But 50 00:02:48,280 --> 00:02:49,560 Speaker 5: I want to talk to you about some of this 51 00:02:49,680 --> 00:02:52,880 Speaker 5: soft economic data that we got out of China, looking 52 00:02:53,040 --> 00:02:58,720 Speaker 5: like that stimulus urgency is just increasing for the mainland there, Eddie, 53 00:02:58,760 --> 00:03:00,760 Speaker 5: What is that sort of doing in terms of the 54 00:03:00,800 --> 00:03:02,959 Speaker 5: impact on US markets this week? 55 00:03:04,200 --> 00:03:07,600 Speaker 6: Yeah, Look, these were really really soft numbers that we 56 00:03:07,680 --> 00:03:12,919 Speaker 6: saw from China. You know, globally, it's quite surprising to see, 57 00:03:13,080 --> 00:03:16,320 Speaker 6: you know, with inflation around the world running so much 58 00:03:16,360 --> 00:03:19,959 Speaker 6: above expectations and so much higher than most central bankers 59 00:03:20,000 --> 00:03:23,239 Speaker 6: would like to see it. In China, they had zero inflation, 60 00:03:23,400 --> 00:03:26,120 Speaker 6: literally nothing over the last year. Number came in a 61 00:03:26,200 --> 00:03:30,720 Speaker 6: zero percent flat, core inflation flowed to zero point four percent, 62 00:03:30,960 --> 00:03:35,000 Speaker 6: and producer prices were in retreat. Now, yes, I mean 63 00:03:35,040 --> 00:03:37,240 Speaker 6: a lot of central bankers would probably look at that 64 00:03:37,640 --> 00:03:41,360 Speaker 6: with envy, but it shows just how difficult the situation 65 00:03:41,480 --> 00:03:44,720 Speaker 6: in China is and just how much, you know, there 66 00:03:44,800 --> 00:03:48,240 Speaker 6: is maybe a need to start the economy because remember, 67 00:03:48,400 --> 00:03:51,400 Speaker 6: they only recently came out of lockdown, and it was 68 00:03:51,480 --> 00:03:53,800 Speaker 6: when the rest of the world came out of lockdown 69 00:03:54,120 --> 00:03:58,040 Speaker 6: that we had that really strong demand that fired inflation 70 00:03:58,120 --> 00:04:00,520 Speaker 6: across the globe. But we're just not seeing that and 71 00:04:00,600 --> 00:04:03,800 Speaker 6: that's feeding through the market. It's sort of certainly adding 72 00:04:04,120 --> 00:04:06,840 Speaker 6: a little bit of a headwind to risk assets. 73 00:04:07,080 --> 00:04:11,280 Speaker 1: More broadly, Hey, Chris, you know how important is it? 74 00:04:12,040 --> 00:04:14,280 Speaker 1: I mean, I guess you know, covering the Treasury there, 75 00:04:15,160 --> 00:04:18,240 Speaker 1: Secretary of yell and being in China is certainly important. 76 00:04:19,040 --> 00:04:20,719 Speaker 1: Talk to us about how it kind of works the 77 00:04:21,440 --> 00:04:23,080 Speaker 1: under the you know, when you get down into the 78 00:04:23,160 --> 00:04:25,640 Speaker 1: makings of the sausage. Is there that much interaction between 79 00:04:25,880 --> 00:04:28,480 Speaker 1: members of the staff the Treasury and counterparts in China. 80 00:04:28,520 --> 00:04:30,440 Speaker 1: Is this something that really needs to be nurtured. 81 00:04:31,440 --> 00:04:35,040 Speaker 4: Well, it certainly does need to be nurtured. It's something, 82 00:04:35,120 --> 00:04:38,159 Speaker 4: as I said, that that deteriorated over the last few 83 00:04:38,240 --> 00:04:41,560 Speaker 4: years and is expected to restart now. And this can 84 00:04:41,680 --> 00:04:45,120 Speaker 4: have a couple of different benefits. First of all, you know, 85 00:04:45,200 --> 00:04:47,640 Speaker 4: Eddie was just talking about what we know about the 86 00:04:47,720 --> 00:04:52,040 Speaker 4: Chinese economy. Well, the information coming out of China is 87 00:04:52,040 --> 00:04:58,240 Speaker 4: not always believable or reliable, and those types of contacts 88 00:04:58,360 --> 00:05:03,320 Speaker 4: help the Treasury at least gather more information, gives them 89 00:05:03,360 --> 00:05:06,479 Speaker 4: a better read about what Chinese officials think is going 90 00:05:06,520 --> 00:05:11,359 Speaker 4: on in their own economy. In fact, from these meetings, 91 00:05:12,200 --> 00:05:14,640 Speaker 4: one thing that was taken away is that Chinese officials 92 00:05:14,760 --> 00:05:20,440 Speaker 4: are concerned about growth and certain pockets of bubbles in 93 00:05:20,480 --> 00:05:23,600 Speaker 4: their economy, but not overly so they feel they have 94 00:05:23,680 --> 00:05:27,080 Speaker 4: it under control. So that's the kind of insider understanding 95 00:05:27,080 --> 00:05:30,440 Speaker 4: that Treasury is always looking for more of. And second 96 00:05:30,440 --> 00:05:33,400 Speaker 4: of all, it's beneficial in the sense that it might 97 00:05:33,600 --> 00:05:40,920 Speaker 4: help prevent certain contentious issues from escalating in a sort 98 00:05:40,960 --> 00:05:45,359 Speaker 4: of retaliatory cycle. It gives each side a chance to 99 00:05:45,560 --> 00:05:49,800 Speaker 4: kind of communicate, intervene, talk things over, and prevent perhaps 100 00:05:49,839 --> 00:05:54,000 Speaker 4: a more severe escalation of issues that begin as small 101 00:05:54,080 --> 00:05:56,000 Speaker 4: economic concerns and could escalate. 102 00:05:56,360 --> 00:05:58,880 Speaker 5: Well, Jennet Yalen kind of echoed the idea that it 103 00:05:58,920 --> 00:06:01,679 Speaker 5: could escalate, sa that she wouldn't rule out the threat 104 00:06:01,720 --> 00:06:04,560 Speaker 5: of a US recession, and it's appropriate and normal for 105 00:06:04,640 --> 00:06:08,640 Speaker 5: growth to moderate as inflation remains too high, So Eddie, 106 00:06:08,640 --> 00:06:12,040 Speaker 5: given that that kind of seems a little bit hotish, 107 00:06:12,040 --> 00:06:15,040 Speaker 5: and we're heading into this next FED meeting here likely 108 00:06:15,080 --> 00:06:18,320 Speaker 5: to see another hike. To what extent is that move 109 00:06:18,360 --> 00:06:20,960 Speaker 5: from the US potentially going to impact China. 110 00:06:22,800 --> 00:06:27,480 Speaker 6: Yeah, Look, there's definitely divergence of monetary policy around the globe. 111 00:06:27,560 --> 00:06:30,400 Speaker 6: Right when we came out of COVID, everybody was in 112 00:06:30,440 --> 00:06:35,080 Speaker 6: the same situation. You know, growth was very strong and 113 00:06:35,160 --> 00:06:38,120 Speaker 6: we had fast inflation, and now we're starting to see 114 00:06:38,320 --> 00:06:40,960 Speaker 6: real divergence. The US is kind of in the middle 115 00:06:41,000 --> 00:06:43,760 Speaker 6: of the road. It's inflation is starting to come down, 116 00:06:43,839 --> 00:06:46,120 Speaker 6: but it's not like it's not where it would like 117 00:06:46,200 --> 00:06:48,320 Speaker 6: to see it. In China, you know, the numbers are 118 00:06:48,400 --> 00:06:51,960 Speaker 6: much lower now. The I think there's a disconnect here 119 00:06:52,000 --> 00:06:54,920 Speaker 6: because in the US we're starting to see wages and 120 00:06:54,960 --> 00:06:58,200 Speaker 6: the services sick to driving that, whereas in China it's 121 00:06:58,279 --> 00:07:01,760 Speaker 6: very much the manufacturies that is at fault. And I 122 00:07:01,800 --> 00:07:05,320 Speaker 6: think as long as China's you know, as long as 123 00:07:05,360 --> 00:07:08,520 Speaker 6: it's services sectors stay stay strong, then I think they 124 00:07:08,600 --> 00:07:12,240 Speaker 6: will be they will be shy of providing further stimulus. 125 00:07:12,280 --> 00:07:14,160 Speaker 6: But I think there is definitely a f two between 126 00:07:14,200 --> 00:07:15,320 Speaker 6: the two economies for sure. 127 00:07:15,760 --> 00:07:17,520 Speaker 3: All right, Eddie, thank you so much for joining us. 128 00:07:17,600 --> 00:07:20,880 Speaker 1: Eddie Vanderwaldt, Deputy Managing editor of the Market's Live team, 129 00:07:21,160 --> 00:07:24,200 Speaker 1: joining us from London, and Chris Condon, your treasury reporter 130 00:07:24,320 --> 00:07:25,760 Speaker 1: with Bloomberg News. 131 00:07:27,000 --> 00:07:30,360 Speaker 7: You're listening to the team. Ken's are live program Bloomberg 132 00:07:30,480 --> 00:07:33,800 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com, 133 00:07:33,920 --> 00:07:37,040 Speaker 7: the iHeartRadio app and the Bloomberg Business APPM or listen 134 00:07:37,120 --> 00:07:39,160 Speaker 7: on demand wherever you get your podcast. 135 00:07:41,080 --> 00:07:44,000 Speaker 1: All right, nobody covers the Fed, I think any better 136 00:07:44,040 --> 00:07:46,280 Speaker 1: or any more intensely than Bloomberg News. But one thing 137 00:07:46,280 --> 00:07:48,880 Speaker 1: that's fallen through the cracks from just for me as 138 00:07:48,880 --> 00:07:49,680 Speaker 1: a reader, is like. 139 00:07:49,920 --> 00:07:50,400 Speaker 8: What's going on? 140 00:07:50,600 --> 00:07:51,520 Speaker 3: Quantitative tightening? 141 00:07:51,560 --> 00:07:53,960 Speaker 1: The QT thing? Isn't Is it still a thing? I 142 00:07:53,960 --> 00:07:56,160 Speaker 1: don't know, but I know somebody does know this stuff. 143 00:07:56,160 --> 00:07:59,120 Speaker 1: It's Lis McCormick's. She's a chief correspondent Macro Markets with 144 00:07:59,160 --> 00:07:59,960 Speaker 1: Bloomberg News Check. 145 00:08:00,040 --> 00:08:00,840 Speaker 3: She follows this stuff. 146 00:08:00,840 --> 00:08:03,240 Speaker 1: I don't know why, but she joined us actually here 147 00:08:03,240 --> 00:08:06,280 Speaker 1: in studio. Liz talk to me about and talk to 148 00:08:06,320 --> 00:08:09,040 Speaker 1: us about quantitative tightening? Is the FED still doing it? 149 00:08:09,400 --> 00:08:11,480 Speaker 1: How are they doing it? Is it important? What's it 150 00:08:11,520 --> 00:08:13,600 Speaker 1: mean for the economy and tell us how they kind 151 00:08:13,600 --> 00:08:14,960 Speaker 1: of screwed up maybe a couple of years ago. 152 00:08:15,280 --> 00:08:17,320 Speaker 9: Yeah, I'm going to tell you all that. But fun fact, 153 00:08:17,920 --> 00:08:21,160 Speaker 9: Liz Capo McCormick's brother used to work at Bloomberg Sports 154 00:08:21,240 --> 00:08:21,800 Speaker 9: years ago. 155 00:08:23,440 --> 00:08:23,640 Speaker 1: Later. 156 00:08:24,720 --> 00:08:27,800 Speaker 9: Yeah, but yeah, QT is still we kind of got 157 00:08:27,840 --> 00:08:30,320 Speaker 9: out off the limelight with that, but it's still going on. 158 00:08:30,840 --> 00:08:33,040 Speaker 9: In fact, in full force. It's going to be about 159 00:08:33,080 --> 00:08:35,920 Speaker 9: a trillion a year that'll come off the Fed's balance sheet. 160 00:08:35,960 --> 00:08:38,160 Speaker 9: And it was so interesting. I mean, maybe I'm just 161 00:08:38,200 --> 00:08:42,520 Speaker 9: a nerd, but listening to Chairman Palell speak on Capitol 162 00:08:42,559 --> 00:08:46,560 Speaker 9: Hill recently and he you know, politicians really don't like 163 00:08:46,800 --> 00:08:48,679 Speaker 9: all the debt on the Fed's balance sheet. I think 164 00:08:48,679 --> 00:08:51,120 Speaker 9: they feel like it takes too much, you know, sway 165 00:08:51,160 --> 00:08:53,360 Speaker 9: in the market. And they were kind of saying to him, hey, 166 00:08:53,400 --> 00:08:55,400 Speaker 9: you're going to get the balance sheet down, and Chairman Pale, 167 00:08:55,480 --> 00:08:58,439 Speaker 9: like you're alluding to, Paul, said, we are, but we 168 00:08:58,440 --> 00:09:00,600 Speaker 9: were going to be careful. Lat you know, in twenty 169 00:09:00,679 --> 00:09:02,920 Speaker 9: nineteen kind of we didn't see it coming that there 170 00:09:03,000 --> 00:09:06,360 Speaker 9: was scarcity in the banking system for reserves, which created problem. 171 00:09:06,400 --> 00:09:07,080 Speaker 1: So the FED had to. 172 00:09:07,120 --> 00:09:10,720 Speaker 9: Quickly reverse course, remember the repo blow up and add reserves, 173 00:09:10,720 --> 00:09:13,000 Speaker 9: So they're they're doing their job. They want to get 174 00:09:13,040 --> 00:09:16,080 Speaker 9: the balance sheet down, but they're being very careful to 175 00:09:16,320 --> 00:09:19,600 Speaker 9: not make reserves too scarce in the system. And it's 176 00:09:19,640 --> 00:09:22,240 Speaker 9: not so easy, right, So I think Pal, I mean, 177 00:09:22,280 --> 00:09:24,360 Speaker 9: I give them credit, was saying like, hey, we learned 178 00:09:24,360 --> 00:09:27,120 Speaker 9: from the last time. We're trying to avoid it. But yeah, 179 00:09:27,120 --> 00:09:29,240 Speaker 9: it's going on in the background. It's the second tool 180 00:09:29,280 --> 00:09:30,000 Speaker 9: of their tightening. 181 00:09:30,520 --> 00:09:33,079 Speaker 5: So in terms of that being the second tool of 182 00:09:33,120 --> 00:09:36,800 Speaker 5: their tightening, do you think that the FED is secretly 183 00:09:36,840 --> 00:09:39,280 Speaker 5: a little bit excited when bad eco news comes out 184 00:09:39,320 --> 00:09:41,920 Speaker 5: and they have an excuse to raise rates again because 185 00:09:41,920 --> 00:09:45,040 Speaker 5: it helps them with their balance sheet if rates are higher. 186 00:09:45,280 --> 00:09:46,319 Speaker 1: Yeah, that's funny, right. 187 00:09:46,360 --> 00:09:49,600 Speaker 9: They would never say that, right, but I mean they would, like, 188 00:09:49,920 --> 00:09:52,440 Speaker 9: you know, on everything to when you kind of go 189 00:09:52,520 --> 00:09:54,280 Speaker 9: one way, you want to go back the other way 190 00:09:54,360 --> 00:09:56,400 Speaker 9: so you have some ammo for the next crisis. 191 00:09:56,480 --> 00:09:56,720 Speaker 1: Right. 192 00:09:56,800 --> 00:09:58,600 Speaker 5: So it's it's tough. 193 00:09:58,400 --> 00:10:01,199 Speaker 9: If you start, you know, every new crisis with an 194 00:10:01,200 --> 00:10:04,199 Speaker 9: even bigger balance sheet, even though you've done some quantitative 195 00:10:04,240 --> 00:10:07,520 Speaker 9: tightening bringing it down. So I think the FED would 196 00:10:07,600 --> 00:10:10,120 Speaker 9: really love, like Janet Yellen, I think was famous for 197 00:10:10,120 --> 00:10:12,720 Speaker 9: saying we want QT to run in the background like 198 00:10:12,760 --> 00:10:13,640 Speaker 9: paint drying. 199 00:10:13,640 --> 00:10:14,760 Speaker 5: Which doesn't always work. 200 00:10:15,520 --> 00:10:17,840 Speaker 9: But I really do think they I mean, they're in 201 00:10:17,880 --> 00:10:20,400 Speaker 9: a new regime. Well, they'll never have the uber small 202 00:10:20,440 --> 00:10:23,880 Speaker 9: balance sheet though, and we all saw years and decades ago. 203 00:10:25,120 --> 00:10:26,800 Speaker 9: But yeah, they would like to get it down a 204 00:10:26,800 --> 00:10:30,520 Speaker 9: little maddie, right, So they if we god willing, we don't. 205 00:10:30,559 --> 00:10:32,400 Speaker 9: But if we go in another crisis, they have the 206 00:10:32,480 --> 00:10:35,200 Speaker 9: AMMO with the ability to cut rates and then jack 207 00:10:35,280 --> 00:10:38,120 Speaker 9: up the balance sheet again. So it's a little bit 208 00:10:38,120 --> 00:10:40,320 Speaker 9: of a tricky, tricky wicket I call it for them. 209 00:10:40,440 --> 00:10:44,200 Speaker 1: Yeah, help, does a central bank actually do quantitative tightening? 210 00:10:44,240 --> 00:10:44,920 Speaker 3: How does it work? 211 00:10:45,280 --> 00:10:45,559 Speaker 1: Yeah? 212 00:10:45,559 --> 00:10:47,959 Speaker 9: So you know the central bank like, it's easy. When 213 00:10:48,000 --> 00:10:49,960 Speaker 9: we know they're buying kuy, they just go in there 214 00:10:50,000 --> 00:10:52,640 Speaker 9: and buy, right. But the quantitative tightening, let's talk about 215 00:10:52,640 --> 00:10:56,520 Speaker 9: the treasury side. So what happens is they have treasury 216 00:10:56,559 --> 00:10:59,800 Speaker 9: debt that mature, Say they haveure debt maturing middle of 217 00:10:59,800 --> 00:11:02,800 Speaker 9: this month. What they'll do is say, hey, we're gonna 218 00:11:02,840 --> 00:11:06,559 Speaker 9: let that mature. Normally, if they're leaving their balance sheet stable, 219 00:11:06,720 --> 00:11:09,719 Speaker 9: then they buy the same amount that matures, and now 220 00:11:09,720 --> 00:11:13,800 Speaker 9: they're saying, hey, we're gonna let x billion mature and 221 00:11:13,840 --> 00:11:16,960 Speaker 9: not buy more, So that kind of whittles down how 222 00:11:17,040 --> 00:11:19,440 Speaker 9: much treasuries they have on their balance sheet. The mortgages 223 00:11:19,480 --> 00:11:22,360 Speaker 9: are a little more convoluted because it's depends on refi 224 00:11:22,520 --> 00:11:24,439 Speaker 9: rates and things like that, but that's what they do, 225 00:11:24,600 --> 00:11:26,720 Speaker 9: kind of not keep rolling into new debt. 226 00:11:27,400 --> 00:11:29,360 Speaker 5: And what does the impact of that look like in 227 00:11:29,440 --> 00:11:31,400 Speaker 5: terms of overall liquidity. 228 00:11:32,040 --> 00:11:36,080 Speaker 9: Yeah, so it's interesting because QI the buying was really 229 00:11:36,200 --> 00:11:38,839 Speaker 9: and is used to kind of help lower long rates. 230 00:11:38,840 --> 00:11:41,760 Speaker 9: It's felt to help juice the housing market and things, 231 00:11:41,760 --> 00:11:44,360 Speaker 9: so QT in essent should go the other way. It's 232 00:11:44,360 --> 00:11:46,080 Speaker 9: a little less clear, but what it does on the 233 00:11:46,120 --> 00:11:48,840 Speaker 9: short end, like we're talking about in this story, is 234 00:11:48,920 --> 00:11:51,440 Speaker 9: what it does is you know, kind of the way 235 00:11:51,480 --> 00:11:54,160 Speaker 9: all the mechanics work on the Fed's balance sheet is 236 00:11:54,200 --> 00:11:56,560 Speaker 9: if they let the asset side roll down, then a 237 00:11:56,600 --> 00:11:59,400 Speaker 9: liability has to roll down. So that's either in bank 238 00:11:59,440 --> 00:12:02,839 Speaker 9: reserves or this facility. They have reverse repos where money 239 00:12:02,840 --> 00:12:05,520 Speaker 9: market funds can put money with the FED. So that's 240 00:12:05,600 --> 00:12:08,959 Speaker 9: where manny, if we get too tight, then that liquidity 241 00:12:09,000 --> 00:12:11,280 Speaker 9: is sucking out of the short end, and that's kind 242 00:12:11,280 --> 00:12:14,200 Speaker 9: of what turns. You know the financial system, right, you know, 243 00:12:14,280 --> 00:12:18,439 Speaker 9: banks having enough liquidity to do their operations. So that's 244 00:12:18,520 --> 00:12:21,760 Speaker 9: where you know, on the exit side of QT that 245 00:12:21,800 --> 00:12:24,320 Speaker 9: you have to worry about liquidity in the repo market 246 00:12:24,360 --> 00:12:25,160 Speaker 9: and things like that. 247 00:12:25,960 --> 00:12:29,560 Speaker 1: So, Liz, how about let's just assume I'm on the 248 00:12:29,600 --> 00:12:31,720 Speaker 1: FED and at the end of this month, I argue 249 00:12:31,760 --> 00:12:34,600 Speaker 1: to my fellow folks on the Fed, Hey, we raised 250 00:12:34,679 --> 00:12:36,680 Speaker 1: rates five one hundred basis points. 251 00:12:36,880 --> 00:12:40,199 Speaker 3: Inflation's coming down. We just saw a three percent headline print. 252 00:12:40,679 --> 00:12:41,120 Speaker 3: We're done. 253 00:12:41,200 --> 00:12:42,680 Speaker 1: Let's just sit on the sidelines. Why don't we have 254 00:12:42,679 --> 00:12:45,160 Speaker 1: to do anything? It's actually working. Why don't we just 255 00:12:45,240 --> 00:12:46,440 Speaker 1: do that? What would happen if I. 256 00:12:46,440 --> 00:12:47,000 Speaker 3: Made that pitch? 257 00:12:47,320 --> 00:12:49,800 Speaker 9: Well, on the rate side, I think that's what they're 258 00:12:49,800 --> 00:12:51,760 Speaker 9: going to eventually get to. Let's just say they hike 259 00:12:51,800 --> 00:12:53,880 Speaker 9: in July. You know, I can't remember if that was 260 00:12:53,880 --> 00:12:54,880 Speaker 9: in your scenario. 261 00:12:54,960 --> 00:12:56,640 Speaker 3: Well, no, my scenariy was don't do anything. 262 00:12:56,679 --> 00:12:58,679 Speaker 9: We're done, well, right, So okay, so say they don't, 263 00:12:58,720 --> 00:13:02,200 Speaker 9: which is possible right now. That's the one tool of 264 00:13:02,240 --> 00:13:04,920 Speaker 9: their policy, the rates. So in that scenario, what the 265 00:13:04,960 --> 00:13:07,120 Speaker 9: FED has been saying is like QT is going to 266 00:13:07,200 --> 00:13:11,040 Speaker 9: keep going right where it gets tricky is the FED 267 00:13:11,080 --> 00:13:13,120 Speaker 9: has always said we don't I'm sorry, I'm telling you 268 00:13:13,440 --> 00:13:16,560 Speaker 9: about my hands. We don't like our tools to be 269 00:13:16,600 --> 00:13:20,120 Speaker 9: moving in opposite direction. So say which we're far away 270 00:13:20,160 --> 00:13:23,719 Speaker 9: from that? The FED started lowering its benchmark rate. Then 271 00:13:23,760 --> 00:13:26,360 Speaker 9: if QT is going on, it's like one hand of 272 00:13:26,400 --> 00:13:28,920 Speaker 9: the FED is easing and the other is tightening. And 273 00:13:28,960 --> 00:13:30,959 Speaker 9: most people say the FED won't want to do that, 274 00:13:31,080 --> 00:13:34,560 Speaker 9: Like the folks at TD who see easing later this year, say, 275 00:13:34,559 --> 00:13:36,839 Speaker 9: the Fed's going to stop the QT because it doesn't 276 00:13:36,840 --> 00:13:39,080 Speaker 9: make sense to be going in opposite directions. But there's 277 00:13:39,520 --> 00:13:41,400 Speaker 9: a lot of variables, so we don't know. So it's 278 00:13:41,400 --> 00:13:43,120 Speaker 9: going to be interesting to see what happens in July. 279 00:13:43,240 --> 00:13:46,160 Speaker 9: I'm already thinking about August and Jackson Hole. What guidance 280 00:13:46,200 --> 00:13:49,000 Speaker 9: dos Sherman Pal give us, h Let's go. 281 00:13:49,440 --> 00:13:50,440 Speaker 1: Of course you should go. 282 00:13:51,160 --> 00:13:53,560 Speaker 3: I'll put a ticket in for that. See how that works. 283 00:13:53,920 --> 00:13:56,559 Speaker 5: What are you anticipating that in terms of FED moves, 284 00:13:56,600 --> 00:13:58,679 Speaker 5: It feels like July is a definite. Do you have 285 00:13:58,720 --> 00:13:59,800 Speaker 5: a take on September? 286 00:14:00,120 --> 00:14:00,320 Speaker 8: Yeah? 287 00:14:00,360 --> 00:14:02,880 Speaker 9: I think that's the wildcard. Now we're already kind of 288 00:14:02,960 --> 00:14:06,520 Speaker 9: like looking through into September and there's a mix. There's 289 00:14:06,559 --> 00:14:09,160 Speaker 9: a lot of economists on Wall Street who say one 290 00:14:09,200 --> 00:14:12,360 Speaker 9: more July and we're done. Then there's others saying, hey, 291 00:14:12,360 --> 00:14:14,800 Speaker 9: the Fed has more to go. You know, we're not 292 00:14:14,880 --> 00:14:17,319 Speaker 9: seeing policy really be that restricted because look at the 293 00:14:17,320 --> 00:14:20,720 Speaker 9: stock market, look at the housing market. So some are saying, 294 00:14:20,880 --> 00:14:23,200 Speaker 9: you know, terminal rate has to be even higher, maybe 295 00:14:23,200 --> 00:14:25,360 Speaker 9: over sixty percent. So I think I was talking to 296 00:14:25,880 --> 00:14:28,600 Speaker 9: you know, the folks around my desk today and we 297 00:14:28,600 --> 00:14:31,240 Speaker 9: were saying it really it sounds boring, but it's going 298 00:14:31,280 --> 00:14:33,840 Speaker 9: to be data dependent. Like if it's like you were saying, 299 00:14:33,840 --> 00:14:36,880 Speaker 9: the data if we start getting another strong jobs, if 300 00:14:36,920 --> 00:14:39,680 Speaker 9: CPI misses to the upside, we have a lot of 301 00:14:39,760 --> 00:14:42,000 Speaker 9: data between now and September, the FED kind of has 302 00:14:42,080 --> 00:14:45,480 Speaker 9: to do if inflation is not coming down, they're going 303 00:14:45,520 --> 00:14:46,960 Speaker 9: to have to do it. So I feel like, oh 304 00:14:47,000 --> 00:14:48,240 Speaker 9: my god, well we ever get a. 305 00:14:48,200 --> 00:14:50,640 Speaker 5: Break, it's not going to be calm right, you know. 306 00:14:50,960 --> 00:14:53,120 Speaker 1: So again it seems like we were just getting some 307 00:14:53,200 --> 00:14:57,160 Speaker 1: data passed around the newsroom here talking about used car 308 00:14:57,240 --> 00:14:59,200 Speaker 1: prices coming down. I mean, there's so many data points 309 00:14:59,200 --> 00:15:01,840 Speaker 1: that you can look at here, But does a FED 310 00:15:01,880 --> 00:15:03,920 Speaker 1: feel like in order from a credibility perspective, they need 311 00:15:03,960 --> 00:15:04,800 Speaker 1: to hike one more time? 312 00:15:04,880 --> 00:15:05,800 Speaker 3: Is that kind of where we are? 313 00:15:06,520 --> 00:15:10,760 Speaker 9: Well? You know, an analysis on Wall Street goes that 314 00:15:11,120 --> 00:15:13,280 Speaker 9: the FED doesn't like to surprise the market, and when 315 00:15:13,320 --> 00:15:16,720 Speaker 9: the market, like the futures in the short term overnight 316 00:15:16,760 --> 00:15:19,560 Speaker 9: interest rate swaps are pricing in like a near certainty 317 00:15:19,600 --> 00:15:21,880 Speaker 9: that they hike in July, FED doesn't like to surprise. 318 00:15:22,400 --> 00:15:24,720 Speaker 9: So I think, I don't know if it's credibility, but 319 00:15:25,640 --> 00:15:27,360 Speaker 9: I don't think they want to upend the market. We're 320 00:15:27,360 --> 00:15:29,760 Speaker 9: so close to that meeting, right, I Mean, I could 321 00:15:29,800 --> 00:15:32,480 Speaker 9: be wrong, but I suspect that they kind of have 322 00:15:32,640 --> 00:15:35,400 Speaker 9: it priced in already. It's almost like a done deal. Look, 323 00:15:35,480 --> 00:15:37,160 Speaker 9: let's just do it, right, yep. 324 00:15:37,200 --> 00:15:39,840 Speaker 1: And if you look at the warp function which Liz 325 00:15:39,920 --> 00:15:44,200 Speaker 1: is referring to, it's almost a ninety percent expectation that 326 00:15:44,280 --> 00:15:47,320 Speaker 1: rates will be hiked in July, so to the extent 327 00:15:47,320 --> 00:15:49,280 Speaker 1: you don't want to upset the apple cart. There we go, 328 00:15:49,480 --> 00:15:51,680 Speaker 1: all right, Liz McCormick, thanks so much for joining us 329 00:15:51,680 --> 00:15:53,480 Speaker 1: here in our Bloomberg Interactive Broker studio. 330 00:15:53,480 --> 00:15:55,480 Speaker 3: Always good to see it in the office. 331 00:15:55,480 --> 00:15:58,680 Speaker 1: Here, Lis McCormick, Chief corresponding covering the global macro markets 332 00:15:59,320 --> 00:16:02,920 Speaker 1: for Bloomberg News again. So we'll have some economic data 333 00:16:02,920 --> 00:16:06,600 Speaker 1: this week, some inflation data this week CPI, so be 334 00:16:06,680 --> 00:16:09,960 Speaker 1: really interesting. PPI as well get a good read on inflation, 335 00:16:10,080 --> 00:16:12,960 Speaker 1: which the Fed will certainly need prior to meeting at 336 00:16:13,000 --> 00:16:14,720 Speaker 1: the end of this month, because we'll get an announcement 337 00:16:14,760 --> 00:16:16,480 Speaker 1: on July the twenty sixth. 338 00:16:16,800 --> 00:16:19,840 Speaker 7: You're listening to the tape can's our live program Bloomberg 339 00:16:19,960 --> 00:16:23,560 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 340 00:16:23,600 --> 00:16:26,840 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 341 00:16:26,880 --> 00:16:29,680 Speaker 7: You can also listen live on Amazon Alexa from our 342 00:16:29,720 --> 00:16:34,800 Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 343 00:16:35,720 --> 00:16:38,800 Speaker 1: All right, we're just talking about threads one hundred million users. 344 00:16:39,160 --> 00:16:40,000 Speaker 3: That gets my attention. 345 00:16:41,520 --> 00:16:43,840 Speaker 1: Let's see what it means for Meta, Let's see what 346 00:16:43,920 --> 00:16:45,600 Speaker 1: it means for Twitter. Let's see what it means for 347 00:16:45,720 --> 00:16:49,080 Speaker 1: just people's spare time, spending more time on social I'm 348 00:16:49,080 --> 00:16:51,160 Speaker 1: gonna blame Man Deep Sing for all of that stuff. 349 00:16:51,160 --> 00:16:54,120 Speaker 1: He covers the technology for Bloomberg Intelligence. He joins us 350 00:16:54,120 --> 00:16:57,360 Speaker 1: here in our Bloomberg Interactive Broker Studio. I mean Zuck 351 00:16:57,400 --> 00:16:59,720 Speaker 1: comes on and says, geos more than our expectations. One 352 00:16:59,760 --> 00:17:03,480 Speaker 1: hundred million signups for threads. Is that number men anything 353 00:17:03,480 --> 00:17:03,680 Speaker 1: to you? 354 00:17:04,280 --> 00:17:06,960 Speaker 8: It does? I mean, look, this is the fastest growing 355 00:17:07,040 --> 00:17:11,080 Speaker 8: app ever. It surpassed chat GPT, which was the craze 356 00:17:11,119 --> 00:17:15,520 Speaker 8: so far. So I think clearly they have a great momentum. 357 00:17:15,520 --> 00:17:19,680 Speaker 8: And what it shows is the creators are seeking an 358 00:17:19,680 --> 00:17:23,440 Speaker 8: alternative here. I mean that is really the crux of it. 359 00:17:23,520 --> 00:17:28,480 Speaker 8: That everyone wants something that is similar to Twitter where 360 00:17:28,520 --> 00:17:31,600 Speaker 8: they can build their network, and they think this is 361 00:17:31,640 --> 00:17:35,560 Speaker 8: a viable platform. Blue Sky, Macedon and the others didn't 362 00:17:35,600 --> 00:17:37,959 Speaker 8: take off because they didn't have that scale. 363 00:17:38,160 --> 00:17:40,080 Speaker 5: Well what do you make of the scale? And it's 364 00:17:40,080 --> 00:17:43,000 Speaker 5: so funny, Mandy, because on Friday we talked about how 365 00:17:43,119 --> 00:17:46,160 Speaker 5: over the weekend we might get that surpassing of chat 366 00:17:46,160 --> 00:17:48,280 Speaker 5: gpt in terms of signups, and I think it happened 367 00:17:48,320 --> 00:17:50,400 Speaker 5: like right after you got off the air with us. 368 00:17:50,440 --> 00:17:53,000 Speaker 5: So you are a leading indicator when it comes to 369 00:17:53,080 --> 00:17:56,720 Speaker 5: the metastory. But why are they able to convert active 370 00:17:56,800 --> 00:17:57,880 Speaker 5: users so quickly? 371 00:17:58,440 --> 00:18:01,719 Speaker 8: I mean, look, it's social media. It's like you have 372 00:18:01,800 --> 00:18:05,119 Speaker 8: those network effects, and in the case of meta, they 373 00:18:05,119 --> 00:18:08,320 Speaker 8: have the three billion users across their family of apps. 374 00:18:08,400 --> 00:18:11,440 Speaker 8: Right they can promote stuff on their app. Look at 375 00:18:11,480 --> 00:18:13,080 Speaker 8: how TikTok grew back. 376 00:18:12,880 --> 00:18:13,359 Speaker 3: In the day. 377 00:18:13,760 --> 00:18:19,160 Speaker 8: They were one of the heaviest advertisers on Facebook on Instagram. 378 00:18:19,320 --> 00:18:22,359 Speaker 8: In this case, I mean, Meta owns all these properties, 379 00:18:22,560 --> 00:18:25,879 Speaker 8: so they can promote their Threads app. And right now 380 00:18:26,280 --> 00:18:30,080 Speaker 8: I feel they have gone with a very niche focused approach, 381 00:18:30,359 --> 00:18:35,640 Speaker 8: text based format. They will keep layering more photos, more 382 00:18:35,760 --> 00:18:38,520 Speaker 8: videos on Threads over time, but what they want to 383 00:18:38,560 --> 00:18:42,000 Speaker 8: make sure is there's a clear value proposition for Threads 384 00:18:42,000 --> 00:18:45,600 Speaker 8: and it doesn't end up cannibalizing Instagram or Blue App. 385 00:18:45,680 --> 00:18:48,960 Speaker 5: Well that's a great point. Do you think that Threads 386 00:18:49,200 --> 00:18:52,160 Speaker 5: is going to be a legitimate competitor to a TikTok? 387 00:18:52,920 --> 00:18:55,600 Speaker 8: I think so over time, I can see Threads having 388 00:18:55,640 --> 00:18:58,800 Speaker 8: a messaging tab. So think of all the things that 389 00:18:58,880 --> 00:19:03,360 Speaker 8: Meta does of features. They're using a very narrow subset 390 00:19:03,400 --> 00:19:07,040 Speaker 8: of that for Threads because they want it to rival Twitter. 391 00:19:08,000 --> 00:19:11,600 Speaker 8: Get those users on board, and then iterate and add 392 00:19:11,640 --> 00:19:14,120 Speaker 8: more features to drive engagement. And look, at the end 393 00:19:14,119 --> 00:19:17,760 Speaker 8: of the day, it's about average time spent on the platform. 394 00:19:17,840 --> 00:19:21,639 Speaker 8: So compare that Instagram average time spent it's around like 395 00:19:21,760 --> 00:19:25,639 Speaker 8: seventy to eighty minutes per daily active user. Twitter is 396 00:19:25,680 --> 00:19:28,480 Speaker 8: around twenty five minutes, and they try to pivot to 397 00:19:28,520 --> 00:19:32,399 Speaker 8: subscriptions too early. I mean, this is still an adriven model, 398 00:19:32,760 --> 00:19:36,199 Speaker 8: and in an adriven model, it's all about engagement and 399 00:19:36,240 --> 00:19:38,119 Speaker 8: time spent on the platform. 400 00:19:38,520 --> 00:19:41,400 Speaker 3: I'm not buying it? Are you on? Are you're a threader? 401 00:19:41,440 --> 00:19:41,680 Speaker 8: Wait? 402 00:19:41,920 --> 00:19:42,760 Speaker 5: Why are you not buying it? 403 00:19:42,760 --> 00:19:44,800 Speaker 1: I don't know, I'm just you know, how many these 404 00:19:44,800 --> 00:19:46,119 Speaker 1: do we need? But all right, let's go to the 405 00:19:46,160 --> 00:19:49,000 Speaker 1: impact on Twitter. Is this a zero sum game? If 406 00:19:49,160 --> 00:19:51,440 Speaker 1: if they sign up one hundred million people to threads, 407 00:19:51,920 --> 00:19:53,280 Speaker 1: do you think a lot of them came from Twitter? 408 00:19:53,359 --> 00:19:54,320 Speaker 3: Or do you think it's going to be a zero 409 00:19:54,359 --> 00:19:54,960 Speaker 3: sum game here? 410 00:19:55,480 --> 00:19:57,760 Speaker 8: Absolutely? I mean again, I go back to that three 411 00:19:57,800 --> 00:20:00,920 Speaker 8: billion daily active users across the family of apps, that 412 00:20:01,200 --> 00:20:04,720 Speaker 8: includes all the Twitter users and for the one hundred 413 00:20:04,800 --> 00:20:07,600 Speaker 8: million that they have signed up, Remember, they haven't launched 414 00:20:07,600 --> 00:20:12,000 Speaker 8: in Europe, so it's right. Once you launch in Europe 415 00:20:12,040 --> 00:20:13,680 Speaker 8: and they'll figure out a way to work with the 416 00:20:13,760 --> 00:20:17,360 Speaker 8: regulators they have the sign ups. In the end, it's 417 00:20:17,560 --> 00:20:20,920 Speaker 8: always about engagement. That's what TikTok got it right, and 418 00:20:20,960 --> 00:20:23,880 Speaker 8: That's why Facebook had to play catch up once they 419 00:20:23,920 --> 00:20:27,640 Speaker 8: saw the viral adoption of TikTok. In this case, they 420 00:20:27,640 --> 00:20:30,320 Speaker 8: have the sign ups, can they keep up the engagement? 421 00:20:30,320 --> 00:20:34,399 Speaker 8: And over there the algorithm, the content recommendation algorithm, matters 422 00:20:34,440 --> 00:20:37,600 Speaker 8: a great deal because what Twitter did wrong was they 423 00:20:37,640 --> 00:20:39,879 Speaker 8: screwed up the algorithm. Right now, if I go on 424 00:20:39,920 --> 00:20:43,480 Speaker 8: my home feed, I don't see any of the people 425 00:20:43,600 --> 00:20:46,480 Speaker 8: I follow. I see feeds from people who are paying 426 00:20:46,520 --> 00:20:49,160 Speaker 8: Twitter eight dollars a month. That's not what I want 427 00:20:49,240 --> 00:20:49,800 Speaker 8: to see. 428 00:20:50,320 --> 00:20:53,800 Speaker 5: And that's very random content, Like I'm only on Twitter 429 00:20:54,080 --> 00:20:56,280 Speaker 5: for eco and finance news, and then I just see 430 00:20:56,320 --> 00:21:02,359 Speaker 5: completely random tweets constantly. So threads the capability to get 431 00:21:02,359 --> 00:21:05,520 Speaker 5: that algorithm play back in and also potentially get advertisers 432 00:21:05,560 --> 00:21:07,280 Speaker 5: in who were spooked by Elon Musk. 433 00:21:08,080 --> 00:21:09,080 Speaker 3: Yeah, it's pretty eirz. 434 00:21:09,160 --> 00:21:12,200 Speaker 1: So when are they going to start putting as madisine suggesting? 435 00:21:12,240 --> 00:21:13,879 Speaker 1: What do they can start loading ads on there? 436 00:21:14,040 --> 00:21:16,960 Speaker 8: I hope they don't do it this year. You really 437 00:21:17,000 --> 00:21:20,840 Speaker 8: need the engagement going. Until the engagement hits like twenty 438 00:21:20,880 --> 00:21:24,240 Speaker 8: five thirty minutes are day per daily active users, I 439 00:21:24,280 --> 00:21:26,840 Speaker 8: mean it would be I think two premature to layer 440 00:21:26,960 --> 00:21:29,440 Speaker 8: ads and I really hope they don't do that. 441 00:21:30,440 --> 00:21:31,199 Speaker 10: So what else is this? 442 00:21:31,240 --> 00:21:32,840 Speaker 1: I mean, the meta story is up at conjillion one 443 00:21:32,880 --> 00:21:36,680 Speaker 1: hundred and forty percent this year basically on cost cuts. 444 00:21:37,080 --> 00:21:39,399 Speaker 1: I hate to ask what's next? But what's next here? 445 00:21:39,440 --> 00:21:41,400 Speaker 1: I mean I'm looking at the stock at two hundred 446 00:21:41,480 --> 00:21:44,920 Speaker 1: ninety bucks. The all time high was back in about 447 00:21:44,920 --> 00:21:47,000 Speaker 1: a year two years ago in twenty twenty one at 448 00:21:47,000 --> 00:21:47,800 Speaker 1: three hundred. 449 00:21:47,520 --> 00:21:49,600 Speaker 3: And eighty bucks. What's the bull case to get us 450 00:21:49,640 --> 00:21:50,040 Speaker 3: back there? 451 00:21:50,160 --> 00:21:53,800 Speaker 8: Well, so think of why people became negative on meta 452 00:21:54,000 --> 00:21:57,640 Speaker 8: it was because the blue app was losing engagement. They 453 00:21:57,640 --> 00:22:00,320 Speaker 8: had to find the next growd driver for engagement. They 454 00:22:00,320 --> 00:22:03,480 Speaker 8: thought Meta Worse was the one. Obviously that didn't work out. 455 00:22:03,960 --> 00:22:06,760 Speaker 8: Now they have found something that can add to the engagement. 456 00:22:07,400 --> 00:22:10,199 Speaker 1: So where are we on the metaverse discussion? I think 457 00:22:10,280 --> 00:22:13,280 Speaker 1: that's a side story really that was going to change 458 00:22:13,320 --> 00:22:13,800 Speaker 1: the world. 459 00:22:13,880 --> 00:22:17,080 Speaker 8: And I mean they still are selling hardware, but in 460 00:22:17,160 --> 00:22:21,000 Speaker 8: terms of engagement, they're not getting engagement on the Meta 461 00:22:21,040 --> 00:22:24,520 Speaker 8: Worse app that they have created. So engagement is coming 462 00:22:24,520 --> 00:22:27,560 Speaker 8: from threads or what they're doing on Instagram. 463 00:22:27,960 --> 00:22:30,280 Speaker 5: Are we going to start to see a roll off 464 00:22:30,359 --> 00:22:33,600 Speaker 5: in threads users? As the parents get on there. That 465 00:22:33,640 --> 00:22:36,000 Speaker 5: was one of the viral threads posts over the weekend 466 00:22:36,200 --> 00:22:38,640 Speaker 5: that the parents are starting to come and therefore it's 467 00:22:38,640 --> 00:22:40,080 Speaker 5: not going to be cool in the next week. 468 00:22:40,720 --> 00:22:45,200 Speaker 8: I think ultimately it comes down to future features and algorithms. 469 00:22:45,200 --> 00:22:49,840 Speaker 8: Look how engaging the algorithm is in terms of the 470 00:22:49,880 --> 00:22:53,960 Speaker 8: content you're seeing, That to me is the key whether 471 00:22:54,080 --> 00:22:56,080 Speaker 8: or not you know your parents are there or your 472 00:22:56,119 --> 00:22:56,920 Speaker 8: relatives are there. 473 00:22:57,000 --> 00:23:00,560 Speaker 5: That second, the demographic is not consideration for you when 474 00:23:00,600 --> 00:23:02,320 Speaker 5: it comes to the success of the platform, because that's 475 00:23:02,359 --> 00:23:05,000 Speaker 5: part of what makes TikTok so great is people feel 476 00:23:05,040 --> 00:23:06,840 Speaker 5: like they can really be themselves on there because their 477 00:23:06,880 --> 00:23:08,760 Speaker 5: parents aren't on there yet, which I'm using as a 478 00:23:08,800 --> 00:23:11,439 Speaker 5: catch all phrase for like the people who would catch you. 479 00:23:11,600 --> 00:23:14,560 Speaker 8: What it does is it makes the other platforms vulnertable. 480 00:23:14,560 --> 00:23:17,360 Speaker 8: Why can't Meta come up with a Pinterest. 481 00:23:16,960 --> 00:23:19,480 Speaker 5: Copycat now right right right? 482 00:23:19,560 --> 00:23:22,000 Speaker 8: So it just opens a lot of doors in terms 483 00:23:22,040 --> 00:23:25,320 Speaker 8: of what the mode is for smaller platforms. I mean, Google, 484 00:23:25,440 --> 00:23:28,439 Speaker 8: I think will come up with something. In terms of 485 00:23:28,440 --> 00:23:32,280 Speaker 8: social media. They have to. They have, you know, over 486 00:23:32,359 --> 00:23:35,639 Speaker 8: a billion, two billion daily active users across the family 487 00:23:35,680 --> 00:23:37,879 Speaker 8: of apps. They don't have a social media app but 488 00:23:37,920 --> 00:23:41,000 Speaker 8: when you look at Google and you know maps and 489 00:23:41,080 --> 00:23:44,040 Speaker 8: all the things they have, they probably should think of 490 00:23:44,160 --> 00:23:48,639 Speaker 8: coming up with something that can rival not Twitter, but 491 00:23:48,720 --> 00:23:52,399 Speaker 8: maybe Pinterest visual search. Why can't they that right? 492 00:23:52,480 --> 00:23:54,440 Speaker 5: And with maps that could be a cool. 493 00:23:55,119 --> 00:23:56,600 Speaker 3: Men, deep Seek, thanks so much for joining us. 494 00:23:56,640 --> 00:23:59,640 Speaker 1: Man Deep Seeing, he's a senior technology channelst for Bloomberg Intelligence. 495 00:23:59,640 --> 00:24:02,159 Speaker 1: We pre him coming into the Bloomberg Interactive Broker Studio. 496 00:24:03,520 --> 00:24:06,920 Speaker 7: You're listening to the team Ken's are live program Bloomberg 497 00:24:07,000 --> 00:24:10,399 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com, 498 00:24:10,440 --> 00:24:13,600 Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen 499 00:24:13,640 --> 00:24:15,760 Speaker 7: on demand wherever you get your podcasts. 500 00:24:18,040 --> 00:24:20,520 Speaker 1: Well, one of the bigger questions I think for global 501 00:24:20,560 --> 00:24:24,639 Speaker 1: economics is what's the outlook for China both as a 502 00:24:24,680 --> 00:24:27,840 Speaker 1: consumer and as a supplier. You got to get that right, 503 00:24:27,880 --> 00:24:30,480 Speaker 1: and there's a lot of challenging data points coming out 504 00:24:30,520 --> 00:24:31,800 Speaker 1: from China, so we want to kind of get the 505 00:24:31,880 --> 00:24:34,680 Speaker 1: latest on that. Hans Dal joins us. He's the CEO 506 00:24:34,720 --> 00:24:37,000 Speaker 1: of Mitchell Madison Group. He's done a bunch in his career, 507 00:24:37,840 --> 00:24:39,359 Speaker 1: but he went to business school at one of my 508 00:24:39,480 --> 00:24:43,720 Speaker 1: favorite business schools, that's the Tuch School of Business at Dartmouth. 509 00:24:43,920 --> 00:24:46,280 Speaker 1: A lot of really smart people that I know went 510 00:24:46,359 --> 00:24:46,720 Speaker 1: to talk. 511 00:24:46,760 --> 00:24:48,280 Speaker 3: And here's the thing about TUCH school. 512 00:24:48,600 --> 00:24:53,760 Speaker 1: They are by far the most loyal alumni anywhere. I'm 513 00:24:53,760 --> 00:24:58,080 Speaker 1: talking well, more than HBS and more than Duke. And 514 00:24:58,200 --> 00:24:59,719 Speaker 1: we don't know how they do it. Hans, Why are 515 00:24:59,720 --> 00:25:01,040 Speaker 1: you guys so loyal to Tuck. 516 00:25:02,080 --> 00:25:03,879 Speaker 10: I think it's the size of the class. 517 00:25:03,880 --> 00:25:06,879 Speaker 1: In the cold weather, you guys have nothing else to do, 518 00:25:06,920 --> 00:25:07,840 Speaker 1: but you might as well become. 519 00:25:07,680 --> 00:25:10,360 Speaker 3: Friendly, right exactly. Yeah, it's great. 520 00:25:10,520 --> 00:25:12,479 Speaker 1: Where you're gonna go and hand over in New Hampshire, 521 00:25:12,480 --> 00:25:13,399 Speaker 1: you might as well stay together. 522 00:25:13,720 --> 00:25:14,040 Speaker 3: Hans. 523 00:25:14,080 --> 00:25:16,600 Speaker 1: Talk to us about China here. Do you have a 524 00:25:16,680 --> 00:25:18,240 Speaker 1: view of what's going on there? 525 00:25:18,520 --> 00:25:18,800 Speaker 3: How? 526 00:25:18,880 --> 00:25:22,800 Speaker 1: How how weak is that economy? Is fiscal stimulus the answer? 527 00:25:22,800 --> 00:25:23,480 Speaker 3: Where are we there? 528 00:25:24,600 --> 00:25:26,199 Speaker 10: I think it's pretty weak. I think it's weaker than 529 00:25:26,200 --> 00:25:29,800 Speaker 10: anybody thinks. It's funny you mentioned Tacket, you know, as 530 00:25:29,840 --> 00:25:32,080 Speaker 10: I was sitting there in the nineties. Uh, you know, 531 00:25:32,240 --> 00:25:34,920 Speaker 10: the ball telling us about the uniqueness of the Japanese 532 00:25:35,000 --> 00:25:37,720 Speaker 10: business model and how that's going to change everything, and 533 00:25:37,760 --> 00:25:40,159 Speaker 10: it didn't happen. Right at the same time, you know, 534 00:25:40,240 --> 00:25:44,240 Speaker 10: all this talk about you know, the government directed economy 535 00:25:44,359 --> 00:25:47,919 Speaker 10: koretsu meti and now it's a Belton road in China Rea. Right, 536 00:25:47,920 --> 00:25:50,439 Speaker 10: there's a lot of parallels. But back to China, I 537 00:25:50,480 --> 00:25:52,880 Speaker 10: think then in a bit of a trouble. Right, So 538 00:25:52,920 --> 00:25:57,000 Speaker 10: we have Western demand weakening because of you know, recessions 539 00:25:57,080 --> 00:25:59,760 Speaker 10: or semi recessions whenever will happen, but it's going to 540 00:25:59,800 --> 00:26:02,800 Speaker 10: hit China first at the margin. Lack of demand is 541 00:26:02,800 --> 00:26:05,800 Speaker 10: going to hit that marginal producer and that's China. So China, 542 00:26:05,800 --> 00:26:08,720 Speaker 10: you can see this already has very weak producer prices 543 00:26:08,760 --> 00:26:12,840 Speaker 10: and has resulted in consumer prices being you know, inflation 544 00:26:12,920 --> 00:26:15,800 Speaker 10: being next to zero. You guys reported that that could 545 00:26:15,800 --> 00:26:18,480 Speaker 10: be a parallel to what happened in Japan, where it 546 00:26:18,560 --> 00:26:22,159 Speaker 10: also started with you know, lack of demand, trade tensions. 547 00:26:22,240 --> 00:26:26,480 Speaker 10: The United States stock market property boom followed by bust, 548 00:26:26,760 --> 00:26:29,600 Speaker 10: same kind of thing, high public sector debt, and you 549 00:26:29,720 --> 00:26:33,480 Speaker 10: ended up getting you know, liquidity trap, really long term 550 00:26:33,560 --> 00:26:36,920 Speaker 10: lost decade inflation. That is something that could truly happen 551 00:26:36,920 --> 00:26:37,720 Speaker 10: in China as well. 552 00:26:38,359 --> 00:26:40,879 Speaker 5: Well. Talk to me about what some of the moves 553 00:26:40,880 --> 00:26:43,960 Speaker 5: are from the Chinese government to try and revive a 554 00:26:44,040 --> 00:26:46,879 Speaker 5: little bit of the economy over there, particularly when it 555 00:26:46,880 --> 00:26:49,439 Speaker 5: comes to stimulus in the real estate sector. How do 556 00:26:49,480 --> 00:26:51,800 Speaker 5: you rate the moves that we're seeing from the Chinese 557 00:26:51,840 --> 00:26:54,000 Speaker 5: government in terms of trying to shore up that space. 558 00:26:55,200 --> 00:26:57,000 Speaker 10: I mean, there's only so much they can do, right. 559 00:26:57,040 --> 00:26:59,480 Speaker 10: I mean, again, it's the parallel to what happened in Japan. 560 00:26:59,720 --> 00:27:05,720 Speaker 10: It's it's almost scary how similar these things are. Once 561 00:27:05,760 --> 00:27:09,600 Speaker 10: you lower interest rates in a zero inflation or deflation environment, 562 00:27:10,040 --> 00:27:12,439 Speaker 10: there's nothing you can do right. You can't lower interest 563 00:27:12,480 --> 00:27:15,840 Speaker 10: rates to negative points, right, So when you reach that 564 00:27:15,960 --> 00:27:18,720 Speaker 10: point and consumers have lost a lot of money in 565 00:27:18,760 --> 00:27:21,119 Speaker 10: the stock market and in the property market. Don't forget 566 00:27:21,200 --> 00:27:23,760 Speaker 10: stock market is down fifty percent or so from this 567 00:27:23,800 --> 00:27:25,800 Speaker 10: peak in two thousand and seven. It's been a long time. 568 00:27:26,240 --> 00:27:27,680 Speaker 10: A lot of people have lost a lot of money 569 00:27:27,720 --> 00:27:30,760 Speaker 10: in China, and what are they going to do? 570 00:27:30,920 --> 00:27:31,080 Speaker 6: Right? 571 00:27:31,160 --> 00:27:33,760 Speaker 10: In cash, at least you don't lose it, right, So 572 00:27:33,800 --> 00:27:36,199 Speaker 10: that that's the dynamic that's going on there. And I 573 00:27:36,240 --> 00:27:37,800 Speaker 10: think there's a lot of things that are outside of 574 00:27:37,800 --> 00:27:40,680 Speaker 10: the control of the Chinese government as well. Right that 575 00:27:40,760 --> 00:27:44,239 Speaker 10: the West is really diversifying. I mean, some people call 576 00:27:44,280 --> 00:27:47,040 Speaker 10: it diversification, decoupling, whatever you want to call it yell 577 00:27:47,080 --> 00:27:49,960 Speaker 10: and call the diversification, which I think makes sense, but 578 00:27:50,080 --> 00:27:52,920 Speaker 10: that is demand that's going to be lacking, and these 579 00:27:52,960 --> 00:27:57,159 Speaker 10: factories in China cannot easily be you know, retooled to 580 00:27:57,640 --> 00:28:01,639 Speaker 10: anything other than supplying the West with goods, and I 581 00:28:01,680 --> 00:28:04,439 Speaker 10: think they really don't have a lot of options. On 582 00:28:04,520 --> 00:28:08,159 Speaker 10: top of that, you have, you know, negative demographic trends, 583 00:28:08,200 --> 00:28:10,600 Speaker 10: and this is always something that is accompanied these women 584 00:28:10,680 --> 00:28:15,200 Speaker 10: bus cycles in Japan, in Taiwan, Korea, you know where 585 00:28:15,200 --> 00:28:19,320 Speaker 10: the working age population peaks and then it declines, and 586 00:28:19,359 --> 00:28:22,080 Speaker 10: that really leads to really two things. One is the 587 00:28:22,119 --> 00:28:26,200 Speaker 10: innovation and spirit and the willingness to invest declines. You know, 588 00:28:26,240 --> 00:28:27,719 Speaker 10: when you're older, you're not going to take a lot 589 00:28:27,760 --> 00:28:30,199 Speaker 10: of risks. At the same time, you're fear workers. So 590 00:28:30,240 --> 00:28:33,600 Speaker 10: these are all highly negative trends that are very very 591 00:28:33,600 --> 00:28:35,960 Speaker 10: hard to change. And on top of that, what you 592 00:28:36,119 --> 00:28:40,000 Speaker 10: have that you didn't have in Japan is an extremely 593 00:28:40,080 --> 00:28:43,000 Speaker 10: negative perception of China in the West. I mean, you 594 00:28:43,000 --> 00:28:45,280 Speaker 10: look at the poles, right, and this could be driven 595 00:28:45,320 --> 00:28:50,200 Speaker 10: by spy balloons that you know, Cuba spy stations, all 596 00:28:50,200 --> 00:28:53,000 Speaker 10: this kind of stuff, all these various scandals, but people 597 00:28:53,080 --> 00:28:56,400 Speaker 10: have a more negative perception of China now than in 598 00:28:56,440 --> 00:28:58,960 Speaker 10: the middle of the pandemic, and that's pretty scary. So 599 00:28:59,000 --> 00:29:01,640 Speaker 10: that limits what policy makers can do in the US 600 00:29:01,680 --> 00:29:02,600 Speaker 10: to help China. 601 00:29:02,680 --> 00:29:06,360 Speaker 1: You know, in hindsight, I'm still not sure why the 602 00:29:06,440 --> 00:29:09,920 Speaker 1: Chinese government cracked down on what was arguably one of 603 00:29:09,960 --> 00:29:12,720 Speaker 1: their most biggest success stories in the last decades, which 604 00:29:12,720 --> 00:29:17,240 Speaker 1: is their technology space with Ali Baba and JD dot Com. 605 00:29:17,360 --> 00:29:20,480 Speaker 1: Is it anything more than is it nothing more than 606 00:29:20,560 --> 00:29:24,160 Speaker 1: just we're reasserting government control over you guys that have 607 00:29:24,240 --> 00:29:25,440 Speaker 1: just gotten too big for your bridges. 608 00:29:26,960 --> 00:29:29,160 Speaker 10: I think so certainly not a smart move, right, that 609 00:29:29,560 --> 00:29:32,800 Speaker 10: sense of real chilling method nested to the entrepreneurial community. 610 00:29:33,120 --> 00:29:35,160 Speaker 10: You're not going to invest if you know, in the 611 00:29:35,240 --> 00:29:37,920 Speaker 10: US you can become a billionaire and people might give you, 612 00:29:37,920 --> 00:29:39,560 Speaker 10: you know, a bad pr but if you end up 613 00:29:39,560 --> 00:29:42,400 Speaker 10: in jail, that's a whole another thing, right, So I 614 00:29:42,400 --> 00:29:44,720 Speaker 10: think that was a terrible mistake, and I think they're 615 00:29:44,720 --> 00:29:47,320 Speaker 10: going to pay for that as well with economic growth. 616 00:29:47,920 --> 00:29:49,480 Speaker 5: Last week, Hans, you gave me a little bit of 617 00:29:49,560 --> 00:29:53,560 Speaker 5: a preview on our politics show about what Yellen's trip 618 00:29:53,600 --> 00:29:55,840 Speaker 5: to China could look like, and you basically said that 619 00:29:56,120 --> 00:29:59,040 Speaker 5: we would not be getting any big headlines out of 620 00:29:59,040 --> 00:30:02,280 Speaker 5: that trip. Following the trip now and looking at some 621 00:30:02,320 --> 00:30:03,680 Speaker 5: of the news to come out of it, did anything 622 00:30:03,720 --> 00:30:05,560 Speaker 5: surprise you? 623 00:30:05,640 --> 00:30:07,240 Speaker 10: Not really. I mean it was a lot of talk 624 00:30:07,400 --> 00:30:10,000 Speaker 10: pop and I don't expect any policy changes cutting out 625 00:30:10,000 --> 00:30:13,280 Speaker 10: of that. She talked about setting up guardrails to competition. 626 00:30:13,800 --> 00:30:18,240 Speaker 10: She mentioned the word diversification, and I think that's not 627 00:30:18,440 --> 00:30:23,600 Speaker 10: particularly good for the Chinese. But I just think the 628 00:30:23,640 --> 00:30:26,760 Speaker 10: degrees of freedom for action are just very limited on 629 00:30:26,800 --> 00:30:30,320 Speaker 10: both sides, just not a whole lot that can be done. 630 00:30:30,760 --> 00:30:33,360 Speaker 1: So but it seems like the Chinese are pulling back, 631 00:30:33,800 --> 00:30:35,240 Speaker 1: and I know a lot of people are saying, hey, 632 00:30:35,480 --> 00:30:37,880 Speaker 1: what's bad for China is good for India to the 633 00:30:37,880 --> 00:30:40,320 Speaker 1: extent that if you think China had a great two 634 00:30:40,360 --> 00:30:44,320 Speaker 1: decade run, maybe if China's closing itself off, India represents 635 00:30:44,640 --> 00:30:47,000 Speaker 1: maybe a China like opportunity over the next twenty years. 636 00:30:47,080 --> 00:30:49,320 Speaker 1: Is that something you think has some ingredience. 637 00:30:50,200 --> 00:30:51,920 Speaker 10: I mean, I don't have a lot of insights into 638 00:30:52,040 --> 00:30:55,440 Speaker 10: India itself as a destination or as a source of production. 639 00:30:55,600 --> 00:30:58,600 Speaker 10: I mean, they've certainly always had issues with the government, 640 00:30:58,760 --> 00:31:01,560 Speaker 10: red tape bureaucracy, those types of things, all the negatives 641 00:31:01,600 --> 00:31:05,240 Speaker 10: that come with with the democracy, right. But what's interesting 642 00:31:05,360 --> 00:31:09,200 Speaker 10: is that I think next year or so, the non China, 643 00:31:09,320 --> 00:31:13,120 Speaker 10: low cost Asian countries, sort of all the countries except 644 00:31:13,200 --> 00:31:15,920 Speaker 10: Japan and Korea will be more than fifty percent of 645 00:31:16,000 --> 00:31:19,600 Speaker 10: US imports. So it may be the smaller countries like 646 00:31:19,720 --> 00:31:23,520 Speaker 10: you know, Vietnam and Indonesia, but certainly also India if 647 00:31:23,560 --> 00:31:26,200 Speaker 10: they can get their act together on the infrastructure side, 648 00:31:26,400 --> 00:31:27,520 Speaker 10: that could really replace that. 649 00:31:27,880 --> 00:31:28,040 Speaker 6: You know. 650 00:31:28,160 --> 00:31:31,000 Speaker 10: At the same time, Mexico is setting export records to 651 00:31:31,040 --> 00:31:33,360 Speaker 10: the US. So I think the private sector has really 652 00:31:33,360 --> 00:31:36,720 Speaker 10: stepped up and kind of pre solved the problems that 653 00:31:36,760 --> 00:31:38,560 Speaker 10: published politicians are working on. 654 00:31:38,640 --> 00:31:41,040 Speaker 1: You know, all right, you gotta be kidding me here, 655 00:31:41,280 --> 00:31:44,200 Speaker 1: Jackson white Owming, you set up your firm in Jackson 656 00:31:44,280 --> 00:31:45,680 Speaker 1: or white Owming, Are you kidding me? 657 00:31:45,960 --> 00:31:46,080 Speaker 8: So? 658 00:31:46,200 --> 00:31:47,040 Speaker 3: Like, if you guys have a. 659 00:31:46,960 --> 00:31:49,480 Speaker 1: Good powder day, do you just shut up and just 660 00:31:49,520 --> 00:31:51,880 Speaker 1: go close up shop, go skiing. 661 00:31:52,400 --> 00:31:54,440 Speaker 10: Store of So yesterday I said about thirteen hours of 662 00:31:54,480 --> 00:31:56,240 Speaker 10: rock climbing, and I'm pretty tired. I might have a 663 00:31:56,480 --> 00:31:58,800 Speaker 10: little sunburn here, but it is a beautiful place and 664 00:31:58,840 --> 00:32:02,160 Speaker 10: I recommend everybody as the Chinese visitors by the way on, 665 00:32:02,400 --> 00:32:05,440 Speaker 10: way down. Yes, the last few years, you've noticed that. 666 00:32:05,400 --> 00:32:06,040 Speaker 3: Do you expect it? 667 00:32:06,160 --> 00:32:08,680 Speaker 1: And that's kind of the government with restrictions on the flights, right, 668 00:32:08,760 --> 00:32:09,840 Speaker 1: Is that the primary issue? 669 00:32:09,880 --> 00:32:10,920 Speaker 3: We've got about twenty seconds. 670 00:32:11,000 --> 00:32:13,720 Speaker 10: No, I don't. I don't actually don't know, but it's noticeable. 671 00:32:13,800 --> 00:32:16,000 Speaker 1: Yes, yeah, we've noticed that here in New York City. 672 00:32:15,880 --> 00:32:19,240 Speaker 1: The European tourism seems like it's back in force. But 673 00:32:19,280 --> 00:32:21,760 Speaker 1: I can't say the same for the Chinese. So Hans 674 00:32:21,840 --> 00:32:25,440 Speaker 1: Du from Jackson Hole, Wyoming, which is a scam in 675 00:32:25,480 --> 00:32:27,160 Speaker 1: and of itself. I don't know how he did that, 676 00:32:27,680 --> 00:32:29,760 Speaker 1: but he's the CEO of Mitchell Madison Group. We appreciate 677 00:32:29,760 --> 00:32:32,480 Speaker 1: getting some of his insights heres we try to parse 678 00:32:32,520 --> 00:32:35,280 Speaker 1: through the economic forecast for China. 679 00:32:35,680 --> 00:32:38,720 Speaker 7: You're listening to the tape catch Are Live program Bloomberg 680 00:32:38,840 --> 00:32:42,440 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 681 00:32:42,480 --> 00:32:45,720 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 682 00:32:45,760 --> 00:32:48,520 Speaker 7: You can also listen live on Amazon Alexa from our 683 00:32:48,600 --> 00:32:53,680 Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 684 00:32:54,480 --> 00:32:55,880 Speaker 3: All right, Charlie Pellow, thank you so much. 685 00:32:55,880 --> 00:32:59,080 Speaker 1: We appreciate that Madison Mills, Paul Sweeney boiling in here 686 00:32:59,120 --> 00:33:02,760 Speaker 1: in our Bloomberg Interact Workers studio. We're also on that 687 00:33:02,840 --> 00:33:05,200 Speaker 1: YouTube thing, right, that's the streaming thing. Yeah, all right, 688 00:33:05,280 --> 00:33:07,600 Speaker 1: just go to YouTube and you can search Bloomberg at 689 00:33:07,600 --> 00:33:11,640 Speaker 1: Global News and you'll find us there. Let's talk ETFs. 690 00:33:12,000 --> 00:33:14,880 Speaker 1: There seems like there's an ETF out there for everything. 691 00:33:15,160 --> 00:33:18,520 Speaker 1: How about the Procure Disaster Recovery Strategy ETF. 692 00:33:18,520 --> 00:33:19,760 Speaker 3: I want to talk about that. We can do that 693 00:33:19,760 --> 00:33:19,920 Speaker 3: with the. 694 00:33:19,920 --> 00:33:23,760 Speaker 1: Andrew Channet, CEO of Procure a M. He joins us 695 00:33:23,760 --> 00:33:27,200 Speaker 1: here in our studio. Andrew talk to us about this fund. 696 00:33:27,480 --> 00:33:29,640 Speaker 1: What's the focus of this fund and kind of how 697 00:33:29,680 --> 00:33:30,520 Speaker 1: did it come about. 698 00:33:30,800 --> 00:33:33,680 Speaker 11: So natural disasters have been something you know, that have 699 00:33:33,760 --> 00:33:36,960 Speaker 11: been around well before humans came to this planet. But 700 00:33:37,200 --> 00:33:40,440 Speaker 11: as we start to increase population centers and increase the 701 00:33:40,440 --> 00:33:43,080 Speaker 11: amount of assets and valuables that we have in these 702 00:33:43,320 --> 00:33:45,240 Speaker 11: in these areas, many of them happen to be in 703 00:33:45,440 --> 00:33:48,959 Speaker 11: very high risk areas for extreme weather. And you know, 704 00:33:49,000 --> 00:33:55,040 Speaker 11: whether you're someone that's pushing for climate change, transition, renewable energy, 705 00:33:55,080 --> 00:33:57,040 Speaker 11: whatever that is. At the end of the day, there's 706 00:33:57,080 --> 00:33:59,520 Speaker 11: technologies that people are trying to do to help us 707 00:33:59,560 --> 00:34:02,960 Speaker 11: go more green or lower emissions. But there are companies 708 00:34:02,960 --> 00:34:05,720 Speaker 11: that actually help us prepare for natural disasters and help 709 00:34:05,760 --> 00:34:07,400 Speaker 11: save us when we need them the most. And that's 710 00:34:07,400 --> 00:34:10,239 Speaker 11: been an area that's been really underfocused on, and we 711 00:34:10,280 --> 00:34:12,360 Speaker 11: think that this is an industry that many people are 712 00:34:12,360 --> 00:34:15,080 Speaker 11: actually looking for the exposures and we wanted to provide 713 00:34:15,160 --> 00:34:16,120 Speaker 11: that fund for them. 714 00:34:16,280 --> 00:34:21,080 Speaker 5: Is it specific to companies that help with the aftermath 715 00:34:21,200 --> 00:34:23,880 Speaker 5: of a natural disaster or is it also prevention as well? 716 00:34:23,960 --> 00:34:25,320 Speaker 3: It is the full life cycle. 717 00:34:25,400 --> 00:34:28,120 Speaker 11: So you have those construction consulting and engineering companies that 718 00:34:28,160 --> 00:34:30,279 Speaker 11: come in and tell you how to better build out 719 00:34:30,320 --> 00:34:32,840 Speaker 11: your infrastructure and what where your risks are so you 720 00:34:32,880 --> 00:34:35,839 Speaker 11: can build more confidently. And then the companies that are 721 00:34:35,920 --> 00:34:38,560 Speaker 11: used during natural disasters. So you think of the wildfires 722 00:34:38,600 --> 00:34:41,200 Speaker 11: and you need fire equipment. You know, MSA Safety is 723 00:34:41,239 --> 00:34:44,000 Speaker 11: a company that's out there that's making respirators and hoods 724 00:34:44,000 --> 00:34:47,400 Speaker 11: for firefighters, and then you know, combating a wildfire, you 725 00:34:47,440 --> 00:34:51,480 Speaker 11: need helicopters and fire retardant and chemicals like that. And 726 00:34:51,520 --> 00:34:53,600 Speaker 11: then rebuilding so you know, when you have a flood 727 00:34:53,680 --> 00:34:56,560 Speaker 11: like we just saw, you know, right up in Hudson Valley, 728 00:34:56,719 --> 00:35:00,520 Speaker 11: there's really important companies for dredging, rebuilding, for construction as well, 729 00:35:00,800 --> 00:35:02,640 Speaker 11: and so it really looks at the full life cycle 730 00:35:02,640 --> 00:35:03,480 Speaker 11: of natural disasters. 731 00:35:03,560 --> 00:35:06,040 Speaker 3: How many names are in this ETA roughly fifty. 732 00:35:06,360 --> 00:35:08,080 Speaker 11: It's an equally aweighted basket as well. 733 00:35:08,120 --> 00:35:11,040 Speaker 3: And what's the assets under management? So the fund's been out. 734 00:35:10,880 --> 00:35:12,680 Speaker 11: For a little over a year and we're a little 735 00:35:12,719 --> 00:35:13,960 Speaker 11: over four million in assets. 736 00:35:13,960 --> 00:35:17,160 Speaker 1: Okay, interesting, okay, And so these types of companies, I mean, 737 00:35:17,360 --> 00:35:19,720 Speaker 1: it seems like that's a theme that has a long 738 00:35:19,880 --> 00:35:22,160 Speaker 1: term tail, I would think, right. 739 00:35:22,080 --> 00:35:24,640 Speaker 11: We certainly believe. So the White House came out a 740 00:35:24,640 --> 00:35:26,640 Speaker 11: little over a year ago saying that they believe by 741 00:35:26,680 --> 00:35:29,560 Speaker 11: the end of this century, the cost to the federal 742 00:35:29,600 --> 00:35:33,640 Speaker 11: budget alone from natural disasters maybe roughly two trillion dollars. 743 00:35:33,800 --> 00:35:36,880 Speaker 11: And that's just saying the US federal budget. Natural disasters 744 00:35:36,880 --> 00:35:39,919 Speaker 11: are a global phenomenon and they can happen at any time. 745 00:35:40,040 --> 00:35:42,080 Speaker 11: So whether you're trying to spend money on prevention or 746 00:35:42,080 --> 00:35:45,760 Speaker 11: you're spending money recovering, this is a really important industry 747 00:35:45,760 --> 00:35:46,759 Speaker 11: that should be championed. 748 00:35:47,000 --> 00:35:48,879 Speaker 5: And you also have some of the big names that 749 00:35:49,719 --> 00:35:52,080 Speaker 5: or our listeners are a little bit more familiar with, 750 00:35:52,080 --> 00:35:55,439 Speaker 5: like an Nvidia in this basket because you talk about 751 00:35:55,440 --> 00:35:58,719 Speaker 5: how their AI helps identify areas that are at risk 752 00:35:59,000 --> 00:36:02,160 Speaker 5: for natural disaster. Are there any other big kind of 753 00:36:02,160 --> 00:36:05,200 Speaker 5: household tech names in the ETF basket that you have 754 00:36:05,280 --> 00:36:05,680 Speaker 5: as well? 755 00:36:06,360 --> 00:36:09,880 Speaker 11: There are some, but really a lot of these companies 756 00:36:09,880 --> 00:36:15,839 Speaker 11: are more of the infrastructure type, building, consulting, engineering. There 757 00:36:15,840 --> 00:36:18,759 Speaker 11: are a couple of technology plays. I mean even water technology, 758 00:36:18,800 --> 00:36:21,080 Speaker 11: whatter is a huge part of natural disasters, whether that's 759 00:36:21,120 --> 00:36:24,440 Speaker 11: the cleaning up, the building of these centers, the transportation. 760 00:36:24,640 --> 00:36:27,279 Speaker 11: So a company like Xylum, which maybe many people may 761 00:36:27,280 --> 00:36:30,239 Speaker 11: know from the water technology side, has a place in 762 00:36:30,239 --> 00:36:31,480 Speaker 11: this fund currently as well. 763 00:36:32,360 --> 00:36:35,160 Speaker 1: You're wearing a shirt with kind of a Space shuttle 764 00:36:35,200 --> 00:36:38,120 Speaker 1: thing on there, so this NASA theme shirt, why is that? 765 00:36:38,520 --> 00:36:40,800 Speaker 11: So we also have a UFO, which is the world's 766 00:36:40,840 --> 00:36:43,080 Speaker 11: first pure place space ETF and there also is a 767 00:36:43,080 --> 00:36:46,200 Speaker 11: lot of overlap between space and believe it, natural disasters. 768 00:36:46,320 --> 00:36:48,479 Speaker 1: All right, give me that pitch, Give me that pitch. 769 00:36:48,520 --> 00:36:52,360 Speaker 11: So there actually was a name that was in both funds, Maxar, 770 00:36:52,440 --> 00:36:56,200 Speaker 11: which got taken private fairly recently, a satellite manufacturer and 771 00:36:56,239 --> 00:36:57,760 Speaker 11: operator company. 772 00:36:58,239 --> 00:37:00,120 Speaker 3: Satellites help us do a lot. 773 00:37:00,080 --> 00:37:05,040 Speaker 11: From detect where you have storms, sea level rises, emissions 774 00:37:05,040 --> 00:37:07,520 Speaker 11: even you're able to track emissions from space now, so 775 00:37:08,239 --> 00:37:12,040 Speaker 11: whether it be climate change or what we can be 776 00:37:12,120 --> 00:37:14,560 Speaker 11: doing and carbon footprints and whatnot, a lot of this 777 00:37:14,640 --> 00:37:17,399 Speaker 11: can be monitored from space. So you know a lot 778 00:37:17,440 --> 00:37:19,360 Speaker 11: of what we know about climate change is made possible 779 00:37:19,440 --> 00:37:20,200 Speaker 11: by satellites. 780 00:37:20,480 --> 00:37:23,920 Speaker 5: This is for Paul here the Space ETF. The biggest 781 00:37:24,680 --> 00:37:27,760 Speaker 5: chunk of that that you have is media at almost 782 00:37:27,760 --> 00:37:29,360 Speaker 5: twenty percent. What does that look like. 783 00:37:29,640 --> 00:37:31,960 Speaker 11: Yes, So when you look at the space industry today, 784 00:37:32,400 --> 00:37:34,840 Speaker 11: you know, roughly a third of it is communications. So 785 00:37:34,880 --> 00:37:40,880 Speaker 11: whether that's Internet or in broadband five g's a huge 786 00:37:41,360 --> 00:37:43,560 Speaker 11: area that people have been talking about and investing in 787 00:37:43,600 --> 00:37:46,719 Speaker 11: for several years now. But when people talk about the 788 00:37:46,760 --> 00:37:49,319 Speaker 11: future growth of the space industry, a lot of the 789 00:37:49,320 --> 00:37:52,160 Speaker 11: experts believe that roughly half of the growth over the 790 00:37:52,239 --> 00:37:55,640 Speaker 11: next ten twenty years may be from the communication side. 791 00:37:55,719 --> 00:37:59,040 Speaker 11: So media communications, you know, there's a lot of overlap 792 00:37:59,040 --> 00:38:02,280 Speaker 11: but in many of these companies nowadays, and satellite communications 793 00:38:02,600 --> 00:38:04,920 Speaker 11: is a very undercovered area in most funds, but one 794 00:38:04,960 --> 00:38:06,520 Speaker 11: that has a large representation in the UFO. 795 00:38:07,400 --> 00:38:10,360 Speaker 1: Just broadly speaking, on the ETF space is it just 796 00:38:11,200 --> 00:38:13,400 Speaker 1: full steam ahead in terms of fun flows in the 797 00:38:13,440 --> 00:38:16,279 Speaker 1: ETFs is because that's been the story for years now. 798 00:38:16,320 --> 00:38:18,520 Speaker 11: It seems like, yeah, you know, as far as as 799 00:38:18,600 --> 00:38:21,200 Speaker 11: a product wrapper, ETFs have been getting you know, a 800 00:38:21,239 --> 00:38:24,000 Speaker 11: ton of attention and inflows. When I first started bringing 801 00:38:24,000 --> 00:38:27,680 Speaker 11: out my first ETFs well over a decade ago, the 802 00:38:27,760 --> 00:38:30,239 Speaker 11: idea is that the ETF industry would be eating the 803 00:38:30,320 --> 00:38:32,840 Speaker 11: mutual fund industry's launch. And we've seen, you know, slowly, 804 00:38:32,840 --> 00:38:36,280 Speaker 11: the ETF industry globally has been getting a lot of presents. 805 00:38:36,560 --> 00:38:38,840 Speaker 11: You know, there are other types of products and vehicles 806 00:38:38,880 --> 00:38:41,120 Speaker 11: that may be competition to ETFs, but when you look 807 00:38:41,160 --> 00:38:44,080 Speaker 11: at flows, it's not just everything gets you know, x 808 00:38:44,120 --> 00:38:47,799 Speaker 11: percent per year. It's always typically pockets. Whether inflation is 809 00:38:47,800 --> 00:38:51,360 Speaker 11: the topic du jour or or you name it, whatever 810 00:38:51,400 --> 00:38:53,360 Speaker 11: that is. There are ETFs for the most part to 811 00:38:53,400 --> 00:38:56,080 Speaker 11: play that. And you know, when there are certain areas 812 00:38:56,080 --> 00:38:58,000 Speaker 11: that are in demand, ETFs do tend to get a 813 00:38:58,000 --> 00:38:58,800 Speaker 11: lot of those flows. 814 00:38:58,960 --> 00:39:01,840 Speaker 5: And in your ETFs specifically, how do you hedge against 815 00:39:01,840 --> 00:39:04,959 Speaker 5: some of the volatility that happens when you do prioritize 816 00:39:04,960 --> 00:39:07,080 Speaker 5: and focus on some of those smaller names. 817 00:39:07,400 --> 00:39:09,960 Speaker 11: So all the funds that I've been bringing out have 818 00:39:10,120 --> 00:39:13,040 Speaker 11: been passive, so they do track an index, so it's 819 00:39:13,040 --> 00:39:17,160 Speaker 11: not running and scampering and doing things as something happens. 820 00:39:17,400 --> 00:39:19,040 Speaker 11: We want to make sure that when we're working with 821 00:39:19,120 --> 00:39:21,920 Speaker 11: index providers that they have a lot of intelligence built 822 00:39:21,960 --> 00:39:24,760 Speaker 11: into them, so we're not throwing on hedges and quickly 823 00:39:24,800 --> 00:39:29,319 Speaker 11: selling positions when some major event happens. These are passive strategies, 824 00:39:29,440 --> 00:39:35,520 Speaker 11: rules based, rebalance, reconstitution depending on the funds, semiannually or 825 00:39:35,560 --> 00:39:39,560 Speaker 11: annually for the reconstitution, so names can get added and removed. 826 00:39:40,040 --> 00:39:42,200 Speaker 11: But really what we're looking at is how those companies 827 00:39:42,480 --> 00:39:44,080 Speaker 11: play into those various themes. 828 00:39:44,560 --> 00:39:46,120 Speaker 3: All right, Andrew, always. 829 00:39:45,800 --> 00:39:48,680 Speaker 1: Interesting stuff talking about ETFs, talk about a fast growing 830 00:39:48,760 --> 00:39:50,000 Speaker 1: part of the market. 831 00:39:50,040 --> 00:39:51,600 Speaker 3: ETFs are just. 832 00:39:51,560 --> 00:39:53,440 Speaker 1: Been really an amazing story here, and if you're in 833 00:39:53,440 --> 00:39:56,359 Speaker 1: a traditional mutual fund business, I'm just not sure where 834 00:39:56,400 --> 00:39:58,440 Speaker 1: that gets positioned. I know they say in retirement accounts 835 00:39:58,480 --> 00:40:00,960 Speaker 1: and other things like that, but boy, it's been a 836 00:40:00,960 --> 00:40:01,399 Speaker 1: big change. 837 00:40:01,440 --> 00:40:03,320 Speaker 3: Andrew Chenn and CEO Procure am. 838 00:40:03,160 --> 00:40:06,280 Speaker 1: Joining us live here in our very toasty Bloomberg Interactive 839 00:40:06,280 --> 00:40:07,080 Speaker 1: Broker Studio. 840 00:40:10,200 --> 00:40:13,319 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 841 00:40:13,360 --> 00:40:17,120 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 842 00:40:17,200 --> 00:40:20,920 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 843 00:40:21,120 --> 00:40:23,800 Speaker 2: at Matt Miller nineteen seventy three can. 844 00:40:23,680 --> 00:40:26,280 Speaker 1: I'm fall Sweeney. I'm on Twitter at pt Sweeney. Before 845 00:40:26,320 --> 00:40:29,120 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg 846 00:40:29,200 --> 00:40:29,680 Speaker 1: Radio